Local Government Finance Bill (Ninth sitting)

Jim McMahon Excerpts

Tuesday 21st February 2017 Public Bill Committees

[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?

[Jim McMahon]

rose—

[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.

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[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.

[Steve Double (St Austell and Newquay) (Con)]

You are making it one.

[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.

[Kevin Hollinrake]

Rubbish.

[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?

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[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.

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[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.