Previous Section Back to Table of Contents Lords Hansard Home Page

The business rate supplement provides a new mechanism for local authorities to work with businesses on projects that will enhance the development of local areas. We want authorities to be innovative in their use

8 Jun 2009 : Column 476

of this new power provided that a link to economic development can be demonstrated. It is for the authority to decide the extent to which BRS revenues should be used to fund a project, but it is probable that BRS will feature as just one part of an overall funding package. Surely, therefore, a local project backed by a range of funding partners should not be put at risk because of the uncertainty surrounding what might be a relatively small contribution to the overall funding package. By the same token, we do not want unnecessarily to constrain levying authorities in their use of BRS; we want them to use this power flexibly. However, there is a real danger that financial institutions and funding partners will not be willing to commit themselves where business has a vote on an element, even a small element, of the overall project. In effect, the BRS would then be used where it forms the lion’s share of the funding so that the whole project would stand or fall on the outcome of a ballot to which the funding partners do not have to be signed up. That is not what we are looking for. We want authorities to have a broader range and a degree of flexibility, and that is why we are against the constraints that would be imposed by ballots.

We have provided many safeguards in the Bill for the interests of business, lest it be suggested that just because I am arguing about the universal ballot in this case, we do not have the interests of business at heart. A ballot on a scheme is necessary where the BRS provides more than one third of the funding, and an overall limit of 2p per pound of rateable value is established in the Bill. The BRS cannot be used to fund statutory services. It must be used for additional developments for the benefit of the economic development of an area. Mandatory consultation is required in all cases and we have provided that the details should be set out in a prospectus, including a cost-benefit analysis. So business has safeguards built into the legislation when it enters into consultation with a local authority about these possibilities. It is right that such safeguards have been included, but requiring a ballot in all cases runs the risk that projects will be put in jeopardy or that local communities will miss out on opportunities of enhancing areas because of the difficulty of securing broader financial backing for much-needed developments.

I appreciate that the noble Baroness, Lady Hamwee, was somewhat guarded in her criticism of local authorities; indeed, all noble Lords who have spoken have shown some degree of respect for the position of local government. Local authorities are democratically elected bodies, so surely we should trust them to work responsibly with businesses on local projects and not shackle them with unnecessary requirements that are not needed given the other safeguards in the Bill. Accordingly, having listened to my case that this process will not work and opportunities will not be exploited unless local authorities work in close partnership with business, I hope that she will feel able to withdraw her amendment.

6.45 pm

Baroness Hamwee: My Lords, I am grateful to all noble Lords who have taken part in the debate. I have to say to the noble Lord, Lord Davies of Oldham, that I did not think he was at all evasive in his response to

8 Jun 2009 : Column 477

the first question. I expected to hear that the noble Baroness, Lady Andrews, has a diplomatic sniffle, but apparently not. The noble Lord has been very honest and straightforward. He has been dealt a difficult—indeed, I think impossible—hand.

I shall pick up on a few points. The noble Lord talked about the importance of engagement with the business community. A vote in a ballot is the greatest form of engagement and is complementary to a preceding consultation but different from it. He said that a ballot should be left to the levying authority and that the Government do not want to be overly prescriptive, so why put in anything at all about it; why pick on one third? He also said that if the BRS is a small proportion, the whole agony would be irrelevant. It would have to be a necessary part because of the extraordinarily stringent tests to prove additionality that we know about from the guidance fleshing out the statutory requirement for additionality which has been issued so far. He said that BRS would be relatively marginal, which I think is the same point. It may be proportionately small for a particular project, but it will not be marginal. By definition, it has to be important.

The noble Lord said that banks might not be willing to fund if a project is dependent on a ballot. I cannot see banks being particularly happy if they know that there is going to be an uprising among the business community, with all the dangers that would present. He also said that we are showing a level of distrust of local authorities. That is simply not the point. As the noble Lord, Lord Jenkin, said, this is a point of principle. We are told that the line has to be drawn somewhere. I do not believe that there needs to be a line. I beg to test the opinion of the House.

6.48 pm

Division on Amendment 1

Contents 132; Not-Contents 125.

Amendment 1 agreed.

Division No. 1


Addington, L.
Anelay of St Johns, B.
Ashdown of Norton-sub-Hamdon, L.
Astor, V.
Attlee, E.
Barker, B.
Bates, L.
Blackwell, L.
Bonham-Carter of Yarnbury, B.
Bottomley of Nettlestone, B.
Bridgeman, V.
Brooke of Sutton Mandeville, L.
Brougham and Vaux, L.
Caithness, E.
Cathcart, E.
Chidgey, L.
Clement-Jones, L.
Colville of Culross, V.
Colwyn, L.
Cope of Berkeley, L.
Cotter, L.
Courtown, E.
Craig of Radley, L.
Cumberlege, B.
De Mauley, L.
Dholakia, L.
Dixon-Smith, L.
D'Souza, B.
Dykes, L.
Eccles, V.
Eccles of Moulton, B.
Eden of Winton, L.
Elton, L.
Erroll, E.
Falkland, V.
Falkner of Margravine, B.
Flather, B.
Fookes, B.
Forsyth of Drumlean, L.

8 Jun 2009 : Column 478

Fowler, L.
Garden of Frognal, B.
Gardner of Parkes, B.
Garel-Jones, L.
Geddes, L.
Glasgow, E.
Goodhart, L.
Greaves, L.
Hamwee, B.
Hanham, B.
Harris of Richmond, B.
Henley, L.
Higgins, L.
Hodgson of Astley Abbotts, L.
Hooson, L.
Howe, E.
Howe of Aberavon, L.
Howe of Idlicote, B.
Howell of Guildford, L.
Jenkin of Roding, L.
Kirkwood of Kirkhope, L.
Knight of Collingtree, B.
Lawson of Blaby, L.
Lee of Trafford, L.
Lindsay, E.
Liverpool, E.
Livsey of Talgarth, L.
Luke, L.
Lyell, L.
McColl of Dulwich, L.
MacGregor of Pulham Market, L.
McNally, L.
Maddock, B.
Marlesford, L.
Masham of Ilton, B.
Miller of Chilthorne Domer, B.
Monson, L.
Montgomery of Alamein, V.
Montrose, D.
Morris of Bolton, B.
Moynihan, L.
Neuberger, B.
Neville-Jones, B.
Newby, L.
Nicholson of Winterbourne, B.
Noakes, B.
Northesk, E.
Northover, B.
Norton of Louth, L.
Oakeshott of Seagrove Bay, L.
Onslow, E.
Patel, L.
Patten, L.
Ramsbotham, L.
Redesdale, L.
Rennard, L.
Roberts of Llandudno, L.
Rodgers of Quarry Bank, L.
Rogan, L.
Rowe-Beddoe, L.
Ryder of Wensum, L.
St. John of Bletso, L.
Saltoun of Abernethy, Ly.
Sanderson of Bowden, L.
Scott of Needham Market, B.
Seccombe, B. [Teller]
Shephard of Northwold, B.
Shutt of Greetland, L. [Teller]
Skelmersdale, L.
Skidelsky, L.
Steel of Aikwood, L.
Stewartby, L.
Stoddart of Swindon, L.
Taverne, L.
Taylor of Holbeach, L.
Tebbit, L.
Thomas of Gresford, L.
Thomas of Walliswood, B.
Thomas of Winchester, B.
Tonge, B.
Tope, L.
Tordoff, L.
Trenchard, V.
Trimble, L.
Ullswater, V.
Valentine, B.
Verma, B.
Waddington, L.
Walmsley, B.
Walpole, L.
Warsi, B.
Wilcox, B.
Williamson of Horton, L.


Acton, L.
Adams of Craigielea, B.
Adonis, L.
Ahmed, L.
Amos, B.
Anderson of Swansea, L.
Archer of Sandwell, L.
Bach, L.
Bassam of Brighton, L. [Teller]
Berkeley, L.
Bernstein of Craigweil, L.
Best, L.
Billingham, B.
Bilston, L.
Blood, B.
Borrie, L.
Bragg, L.
Brett, L.
Brooke of Alverthorpe, L.
Brookman, L.
Brooks of Tremorfa, L.
Campbell-Savours, L.
Carter of Coles, L.
Clark of Windermere, L.
Clinton-Davis, L.
Cohen of Pimlico, B.
Corbett of Castle Vale, L.
Crawley, B.
Cunningham of Felling, L.
Davies of Abersoch, L.
Davies of Coity, L.
Davies of Oldham, L.
Dubs, L.
Elder, L.
Elystan-Morgan, L.
Evans of Parkside, L.
Evans of Temple Guiting, L.
Faulkner of Worcester, L.
Filkin, L.
Ford, B.
Foster of Bishop Auckland, L.
Foulkes of Cumnock, L.
Gale, B.
Gibson of Market Rasen, B.
Giddens, L.
Golding, B.
Gordon of Strathblane, L.
Goudie, B.
Gould of Brookwood, L.
Gould of Potternewton, B.
Graham of Edmonton, L.

8 Jun 2009 : Column 479

Griffiths of Burry Port, L.
Grocott, L.
Harris of Haringey, L.
Hart of Chilton, L.
Haskel, L.
Haskins, L.
Haworth, L.
Henig, B.
Howarth of Newport, L.
Howells of St. Davids, B.
Hughes of Woodside, L.
Hunt of Kings Heath, L.
Janner of Braunstone, L.
Jones, L.
Jones of Whitchurch, B.
Jordan, L.
Kilclooney, L.
King of West Bromwich, L.
Kirkhill, L.
Lea of Crondall, L.
Leitch, L.
Lipsey, L.
Lofthouse of Pontefract, L.
Low of Dalston, L.
Macdonald of Tradeston, L.
Mackenzie of Framwellgate, L.
McKenzie of Luton, L.
Mandelson, L.
Massey of Darwen, B.
Maxton, L.
Mitchell, L.
Morgan of Drefelin, B.
Morgan of Huyton, B.
Morris of Aberavon, L.
Morris of Handsworth, L.
Morris of Yardley, B.
Myners, L.
O'Neill of Clackmannan, L.
Patel of Blackburn, L.
Prosser, B.
Puttnam, L.
Quin, B.
Radice, L.
Rea, L.
Rendell of Babergh, B.
Richard, L.
Rooker, L.
Rosser, L.
Rowlands, L.
Royall of Blaisdon, B.
Sawyer, L.
Sewel, L.
Sheldon, L.
Simon, V.
Smith of Finsbury, L.
Soley, L.
Stone of Blackheath, L.
Symons of Vernham Dean, B.
Taylor of Bolton, B.
Temple-Morris, L.
Thornton, B.
Tomlinson, L.
Tunnicliffe, L. [Teller]
Uddin, B.
Vadera, B.
Wall of New Barnet, B.
Warner, L.
Warwick of Undercliffe, B.
Watson of Invergowrie, L.
Whitaker, B.
Whitty, L.
Wilkins, B.
Woolmer of Leeds, L.
Young of Norwood Green, L.

7 pm

Amendment 2

Moved by Baroness Hamwee

2: Clause 1, page 1, line 7, at end insert—

“(2A) Regulations may amend subsection (2) so as to add to or to vary the purpose of projects for which money may be raised by a BRS.

(2B) The appropriate national authority shall consult the following on the draft of any regulations proposed to be made under subsection (2A)—

(a) representatives or membership organisations of persons who are non-domestic ratepayers;

(b) representatives of local authorities;

(c) such other persons as the national authorities think appropriate.”

Baroness Hamwee: My Lords, I beg to move Amendment 2 and shall speak to Amendments 5 and 29, which are grouped with it. As we discussed in the previous stage the Bill is, by definition, one for the long term. Amendment 2 would allow there to be variation in the purpose of projects to be funded by the business rate supplement. Under Clause 1, a project has to be one which the local authority,

In the current climate, I accept that focus, although in Committee I think that we agreed on all sides that one could attribute almost anything to “economic development”. Sir Michael Lyons himself, in the recommendations to his report, refers to,

8 Jun 2009 : Column 480

the local authority—

That is not quite the same thing.

I would argue that environmental and social improvements in any event contribute to the economy of an area. When I was chairing the London Planning Advisory Committee—I think it was in about 1991—we commissioned some wide-ranging and deep research into the world-city status of London, and asked, “What makes a company decide to locate to a particular city?”. The quite clear answer was quality of life, something very wide that clearly encompasses environmental and social aspects. Is it not rather arrogant of us to say that businesses are only interested in economic development in a narrow manner? I do not know, of course, whether the Government will seek to overturn the amendment that your Lordships have just agreed, but if we can retain the ballot it seems to answer the issue of what the statutory purpose of BRS should be. I am not proposing an immediate extension, but it would be dotty not to facilitate that extension if the mood or climate is such that it should be extended.

My amendments are facets of the same issue. Amendment 2 would require consultation leading to regulations. Amendment 5 is one that we debated at the last stage, requiring,

and that amendment has important provisions for representations to be made by anyone who is interested are. That amendment and what the review will report should come first, before any regulations provided for in Amendment 2. The Minister may tell us that such a review will happen in any event. The noble Baroness, Lady Andrews, whom I met last week to discuss this stage of the Bill, said that she was going to explain to your Lordships that, under other legislation, there would have to be a review. I hope that the Minister, if he is to pursue that line, can tell the House whether, on such a review, alterations to legislation can be made without more. I suspect not, which is why I am seeking, if not to require regulations, to allow for them.

In the last stage, the noble Lord, Lord Best, had an amendment—promoted in that case by the Local Government Association—that would have allowed for the variation, if not necessarily the increase, of the 2p limit. Again, my Amendment 29 would require consultation to precede any regulations that provide for such a variation—and my argument about the ballot is obvious. If this legislation is to support Crossrail, which is its major aim, by definition it must apply for some decades. We believe that it should be flexible enough, with the safeguards that my amendments include, to cater for those decades, not just for the present.

Lord Graham of Edmonton: My Lords, I listened carefully to the noble Baroness, and I have no doubt that with an attachment, which I also have, to the London Councils she has taken fully into account its general support for these amendments. I have some sympathy with it, because it is pleading, over a long period, that the Bill needs to be a little more specific

8 Jun 2009 : Column 481

about precisely how consultation shall take place. Now, I know it is a common view in Committee that, as regards consultation, there should not be a long list of interested bodies that are entitled to be consulted. However, I would simply say thatLondon Councils clearly have a deep interest in this, not only from the point of view of the councils’ size, stature and importance but because of their potential rate-levying powers.

As regards Crossrail, which will be a long-time involvement, if it is not already clear in the Bill, it is not unreasonable to ask the Minister to explain to us the mechanism that the Government have in mind to provide bodies like the London Councils, and any others which have a big interest, with the methods and manner in which they can be consulted. These amendments are not talking about a prescriptive power to be placed in the Bill, but asking that due note be taken of the great importance. The Minister would also help the House and many outside if he could spend a little time on precisely how wide the raising of a business rate can go. In other words, will it be open to separate councils? Will it be more widely available than it appears to be in the Bill? The Minister could help the House and London Councils there.

Lord Bates: My Lords, I am sympathetic to at least some of these amendments. While beginning this process, at Second Reading and in Committee I put on record my interests as director of a number of businesses that pay business rates. I probably should have done that with the first group of amendments, for which I apologise; I certainly put that on the record now.

On the amendments that we support, anything that improves communication and information on business rate supplements clearly has to be welcomed. We have a problem with Amendment 29, which contains the notion of varying the cap on the business rate supplement of 2 pence; we already think that a very high burden on business. I know that the Minister, in responding to the first group of amendments, made the point that potentially relatively small sums will be involved, but the Local Government Association has calculated that if every authority used the 2p levy, then the total tax take would be in the region of £750 million, and possibly even more than that in 2010 after the rating revaluation takes place. These are significant sums. It is in the nature of taxation that when someone applies an upper limit, there is a tendency to go up to that limit. One also needs to remember—I am sure that the Minister will want to make this point—that the figure is a maximum, not a minimum.

There is an issue that we feel strongly about, and I want to put it on the record. The noble Baroness, Lady Hamwee, talked about what attracts businesses. Business rates are either the second or third biggest charge faced by most businesses, and we know from experience in the 1980s and 1990s, with initiatives such as enterprise zones and the like, that when you offer a business-rate-free zone, that becomes attractive to businesses. Given that business rates have a major impact on businesses locating in particular areas, we would have liked the Government to consider the notion, which we would have supported from these Benches, that funds from the levy could be used to discount business rate bills.

8 Jun 2009 : Column 482

There are various reasons why businesses might locate in a particular area. People might want to use the funds raised through the business rate supplement to discount the cost of business rates, which are an incredible burden on many businesses, particularly as a result of the increases that have already been levied this year. Although the 5 per cent increase has been deferred for a year, that additional 3 per cent will be levied on businesses next year. Next year there will also be the rating revaluation, so this is becoming a bigger issue.

We would have thought that in those circumstances, being able to say to people, “Listen, you can raise funds through the business rate supplement and you can actually use them to discount the cost of locating and operating in your particular area” would be a sensible use of that facility. If the aim is to promote economic regeneration, we on this side of the House—and we would expect there to be some sympathy on the other side of the House, given the body of evidence for this—suggest that lower tax rates tend to stimulate exactly that. And if that is the aim, anything that lowers tax rates has to be a good thing.

From that point of view, we are basically sympathetic to the spirit of these amendments, although in the case of Amendment 29 we would have serious reservations. If there were an additional level of flexibility, allowing it to be used to cut the excessive burden of business tax, we would be minded to support it more than we shall be.

Lord Best: My Lords, I moved amendments to similar effect in Committee and I support these, particularly those in Clause 14. I made the point on behalf of the Local Government Association, of which I am proud to be president, that although the level of 2p in the pound will raise a fairly large sum in pound terms, it will raise quite a small proportion of revenues for local government—something like 5 per cent of the money raised by the business rate alone, not 5 per cent of all the revenue raised for local authority spending. I see the supplement not so much as a tax burden as a collective means of paying for goods, services and projects that the local community wants. If this mechanism for raising money for important local projects turns out to be successful—we hope that eventually it will be, although we know that at present no local authorities are planning to move swiftly forward with these measures—it will be helpful if one does not need primary legislation to raise that amount of 2p in the pound to a higher sum at a later stage. The amendment would create something in advance of its requirement and well in advance of anyone wishing to share this load with the business community, and is helpfully trying to ensure that legislation puts it on the record now.

7.15 pm

Lord Davies of Oldham: My Lords, I am grateful to all noble Lords who have spoken in this brief debate. I noticed one or two cross-currents in the debate: I heard the noble Lord, Lord Bates, say that he was broadly in favour of the spirit of the amendments, but he then produced some hefty reservations about

8 Jun 2009 : Column 483

Amendment 29 which I actually share. Noble Lords have argued, though, that there should be potential in the future to use BRS funds to invest in a wide range of community interests, which is what Amendment 2 seeks to do, rather than simply being limited to economic development, although, as noble Lords appreciate, “economic development” can cover quite a wide range of possibilities.

It has always been the aim that the business rate supplement would be a pool that could be used to promote the economic development of local areas, hence the link to business rates as opposed to other forms of rating revenues. That is a clear theme that runs through the Government’s subnational review, the White Paper that preceded this legislation and now the legislation itself. The link to economic development provides an important reassurance to local businesses that BRS will not be used to fund services that have little or no relation to them. BRS is intended as a tool that can be used to fund joint projects between local businesses and local authorities. It will be a means of raising additional revenue from businesses.

I accept the point that the noble Lord, Lord Best, made: it is not a tax but the raising of funds for joint enterprise in which all wish to share and the outcome of which is meant to be for the benefit of the locality. It is logical that the BRS should be linked to the aspect of the local community that will be of most interest to local businesses, which is, inevitably, economic development. That is the premise behind the Bill.

The concept of “economic development” is clearly understood. It has been explored in the subnational review and, subsequently, when appropriate implementation of the actions put forward by that review was being considered. We should not overlook the fact that the term “economic development” gives levying authorities and local businesses adequate scope for innovation, which is what we want to see from the Bill. Outside the core services that levying authorities should provide, BRS can be used flexibly and constructively to promote economic development in the local area. We did not limit the use of BRS to only one kind of project; instead, we have acknowledged that what is necessary will depend on the judgments of the local area, so there is considerable flexibility behind the concept of the legislation.

Next Section Back to Table of Contents Lords Hansard Home Page