Business Rate Supplements Bill

My Lords, I am of course aware that the amendment of the noble Lord, Lord Tope, would reintroduce the requirement on levying authorities to hold a ballot before introducing any BRS or varying any existing BRS. However, as your Lordships will be aware, the other place has disagreed with the Lords amendments requiring authorities to hold a ballot before levying a BRS or making a variation to an existing BRS, except in the case of Crossrail, and has offered this House an amendment in lieu. During consideration of the Lords amendments in the other place, the Government clearly set out their thinking on ballots. However, for the sake of completeness, I should like to reiterate the key points. In developing BRS, the Government have balanced the need to protect business interests with ensuring that the requirements on levying authorities are practical and proportionate. It is right that where businesses will contribute a relatively large proportion towards the cost of a project they should have the power to vote on whether they should make that contribution. That is why we believe that levying authorities should be required to hold a ballot in those cases where the supplement will fund more than one-third of the estimated total cost of a project. As an aside, I mention that this goes further than the recommendations made by Sir Michael Lyons in his review into local government and the Communities and Local Government Select Committee. Both considered that the decision to hold a ballot should be left to the discretion of levying authorities. However, the Government decided to require a ballot in certain circumstances to protect businesses and ensure a fair deal. Where a ballot is required, there is a risk that financial institutions and funding partners will be unwilling to commit themselves as one element of the funding package is uncertain. Even where an authority is confident of businesses’ support, the outcome of a ballot can never be guaranteed. While the Government consider that it is right that there must be a ballot where the BRS is funding a relatively large proportion of the project, it would be disproportionate for an entire funding package for a project to be put in jeopardy by a ballot on one small element of it. Holding a ballot will not be a quick or inexpensive process. Making a ballot mandatory in all cases potentially creates unnecessary obstacles to using BRS as a small part of a funding package and prevents levying authorities determining the most appropriate course of action in their area. This could discourage levying authorities from using BRS as part of a funding package in circumstances where a small supplement might make a real and positive difference to an area. This could have particular repercussions for levying authorities outside London. As your Lordships may be aware, rateable values are typically lower outside the capital. As such, the potential revenue raising power of BRS is lower outside the capital. This increases the likelihood that BRS will form part of a wider funding package. Therefore the potential problems caused by requiring a ballot in all cases could be more significant outside London and deter the use of BRS other than in the capital. As we made clear during the passage of the Bill, both in this House and in the other place, even if there is no ballot, levying authorities will not have the freedom to levy a supplement irrespective of the views of local businesses. Levying authorities will be required formally to consult businesses and we commit that the statutory guidance will make clear that levying authorities must consider how they will engage with businesses over and above the statutory consultation requirements. Business interests are also protected though other safeguards, such as the national upper limit of 2p, the £50,000 threshold for liability to a BRS in England and the fact that the supplement can be used only for economic development and to fund additional projects. We must trust levying authorities to do the right thing. What is appropriate in terms of engagement will depend on the nature of the project that BRS will be funding and the needs of the local area. For this reason, the Bill sets a minimum standard for engaging with businesses, but leaves the rest to levying authorities. This localised approach reflects the diversity of local areas. However, noble Lords and Members of the other place have expressed real concern that there must be genuine engagement with local businesses before a supplement is introduced. In recognition of that, we propose that in those cases where a ballot is not required, by virtue of the fact that the supplement is expected to fund less than one third of the total cost of the project, the authority should be required to set out in its BRS prospectus whether or not it intends to hold a ballot. Importantly, the amendment will also require the levying authority to provide an explanation as to why it proposes that course of action. While the Government believe that it is right that levying authorities should have discretion as to whether or not to hold a ballot in certain circumstances, we acknowledge that the decision-making process must be transparent to those who would ultimately be liable for the supplement. This amendment will provide local businesses with an explanation of the levying authority’s decision, ensuring that authorities are accountable to local businesses for their decision on whether to hold a ballot. The amendment requires the levying authority to set out its proposed course of action and the reasons for its approach on ballots in the initial prospectus. This gives businesses an opportunity to challenge the levying authority’s thinking, should they wish to do so, at the consultation stage. The decision on balloting is not something which should be explained only after a BRS has been imposed. As such, the decision of ballots is as much part of the consultation as the other aspects of the project and the levying authority will have to justify its approach. That will be just as important in cases where, for example, a BRS will fund only 5 per cent of a popular project over a few years—when it will have to justify using its resources for a ballot if it decides to hold one—as in cases where it decides not to hold a ballot. This amendment gives businesses the confidence that the decision-making process on ballots will be transparent and, at the same time, gives levying authorities the scope to respond to the specific circumstances of individual projects. I beg to move.