Localism Bill

Debate between Lord McKenzie of Luton and Lord Bishop of Birmingham

Tuesday 28th June 2011 Lords Chamber

[Lord McKenzie of Luton]

My Lords, I shall also speak to the other two amendments in the group. These are probing amendments, at this stage. We are on record as supporting the thrust of these provisions. They would allow local authorities complete discretion to offer business rate discounts to other hereditaments of their choosing, in particular to support businesses. However, the cost of these discounts will be met, one way or another, by the local authority. Under existing arrangements, the local authority can provide discretionary rate relief in a number of restricted circumstances—for example, by topping up the 80 per cent mandatory relief given to charities and providing 100 per cent relief to other non-profit-making bodies. The cost of existing discretionary rate relief is shared between the local authority and central government.

My first question to the Minister is: whether or not a local authority uses the opportunity to offer discretionary relief, will the cost of ongoing relief to existing types of hereditaments be shared on the same basis as now—partly by central government and partly by the local authority? Is there any change to that regime? Clearly, there will be little appetite for any new discretion, given that the costs will in effect have to fall on council tax payers, with referendums constraining council tax increases.

This leads to our first amendment. The relief can be granted when the billing authority is satisfied that it is reasonable to do so, having regard to the interests of persons liable to pay council tax set by the authority. However, we know that the Government are considering localisation of the business rate, which was discussed in the amendment we considered before the dinner break, and that a resource review is under way. If another potential source of income were to come about, with another group of peoples’ interests to consider, would that be one of the factors to be taken into account, or are the Government saying that those people can be ignored for these purposes?

The second amendment seeks only clarification—although I accept that it relates to a pre-existing form of words—of what is included in the definition of “fine arts”. This is relevant for the purposes of identifying who is eligible for discretionary relief. In the Bill, non-profit-making bodies include:

“each of whose main objects are charitable or are otherwise philanthropic or religious or concerned with education, social welfare, science, literature or the fine arts”.

Having read that, I was genuinely unclear as to the dividing line between fine arts and other arts. The House of Lords Library helped a little and referred me to Stroud’s Judicial Dictionary of Words and Phrases. It refers to a judge, who said at one stage:

“I am prepared to accept the wider meaning assigned to the ‘fine arts’ in the definitions and to treat them as including, for example, poetry, eloquence and music, as well as such ‘arts of design’ as painting, sculpture and architecture. We are indeed bound for the present purposes to include music amongst them. It is possible that dramatic art should also be included”.

However, can the Minister help with perhaps a more contemporary definition? I am aware that his noble friend Lord Taylor has a very keen and current interest in carnival arts, for example. Would that be included? This might seem a somewhat frivolous point, but there is a real issue about why the word “fine” is attached to the arts here. Perhaps the Minister can help me on that.

Our third amendment just deletes the Secretary of State’s powers to issue guidance. Surely this is about local discretion, and local authorities can make up their own minds about how they go about it. However, if the noble Lord seeks to defend the inclusion of that provision, perhaps he might elaborate on the type of issues that would be encompassed by the guidance.

These amendments do not seek to undermine the thrust of the clause. There are issues about how valuable discretionary rate relief might be. There is some evidence that landlords eventually factor the reduced rates into increased rents. There are some issues about authorities undercutting each other; indeed, the result of that can reinforce the inequality of resources that exists at the moment, making those worse, although lower business rates can lower the entry barrier for certain businesses. This is important at the current time because reports, for example in Sunday newspapers and earlier this week, about the challenges that high streets face are very real.

Action on rents may be needed as well as action on business rates. I note the concerns of the right reverend Prelate the Bishop of Exeter, who is going to speak on this issue in a moment. I presume that those concerns are focused on the fact that the wider discretion is allowed and whether that will undermine the support given to existing recipients of the benefit. However, I do think that we have to allow discretion to local authorities in the hope that they will do the right thing but also balance the issue of benefits in the medium and longer term, perhaps forgoing some revenues in the short term. Having explained the thrust of these probing amendments, I look forward with interest to the noble Lord’s reply, particularly to his definition of “fine arts”.

[The Lord Bishop of Birmingham]

My Lords, it might help to progress the debate if I admit that I am speaking on behalf of my right reverend friend the Bishop of Exeter and that I fly under the flag of Birmingham, although I share a Scottish name with the noble Lord opposite.

My right reverend friend the Bishop of Exeter gave notice of his intention to oppose the question that Clause 39 stand part in order to seek an assurance from the Minister on the future of discretionary relief for charities from non-domestic rates. I probe, from these Benches, the Government’s intention in this area.

Currently, under the terms of the Local Government Finance Act 1988, buildings used by charities qualify for a mandatory 80 per cent discount on their non-domestic rates. In addition, as already mentioned, local authorities have discretion to waive some or all of the remaining 20 per cent. Clause 39 deals with the exercise of that discretion. The clause appears to be largely a simplification measure. It removes a series of detailed conditions that must currently be applied when deciding whether to grant discretionary relief. In effect, it appears to replace those detailed conditions with a simple “yes” or “no” exercise of discretion by the billing authority. However, under the terms of new subsection (5A),

“the billing authority may make the decision only if it is satisfied that it would be reasonable for it to do so, having regard to the interests of persons liable to pay council tax set by it”.

We all know that local authorities are currently under severe financial constraints and I am aware of fear among some in the charity sector—here, I declare an interest in several charities with which I am associated as a trustee, president or patron, but hope that noble Lords will excuse me from listing them all now—that the discretionary relief is under threat because cash-strapped councils are looking to make any possible savings that they can. The change proposed in Clause 39 might of course be totally innocuous, but what worries charities is that it might be the green light to cease granting discretionary relief. What does the phrase,

“only if it is satisfied that it would be reasonable for it to do so”,

mean in this situation? Is this what might be called the traditional Wednesbury “reasonable” from 1947 or is it a milder test? My question is very simple: do Ministers expect councils to continue giving discretionary relief or are the Government trying to make it easier for councils to refuse such requests? If the DCLG is trying to make it easier for councils not to give the 20 per cent discretionary relief, how does that square with the big society agenda? Looking to the future, how secure is the 80 per cent mandatory relief?

I very much hope that the Minister can reassure us on both the general intention of this clause and the precise meaning of the words to which I have referred.