Business Rate Supplements Bill

I shall have to leave that question until the end of the debate. That will give me time to think about it, too. As the noble Lord, Lord Bates, said, very important issues have been raised in our debates on these amendments. I was particularly struck by his saying that we have defined the investment that the BRS will prompt by what it does not cover rather than by what it does. We were very wise to do so, because throughout this whole process we have been trying to avoid any flavour of prescription while at the same time being clear that there are criteria that will be absolutely fundamental to the way in which the BRS can command complete partnership and complete credibility and help to deal with some of the fears among businesses, especially small businesses, which the noble Lord spoke of and which I can understand. That is why I am happy to put as much as possible on the record in Committee. I hope that, by doing so, I can put a lot of those fears to rest. Amendments 2, 7, 12 and 65 are clearly asking about the use and purpose of the BRS. This is fundamental: what can the BRS be used for and not used for, and why? In essence, Amendments 2 and 65 would give the Secretary of State, and Welsh Ministers in Wales, powers to extend the use of the BRS beyond the promotion of economic development. The amendment to Clause 1 would allow the Secretary of State to make regulations to add to or vary the purpose for which the BRS might be raised. These regulations would be subject to the affirmative procedure. The crucial question that we have been asked is what we mean by economic development. In essence, the best account of why the focus is so firmly on economic development is given in the White Paper in the first part of the chapter that introduces the idea of the BRS and explains why it is a relevant and important opportunity. I shall give a little history and explain the economic capability of local authorities now. We are facing situations where we still have gross regional inequalities and local inequalities which need to be confronted. Over recent years, given that we are facing globalisation and the competition that comes through that, which impacts on location of skills, enterprise and investment, that combination has genuinely led to a situation where for a range of reasons with different agencies the Government have tried to give local authorities a much firmer grip on the levers of economic power. We saw that recently, during the passage of the Bill that we have just finished, in terms of economic regeneration, the configuration of regional and local economic capacities, the economic assessment and the sub-national review, which has led to those configurations and so on. Essentially, the argument is that there are different strengths in different places and that local authorities need, in a way that they have not before, to take a grip on what can be done in terms of their economic prospects and productivity now and in the future; that is, planning locally for greater prosperity. This serious agenda was reinforced by the Lyons inquiry, which obviously considered reforms to business rates. He recommended a new local flexibility to set a supplement on the current national business rate, which we are debating. That was reinforced by the SNR. I take the point that "economic development" is hard to define because of what constitutes direct and indirect economic development. It makes sense if we look at it in that context, bearing in mind the journey that has been made and the focus that we are trying to give. In responding to the Lyons recommendations, for example, the Government stated that, ""a local supplement has the potential to support local economic development, but would need to be subject to credible accountability to rate payers and real protection to any businesses—particularly SMEs—that might be disproportionately affected"." That argument was taken up by the SNR, which talked about, ""a powerful new tool for local authorities to invest in infrastructure to support long-term economic growth in their areas, backed by mechanisms to ensure that there is a strong voice for business and supplements are introduced only where they can command support from all those affected"." The lobbies representing business need to know the term "command support" and that people are very serious about that notion. All the subsequent discussions we have had with industry have been on the basis that there is a clear commitment to promoting economic development and economic growth, which is their core business and what they do. The concept of economic development clearly is commonly understood. There is no single definition of the term. As we set out in the guidance, it may be considered that the projects to promote economic development are likely to focus on supporting the productivity and prosperity of the area. From the first, we been clear that that is what it should be. But we have also said that there must be scope for innovation as to how the local area, the local authority and local business interpret what is best in terms of economic development and how innovative it can be. Basically, we want to encourage innovation, provided that both partners of the contract are in agreement. It is not just about what the levying authority thinks will best promote economic development, it is about what business thinks too. I completely understand why the noble Baroness has raised the amendments, because there is a genuine debate around these issues. As she says, these are long-term issues. This journey to give local authorities more grasp of local economic development has been a long journey already. From what the noble Lord, Lord Bates, and I are saying, she will not be surprised when I say that I cannot accept the amendments because they deflect and distort away from the single purpose of the BRS. Essentially, and as the noble Baroness herself admitted, the amendment would mean that the BRS could be used for anything ranging from tackling crime to housing improvement to climate change issues, because all can bring some indirect economic benefit if they are properly managed. However, they are not central to economic development in the normal sense. The noble Baroness said that the thinking behind the amendment is the need for greater flexibility and to recognise that communities are in themselves successful economic entities. Having dealt with that argument, I shall move on to her second point. We are also looking at a potential compromise in the consideration of additionality. Schemes aimed at housing—the noble Lord, Lord Bates, mentioned housing—the greener, safer agenda or health issues all have statutory funding mechanisms and form part of what the community expects to fund, as well as being the recipients of specific grants. But the same is not true of strategic economic development, and this Bill is intended to boost the ability of local authorities to raise revenue for investment in economic development. That brings me to the third reason for the difficulty here. We need to return to the primary purpose of the Bill. Businesses already contribute to the provision of services such as street cleaning and social services provision through the national business rate, and I do not think that they would take kindly to funding more of the same. The BRS is essentially a new tool aimed at raising revenue to invest in local areas over and above the provision of services and projects already in place, and since it will be a method of securing additional revenue from local businesses, it should be used to fund aspects of the community that are of most interest to those local businesses. We made it clear throughout our preparatory documentation for the Bill that any supplement will have to be subject to strong safeguards. Businesses need to know that they are not going to be asked to fund projects that are not relevant. That is important to the credibility and integrity of the proposals. Indeed, businesses should not see this as something being done to them, but as a shared enterprise at every stage right through from being a gleam in the eye of the partners to its implementation. The Bill ensures that, within the broad remit of economic development, there is scope for innovation depending on the nature of the local economy. Communities are different and there must be flexibility in order to foster creativity through these proposals. My first reaction to Amendment 12 was to say that these are local activities so we should not have a national review mechanism. However, having heard the arguments of the noble Baroness about the criteria and national context, and having taken note of what the noble Lord, Lord Bates, had to say, I am minded to take it away and think about it. I cannot promise anything, but the noble Baroness has made an interesting case for the concept of a review mechanism, and I take the point made by the noble Lord about the involvement of business partners. Indeed, we shall come on to that when we talk about consultation. I turn now to Amendment 7. Although the noble Baroness knows that I have argued in the context of other legislation that housing is an economic function, in this context it is not of the same order of economic development. I echo again the noble Lord, Lord Bates, that a broad range of funding already goes into housing through the vast sums distributed through, for example, the Homes and Communities Agency, as well as substantial private funding. Therefore, although housing is very much part of what makes a community successful, in the context of BRS it is not different from the other services. I could argue, for example, that the health service services the local community because it keeps people healthy and active in their workplace. I could argue that without education we would have nothing in the way of economic development. Those are both persuasive arguments. To come back to the main point, though, it is important that we keep the focus on economic development and the connection with business, which can be robustly promoted. As I said, businesses already provide and contribute towards core services, and should not be asked again in a different way to contribute. We would have problems with the notion of additionality. The short answer to the question of the noble Earl, Lord Cathcart, is no. This will be worked out not by geographical area but, essentially, on the scope of the distribution of businesses within the area of a levying authority. That is what will define the criteria. One would hope that, within the scope of Norfolk, if something were to be offered through BRS it would be sufficiently strategic that even some of the more outlying areas would get some benefit from it. It would depend on the nature of the local project, the consultation and the scope of the commitment that went into it. I have spoken at some length on that amendment. I hope that the noble Baroness will feel that she is able to withdraw it.