Business Rate Supplements Bill

This is an important amendment, which gives me an opportunity to explore the issues raised by additionality. They are complex, because to an extent we are dealing with hypothetical situations, as the noble Lord, Lord Bates, said. It is about the place of BRS when it is levied for a project with more than one funding stream. The noble Lord has raised a probing amendment that would remove the restrictions on the use of BRS only for expenditure on the project to which the BRS relates, and for expenditure that the local authority would not have incurred had it not imposed the BRS, which is fundamental to the BRS. Noble Lords said that there were myriad funding streams. That is the point: there are many funding streams but this is quite different. I shall set out again why we are so clear that this will not be used to plug gaps or as a substitute for other funding. It would have been verging on the dishonest if we had been less than clear in what we said in paragraph 2.17 of the White Paper, which I shall cite again: ""supplements should only be used for investment that would not otherwise have taken place. Local authorities should not use revenues from supplements to substitute for their own resources … This is … a new tool to stimulate economic growth—not … a different way of financing existing policies"." That is the answer to concerns about the Treasury. This has been crafted with specific challenges in mind—the sort of exceptional project that may be like the projects that the noble Lord mentioned which are funded in other ways but which, without the BRS and the commitment of this partnership between business and local authorities, simply would not have happened. I understand the concern that the noble Lord has raised about RDA funding. It is important to say again that the RDAs’ terms of reference are based in law. They are publicly funded and they have to deliver on their aims and objectives and spend their budgets. It may be that an RDA would find a role in a partnership, but crucially, as the noble Baroness, Lady Hamwee, was getting at, the BRS is the crucial and unique link that makes it possible to do something with available funding that would not otherwise have happened. I will try to say this again in another way, because I think that I am repeating myself. The fundamental point is straightforward. It is not the Government’s intention that BRS will replace funding streams from central government or anywhere else in the public sector, any more than we intend that BRS should replace funding streams from within the levying authority. BRS is about promoting economic development locally in partnership between the levying authority and business in ways that would not be possible without a contribution from the business sector. This will be a case-by-case opportunity for development which will be unique to each local authority. It is very difficult to hypothesise, because local authorities are innovative and imaginative. All sorts of things may lend themselves to this sort of partnership, which will be extremely successful. Yes, BRS can complement other funding streams, but it is about delivering more. When we consider additionality and why the focus on economic development is fundamental, I should again refer to the White Paper. We went on to say that BRS is, ""not intended as a new means to fund existing expenditure, or as a resource to support general service expenditure. The Government intends their use to be clearly focused on economic development, ""with local flexibility over what specific projects will best promote long-term economic growth in that area"." It is fundamental, therefore, that BRSs are used on the project to which they relate, because the White Paper essentially was clear that BRS is, ""intended to support specific investments in economic development in a transparent and targeted way"." That is the credibility of the project. That is why business has to be confident that its contribution to a project cannot be used for any other purpose. The Bill provides for that. I turn to the question of determining additionality. In the White Paper, we did not disguise the fact that assessing additionality may well be complex. In fact, paragraph 2.19 makes that clear. It states: ""It requires comparison with a hypothetical ‘no supplement’ scenario which can never be fully tested in reality. There will need to be clear accounting of the revenues";" and identifies four ways in which that might be done to test the claim that it is additional expenditure. There could be benchmarking in the areas affected by spending, so it can be assessed by how far it is additional. The White Paper states that, ""local authorities could be required to set out the funding routes that have been explored, and the reasons that they are not sufficient"." A local authority with a three-year budget has a baseline and can easily build in benchmarks across the range of those revenues in transparent ways. It also states: ""where an authority intends to use a supplement to support borrowing they could be required to set out their full borrowing plans"." Therefore, there are ways in which this can be tested, and the sort of examples that have been given in the provisional guidance and the White Paper ranged over a number of different types of projects. For example, the White Paper mentioned projects such as a new bus transit, a light rail scheme or a convention centre that could pull in experience and opportunities; or there could be a retail development. There are all sorts of different ways in which this claim of additionality could settle on a partnership or project and could be tested under the criteria that we have set out. That is not at all woolly. It will be a tough test, but we have sufficient detail in the White Paper and there will be further information in the policy paper that we will issue later this week. I was wrong to call it guidance; it is actually a policy paper that will provide the context to the regulations. That is why it has been a more complex document to write. Although I am conscious that I have been repetitive—which is partly to do with the helicopter circling overhead—I hope that I have answered some of the questions that have been raised by the noble Lord and that he will feel able to withdraw his amendment.