Local Government Finance Bill (Ninth sitting)
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.