Guardianship (Missing Persons) Bill (First sitting)
Tuesday 21st February 2017
(7 years, 2 months ago)
Public Bill CommitteesRead Full debate Guardianship (Missing Persons) Act 2017 View all Guardianship (Missing Persons) Act 2017 Debates Read Hansard Text Read Debate Ministerial Extracts
The Chair
I begin with the usual announcement that electronic devices must be switched off or kept silent and that tea and coffee are not allowed in the Committee Room.
No amendments have been tabled, so we have only to consider whether the clauses should stand part of the Bill. For the Committee’s convenience, I suggest that we do so in two debates. The first will be on clauses 1 to 7, which focus on the definition of missing persons and the making of a guardianship order. After we reach a decision on clause 1, I will then put the Question that clauses 2 to 7 stand part of the Bill. The second debate will be on clauses 8 to 25 and the schedule to the Bill, and we can then take a vote or a decision on them. I hope that hon. Members are content with that.
Clause 1
Missing persons
Question proposed, That the clause stand part of the Bill.
Kevin Hollinrake (Thirsk and Malton) (Con)
It is a pleasure to serve under your chairmanship, Mr Hanson.
Quite simply, the Bill will fill a gap in the law that few people even know exists. Around 4,000 people go missing every single year, yet there is currently no mechanism under the law for anyone else to manage their property and financial affairs. Data protection and contract law prevent dialogue between banks, landlords, insurance companies or utility companies, for example, and any party other than the account holder—I note at this point that the Bill has the full support of the Council of Mortgage Lenders—and the missing person, their estate and their dependants are often worse off as a result. The new status of guardian of the property and affairs of a missing person will fill that gap and help families and others after a disappearance. Many of us have benefited from similar powers in other difficult circumstances, such as when someone close to us passes away or is no longer able to manage their own affairs because of dementia or other mental capacity issues.
The core provision of the Bill is that the court will have the power, on the application of a person with a sufficient interest in the property and affairs of the missing person, to appoint a guardian. The Bill draws on systems used abroad—in certain states of Australia, for instance—and on the system for appointing deputies under the Mental Capacity Act 2005. It provides that the guardian will take control of some or all of the property and financial affairs of the missing person, who must generally have been missing for at least 90 days; will have authority to act on the missing person’s behalf; will be able to use the missing person’s property to help those left behind; will be accountable for his or her actions and supervised by the Office of the Public Guardian; will be appointed for a renewable period of up to four years; and, crucially, will be required to act in the missing person’s best interests. The small fee involved will be payable by the missing person’s estate, so there will be little or no cost to the taxpayer.
Clauses 1 to 7 cover who is defined as a missing person, who can be appointed as a guardian, when, how and for how long a guardian can be appointed, and the extent of the guardian’s role and powers. I commend them to the Committee.
Richard Burgon (Leeds East) (Lab)
It is a great pleasure to serve under your chairmanship, Mr Hanson. With your permission, I will make all my remarks to the Committee in this debate.
I congratulate the hon. Member for Thirsk and Malton on all the work that he has done to introduce the Bill. As he says, it fills a gap that many people are lucky enough not to be aware of. He knows better than most here that such a Bill has been a long time coming and is very welcome indeed.
I can confirm, as expected and as hon. Members will be aware, that we will not oppose the Bill. We support it, and there is strong cross-party support for filling this gap in the law. I understand that the Missing People charity, one of the main promoters of this change in the law, endorses the Bill as drafted. As has been discussed, and as hon. Members know, there is no mechanism in England and Wales to protect the property and affairs of a missing person. As we have heard, the Bill seeks to change that. The absence of such a provision has led to profound hardship for many people.
Hon. Members will recall the Westminster Hall debate in March 2016 in which hon. Members spoke passionately of the experiences of themselves and their constituents, which are relevant to the Bill. As many will remember, the hon. Member for York Outer spoke of his constituent Peter Lawrence, whose daughter Claudia Lawrence has been missing since 2009. It is a well-known case, and I understand that it was announced last month that a review of the case is to be scaled down. I know that Peter Lawrence has campaigned vigorously alongside Missing People for a change in the law for some time. My hon. Friend the Member for Neath also spoke of her personal experience of her uncle vanishing abruptly.
The anguish that those circumstances must cause to families is truly unimaginable to those who have not known the uncertainty and trauma of such a loss. The inability to manage a missing person’s property and finances can only add to that distress, anxiety and anguish. Of course, there may be dependants who require financial support, outstanding bills and obligations or mortgage payments on which families rely—it is very welcome that the hon. Member for Thirsk and Malton has mentioned the support for the Bill from the Council of Mortgage Lenders. As I have mentioned, the importance of trying to maintain some measure of order while a loved one is being traced is perhaps overlooked by the rest of society, who cannot imagine such a situation. Plainly, that needs to be corrected, which is why we welcome the Bill.
There have been faltering attempts at legislation before, so I am glad that we are now seeing real, practical progress. Hon. Members will recall that the Ministry of Justice launched a consultation in 2014, and on 23 March 2015 confirmed that the coalition Government would legislate to create the legal status of guardian of the property and affairs of a missing person. The Ministry recognised the strong support for such an advance in the law. The Justice Minister at the time, Lord Faulks, released a written statement in which he expressed a wish that legislation would follow quickly in the following Parliament.
While the expected legislation did not materialise as swiftly as people would have liked, we are pleased to see practical progress being made today. On 6 June 2016, my hon. Friend the Member for Stockport tabled an early-day motion noting the delay in progress and requesting that the Government urgently set out a timetable. However, it is the private Member’s Bill from the hon. Member for Thirsk and Malton that has brought us to this position, and we seem to be well on the way to introducing a piece of practical, useful and necessary legislation.
The hon. Gentleman has previously estimated that some 2,500 people could benefit from a law of this kind. As we have heard, it will give the courts the power to appoint a guardian to manage the property and affairs, and act on behalf, of a missing person. The Bill also proposes safeguards to ensure that that guardian is accountable and acts in the best interests of the missing person. Moreover, the Bill takes inspiration from an existing precedent in Australia, which has a legal system that shares some similarities with our own.
To reiterate, it is welcome that the House is legislating to fill the gap in the law. There has been long-standing and consistent cross-party support for legislation to address the issues. Moreover, campaigners and other interested parties, including the Council of Mortgage Lenders and the charity Missing People, support the Bill in its current form. There is therefore welcome agreement across the board on the issue. We must not drag our heels. I am glad that we have the opportunity to see the Bill progress today.
The Parliamentary Under-Secretary of State for Justice (Dr Phillip Lee)
It is a pleasure to serve under your chairmanship, Mr Hanson. I congratulate my hon. and long-standing Friend the Member for Thirsk and Malton on introducing a Bill to create the new legal status of guardian of the property and financial affairs of missing people and on presenting the case for clauses 1 to 7 to stand part of the Bill.
The Government have indicated on several occasions in recent months—not least in reply to questions from my hon. Friend and other Members from all parts of the House—that we intend to bring forward legislation on the subject as soon as parliamentary time allows. It will therefore come as no great surprise that the Government welcome the Bill and intend to support it. I also very much welcome the support of Her Majesty’s Opposition.
Nothing can cure the emotional and psychological pain caused by the sudden, unexplained disappearance of a loved one, but changes to the law can help to provide solutions to some of the practical problems faced by those left behind. Clauses 1 to 7 provide the core of a legal framework within which the best interests—in a wide sense—of the missing person can be protected and those left behind can be sustained in a way that it is reasonable to think the missing person would have approved, had he or she been present.
The clauses define when a guardian may be appointed, the terms on which he or she may be appointed and the duration of the appointment, where a person is “missing” as defined in clause 1. My hon. Friend has provided a clear explanation of the purpose of the Bill’s provisions, and I do not intend to repeat his observations. I urge the Committee to agree that clauses 1 to 7 should stand part of the Bill.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clauses 2 to 7 ordered to stand part of the Bill.
Clause 8
Guardians and effect of guardianship order
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss clauses 9 to 25 and the schedule to the Bill.
Kevin Hollinrake
Quite simply, clauses 8 to 25 cover the guardian’s obligations, the role of the Office of the Public Guardian, the relevant courts that would supervise the proceedings, and the code of practice. On that basis, I commend the clauses to the Committee.
Dr Lee
I thank my hon. Friend for his explanation of clauses 8 to 25. The clauses build on the foundation laid by clauses 1 to 7 and lay out the remainder of the legal framework to which secondary legislation and codes of practice are to be added. The clauses are unified by the theme of the guardianship, but are fairly disparate in their detail.
First, the clauses deal with the obligations of the guardian and the effect of his or her dealings with third parties. In that respect, the guardian is obliged to act in what he or she reasonably believes to be the best interests of the missing person and is to be treated as the agent of the missing person. Third parties dealing with the guardian need to know where they stand, just as they do with any agent.
Clauses 8 and 11 build on the law of agency and the provisions relating to deputies in the Mental Capacity Act 2005. Clause 10 allows guardians and others to seek instructions from the court on how to act. Personal representatives and trustees have similar options. Once appointed, a guardian will be entrusted by the court with authority to act on behalf of the missing person, but circumstances may change. Clauses 12 to 15 create a system within which orders can be changed by court order or revoked, whether by court order or automatically, in the light of changing circumstances.
Guardians will be held to account by third parties under clause 11, where the guardian acts outside their authority. They will also be subject to the supervision of the Public Guardian, by virtue of clause 17. Here, too, the Bill draws on the existing legislation relating to deputies, as it does in clause 22, in relation to the issues of codes of practice, to provide guidance to guardians and others.
I welcome the inclusion of the definition of the best interests of the missing person in clause 18, particularly the provision allowing for further definition of that concept through regulations subject to the affirmative resolution procedure. None of the secondary legislation that may be created under the Bill has yet been drafted, but a memorandum on the powers has been sent to the Delegated Powers and Regulatory Reform Committee in the other place. I certainly envisage that the draft legislation will be subject to consultation with stakeholders and experts.
I do not think that I need to comment on any other aspects of the Bill, save to say that I hope that all the necessary secondary legislation can be made within a year of Royal Assent, so that if the Bill is enacted, it can be brought into force in 2018. I commend clauses 8 to 25 of the Bill to the Committee.
Question put and agreed to.
Clause 8 accordingly ordered to stand part of the Bill.
Clauses 9 to 25 ordered to stand part of the Bill.
Schedule agreed to.
Question proposed, That the Chair do report the Bill to the House.
Kevin Hollinrake
On a point of order, Mr Hanson. I would just like to thank a number of people. I thank our wonderful doorkeepers and Hansard reporters, all colleagues across all parties who have given up their time today and on many other occasions, the Clerks for their essential guidance, the officials from the Ministry of Justice, particularly the excellent Mr Hughes, who has been tremendous, and of course our superb Ministers, who have been so supportive. Of course, I also thank everyone connected to the Missing People organisation, which has campaigned so hard and for so long for the introduction of this legislation.
I am grateful to Members from all parts of the House and to Members of the other place who have pledged their support. I give particular thanks to my hon. Friends the Members for York Outer and for Selby and Ainsty and to the hon. Members for York Central (Rachael Maskell), for Stockport and for City of Chester, who have been so supportive and worked so hard on this issue. I was simply in the right place at the right time and have hopefully carried the baton over the last few yards. I am also very grateful to the Select Committee on Justice and the all-party group on runaway and missing children and adults for their work.
I offer my final and most important thanks to my constituents, Mr and Mrs Lawrence—Peter Lawrence is here today—who have championed the cause of guardianship, even though it can no longer help with their situation. They are, of course, the parents of Claudia Lawrence, a missing person since 18 March 2009, nearly eight years ago, her fate still unknown. As a testimony and tribute to their endeavour, their eternal hope, their endless fight for answers and justice, and their selfless commitment to help others faced with similar tragic circumstances, I very much hope that this legislation, if effected, will always be known as Claudia’s law.
Question put and agreed to.
Bill accordingly to be reported, without amendment.
Local Government Finance Bill (Ninth sitting)
(7 years, 2 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text
The Committee divided: - Ayes: 5 / Noes: 8 - Question accordingly negatived.
The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Marcus Jones)
On a point of order, Mr Gapes. I would like to highlight to the Committee that on Wednesday last week, my Department published its response to the summer consultation on business rates retention. Alongside that we published a further consultation on the Government’s proposed approach, which provides additional information on the design of the new, reformed business rates retention system.
Mr Gareth Thomas (Harrow West) (Lab/Co-op)
Further to that point of order, Mr Gapes. We are delighted that you and your fellow Chair have clearly had some influence on the Minister and finally managed to get those documents released. It would have been helpful, though, if the full 450 consultation responses had been published alongside the summary that the Minister released and if he had given a bit more of a clue about how the system will look by 2019. I have a further point of order.
Mr Thomas
On a point of order, Mr Gapes. You may have followed media reports of a letter from the Secretary of State for Communities and Local Government to some Members of Parliament about business rates. I have not yet received my copy, and I do not think other Opposition Members have either. I wonder whether you and Sir David might use your influence with the Minister to persuade him to release a copy of the full letter. Obviously we have seen transcripts in the media, but it would be good to have sight of the full letter.
The Chair
I do not think that is a matter for me. It relates to other issues that are not necessarily within the scope of the Bill. The hon. Gentleman is experienced enough to know that there are many channels through which he can make his concerns heard. He has done it here, but I suggest he now goes elsewhere.
Clause 37
Business improvement districts: property owner arrangements and levy
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss that schedule 5 be the Fifth schedule to the Bill.
Mr Jones
The Government support clause 37, which introduces schedule 5 to the Bill. Schedule 5 allows billing authorities across England to make property owner arrangements and introduce a property owner levy, which can be raised on property owners in an existing business improvement district.
Business improvement districts have been instrumental in improving the vitality of local high streets and town centres. Property owners are currently able to have their own BID levies, but only in London, due to existing legislation. The Business Rate Supplements Act 2009 introduced property owner BIDs but required a business rates settlement to be enforced in the same area. That has limited property owner BIDs to areas where such a settlement is being implemented, which is currently only for Crossrail. Schedule 5 will remove that requirement, so that it will no longer be the case that a business rates settlement must be enforced in order to set up a property owner levy. We have otherwise sought to ensure that the business improvement district model remains unchanged, so the schedule replicates the existing statutory framework.
Schedule 5 omits schedule 2 to the 2009 Act, which provided for the existing property owner BID arrangements, and inserts new chapter 2 into part 4 of the Local Government Act 2003. Schedule 5 sets out the provisions for the property owner BID. The levy can be introduced only within an existing BID and must be used to fund only the projects that are specified in the relevant arrangements and are intended to benefit those in the district. The levy is raised on those with a relevant property interest. How it is calculated, and which persons with a property interest are to pay it, is left to the discretion of each BID and must be specified in the property owner arrangements.
Mr Thomas
I had hoped to catch your eye after my hon. Friend the Member for Oldham West and Royton to pick up on one particular concern, Mr Gapes, but I will ask the Minister about it now. As I understand it, there is no definitive and accurate record of property owners in the UK, so property owners wanting to take advantage of the clause and schedule may face difficulties in tracking down their fellow property owners. What further steps does the Minister envisage taking—perhaps through work with the Land Registry or other arrangements—to help to tackle that problem?
Mr Jones
We are certainly looking at that area. In terms of bringing forward property owner BIDs, it is obviously extremely important that the whereabouts of property ownership are clearly identified, because a system very similar to that implemented in current BID legislation will be used to ballot property owners in that regard.
Mr Thomas
I wonder whether I could pursue that a little further. I hear the point that the Minister makes, but I wonder whether the Bill makes it easier for property owners wanting to take advantage of the legislation further down the line. For example, would it be sensible for Ministers to contemplate making it a requirement of property owners that they declare their ownership to the local billing authority, in order to make it easier for the local authority to collect other charges and, in the context of the clause, to make it easier for property owners to talk to each other about a possible BID in future?
Mr Jones
There are no plans to do that at this stage, but I certainly hear what the hon. Gentleman says. I will take that point seriously and consider those comments, as I always do with points he raises. Obviously, as I said before, it is important in the context of what we are talking about that the ownership of property is clearly identified.
Coming back to my original point, a property owner levy cannot be introduced until proposals have been approved in a ballot by those who would be liable to pay it. For a ballot to be successful, it must pass a double-lock mechanism—by receiving a majority of votes cast, and with the total rateable value of the properties of those voting for being more than that of those voting against. Several other important checks and balances remain in the model. The billing authority may veto property owner proposals under prescribed circumstances, and those who voted on the proposals retain the right to appeal to the Secretary of State to overturn that veto. The Secretary of State will also have the power to declare a ballot void if there have been material irregularities in the ballot process.
The levy can be imposed for a maximum of five years, after which the BID body must write a new proposal and go back to the ballot. We have seen the success of occupied BIDs and property owner BIDs in London, which give local businesses the tools to undertake projects that improve their high streets and town centres. Overall, the schedule will give property owners across the whole of England the opportunity to improve their local environment and play a greater role in efforts to shape their local area.
Jim McMahon (Oldham West and Royton) (Lab)
It is a pleasure to serve under your chairmanship, Mr Gapes. I am a great fan of the schedule, but before I go any further I should perhaps declare my interest as the chair of the all-party parliamentary group on town centres. That group’s secretariat is the Association of Town and City Management, which supports a number of areas in developing their BIDs. As a former town centre manager, I fully understand the struggle that many of our town centres face and the real need through whatever means possible to try to have focused investment, not just in terms of cash, although that is important, but in terms of energy and co-ordination and making sure that all partners in the area—whether the private sector, the public sector or shoppers and visitors—have a shared vision for what that place can be. I see BIDs in their widest sense as being not just about building for additional income to create a pot of money to spend, but about bringing people together to develop that shared vision. So I am a fan of BIDs and I want to see more across the country.
We have seen the success of BIDs, because towns and cities have learned from other towns and cities where the process has been done well and have adopted the principle. Because they are now so well established, with 260 BIDs across the country, there is trust and confidence in the way that the money is generated and in the way in which businesses may be able to steer and navigate how the money is spent and are held to account. There is a great deal of confidence.
Also, of course, a lot of national and particularly regional retailers, with a reach right across the country and regions, support this. At times, supermarkets get a great deal of bad press. My experience in many BID areas is that supermarkets come to the table with a very positive approach. Because they are such a large ratepayer and because the voting mechanism is weighted towards rateable values as well as individual owner occupiers, they are a substantial voice in that process. When they come to the table and are supportive, it is a very important part of the process. We know that, through the BIDs, £75 million a year is generated to support greater activity.
I think about the improvements that have been made in my town of Oldham—to some people this can seem frivolous, but the annual planting that takes place when we enter the Britain in Bloom contest has become a source of pride for the town. People come to visit and local school children take part in planning the contest. It has gone beyond the town centre, with local schools planting allotments and community gardens. There are public displays beyond the town centre. Had it not been for the work of the BID and the town centre partnership in developing it, I do not believe that Oldham in Bloom would be on such a scale or that we would have won the biggest city contest. I will put that on the record. It is very important in creating a sense of place.
I mentioned in previous sittings that town centres are not just about creating retail space for retailers to sell goods to the public; they are the heart of the community. They are where people come together to socialise and mix. For people who live by themselves and have few visitors to their home, it is perhaps the one place they can go where they see familiar faces whom they can talk to and share experiences with. I strongly believe that our town and city centres are more than places to operate from.
However, I am concerned, and I hope that you will indulge me slightly, Mr Gapes, because there is absolutely a connection with the letter from the Secretary of State to Conservative MPs. Like my hon. Friend the Member for Harrow West, I feel slightly left out in not being included in the distribution of the letter. I like to receive letters. I read all the letters that come through. It would have been received well. However, this was nothing other than, “This is a contentious issue”. How you teem and ladle the liability for business rates is fundamentally important to the relationship between business and the Government. Business rates are contentious in themselves, but they are an important part of our system of taxation. We rely on property-raised taxes to fund local public services, but there is no doubt that a lot of businesses feel that, in the way council tax has been pushed to the edge, business rates have been pushed to the edge and do not reflect the way that industry and retail are changing very quickly with online retail and globalisation. It seems that we cannot make the transition effectively, from a taxation point of view, from a traditional property-based tax to recognising that companies are now multinational and can be very mobile in the way that they treat their tax affairs. I think businesses feel particularly hard done by.
Mr Jones
The hon. Gentleman is talking about businesses being very mobile. Is that not one of the challenges that we face? One cannot easily avoid paying a property-based tax. That is why generally Governments of all colours have stuck with a property-based tax, rather than moving to a different system, where multinational companies may seek to avoid that situation.
Jim McMahon
I agree. We can see where a property is and we know where to send the bill, and when people do not pay we know which door to knock on. But we can do the same for an online retailer; we know the IP address and where the computer is, and we know the delivery address when parcels are sent from an Amazon depot, for example. We know where transactions on goods happen and where money is being made.
The issue with business rates is more fundamental. They have a role—I support the principle of business rates and property-based taxes as part of a range of taxation—but they must be manageable for the people who are expected to pay them. The outcry that we have heard from some significant businesses has come after a significant outcry from small businesses, which have been saying for a long time that business rates are taking them over the edge and making their existence unaffordable.
In the review and revaluation there has been a shift towards larger retail and towards particular parts of the country, but those businesses are now saying that it has become too much for them to bear, and there will be an impact on their business model. It strikes me that if the quantum is still required, and all that can be done is move it around a diminishing tax base, there will always be a disproportionate effect on some elements of the retail property base, whereas the way people spend and make money is changing quickly.
Mr Jones
I am following the hon. Gentleman’s argument, but does not what he says make it all the more important for the Government to stick to their guns and not allow local authorities an arbitrary situation in which they can increase the multiplier, as has been advocated? [Interruption.]
The Chair
Order. I would be grateful if hon. Members did not make such interventions from a sedentary position. It is not helpful to the debate.
Jim McMahon
I do not accept the starting point that the Government are sticking to their guns. If they have guns, they have no ammunition. The guns are weak and meaningless, because ultimately those who are expected to pay will collectively determine whether the pressure applied is something they can bear.
Kevin Hollinrake (Thirsk and Malton) (Con)
The hon. Gentleman has made some good points about the current state of the business rates system, but is he looking to revise the whole business rates system in this Bill Committee? Various bodies have looked at this, and it is a difficult issue to resolve. I would support taking a cross-party view to consider how we tax business in future, but we are not going to solve it today. What is the hon. Gentleman’s point?
The Chair
Order. Before the hon. Gentleman replies, I remind hon. Members that we are discussing property owner levies in clause 37 and the schedule.
Jim McMahon
Thank you, Mr Gapes. We need to debate the issue here, and it is not for the Opposition to draw out the Government’s policy position; it is for the Government to do that. The Opposition’s role is to hold the Government to account by applying the right scrutiny and asking the necessary questions. We will of course develop our own position through our internal party structures. We will do that by reaching out to those affected to ensure that we co-produce a successful system of taxation that will fund public services properly and be proportionate to the ability of those involved—whether council tax payers or business rate payers—to pay.
What I have been saying is absolutely relevant to the debate, because there is only a certain amount of money that businesses will be able to pay through a property-based tax, in total, from the money they make in their location. If a greater burden is being placed on business rates, as industry says, businesses may think twice about whether to enter into a BID arrangement. It could be that their business rate has gone up significantly anyway, and they might think, “I am paying more than I used to and it is a burden I cannot take.” I really fear what that means for local regeneration, local improvements and a local shared vision about town and city centre improvements. Moreover, I believe that it could be really toxic for the relationship between businesses that are struggling to survive and a Government who seem completely ignorant of the real situation on the ground.
Mr Jones
I hear what the hon. Gentleman says. I am not sure he is talking much about property owner BIDs, but he is giving his theory on how the business rate revaluation has been conducted and what should have been done. If that is the case, why did he or his party not oppose the independent business rate review when it came through both Houses?
Jim McMahon
There is general consensus; I am not sure why this has become a matter of contention.
Jim McMahon
There is a world of difference in having a property-based system of taxation where regular assessments are carried out to make sure that the valuations placed on properties are relevant to market conditions. We have seen with council tax the way that decision has been ducked for 26 years, and it is right that we make sure that it is kept up on. The principle of a revaluation ought to be supported because it has to reflect the market and property conditions at the most appropriate moment in time. However, the way that is done, its impact and the outcome will be matters for debate. That is the debate that not only I but Conservative Back Benchers are having, and that we read in the papers today. In fact, there is real concern about whether this will get support from the Conservative Benches when it comes before the House.
It is right to challenge whether we should be redrawing the system of business rates within a Bill Committee. Of course we should not be doing that, but neither should we be redrawing it behind closed doors in secret.
Jim McMahon
We say it is rubbish, and I agree that it would be rubbish to do it in that way, but when we have a system where a letter goes out to Conservative MPs, incorrectly stating that many areas will not be affected when in fact they are, and when the truth is discovered, it is very clear that MPs come back—
The Chair
Order. Can we please get back to the content of clause 37? The interventions and heckling are not helping either. Can we please focus on the clause stand part debate?
Jim McMahon
Thank you, Mr Gapes, for bringing us back to this point. I hope that Members on the Government side of the Committee take note of the Chair’s guidance.
The Chair
Order. I am asking all hon. Members, on both sides of the Committee, to take note of what I have said.
Jim McMahon
Thank you, Mr Gapes. I of course listen to every word you say and take your direction.
This issue is important, because the system that we end up with and the amount of money that individual businesses are expected to pay will be a fundamental factor, I believe, in whether they will be willing to enter into a BID arrangement. Until we see what the final package and settlement will be, it is difficult to understand what the take-up of new BIDs will be and what impact the new legislation will have in a real sense, on the ground, in towns and cities throughout the country.
Mr Jones
Does the hon. Gentleman not accept, however, that under the definition of a property owner BID, the actual BID amount will be paid for through a separate bill chargeable to the property owner, not the ratepayer? The ratepayer is obviously the person operating the business from the particular premises that the property owner owns. Will he not accept that the argument he is making is actually pretty flawed?
Jim McMahon
I thank the Minister for that intervention, but I can say with confidence that I have never knowingly made a flawed argument and I do not intend to start today. Landlords are of course there to make money from the rental of their properties. They have an expectation about the amount of money they will receive for the property, and in a number of cases they could well decide to pass the additional cost on to the tenant through rent increases. That could well be the impact, and of course if the tenant has to pay more money, they will look at the overall amount of money that they have to spend as part of their business operation and decide whether or not they can support a BID arrangement.
Mr Thomas
Will my hon. Friend reflect on the point that I made in an intervention on the Minister? Attractive as the opportunity to set up BIDs will be for property owners, the worry that I suspect they will have when they come to do the hard yards of putting the BID together will be access to the information about who actually owns the properties. Does my hon. Friend share my view that the gap between Committee and Report might be a good opportunity for the Minister to reflect on what else could be done to make it easier for the initiators of a BID to find the details of who really owns properties?
Jim McMahon
I absolutely agree with that point, not simply because what my hon. Friend refers to would be helpful—in fact, essential—to support the implementation of BIDs on the ground, but because it would help local authorities in a wider sense. Many local authorities have empty buildings in their areas, and tracking down the property owner can be very difficult. There may be health and safety issues or vandalism, antisocial behaviour or other illegal activity taking place. Finding out who the property owner is in those cases can be extremely difficult. Having a register that makes sense, whereby the owner is easily identifiable, would be important for what we are discussing, but it would also be beneficial for local authorities in a wider sense.
The levy that has been proposed evidently makes sense. This is more of a tidying-up exercise than a groundbreaking initiative, but sometimes tidying up is as important as breaking ground, so on that basis we perhaps should reflect. However, the Government could perhaps do slightly more to assist in the development of BIDs. I think that there is cross-party agreement that the way BIDs can be developed, not just in being able to generate the money but in the process by which local authorities and the business community have to develop a prospectus to get local support and win the vote on the day, is actually quite empowering. I am talking about getting that sense of ownership at local level and of being able actually to do something.
We find that, in many areas, people are looking at their town and city centres declining and asking, “What can we do about this?” It is happening because of the supermarkets and online retailing. It is almost being done to people, as opposed to their being able to get a grip themselves and have that shared vision. I see this route as one way whereby people can assert their own responsibility for taking control, and of course the way businesses can really get a grip of how the money is spent is quite important.
Of course, the money is ring-fenced, so when the prospectus is given to local businesses—local landlords as it will be—the money cannot be used by the local authority for any purpose other than improving the circumstances within that business improvement district. However, how that money is used in the business improvement district can be quite imaginative and flexible. It could be used to attract new visitors or provide events and activities. We have seen areas that pay to have their Christmas lights switched on, fireworks displays, Christmas markets or summer and Easter activities, and others that install CCTV or provide car parks to create a pleasant place for visitors.
The evidence shows that such measures increase footfall, and that people reflect afterwards that they ought to be supported. It would be helpful if the Government—not today, but at some point in future—outlined, perhaps in a letter to our team, what they intend to do to actively promote the further expansion of BIDs across the country, and their assessment of what the total impact of the business rate revaluation might be for the uptake in business improvement districts.
Rob Marris (Wolverhampton South West) (Lab)
May I take this opportunity to thank the Minister for the courtesy of his letter to me following our discussions? It was on a different matter from the one that my hon. Friend the Member for Oldham West and Royton spoke about. The Minister wrote to me to clarify the relief for telecommunications infrastructure.
On clause 37 and schedule 5, page 51 of the helpful Library briefing reminds us that under the Business Rate Supplements (Rateable Value Condition) (England) Regulations 2009, with which the Minister will be intimately familiar, properties with a rateable value of less than £50,000, or £55,000 for Crossrail, are exempt from business rate supplements. I had a discussion yesterday with the Federation of Small Businesses, which was helpfully attended by the hon. Member for Thirsk and Malton, because he and I like to do consensual things. I understand the FSB’s approach in saying that when levies of this kind proliferate—one such levy is in clause 37 and schedule 5; another is in clause 38, which I know we have not yet discussed—it is difficult for businesses, and a common floor of £50,000 that could be read across would be helpful. I hope that the Minister will feel able to comment on that.
The Chancellor has trumpeted the change in small business rate relief, which the Opposition support, so that another 600,000 small businesses will not have to pay business rates. However, we risk a proliferation of different benchmarks, floors or ceilings—call them what you will. The landscape is made much more complex by the Bill. I have some background in small business, although the Minister has a lot more. A schedule such as schedule 5, which runs to 11 pages, is bad enough in terms of complexity, but it gets a whole lot worse.
Schedule 5 will amend the Local Government Act 2003 and introduce alphabetised sections after section 59. I will refer to them as they are numbered in schedule 5. New section 59B allows the Secretary of State to make regulations. New section 59E allows the Secretary of State to make regulations. New section 59F allows the Secretary of State to make regulations. New section 59G allows the Secretary of State to make regulations. New section 59H allows the Secretary of State to make regulations. New section 59I allows the Secretary of State to make regulations. New section 59M allows the Secretary of State to make regulations. New section 59O allows the Secretary of State to make regulations. New section 59P allows the Secretary of State to make regulations. New section 59Q allows the Secretary of State to make regulations.
I say to the Minister that this 11-page schedule to the Bill effectively adds to the tax regime, when “Tolley’s Tax Guide” has grown in the last seven years from 1,000 to 1,500 pages in round terms. Here we have, albeit not in a Finance Act, another 11 pages of legislation in schedule 5, and then—get this—10 sets of regulations within that 11-page schedule. How are businesses supposed to get on with the business of making money and adding to prosperity, which we all want, when faced with a tsunami of red tape?
Justin Tomlinson (North Swindon) (Con)
First, I thought everybody would like to share in the great news that Swindon has just voted through its second renewal of its local BID. I have been a long-standing supporter of that. The reason I am supportive, and the reason it works so well, is that it provides a co-ordinated single point of contact.
Let us look at out-of-town shopping centres, such as the McArthurGlen outlet village in Swindon. There are a number of reasons why it is a success, but one of the main reasons—I say this as a former co-chair of the all-party parliamentary group on retail—is that there is that single point of contact. Retailers know who to speak to and are given clear costs, rules and regulations, so they can weigh it up and see whether it makes commercial sense to proceed. That then allows them to trade happily. A traditional high street is complex. Is it the landlord? Is it the council? Who do people speak to if they want to secure a deal or they want to do co-ordinated marketing to help the area? This policy is clearly an extension of that successful appeal.
I was a big supporter of the principle of super-BIDs because I would like to see a lot of town centres become collective shopping centres, with all the different owners working in co-ordination to replicate the successes of the out-of-town shopping centres. I think that that has huge potential.
Jim McMahon
Does the hon. Gentleman agree that the policy also allows local authorities to look at their town centre as a business unit in its own right? When they are making decisions about the quality of street lighting, CCTV or car parking charges, for instance, they would take into account the economic impact of that and the support for their local businesses.
Justin Tomlinson
That certainly has potential, particularly now that we will be incentivising local authorities to grow their business rate base. The key is to make sure that those that have a vested interest in making their town centre a success are equipped to do so. We have had some very good success stories with the BIDs, and this is a good move by the Government to further unleash that potential.
Mr Thomas
It is always a pleasure to see the hon. Member for Swindon North tempted to speak in this Committee. He gave an interesting southern example to complement the example given by my hon. Friend for Oldham West and Royton of the potential benefits of the clause.
We need to understand why we are having to discuss clause 37 and schedule 5. It appears to be because Ministers did not get it right when the Business Improvement Districts (Property Owners) (England) Regulations 2014 were made. That was an opportunity to solve the apparently odd situation whereby property owner-led business improvement districts could be established only where a business rate supplement was in place.
As the Minister hinted, the only place where a business rate supplement is in place at the moment is in London, where the Crossrail supplement is kicking in. The power of the success of the New West End Company, which has already raised £3.2 million just in its first year, is testimony to the potential strength of property owner-led BIDs. It is a sensible change, although it was brought on by Ministers having made a mistake with the 2014 regulations. Nevertheless, it does provide an opportunity to see whether we can do more to help property owners who want to establish a business improvement district.
I fear that one of the key constraints on property owners will be accessing the details of who owns other properties. Some property owners like to hide their ownership.
Mr Thomas
Perhaps offshore, through myriad trusts or in other ways.
I wonder whether it is time to require the beneficial owner of property or land to be registered and, therefore, accessible to the billing authority. That has got to be good for tax purposes in general but, in the context of clause 37, it surely has to be good for those property owners who, hearing of the success of what has happened in Swindon, Oldham or other business improvement districts, want to lead an effort in their area for such a district. Surely, we ought to make it as easy for them as possible to contact other property owners in their area.
Rob Marris
My hon. Friend will be acutely aware, as will the Minster, that compulsory registration of land title in England and Wales came in under the Law of Property Act 1925, which was effective from 1 January 1926, but was phased in throughout the country, and that phasing ended in the 1980s. Here we are, coming up to the 100th anniversary of that Act. Does my hon. Friend agree that it would be suitable, by that anniversary, to make registration compulsory whether there is a transfer of title or not?
Mr Thomas
I have always admired my hon. Friend’s prodigious research efforts before he attends a Bill Committee. He makes the fair point that legislation has been introduced to tackle this problem, but the less scrupulous and those who have something to hide have become more skilled and found new ways to hide their ownership.
I gently suggest to the Minister that if, for the best of reasons, we want to make it easy for business improvement districts to be established where appropriate, surely we need to help property owners by making it easier to access the details of who else owns property in their district. I gently encourage the Minister to reflect on that at length and perhaps to bring forward amendments or at least more information on how Ministers are going to make that easier. I look forward to the Minister’s reply.
Mr Jones
To respond directly to the hon. Member for Harrow West, he just mentioned that we did not take this step in the 2014 regulations. To clarify, that is because new primary legislation is needed to make the change, so we could not have pursued it through the 2014 regulations. I dealt with the ownership of property during his interventions on my initial comments on the clause.
The hon. Member for Wolverhampton South West mentioned the potential proliferation of different supplements. In order to bring in a business rate supplement, one would need a ballot of businesses, unless the supplement was being levied by the Mayor of a combined authority, in which case it would be done in consultation with business. On property owner BIDs, again there would be a ballot, but that would be a ballot of property owners rather than ratepayers, so there is a distinct difference.
Kevin Foster (Torbay) (Con)
The Minister says that that ballot would logically be of the property owners rather than the ratepayers. Will he confirm that the same majority thresholds would apply, not just on number but on rateable value?
Mr Jones
I was coming on to rateable value, because the hon. Member for Wolverhampton South West also asked that question. We will set out how the matter is to be determined through regulations. It is envisaged that property owners will set their own threshold, but we are clear that that has to be subject to the ballot of those property owners. It is not just something that will be imposed on a particular property owner. That brings me to the conclusion of my comments.
Question put and agreed to.
Clause 37 accordingly ordered to stand part of the Bill.
Schedule 5 agreed to.
Clause 38
Power of mayoral combined authorities to impose business rate supplements
Mr Thomas
I beg to move amendment 19, in clause 38, page 28, line 38, after “2009”, insert—
“(f) any other billing authority.”
This amendment would add any billing authority to the list of levying authorities with a power to impose business rate supplements.
I hope not to detain the Committee too long on this amendment, although I do have a series of questions for the Minister.
Amendment 19 seeks to put right the rather odd exclusion of non-mayoral combined authorities from the power to levy business rate supplements. It will be interesting to hear why Ministers think that the existence of a Mayor is the only thing that should be pivotal to whether an area should be allowed to raise money for investment in infrastructure. One would have thought that the principle of localism would allow local authority areas to come forward and decide whether they needed a Mayor, and that Ministers would respect the decisions of the people of England in that regard.
In the particular case of business rate supplements, we should remember that a ballot of non-domestic ratepayers is required. A series of checks and balances is therefore built in to the levying of business rate supplements already. Given that, it seems even more unfair that non-mayoral combined authorities should not have the power to levy business rate supplements, if they have identified with their business community a significant need to raise money for investment in infrastructure. That smacks of the nanny state—a mentality that “Whitehall knows best” and should be able to dictate what happens in Swindon, Cornwall, Totnes or Northamptonshire. We believe that the people of England should be trusted to make a decision in their particular areas about whether they have a Mayor. Denying them the chance to work with their business community to raise money for much-needed investment in infrastructure seems to be particularly unfair.
Kevin Hollinrake
The hon. Gentleman makes some interesting points. Has he run these plans by any business organisations, such as the Federation of Small Businesses, the Institute of Directors, the CBI, or the chambers of commerce, to see whether they would be in favour?
Mr Thomas
The Federation of Small Businesses raised a particular concern with me about the potential for both business rate supplements and property owner levies in terms of BIDs to be covered. If the hon. Gentleman will forgive me, that issue probably works best as part of a clause 38 stand part debate. I want simply to equalise what Ministers are giving to mayoral combined authorities with those combined authorities that do not have a Mayor. It is called fairness. I appreciate that that is a concept that Conservative MPs sometimes struggle to come to terms with, but I hope that our efforts in the last two weeks have been helpful, particularly to the hon. Member for Thirsk and Malton.
Mr Jones
The Business Rate Supplements Act 2009 was, indeed, brought through Parliament during the period of a Labour Government. That was done off the back of the review by Michael Lyons, who recommended not to include district councils in regard to business rate supplements. Does the hon. Gentleman therefore believe that the legislation made by his Government in 2009 was flawed?
Mr Thomas
I think that times have moved on and people have seen the success of business rate supplements as they have worked, particularly in London. Now is the time to make a sensible change. I certainly do not think it was the intention of the last Labour Government to say that if an area does not have a Mayor it must for ever be denied the chance to have investment in infrastructure.
Kevin Foster
A few moments ago the hon. Gentleman said that he wanted to see fairness for non-mayoral—or non-elected Mayor-led—combined authorities, but his amendment states “any other billing authority”, not any other combined authority, in other words deleting the requirement for an elected Mayor. Therefore he is not seeking fairness for areas without a Mayor: he seeks to include a range of things, which could mean that some places end up paying two of these supplements.
Mr Thomas
I used the example of the non-mayoral combined authorities to make a crucial point. This is a probing amendment and I am interested in hearing why Ministers want to exclude non-mayoral combined authorities. I say that in the context of my huge support for the Mayor of London, Sadiq Khan, who is doing an excellent job. I am conscious, though, that many council leaders and councillors have strong relationships with their local business community. I gently suggest that we should trust both business owners and local people who have elected councils to look at the merits of a particular proposal on infrastructure, rather than dictating from Whitehall whether they have to have a Mayor in order to levy a business rate supplement.
Jim McMahon
Does my hon. Friend agree that this is an absolute obsession with directly elected Mayors full stop? The Government use an example of a combined authority with a Mayor not even having to consult on the referendum result on business rate introduction. However, a city Mayor directly elected by the population has to have a vote in the same way as a Mayor of a combined authority.
Mr Thomas
My hon. Friend makes a good point. Now is the time to embrace the spirit of localism, which Ministers have previously professed to support, with investment in infrastructure and to trust local businesses. They will be able to smell perfectly easily whether a proposal for a business rate supplement is a sensible suggestion or not.
Kevin Hollinrake
I do not think the hon. Gentleman has addressed my earlier point. My point was simply that he is proposing a significant change to the legislation and he has not said whether he has consulted anybody about it—the Federation of Small Businesses, for example. Has he done that? Does he not think it is right that we have those conversations prior to introducing legislation in this House?
Mr Thomas
We have had consultations with a whole series of organisations which wanted reform to the Bill because of the poor way in which it has been drafted and brought forward by the Minister. I encourage the hon. Gentleman to have patience, as I hope to raise the question of double charging for investment under clause 38 stand part. He is not normally excitable, so I encourage him to be patient. I look forward with interest to hearing from the Minister why he thinks we should discriminate against those areas and people of England who do not have a Mayor.
Mr Jones
I thank the hon. Gentleman for his explanation of amendment 19. The amendment would add to clause 38 any billing authority to the list of authorities set out in section 2 of the Business Rate Supplements Act 2009 that would be able to use powers under the Act to introduce a business rate supplement.
Hon. Members will understand that we cannot support this amendment for several reasons. Many of these will be familiar from the debate on amendment 29, which proposed adding billing authorities to the list of authorities which could levy an infrastructure supplement. However, I think it might be informative to look back at the report that I alluded to earlier that originally suggested the introduction of a business rate supplement.
Sir Michael Lyons in his 2007 report set out the benefits that he felt could be delivered through a new flexibility on business rates. In doing so, he had reservations about providing the power to a wider range of authorities, particularly with business concerns about the scope for complexity if the settlement applied across all authorities. That was a legitimate point about complexity that the hon. Member for Wolverhampton South West made earlier.
Sir Michael Lyons recommended, therefore, that the power should be available to upper-tier authorities and unitary authorities. However, importantly, he highlighted the scope for engagement and development of joint plans between both tiers of local government in two-tier areas which could assess how the revenues raised could be utilised to benefit the wider area.
As the Bill that became the Business Rate Supplements Act progressed through Parliament, there was a wide-ranging debate about which authorities should have the power to take forward the supplement. Following those well-informed debates, Parliament came to the conclusion that the supplement should be available in England to the GLA and to county and unitary authorities. The Bill we are now considering includes a clause to add mayoral combined authorities to the list of authorities able to levy a business rate supplement, but essentially recognises that such bodies did not exist at the time of the 2009 Act. However, I do not believe that the circumstances have changed between 2009 and now to warrant extending the power to all billing authorities—that would add further complexity for business, as Sir Michael warned against at the time. Instead, I believe the billing authorities that are not unitaries should engage proactively in partnership with their upper-tier authorities to develop imaginative proposals for a business rate supplement that can deliver benefits for all local businesses. That does not require a supplement at billing authority level.
The hon. Member for Harrow West said that it is a probing amendment and I hope that in that spirit, and having reflected on the points I have made, he will withdraw the amendment.
Mr Thomas
Briefly, I want to raise a concern that the Federation of Small Businesses put to me. It relates to the intervention by the hon. Member for Thirsk and Malton. The FSB’s concern is that the Bill already allows for two levies to be levied on small or medium, as well as large, businesses—the business rates supplement and the property owner-led business improvement districts. The FSB is concerned that that would potentially see another 4% on top of existing business rates as a result of the Bill as it is currently drafted. Its concern is that that would make business rate bills even higher. In particular, in some areas in London and, notably, the south-east—although not exclusively those areas—that would send business rate bills even higher. Given the FSB’s considerable concern about the size of business rate bills following revaluation, it would be good to hear the Minister’s view about the potential for an extra 4% on top of existing business rates.
Mr Jones
Clause 38 is relatively straightforward and makes a number of linked amendments to the Business Rate Supplements Act 2009. The rationale for the amendments is to recognise that at the time that the Business Rate Supplements Act gained Royal Assent, mayoral combined authorities did not exist and therefore could not have been considered for inclusion within the types of authority that were given the power to raise a business rate supplement. The 2009 Act provides that power to the GLA and to upper-tier and unitary authorities. The Government are moving forward with arrangements for establishing directly elected Mayors in combined authority areas, and elections will take place in six areas in May.
We have already discussed the particular functions and roles of mayoral combined authorities that merit the use by such authorities and the GLA of the infrastructure supplements set out in part 3 of the Bill. Clause 38 closes the gap that exists in the 2009 Act and adds mayoral combined authorities to section 2 of it as a levying authority for the purposes of that Act. It also clarifies that the functions of a mayoral combined authority are exercisable only by the Mayor acting on behalf of the authority, providing the focal point for accountability for the supplement. Subsections (3) and (4) of clause 38 make consequential amendments to sections 3 and 5 of the 2009 Act to reflect the addition of mayoral combined authorities to the list of levying authorities for the purposes of the business rate supplement. As I said, the clause effectively tidies up the gap in the 2009 Act that could not have been foreseen at the time.
The hon. Member for Harrow West mentioned adding to the burdens on business, and that is a very important point. In theory, it is certainly possible that businesses could be liable for a number of different settlements. However, the purpose of each of these would be to deliver directly benefits to the businesses, which would also have the opportunity to frame the nature of those improvements, either through ballot or extensive engagement and consultation, so we believe there are significant safeguards. On that basis, the clause should stand part of the Bill.
Rob Marris
I have reservations about this clause, which will not surprise the Minister. Building on what I referred to when we discussed clause 37 and schedule 5, I understand that a business could face a business improvement district levy, a business rates supplement, a BRS bid, the combined authority levy in clause 38, as well as the infrastructure levy that we discussed in part 3 of the Bill in clauses 15 through 36.
As my hon. Friend the Member for Harrow West has said, there is a risk, which has been raised by me with the Federation of Small Businesses, of a cumulative effect of a proliferation of tax measures on businesses, including medium-sized ones, if there is a common floor of £50,000. That proliferation, without a cap that would prevent repeated additions, is unhelpful to the growth of businesses in our country. I urge the Minister to look again at the proposals and to provide cohesion so that there is no cumulative overspill with five different local measures.
When Professor Sir Michael Lyons was Mick Lyons and barely out of short trousers in the early 1980s, he was chief executive of Wolverhampton Metropolitan Borough Council, as it then was, and he was already well known and obviously going places. Clause 38 would further a system about which I and some colleagues—I do not know about my Front-Bench colleagues—are deeply uneasy.
There are two factors. The first is taxation by referendum, which has bedevilled places such as California where there can be opposing referendums. One referendum might say, “We want the Government to spend less money,” but another says, “We want the Government to spend more money on education.” Opposing referendums would not happen here, but it is a slippery slope if we introduce taxation by referendum.
The second factor marks a step change in the way in which we do things and I am surprised that this Government have proposed it. It was started under the previous Labour Government, but has been much furthered through this Bill, including in clause 38. Effectively, it is hypothecation. There is hypothecation with the business improvement district, the business rates supplement and the infrastructure levy under part 3 of the Bill. Now, under clause 38, there is also hypothecation with the combined authority levy. A taxation system that is based on referendums and hypothecation is a step too far and the Government ought to rethink rather than extend that approach.
Question put and agreed to.
Clause 38 accordingly ordered to stand part of the Bill.
Clause 39
Power to make consequential provision
Question proposed, That the clause stand part of the Bill.
Mr Thomas
Briefly, the clause raises the thorny question of the use of statutory instruments by the Executive and whether Ministers think they should be subject to affirmative procedure, requiring scrutiny in Committee, or allowed to slip through under negative procedure. Given the importance of business rates to our economy and the more general concern about them, we assert that if statutory instruments are used by Ministers further down the line to introduce regulations, they should be subject to the affirmative procedure and open for the public to see our debate in the House. The SIs should be introduced under the affirmative procedure. I look forward to the Minister confirming whether or not that will be the case.
Rob Marris
Clause 39 is a catch-all, and it is part of a Bill that allows the Secretary of State more than a dozen opportunities to make regulations. As if that is not enough red tape, clause 39 then states, “Oh, if we have forgotten anything, we can make a few regulations about that.” I do not think that that is good enough in a democracy. There needs to be much more clarity. Someone should have looked at the gaps in the clause and we should have had specificity, as we do in at least a dozen other places in the Bill, rather than a general catch-all and comments along the lines of, “Oh well, if we make mistakes, we’ll be all right, because we can rely on clause 39.” Frankly, that is not good enough in a parliamentary democracy.
Mr Jones
Clauses 39 to 41 make standard provision in relation to expenditure incurred, consequential provision that can be made, and the Bill’s extent. Clause 39 confers on the Secretary of State a power to make such consequential provision as is considered appropriate for the purposes of the Bill. Although the Bill contains as many consequential amendments as possible, we may find that there are further consequential amendments to make to either primary or secondary legislation.
Before I go on to clause 40—
Mr Jones
Yes, Mr Gapes. I was just coming on to the question about parliamentary procedure in regard to consequential amendments. The Bill makes numerous changes to existing legislation, including changes of terminology. Although the Bill contains many consequential amendments—we have tried to include as many of those as possible at this point—we may need to make further amendments to either primary or secondary legislation. The regulations containing any amendments to primary legislation will certainly be subject to the affirmative procedure, as the hon. Member for Harrow West asked.
Question put and agreed to.
Clause 39 accordingly ordered to stand part of the Bill.
Clause 40
Financial provisions
Question proposed, That the clause stand part of the Bill.
Mr Jones
Clause 40 provides spending authorisation for any expenditure incurred in consequence of the Bill. That is necessary in relation to, for example, clause 2 and paragraph 23 of schedule 1, which relate to new types of payment—loss payments and safety net reconciliation payments—to be made by the Secretary of State to authorities.
Question put and agreed to.
Clause 40 accordingly ordered to stand part of the Bill.
Clause 41
Extent
Question proposed, That the clause stand part of the Bill.
Mr Jones
Clause 41 sets out the territorial extent of the Bill: it applies only in relation to England. However, if the Bill is passed, it will form part of the law of England and Wales. Because England and Wales are a single jurisdiction, legislation cannot form part of the law in England without forming part of the law in Wales, even if it does not have effect in Wales. The clause clarifies that situation.
Question put and agreed to.
Clause 41 accordingly ordered to stand part of the Bill.
Clause 42
Commencement and short title
Mr Thomas
I beg to move amendment 52, in clause 42, page 30, line 8, leave out from “14” to end of line 21 and insert
“Schedule 3 and this section.
(2) The remaining provisions of this Act come into force on 1 April 2019.”
This amendment would provide that the provisions of the Bill as enacted, other than the provisions relating to telecoms relief, guidance about notices relating to non-domestic rates and the provision relating to preparatory expenditure for digital services come into force on 1 April 2019.
The Chair
With this it will be convenient to discuss amendment 54, in clause 42, page 30, line 8, leave out from “14” to end of line 21 and insert
“Schedule 3 and this section.
(2) The remaining provisions of this Act shall only come into force after the Secretary of State—
(a) has conducted a review into the future of business rates, and
(b) has assessed the impact of the future of business rates on local government finances.”
This amendment would require the Secretary of State to conduct a review into the future of business rates and their impact on local government finances before the commencement of the Bill (save for the provisions under sections 8, 13, 14 and Schedule 3).
Mr Thomas
Amendment 52 would allow key provisions, including telecoms relief, the issuing of key bits of guidance and the commencement of digital preparatory work, to be implemented after the Bill receives Royal Assent, but it would delay the coming into force of all other provisions until 1 April 2019.
The reason for the amendment is that the delay would allow more public scrutiny of the impact of 100% business rates devolution after the implementation of some of the other key elements of the proposals, such as the fair funding review, the needs assessment and the detailed regulations. A consultation was also launched by the Minister last week. One would hope that by 2019 the responses will have been made fully public and that we will be able to assess the impact of 100% business rates devolution in each local authority across the country. There might be scope, where there are problems, for further conversations with Ministers before the legislation passes and we are set on a path that might be difficult for one or two local authority areas.
A series of additional annual local government finance settlements will, of course, provide an opportunity to scrutinise the overall position of local government finances as details of the new systems bed down fully. When does the Minister expect the annual local government finance settlement provisions to be implemented? That will tell us whether tomorrow’s annual local government settlement debate will be the last one, or whether there will be other opportunities for hon. Members to raise concerns annually about the state of financing for local public services.
We want key bits of the Bill to proceed, but there are many unknowns about how it will work in practice. It would be sensible to pause once the Bill comes into force, in order to allow more information to become available about how the system will work in practice. Let us remember the particular challenge currently faced by local authority public services: social care is in crisis. I am sure that no one in this Committee would want 100% business rates devolution inadvertently to worsen the situation.
Efforts have apparently been made by the Cabinet Office, which has been tasked with coming up with proposals for the long-term future of social care. By then we might have some clue of what is emerging from that review, which might or might not give confidence to local authorities and the many critical charities such as Age UK that observe carefully what is happening. More importantly, it might reassure those who are getting older that the care they deserve will be in place. If we rush ahead and allow the Bill to become law before all those additional details are available, there is scope for concern about whether the problem will have been addressed.
There are big concerns for those authorities that do not have huge amounts of space for business expansion of the sort provided by property-based, Amazon-style warehouses, of which I think the hon. Member for North Swindon is a fan. He sees Swindon potentially benefiting from that type of expansion as a result of this Bill. Clearly, some local authorities could experience that type of expansion, but others will not. I have given the example of Allerdale Borough Council, which has a whole series of natural barriers to that type of economic growth.
Justin Tomlinson
I rise just to confirm that Swindon is benefiting from huge economic growth and a fall in unemployment of more than 60% since 2010 and that 8,100 more people are in jobs. I would welcome any businesses that want to relocate to a growing, successful Swindon.
Mr Thomas
I welcome that. I can only hope, given what the hon. Gentleman has just said, that there are no businesses in Swindon that are worried about the revaluation of business rates, which is what he implies. Perhaps we can discuss that issue when we consider amendment 54.
We know that the social care system is in crisis. We do not want to make that worse, but we also know that a series of other statutory services are not being properly funded either. Full business rates devolution potentially provides the opportunity to close some of the £5.8 billion funding gap that the Local Government Association has identified. However, there is a “but” to that. One of the few things we do know as a result of the summary consultation document published last week is that Ministers intend to axe the £3 billion public health grant that currently goes to local authorities, plus the rural services grant, which may interest the hon. Member for Thirsk and Malton. They have also confirmed the abolition of the Greater London Authority transport grant.
Already, therefore, some of that potential additional £12.8 billion of business rates has been spent, just in the two weeks that we have been considering the Bill. Hopefully, by 2019, we will know exactly what additional responsibilities Ministers want to require of local government and whether there will be any section 31 grants to help to pay for those additional responsibilities. As a result, we will be in a better position to assess the long-term financing of local government.
There is also the question of whether the system of business rates is affordable. I will dwell on that issue in speaking to amendment 54. One of the benefits of amendment 52 is that it would delay the triggering of the majority of the Bill’s provisions, which would give us the chance to have a period to assess properly whether the business rates system is fit for purpose. In that context, I offer amendment 52 as a sensible opportunity to pause, to reflect on local authority financing and to consider whether the business rates system is entirely fit for purpose, or whether there are other ways that we need to think about in terms of the financing of local government.
There is huge concern across councils up and down the land—not only Surrey County Council, but across local government—about their finances. The last thing we want to do is to make the situation worse by getting wrong the implementation of this particular proposal.
Let me turn to amendment 54, which you, Mr Gapes, very generously allowed the debate to begin on. The question is: do business rates work for businesses, do they work for local authorities and do they work for public services? It seems to me, given the huge concern that exists about the business rate revaluations and given other concerns about how local government will be financed, that there should be a full review of business rates before this Bill comes into force.
Given that six of Amazon’s nine distribution warehouses are set to have a fall in business rates, given how little it pays in corporation tax and given how high the business rate bill is going to go up by for many small and medium-sized businesses in our high streets, we have to wonder whether we have the system as correct as we might. The British Retail Consortium has repeatedly voiced the concern—and so did we, earlier in the Committee’s consideration of the Bill—that online retailers have an advantage in terms of costs over businesses that rely on bricks and mortar, not just because their liabilities are lower but because they can offer cheaper prices compared with those on the high street who have to pay business rates. What does that mean for the long-term future of our high streets up and down the country? My hon. Friend the Member for Oldham West and Royton and, to be fair, the hon. Member for North Swindon alluded to the importance of our high streets as community centres and the sense of place that we all value.
Reputable media outlets such as The Times have suggested that online retailers are rated at less than one eighth of the valuation per square metre of some small shops. That is a huge cost differential. Whether it is fair is an open question but, as our economy begins to change significantly and technology moves forward rapidly, we need to think about whether we are levying tax on business in the most appropriate way.
Business rate revaluation hits businesses hardest in areas that have seen rapid property price increases. London is one of the most severely affected areas. It is not just London, though, that is severely hit. I want to come on to Southwold in Suffolk, just south of the Waveney constituency. Sadly, the hon. Member for Waveney is not with us today. He might usefully have reflected on that story. However, we do know that many businesses in Suffolk have raised their concerns.
How significant are the increases in London? You will be interested in this, Mr Gapes, given the constituency you represent. I am sure that the hon. Member for Thirsk and Malton will take this particularly seriously, even if he does not like London very much. The FSB says that business rates in the capital are set to increase by 11%. In some parts of London, the increases are much more significant than that. For example, in Islington, rates are set to increase on average by 27%, and in the City of London, by 25%. In some areas of Mayfair, the increase will be as high as 415%. In the constituency of my hon. Friend the Member for Lewisham, Deptford, the business rate is set to increase by an average of 36%. My hon. Friend the Member for Eltham, who could not be here this morning, will see business rates increase on average by 21% in his borough of Greenwich. Forgive me for being mildly parochial, but in Britain’s most important borough, Harrow, business rates are likely to rise by an average of 14%. In Hillingdon, which is next to Heathrow airport—set to benefit from a third runway—rates will increase by an average of just 1%.
Mr Jones
I hear what the hon. Gentleman says. He knows that this is an independent revaluation, not a revaluation that has been directly undertaken by the Government. If he is so opposed to the way this revaluation has been undertaken, why did his party not oppose it when it went through both Houses of Parliament?
Mr Thomas
I must gently say that not even we thought that the Government could get this so badly wrong. I want to come on to the question of resources for the Valuation Office Agency, which have been significantly cut and are leading to many delays in appeals by businesses that have genuine concerns about their revaluation, which has not helped either.
There is a more general point. As politicians, we cannot always predict what is going to happen, but we should be willing to react when circumstances change. There is such concern across the business community about the potential impact of the revaluation on small and medium-sized businesses that it is time that we listened to those concerns.
Rob Marris
My hon. Friend mentioned a situation I am in. I bear no candle for London, with due apologies, Mr Gapes, but I understand from the Federation of Small Businesses that the Government are really on the back foot. Small business rate relief will benefit 16% of businesses in London but 32% of businesses in the rest of England.
Mr Thomas
My hon. Friend makes his point and he may have the chance to expand on it. It is worth listening to the FSB. In a London context, it is calling for higher inner and outer London small business rate relief thresholds to reflect the specific problems faced by small businesses in the capital. In inner London, it argues that the threshold for 100% relief should be a £20,000 rateable value, tapering to £23,000. In outer London, where rateable values have fortunately increased by a slightly lower percentage, it believes that the threshold for 100% relief should be £15,000, tapering to £18,000. It suggests that Ministers might be tempted to look at a system of transitional relief. That has happened in previous revaluations. However, it wants small businesses to have certainty for the future. Although transitional relief would be helpful, its argument is that the system needs a fundamental look-at to reflect the problem properly.
The Chair
Order. I think I have been very tolerant so far in allowing the discussion to range over matters that could potentially not be within the scope of the two amendments. I should be grateful if the hon. Gentleman focused specifically on the amendments.
Mr Thomas
Absolutely, Mr Gapes. I would not want to do anything other than that. I gently make the point that businesses continue to have concerns about the way in which business rates are levied, and that local councils are concerned about whether the business rates system will provide sufficient revenue for the provision of statutory services. We can understand their concern. Therefore, I think that it is right that we have tabled amendment 54 to require the Secretary of State to review the future of business rates and their impact on local government finances before the commencement of the Bill.
I gently suggest that, if business rates do not have the support of the business community, it will make it very difficult for local councils that want to explore with that community the case for investment in infrastructure in their area, of the type we have been discussing, under the business improvement districts or the property owner levy. We have heard the Minister confirm that there is potential for an extra 4p on business rates as a result of the way the legislation has been drafted. In the context of the anger about the business rates revaluation, Labour Members are worried that local authorities may not have the support they need for investment in their authorities, if they want to encourage businesses to think about business improvement districts.
Mr Jones
All of a sudden the hon. Gentleman seems to want to be the champion of small business—something many of us would find difficult to recognise—by saying that business rate bills are too much for businesses. When this Government bring forward a measure in this Bill to reduce the indexation on the business rate multiplier from the higher RPI, to the lower CPI, which would save businesses hundreds of millions of pounds in its first year alone, he seems to oppose it. What is his position?
Mr Thomas
The Minister is being inaccurate. As he knows full well, we did not oppose that change; we do want to help businesses. We are the party of small business in particular, but the party of business more generally. When business groups make serious representations to us, we listen. They are profoundly concerned about the business rates revaluation. Surely it is also the responsibility of all of us in the House to consider whether business rates will provide sufficient revenue for local authorities to fund essential public services. Local authorities express serious concern to us as to whether, given the huge cuts to revenue support grant, business rates, which will be one of only two key sources of local authority income down the line, will provide enough resource. When one considers too the impact on other public services, such as schools and hospitals—we will look at that, I hope, as part of new clause 4 or 8 I think, this afternoon—
Mr Thomas
Definitely not this clause, but it is important to be aware of that in the context of the need for a full review of business rates. I gently suggest to Ministers that they need to take their fingers out of their ears, listen to the concerns of business, the LGA and others and agree to support amendment 54.
Rob Marris
I shall focus on proposed subsection 2(a) as inserted by amendment 54, asking for a review into the future of business rates, and why I think the Government ought to support the amendment and accede to that request. I will make a few brief remarks as to why I think a wide-ranging review is necessary.
I referred earlier this morning to the fact that businesses could be faced with six different and overlapping rates: business rates, business rate supplements, business improvement districts, BRS-BIDs, the infrastructure levy and the combined authority supplement or levy. It is a very complex system, it is getting more complex, and it is overlapping.
Some proposals in the Bill would be delayed were a review brought in. The Opposition asked for evidence from the Government on the rationale for bringing in the changes and what they would in fact do. We asked whether there is evidence that the incentivisation—much heralded by the Government—will take place. In the course of the Committee’s consideration of the Bill thus far, I have made six direct requests of the Minister. My excellent researcher, Imogen Watson, has dug out the number of occasions on which the Government were asked for evidence for the measures that would introduced under clause 42 and their phasing, which would be delayed by amendment 53. The Government could have put forward evidence 33 times, and they singularly failed to do so on every occasion.
We read all over the press about the absolute mess with the evidence, which has been provided to one set of MPs—apparently it has been produced for Government MPs, but not, disrespectfully, for Opposition MPs. Certainly my four hon. Friends in the room have received no such evidence. Also, there is conflicting evidence. The Secretary of State—he is a west midlands MP, like me and the Minister—has put forward figures that seem to be contradictory.
There is light at the end of the tunnel, however. According to The Times this morning, an area that was going to be a winner under the system will, under the second round of figures released by the Government, now be a loser. That area is represented by my parliamentary neighbour and the Chief Whip, the right hon. Member for South Staffordshire (Gavin Williamson). When the Chief Whip represents a constituency that will now be a loser, some of the changes may be altered or delayed, and delay is what amendment 54 seeks.
I agree with the FSB and my hon. Friend the Member for Harrow West that the whole system of taxation on businesses at the local level needs to be revamped. Amendment 54 opens the way for that by asking for a review of the future of business rates. Contingent on that review would necessarily be a look at the broader picture. As the FSB’s letter suggested some time ago, we should be looking at a turnover tax, rather than the bricks and mortar taxes that are reinforced by the Bill’s provisions. They are old-fashioned, and we need a more wide-ranging approach.
Mr Jones
I thank the hon. Member for Harrow West for tabling the amendments, which would delay the commencement of the majority of the Bill’s provisions. Amendment 52 would delay the commencement of the Bill until 1 April 2019, making exceptions for
“provisions relating to telecoms relief, guidance about notices relating to non-domestic rates and the provision relating to preparatory expenditure for digital services”.
In amendment 54, the hon. Gentleman takes an alternate position, this time proposing that commencement, with the same provisions excepted, be delayed until after the Secretary of State
“has conducted a review into the future of business rates, and…has assessed the impact of the future of business rates on local government finances.”
We have been clear that the Government’s commitment is to implement the 100% business rate retention reforms for the financial year 2019-20 and to make the associated arrangements ahead of that to ensure that that is possible.
The hon. Gentleman raised a point about the annual local government finance settlement. The finance settlement as it stands will continue to be agreed, as is the case now, for the years up to 2019-20. For 2019-20, we will need to lay regulations in advance to ensure the details of the new system are in place for April 2019. I hope that deals with the concern that the hon. Gentleman expressed.
The Bill also provides the framework for the reformed system. Establishing the framework now gives us the opportunity to continue to work with local government and business in the coming months on the details of the reforms. We know that councils in particular welcome that approach. It ensures that councils have continued opportunity to shape the design and detail of the system on the basis of the certainty put in place by the framework provided by the Bill.
That approach echoes the implementation of the 50% rates retention system. Given the importance of the change, we are allowing more time to work with local government on the detail of these reforms. We will need to do preparatory work to ensure the implementation of provisions is tailored appropriately, including drafting regulations before the start of the 2019-20 financial year. That will be essential to ensure that local authorities are suitably prepared for the changes made by the new arrangements. I am sure that the hon. Member for Harrow West would agree that that is of the utmost importance.
Amendment 52 would not allow for that timely preparation, nor would it allow a timely commencement of a number of other provisions in the Bill that directly support businesses and premises owners. It would delay the introduction in rural rates relief, meaning that local shops in rural areas would pay more. It would also delay our commitment to enable authorities to grant reliefs for public toilets, ensuring that those important local amenities are protected.
Amendment 54 proposes that progress on reforms delivered in the Bill should be halted to allow for a review of the business rates system. As I hope the hon. Gentleman is aware, the Government undertook a review of the business rates system as recently as 2015. In fact, the Bill seeks to implement some of the important commitments that the Government made in response to that review. Amendment 54 would risk the delivery of them.
The 2015 review asked for views on the future of the business rates system and received 269 responses from councils and businesses of all sizes up and down the country, as well as business groups and others with an interest, such as rating agents and think-tanks. A clear message from those responses was a majority in favour of retaining a property-based tax. Respondents agreed with the Government’s view that property-based taxes were easy to collect, difficult to avoid and had a clear link with local authority spending.
Rob Marris
I have just checked the Bill. The Minister indicated that were the amendments to be agreed that would delay the implementation of relief for rural shops under clause 7. However, under clause 42, clause 7 would not come into force immediately anyway.
The Chair
Order. Please can we refrain from the personal remarks and get back to the point?
Mr Jones
I will certainly get back to the point, Mr Gapes. As I was explaining, there was a very clear message from the responses we received to the business rate review undertaken in 2015: the clear view then, including from the business community, was that they wanted to retain the current system.
Mr Jones
I will make some progress and then I will take the hon. Gentleman’s intervention.
There were also other clear messages from that review. People called for more protection for small businesses, and we have permanently doubled small business rate relief as a result. That means that 600,000 small businesses —a third of businesses overall—will pay no business rates at all. Understandably, many businesses wanted their rates cut and, in particular, for business rates to be uprated by CPI. The Bill delivers that change, which represents a cut in business rates every year from 2020—a saving of around £370 million in the first year alone and even more in each and every year after that.
People also called for the administration of business rates to be modernised. Again, we have listened and are taking action, including measures in the Bill to make it easier for businesses to receive and pay their bills. Importantly, local authorities called for greater rates retention and increased devolution of rate setting. They said that that would help them to get control of their finances as well as boost growth and respond to the needs of businesses in their areas. Does the hon. Gentleman still want to intervene?
Mr Jones
Before the hon. Gentleman intervenes again, perhaps he will explain his position on the measure in the Bill to reduce the multiplier. We are reducing the multiplier through the provisions in the Bill and we have clearly said that the multiplier will be based on an indexation of CPI rather than RPI from 2020. That will save business £370 million in the first year of that system alone. Does the hon. Gentleman agree with that? He has seemed to disagree throughout this Committee.
Mr Jones
I think I am going to move on because I have answered that question on several occasions.
The Bill delivers on providing a framework for local government to retain 100% of locally raised business rates, giving councils new powers to reduce business rates in their areas to boost growth and providing for Mayors in combined authority areas to seek investment in local infrastructure projects. Amendment 54 suggests that those reforms should be delayed until after further consideration of the impact of business rates on local government finances.
As I have said many times, the move to 100% business rates retention is a reform that councils have long campaigned for. Councils are right to argue that the reforms will help them move to greater self-sufficiency. At a national level, business rates are a relatively stable tax. We recognise that there can be change and volatility locally, and we have been clear that we want to design this scheme in a way that helps councils to manage better those local changes. That is why we are taking measures in the Bill to help councils manage the impact of successful business rates appeals.
We have been clear from the outset that we will continue to make sure that there is a redistribution between authorities so that no council loses out because it currently collects less in business rates. That is why there will continue to be a safety net to help cushion councils from significant falls in their business rates income. Our continuing engagement with local government on the detail of the scheme will help ensure that the aspects of the new system work in a way that helps councils to manage local volatility.
As I have demonstrated, the amendments are clearly unnecessary and would prevent us from delivering on a range of commitments that business and councils have called for. On that basis, I hope that the hon. Gentleman will withdraw his amendment.
Mr Thomas
I do not intend to press amendment 52 to a vote at this point, not least because I take the Minister’s point about rural rate relief. We would certainly not want to stand in the way of that additional support for businesses in rural areas. We may well come back on Report to the question of a delay.
The Minister has not been convincing on amendment 54. I am disappointed that he has cited previous looks at business rates as an excuse for ignoring the very real difficulties that many businesses will face as a result of the revaluation that has taken place. He ignores the difficulties arising from the cutbacks at the Valuation Office Agency in relation to enabling businesses to have their revaluations considered on appeal in good time. He also ignores the real concerns of local authorities about how much business rates income there will be when Ministers finally decide what additional responsibilities are to be handed over.
We know that just over £3.5 billion of extra responsibility has just been handed to local government, reducing the £12.8 billion pot that Ministers boldly said would be passed over as extra money for local authorities. Those specific additional grants have been cut back. We have heard the Minister confirm that businesses could face an extra 4p on business rates in respect of the multiplier, as a result of the business rates supplement and the BID.
The complacency from Ministers—not just the local government finance Minister, but across the Government—about the situation faced by businesses and local authorities means that I am going to seek to divide the Committee on amendment 54. I beg to ask leave to withdraw amendment 52.
Amendment, by leave, withdrawn.
Amendment proposed: 54, in clause 42, page 30, line 8, leave out from “14” to end of line 21 and insert
“Schedule 3 and this section.
‘(2) The remaining provisions of this Act shall only come into force after the Secretary of State—
(a) has conducted a review into the future of business rates, and
(b) has assessed the impact of the future of business rates on local government finances.”—(Mr Thomas.)
This amendment would require the Secretary of State to conduct a review into the future of business rates and their impact on local government finances before the commencement of the Bill (save for the provisions under sections 8, 13, 14 and Schedule 3).
Question put, That the amendment be made.
Local Government Finance Bill (Tenth sitting)
(7 years, 2 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text
The Committee divided: - Ayes: 6 / Noes: 9 - Question accordingly negatived.
Mr Gareth Thomas (Harrow West) (Lab/Co-op)
On a point of order, Sir David. We are always grateful to see you in the Chair. You will have missed the exchange we had with Mr Gapes in which we asked for his help—perhaps with your influence—to see whether the whole Committee, as opposed to one half of it, might have access to a letter that the Secretary of State sent to some Members of Parliament about the future of business rates, which is obviously pertinent to the Bill. We believe that the letter was sent to every Conservative MP, and some of them have helpfully shared it with the media, but the Opposition have not had the chance to see it in full. If you can bring any influence to ensure that it is released to us, that would be extremely helpful.
The Chair
I had not been alerted to the fact that this matter was raised this morning. The Minister has heard what has been said, but I am afraid that it is not a matter for the Chair.
Clause 42
Commencement and short title
Question (this day) again proposed, That the clause stand part of the Bill.
The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Marcus Jones)
It is a pleasure to serve under your chairmanship once again, Sir David. The clause makes standard provision in relation to the commencement of provisions in the Bill, as I explained in relation to amendments 52 and 54 before we broke. Subsection (1) sets out that the provisions relating to the telecommunications relief guidance about notices relating to non-domestic rates and Her Majesty’s Revenue and Customs expenditure for digital services will come into force on Royal Assent. Powers to make regulations in the Bill as well as the final standard provisions of the Bill will also come into force on Royal Assent.
Mr Thomas
One of the things that is missing from the Bill is any reference to local enterprise partnerships. The Minister may remember that before the former Chancellor, the right hon. Member for Tatton (Mr Osborne), was sacked for incompetence by the new Prime Minister, he made reference to 100% business rate devolution and, crucially, infrastructure supplements that require the consent or support of local enterprise partnerships, but there has been no mention of local enterprise partnerships in any of the clauses, or indeed in the Minister’s speeches. Will he set out why there appears to be a change in the involvement of LEPs?
Mr Jones
The hon. Gentleman raises an interesting point. I suppose it would have been more pertinent to our earlier deliberations in considering the Bill, when we were dealing directly with supplements that can be charged by directly elected Mayors and the consultation process that will be gone through with businesses. I do not want to dwell on that point, other than to say that we clearly set out how the matter will be considered. We consulted widely with the business community, including local enterprise partnerships. That is why we came to the conclusion and took the view that we did on how Mayors will have to consult with business if they wish to implement a business rate supplement for infrastructure.
In my response to amendments 52 and 54, I set out the reasons why the Bill commencement regulations should not be delayed until 2019. We have had several discussions on delegated powers. As I have explained, the Bill provides a framework to establish a new business rates retention system. Our approach allows us to continue to work with local government over coming months and years on the details of the reforms, which councils will welcome.
In line with the approach taken in the previous local government finance legislation, the Bill necessarily contains a number of delegated powers, as set out in the delegated powers memorandum, which describes each power’s purpose, justification and proposed procedure. The Bill takes a similar number of powers to the previous legislation. As I said at our previous sitting, the majority of those powers amend or replicate existing legislation, predominantly the Local Government Finance Act 1988 and the Business Rate Supplements Act 2009.
Where replicating existing powers, the Bill retains the procedure for each from previous legislation. Where the Bill creates new powers, the majority will provide for parliamentary procedure but, as is normal for this type of legislation, the Bill contains new powers that do not have a parliamentary procedure, such as the commencement regulations under this clause.
Mr Thomas
On the commencement proceedings, the Minister might remember that I asked specifically when he intends the abolition of the local government finance statement to kick in. Does he see tomorrow’s as the last such statement, or will there be another one for 2018-19? What is the commencement date for that provision?
Mr Jones
The hon. Gentleman has listened intently to every word I have said in this Committee, so he knows that earlier in our deliberations I confirmed to him that this year’s local government finance settlement will not be the last settlement of its type. The local government finance settlement process will continue until the new policy is implemented in 2019-20. Regulations will therefore have to be put in place by 2019, in advance of the forthcoming settlement for local government for that year. I hope that clarifies the matter for him.
The central principle of our approach to implementation of the business rate reforms is that we have developed and continue to develop the detail of provisions through close work with local authorities and businesses. By way of assurance to the Committee and to ensure openness, where possible we will publish draft regulations or policy statements on the content of the provision to be made under the powers in the Bill.
Given the above assurance, I ask the Committee to let the commencement clause stand part of the Bill.
Mr Thomas
I am grateful to the Minister for confirming that the local government finance settlement debate will continue to take place. It is an opportunity for Members across the House to continue to scrutinise not only local government finance as it operates at the moment but, crucially, as we get more clarity, how business rates might end up working when 100% devolved—goodness only knows, we need that clarity.
We have no sense of how the so-called fair funding review will work for each individual local authority. We have no sense as yet of the consequences of the detail of the financial regulations to accompany the Bill. It will therefore be helpful for us to continue to have the opportunity to debate such matters on the Floor of the House and to explore what they mean for each of our local authorities and the public services that they provide to the people of England generally.
It would be helpful to hear a little more from the Minister about any further arrangements for consultation with business. It seems a little odd that before the Bill is commenced, in the light of the huge concern about the business rates revaluation that has hit the media of late, there will not be further detailed consultation with business through local enterprise partnerships. Here is a quote from the Treasury press release that accompanied the previous Chancellor—before he was sacked for incompetence by the current Prime Minister—which outlined how the infrastructure premium would operate:
“Directly elected mayors—once they have support of local business leaders through a majority vote of the business members of the Local Enterprise Partnership—will be able to add a premium to business rates”.
Yet there has been no mention by the Minister of local enterprise partnerships in any of his speeches to date. He might prefer me to have mentioned it earlier in the proceedings—perhaps his memory might have come back to him at that point about why he made the change and decided to cut out local enterprise partnerships from the Bill. It would be good to hear a little more from the Minister about how local enterprise partnerships will be involved in the coming months.
Rob Marris (Wolverhampton South West) (Lab)
I am a little surprised, given that when we were talking this morning about timing and implementation of the various clauses in the Bill, the Minister prayed in aid clause 5, on indexation, and clause 7. When he talks this afternoon about developing policy in conjunction with local authorities and liaising—my verb, not his—it would be good if we had some evidence. He challenged my hon. Friend the Member for Harrow West on whether Labour supports clause 7, on rate relief for rural shops, and clause 5, on indexation, to which my hon. Friend gave a clear answer. The Minister relied on those clauses as examples of clarity and the way forward, but if they are so clear, why will their implementation be delayed?
Mr Jones
We have made it quite clear why those matters are to be implemented in that sequence. I made it clear earlier, in answer to the hon. Member for Harrow West, that we consulted widely with business groups, including local enterprise partnerships. This Government do listen. We have decided to bring forward a system in relation to business rate supplements that reflects the views of business, and when proposals are developed in local areas they will certainly need to take into account the views of the business community in that particular combined authority area.
Mr Jones
As was shown earlier, the hon. Gentleman seems to have undergone a complete transformation while scrutinising the Bill, having previously advocated that local authorities should be able to increase the multiplier at will and therefore increase the tax rate on business rates. He then seemed to have a conversion, given that he now wants to look at a review. I set out our reasoning earlier, carefully and in some detail. As I said, the Government considered the issue of business rates as recently as 2015. We looked at the issue carefully and consulted business groups and local authorities, which at that time thought the system we had, although not perfect, was one the Government should continue with. On that basis, I will curtail my comments and commend the clause to the Committee.
Question put and agreed to.
Clause 42 accordingly ordered to stand part of the Bill.
New Clause 2
Needs assessment prior to each reset
‘(1) Before any alteration to the Business Rate Retention Scheme, an independent body must conduct a full needs assessment of every billing authority.
(2) The conclusions of the assessment under subsection (1) must be taken into account when considering any changes to calculations under paragraph 2 of Schedule 7B to the Local Government Finance Act 1988 that are made as part of the BRRS reset.”—(Jim McMahon.)
This new clause would require a full needs assessment to be carried out for every billing authority in order to inform the new tariff and top ups system at each BRRS reset.
Brought up, and read the First time.
Jim McMahon (Oldham West and Royton) (Lab)
I beg to move, That the clause be read a Second time.
The Chair
With this it will be convenient to discuss the following:
New clause 3—Local Authority Needs Commission—
‘(1) There shall be a body called the Local Authority Needs Commission (“the Commission”).
(2) It shall be the duty of the Commission to carry out assessments of the matters specified in subsection (4) from time to time as it thinks fit, but no less than once every two calendar years.
(3) It shall be the duty of the Commission to carry out assessments of the matters specified in subsection (8) when requested to do so by the Secretary of State.
(4) The matters specified in this subsection are, in respect of each billing authority in England, all matters which the Commission considers are relevant to an understanding of the resource need of each billing authority, including, but not confined to—
(a) the extent of social deprivation in the area,
(b) the resident and day-time populations of the area,
(c) the condition of housing stock in the area,
(d) the economic profile of the area,
(e) the population density of the area,
(f) the ethnic composition of the population of the area,
(g) the extent to which the population of the area has a first language other than English.
(5) It shall be the duty of the Commission to assess the impact of any new requirement imposed upon a billing authority—
(a) by legislation, or
(b) by direction from the Secretary of State
as soon as is reasonably practicably after the introduction of the new requirement takes effect.
(6) An assessment under subsection (5) must include a needs assessment of the billing authority in relation to the new requirement, having regard to the matters specified in subsection (4), which must be made publicly available.
(7) It shall be the duty of the Secretary of State, before making a grant to billing authorities under—
(a) section 78 of the 1988 Act, or
(b) section 31 of the Local Government Act 2003
to inform the Commission of the billing authorities intended to receive a grant and request the Commission to undertake an assessment in accordance with subsection (3).
(8) The matters specified in this subsection are, in respect of each billing authority in England intended to receive a grant, all matters which the Commission considers are relevant to an understanding of the resource need of each such billing authority, including, but not confined to, the matters specified in paragraphs (a) to (g) of subsection (4).
(9) Any assessment made under subsection (2), (3) or (5) shall be laid before the House of Commons by the Secretary of State as soon as practicable after the final version of the assessment has been provided to the Secretary of State by the Commission.
(10) Schedule (Local Authority Needs Commission: further provision) makes further provision about the Commission.”
New schedule 1—Local Authority Needs Commission: further provision—
Membership, chair and deputy chair
1 (1) The member of the Commission are to be—
(a) a chair appointed by the Secretary of State, and
(b) at least four other member appointed by the Secretary of State.
(2) Before appointing members under sub-paragraph (1)(b), the Secretary of State must consult the chair.
(3) The Commission may appoint one of the members as the deputy chair.
(4) The Secretary of State must have regard to the desirability of securing that the Commission (taken as a whole) has experience in or knowledge of—
(a) the management of local government finances,
(b) research into matters relating to social and economic needs and their assessment.
Term of office
2 Members are to hold and vacate office in accordance with the terms of their appointment, subject to the following provisions.
3 Members must be appointed for a term of not more than 5 years.
4 A member may resign by giving notice in writing to the Secretary of State.
(a) resigns that office by giving notice in writing to the Secretary of State, or
(b) ceases to be a member.
6 A person who holds or has held office as the chair, or as the deputy chair or other member, may be reappointed, whether or not to the same office.
Staff and facilities
7 The Secretary of State may provide the Commission with—
(a) such staff,
(b) such accommodation, equipment and other facilities, and
(c) such sums,
as the Secretary of State may determine are required by the Commission in the exercise of its functions.
Research
8 (1) The Commission may at any time request the Secretary of State to carry out, or commission others to carry out, such research on behalf of the Commission for the purpose of the carrying out of the Commission’s functions as the Commission may specify in the request.
(2) If the Secretary of State decides not to comply with the request, the Secretary of State must notify the Commission of the reasons for the decision.
Payments to members
9 The Secretary of State may pay to or in respect of the members of the Commission such remuneration, allowances and expenses as the Secretary of State may determine.
Status
10 The Commission is not to be regarded—
(a) as the servant or agent of the Crown, or
(b) as enjoying any status, privilege or immunity of the Crown.
Sub-committees
11 The Commission may establish sub-committees.
Validity of proceedings
12 The Commission may regulate—
(a) its own procedure (including quorum), and
(b) the procedure of any sub-committee (including quorum).
13 The validity of anything done by the Commission or any sub-committee is not affected by—
(a) any vacancy in the membership of the Commission or subcommittee, or
(b) any defect in the appointment of any member of the Commission or sub-committee.
Discharge of functions
14 The Commission may authorise a sub-committee or member to exercise any of the Commission’s functions.
Public records
15 In Schedule 1 to the Public Records Act 1958 (definition of public records) in Part 2 of the Table at the end of paragraph 3 at the appropriate place insert—
“The Local Authority Needs Commission”
Parliamentary Commissioner
16 In Schedule 2 to the Parliamentary Commissioner Act 1967 (departments etc subject to investigation) at the appropriate place insert—
“The Local Authority Needs Commission”
Disqualification
17 (1) In Part 2 of Schedule 1 to the House of Commons Disqualification Act 1975 (bodies of which all members are disqualified) at the appropriate place insert—
“The Local Authority Needs Commission”
Freedom of information
18 In Part 6 of Schedule 1 to the Freedom of Information Act 2000 (other public bodies and offices: general) at the appropriate place insert—
“The Local Authority Needs Commission”
Jim McMahon
It is a pleasure to serve under your chairmanship, Sir David. We have had a lot of debates in this Committee about moving to a new system of self-sustaining local government. There have been great calls from central Government for a level of independence, and my hon. Friend the Member for Harrow West has challenged the Government on just how independent local government will be and what safeguards will be in place to ensure it is funded adequately so it can carry out its legal responsibilities. We are effectively being asked to agree the framework without knowing what the method of assessment will be. We are understandably nervous about that, as is local government, particularly given the kick-off with the business rate revaluation. We are not sure whether the Chancellor or the Secretary of State will grant concessions that mean that even less money is available to deliver local public services.
With these new clauses and the new schedule, we want to set out a positive alternative and show what we could do in a constructive, cross-party way to put local government funding on a fair and firm footing. These are not new ideas. I will be honest and admit that we copied and pasted them. Why reinvent the wheel? If somebody has gone to the trouble of doing the work, carrying out the investigation, understanding the evidence base and consulting with the industry, the sector and those affected, we ought to listen to what they have to say and consider it in the right way.
Members might be aware that the Local Government Association commissioned an independent review into local government finance and whether it is sustainable. The review recognised that we are in a period of austerity, but that demand for public services is increasing all the time. It also recognised that the world is changing, and that how people access and interact with public services is changing, too. How people work is changing, and the part of the workforce that works across different institutions is changing, too.
In the review, the Independent Commission on Local Government Finance highlighted a number of things and set out its vision of a self-financing system that promotes self-reliance and self-sufficiency in local government, encourages areas to be innovative, promotes local decision making on service delivery, ensures transparency in how it works and in the division of responsibilities between central and local government, and maintains support for the most vulnerable people in the community. It came out with a series of recommendations, which are directly relevant to these clauses and are worth talking about in some detail. If we can get agreement on this today, we will not only show the country that some things are above party politics—in my view, funding vital frontline services should be one of them—but show local government that the work it has undertaken in previous years to research and develop an alternative idea has paid off and been respected and adopted by the Government with the support of the Opposition. That is our intention, and I hope the Minister responds with the same degree of charity. Hopefully, we can make some progress.
Critical to the recommendations was the establishment of an independent body to advise the Government on funding needs in each local area and on the allocation of funding to local areas and sub-regional areas that have combined authority arrangements in place. The report talks a great deal about how local freedoms should be in place—in particular, the freedoms to set local discounts and to decide how much, if any, council tax should increase without the Secretary of State imposing a referendum cap. It also talks about a business rate retention scheme that could be introduced.
At times, reports come out of Parliament that say, “Local government just doesn’t get it right,” and reports come out of local government that say, “Parliament just doesn’t get it,” but what inspired me about this report is that it is not like that at all. It says, “The system isn’t working for any party, so we need to find a new model that works for all concerned.” The language used throughout the report is very much about working together. When it talks about an independent body being set up, it is not saying that local government does not trust national Government; it is saying that having an independent body to one side, to advise, would add to decision making and help Government. Government would still have the ability to hold the ring, but they would have the depth and quality of an independent body sat to one side. There is a great deal to be commended in that.
The report should be read, and read in the spirit in which it is intended. The commission’s membership is significant: it has the experience of former civil servants, people who have worked in the private sector, people who have worked for health authorities and accountancy firms, and entrepreneurs who have experience of creating value from the ground up and being successful in their industries. It includes people who have experience of working all over Europe and around the world who are, at their core, used to setting up complex financial systems and making them work in their practical application. That has been quite absent from the debates we have had.
We have talked about systems and processes, and we have talked about governance to a degree, but we have not really talked about the pounds and pence. That matters to the communities we are here to serve. When we have asked questions about that, we have been told an assessment will be made at some point that will take into account a range of criteria, all of which we have discussed over the course of the Committee’s sittings, but we are still none the wiser as to what that will mean in practice. What will it mean for a town like Oldham or a city like Oxford? The truth is that, today, we just do not know.
If we believe that the best public services are formed around communities and individuals rather than governments and institutions, maybe the answer will not derive from this building. Allowing freedom at a local level to co-produce and having an independent body that liaises and interacts at a local level, reporting and feeding back to Government, would add a lot of value to the work that Government are doing.
I am not the Secretary of State; I am not even a Minister, but I imagine that if I were in either of those positions, I would not relish the current annual responsibility to produce a financial statement to Parliament. There are two ways of dealing with that: we either do what the Government of the day propose, which is to delete that requirement altogether, or—this would be my preference—we have the assessment in place but ensure that we have the cover of a strong evidence base, that the assessment is tested and supported by rigorous criteria that can be objectively assessed and challenged by anybody interested, and that the process is one to which people can contribute if they are affected by the decision that will ultimately be taken. That would be a far more forward-thinking way of running Government post-Brexit.
When people went to the polling stations and voted to remain or leave, I do not believe for one second they were talking about repatriating powers from the EU to this building. I think they were saying, “I want more power and determination over my life. I’m sick of having things done to me. When my son, daughter, grandchildren or I need a new house, I want there to be a home to get. When the quality of the school isn’t good enough, I want it to improve and be the best it can be. When I want to get a better job, I want to know that the route to that is available to me and I won’t have barriers put in front of me.” The truth is that our communities are so diverse and different that we cannot design that here; it has to be designed within the community, and there has to be a funding model to support it.
We can talk as much as we want—warm words are great. We are all aware that Brexit means Brexit, but we do not know what the new world means, if we are honest. We do not know what a United Kingdom is and whether we will have one if we carry on. Even if we know the place of a further devolved Scotland, Wales and Northern Ireland, not many people can draw out where the Government intend to take a devolved England. The fragmentation of devolution we have seen so far, the absence of a framework and the complete lack of fair funding to support the delivery of local public services and economic growth are a major barrier to having a post-Brexit solution that works for our communities.
This is more important to the Government of the day than just a technical exercise to establish a body to report to the Government; it is about a fundamental reset of the relationship between local communities and their directly elected local authorities, which determine how much money is spent on local priorities, public services and inward investment.
I do not intend to detain the Committee for much longer, but we think that these new clauses are important. We tabled several amendments, having locked ourselves away in a room and thought, “This is going to be a good debating topic,” or, “I’m sure the Government haven’t done their work on this; we might expose one or two weaknesses.” That is the nature of opposition and, to be fair, those amendments worked quite well, but new clauses 2 and 3 and new schedule 1 were not tabled with that intention at all. We are trying to be the voice of local government in this place and to ensure that its interests are represented. As I said, I think the answer has been presented. If the Government of the day do not recognise that they have a gift, which has been adopted by local government on a cross-party basis, and do not take it, they will miss a trick and face further disquiet from their local government ranks.
Anna Turley (Redcar) (Lab/Co-op)
It is a pleasure to serve under your chairmanship again, Sir David. I rise to speak to these new clauses because they are extremely important for the local government sector and would add huge value for the Government. Not only are we struggling to work our way through the Bill without the evidence that we need about the fair funding settlement and so on, as my hon. Friend the Member for Harrow West has said, but year after year, when we come to the local government funding settlement, the Government have to defend themselves against accusations of unfairness, pork barrel politics and so on, in the face of quite extreme evidence—particularly in the last few years as cuts have been applied—of unfairness in the way that local government funding is distributed. Opposition seats are often the hardest hit, and areas of need have seen the hardest cuts. I urge the Government to defend themselves to some extent against such accusations, and these new clauses would provide them with a positive way to do that.
There has been a total lack of clarity in the way that the funding formula is applied. In last year’s debate about local government funding, we even saw Conservative MPs stand up and say to the Minister, “I was going to vote against the local government funding settlement, but since our conversation and since I was given some transitional arrangements, I have decided to support it.” That is obviously extremely distressing to Opposition Members, who are trying to fight for our communities and have seen our constituencies ravaged by local government cuts. There seems to be a preference: people who can get in and advocate their case to the Minister will get funding. That lack of clarity exposes the Government to criticism, and we are offering them an opportunity to defend themselves and give the rest of the country, the local government sector and Opposition MPs some confidence in the way they distribute funding.
There is a second important issue: if we devolve business rates and give local authorities more power to decide on the future of funding, we could leave them in a difficult situation. During the evidence sessions, I asked one of the local government representatives whether she felt local government could co-operate and work in partnership or whether there would be competition, with local authorities essentially fighting each other for the biggest slice of the cake. I have to say that her answer did not fill me with confidence that there really was a united sense of partnership. In my view, having an independent commission and the evidence base on which to proceed would be extremely helpful to both the local government family and the Government themselves.
My biggest concern is that we hear from Government Members: “We have had enough of evidence.” We seem to live in a post-truth, post-evidence world. We are offering the Government the opportunity to have evidence about demand, need and how we can best serve our local communities through local government funding. This is an opportunity for the Government to respond fully and ensure that they are fair and above any accusations or criticism. This seems like an obvious one, and I cannot understand why the Government would object, so I urge them to accept these new clauses.
Rob Marris
I salute my hon. Friends the Members for Oldham West and Royton and for Redcar for their perseverance. As I said this morning, the Opposition have solicited evidence from the Government 33 times before today in Committee—and evidence came there none. As my hon. Friend the Member for Oldham West and Royton said a moment ago, he wants a strong evidence base, and so does my hon. Friend the Member for Redcar.
My hon. Friend the Member for Oldham West and Royton also said—I think I have got this right; it was a double negative—that he was not saying that local government does not trust central Government. I have to tell him that I am saying that. I do not trust central Government, and the reason is that they do not want the evidence, because it would lay bare the unfair nature of local government funding and, in particular, local government cuts over the last six years. I suspect that those cuts have taken their toll in communities such as Redcar and Oldham, just as they have in Wolverhampton. The Government keep hoping that people will not notice and, thus far, they have done not a bad job of keeping away from it. New clause 3(4) would solicit evidence on
“the resource need of each billing authority”.
Subsection (5) states:
“It shall be the duty of the Commission to assess the impact of any new requirement imposed upon a billing authority”.
Well, the Government do not want that evidence.
Using my own local authority in the west midlands as an example, the evidence is clear that over the last seven years almost, the cut in the central Government grant to Wolverhampton residents has been more than £200 a head, in one of the most deprived cities in England. Correspondingly, the alliterative Wokingham, in one of the most advantaged places in England—good luck to them—has seen a slight increase in funding per capita. I hope that the Minister is going to get up and astound me and say that he accepts these amendments, but I would be extremely surprised, because they would require evidence to be generated and the Government do not want such evidence.
Mr Jones
The distribution of resources and the assessment of the relative needs of local government is an essential feature of the local government finance system, but those elements do not require legislation to determine them. However, I thank Labour Members for providing me with the opportunity to outline the work we are doing in that area.
Before doing so, I would say that I have heard what has been said, particularly by the hon. Member for Oldham West and Royton. It was unclear whether the commission would be there to simply divide the money available at the time between local authorities, or whether there is a role for it to determine the total money available and national policy on council tax. Were it the latter, it is important to set out that those issues have been determined for many years by central Government. Successive Governments, including Conservative Governments, the coalition Government of Liberal Democrats and Conservatives, and Labour Governments, have held to those principles.
In regard to the work already under way, we announced the fair funding review last year, which was universally welcomed by the local government sector. The review is conducting a thorough examination of what a relative needs assessment formula should be in a world where local government spending is funded by local government resources and not central grant. The findings of that review will set the initial baseline for the 100% business rate retention system.
From the start, we have recognised the essential role that local government has to play in shaping those reforms. That is why we have been working collaboratively with the Local Government Association, which is responsible for representing a broad range of views held by different sections of local government and their member authorities. That effective working relationship has already seen the establishment of a steering group supported by a number of technical working groups, which my officials co-chair with colleagues from the Local Government Association. That gives local experts a unique opportunity to help shape the review, and all the work of those groups is available online, adding real transparency to the progress of the review.
The process for assessing the relative needs of local government is well precedented and was, of course, followed by the Opposition when Labour was in power. Our collaborative and transparent approach represents a significant improvement on that process. In the summer, we published a call for evidence that set out key questions that the review will address. The Secretary of State has confirmed that he will report back to the House on the progress of that review.
Creating a new commission to consider needs assessment and new burdens, as these new clauses would do, blurs accountability for that important work and would add another significant layer of unnecessary bureaucracy, over-complicating the process for assessing the relative needs of local government. It is important to point out that it would undoubtedly lead to a situation where it simply costs the taxpayer more money.
Our proposals offer a better guarantee of a transparent process, supported by the best available advice from local government and elsewhere. On that basis, I ask the Opposition not to press the new clause.
Jim McMahon
Thank you, Sir David, for the opportunity to respond to the Minister. I cannot understand why the Government are so reluctant to accept these measures. Of all the changes in the Bill, some are extremely minor and it would not require legislation for the Government just to get on and make them. Their argument is that they have put them in the Bill to give clarity and to ensure that there is a clearly understood framework in place. If they were to establish an independent body to look at a needs-based assessment, potentially with redistribution, it would be right for it to form part of the same transparent framework that has been proposed for far more minor changes.
Rob Marris
Will my hon. Friend join me in congratulating the Minister on decrying the amendments with a straight face, claiming that they would add another layer of bureaucracy, when he has introduced a Bill that will bring in at least 12 sets of new regulations?
Jim McMahon
I absolutely share that point. There are 12 sets of regulations and something like 56 new powers for the Secretary of State. We are not seeing a loosening of what binds the hands of local government; it is much more a tightening. I do not think that that will be well received.
The main thing is how we move forward. There is so much uncertainty now, not just with the amount of demand in the system for public services. We have seen the social care demand, but there will also be child safeguarding and educational attainment demands and mental health and disability support pressures very soon. That is notwithstanding all the other 700 services that local authorities deliver on a daily basis to support our residents.
We are seeing a genuine crisis in public services in many parts of our country. Some have been more protected than others and some have been more affected than others, but there will be an impact across almost every community in the country. Either the Government are lining up to continue to ignore the scale of that problem and what it means to individuals, families and communities—following a similar pattern of behaviour to that which we have seen under the coalition and the current Governments—or they genuinely want to get a grip and put in place a more sustainable system that would prevent such shocks to local public services. If local government is saying that, through an independently commissioned report that has been agreed by every party political party—including the Conservative party—on the Local Government Association, I cannot understand for the life of me why the Government do not just take that with both hands and run with it. At the moment, their defence seems to be, “That would cost money. It would cost money to have this independent system in place.”
Let us be clear about what the role of that independent body would be. It would be there to assess the need in each area against some objective criteria that would be agreed with central and local government. The Government have said they are going to do that anyway, so let us put that to one side; it will happen whether this body exists or not.
We then talk about redistribution. We know how much money will be required, because a thorough and in-depth review would have taken place. We then need to understand how much money we have and how much we distribute to meet the demand that has now been identified. What Government would not want the ability to say, “This is an independent recommendation”? It would be a gift. We know that they are fearful of scrutiny. We have seen that in the decision that the annual financial settlement will not come to Parliament in the future—they do not want that parliamentary debate. But this gives them a gift to say, “This is not the Government’s saying this; this is an independent body that has worked in consultation with local government.”
Where we are going and what the end looks like is extremely unclear. We have been promised an independent assessment of need. We do not know the criteria, the timescale, the membership or the status. We do not know whether it will be inside or outside the Government or completely independent. Will it sit within local government? We do not know the detail of any of that. We do not know what the new business rate devolution will be. We do not even know which different schemes have been negotiated in each of the pilot authorities, let alone the sweetheart deal that has been agreed with Surrey, which is the only single authority negotiated business rate retention pilot in the country—I am sure the Minister will say whether this is right or wrong. All the rest have been done through a devolution deal through their combined authority arrangements or the imposition of directly elected Mayors. Surrey is being treated in a very special way—a way that other local authorities are not. The Government cannot craft a special sweetheart deal for everybody. At some point, we have to accept that the quantum of money is a quantum of money and we have to teem and ladle.
Mr Jones
I think the hon. Gentleman knows in his own heart that I have been quite clear that we need a pilot in a two-tier area. Councils across that part of the local government sector will be invited to put their name forward to be part of that pilot. No decisions around that have been made.
Coming back to the quantum of funding that the hon. Gentleman has just mentioned: I am still unclear on this. Is he saying that the commission that he wants to set up would determine the overall quantum of funding and things such as council tax setting? While he alludes to that, he has not actually said that as yet.
Jim McMahon
I hope that the Minister does not mind too much. We have done our best to be helpful and constructive and to offer ideas. Ultimately, there is only one person in this room drawing a ministerial salary and being driven around by a chauffeur and it is not me, yet.
Jim McMahon
You have to earn the perks that come with the job. I am not going to give way. We need to make progress. I am happy to receive a letter from the Minister if he feels it is necessary to justify his position. What is most important is not to conflate a number of different points that have been made that are legitimate and stand on their own two feet—they are not one and the same thing. There is a world of difference between establishing an independent financial commission to understand the need in each area for public services and then to advise back to the Government what that assessed need should be. Government may well say as part of the remit of that review that there is a quantum of money that is limited and within the criteria that are set, they may well seek advice from the independent body on how to teem and ladle within that quantum. There has been no suggestion that the independent body would take away the right of the Treasury to determine how taxation is generated and spent in the country. It is very clear if the Minister reads the new clauses and the new schedule that the remit is to advise Government.
Rob Marris
Does my hon. Friend agree that it would help the Minister, whether chauffeur-driven, well-paid or not, with all his officials, to do the Opposition the courtesy of reading new clause 3? If he reads new clause 3, it is entirely clear that the proposed commission would not usurp the power of the Secretary of State to decide on the grant.
Jim McMahon
That is absolutely right. I suppose that in some ways I took it for granted that the Minister would read the papers. Perhaps I should not have done that and I should have read it out line by line. What the new clause intends to do is very clear. I am a new Member so perhaps I am entitled to a degree of naivety— some other people do not have that excuse. We were so prescriptive because we did not want it to be conflated or confused, and we wanted it to be accepted as a constructive amendment on that basis. I hope that the Minister has read it. It is clear what it is intended to do and what it is not intended to do.
The Chair
With this it will be convenient to discuss the following:
New clause 8—Relief for public buildings—
‘(1) The Secretary of State shall, by regulations, introduce provision for relief from non-domestic rates in respect of hereditaments used principally for the purposes of a public body.
(2) For the purposes of this section, a public body means any body funded principally through funds voted by Parliament.”
This new clause would require the Secretary of State to make provision for business rate relief for public buildings, defined by reference to public funding of the body for whose purposes the building is principally used.
New clause 9—Relief for licensed markets—
The Secretary of State shall, by regulations, introduce provision for relief from non-domestic rates in respect of hereditaments used principally for the purposes of a licensed market.”
This new clause would require the Secretary of State to make provision for business rate relief for licensed markets.
Mr Thomas
Sir David, could I first dwell on the two new clauses that are linked to new clause 4? New clause 8 draws attention to the fact that many public buildings have business rates bills that they have to pay, particularly in local authorities. Essentially, that money comes back, so public services funded by revenues from Westminster have to pay a business rates bill back to the Exchequer or the billing authority, creating paperwork and bureaucracy. One wonders whether the system would not be more efficient if we tried to exempt those public buildings from business rates in the first place. Obviously, there would be a commensurate reduction in the grant or whatever to the public body in those premises, but that might help to ensure a slightly more efficient system than essentially allowing flows of money around the system, with the additional costs that that generates. New clause 8 would reduce some of the inefficiency in the business rates system.
New clause 9 would introduce a relief for licensed markets—small business at its very best. Licensed market owners essentially provide a platform—for want of a better phrase—for small businesses to come and ply their wares. One wonders whether there should not also be some benefit in relief to allow those markets to continue to operate. They are often crucial to the footfall in town centres. One wonders whether Ministers have properly thought through the potential appeal of town centres and high streets in terms of licensed markets. It would be helpful to hear the Minister’s response to those probing new clauses and what the thinking is in those areas.
I want to concentrate my remarks on new clause 4, which would ensure that relief from business rates was given to schools and hospitals. We know from the current revaluation process that NHS hospitals and GP surgeries in England, and indeed in Wales—I appreciate that Wales is not covered by the Bill, but this figure is illustrative—face a £635 million hike in their business rates in the next five years. In the context of the scale of the financial crisis affecting the national health service, one wonders whether, as a small immediate contribution to solving the crisis, Ministers could offer hospitals and GP surgeries an exemption from business rates.
Some of the country’s biggest hospitals will see their business rates bill double over the next few years, so one wonders how they will find the money to pay for that increase without having to find further savings. Many NHS trusts say that they are already cutting to the bone on the staffing they need. Analysis by Gerald Eve, a firm that advises businesses on rates, found that business rates for hospitals would rise from £328 million this year to £418 million in five years’ time, while GPs and health centres would see their costs rise from £257 million to £332 million a year over that same period. As I understand it, those figures are for England and Wales, and we are talking about only England in the context of the Bill, but the figures are illustrative and helpful to the debate.
Kevin Hollinrake (Thirsk and Malton) (Con)
The hon. Gentleman mentions GP surgeries, which of course are private businesses. Does he think that dispensation should also be given to private businesses?
Mr Thomas
Let us be clear: GP surgeries provide a public service. I will come on to some of the difficulties that GPs face. On the news just the other day there was a report by the BBC’s excellent health editor, Hugh Pym, on GP surgeries that had had to close because they could not make the finances add up. One wonders whether, had they faced the business rates hike that we are talking about now, that would not have exacerbated the problems.
Rob Marris
My hon. Friend will be aware—as will the hon. Member for Thirsk and Malton, given that I am sure he has read the proposed new clause—that new clause 4 does not cover GP surgeries, because they are primary.
Mr Thomas
I will in a second; I have one further point. Some trusts, including Peterborough City Hospital, will see rates rise from £2.5 million to £4.8 million by 2021, while the University Hospitals Birmingham NHS Foundation Trust’s bill is set to rise from £4.2 million to £7.6 million. A further example is the Royal London Hospital in east London, which according to the Gerald Eve consultancy will see its business rates bill rise by nearly 60% to £9.7 million. I will happily give way to the hon. Gentleman; presumably he is going to say how he thinks these bills should be dealt with by the hospitals concerned.
Kevin Hollinrake
I wonder whether the shadow Minister will comment on whether the hon. Member for Wolverhampton South West was paying attention to his own comments, or whether he switched off in the middle, on the basis that it was he who mentioned GP surgeries? I was responding to that point.
Mr Thomas
All I will say is that I have never known my hon. Friend the Member for Wolverhampton South West be anything other than switched on. I learned that to my cost in a statutory instrument Committee a long time ago.
When the NHS is under such huge budgetary pressures, the fact that hospitals face these new, potentially huge, business rate liabilities may result in pressure for further reductions—for instance, in staff. That must be profoundly worrying, not only to Opposition Members but to Government Members who represent hospitals facing similar business rate increases. When we consider that NHS trusts posted a deficit of £886 million at the end of the third quarter of this year alone—£300 million more than the target for the end of this financial year—we have some sense of the scale of the pressures on NHS hospitals. If Ministers were so minded, perhaps a little business rate relief now might help to ease some of the pressure on finance directors and chief executives in NHS hospitals who are trying to make hospital budgets balance.
You will know, Sir David, because you are very knowledgeable about these things, that the Secretary of State for Health, clearly as a result of the scale of the pressure that hospitals are under, has suggested that the four-hour A&E target might be downgraded and no longer apply to minor injuries. One wonders whether he would have gone to those lengths had there not been the scale of pressure on NHS hospitals that we are seeing at the moment, particularly financially. He might have been more willing to defend what is an essential management target and an indicator of the quality of healthcare in our communities. I gently suggest that abandoning the four-hour target is a total admission of failure by the Government. One can understand the context for that abandonment in the light of the financial pressures, which new clause 4 seeks to ease a little. One wonders whether the Secretary of State for Health would welcome ministerial support from the Department for Communities and Local Government in negotiations with the Treasury, perhaps through the easing of the business rates burden, to reduce some of the financial pressure on NHS hospitals.
Rob Marris
Does my hon. Friend remember a single winter between 2001 and 2010 in which there was a so-called winter crisis in the NHS?
The Chair
Order. I am listening very carefully to what the hon. Gentleman is saying and to how he is tempted to respond to that intervention, but I call on him to make his remarks conform much more closely to new clause 4.
Mr Thomas
I am very grateful to you, Sir David. My hon. Friend the Member for Wolverhampton South West has long experience on Public Bill Committees and, out of respect for him and the experience that I suffered at his hands on a previous occasion, I always try to respond to him. However, I am grateful for your help on this occasion.
Let me turn, as I was about to before my hon. Friend’s intervention, to the second element of the new clause, which is the issue of whether schools, too, should receive business rates relief. I was minded to make a case to my hon. Friends in the closed room to which my hon. Friend the Member for Oldham West and Royton has alluded. We thought about issues to raise in amendments and discussed the problems with school funding. The Conservative party is overseeing the first real-terms cut in school budgets for more than two decades and the steepest cuts our schools have faced since the 1970s.
You might reasonably wonder, Sir David, whether the new clause is needed. I would point to a National Audit Office report on the financial sustainability of schools. It said there will be an 8% real-terms reduction in per-pupil funding for mainstream schools between 2014-15 and 2019-20 “due to cost pressures”. Those are the words of the National Audit Office—no one can fault its impartiality. It is not a Labour body, a Conservative body or a Liberal Democrat body; it is an independent, impartial body, and it has set out clearly and explicitly the scale of the funding cuts that our schools will experience. Were Ministers willing to protect funding for pupils in the future, they might be tempted to use business rates relief as one part of the package to help our schools.
Anna Turley
Does my hon. Friend share my view that it is absurd to the point of offensive that private schools in this country get business rates relief, on the basis of being a charity, of up to 80% of their costs? Those schools are educating children on the basis of their parents’ ability to pay, not the child’s right to an education. They are reinforcing social inequality in this country and are getting rates relief of up to 80%. Would the new clause not go some way to creating a level playing field for our maintained schools to compete on?
Mr Thomas
My hon. Friend makes an interesting point. I would put it slightly differently. It seems odd that some schools offering a service to one group of children benefit from business rates relief, while other schools offering a service to another group of children in the maintained sector do not. My hon. Friend’s broader point about equalising the treatment of schools has considerable merit.
Mr Jones
I will give the hon. Gentleman some background. He is right to say that local authority maintained schools do not get the charitable relief that, say, an academy school does. However, as I am sure he will be aware, those schools are compensated for the business rate they have to pay in the funding formula provided by the Department for Education through local authorities.
Mr Thomas
Let me address the question of the funding formula, because that opens a whole can of worms in terms of the financial pressures facing many of our schools. Some immediate business rates relief, without the compensation to school budgets suggested by the Minister, might provide an additional increase in funding to schools at a time when they most need it.
It is important that we discuss new clause 4 and relief for schools in the context of the funding formula. Almost half of the schools in this country will lose funding. They are already being hit by the 8% real-terms cut that the NAO has identified, but almost half face further cuts in 2019-20 under Department for Education proposals that are on the table for consultation.
At the Public Accounts Committee recently, a number of headteachers laid bare the scale of the challenge facing their schools. Liam Collins from Uplands Community College told the Committee that his school had reduced staff numbers by nine teachers and five support staff over the past four years. He argued:
“We cannot afford to buy text books...We cannot afford to send staff on training.”
That is a dire financial situation. Perhaps a little bit of business rates relief, without a reduction in school budgets, would provide one way to help that particular school.
Kevin Hollinrake
I am struggling to understand the relevance of the hon. Gentleman’s argument, for two reasons. According to the Institute for Fiscal Studies, the Opposition’s manifesto pledges on education at the last election completely mirrored ours with regard to the funding pot. In addition, their manifesto did not specify or propose anything about business rates relief, including for schools. The hon. Gentleman is playing cheap party politics.
The Chair
Order. Before the hon. Member for Harrow West replies, this is revisiting old ground. I hope he will talk about his proposals for prospective funding.
Mr Thomas
I am grateful to you, Sir David, for the offer of protection from that outrageous slur from the hon. Member for Thirsk and Malton. I suggest that Government Members might usefully remember the old maxim: when circumstances change, good politicians have to recognise that that has happened and try to adjust to the financial realities that, in this case, schools are facing. My amendment, in the context of the Bill, is simply one small effort to offer a bit of additional financial support to schools that have very serious financial problems, and Government Members should not make light of that.
Rob Marris
My hon. Friend will be aware that one circumstance that has changed—and that this measure would help address—is the apprenticeship levy, which will be paid by maintained schools but not by academies. That is a change of circumstance; hence the change of our position.
Mr Thomas
My hon. Friend makes a very good point. A series of additional costs, some with the best of motives, are causing financial pressures on maintained schools. New clause 4 might be one way to provide additional financial support to deal with some of those costs and pressures.
Mr Jones
Despite the fact that grant maintained schools are compensated for the business rates they incur, the hon. Gentleman wants to exempt them from business rates, although he does not want the same treatment for academy schools, which by definition of the policy he advocates would be out of pocket compared with maintained schools.
Mr Thomas
With all due respect to the Minister, I want the terrible financial situation facing schools across the country to be sorted out. I am merely proposing new clause 4 as one potential route to address one part of that problem.
Stuart McLaughlin, head teacher of Bower Park Academy, said:
“I have cut my teaching to the bare bones. Every teacher is teaching at full capacity. I have very little spare capacity in terms of spare lessons on the timetable, so I am now starting to hit the support staff. My worry about that is that it is going to affect the most vulnerable students.”
Another example of a school in serious financial trouble for which new clause 4 might provide one route for a bit of additional support.
The Institute for Fiscal Studies has also backed up the National Audit Office conclusions about the scale of pressure on schools. It did not identify the apprenticeship levy but it talked about the additional costs from the public sector pay settlement, the increased employers’ national insurance contributions and the increase in the employer pension contribution to the teachers’ pension scheme that started in April 2015 and was not funded by the Conservative party. All that leads up to the 8% cut in real terms that our schools are facing. That situation is exacerbated by the new funding formula for at least half the schools in the country, which will see significant losses.
Organisations within the schools sector, such as the National Association of Head Teachers—not the sort of body to sound the alarm unnecessarily—are also profoundly worried about the funding situation facing schools. It is in that spirit that the Opposition tabled new clause 4. I look forward to Ministers saying why they are so determined not to solve the financial crisis facing schools and hospitals. I also look forward to the Minister’s response to new clauses 8 and 9.
Mr Jones
I thank the hon. Gentleman for tabling the new clauses, which would require the Government to provide a range of additional reliefs from business rates. New clause 4 would require the Government to introduce a relief from business rates for non-domestic properties used for the provision of NHS secondary or tertiary care or the provision of education in maintained schools. New clause 8 would include a similar but wider requirement for relief to be provided to all properties used principally by public bodies.
Although I appreciate the intention to provide support to important public services, I do not agree that exempting public bodies from the payment of business rates would necessarily be a helpful step. It may help if I remind hon. Members that buildings occupied by the vast majority of public services, including NHS hospitals and maintained schools, have been subject to non-domestic rates since they were introduced in 1990. That is part of delivering a fair and consistent system of non-domestic rates.
Given that long-established position, I am sure Opposition Members will appreciate that operational costs associated with property occupied by public bodies are taken into account in determining the overall funding level for the relevant public services. More importantly, I should highlight that granting an exemption of such a nature would ultimately reduce the income under the direct control of local authorities through 100% business rate retention. It could also have a disproportionate impact on those authorities that receive a greater proportion of their business rate income from public bodies.
Jim McMahon
I am not sure whether the spirit of the new clause has been understood. To clarify, my understanding is that my hon. Friend the Member for Harrow West is trying to achieve a reduction in what is effectively a paper transaction in the system. If the money were taken away from the council because a business rate was no longer payable, it would be taken away from the public body and given to the council in a different way. The money would still get to the council; the new clause would just stop the in-and-out transaction that takes place.
Mr Jones
I hear what the hon. Gentleman says. As I have said, the current system has been employed since 1990, and for 13 years of that period we had the misfortune of a Labour Government, who did not seek to change the system because they recognised that it was the fairest way of applying non-domestic rating to non-domestic property, including public sector buildings.
Jim McMahon
This is about fairness. I am interested in the Minister’s response to this. It makes no sense for a school that was a local authority school yesterday and is today an academy to be exempt today from paying business rates.
Mr Jones
I think I made it clear earlier that there is no disparity in the system in that example. Local authority-maintained schools are given a dedicated sum to pay their business rates. Academy schools do not get that sum because they are exempt from business rates. There is an implication, particularly in terms of when the new clause would come into force. The way in which the system currently operates is that at a spending review, when the spending decisions about need are determined in relation to a particular public service, the cost of the business rate is taken into account.
I am not absolutely certain of the hon. Gentleman’s intention in tabling the clause, but if, as is implied by what has been said today, the Opposition want to apply this more quickly than the next spending review, that would involve a cost for the Exchequer. That would have to be met either through increased borrowing or additional taxation. Of course, as we all know, the Labour party does not mind racking up a deficit or taxing the public for its spendthrift nature.
Kevin Hollinrake
The Minister is absolutely right. The shadow Minister was saying exactly that: that the hospitals would be better off. That implies that the money is not going in and out; it is just not going out any more. The £360 million would have to be found from somewhere. Would the shadow Minister find it from increased borrowings or increased taxation? There are only two places it can come from.
Mr Jones
That is a really good question and very pertinent in this context. It highlights one of the challenges we have with the Opposition. One party at the general election pledged significantly more money to the NHS than the other party. The Government are now putting an additional £10 billion into the NHS, while the Labour party committed to £1.5 billion extra for the NHS; that shows that the Labour party is raising a bit of a red herring, I think, to hide its embarrassment about not being willing to back the NHS as the Conservative Government have.
Rob Marris
May I caution the Minister about praying history in aid and going back to 1990? He referred to 13 years of a Labour Government. Under 13 years of a Labour Government, the real-terms increase in funding for Wolverhampton City Council was 40%; under a Conservative Government, the real-terms cut has been 40%. Under a Labour Government for 13 years, the national debt fell; under a Conservative Government, it has gone up by 70%.
The Chair
Order. Before the Minister responds, I should say that I get the sense that the Committee is becoming demob happy. I ask the Minister and the Committee to deal specifically with the response to new clause 4 and not to become partisan and drawn by what has gone on in the past.
Mr Jones
Thank you, Sir David. I was tempted to go down the route of mentioning the £150 billion deficit that was left over, but I entirely take your point.
I turn to new clause 9. I am grateful to hon. Members for raising the important issue of support to licensed markets. I am sure that the Committee will agree that markets are an important and valued part of our local economies. When I was Minister for high streets, which included responsibility for markets, I was a very keen supporter of our markets and supported the “love your local market” competition, towards which the Government contributed and supported.
While we should certainly be supporting our markets to survive and thrive, I do not agree that introducing a new relief targeted at market stalls through new clause 9 is necessary or justified. At Budget 2016, the Government announced a package of cuts to business rates worth over £6 billion over five years. That included the permanent doubling of small business rate relief and an increase in the relevant threshold for 100% relief from £6,000 to £12,000. That will be of significant benefit to stall holders in licensed markets, many of whom qualify for the relief. As a result of the change, more than 600,000 small businesses will pay no rates at all.
It will be for the valuation office to decide on the facts of whether individual market stalls are rateable. Typically, temporary and infrequent markets in the street are not rateable, whereas permanent markets in their own dedicated hall or site will pay rates. I hope Committee members agree that where market stalls are rateable, it is right that they are subject to the same rules as other non-domestic properties. Again, that ensures they are treated fairly in comparison with other properties, whether a small high street shop, a café, a fishmonger’s or a baker’s.
Jim McMahon
Does the Minister accept that there is a fundamental difference between a market site or a market operator and an individual market trader who operates from that site? A small business will most likely be under the threshold for attracting the relief. Because the business rate is paid by the operator of the market, a market trader will almost certainly be above that threshold and liable for business rates.
Mr Jones
I have been clear that the liability for rates will operate differently in relation to different types of market. I have also been clear that the same type of regime should apply to non-domestic property, which is certainly the case in this sense. It is for the valuation office to decide on the facts whether an individual market stall is rateable or not.
To conclude, I hope the Committee is reassured that the new clauses are not necessary and would not further our collective aims to support an independent and self-sufficient local government sector. I ask the hon. Member for Harrow West to withdraw the new clause.
Mr Thomas
I am grateful for the opportunity to sum up our debate on new clauses 4, 8 and 9. New clauses 8 and 9 were very much tabled as probing amendments. Although I am not 100% satisfied by the Minister’s response—something that I have had to get used to—I do not intend to divide the Committee on the new clauses.
New clause 4 was also a probing amendment, to find out the extent to which the Minister and his colleagues have really grasped the scale of the financial crisis facing both schools and hospitals. What we have had back from the Minister and from some Government Members in interventions suggests a profoundly worrying complacency about the financial situation in schools and hospitals. One has to hope that the Chancellor of the Exchequer sees things slightly differently, but we are where we are. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 7
Duty to ensure no loss of funding following withdrawal from the European Union
‘(1) This section applies where any funding is provided to a billing authority or Combined Authority by the Secretary of State in consequence of funds made available by EU institutions in the financial years beginning on 1 April 2017, 2018 and 2019.
(2) Where this section applies, it shall be the duty of the Secretary of State to ensure that, in the five year period beginning with the date on which the United Kingdom leaves the European Union, the funding made available to a billing authority in question is not reduced in respect of any funds that were made available by EU institutions in the period specified in subsection (1).’—(Jim McMahon.)
This new clause would ensure that funding available from EU institutions is replaced by funding from the Secretary of State for the five years after exit.
Brought up, and read the First time.
Jim McMahon
I beg to move, That the clause be read a Second time.
I do not intend to spend a great deal of time on the new clause, which does what it says on the tin: it would secure the money that is currently provided to local areas through European funding post exit from the European Union. For many of our areas, that money is integral to their local economic development plans, to their education and training plans and, in many cases, to their devolution submissions. In a number of our areas, particularly those with combined authority arrangements in place, the local authority is the accountable body for EU funding in its area.
There is one thing that Members may not appreciate about European money. We always discuss whether it is being spent in the best possible way, although that is usually determined by the local community and not by the European Union. It is the communities themselves, through their councils, that make the applications, not the European Union. We talk about the north-south divide, but it is really London and the south-east that has a significantly different financial settlement from everywhere else in England. European funding and the way it is allocated by region provides an element of rebalancing.
I remind Members of the transport investment figures that have come out just this week, which highlighted that London gets £1,940 per head compared with £220 per head for those in the north-east, £680 per head for those in the north-west—although quite a lot of that is temporary funding; it is time limited—and just £190 per head for those living in Yorkshire and the Humber.
London gets £93 per head in European structural funds, compared with £285 in the north-east, £161 in the north-west and £150 in Yorkshire and the Humber. Therefore, there is a strong argument to say that European Union funding is being used partly to counterbalance a centralising Government in Westminster who advantage the London boroughs.
Justin Tomlinson (North Swindon) (Con)
On that point, will the hon. Gentleman join me in congratulating the Government for today awarding £235,000 to my constituency for smart traffic management, showing that they do look well beyond London?
Jim McMahon
I will join the hon. Gentleman in congratulating the residents of Swindon on that investment. I have no idea what it has got to do with the new clause though.
Steve Double (St Austell and Newquay) (Con)
I note with interest that the hon. Gentleman did not include any figures for the south-west or Cornwall. Historically, Cornwall has received just about the lowest level of investment in its transport infrastructure, yet it receives the highest level of EU funding. Despite that, Cornwall voted 62% to leave because we recognise that the EU programme is so prescriptive we cannot spend the funding on the things we actually want and need to spend it on to improve our local economy. I believe we will be far better off running our own programme. I am not worried about it being pound-for-pound matched, but I do want it to be fit for purpose for our local needs.
Jim McMahon
I am absolutely delighted that Government Members are supporting the new clause on that basis because that is exactly what the new clause is there to do. It is not there to stick with the current assessment criteria outlined by the European Union; it is not even there to ensure that the programme activity is continued. The new clause is about maintaining the amount of money being provided to those regions at current levels.
Kevin Hollinrake
The hon. Gentleman makes a good point. I would like to pick up on an earlier point made by the hon. Member for Harrow West, who talked about the antipathy to London. Nothing could be further from the truth. I think London is a wonderful place. It is so successful economically, but that is because it has had more investment. That is the point that is being made.
Southend-on-Sea, for example, is very badly treated in terms of local government funding—it receives around £720 a year per head, when many rich London authorities get £1,200 a year per head. It is simply not fair. The position is similar with transport projects. This is not a metropolitan versus rural issue; it is a London versus the rest of the country issue.
Jim McMahon
The rebalancing discussion was more about making the point that there has to be a recognition that more public sector investment goes into London. There will be reasons for that. This is not about London not being entitled to the money it gets. However, there is a call from other regions, not to say, “We want London to get less,” but to say, “We want the same.” A conversation on that basis is far more productive than setting one part of the United Kingdom against another, which other parties might to seek to. No one in this room would want to do that.
On that basis, there would be an open door for retaining European funding to the regions and, absolutely, allowing flexibility on how that is spent, even tied to negotiation with Government. However, as it stands, there is no certainty that that money will continue when we leave the EU. More than that, there is concern that in order to pay the divorce bill—not just for the lawyers, but for the settlement in terms of pension costs and historical and ongoing liabilities—the nation may have to provide a lot of money up front, which could be used for regional funding in the way that has been discussed.
If the new clause is agreed today, at least we will be able to lock down the funding that is sent to the regions to ensure that they are not paying a price for that divorce. There is a world of difference between people saying, “I’m going to vote to leave because I want more determination by my nation of the future of my nation,” and “I voted to leave because I want less investment for my community.” We need to be careful. Our challenge to the Government is to prove that their flavour of Brexit is not going to leave our constituents poorer than they were before. The new clause would help to show that they will not necessarily be poorer and that the Government understand that our regions need to be supported.
I should perhaps confess that it is a probing new clause. However, if it is not supported by the Government, we run the risk of providing further evidence to our local authorities that those in this grand place simply do not get it.
Mr Jones
I thank the hon. Gentleman for providing the opportunity to discuss the new clause, which aims to ensure that local authorities see no loss in funding following our withdrawal from the European Union. The Government will want to consider the future of all programmes that are currently EU funded once we have left the EU.
Over the coming months, we will consult closely with stakeholders to review all EU funding schemes in the round to ensure that any ongoing funding commitments best serve the UK’s national interest, while ensuring appropriate investor certainty. We will, of course, ensure that local government’s voice is heard in negotiations with the EU. I think that is what the hon. Gentleman was alluding to with some of his concerns. The Government have already announced that local authorities will be guaranteed EU funding for European structural and investment funds projects that provide good value for money and meet domestic priorities that are signed off before the UK’s departure from the EU, even when those projects continue after we have left the EU.
I hope the reassurance I have provided means that the hon. Gentleman will stick to his confession and decide not to put the new clause to a vote.
Jim McMahon
I thank the Minister for his comments. We have had a good debate but I do not think we have had clarity that the Government have committed to ensure that the EU funding will be in place over the life of the programme. The programme, of course, takes us only to 2020. Beyond that date, our regions have no idea how much money they will receive for research, development and skills investment. I do not accept the Government’s response as sufficient to give comfort to those areas. However, it was important to table the new clause in order at least to elicit that response. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 10
Non-domestic rating: exemption for nursery grounds
‘(1) Schedule 5 to the Local Government Finance Act 1988 (non-domestic rating: exemption) is amended as follows.
(2) In paragraph 3(b), after “market garden” on each occasion where it appears, insert “or nursery ground”.—(Steve Double.)
This new clause would provide that the definition of an agricultural building for the purposes of the exemption from non-domestic rating includes a building which is or forms part of a nursery ground and is used solely in connection with agricultural operations at the nursery ground.—(Steve Double.)
Brought up, and read the First time.
Steve Double
I beg to move, That the clause be read a Second time.
With the new clause, I seek clarification of the legislation and confirmation of my belief of the original intention of the Local Government Finance Act 1988 regarding the agricultural exemption from non-domestic rates for nurseries and market gardens. This has been prompted by a court case brought by the Valuation Office Agency in 2015 against Tunnel Tech Limited, mushroom growers who grow their product under polythene or glass.
For more than a century, legislation has dictated that agricultural land and, latterly, buildings have been exempt from rating liability. The principle of an agricultural exemption is well established. The Court of Appeal, however, interpreted the legislation as not to include nursery grounds consisting wholly of greenhouses, polythene tunnels or buildings with the exemption.
The horticultural industry in the UK has undergone significant changes in recent years in order to increase our home food production, something I am sure we all support. That has included more and more crop-growing operations taking place under the cover of polythene tunnels and other buildings. It has also led to more sophisticated growing techniques being explored.
There is no longer a distinction between enterprises that would have been classified as a “market garden” and those classified as a “nursery ground”, as per the legislation. They are instead simply “food growers”. Many growers are a combination of both “nursery ground” and “market garden”, operating from the same premises with no distinction of areas. The Valuation Office Agency argument in the case centred around the fact that Tunnel Tech did not produce mushrooms that were ready for market.
In order to become more productive and cost-effective, the industry has become increasingly segmented in its approach to production. There has been a move towards businesses specialising in niche production. Growers may now only produce one stage in the development of an end product, such as plug plants for vegetable production. That is more economical for the industry, allowing it to be more competitive in the global marketplace. Significant increases can be made in production, where each stage can be carried out at individual premises designed solely for each specific stage of production. Dealing with all production stages on the same premises has substantial limitations.
With more and more agricultural land being taken up with housing provision for our expanding population, there is a need to be able to produce food for the country over smaller areas more efficiently and more reliably. That can, to an extent, be addressed by growing more product under cover.
The Tunnel Tech case has highlighted how outdated or ambiguous the current legislation is in that regard. It makes a defined distinction between “market gardens” and “nursery grounds” and treats them differently for exemption purposes, whereas enterprises today are, in reality, simply growers.
It is unlikely that, in drafting the legislation, it was Parliament’s intention to limit UK horticultural production, as will be the case potentially should the legislation stand as it is. A significant ratings bill in addition to other rising costs will prevent investment in growing businesses. It will prevent growers from exploring new techniques requiring under-cover operations. It may also have a reverse effect on operations that already do grow under cover, forcing them to abandon these growing methods. I have tabled the new clause simply to clarify the relevant legislation, which is the Local Government Finance Act 1988, and to ensure that the agricultural exemption from ratings liability is protected as the industry evolves and modernises. I do not believe that there will be any significant fiscal impact to the Treasury from this change, as it is not revenue that the Treasury has historically been receiving.
Mr Thomas
I am sympathetic to the new clause. I just wanted to clarify the question of cost. We would not want to support anything without knowing whether there were cost implications. It would be helpful for the hon. Gentleman to clarify whether he has checked with the House of Commons Library or with other sources about the potential financial cost to the Treasury of the new clause.
Steve Double
I am grateful for the hon. Gentleman’s intervention, and indeed for the revelation that he has come to the view that we need to consider the costs of all new moves, which is welcome. I have not got the figures from the Library, but my understanding, from speaking to people in the Treasury and people from the National Farmers Union, is that this is not money that the Treasury has historically been receiving. This is a recent development; it has happened only in the last few months. Therefore, if the change happens, this will be new money—increased revenue—to the Treasury. It is not something the Treasury has been receiving historically; I believe that is the case. Therefore, I am seeking support for the new clause to restore the position that I believe was Parliament’s original intention when the legislation was introduced in 1988, to clarify the position in the light of the court ruling and to continue this vital support to our food producers.
I do not intend to push the new clause to a vote. I simply seek the Minister’s response and put down a marker that I believe that this issue needs to be addressed by the Department and by the Treasury to provide clarity and certainty for our food growers that they can continue to enjoy the relief, which I believe was the original intention.
Rob Marris
I rise in support of the new clause. As the hon. Gentleman has said, the background is that for the past 20 years at least, food security in the United Kingdom has been much overlooked. We import an increasing proportion of our food and the strain on our food security may increase or decrease because of Brexit, depending on what we do. The measure proposed by new clause 10 is very helpful in that regard.
The Tunnel Tech case, as I understand it, related to the tunnels where mushrooms are produced, ready for market. Paragraph 2(1)(a) of schedule 5 to the Local Government Finance Act 1988 provides the definition of agricultural land, whereas paragraph 3 provides the definition of an agricultural building. The definition of agricultural land includes meadows, which are extremely important, whether they are in Cornwall or elsewhere. However, as I understand it—I am not an agriculturalist or a horticulturalist—meadows do not produce food that is directly ready for market. Even so, they are an important part of our landscape and can contribute to the food chain. Therefore we have an anomaly. Paragraph 9(1) of schedule 5 to the 1988 Act exempts fish farms, so the provision applies more widely than suggested by paragraph 2, which defines agricultural land as
“pure arable meadow or pasture ground”.
I am sorry that the hon. Gentleman does not intend to press his new clause to a vote, but I understand his reasons for that. In supporting his amendment, however, I advise him—he may have liaised with others on this— to consider whether a change needs to be made to paragraph 2, which provides the definition of agricultural land, as well as to paragraph 3, which provides the definition of agricultural buildings. He and I both want clarity so that the matter is not ventilated before the courts again, and I suspect that a tweak to the definition of agricultural land would also be helpful.
Mr Thomas
I am minded to press the new clause to a vote, such was the clarity of the argument of the hon. Member for St Austell and Newquay. My hon. Friend the Member for Wolverhampton South West has made a compelling case in support of it. The hon. Gentleman has reassured me that, having had conversations with the Treasury, there is no cost associated with it and he clearly has the support of the NFU. The Minister will have to make a pretty powerful speech to convince us not to press the new clause to a vote.
Mr Jones
It looks as if there is no pressure on me to satisfy the hon. Gentleman. I am grateful to my hon. Friend the Member for St Austell and Newquay for raising this important issue. The Valuation Office Agency faces a challenging task of maintaining non-domestic rating lists covering a vast array of different types of property throughout England.
The background to the amendment originates from a rating case concerning a property producing mushroom mycelium, which is essentially the material from which mushrooms are grown. It is then sold on by the ratepayer to mushroom farms, which then produce the final product. The VOA felt that, because the property was not producing the mushrooms itself, it was not able to claim the agricultural building exemption and therefore should not be rateable. The ratepayer disagreed. Eventually, the matter reached the Court of Appeal which ruled that the property should be rateable.
On business rates, there is nothing unusual about that chain of events. Usually, further discussion of such technical rating cases would be confined only to the most dedicated members of the ratings profession. The Government are not usually involved in that sort of discussion, but the Court of Appeal decision has wider implications in this case.
The judgment clarified that there is a difference between market gardens and nursery grounds where buildings are involved. In effect, that means that there is a difference between the exemptions available for market gardens and nursery grounds. The Court of Appeal judgment means that where the activity at a nursey ground takes place only in buildings, it is not exempt because it is not an agricultural building as defined by the legislation. Previously it was a long-held practice to treat such buildings as though they were exempt from business rates. The VOA has been discussing with the industry what the decision means in practice. We understand that it would mean that some ratepayers operating nurseries producing plants prior to the point of sale to the consumer could face a rate bill for the first time. However, the proposed new clause would ensure that those nurseries were again exempt from business rates.
I stress that the Government believe that the exemption for agricultural property is an important part of the rating system. It ensures that large areas of agricultural land and buildings are not liable to pay a property tax that could have a significant impact on the cost of farming. We firmly believe that it is necessary for a line to be drawn for all exemptions and the Court of Appeal has clearly done that in its judgment. It is also important that reliefs and exemptions are targeted where support is most needed. I have therefore asked my officials to look at the impacts of that decision, how it will be applied in practice by the VOA and what it means for the companies affected. I will also meet the NFU to discuss it. The Government keep all taxes, including business rates, under review and I assure my hon. Friend that that includes the implications of the Court of Appeal decision.
Mr Thomas
Given that one should support even Government Back Benchers when they suggest very sensible amendments, I want to clarify whether the Minister will take a serious look at the merits of the amendment and potentially bring something back on Report, or is he just going to go through the motions of a quick chat with the NFU on the back of something else, while his colleague is sent away with nothing?
Mr Jones
The hon. Gentleman is taking an interest in this subject, but I have spoken a number of times to my hon. Friend the Member for St Austell and Newquay, who came to me with this important issue, and I have also spoken to several other hon. Friends on the Government Back Benches who are concerned about it. I have been clear today that the Government take the situation seriously and I have asked my officials to look at the impacts of the decision, how it will be applied in practice and what it means for the companies affected. I will also speak to the NFU. Given the gist of my comments, I hope that hon. Members are assured that we take this matter seriously and that we will consider it carefully before we get to the next stage of the Bill. I hope therefore that my hon. Friend will withdraw his amendment and that, in the spirit of my comments, Opposition Front Benchers will not seek to press it to a division.
Steve Double
I thank the Minister for his response and I am grateful for the support of Opposition Members. I am happy to take the Minister at his word at this stage and hope that they will, too. I have put down a clear marker and believe that the Minister takes the matter seriously, but I will be watching closely to ensure that it is addressed in the near future. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 11
Power to remove or reduce mandatory reliefs in cases of business rates avoidance
(1) Part 3 of the Local Government Finance Act 1988 (non-domestic rating) is amended as follows.
(2) In section 43 (occupied hereditaments liability) after subsection (8C) insert—
“(9) For any hereditament for any charging day to which this section applies, if the relevant billing authority has reasonable grounds to suspect that the occupier is taking inappropriate steps to reduce liability for business rates, the billing authority may treat that hereditament instead as if section 47 (discretionary relief) applied to it.”—(Jim McMahon.)
This would enable billing authorities to have powers to treat mandatory reliefs (which are specified in section 43 of the Local Government Finance Act) as discretionary reliefs, which are dealt with in section 47 of the same Act, if they had reasonable grounds to suspect that liability was being reduced through business rates avoidance.
Brought up, and read the First time.
Jim McMahon
I beg to move, That the clause be read a Second time.
Again, like the best ideas, this one has been nicked. It was taken from the LGA, which has been consulting its members on how the business rate scheme has been abused by some landlords who have sought to avoid their liability to pay business rates. During the consultation, which was held in 2014, the LGA asked local authorities what types of tricks and techniques were used by companies and landlords who wanted to avoid paying business rates.
Some of the methods shared included repeated short-term periods of occupation; declaring that vacant properties are intended for future use by a charity; and fictitious occupation of properties by charities: for instance, certain window displays are used to decorate the building, but the activity carried out inside is quite different. Landlords also use insolvency to rack up high bills. When the moment comes for them to face court, the company is wound down, and people avoid paying them. Avoidance also results from properties not being on the rating list at all; people not reporting where properties have been split and should be subject to separate assessment for rating liability; the use of shell companies or offshore companies; and the use of vacant properties whose ownership is not known, although the owner might be local and using a fictitious address or name to avoid liability.
The new clause would ensure that when such techniques are discovered, safeguards are in place to ensure that the same occupier is not entitled to apply for a discount in future. They have effectively abused their chance to play the system fairly; the intention was to support those businesses and landlords who need it. I hope that the Government see that it is about fairness and balance. It is also about showing that where fault is discovered and people are proven to have been abusing the system, the Government have no truck with them and will hold them to account and restrict them from taking advantage again in future. If the Minister supports the new clause, he will win friends in local government and show that the Government have listened to what they have said.
Mr Jones
I thank the hon. Gentleman for giving us the opportunity to discuss the important matter of business rate avoidance, which the new clause seeks to address. New clause 11 would provide billing authorities with power to treat any hereditament to which section 43 of the Local Government Finance Act 1988 applies as if it were subject to section 47 of that Act where they have reasonable grounds to suspect that the occupier took inappropriate steps to reduce their business rates liability.
The effect would be to provide the billing authority with the discretion to grant or withhold any mandatory relief that the hereditament would otherwise be eligible to receive under section 43. That would include charitable relief, rural rate and small business rate relief; however, it would not extend that discretion to empty property rates relief.
The Government have been clear that we wish to retain the benefits that the system of mandatory reliefs brings. Mandatory reliefs provide businesses and charities with certainty and a consistent framework within which to operate and grow. For example, the small business rate relief scheme provides uniform support for all small businesses, applied evenly across the country. I have some sympathy with the hon. Gentleman’s intention to ensure that mandatory reliefs and exemptions are used appropriately, and I recognise some of the questionable methods used to avoid paying business rates; I have seen them in my own area. However, I do not agree that giving local authorities a power to decide whether to grant mandatory reliefs where they have reasonable grounds to suspect that steps are being taken to avoid business rates is the right approach. Nor would it follow due legal process to enable a local authority to withhold reliefs without evidence, solely on having reasonable grounds of suspicion. It would create inconsistencies in the application of reliefs and risk penalising legitimate charities and businesses that are rightly entitled to these important reliefs and penalise those whom the policy is designed to support.
Jim McMahon
We had intended to press the new clause to a vote. We are committed to it and are convinced we had the support of local government, but equally we appreciate the Minister’s constructive response. We will watch with interest how those conversations with the LGA develop. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 12
Removal of provision for referendums relating to council tax increase in England
(1) Part 1 of the Local Government Finance Act 1992 (council tax: England and Wales) is amended as follows.
(2) Omit Chapter 4ZA (referendums relating to council tax increases in England).—(Jim McMahon.)
This new clause would remove Chapter 4ZA of the Local Government Finance Act 1992, inserted by Schedule 5 to the Localism Act 2011, which provides for council tax referendums.
Brought up, and read the First time.
Jim McMahon
I beg to move, That the clause be read a Second time.
You will be pleased to hear that this will be a quick speech, Sir David. It should not be for anybody in this building to determine the relationship between local authorities and the council tax payers in their area. It is for local people to hold decision makers to account through the ballot box, as they do with central Government. When people go to vote in a general election, they take a view on the decisions of the Government during their period in office and whether their fiscal decisions have been good or bad for them and their families. Local people should have the same ability to do that with local government. It should not be for the Secretary of State to impose an arbitrary referendum limit. The LGA, a cross-party organisation, supports that view, too.
I would appreciate a response from the Minister. I am sure he appreciates the growing calls from local government to tell the Secretary of State to mind his own business, and I hope the Minister will look at the new clause and take that message back.
Mr Thomas
This is, if you like, Sir David, the David Hodge memorial clause. Surrey County Council has blown out of the water the rationale that the Government once used for referendums. There is a deep irony in the situation this year, where the one council that is likely to impose a 0% council tax rise will be a Labour council and the one council that proposed the single biggest increase in council tax this year is a Conservative council. We have to admire the chutzpah of Mr Hodge. He has managed to get himself a sweetheart deal by completely blowing away the rationale Ministers once had for referendums. It is in that spirit that we move this probing new clause.
Mr Jones
I thank the hon. Member for Oldham West and Royton for his explanation of new clause 12. It was a slightly more constructive effort than that of the hon. Member for Harrow West, who seems to be preoccupied with sweethearts. Perhaps that would have been best placed last week, when the House was in recess and it was Valentine’s day. He seems to persist with a misplaced line of questioning.
The new clause would remove chapter 4ZA from the Local Government Finance Act 1992 and thereby abolish the system of council tax referendums. That would allow local authorities to set whatever increases they choose, without having to seek the approval of local voters.
Arguments in favour of abolishing council tax referendums, or for not setting any referendum principles are certainly familiar to the Government. However, they are not arguments that the Government accept. Government defining an excessive increase has been part of the council tax system for decades. Council tax is currently 9% lower in real terms than it was in 2010-11. It will still be lower in real terms in 2019-20, but only if the Government continue to work with local authorities and maintain a referendum threshold, as promised in their manifesto.
The referendum threshold is not a cap. Councils can set any council tax increase that they like, provided that they have obtained the consent of their local electorate in a referendum. That is direct democracy in action. Local people have the right to choose whether they wish to pay extra council tax for additional spending and councils have the right to make the case to them.
In setting the referendum threshold, the Government listen to the views of local authorities, but clause 4 will formalise that by requiring the Secretary of State to consult their representatives. I believe that that flexible and constructive approach to setting excessiveness thresholds is crucial in striking the correct balance between funding for local services and protection of council tax payers.
Council tax is 9% lower than it was in 2010. That makes a significant case—unlike the 13 years before then, when council tax actually doubled during the Labour Government. I hope that, having reflected on the points I have made, the hon. Member for Oldham West and Royton will consider the challenge that this proposal would present to many council tax payers and withdraw his new clause.
Jim McMahon
It was interesting to hear that response from the Minister. I am not sure that the spirit of where the new clause is trying to get to was fully appreciated. This is not about the appropriateness or not of council tax increases; it is about the balance of power in the relationship between local government and central Government. The fact is that the Secretary of State in this place wants to determine what goes on in every single community in the country. I do not think that that is in the spirit of localism. We have seen in Surrey, where the 15% proposed increase—
Kevin Hollinrake
Surely the point is that the power is not with local government or central Government. The power is with the people. All any local authority has to do is go to the people and ask them to endorse the proposed rises, and they can have whatever rise any local authority may propose.
Jim McMahon
The funding of the new elected mayors for our combined authority areas is being met by council tax payers in those areas, as an additional burden. There was no referendum about whether local people wanted that, so talking about seeking a referendum if local people are to be expected to spend more money does not, I am afraid, hold water.
We will not make progress on the point today, because I think there is a fundamental gap between the spirit of localism—which can be heard from the Opposition Benches and is about empowering local communities and giving them the tools and levers to effect change, and the resources to make change happen—and the centralising, command and control way in which the Government are seeing through their devolution of financial settlements.
Jim McMahon
I am about to wind up. Local government will say that the issue is beyond party politics, but when they look to this place they will see that the party speaking for local government devolution is the Labour party. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 13
Power to impose a charge for business rate appeals
‘(1) A billing authority or major precepting authority may charge a ratepayer a fee in connection with activities undertaken as a result of an appeal by that ratepayer to alter the authority’s local non-domestic rating list under section 55 of the Local Government Finance Act 1988.
(2) The amount of fee payable must be calculated by reference to costs incurred by the authority when undertaking activities relating to that ratepayer’s appeal and the amount of fee payable must not be calculated by reference to costs incurred by the authority in the undertaking of any other activities.
(3) The Secretary of State may, by regulations, make provision about the circumstances in which those fees are to be refunded.’ —(Mr Thomas.)
This new clause would enable billing authorities or major precepting authorities to charge fees on a cost recovery basis to ratepayers in connection with business rates appeals.
Brought up, and read the First time.
Mr Thomas
I beg to move, That the clause be read a Second time.
I understand that Ministers intend to charge £300 for large businesses and £150 for small businesses that want to make a business rate appeal. The new clause is a probing measure to explore how Ministers arrived at those figures. Given that there are likely to be substantially more appeals as a result of the current business rates revaluation, it would be good to understand what the thinking has been about the charges.
In the context of business rates bills being reduced on six out of nine warehouses of a very large business such as Amazon, one wonders whether £300 is not rather low. It costs £250 to submit a claim for unfair dismissal and £950 if the case goes to a tribunal. Funding has been cut from the Valuation Office Agency and I wonder whether a fee of £300 for a big business submitting a speculative revaluation claim is truly appropriate.
It would be good to hear what Ministers have to say and whether they will keep the matter under close review, with the potential for amending the charges as evidence begins to emerge.
Rob Marris
The charge for business rate appeals is understandable, given the regrettable trend of recent years, which started under a Labour Government, of charging for access to justice. However, we also need to see things in the context of something that was raised with me and the hon. Member for Thirsk and Malton—the margin of appreciation, as I think it would be called; the flexibility. A business pays a charge and there is an appeal. It wins, but is told that the difference between what it would have been charged and what it will be charged post-appeal is less than 15%. Then it has lost—even though it has won. That does not seem to me to be a good way to proceed.
Mr Jones
I am grateful to the hon. Member for Harrow West for tabling the new clause as it gives me a further opportunity to remind the Committee of the work that we are doing to improve the business rate appeal system.
The system has always suffered from too many speculative applications clogging it up, causing delays and uncertainty for those ratepayers with genuine cases. It has for far too long been too easy for rating agents to lodge speculative appeals with little or no supporting evidence.
More than 1 million appeals have been made against the 2010 rating list, using the system that was put in place on 1 April 2010. Of those that have been resolved, only 29% resulted in a change to the rating list. With the introduction of a new rating list on 1 April 2017, we have a fresh opportunity to reform the system. Our check, challenge, appeal system will introduce a new three-stage process. We will put the emphasis on early engagement and resolution by all parties to ensure that, where ratepayers and rating agents decide to make a formal challenge, they must bring forward proper evidence cases. In turn, it will support local government, giving it greater certainty over its rates income.
Mr Thomas
I do intend to withdraw the new clause. I am grateful to the Minister for the clarification; I think it is something that he should keep under review, but we have had a useful trip around the issue. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
Mr Jones
On a point of order, Sir David. I would like to thank you and Mr Gapes for the skilful and diligent way in which you have chaired proceedings over the past few weeks. There were times at which the Committee may have stepped near to the edge of being in order, and at every opportunity you and Mr Gapes kept us on the straight and narrow, so I thank you and Mr Gapes for that.
I also thank the Committee Clerks for the part that they have played in this Committee and the assistance that they have provided in supporting members of this Committee. In that context, I would also like to thank the people who are here from Hansard. I also thank the Government’s officials for the hard work that they have put into the Bill so far and for the support that they have given to me throughout the Committee stage.
Finally, I would like to thank the members of the Committee. At times, it has been an interesting Committee and although not all Committee members have always seen eye to eye, I think that we have conducted it in a reasonable spirit. Despite the fact that both sides have not seen eye to eye on a number of amendments that have been put to a Division, debate has always been conducted in a respectful way. I would like to thank the members of the Committee for the part that they have played.
Mr Thomas
Further to that point of order, Sir David. I echo the thanks to you and to Mr Gapes for chairing the Committee. The way that your interventions have been very helpfully timed to stop Members going off track is remarkable. You have the perfect knack of intervening at just the right moment to stop temptation getting the better of us.
I should add the Committee’s thanks to the Clerks, who have ensured that amendments that were debated were in order, to the Doorkeepers and to the Hansard writers for the important job that they have done. I thank too those who crucially submitted evidence and who have appeared before the Committee. Their contributions without doubt made the Committee’s deliberations more informed.
It would be entirely remiss of me not to also thank my hon. Friends on this Committee. In Bill Committees, the odds are always stacked against Her Majesty’s loyal Opposition, but the quality of my hon. Friends has meant that it has not felt quite such an imbalance on this occasion. I thank in particular my fellow shadow Minister, my hon. Friend the Member for Oldham West and Royton, whose expertise has been particularly welcome. That of my hon. Friend the Member for Wolverhampton South West has been particularly important too. My hon. Friend the Member for Redcar made an important contribution this afternoon. My hon. Friend the Member for Eltham has been a lurking presence throughout, which brings me lastly to my hon. Friend the Member for Lewisham, Deptford, who has helped to make sure that we have stayed firmly in order on this side. There have on occasions been moments of edge, as there should be between two different political parties but, as the Minister says, in general this has been conducted in a friendly, good-hearted and provocative way, which is surely exactly the purpose of a parliamentary Bill Committee.
The Chair
I thank hon. Members for their kind and generous remarks. Mr Gapes and I have thoroughly enjoyed chairing the Committee, because proceedings have been conducted with good temper throughout. Hon. Members have fulfilled their duty of thoroughly scrutinising the Bill and being kept in good order. I thank the Hansard writers and the Doorkeepers for their support, and I particularly want to thank our Clerks, whose wisdom has prevailed at all times and whose firmness has ensured that I have not been as lax with the Committee as might otherwise have been the case.
Bill, as amended, to be reported.