Business Rate Supplements Bill

My Lords, I am truly delighted by the response offered to the Bill. I knew that I should not have used the word "pristine": it certainly got me into serious trouble almost before I began. Clearly, we will have some interesting debates. It has been an excellent debate so far, as usual demonstrating a wealth of expertise and commitment, and a genuine diversity of approach across the House. Noble Lords have been able to support the principle of the Bill by and large. I am very pleased by the language that has been used. This Bill has been described as modest and useful, which means that it is in with a good chance. My noble friend Lord Smith, the noble Lord, Lord Best, and the noble Baroness, Lady Hamwee, used those terms. The noble Baroness, Lady Valentine, described it as a good thing. I am delighted by those approaches. It does not mean that we will not have intense scrutiny, which I welcome. But there has been an understanding about what the Bill is about, which was not least exemplified in the words of the noble Lord, Lord Bates, in relation to Crossrail. In his summing up, the noble Lord, Lord Tope, did the Bill a great service in describing the nature of partnership and the way in which partnership fundamentally informs and will make a success of BRS. That was a useful description. Partnership was described not least by my noble friend Lord Smith with all his experience of promoting partnership. The noble Baroness, Lady Valentine, has already had tribute paid to her role in bringing business together, as has the role of the LGA in its ambitions of working with local government. Crossrail has commanded unanimous support, which is a very important part of the success of this Bill as it goes through the House. The noble Lords, Lord Bates and Lord Moynihan, introduced a very interesting perspective, to which I will turn in due course. The noble Baroness, Lady Valentine, and my noble friend Lord Berkeley, raised detailed questions which I will answer. In this Bill we are trying to achieve a balance of interest and outcomes, and the importance of additionality. I was particularly intrigued by the invitation by the noble Lord, Lord Tope, to answer the noble Lord, Lord Bates. I always look forward to the Opposition answering each other’s arguments and leaving me out of the picture completely. I am very happy for that to continue. Essentially, I say to the noble Lord, Lord Bates, that, as demonstrated by his response, we have a slightly different take on the Bill. I want to emphasise the principles again; first, the exceptional nature of what we would see BRS as offering. It is normative in the sense that it is in the Bill and will be there as an opportunity. Certainly, it will be an exceptional opportunity for those local authorities which want to take it up. That is partly my response to the fears raised by the noble Lord, Lord Moynihan, in relation to the leisure and sport industries and the interests that they represent. The £50,000 rateable value limit will certainly put many fears to rest because most of those organisations will certainly fall within the 90 per cent that are excluded by the Bill. This money goes to local authorities in partnership with business to develop local significant projects which have been jointly agreed, designed, devised and expressed in the prospectus, so this is very much local funding done on a joint basis. Therefore, it is about responding to the needs of the local community. In developing BRS, therefore, the Government have been mindful of the need to balance these greater freedoms to raise revenue locally with the need to protect business interests. I particularly welcome noble Lords applauding this celebration of local autonomy, and the power which it gives local authorities. I agree with the noble Lord, Lord Tope, that it is regrettable that the debate has become polarised between the 2p rate and the extent of the ballots. I hope that we can enable people outside to understand that there is common ground on the balance that we are seeking to achieve, and that we shall get that balance right. I believe that the Bill strikes the right balance, which is reflected in the support which it has by and large received. Indeed, all the business representatives who gave evidence to the Commons Public Bill Committee supported the principle of BRS. It is interesting to note that the director-general of the British Chambers of Commerce said that people in several parts of the country spoke of the need for more local determination and to raise additional revenue from the business community. That attempt to balance rights and interests underpins the credibility of the Bill because it is very clear that an explicit benefit has to be proved in the prospectus of whatever project emerges, as the noble Baroness, Lady Hamwee, said, which has to be owned by the people involved. That has to be balanced with the need to protect smaller businesses from paying the supplement. My second major point in relation to balance is that the Bill does not give local authorities unfettered access to businesses’ profits. It includes numerous protections for business rate payers. As I said, it gives them a real say in whether the supplement should be levied, not least because we are requiring a double lock which will guarantee support as 50 per cent of all qualifying businesses will have to agree to give their support in a ballot, and they will have to represent more than 50 per cent of rateable value among businesses. That is genuine fairness in terms of proven support. The noble Lord, Lord Best, on behalf of the LGA, referred to the 2p rate. We are aware that the LGA has taken a particular stance on that. The 2p limit allows local authorities to raise what we think is a significant and meaningful sum towards projects while safeguarding business. The national upper limit provides an important safeguard for business in terms of the maximum that they may be required to pay. We shall return to that issue in Committee when we discuss the noble Lord’s amendment. Alongside that we have had the beginnings of a debate about the ballot. The noble Lord, Lord Bates, and other noble Lords asked why there should not be a ballot in all cases. There have indeed been strong calls from the business sector for a vote in all cases. However, again, this contrasts sharply with the position of the Local Government Association, which takes the opposite view entirely and would like the local ballot to be left to local discretion. Once again, the Government find themselves in the middle, trying to balance the interests of both parties. Requiring a ballot where the supplement will support more than one-third of the total cost of the project strikes the right balance. It will ensure that where the BRS is contributing a relatively large proportion, or all, of the funding needed for a project, that business will get a vote. However, in the circumstances where it is contributing a smaller package, we do not believe that it would be desirable. There will be a robust consultation process, but we think that it would create additional uncertainty, greater delay and confusion about whether complex and large projects can be agreed and can go ahead. I say to noble Lords, in particular the noble Lord, Lord Bates, that although we have not specified it in the Bill, there is nothing to stop local authorities choosing to introduce a ballot on any BRS if they were to so choose. Noble Lords have addressed additionality and how money is spent, which are important. As the noble Baroness, Lady Hamwee, said, this could be about revenue-raising projects as well as capital-raising projects. The noble Lord, Lord Bates, put forward some very interesting examples. I reiterate that in Clause 3 we have provided that the projects must be specific to what the prospectus says, and they can take place only if they are funded additionally and for the purpose specified. The examples that the noble Lord gave of the RDAs and the centres of excellence are interesting, but we do not see this as a substitute for projects that can be funded in other ways. My sense is that those options would have been exhausted, or a decision would have been arrived at that the RDA might be a contributing partner, for example. Certainly, every case would be taken on its merits in terms of the local conditions. I am sure that there will be many opportunities for us to discuss that in Committee. The noble Lord, Lord Moynihan, raised some interesting issues in relation to community amateur sports clubs. The noble Lord will know that registered sports clubs are eligible for 80 per cent relief from national non-domestic rates, and they will get exactly the same relief in the Bill. Billing authorities can top up the mandatory 80 per cent relief, and if they do so they will have to make sure that it is systematic across both ordinary relief and this levy. Obviously, I agree with everything that he said about the contribution of sport and about the legacy that we want to see and, we would not wish to inhibit that in any way. I foresee the possibility of a project under BRS that would bring the boroughs, the sports community and sports industries together to conceive of something specific and part of that legacy. I would have thought that there is a lot of comfort to be got from the £50,000 rateable value limit in relation to those businesses and charities. I will read the noble Lord’s speech in more detail, as he may have raised other issues. My noble friend Lord Berkeley and the noble Lord, Lord Tope, talked about Crossrail, and asserted that there will be differential benefits for different parts of London. The whole of London’s economy and the areas surrounding London will benefit from Crossrail in the long run. It is a London project but, my goodness, its benefits are not confined to London. We know how much London drives not just the economy of the south-east but the country as a whole. Its impact will be felt in reducing congestion and enabling faster-timed journeys. That will free up many routes, not just across London. It will contribute to the build-up of jobs in London as well. The Mayor of London’s briefing suggests that every London borough is projected to benefit by at least £14 million by 2026 in terms of wider economic employment and transport benefits for local residents. There are some variations within that, but I look to the expertise on London across the House to see whether a test will be applied to that. On the question of my noble friend Lord Berkeley, we estimate that the BRS will raise about £177.9 million a year. That would bring in less than a third of the total cost of Crossrail, and that is why a ballot will not apply in that case. I shall look in more detail at his other questions. One fundamental and important question raised was: why not limit the Bill to London? We heard a conclusive argument as to why not from my noble friend Lord Smith, who asked why other areas should be denied the potential benefits of the Bill. I cannot think of a better counterargument, because that is the point of creating an opportunity in the Bill for areas outside London. If and when the time is ripe and the partnerships agree and want to work on something exceptional that crosses different local authorities, why should they not have this opportunity? Is it not more undemocratic to deny them that chance and construct something for London alone? I suspect that if we had constrained the Bill to London, I would be here making an altogether much weaker case. We are very mindful of the potential use of BRS more widely as local authorities move towards subnational organisation. Indeed, there were splendid examples of progress on that in today’s Budget. I was also very pleased that so much attention was paid to the nature of consultation. The noble Lord, Lord Bates, talked about the importance of transparency. That was absolutely right. The issue, as the noble Baroness, Lady Hamwee, said, is about the need to take the whole funding package, whereby everyone is clear about their roles and responsibilities, particularly funding responsibilities within the package, and the need for the prospectus to be absolutely clear about the expectation, the additionality, the cost benefits and the responsibilities. That will be an extremely serious part of our debate on the detail of the Bill. My noble friend Lord Smith also referred to that. Underpinning that is the idea that this is not something that will be done to local businesses; they will be involved in this and will benefit from it. The consultation process before each BRS is levied is an extremely important part of the whole argument. I am winding up, but I should address the issue raised by the noble Baroness, Lady Valentine, about BIDs. There was much discussion in another place about the possible impact of BRS on BIDs, but she raised a wider issue. This was also raised by Nick Raynsford in another place. Perhaps I may deal first with the notion of offsets; the decision to offset BIDs against BRS is accomplished in the Bill. That will depend very much on the specific circumstances of the project. Clause 16 leaves the decision to local discretion. As for the wider issue about whether property owners should be included in BIDs to strengthen the role and to spread the weight, since the Commons considerations we have received further representations on the issue. It is now clear that there is widespread support for BIDs and we are keen to ensure that they continue to flourish. We are giving further consideration to the representations on the interaction between BIDs and BRS, and I hope that in Committee I can come forward with more detail on that and keep the noble Baroness fully informed. I believe that I have taken care of most of the substance of the arguments that have been made, but I shall read Hansard tomorrow to make sure. The issue of implementation and the timing of regulations was raised by the noble Lord, Lord Moynihan, and the noble Baroness, Lady Hamwee. We intend to consult shortly on the policy that will underpin the regulations. Even if we do not have the regulations in front of us, we will have the substance of the regulations to enable us to have an intelligent debate, and we can do that as soon as possible. We aim to issue the consultation paper on our proposals for secondary legislation very soon. With that in mind, I hope that we will be able to proceed before, if not during, Committee stage with a map in front of us of what implementation will look like. I am extremely grateful to everyone who has spoken in this debate. I am very grateful for the welcome that noble Lords across the House have given to the Bill and for the intelligence and thoughtfulness with which they have responded. I very much look forward to our later debates on the detail. Bill read a second time and committed to a Grand Committee.