Local Government Finance Bill

Debate between Lord Jenkin of Roding and Earl of Lytton

Thursday 5th July 2012 Grand Committee

[Lord Jenkin of Roding]

My Lords, I shall add a word or two on this, about which I spoke briefly at Second Reading. I agree entirely with the arguments that have been put forward so far. The speech of the noble Lord, Lord Best, was extremely clear and he made his point with great force.

We have been here before. I introduced in the House of Lords a Private Member’s Bill on business improvement districts, or BIDs. That was based on a precedent from the United States, as is TIF. We got it right though the House of Lords but the previous Government found no time for it in the Commons, so it failed. Two years later, a Bill was introduced by the Government, which the noble Lord, Lord Rooker, presented with enormous pride, saying, “Look at what we’re doing”. It was my Bill, almost word for word, but the noble Lord, Lord Rooker, whom I have known for some time and for whom I have great regard, did not acknowledge that fact at all. I took the view that I was not prepared to make a fuss. The fact is that I was pleased to see BIDs reach the statute book, and they have been quite effective so far, so one has seen this happen.

I have some sympathy for my noble friend at the Dispatch Box, but of course the person who ought to be answering these arguments is my right honourable friend the Chief Secretary to the Treasury, Danny Alexander. That is part of our system. I have been the Chief Secretary so I know and understand the system, which is extraordinarily advantageous to Treasury Ministers. They make the operational department answer all the arguments that are put up. The most we can expect from my noble friend on this is if she says that she is impressed by the strength of the arguments and that she will prevail upon her Secretary of State to have another go at the Treasury. The fact that the Treasury is proposing to treat this simply as an addition to the borrowing requirement in the year in which it is spent is, as the noble Lord, Lord Best, and others have made clear, to ignore totally the reality of what a TIF is. It is not just spending in the year; it uses the prospective revenue from additional business rate income in order to raise a loan which can then be used for infrastructure projects. Many examples could be given, such as money being spent on a housing estate, roads and so on.

That is what everyone expected would happen. When we heard the announcement back in 2010 by the Deputy Prime Minister, enormous hopes were raised. I would suggest that the Chief Secretary to the Treasury might be invited to answer why those hopes have not been met. As I say, I have some sympathy for my noble friend because there is nothing she can do about it except to go back to the Secretary of State and have another go by bearding the Treasury and saying, “Look, this is not a tenable argument. It has to be made to work”.

After all, the Government have made a great song and dance about how one of the ways we can secure economic growth is by investing in our infrastructure. Some very large schemes have been put forward on that basis in the hope that they will be funded by the private sector or even from inward investment. A few hours ago I was discussing foreign direct investment in the Chamber, and this is the same issue. If one can borrow money in order to be able to develop infrastructure in this country, one is creating jobs and building in growth, which is what we all want to see. What is in the Bill—simply having TIF 1 and TIF 2—is what I would say advisedly is simply a form of emasculation. I quoted at Second Reading the view of one of the local authority associations. It has looked at this carefully and does not think it adds anything that will be of any use to anybody. It pains me to have to say this to my noble friend, but I would ask her to go back to the department to say, “We cannot defend this. The arguments are overwhelming and we must look at it again”. Otherwise I suspect that we shall be asking the House to accept amendments on Report perhaps along the lines of those put forward by my noble friend Lord Tope and the noble Baroness, Lady Kramer, tabled today. Again, I feel very strongly about this and share their views absolutely, so I hope that my noble friend may be able to respond.

[The Earl of Lytton]

My Lords, unlike my noble friend Lord Best and the noble Baroness, Lady Kramer, I am not an expert on TIF, but I can relate to this process, having been involved with development schemes in one form or another. I understand the principle behind this and I strongly support it. I feel like something of a spoilsport in view of what has been said because I have just one slight concern. In normal circumstances if one was looking forward to steady and progressive growth, one would say, “Let’s do it”. However, the information that I have had has indicated that one or two municipalities in the United States have suffered from solvency problems after getting themselves involved in these things because of a larger-scale downturn that was beyond their or probably anybody else’s control. I could understand a Treasury reticence about opening what it might see as a floodgate if it felt that we were in sufficiently uncertain times—and I believe that we are in quite uncertain times—and that, as a long-term punt, it could not foresee a guarantee of growth that would pay that back.

There are many instances right across London. I go back to the early days, when Canary Wharf was being developed. One of the problems that it hit was that, at that time, it could not finance the Jubilee line extension. In effect, it caused the developer to become insolvent. If you imagine that being done on a municipal scale, then obviously it is a very significant issue. The guarantees are not built in. I do not think that any of us would want to find that municipalities involved in TIF schemes would become insolvent. I am sure that there must be safeguards.

Local Government Finance Bill

Debate between Lord Jenkin of Roding and Earl of Lytton

Tuesday 3rd July 2012 Grand Committee

[Lord Jenkin of Roding]

I am grateful to the noble Lord for giving me an opportunity to explain. I referred a few moments ago to the number of amendments tabled on the first part of the Bill that would make quite substantial changes, particularly about the division between the central and local shares of business rates revenue. That would be a change that, if my noble friend Lady Hanham could persuade her colleagues that it might be accepted, would go a long way towards meeting the concerns not only of London Councils but of the Local Government Association and local authorities generally, which are anxious to see a faster process of the localisation of business rates revenue. I will no doubt have an opportunity to talk about this a little later, but I do not think that the questions of timing and of the changes that we are proposing are in any way inconsistent. As my noble friend Lord Tope said, there would be some regret if this were to be delayed. I think that both he and I were making that point. Perhaps that is a way of explaining to and satisfying the noble Lord, Lord McKenzie, that there is no inconsistency in what we were arguing.

[The Earl of Lytton]

My Lords, the noble Lord, Lord Beecham, made a perfectly correct reference to some comments that I put to him. Indeed, I have made comments in the context of this Bill before. Before I go any further, I ought to declare various interests: as a practising chartered surveyor, a member of the Rating Surveyors’ Association and a member of the Institute of Revenues, Rating and Valuation, which explains my interest in the valuation aspects of business rates.

There is a growing issue that creates a greater than usual level of uncertainty with regard to the yield of business rates. I referred previously to the number of outstanding non-domestic rating appeals. I believe that the current total is around 144,000 or 146,000. Even if you get rid of the repetitious ones, the true total probably sits at around slightly more than that—so, 80,000 or 90,000 appeals. Some of these go back to the 2005 rating list.

Business rate payers are getting increasingly concerned that access to justice is effectively being denied to them. A typical lead-in period from the time when an appeal is lodged to the time when the Valuation Office Agency is able to make any sort of substantive comment, I am advised, is in the order of two years—and that is not to the time when it actually gets before the valuation tribunal, when the valuation officer can actually open his book and address the issue. I do not blame the Valuation Office Agency for that. I think that the Committee should be aware that this is fundamentally to do with the agency being starved of the necessary resources. It is being starved of the personnel and starved of the resources to upgrade its computer technology; its computers do not interleave with the valuation tribunal’s computers, and so on and so forth.

Businessmen are particularly concerned because the non-domestic multiplier—that is, the multiplier that is applied to the rateable value in order to provide, as it were, the gross amount of the rates payable before transitional relief and other things—contains an element for potential losses to the tax base arising from successful appeals. So businesses up and down the country are bearing the cost of this contingent risk factor which is implicit in the fact that we are dealing with a system that is lacking in the necessary resources.

My point in raising this on Second Reading was to outline that this is the nature of the animal that is about to be bestowed—or, rather, its risks are about to be bestowed—on to billing authorities. I think that this needs to be addressed. I do not know how this relates to whether the Bill should be brought into force in 2013 or subsequently—I make no comment about that. I just say that there is an in-principle issue about the maintenance and management of the tax base that, if you do not get it right, will be in the nature of passing the buck, an issue that the noble Lord, Lord Beecham, raised on Second Reading. This is a risk factor. I think that it would be entirely wrong, although— I declare another interest as president of the National Association of Local Councils—that does not make me unaware of the risks that are being imposed on the principal authorities, which are represented here by their president, my noble friend Lord Best. I think that it is right that, when we are dealing with these matters of principle, we actually address them at this stage. This is part of the tapestry—the backdrop—over which an awful lot of the other bits that we discuss will have to be viewed.

Localism Bill

Debate between Lord Jenkin of Roding and Earl of Lytton

Monday 17th October 2011 Lords Chamber

[The Earl of Lytton]

My Lords, I rise to plead guilty as charged I am afraid. I am indeed a professional practitioner in matters of party walls, and I am indeed the chairman of the professional panel set up by the Royal Institution of Chartered Surveyors on boundaries and party wall issues, which was responsible for the recent guidance note to which the noble Baroness, Lady Gardner, and the noble Lord, Lord Jenkin, referred.

I am also a paid-up member and a former national council chairman of something that is known as the Pyramus and Thisbe Club—that delightfully named organisation which is peopled by specialists who have a particular interest in party wall matters. Noble Lords will realise straight away that it is named after Shakespeare’s characters in “A Midsummer Night’s Dream” who whispered, conversed and conducted their courtship through a chink in a party wall. I have to say that most of the things that go on through chinks in party walls are anything other than courtship, as we have already heard. A further charge to add to the sheet is—

[Lord Jenkin of Roding]

There is, I believe, a committee of surveyors called the Pyramus and Thisbe group which draws its name entirely from what the noble Earl has just referred to.

[The Earl of Lytton]

Yes, indeed. It is actually called the Pyramus and Thisbe Club, and it has London and regional representation. It expanded quite considerably after the Party Wall etc. Act 1996 became law. Noble Lords—and certainly the noble Baroness, Lady Gardner—will remember that I took that Bill through its stages in this House in a previous parliamentary incarnation. I make no apology for saying that I have always thought that Section 10 of that Act—which is the dispute resolution process—was a model for our time. It is a form of alternative dispute resolution, and I thought it was well worth applying to a much larger range of inter-neighbour issues, as opposed to people having to go through the courts.

Let us leave aside for one minute the point that the noble Lord, Lord Jenkin, mentioned about the state of the housing market and the huge pressures that that brings to bear on scarce urban space, about which I will make a comment later. Many of the things that noble Lords have referred to are, of course, true. Subterranean development can have very significant implications for neighbouring properties both during the course of construction and in the subsequent effects, often several years later. The planning and building regulations regime provides only a partial protection. Sometimes it provides none, and the common law gives rise to actions often only once damage has become apparent, sometimes long after the original developer has gone from the scene.

I turn to the question of whether the Party Wall etc. Act 1996 can be usefully amended. At this juncture I would say that that legislation is, of course, very narrowly framed. It came out of the old London Building Acts, which had broadly similar provisions. That legislation risked being abolished under the terms of the repeal of the London Building Acts with the abolition of the GLC. It was saved from that in no small part by the prompting from the noble Lord, Lord Lucas. I am very grateful to him. From his knowledge and experience at the time, he was one of the mainsprings for making sure that that legislation was preserved. I pay him tribute for that. But widening its scope would have to be considered very carefully. It is a very finely drafted construct. There are many professional and technical understandings that are interwoven right the way through the Act. To amend one particular bit through an amendment to this Localism Bill would, I am afraid, have other consequences that might be less desirable—possibly the law of unforeseen consequences. That said, I would welcome the opportunity to see whether that Act can be amended to deal with this issue.

On security for expenses, we have this issue with the technically challenging nature of very deep excavations. They often create larger risks than those just arising from works for which notice would have to be served under the party wall provisions. So there is an issue about how you extend that scope, and make sure that it remains cohesive. There must be very few surveyors involved in this area of work who have not come across a building site where the contractor or the developer—or sometimes both—have gone bust, possibly leaving a building site with a large hole in the ground, and creating huge ongoing liabilities for adjoining properties. Enabling a default mechanism where this can be addressed is in the public interest. But then comes the question: if you are going to empower something to be done about it, how do you pay for it? This brings into question the matter of an insurance-backed warranty of some sort.

Again, this is a very difficult area. It depends how the provision is constructed, how it is worded, and how it benefits other people, who are not necessarily identified from inception as being beneficiaries of this. Overseas-based developers, non-resident owners and possibly eastern European builders do go to make a bit of a heady mix in the more valuable and economically important parts of our inner cities. Clearly these matters need to be dealt with by technicians who are competent and know what they are doing, know what they are looking at, can identify issues of boundaries and know something about construction. However, there is no generally applicable or enforceable code of practice for this type of development. The noble Lord, Lord Jenkin, referred to Camden. The London Borough of Camden probably has the most competent of all the codes of practice that I have seen.

However, the whole process is permissive at the moment. It is actually dogged by having poor enforcement procedures. It needs to have something better than it has. It operates by a process of consensus. With those who wish to play fast and loose with the system, often the consensus does not exist. That is a criticism of the whole process.