Gareth Thomas
Main Page: Gareth Thomas (Labour (Co-op) - Harrow West)Local Government Finance Bill (Tenth sitting)
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Mr Gareth Thomas (Harrow West) (Lab/Co-op)
On a point of order, Sir David. We are always grateful to see you in the Chair. You will have missed the exchange we had with Mr Gapes in which we asked for his help—perhaps with your influence—to see whether the whole Committee, as opposed to one half of it, might have access to a letter that the Secretary of State sent to some Members of Parliament about the future of business rates, which is obviously pertinent to the Bill. We believe that the letter was sent to every Conservative MP, and some of them have helpfully shared it with the media, but the Opposition have not had the chance to see it in full. If you can bring any influence to ensure that it is released to us, that would be extremely helpful.
The Chair
I had not been alerted to the fact that this matter was raised this morning. The Minister has heard what has been said, but I am afraid that it is not a matter for the Chair.
Clause 42
Commencement and short title
Question (this day) again proposed, That the clause stand part of the Bill.
The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Marcus Jones)
It is a pleasure to serve under your chairmanship once again, Sir David. The clause makes standard provision in relation to the commencement of provisions in the Bill, as I explained in relation to amendments 52 and 54 before we broke. Subsection (1) sets out that the provisions relating to the telecommunications relief guidance about notices relating to non-domestic rates and Her Majesty’s Revenue and Customs expenditure for digital services will come into force on Royal Assent. Powers to make regulations in the Bill as well as the final standard provisions of the Bill will also come into force on Royal Assent.
Mr Thomas
One of the things that is missing from the Bill is any reference to local enterprise partnerships. The Minister may remember that before the former Chancellor, the right hon. Member for Tatton (Mr Osborne), was sacked for incompetence by the new Prime Minister, he made reference to 100% business rate devolution and, crucially, infrastructure supplements that require the consent or support of local enterprise partnerships, but there has been no mention of local enterprise partnerships in any of the clauses, or indeed in the Minister’s speeches. Will he set out why there appears to be a change in the involvement of LEPs?
Mr Jones
The hon. Gentleman raises an interesting point. I suppose it would have been more pertinent to our earlier deliberations in considering the Bill, when we were dealing directly with supplements that can be charged by directly elected Mayors and the consultation process that will be gone through with businesses. I do not want to dwell on that point, other than to say that we clearly set out how the matter will be considered. We consulted widely with the business community, including local enterprise partnerships. That is why we came to the conclusion and took the view that we did on how Mayors will have to consult with business if they wish to implement a business rate supplement for infrastructure.
In my response to amendments 52 and 54, I set out the reasons why the Bill commencement regulations should not be delayed until 2019. We have had several discussions on delegated powers. As I have explained, the Bill provides a framework to establish a new business rates retention system. Our approach allows us to continue to work with local government over coming months and years on the details of the reforms, which councils will welcome.
In line with the approach taken in the previous local government finance legislation, the Bill necessarily contains a number of delegated powers, as set out in the delegated powers memorandum, which describes each power’s purpose, justification and proposed procedure. The Bill takes a similar number of powers to the previous legislation. As I said at our previous sitting, the majority of those powers amend or replicate existing legislation, predominantly the Local Government Finance Act 1988 and the Business Rate Supplements Act 2009.
Where replicating existing powers, the Bill retains the procedure for each from previous legislation. Where the Bill creates new powers, the majority will provide for parliamentary procedure but, as is normal for this type of legislation, the Bill contains new powers that do not have a parliamentary procedure, such as the commencement regulations under this clause.
Mr Thomas
On the commencement proceedings, the Minister might remember that I asked specifically when he intends the abolition of the local government finance statement to kick in. Does he see tomorrow’s as the last such statement, or will there be another one for 2018-19? What is the commencement date for that provision?
Mr Jones
The hon. Gentleman has listened intently to every word I have said in this Committee, so he knows that earlier in our deliberations I confirmed to him that this year’s local government finance settlement will not be the last settlement of its type. The local government finance settlement process will continue until the new policy is implemented in 2019-20. Regulations will therefore have to be put in place by 2019, in advance of the forthcoming settlement for local government for that year. I hope that clarifies the matter for him.
The central principle of our approach to implementation of the business rate reforms is that we have developed and continue to develop the detail of provisions through close work with local authorities and businesses. By way of assurance to the Committee and to ensure openness, where possible we will publish draft regulations or policy statements on the content of the provision to be made under the powers in the Bill.
Given the above assurance, I ask the Committee to let the commencement clause stand part of the Bill.
Mr Thomas
I am grateful to the Minister for confirming that the local government finance settlement debate will continue to take place. It is an opportunity for Members across the House to continue to scrutinise not only local government finance as it operates at the moment but, crucially, as we get more clarity, how business rates might end up working when 100% devolved—goodness only knows, we need that clarity.
We have no sense of how the so-called fair funding review will work for each individual local authority. We have no sense as yet of the consequences of the detail of the financial regulations to accompany the Bill. It will therefore be helpful for us to continue to have the opportunity to debate such matters on the Floor of the House and to explore what they mean for each of our local authorities and the public services that they provide to the people of England generally.
It would be helpful to hear a little more from the Minister about any further arrangements for consultation with business. It seems a little odd that before the Bill is commenced, in the light of the huge concern about the business rates revaluation that has hit the media of late, there will not be further detailed consultation with business through local enterprise partnerships. Here is a quote from the Treasury press release that accompanied the previous Chancellor—before he was sacked for incompetence by the current Prime Minister—which outlined how the infrastructure premium would operate:
“Directly elected mayors—once they have support of local business leaders through a majority vote of the business members of the Local Enterprise Partnership—will be able to add a premium to business rates”.
Yet there has been no mention by the Minister of local enterprise partnerships in any of his speeches to date. He might prefer me to have mentioned it earlier in the proceedings—perhaps his memory might have come back to him at that point about why he made the change and decided to cut out local enterprise partnerships from the Bill. It would be good to hear a little more from the Minister about how local enterprise partnerships will be involved in the coming months.
Rob Marris (Wolverhampton South West) (Lab)
I am a little surprised, given that when we were talking this morning about timing and implementation of the various clauses in the Bill, the Minister prayed in aid clause 5, on indexation, and clause 7. When he talks this afternoon about developing policy in conjunction with local authorities and liaising—my verb, not his—it would be good if we had some evidence. He challenged my hon. Friend the Member for Harrow West on whether Labour supports clause 7, on rate relief for rural shops, and clause 5, on indexation, to which my hon. Friend gave a clear answer. The Minister relied on those clauses as examples of clarity and the way forward, but if they are so clear, why will their implementation be delayed?
Mr Jones
As was shown earlier, the hon. Gentleman seems to have undergone a complete transformation while scrutinising the Bill, having previously advocated that local authorities should be able to increase the multiplier at will and therefore increase the tax rate on business rates. He then seemed to have a conversion, given that he now wants to look at a review. I set out our reasoning earlier, carefully and in some detail. As I said, the Government considered the issue of business rates as recently as 2015. We looked at the issue carefully and consulted business groups and local authorities, which at that time thought the system we had, although not perfect, was one the Government should continue with. On that basis, I will curtail my comments and commend the clause to the Committee.
Question put and agreed to.
Clause 42 accordingly ordered to stand part of the Bill.
New Clause 2
Needs assessment prior to each reset
‘(1) Before any alteration to the Business Rate Retention Scheme, an independent body must conduct a full needs assessment of every billing authority.
(2) The conclusions of the assessment under subsection (1) must be taken into account when considering any changes to calculations under paragraph 2 of Schedule 7B to the Local Government Finance Act 1988 that are made as part of the BRRS reset.”—(Jim McMahon.)
This new clause would require a full needs assessment to be carried out for every billing authority in order to inform the new tariff and top ups system at each BRRS reset.
Brought up, and read the First time.
The Chair
With this it will be convenient to discuss the following:
New clause 8—Relief for public buildings—
‘(1) The Secretary of State shall, by regulations, introduce provision for relief from non-domestic rates in respect of hereditaments used principally for the purposes of a public body.
(2) For the purposes of this section, a public body means any body funded principally through funds voted by Parliament.”
This new clause would require the Secretary of State to make provision for business rate relief for public buildings, defined by reference to public funding of the body for whose purposes the building is principally used.
New clause 9—Relief for licensed markets—
The Secretary of State shall, by regulations, introduce provision for relief from non-domestic rates in respect of hereditaments used principally for the purposes of a licensed market.”
This new clause would require the Secretary of State to make provision for business rate relief for licensed markets.
Mr Thomas
Sir David, could I first dwell on the two new clauses that are linked to new clause 4? New clause 8 draws attention to the fact that many public buildings have business rates bills that they have to pay, particularly in local authorities. Essentially, that money comes back, so public services funded by revenues from Westminster have to pay a business rates bill back to the Exchequer or the billing authority, creating paperwork and bureaucracy. One wonders whether the system would not be more efficient if we tried to exempt those public buildings from business rates in the first place. Obviously, there would be a commensurate reduction in the grant or whatever to the public body in those premises, but that might help to ensure a slightly more efficient system than essentially allowing flows of money around the system, with the additional costs that that generates. New clause 8 would reduce some of the inefficiency in the business rates system.
New clause 9 would introduce a relief for licensed markets—small business at its very best. Licensed market owners essentially provide a platform—for want of a better phrase—for small businesses to come and ply their wares. One wonders whether there should not also be some benefit in relief to allow those markets to continue to operate. They are often crucial to the footfall in town centres. One wonders whether Ministers have properly thought through the potential appeal of town centres and high streets in terms of licensed markets. It would be helpful to hear the Minister’s response to those probing new clauses and what the thinking is in those areas.
I want to concentrate my remarks on new clause 4, which would ensure that relief from business rates was given to schools and hospitals. We know from the current revaluation process that NHS hospitals and GP surgeries in England, and indeed in Wales—I appreciate that Wales is not covered by the Bill, but this figure is illustrative—face a £635 million hike in their business rates in the next five years. In the context of the scale of the financial crisis affecting the national health service, one wonders whether, as a small immediate contribution to solving the crisis, Ministers could offer hospitals and GP surgeries an exemption from business rates.
Some of the country’s biggest hospitals will see their business rates bill double over the next few years, so one wonders how they will find the money to pay for that increase without having to find further savings. Many NHS trusts say that they are already cutting to the bone on the staffing they need. Analysis by Gerald Eve, a firm that advises businesses on rates, found that business rates for hospitals would rise from £328 million this year to £418 million in five years’ time, while GPs and health centres would see their costs rise from £257 million to £332 million a year over that same period. As I understand it, those figures are for England and Wales, and we are talking about only England in the context of the Bill, but the figures are illustrative and helpful to the debate.
Kevin Hollinrake (Thirsk and Malton) (Con)
The hon. Gentleman mentions GP surgeries, which of course are private businesses. Does he think that dispensation should also be given to private businesses?
Mr Thomas
Let us be clear: GP surgeries provide a public service. I will come on to some of the difficulties that GPs face. On the news just the other day there was a report by the BBC’s excellent health editor, Hugh Pym, on GP surgeries that had had to close because they could not make the finances add up. One wonders whether, had they faced the business rates hike that we are talking about now, that would not have exacerbated the problems.
Rob Marris
My hon. Friend will be aware—as will the hon. Member for Thirsk and Malton, given that I am sure he has read the proposed new clause—that new clause 4 does not cover GP surgeries, because they are primary.
Mr Thomas
I will in a second; I have one further point. Some trusts, including Peterborough City Hospital, will see rates rise from £2.5 million to £4.8 million by 2021, while the University Hospitals Birmingham NHS Foundation Trust’s bill is set to rise from £4.2 million to £7.6 million. A further example is the Royal London Hospital in east London, which according to the Gerald Eve consultancy will see its business rates bill rise by nearly 60% to £9.7 million. I will happily give way to the hon. Gentleman; presumably he is going to say how he thinks these bills should be dealt with by the hospitals concerned.
Kevin Hollinrake
I wonder whether the shadow Minister will comment on whether the hon. Member for Wolverhampton South West was paying attention to his own comments, or whether he switched off in the middle, on the basis that it was he who mentioned GP surgeries? I was responding to that point.
Mr Thomas
All I will say is that I have never known my hon. Friend the Member for Wolverhampton South West be anything other than switched on. I learned that to my cost in a statutory instrument Committee a long time ago.
When the NHS is under such huge budgetary pressures, the fact that hospitals face these new, potentially huge, business rate liabilities may result in pressure for further reductions—for instance, in staff. That must be profoundly worrying, not only to Opposition Members but to Government Members who represent hospitals facing similar business rate increases. When we consider that NHS trusts posted a deficit of £886 million at the end of the third quarter of this year alone—£300 million more than the target for the end of this financial year—we have some sense of the scale of the pressures on NHS hospitals. If Ministers were so minded, perhaps a little business rate relief now might help to ease some of the pressure on finance directors and chief executives in NHS hospitals who are trying to make hospital budgets balance.
You will know, Sir David, because you are very knowledgeable about these things, that the Secretary of State for Health, clearly as a result of the scale of the pressure that hospitals are under, has suggested that the four-hour A&E target might be downgraded and no longer apply to minor injuries. One wonders whether he would have gone to those lengths had there not been the scale of pressure on NHS hospitals that we are seeing at the moment, particularly financially. He might have been more willing to defend what is an essential management target and an indicator of the quality of healthcare in our communities. I gently suggest that abandoning the four-hour target is a total admission of failure by the Government. One can understand the context for that abandonment in the light of the financial pressures, which new clause 4 seeks to ease a little. One wonders whether the Secretary of State for Health would welcome ministerial support from the Department for Communities and Local Government in negotiations with the Treasury, perhaps through the easing of the business rates burden, to reduce some of the financial pressure on NHS hospitals.
Rob Marris
Does my hon. Friend remember a single winter between 2001 and 2010 in which there was a so-called winter crisis in the NHS?
The Chair
Order. I am listening very carefully to what the hon. Gentleman is saying and to how he is tempted to respond to that intervention, but I call on him to make his remarks conform much more closely to new clause 4.
Mr Thomas
I am very grateful to you, Sir David. My hon. Friend the Member for Wolverhampton South West has long experience on Public Bill Committees and, out of respect for him and the experience that I suffered at his hands on a previous occasion, I always try to respond to him. However, I am grateful for your help on this occasion.
Let me turn, as I was about to before my hon. Friend’s intervention, to the second element of the new clause, which is the issue of whether schools, too, should receive business rates relief. I was minded to make a case to my hon. Friends in the closed room to which my hon. Friend the Member for Oldham West and Royton has alluded. We thought about issues to raise in amendments and discussed the problems with school funding. The Conservative party is overseeing the first real-terms cut in school budgets for more than two decades and the steepest cuts our schools have faced since the 1970s.
You might reasonably wonder, Sir David, whether the new clause is needed. I would point to a National Audit Office report on the financial sustainability of schools. It said there will be an 8% real-terms reduction in per-pupil funding for mainstream schools between 2014-15 and 2019-20 “due to cost pressures”. Those are the words of the National Audit Office—no one can fault its impartiality. It is not a Labour body, a Conservative body or a Liberal Democrat body; it is an independent, impartial body, and it has set out clearly and explicitly the scale of the funding cuts that our schools will experience. Were Ministers willing to protect funding for pupils in the future, they might be tempted to use business rates relief as one part of the package to help our schools.
Anna Turley
Does my hon. Friend share my view that it is absurd to the point of offensive that private schools in this country get business rates relief, on the basis of being a charity, of up to 80% of their costs? Those schools are educating children on the basis of their parents’ ability to pay, not the child’s right to an education. They are reinforcing social inequality in this country and are getting rates relief of up to 80%. Would the new clause not go some way to creating a level playing field for our maintained schools to compete on?
Mr Thomas
My hon. Friend makes an interesting point. I would put it slightly differently. It seems odd that some schools offering a service to one group of children benefit from business rates relief, while other schools offering a service to another group of children in the maintained sector do not. My hon. Friend’s broader point about equalising the treatment of schools has considerable merit.
Mr Jones
I will give the hon. Gentleman some background. He is right to say that local authority maintained schools do not get the charitable relief that, say, an academy school does. However, as I am sure he will be aware, those schools are compensated for the business rate they have to pay in the funding formula provided by the Department for Education through local authorities.
Mr Thomas
Let me address the question of the funding formula, because that opens a whole can of worms in terms of the financial pressures facing many of our schools. Some immediate business rates relief, without the compensation to school budgets suggested by the Minister, might provide an additional increase in funding to schools at a time when they most need it.
It is important that we discuss new clause 4 and relief for schools in the context of the funding formula. Almost half of the schools in this country will lose funding. They are already being hit by the 8% real-terms cut that the NAO has identified, but almost half face further cuts in 2019-20 under Department for Education proposals that are on the table for consultation.
At the Public Accounts Committee recently, a number of headteachers laid bare the scale of the challenge facing their schools. Liam Collins from Uplands Community College told the Committee that his school had reduced staff numbers by nine teachers and five support staff over the past four years. He argued:
“We cannot afford to buy text books...We cannot afford to send staff on training.”
That is a dire financial situation. Perhaps a little bit of business rates relief, without a reduction in school budgets, would provide one way to help that particular school.
Kevin Hollinrake
I am struggling to understand the relevance of the hon. Gentleman’s argument, for two reasons. According to the Institute for Fiscal Studies, the Opposition’s manifesto pledges on education at the last election completely mirrored ours with regard to the funding pot. In addition, their manifesto did not specify or propose anything about business rates relief, including for schools. The hon. Gentleman is playing cheap party politics.
The Chair
Order. Before the hon. Member for Harrow West replies, this is revisiting old ground. I hope he will talk about his proposals for prospective funding.
Mr Thomas
I am grateful to you, Sir David, for the offer of protection from that outrageous slur from the hon. Member for Thirsk and Malton. I suggest that Government Members might usefully remember the old maxim: when circumstances change, good politicians have to recognise that that has happened and try to adjust to the financial realities that, in this case, schools are facing. My amendment, in the context of the Bill, is simply one small effort to offer a bit of additional financial support to schools that have very serious financial problems, and Government Members should not make light of that.
Rob Marris
My hon. Friend will be aware that one circumstance that has changed—and that this measure would help address—is the apprenticeship levy, which will be paid by maintained schools but not by academies. That is a change of circumstance; hence the change of our position.
Mr Jones
Despite the fact that grant maintained schools are compensated for the business rates they incur, the hon. Gentleman wants to exempt them from business rates, although he does not want the same treatment for academy schools, which by definition of the policy he advocates would be out of pocket compared with maintained schools.
Mr Thomas
With all due respect to the Minister, I want the terrible financial situation facing schools across the country to be sorted out. I am merely proposing new clause 4 as one potential route to address one part of that problem.
Stuart McLaughlin, head teacher of Bower Park Academy, said:
“I have cut my teaching to the bare bones. Every teacher is teaching at full capacity. I have very little spare capacity in terms of spare lessons on the timetable, so I am now starting to hit the support staff. My worry about that is that it is going to affect the most vulnerable students.”
Another example of a school in serious financial trouble for which new clause 4 might provide one route for a bit of additional support.
The Institute for Fiscal Studies has also backed up the National Audit Office conclusions about the scale of pressure on schools. It did not identify the apprenticeship levy but it talked about the additional costs from the public sector pay settlement, the increased employers’ national insurance contributions and the increase in the employer pension contribution to the teachers’ pension scheme that started in April 2015 and was not funded by the Conservative party. All that leads up to the 8% cut in real terms that our schools are facing. That situation is exacerbated by the new funding formula for at least half the schools in the country, which will see significant losses.
Organisations within the schools sector, such as the National Association of Head Teachers—not the sort of body to sound the alarm unnecessarily—are also profoundly worried about the funding situation facing schools. It is in that spirit that the Opposition tabled new clause 4. I look forward to Ministers saying why they are so determined not to solve the financial crisis facing schools and hospitals. I also look forward to the Minister’s response to new clauses 8 and 9.
Mr Jones
I have been clear that the liability for rates will operate differently in relation to different types of market. I have also been clear that the same type of regime should apply to non-domestic property, which is certainly the case in this sense. It is for the valuation office to decide on the facts whether an individual market stall is rateable or not.
To conclude, I hope the Committee is reassured that the new clauses are not necessary and would not further our collective aims to support an independent and self-sufficient local government sector. I ask the hon. Member for Harrow West to withdraw the new clause.
Mr Thomas
I am grateful for the opportunity to sum up our debate on new clauses 4, 8 and 9. New clauses 8 and 9 were very much tabled as probing amendments. Although I am not 100% satisfied by the Minister’s response—something that I have had to get used to—I do not intend to divide the Committee on the new clauses.
New clause 4 was also a probing amendment, to find out the extent to which the Minister and his colleagues have really grasped the scale of the financial crisis facing both schools and hospitals. What we have had back from the Minister and from some Government Members in interventions suggests a profoundly worrying complacency about the financial situation in schools and hospitals. One has to hope that the Chancellor of the Exchequer sees things slightly differently, but we are where we are. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 7
Duty to ensure no loss of funding following withdrawal from the European Union
‘(1) This section applies where any funding is provided to a billing authority or Combined Authority by the Secretary of State in consequence of funds made available by EU institutions in the financial years beginning on 1 April 2017, 2018 and 2019.
(2) Where this section applies, it shall be the duty of the Secretary of State to ensure that, in the five year period beginning with the date on which the United Kingdom leaves the European Union, the funding made available to a billing authority in question is not reduced in respect of any funds that were made available by EU institutions in the period specified in subsection (1).’—(Jim McMahon.)
This new clause would ensure that funding available from EU institutions is replaced by funding from the Secretary of State for the five years after exit.
Brought up, and read the First time.
Jim McMahon
I beg to move, That the clause be read a Second time.
I do not intend to spend a great deal of time on the new clause, which does what it says on the tin: it would secure the money that is currently provided to local areas through European funding post exit from the European Union. For many of our areas, that money is integral to their local economic development plans, to their education and training plans and, in many cases, to their devolution submissions. In a number of our areas, particularly those with combined authority arrangements in place, the local authority is the accountable body for EU funding in its area.
There is one thing that Members may not appreciate about European money. We always discuss whether it is being spent in the best possible way, although that is usually determined by the local community and not by the European Union. It is the communities themselves, through their councils, that make the applications, not the European Union. We talk about the north-south divide, but it is really London and the south-east that has a significantly different financial settlement from everywhere else in England. European funding and the way it is allocated by region provides an element of rebalancing.
I remind Members of the transport investment figures that have come out just this week, which highlighted that London gets £1,940 per head compared with £220 per head for those in the north-east, £680 per head for those in the north-west—although quite a lot of that is temporary funding; it is time limited—and just £190 per head for those living in Yorkshire and the Humber.
London gets £93 per head in European structural funds, compared with £285 in the north-east, £161 in the north-west and £150 in Yorkshire and the Humber. Therefore, there is a strong argument to say that European Union funding is being used partly to counterbalance a centralising Government in Westminster who advantage the London boroughs.
Steve Double
I beg to move, That the clause be read a Second time.
With the new clause, I seek clarification of the legislation and confirmation of my belief of the original intention of the Local Government Finance Act 1988 regarding the agricultural exemption from non-domestic rates for nurseries and market gardens. This has been prompted by a court case brought by the Valuation Office Agency in 2015 against Tunnel Tech Limited, mushroom growers who grow their product under polythene or glass.
For more than a century, legislation has dictated that agricultural land and, latterly, buildings have been exempt from rating liability. The principle of an agricultural exemption is well established. The Court of Appeal, however, interpreted the legislation as not to include nursery grounds consisting wholly of greenhouses, polythene tunnels or buildings with the exemption.
The horticultural industry in the UK has undergone significant changes in recent years in order to increase our home food production, something I am sure we all support. That has included more and more crop-growing operations taking place under the cover of polythene tunnels and other buildings. It has also led to more sophisticated growing techniques being explored.
There is no longer a distinction between enterprises that would have been classified as a “market garden” and those classified as a “nursery ground”, as per the legislation. They are instead simply “food growers”. Many growers are a combination of both “nursery ground” and “market garden”, operating from the same premises with no distinction of areas. The Valuation Office Agency argument in the case centred around the fact that Tunnel Tech did not produce mushrooms that were ready for market.
In order to become more productive and cost-effective, the industry has become increasingly segmented in its approach to production. There has been a move towards businesses specialising in niche production. Growers may now only produce one stage in the development of an end product, such as plug plants for vegetable production. That is more economical for the industry, allowing it to be more competitive in the global marketplace. Significant increases can be made in production, where each stage can be carried out at individual premises designed solely for each specific stage of production. Dealing with all production stages on the same premises has substantial limitations.
With more and more agricultural land being taken up with housing provision for our expanding population, there is a need to be able to produce food for the country over smaller areas more efficiently and more reliably. That can, to an extent, be addressed by growing more product under cover.
The Tunnel Tech case has highlighted how outdated or ambiguous the current legislation is in that regard. It makes a defined distinction between “market gardens” and “nursery grounds” and treats them differently for exemption purposes, whereas enterprises today are, in reality, simply growers.
It is unlikely that, in drafting the legislation, it was Parliament’s intention to limit UK horticultural production, as will be the case potentially should the legislation stand as it is. A significant ratings bill in addition to other rising costs will prevent investment in growing businesses. It will prevent growers from exploring new techniques requiring under-cover operations. It may also have a reverse effect on operations that already do grow under cover, forcing them to abandon these growing methods. I have tabled the new clause simply to clarify the relevant legislation, which is the Local Government Finance Act 1988, and to ensure that the agricultural exemption from ratings liability is protected as the industry evolves and modernises. I do not believe that there will be any significant fiscal impact to the Treasury from this change, as it is not revenue that the Treasury has historically been receiving.
Mr Thomas
I am sympathetic to the new clause. I just wanted to clarify the question of cost. We would not want to support anything without knowing whether there were cost implications. It would be helpful for the hon. Gentleman to clarify whether he has checked with the House of Commons Library or with other sources about the potential financial cost to the Treasury of the new clause.
Steve Double
I am grateful for the hon. Gentleman’s intervention, and indeed for the revelation that he has come to the view that we need to consider the costs of all new moves, which is welcome. I have not got the figures from the Library, but my understanding, from speaking to people in the Treasury and people from the National Farmers Union, is that this is not money that the Treasury has historically been receiving. This is a recent development; it has happened only in the last few months. Therefore, if the change happens, this will be new money—increased revenue—to the Treasury. It is not something the Treasury has been receiving historically; I believe that is the case. Therefore, I am seeking support for the new clause to restore the position that I believe was Parliament’s original intention when the legislation was introduced in 1988, to clarify the position in the light of the court ruling and to continue this vital support to our food producers.
I do not intend to push the new clause to a vote. I simply seek the Minister’s response and put down a marker that I believe that this issue needs to be addressed by the Department and by the Treasury to provide clarity and certainty for our food growers that they can continue to enjoy the relief, which I believe was the original intention.
Rob Marris
I rise in support of the new clause. As the hon. Gentleman has said, the background is that for the past 20 years at least, food security in the United Kingdom has been much overlooked. We import an increasing proportion of our food and the strain on our food security may increase or decrease because of Brexit, depending on what we do. The measure proposed by new clause 10 is very helpful in that regard.
The Tunnel Tech case, as I understand it, related to the tunnels where mushrooms are produced, ready for market. Paragraph 2(1)(a) of schedule 5 to the Local Government Finance Act 1988 provides the definition of agricultural land, whereas paragraph 3 provides the definition of an agricultural building. The definition of agricultural land includes meadows, which are extremely important, whether they are in Cornwall or elsewhere. However, as I understand it—I am not an agriculturalist or a horticulturalist—meadows do not produce food that is directly ready for market. Even so, they are an important part of our landscape and can contribute to the food chain. Therefore we have an anomaly. Paragraph 9(1) of schedule 5 to the 1988 Act exempts fish farms, so the provision applies more widely than suggested by paragraph 2, which defines agricultural land as
“pure arable meadow or pasture ground”.
I am sorry that the hon. Gentleman does not intend to press his new clause to a vote, but I understand his reasons for that. In supporting his amendment, however, I advise him—he may have liaised with others on this— to consider whether a change needs to be made to paragraph 2, which provides the definition of agricultural land, as well as to paragraph 3, which provides the definition of agricultural buildings. He and I both want clarity so that the matter is not ventilated before the courts again, and I suspect that a tweak to the definition of agricultural land would also be helpful.
Mr Thomas
I am minded to press the new clause to a vote, such was the clarity of the argument of the hon. Member for St Austell and Newquay. My hon. Friend the Member for Wolverhampton South West has made a compelling case in support of it. The hon. Gentleman has reassured me that, having had conversations with the Treasury, there is no cost associated with it and he clearly has the support of the NFU. The Minister will have to make a pretty powerful speech to convince us not to press the new clause to a vote.
Mr Jones
It looks as if there is no pressure on me to satisfy the hon. Gentleman. I am grateful to my hon. Friend the Member for St Austell and Newquay for raising this important issue. The Valuation Office Agency faces a challenging task of maintaining non-domestic rating lists covering a vast array of different types of property throughout England.
The background to the amendment originates from a rating case concerning a property producing mushroom mycelium, which is essentially the material from which mushrooms are grown. It is then sold on by the ratepayer to mushroom farms, which then produce the final product. The VOA felt that, because the property was not producing the mushrooms itself, it was not able to claim the agricultural building exemption and therefore should not be rateable. The ratepayer disagreed. Eventually, the matter reached the Court of Appeal which ruled that the property should be rateable.
On business rates, there is nothing unusual about that chain of events. Usually, further discussion of such technical rating cases would be confined only to the most dedicated members of the ratings profession. The Government are not usually involved in that sort of discussion, but the Court of Appeal decision has wider implications in this case.
The judgment clarified that there is a difference between market gardens and nursery grounds where buildings are involved. In effect, that means that there is a difference between the exemptions available for market gardens and nursery grounds. The Court of Appeal judgment means that where the activity at a nursey ground takes place only in buildings, it is not exempt because it is not an agricultural building as defined by the legislation. Previously it was a long-held practice to treat such buildings as though they were exempt from business rates. The VOA has been discussing with the industry what the decision means in practice. We understand that it would mean that some ratepayers operating nurseries producing plants prior to the point of sale to the consumer could face a rate bill for the first time. However, the proposed new clause would ensure that those nurseries were again exempt from business rates.
I stress that the Government believe that the exemption for agricultural property is an important part of the rating system. It ensures that large areas of agricultural land and buildings are not liable to pay a property tax that could have a significant impact on the cost of farming. We firmly believe that it is necessary for a line to be drawn for all exemptions and the Court of Appeal has clearly done that in its judgment. It is also important that reliefs and exemptions are targeted where support is most needed. I have therefore asked my officials to look at the impacts of that decision, how it will be applied in practice by the VOA and what it means for the companies affected. I will also meet the NFU to discuss it. The Government keep all taxes, including business rates, under review and I assure my hon. Friend that that includes the implications of the Court of Appeal decision.
Mr Thomas
Given that one should support even Government Back Benchers when they suggest very sensible amendments, I want to clarify whether the Minister will take a serious look at the merits of the amendment and potentially bring something back on Report, or is he just going to go through the motions of a quick chat with the NFU on the back of something else, while his colleague is sent away with nothing?
Mr Jones
The hon. Gentleman is taking an interest in this subject, but I have spoken a number of times to my hon. Friend the Member for St Austell and Newquay, who came to me with this important issue, and I have also spoken to several other hon. Friends on the Government Back Benches who are concerned about it. I have been clear today that the Government take the situation seriously and I have asked my officials to look at the impacts of the decision, how it will be applied in practice and what it means for the companies affected. I will also speak to the NFU. Given the gist of my comments, I hope that hon. Members are assured that we take this matter seriously and that we will consider it carefully before we get to the next stage of the Bill. I hope therefore that my hon. Friend will withdraw his amendment and that, in the spirit of my comments, Opposition Front Benchers will not seek to press it to a division.
Jim McMahon
I beg to move, That the clause be read a Second time.
You will be pleased to hear that this will be a quick speech, Sir David. It should not be for anybody in this building to determine the relationship between local authorities and the council tax payers in their area. It is for local people to hold decision makers to account through the ballot box, as they do with central Government. When people go to vote in a general election, they take a view on the decisions of the Government during their period in office and whether their fiscal decisions have been good or bad for them and their families. Local people should have the same ability to do that with local government. It should not be for the Secretary of State to impose an arbitrary referendum limit. The LGA, a cross-party organisation, supports that view, too.
I would appreciate a response from the Minister. I am sure he appreciates the growing calls from local government to tell the Secretary of State to mind his own business, and I hope the Minister will look at the new clause and take that message back.
Mr Thomas
This is, if you like, Sir David, the David Hodge memorial clause. Surrey County Council has blown out of the water the rationale that the Government once used for referendums. There is a deep irony in the situation this year, where the one council that is likely to impose a 0% council tax rise will be a Labour council and the one council that proposed the single biggest increase in council tax this year is a Conservative council. We have to admire the chutzpah of Mr Hodge. He has managed to get himself a sweetheart deal by completely blowing away the rationale Ministers once had for referendums. It is in that spirit that we move this probing new clause.
Mr Jones
I thank the hon. Member for Oldham West and Royton for his explanation of new clause 12. It was a slightly more constructive effort than that of the hon. Member for Harrow West, who seems to be preoccupied with sweethearts. Perhaps that would have been best placed last week, when the House was in recess and it was Valentine’s day. He seems to persist with a misplaced line of questioning.
The new clause would remove chapter 4ZA from the Local Government Finance Act 1992 and thereby abolish the system of council tax referendums. That would allow local authorities to set whatever increases they choose, without having to seek the approval of local voters.
Arguments in favour of abolishing council tax referendums, or for not setting any referendum principles are certainly familiar to the Government. However, they are not arguments that the Government accept. Government defining an excessive increase has been part of the council tax system for decades. Council tax is currently 9% lower in real terms than it was in 2010-11. It will still be lower in real terms in 2019-20, but only if the Government continue to work with local authorities and maintain a referendum threshold, as promised in their manifesto.
The referendum threshold is not a cap. Councils can set any council tax increase that they like, provided that they have obtained the consent of their local electorate in a referendum. That is direct democracy in action. Local people have the right to choose whether they wish to pay extra council tax for additional spending and councils have the right to make the case to them.
In setting the referendum threshold, the Government listen to the views of local authorities, but clause 4 will formalise that by requiring the Secretary of State to consult their representatives. I believe that that flexible and constructive approach to setting excessiveness thresholds is crucial in striking the correct balance between funding for local services and protection of council tax payers.
Council tax is 9% lower than it was in 2010. That makes a significant case—unlike the 13 years before then, when council tax actually doubled during the Labour Government. I hope that, having reflected on the points I have made, the hon. Member for Oldham West and Royton will consider the challenge that this proposal would present to many council tax payers and withdraw his new clause.
Jim McMahon
I am about to wind up. Local government will say that the issue is beyond party politics, but when they look to this place they will see that the party speaking for local government devolution is the Labour party. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 13
Power to impose a charge for business rate appeals
‘(1) A billing authority or major precepting authority may charge a ratepayer a fee in connection with activities undertaken as a result of an appeal by that ratepayer to alter the authority’s local non-domestic rating list under section 55 of the Local Government Finance Act 1988.
(2) The amount of fee payable must be calculated by reference to costs incurred by the authority when undertaking activities relating to that ratepayer’s appeal and the amount of fee payable must not be calculated by reference to costs incurred by the authority in the undertaking of any other activities.
(3) The Secretary of State may, by regulations, make provision about the circumstances in which those fees are to be refunded.’ —(Mr Thomas.)
This new clause would enable billing authorities or major precepting authorities to charge fees on a cost recovery basis to ratepayers in connection with business rates appeals.
Brought up, and read the First time.
Mr Thomas
I beg to move, That the clause be read a Second time.
I understand that Ministers intend to charge £300 for large businesses and £150 for small businesses that want to make a business rate appeal. The new clause is a probing measure to explore how Ministers arrived at those figures. Given that there are likely to be substantially more appeals as a result of the current business rates revaluation, it would be good to understand what the thinking has been about the charges.
In the context of business rates bills being reduced on six out of nine warehouses of a very large business such as Amazon, one wonders whether £300 is not rather low. It costs £250 to submit a claim for unfair dismissal and £950 if the case goes to a tribunal. Funding has been cut from the Valuation Office Agency and I wonder whether a fee of £300 for a big business submitting a speculative revaluation claim is truly appropriate.
It would be good to hear what Ministers have to say and whether they will keep the matter under close review, with the potential for amending the charges as evidence begins to emerge.
Rob Marris
The charge for business rate appeals is understandable, given the regrettable trend of recent years, which started under a Labour Government, of charging for access to justice. However, we also need to see things in the context of something that was raised with me and the hon. Member for Thirsk and Malton—the margin of appreciation, as I think it would be called; the flexibility. A business pays a charge and there is an appeal. It wins, but is told that the difference between what it would have been charged and what it will be charged post-appeal is less than 15%. Then it has lost—even though it has won. That does not seem to me to be a good way to proceed.
Mr Jones
On a point of order, Sir David. I would like to thank you and Mr Gapes for the skilful and diligent way in which you have chaired proceedings over the past few weeks. There were times at which the Committee may have stepped near to the edge of being in order, and at every opportunity you and Mr Gapes kept us on the straight and narrow, so I thank you and Mr Gapes for that.
I also thank the Committee Clerks for the part that they have played in this Committee and the assistance that they have provided in supporting members of this Committee. In that context, I would also like to thank the people who are here from Hansard. I also thank the Government’s officials for the hard work that they have put into the Bill so far and for the support that they have given to me throughout the Committee stage.
Finally, I would like to thank the members of the Committee. At times, it has been an interesting Committee and although not all Committee members have always seen eye to eye, I think that we have conducted it in a reasonable spirit. Despite the fact that both sides have not seen eye to eye on a number of amendments that have been put to a Division, debate has always been conducted in a respectful way. I would like to thank the members of the Committee for the part that they have played.
Mr Thomas
Further to that point of order, Sir David. I echo the thanks to you and to Mr Gapes for chairing the Committee. The way that your interventions have been very helpfully timed to stop Members going off track is remarkable. You have the perfect knack of intervening at just the right moment to stop temptation getting the better of us.
I should add the Committee’s thanks to the Clerks, who have ensured that amendments that were debated were in order, to the Doorkeepers and to the Hansard writers for the important job that they have done. I thank too those who crucially submitted evidence and who have appeared before the Committee. Their contributions without doubt made the Committee’s deliberations more informed.
It would be entirely remiss of me not to also thank my hon. Friends on this Committee. In Bill Committees, the odds are always stacked against Her Majesty’s loyal Opposition, but the quality of my hon. Friends has meant that it has not felt quite such an imbalance on this occasion. I thank in particular my fellow shadow Minister, my hon. Friend the Member for Oldham West and Royton, whose expertise has been particularly welcome. That of my hon. Friend the Member for Wolverhampton South West has been particularly important too. My hon. Friend the Member for Redcar made an important contribution this afternoon. My hon. Friend the Member for Eltham has been a lurking presence throughout, which brings me lastly to my hon. Friend the Member for Lewisham, Deptford, who has helped to make sure that we have stayed firmly in order on this side. There have on occasions been moments of edge, as there should be between two different political parties but, as the Minister says, in general this has been conducted in a friendly, good-hearted and provocative way, which is surely exactly the purpose of a parliamentary Bill Committee.
The Chair
I thank hon. Members for their kind and generous remarks. Mr Gapes and I have thoroughly enjoyed chairing the Committee, because proceedings have been conducted with good temper throughout. Hon. Members have fulfilled their duty of thoroughly scrutinising the Bill and being kept in good order. I thank the Hansard writers and the Doorkeepers for their support, and I particularly want to thank our Clerks, whose wisdom has prevailed at all times and whose firmness has ensured that I have not been as lax with the Committee as might otherwise have been the case.
Bill, as amended, to be reported.