Business Rate Supplements Bill

I am delighted to catch your eye in this debate, Madam Deputy Speaker. I had not intended to speak. I entered the Chamber this afternoon with a relatively open mind on this proposal, but the more that I listened to the debate, the more I realised that the Bill lacks adequate safeguards for businesses and the more I therefore realised that my Front-Bench colleagues are right to oppose it, for the reasons that I wish to outline. The people of London have already been, or are likely to be, caned through increased council tax to pay for the Olympics, and it now seems that the businesses of London are to be caned through this mechanism to fund Crossrail. Before the right hon. Member for Greenwich and Woolwich (Mr. Raynsford) leaps up to intervene on me, I wish to say that I totally support Crossrail, but a fairer method of funding it—if the Government wish to do it that way—would be a supplemental increase in the uniform business rate so that all businesses throughout the country pay for it. As he and others have made perfectly clear, all businesses in London and businesses elsewhere in the country are likely to benefit from these measures, so why should they not all pay, rather than just a certain section of them? There are a number of reasons why I oppose the Bill, but my hon. Friend the Member for Northampton, South (Mr. Binley) made the very powerful case that now is not the right time to introduce such a measure. The country is enduring negative growth and huge increases in unemployment, the rate of business failures is increasing alarmingly, and the rate of business output is decreasing alarmingly. Perhaps the most important reason is that given by the hon. Member for North Cornwall (Dan Rogerson): we have to remain internationally competitive. If we keep increasing bureaucracy and taxation on businesses, they will simply relocate away from these shores. I have just come back from Hong Kong where there is a maximum corporation tax of 15 per cent., no capital gains tax, no inheritance tax and very low business rates. It is very easy to get money in and out of Hong Kong, and the tax returns are one page long. Let us compare that with the bureaucracy of this country and the huge increase in it that this proposal will engender. It is not just tax-raising problems that these proposals will engender; there is the whole bureaucracy connected with collection, which the local authorities will have to undertake. As my hon. Friend the Member for Cities of London and Westminster (Mr. Field) said in the closing moments of his speech, a whole new form of software will be required to collect these rates. The Bill does not contain adequate safeguards. We all know what happened when the Conservative Government introduced the lottery. We were clearly told that it would be additional to normal Government expenditure and that in no way would it be used to supplement their tax-raising powers, expenditure on health or other normal expenditure. But what happened? This Government came along and started raiding the lottery for all sorts of purposes—health, education—that the lottery was never designed to pay for in the first place. Clause 3 sets out clearly some purposes that the mechanism is not supposed to pay for: housing, social services, education services, services for children, health services and so on. The problem with the Bill is that it contains very wide order-making powers. My reading of it is that the Government would easily be able to alter those purposes by a simple statutory instrument discussed upstairs. Indeed, almost anything proposed in the Bill could be altered by a simple statutory instrument after an hour and a half’s debate upstairs. There is a second thing that I dislike about the Bill. Clause 4, entitled ““Conditions for imposing a BRS””, indicates that there is to be consultation on these proposals. One of the conditions is that a levying authority"““has consulted the relevant persons on the proposal””." Who are the ““relevant persons””? Are they strictly businesses? Are they other organisations? In any case, this Government have made a new art form of consultation. We all know what happens when they consult on anything: they may take people’s views but then they completely ignore them. Let us take the example of the post offices in my constituency. Twelve post offices were proposed for closure. There was a huge number of demonstrations, public meetings and letters and much annoyance of every sort—and the Government took not one jot of notice. I warned when my ambulance trust was going to be merged that there would be problems. What did the Government do? They consulted—and proceeded with the proposal. There have been countless occasions when they have consulted on things and completely ignored that consultation, so the safeguard in the Bill is very scant. Thirdly, there are other safeguards in the Bill. As has been mentioned by other Members, there is a 2p in the pound rateable value safeguard. There is a £50,000 safeguard—we believe—to be implemented. There are safeguards whereby a local authority can introduce transitional measures. Again, however, those can all be altered on a whim by a statutory instrument discussed upstairs. The Government must give an undertaking that those things will be constantly reviewed, because we all know what happens if monetary safeguards in a taxation regime are not upgraded from time to time—through fiscal drag the Government end up raising more money. For example, personal allowances, which were not increased for years under this Government, were, in effect, just an extra income tax that the Government were raising. The most important aspect of this Bill is the lack of a mandatory ballot of all the affected businesses. That is what I object to most, because if the Government had confidence in their proposals—and they clearly do not—they would be perfectly happy to allow businesses to have a ballot. As I said in an intervention on my hon. Friend the Member for Bromley and Chislehurst (Robert Neill), the Government might be scared that businesses will block a proposal, but businesses will do so only when they consider it not to be in their interests. If they consider that improved infrastructure will improve their profits, they will want things to go ahead. The argument being made is incredibly weak, and I hope that my hon. Friends will address it in Committee—indeed, I have a forlorn hope that the Government may yet recant on this provision. We can all remember the days when businesses without representation went bust under the old local business rates system. In Sheffield, business owners had to take the roofs off their factories so that they were not liable for the excessive local business rates that the Sheffield borough council wanted to raise. If we are not careful, we will go back to that system and we will simply put businesses out of business. I was not elected to this place to put businesses out of business; I was elected to help my constituents form businesses for this country, so that we can create the wealth to pay the tax to have the Government expenditure on the projects that we want. I am extremely concerned about the lack of a ballot. The right hon. Member for Greenwich and Woolwich and I spent a great deal of time discussing business improvement districts in Committee when that system was introduced by the Local Government Act 2003. We discussed not only the fact that there needed to be a ballot, but the form of the ballot. I do not think it beyond the wit of man to see that we should do the same this time. My fifth objection to the Bill is that although businesses will be sheltered—they may only have to pay up to a third before there is a ballot—they may well have to pay more than a third. That is a real worry, and it is only a third in the initial prospectus that would trigger the ballot. We all know what local authorities, and, indeed the Government, are like at managing large-scale infrastructure projects. They have a habit of spending far more than the initial budget, and in such circumstances the whole project could cost much more. I have no doubt that Crossrail will come in greatly over budget, because a host of problems will be encountered in its construction. For example, we know that burying just one 7 km bit of cable under the ground for the Olympics will cost a staggering £160 million. Huge costs and huge difficulties are involved, and even with the best will in the world and the best surveyors in the world those cannot be fully foreseen until the machines start to dig the necessary tunnels for Crossrail. I have a great concern about how expenditure will be controlled. Much more than that, I am concerned about the Government’s motive in all this. Once they have introduced this mechanism, I think they will start to say to every local authority in the land, ““We’re not paying for this large-scale infrastructure project. You pay for it, using the local rates supplementary mechanism.”” We might almost see an end to central Government funding of large-scale infrastructure projects, and that is what really worries me. We could find that such a situation became the norm, and that every authority that wanted a new road, railway, port or airport would be told that it must get its businesses to pay, because they were the ones going to benefit. We will simply find that, as happened under the old local business rates system, businesses will move away from those areas to where they know local authorities are cheaper—they are likely to be the Conservative-controlled ones. I am greatly concerned about the Bill, because it is a Trojan horse being introduced not, as my hon. Friend the Member for Northampton, South said, by a new Labour Government but by an old Labour socialist Government who do not understand the needs of businesses. This Bill is taxation through the back door, and it is dishonest taxation because it does not provide for a proper ballot. I hope that my hon. Friends will oppose the Bill for all they are worth. If the Government do not provide the proper safeguards, I hope that when we get into government after the next election we will provide them, because I was elected to this House to represent the interests of my constituents and of business, so that this country flourishes and gets a bigger and bigger share of world trade, not a smaller and smaller share, as is happening at the moment.