Business Rate Supplements Bill

I welcome everyone to the Grand Committee on a shorter Bill than the last one, but no less significant. I am sure that we will have the usual vivid debates. I am pleased to have kicked off with a general debate on the disposition of the BRS itself. I am also grateful for the clarification, because we struggled; we thought that a subtlety in the amendment had evaded the combined experience of officials and Ministers, but I now understand more what the noble Lord is getting at. Certainly, the crucial word is "discount". I will not repeat anything that the noble Baroness, Lady Hamwee, said about the issues raised by the amendment, but this is an opportunity for us to debate the general principle. The noble Baroness is right. As regards the BRS, local authorities will be free to levy up to 2 per cent. There is flexibility within that, although it is slightly different from that raised by the noble Lord in his amendment. The amendment proposes that levying authorities be given a power to reduce business rates. As I understand it, the noble Lord argued that as well as being able to raise BRS for projects that will enhance economic development, they should have the flexibility to use BRS as a trigger to reduce business rates for smaller businesses. That was the background to the general argument about whether that would be a plausible and sensible thing to do. It is an interesting point. It is worth just giving a brief outline of where the current rating arrangements derive from. As noble Lords will know, they have been in place since 1990. They ensure that business rates are collected by billing authorities and transferred to central government. For many years, we have followed the principle of equalisation according to local need and resource, and redistributed to local authorities for them to provide local services. I believe—as did Sir Michael Lyons, the last person to have a serious look at the systemic nature of this—that it ensures that businesses that benefit from those local services contribute towards them. Although the system has its critics, it is fair. Nevertheless, the noble Lord raised a good question about whether there should be scope for local authorities to be able to use BRS to reduce business rates. It was in that context that this question was raised in the discussions around the 2007 White Paper. Paragraphs 2.43 to 2.50 developed that argument, and I will take the issue on from there. It was acknowledged that, while there had been widespread debate of the issues that surround allowing local authorities to raise a supplement on business rates, there had been less discussion of the arguments for and against permitting authorities to reduce their local rate below the current national level. The White Paper raised the theoretical possibility of allowing local authorities a broader discretionary power to lower their local rate if this were in the economic interests of the area. As the noble Lord said, an authority might want to do this to attract inward investment or to deal with other local economic challenges. In the White Paper, we said that we would discuss the case for allowing local authorities in the context of BRS to reduce rates with business, local government and other stakeholders, which is what happened. We held meetings between officials and representatives of business interests, including the CBI, the British Chambers of Commerce, the British Retail Consortium, local government, the LGA and London Councils. We invited views on the proposition and asked stakeholders to consider how such a measure might work in the context of BRS and some of the implications. These included the impact on local services, how local authorities might use the power, what safeguards might be put in place to protect council tax payers and the implications for tax complexity. This was a thorough discussion but, significantly, the outcome was that there was little appetite to pursue that further. Businesses and local government could not see how this would work without a general negative impact on local services and council tax payers. So they debated it in the round in that context. Given the response, I am very happy we have had this debate on the record. It would be perverse of the Government to bring forward such a measure and, clearly, it would be perverse if we were to support it. However, let me reassure the noble Lord that local authorities already have the power to provide discretionary hardship relief to businesses which would otherwise suffer hardship, provided it is reasonable to do so having considered the interests of council tax payers. This is because part of the cost of providing hardship relief must be met by local taxpayers. I know that the noble Lord’s argument was in the context of economic incentives and ways of promoting local economic activity, but in order to complete the debate it is worth saying that hardship relief is given in the most extreme circumstances. I am grateful to the noble Lord for raising the issue, and I hope he will feel able to withdraw his amendment.