Business Rate Supplements Bill

This has been an interesting, if somewhat short, debate, and it is a shame that only two Members from the Government party were able to join us this evening to contribute—I am sure that others might have been able to make a contribution. It is good to welcome the Ministers back to their places to be able to contribute at least to the end of the debate. The Minister for Local Government, who has just returned, set out the case in his characteristically cautious, but always reasonable manner. He and I had the fortunate—or otherwise, depending on how one describes this—opportunity to debate stamp duty land tax at some length; I am pleased to say that I get out more often now. He showed his ability to do an extraordinary turn at heel when displaying new Labour doublespeak. He started off with the old gag that a power to tax is not a tax—I particularly enjoyed that. When asked why the Government were cutting a particular initiative, he told us that it was not a cut—they were merely building it into the rates system. He then surpassed himself, because just for a moment, when using the deadpan manner that he uses when telling something that he knows is palpably incorrect—perhaps I should put it that way—a glimmer appeared at the edge of his lips as he told us that this Prime Minister and this Government have at their heart the belief in decentralising power. We all know that the reality is somewhat different; I could use many words to describe the Prime Minister, but ““decentralising”” would not be one of them. Business will be concerned that, when questioned, the Minister for Local Government refused to agree to ballots for all supplementary business rates. That is on the record, and businesses will note it. He also admitted when questioned that empty properties face an additional levy under this Bill, despite the impact that that could have at this time. Only Labour could charge 102 per cent. on empty business properties in a recession. We subsequently heard an excellent contribution from my hon. Friend the Member for Bromley and Chislehurst (Robert Neill), who set out how the original principles have been lost in the Bill, how flexibility has been replaced with a rigid tax-raising scheme and how simplicity has been replaced with complexity. He also rightly spoke about the danger of removing ballots or not permitting ballots for all schemes. We want business and local authorities to work together, and the danger of this Bill is that it will merely divide those two camps. He also contrasted the words of the Prime Minister with the actions of his Government. This morning, the Prime Minister talked about jobs, yet this afternoon his Government are introducing a new tax on employers—we intend to highlight that contrast. We heard an excellent and knowledgeable contribution from the right hon. Member for Greenwich and Woolwich (Mr. Raynsford), although it was somewhat short for him. At the beginning, he tried to pretend that the Conservatives are adamantly opposed to Crossrail, although he knows that to be untrue—I see him smiling on the Benches opposite. He was eloquent about the business improvement districts scheme—rightly so, for he introduced it. I differ with him in that I do not think that the scheme before us will engender that strengthened relationship between business and councils. I suspect that is where his argument falls down, but it was an excellent bid for a return to ministerial office, and we look forward to his coming to the Dispatch Box in due course. The hon. Member for North Cornwall (Dan Rogerson), who speaks for the Liberal Democrats, set out why his party will support the Bill. I was intrigued by the fact that the position may conflict with that of his colleague, Lord Cotter, who speaks for the Liberal Democrats in the Lords:"““It does not seem to be a good time to introduce an additional cost for businesses that are struggling to survive in a time of economic crisis.””—[Official Report, House of Lords, 8 December 2008; Vol. 706, c. 222.]" I agree with the noble Lord, but I am disappointed that Liberal Democrat Members are confused. We then had a wide-ranging contribution from the hon. Member for Newcastle-under-Lyme (Paul Farrelly), which was mostly about business rates arrears and an interesting press release that attacked the local council. I have no doubt that Ministers look forward to his contribution in Committee. We then had four strong contributions from Conservative Members: my hon. Friends the Members for Northampton, South (Mr. Binley), for Ilford, North (Mr. Scott), for Cities of London and Westminster (Mr. Field) and for Cotswold (Mr. Clifton-Brown). My hon. Friend the Member for Northampton, South spoke with his characteristic passion. He gave us the full economic context—perhaps a little fuller than you liked, Madam Deputy Speaker. In the broad range of issues, he highlighted and rightly contrasted the way in which the Government say one thing and do another. I hope that he keeps banging that drum—I am sure that he will—in the weeks and months to come. My hon. Friend the Member for Ilford, North spoke strongly in favour of Crossrail, which will benefit Ilford and much of east London. He also made a powerful point: consultation and ballots are not the same. I see the Minister nodding in agreement, and I hope that he will say so on the record. My good and hon. Friend the Member for Cities of London and Westminster made, as expected, a knowledgeable contribution He gave the history of how such infrastructure projects need to be funded, and the underlying dilemmas. He explained the difficulty of quantifying benefits for businesses and why the matter needs to be handled with such care. That is the line that we want to take. Last, but by no means least, my hon. Friend the Member for Cotswold made a powerful contribution. Like me, he is a chartered surveyor, and he brought his knowledge of surveying to the debate, as well as a powerful exposition of the weakness of the Government’s arguments. He highlighted the fact that many of the key elements are not in the Bill, but will be revealed later, dripping through the legislative system when we can challenge them only more weakly. The core of this debate and the origin of the measure lie, as hon. Members have said, in the Lyons inquiry into local government finance. It highlighted the need for local authorities to have a more flexible way of raising supplemental revenue for local economic development. Several hon. Members pointed out that the inquiry emphasised that"““local supplementary powers should be designed in a way which can gain credibility with business and the wider community.””" That is where the Bill’s weakness lies. The Government’s White Paper followed in October 2007 and set out the key features of a new business rate supplement. They were to include a limit on the rate in the pound, the need for businesses to be balloted, although only in limited cases, and the exemption of businesses whose rateable value falls below £50,000. Those elements remain in the Bill. Alongside that has been the need to progress the Crossrail scheme. Indeed, a business rate supplement in London will be used to part-finance the expected £16 billion cost of Crossrail. We welcome and support Crossrail, not least because it will enable us to link our capital’s rail network and help to reduce the pressure on an already overcrowded tube network. However, it is not unreasonable for many London businesses to question the cost. After all, much of the revenue to be raised is likely to come from businesses in boroughs such as Westminster, the City and Hillingdon, where the specific benefit to each firm will be extremely difficult to show. There is evidence for direct and indirect benefits but hon. Members must understand that it is not wrong to raise those concerns, because those are the people who pay not just our salaries, but those of the public sector as a whole. That leads me to one of the key points in this debate. Business rates have long been resented by firms because they are taxation without representation. That charge is raised from entities that do not have a vote. The owner may vote and the staff may vote, but the firm—the payer of the tax—has no vote. If businesses receive nothing specific in return, they understandably question the fairness of the levy. That is why changes to business rates must be handled carefully. The Lyons inquiry said that the rules covering business improvement districts, for example, have been credible to the business community, because they specifically require a majority of the affected tax-paying businesses must agree to the additional charge. Conservative Members support that approach. The Bill is fundamentally flawed because it seeks to permit a supplementary rate to be charged, but requires a ballot only in certain circumstances. Under clause 7, a ballot must be held only when the amount raised accounts for more than one third of the estimated costs. Councils may hold ballots in other circumstances, but they are not obliged to do so. That is the problem. There should be a vote on any proposed supplementary rate with no ifs or buts. Issues arise about costs, not least the fact that they could range from £319 million a year to £600 million a year. It would help if the Minister clarified the basis on which those estimates were made. After all, they come at a difficult economic time when output is falling, unemployment is rising and the economy in this country is contracting faster than in any of our G7 competitor nations. The result is a squeeze on small businesses, which is why so many business organisations are worried about the measure. Perhaps the Minister will tell us how many jobs could be lost as a result of introducing the measure now. What is the Government’s estimate of the number of jobs that will be affected by the extra charge? The impact of the measure could be affected severely by the rates revaluation planned for next year. It will be based not on 2010 values, but on values at 1 April last year. Hon. Members will realise that that creates two serious problems. First, many firms will face big rises in rates bills, just when they can ill afford them. Secondly, the revaluation will push many firms that are below the £50,000 threshold into paying the new charge. Implementing the levy now will deliver a double whammy to many small and medium-sized firms. The question for us is, why is it right that in the next year those businesses must pay more on their main rates bills and more on their supplementary rates bill? In conclusion, there is a case for businesses to contribute to infrastructure projects from which they benefit. Clearly, businesses throughout London will benefit from Crossrail and a radically improved rail service. However, the Bill is fundamentally flawed. A measure that should be flexible and accountable has been turned into a rigid tax rise that is needlessly complex and highly undemocratic. At a time of recession, it threatens not to help economic development but to burden hard-pressed employers. At a time when firms need fewer regulations, it introduces more red tape. At a time when we should be encouraging councils and businesses to work together, the Bill threatens to divide them. For all those reasons, the Bill is a missed opportunity that businesses and their workers can ill afford.