Business Rate Supplements Bill

I want to give general support to the Bill, which advances modest reforms to the uniform business rates regime that has been run nationally since its introduction with the ill-fated poll tax 1990. The poll tax—I am sorry to mention it twice in two sentences—was swiftly replaced, but this small amount of discretion locally to tinker with business rates has been a long time coming. Importantly, it is not mandatory—no council will be forced to implement a business rate supplements scheme. It also gives local businesses a strong voice in the introduction of any such scheme and over the projects for which any funds raised are earmarked. That said, I have concerns about the operation of the business rate regime that I hope to highlight with specific examples after these short opening remarks. I promise that I am not going to mention Boris, London or Crossrail. I want to deal with some of the potential benefits outside the capital, but also some of the flaws in the current system that assist abuse. In short, I want to talk about some of the good intentions in the Bill, but also some of the bad apples out there abusing the system. That issue should be addressed with further reforms, possibly as the Bill goes through the House. In my area of Newcastle-under-Lyme and north Staffordshire, one of the biggest challenges that we face is economic regeneration in a traditional manufacturing and former coalmining area. It will not have escaped the notice of any hon. Member—not least the hon. Member for Lichfield (Michael Fabricant) and my hon. Friend the Member for Stoke-on-Trent, South (Mr. Flello), who are both here—that last week, on practically the first working day of the year, Waterford Wedgwood, one of north Staffordshire’s biggest and most renowned employers, went into receivership. Indeed, Wedgwood’s employees are today expecting to learn their fate. Like my colleagues locally, I am in touch with Government Departments, agencies and our local Potteries trade union, Unity—its general secretary, Geoff Bagnall, its deputy general secretary, Garry Oakes, and officers in particular—to see what help and advice can be offered. In Newcastle-under-Lyme, large swathes of land, particularly around the central ring road, are awaiting development. As in other towns across the country, how they are developed will determine not only the economic future of the town but how it looks and feels for the foreseeable future. The issue of land acquisition by the public sector has been one of the key stumbling blocks to joined-up regeneration in our area for many years. A business rate supplements scheme might provide useful extra funding—an additional tool in the armoury, as it were—to make the town more the master of its own future. Public land acquisition would help to safeguard against speculative developers playing the planning system, cajoling local councillors and getting away with poor design, especially as the siren calls of ““Any development is welcome development”” will only grow stronger during a downturn. In my area, it may well prove popular with local traders and property owners in a traditional market town that is under threat of further huge supermarket developments right round the town centre, not only on the edges of the town. Together with a coherent local plan, having more wherewithal for public ownership of key sites would act as a bulwark against—or perhaps provide a backbone for—weak, old-fashioned, unimaginative, unambitious or simply perverse planning officers who cave in too easily. That happened yet again in Newcastle before Christmas. Our head of development control, who goes largely unsupervised in a dysfunctional planning department, almost single-handedly pulled the rug from under the feet of councillors, his planning colleagues and experts from Urban Vision North Staffordshire, our local architecture and design centre, by recommending the approval of a Lidl discount store and budget Travelodge hotel, right in the town centre, against all expert opinion and emerging site guidance. Had the site been in public ownership, that could have been resisted. That failure is ultimately political and managerial at the highest level of the council. However, there is no doubt that if these sites were in public hands, in Newcastle-under-Lyme, as in many towns and cities up and down the land, we would be more masters of our own fate. As in many other areas, housing is another example of major concern where a business rate supplements scheme may well have a part to play in well thought out projects to revitalise the economic fortunes of town centres, in particular. Again before Christmas, representatives from our registered social landlord, Aspire Housing in Newcastle, informed me almost lackadaisically, in a meeting about a totally separate matter, that they did not see the building of new social housing as part of their so-called core business any more. Newcastle alone has a waiting list of 3,000 for social housing. We have regional and sub-regional targets for house building aimed particularly at encouraging town and city-centre living in Newcastle and Stoke-on-Trent. Aspire Housing owns all Newcastle’s former council housing stock. If it does not intend to build social housing beyond schemes already in the works, it is hard to see who will, especially at this point in the economic cycle. Frankly, that is a dereliction of duty that I am pursuing with it vigorously. However, it is another example of a development, coupled with key public site acquisition, which meets a need, which might make town centres more sustainable, and which otherwise would not happen, where a BRS scheme might have a role to play and local businesses may well support it in their own interests. In that respect, I discussed with my local council the option of a business improvement district—an idea introduced by my right hon. Friend the Member for Greenwich and Woolwich (Mr. Raynsford), the former Minister—that would be backed by regeneration agencies to help to revitalise the town centre. A business rate supplement scheme, as provided for by the Bill, would allow for a further alternative in co-operation with local businesses. It is absolutely inconceivable in places such as Newcastle-under-Lyme and north Staffordshire that anything would be implemented without such co-operation or against the interests of local business. When I refer to local business, I am talking about the vast majority of local employers and traders, as well as national firms and store chains, which are socially responsible and pay their taxes and business rates. However, in Newcastle and north Staffordshire, as in other areas, there is a small minority of unscrupulous so-called business people who do not. They let other suppliers and creditors suffer, as well as the taxman, local councils and the Government’s business rate pool. I am not talking about entrepreneurs who genuinely set up firms and take risks that do not work out in a free market, or about businesses, of which there will be a growing number in the recession, which find they cannot cover their costs and have to close. I am referring to a small minority of parasites, frankly, who have no intention of paying their dues from the outset and who hide behind limited liability and deliberately play the system to avoid business rates. I hope, therefore, that any change to the business rates system, such as the provisions of the Bill, will contain measures to address flaws in the current regime. First, breaking the link between local collection and the ability to spend business rates locally gives councils such as mine little financial incentive to pursue serial evaders seriously. After the passage of the Bill, even if councils set up a business rate supplement scheme, they will still be collecting agents for central Government for the vast proportion of business rates and, importantly, they will not suffer financial loss for any lack of rigour in tackling evaders. Secondly, many of the people in question serially go bust and leave little or nothing by way of assets because they do not own the properties from which they trade, or because they have hived them off into separate companies or trusts. Business rates will still be collected from the operators of business premises and not from the owners or landlords—a point that has been made by Members in all parts of the House. Reforming that process would aid collection from such evaders and I urge the Government to consider addressing the issue in the Bill, or in further reforms to the system. Thirdly, on the detail of a business rate supplement scheme, I and honest traders in my town have serious concerns about how consultation and balloting arrangements in the Bill—or any subsequent regulations—would cater for evaders. Put simply, they do not operate on a level playing field, so why should they have a voice or a vote, and how could such a situation be prevented? Such details need to be discussed. I shall illustrate those concerns with a specific example from my area, to give them meaning. We in north Staffordshire are by no means alone in suffering from the actions of such people, but there is one particularly shocking case that I have taken the time and trouble to investigate and pursue over the last nine months as the local Member of Parliament. In the past three years, business rates written off by Newcastle-under-Lyme borough council have more than doubled from £195,000 in 2005-06 to nearly £420,000 in 2007-08. That is a substantial amount for any second-tier authority, and had the borough council collected it and been able to spend it locally—or not—the effect on the council tax would have been enormous. The council has lost a serious amount of money. Those figures dwarf the amount of council tax write-offs from ordinary taxpayers. In March 2007, for instance, £252,000 was written off in business rates for the financial year, which was almost 10 times the amount due from council taxpayers that was eventually written off. Sadly, the council, like many throughout the country, tries to keep those figures secret. It should not. The public have a right to know how the system is operating, and it is perfectly possible for councils to be more robust by shaming serial offenders as a discouragement to others tempted to do the same who give towns such as mine a bad name in business. I come to the worst example that I have found locally. In March last year, the borough cabinet—behind closed doors again—wrote off more than £13,000 owed by a firm running the Albion public house in Newcastle town centre. The Albion is an old pub—coincidentally, my uncle’s mother and father-in-law used to keep it when I was growing up. This was the fourth time in four years that the council wrote off its business rates, and for four different pub operating companies that went into liquidation. The owners and directors of the companies were the same: two local characters called Anthony William James and Peter Andrew Whieldon. Piecing together all their companies’ affairs from Companies House and liquidators’ reports, one finds that the track record of serial insolvencies and non-payment from their numerous pub companies since 2003 runs as follows: more than £47,000 in business rates was written off by Newcastle-under-Lyme borough council, another £57,000 in business rates was owed to Stoke-on-Trent city council, and at least £184,000 in VAT, tax and unpaid national insurance was owed to Her Majesty’s Revenue and Customs. In all, their failed companies have left a trail of £1.3 million in unpaid debts across the Potteries, but they are still in business and, by all accounts, they have never had it so good. I am not making a political point, but what makes the case particularly shocking is that Peter Whieldon, one of the co-owners, is a local Conservative borough councillor. Until I pursued that track record, he was vice-chairman of Newcastle-under-Lyme council’s financial audit and risk sub-committee. He is still the treasurer of the local Conservative association. His current companies run at least three pubs in Newcastle, and others in Stoke-on-Trent, which make people’s lives a misery in town on Saturdays by showing live Stoke City matches, accessing dodgy satellite signals aimed at Scandinavia and elsewhere. They are doing a thriving trade, but to add injury to insult, the resulting antisocial behaviour causes some traders who pay their business rates to shut up shop early and lose business. As well as football’s premier league, the police have serious concerns. On business rates, I want to stress that the present regime provides no incentive financially to a local council that shows no determination—as a matter of good practice or, as in this case, to uphold civic values—to pursue such serial evaders seriously. The council as a collector for the Government suffers no financial loss. The premises in question were not owned by the companies liable to pay the business rates. The freehold of the Albion pub, for instance, is owned by Marston’s. When the companies go bust—surprise, surprise—the landlord, and main drinks supplier, does not appear on the list of creditors. Either the landlord is very prescient, or that is prima facie evidence of preferential treatment of a key creditor and of tolerance of dubious business practices over quite a number of years, which can only detract from a reputable brewery’s standing in the community. If the business rates regime allowed councils to collect business rates from the actual owners of properties—either generally or in the special circumstances that I have outlined—the opportunity for evasion would be much more limited. I encourage the Government to consider such a reform during the passage of the Bill. Locally, we pursued the council over the affair after receiving many complaints from the public and local businesses A letter was sent last April, for instance, to the Conservative leader of the council, Simon Tagg, to ask not just why the council always wraps itself in so much secrecy, but what straightforward measures the council had taken to protect itself and the Government’s business rate pool, given the track record, by means such as not allowing rates to build up over a year but instead demanding them up front or in instalments, which is the case for ordinary council tax payers The leader replied that existing legislation does not allow the council to do that. He also wrote:"““The Council’s finance department cannot take account of ‘previous bad history’ when issuing demands because they have to treat each financial year separately.””" That defies common sense and any good business practice, and I would like to hear from the Government whether that advice, no doubt given to the leader by his officials, is correct. If not, I will further pursue the matter locally. If it is correct, I would urge the Government to amend the Bill to give councils common-sense flexibility in how they pursue such cases. I have written at length several times to the council’s relatively new chief executive, Mark Barrow, who has been in post for about 18 months now. The first time was in April, when I pieced together the track record. I wrote again in June and again at the end of July after receiving no substantive reply. I am afraid that at that point, for the first time as a Member of Parliament, I invoked the Freedom of Information Act, but pretty much to no avail. Apart from general procedural details about the new standards procedure for local councils, which I knew about by that stage, I received no answer to specific questions and heard no more. I wrote again on 4 December, expressing grave disappointment and again citing the Freedom of Information Act. This time I received a two-line acknowledgment, dated 8 December, from the council’s freedom of information co-ordinator, promising me a response about the business rates within the statutory deadline of 20 working days As of today, 12 January, there is still a resounding silence from my council and its chief executive over the affair. The point that I wish to make about the reform of the business rates regime is that if such things are happening in my area, they are happening up and down the land to the detriment of government, councils, council tax payers and honest business rate payers. There is some local evidence that the more widely such behaviour becomes known—traders talk to each other all the time—the more others follow suit, either just because they can or because they cannot otherwise compete on a level playing field. Have the Government calculated the total cost of business rate write-offs each year, and have they commissioned any studies to estimate how further reforms such as those I have suggested may help to reduce that amount, to the benefit of everybody across the country? Councils could either be helped by being able to levy business rates on the owner of a business property, or they could be given specific duties to pursue serial evaders, with financial penalties on councils as an incentive. That would apply particularly to councils such as Newcastle, which has hardly pursued with zeal the affair that I have mentioned or complied with its statutory duties under FOI legislation. If that is the frustrated complaint of the local MP, what chance do ordinary local council tax payers and honest businesses have of ensuring that the business rates system operates fairly? I shall draw my remarks to a conclusion by discussing openness. A further reform should involve a duty on councils to be transparent about write-offs and the non-collection of business rates in general. In the case that I mentioned, the council’s standards committee has now considered a complaint against Councillor Whieldon, concluded that there is a case to answer and appointed an investigator. However, that has all been done behind closed doors. Nothing has been said in public, and nine months on I have not been contacted. I hope that the review has not been set up to clear the council and to whitewash the procedures that it adopted. One of the more farcical elements of the case is that the only thing that has been made public is an investigation into how the information came into the possession of a Member of Parliament—a leak inquiry into myself. As part of that investigation, last July the council reviewed its policy of writing off business rates in secret and gagging cabinet members and ordinary councillors from saying anything to anybody, even in the public interest. In a paper to its cabinet, the council surveyed the policies of nine councils in Staffordshire and labelled them—