Business Rate Supplements Bill

My Lords, I declare my interest as president of the Local Government Association—an unremunerated post. In that capacity, I welcome the Bill with the extra power that it introduces for local authorities to raise additional revenue to assist in local economic development. Although the majority of local authorities are currently Conservative-controlled, the LGA seeks to work on the basis of consensus and speaks for local government across the political spectrum. If there is one issue on which local government politicians unite, it is on the need to empower local authorities to devolve from central to local government. That theme is the policy of all the main political parties at national level as well. The Bill is one modest step in the direction of decentralisation and devolution and it should prove a useful instrument to assist in economic development—not, I fear, in the short term, but in the medium and longer term. However, two particular bones of contention remain for the LGA, on which local government hopes to see the Bill improved. First, local government would like more flexibility on the 2p limit, which is hard-wired into primary legislation, so that it could be changed later through regulation alone. Secondly, it is felt that councils should not be forced to hold a ballot on the business rate supplement but, as the bodies with local knowledge of local accountability, should take the decision directly on whether the BRS would be appropriate to local circumstances. Let me elaborate on those two points. The Bill builds a limit of 2p in the pound into primary legislation. The Minister mentioned the report from Sir Michael Lyons back in March 2007. The Lyons report recommended a limit of 4p. It stated that a balance needed to be struck between providing flexibility to enable a real difference to be made and ensuring that tax limits remain within acceptable limits. It noted that a lower limit would provide less revenue and less flexibility. The 2p limit would raise a relatively modest sum in the totality of public finances of about £600 million, as the noble Lord, Lord Bates, said, which is about 5 per cent, or perhaps a bit less, of the £19.5 billion that has been raised by the main business rate. It is clear that, in the current economic climate, attempts to increase the limit to anything more than 2p would be entirely inappropriate. Local government accepts this; the 2p limit in the Bill is perfectly acceptable at the moment for local authorities and, it is believed, for business. However, the amendment that I shall move when the Bill reaches Committee would ensure that the Secretary of State consults at five-yearly intervals on whether the limit is still appropriate. This would ensure that when the economy recovers, which it surely must one day, projects funded by the BRS become more attractive. There will be no more need for primary legislation, and changes could be made more quickly. This proposal recognises that central and local government must be mindful of the circumstances in which businesses find themselves, so we envisage consultations to seek views from local authorities and the business sector. If, following consultation, the Secretary of State concludes that the upper limit should be varied, this could be done simply through regulation. The LGA believes that councils should not be obliged to hold a ballot but should be allowed to respond to local circumstances if appropriate. This reflects the conclusions of the Lyons inquiry report, which recommended strong consultation with business rather than a ballot. I therefore hope that this valuable new measure will not be inhibited from achieving its full potential in the future, or undermined or diluted by arrangements for ballots that overrule councils’ own decision-making role. With these thoughts, I wish the Bill well.