Local Government Finance Bill

Lord Palmer of Childs Hill Excerpts

Wednesday 10th October 2012 Lords Chamber

Why do I raise this? I do so because we are dealing with the local retention of non-domestic rates and the change from having a collection agency process on the part of local government whereby it hands over part of the non-domestic rate income to central government to a process, whereby local government has a direct stake in the amount that is gleaned locally. Given the changes that have occurred in value since 2008, it will be a huge problem to predict rate income over time, not just because of businesses and their advisers doing some fancy footwork to see whether they can avoid the problem but because of insolvencies and the fact that properties that fall in value may become prey to other pressures such as redevelopment. Then, of course, you have another possible shift to a different type of use. Although I would like a review to be much further reaching than the one proposed by the noble Lord, Lord McKenzie, there must be an independent review of how this system is working. I would hope that part of the feedback into that review considered the uncertainties about what is happening with the tax base of non-domestic rates. For that reason, I support this amendment as far as it goes.

[Lord Palmer of Childs Hill]

My Lords, I take a contrary view, as this amendment would add uncertainty to a situation that is already too uncertain. I believe that local authorities and the businesses to which the noble Earl referred want certainty most of all. They want to know what the rates are and roughly what local authorities will be able to retain. There will be a problem with valuations and the changes experienced by businesses. The noble Earl considered how the measure would affect businesses, but we are talking about the local retention of business rates by the local authority and how that affects that local authority’s expenditure. With respect, I suggest that the measure’s effect on businesses will be a problem whatever system we have: the current one or another. As the noble Earl rightly said, many accountants, surveyors and the like will look for ways to avoid paying taxes for all the right reasons, whatever the system. Therefore, this amendment would do no more than add further confusion and uncertainty to an already uncertain situation.

[Lord True]

My Lords, I take a similar position to that of my noble friend who has just spoken but I have a different perspective. I declare an interest as leader of a London local authority—the worst-funded local authority—which will be a tariff authority under the system put forward. One might therefore conclude that I would look forward to a review of these matters. In the unlikely and unfortunate event that the party opposite finds itself back in power, I take this amendment as a pledge that it will conduct a review.

I spoke at some length in Committee on the philosophy of these questions so I do not intend to detain your Lordships on the same issues now. My authority calculates on the basis of the information that has been provided so far. Through my noble friend the Minister I thank officials for their courtesy in contacting my officers. My authority currently expects to be about 17% adrift of our business rate target. We have absolutely no prospect whatever of growing business rates to get out of that hole, which is a continuation of a historic hole in which my authority has sat for a long time. That ought to lead me to say, “Yes, let’s have this review”, but, actually, that would be a rather mechanistic approach. I am not happy at all, as I made clear in Committee. Nor am I happy with the idea that there should be no reset before 2020. That position is absolutely unsustainable and there has to be a system whereby these matters are reviewed before then. I would like them to be looked at before 2013, as the amendment suggests. However, I thought that I heard my noble friend say in Committee that, although she would not be prepared to entertain an overall, general reconsideration of the system, there would be some kind of ongoing consideration of problems and issues as they arose, and there would not always be a flint-hearted, Treasury-style response, although there would be many such responses to questions that might arise.

I agree with the noble Lord, Lord McKenzie, that we need to know more, and I am grateful for the assurances from my noble friend that we will hear more. My feeling is that if we park this away and do not have a review until 2013, everyone will say, “Oh well, there will be a review one day”, and nothing will happen. We need an ongoing dialogue, and I shall listen carefully to what my noble friend says in response. I hope she will indicate that there will be flexibility and a continuing readiness to listen, not only before 2013 but after, and that she will agree that 2020 is not the date before which no move will be made.