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Finally, I turn to empty properties. The starting point is how the non-domestic rate system works in relation to empty properties. Owners of empty properties are liable for 100 per cent of business rates liability unless they are specifically exempted. The exemptions are set out in regulations made by the Secretary of State. These include, for example, listed buildings. In such cases, those ratepayers have no liability for non-domestic rates. Levying authorities can choose whether their BRS should apply to empty properties. If they choose to do so, the same rules apply to the application of BRS liability as to non-domestic rate liability. That means that empty properties that are exempt from liability for NDR will also not be liable for BRS.
However, for empty properties liable to 100 per cent NDR, those of more than £50,000 rateable value will have 100 per cent liability for BRS. So, if a levying authority levies the maximum 2p BRS for occupied as well as empty properties, those empty properties with a rateable value of more than £50,000 will be subject to the same 2p levy. If a levying authority chooses to include empty properties in their BRS, any reliefs it may wish to apply—that is, the reliefs under Clause 15 —must apply equally to occupied and empty properties. For example, if a levying authority wishes to increase the threshold for BRS liability to £60,000, this would apply to occupied and empty properties. The levying authority could not apply different rules to empty properties. It could not, for example, set a threshold of £55,000 rateable value for occupied properties and set a different threshold of, for example, £60,000 for empty properties. That is not permissible.
It would be worth spending a brief moment to explain the role of Clause 13(6). This prescribes the formula for calculating the daily chargeable amount for empty properties. But this subsection applies only where the Secretary of State or, in Wales, the Welsh Ministers, have made an order under Section 45(4A) of the Local Government Finance Act 1988, which reduces the liability to national non-domestic rates of the owners of empty properties to less than 100 per cent of the basic liability. If such an order had been made under that Act, reducing NDR liability for empty properties to, say, 50 per cent, I assure the House that liability for BRS would mirror this. Liability for BRS would also be at 50 per cent. However, no such order under the 1988 Act has ever been made, so the subsection has no effect at this stage.
I am sure that the noble Baroness, Lady Hamwee, was all too well aware of that issue, but I put that on the record for those who know a little less about these
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Baroness Hamwee: My Lords, that was admirable. I hope that the noble Lord did not have to spend more than about five hours on that over the weekend. Seriously, that was extremely helpful. I am sure that I will understand it even better when I have read it, but after that final point about the order under the 1988 Act, as amended, not having been made, suddenly everything slots into place. I beg leave to withdraw the amendment.
Clause 16 : Interaction with BID levy
31: Clause 16, page 11, line 37, leave out subsection (1) and insert—
“(1) Where a person is, by reference to a hereditament, liable for BID levy in respect of all or part of a financial year in respect of which the person is, in relation to that hereditament, subject to a BRS imposed by the authority, the chargeable amount payable in relation to the BRS shall be offset in accordance with subsection (2).”
Lord Bates: My Lords, the amendment stands in my name and that of my noble friend Lord Cathcart. The amendments in this group have been retabled for the good reason that we were not satisfied with the answer that we received in Committee. Therefore, we sought to revisit the amendments on Report.
First, I shall briefly run through what we propose. Amendment 31 means that where a person is liable for a business improvement district, or BID, levy, and is subject to a business rate supplement imposed by that authority, the chargeable amount payable in reference to the business rate supplement will be offset, as stated in subsection (2). Amendment 32 follows on from that and would leave out,
Amendment 33 would leave out subsection (4), which states how the rules must be made.
As the Bill stands, the levying authority is enabled to make rules on what to do when a person is liable for the business improvement district levy and is also subject to the business rate supplement. Our amendments remove the levying authority’s right to make rules about it and instead specify that the liability for business improvement districts will be offset against the amount that the person would pay for business rate supplement.
9.45 pm
Amendment 35 would mean that this section does not apply to Crossrail for the reasons which we touched on earlier. The first tranche of amendments deals with offsetting the bid levy. This was debated in another place in Committee on 27 January at cols. 181 to 186 of Hansard. We do not want to risk harming business improvement district schemes, which by and large
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We are none the less cognisant of the huge pressure being put on businesses at the moment. This is an issue to which we return time and time again. It is a question of good legislation being a matter of timing. There could not be a worse time for levying further charges on business, particularly where a business has willingly and voluntarily engaged in a business improvement district and then finds that, in addition to the contributions it is making at that level, which in reference to Amendment 16 may or may not be tax deductible, it could potentially be faced with a business rate supplement of up to 2p in the pound. That is on top of the business rates which are already levied, currently at a rate of about 48p in the pound. These are substantial sums of money and effectively take business rates to 50p in the pound on rateable value, which is a significant sum.
Although I do not want to run foul of tolerance in terms of procedure, I refer to the previous debate as an example. Take an empty property which has a rateable value in excess of £50,000—a property which has been declared empty because the business has gone bankrupt. If the property has to potentially stump up £25,000 a year, notwithstanding that the owner is not getting any rent, that seems to be unsympathetic and unhelpful to business, in contrast to what the Government tell us that they are trying to do.
In many ways, the concern that levying authorities will raise the business rate supplement by a low enough threshold so that the ballot will not be triggered has been eased, providing that, when the amendment and the Bill make their way back down the corridor, those important amendments and the express will of this House are honoured in another place.
Because businesses are under so much pressure at the moment and are not able to vote against business rate supplements, they will be forced to vote against business improvement districts. This is in addition to—this was a fair point raised by my noble friend Lord Jenkin of Roding—the community improvement levy, which has not been exercised and which they do not have a vote for.
The best way to prevent this situation is to allow an automatic offset of bid levies. This is necessary reassurance to business so that they will not be hit by a double or potentially even a triple whammy at a very difficult time. Our Amendment 35 makes sure that Crossrail is exempt. For the reasons we have given, we have always taken the view that Crossrail is an exceptional case. We have acknowledged that; we are supportive of it and our argument throughout has been that we should not turn something exceptional into something normative.
On business improvement districts, the Bill allows a levying authority to decide whether to offset the payment of BID levies against the business rate supplement liability, provided that the approach is consistent with all BIDs in the area. In London, the mayor does not intend to exempt BIDs from paying Crossrail a business rate supplement for the reasons that I shall set out. I
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Business improvement districts contribute towards local improvements such as street cleaning, security and public area improvements. They are unrelated items of expenditure and, in our opinion, it would be a mistake to offset funding for one against the other. Another reason is that many voluntary associations which are not formally set up as business improvement districts will have to pay the Crossrail business rate supplement. Without the revenue from businesses in business improvement districts, Crossrail would have a funding shortfall, particularly as large parts of the West End, including Oxford Street and Regent Street, which are likely to be among the biggest beneficiaries of Crossrail, would not be required to pay the Crossrail business rate supplement. I make that point simply in the hope of heading off any charge that the amendments do not quite square up to our position.
For those reasons, the mayor opposes offsetting the payment of business improvement district levies against the Crossrail business rate supplement liability. However, he will work with the boroughs and the business community to ensure that the impact of the Crossrail business rate supplement is minimised.
Business improvement districts, the British Property Federation, London First and other organisations have long argued that BIDs should have the power to decide whether to include property owners in business improvement districts, subject to this being approved by a ballot. They are currently exempt from paying any BID levy, although many property owners have contributed voluntarily to BIDs. However, some of the uncertainty now surrounding the tax status has been a cause for concern.
Why are we debating this again after we covered the matter in some detail in Committee? We are grateful that the Minister has tabled government amendments, which we will reach in the next or a later group, that will allow the burden to be shared between property owners and occupiers. That should go some way towards helping to alleviate the weight of taxation on businesses, which this Bill will increase. However, we are still concerned. In Committee, the Minister could tell us only that an automatic offset would impose rules on local authorities rather than devolve responsibility to them. She quoted the example of the South Bank Employers Group, which said:
“The fact that businesses have chosen to contribute to this fund of local additionality ... should not in any way relieve them of the obligation to contribute to a major pan-London project like Crossrail”.
It seems to us that the Government must admit that our amendments achieve just what the Minister was seeking to achieve and which she articulated in Committee. She also said that the chief executive of British BIDs, Dr Julie Grail, had said that,
- “a full offset in London would be a ridiculous and dangerous move”.—[Official Report, 18/5/09; col. GC 553.]
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Again, our amendments show that we are very much listening to what the business community and business improvement districts want. The Minister then argued that the crucial point is that the levying authorities can use their discretion on whether or not to have an offset. We would argue on the side of businesses, the crucial point being that they should not be hit by two levels of taxation. The Minister knows that we disagree with the Bill on a point of principle, but our amendments at least try to make sure that businesses are protected in some way. I beg to move.
Baroness Hamwee: My Lords, I wrote a note to myself to refer to the Mayor of London’s briefing. I will not read it out because the noble Lord, Lord Bates, has done it full justice. We are, however, opposed to an automatic offset. BIDs are different from BRSs—they have a different purpose and there are different ratepayers—so we do not think it would be appropriate for there to be an offset in the automatic way he suggests. I am afraid, therefore, that we cannot support this amendment.
Lord Davies of Oldham: My Lords, at this stage in the evening, one takes solace where one can, and I take a great deal of solace from the noble Baroness, Lady Hamwee, who, in very succinct terms, has indicated why she cannot support the amendments, and, of course, neither can I. I will deal with Amendment 35 separately.
The interaction between business improvement districts and BRSs has generated a fair degree of debate and passion, both in this House and in the other place. I do not for one moment underestimate the concerns that have been raised on this issue and I understand the force with which the noble Lord presented his amendments and the articulate way in which he sought to advance them. However, we do not think that having an automatic offset is the right way forward. It is worth taking a step back and thinking about what we are trying to deliver here.
This Bill provides a real opportunity for local authorities to work together with businesses to develop proposals that will enhance the economic development of local areas. This is not about diktats from Whitehall; it is about devolving responsibility to the local level. It will be for the local authorities, working in partnership with businesses in their area, to put forward proposals in their prospectus. Provided local authorities can make the link to economic development, we want
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All this represents the fact that flexibility is at the heart of the Bill. It would be totally inconsistent to impose a requirement on levying authorities to have an automatic offset for those paying BID levies. It would be equally illogical for the automatic offset to apply in every case except for the Crossrail project. I heard what the noble Lord had to say about his Amendment 35, but the Bill is clear that it should be left to the Mayor to decide whether to have an offset. Surely that is the simplest and most consistent way of going about it. I understand the arguments for an automatic offset, but the noble Lord will recognise from the debates I have outlined here and elsewhere that he does not command a universal view. We have heard from those in the BID sector itself who do not favour this approach. It would be unwise and irresponsible to ignore those views. The Bill is right to say that levying authorities can choose to do it, if appropriate. It is for the local authorities to make their decisions.
The noble Lord valiantly pressed an issue which, I recognise, has a degree of support, although he suggested that, with Crossrail and the mayor, there is not that support. The other side of the case is at least as strong and our concern in the Bill is to maintain for local authorities—they will have to take the initiative, nothing is imposed on them; if they do not take initiatives, none of these projects go forward—the maximum flexibility for them to make the choice. That must be the right strategy, and I hope that the noble Lord is at least persuaded enough to withdraw his amendment.
Lord Bates: My Lords, I am pleased to say that the Minister has given fulsome consideration to my concerns and given me a good response. I certainly do not want to press the amendments, and beg leave to withdraw the amendment.
Amendments 32 and 33 not moved.
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