Local Government Finance Bill (Sixth sitting)
Debate between Jim McMahon and Peter Aldous(7 years, 9 months ago)
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Jim McMahon
These two probing new clauses are designed to test the appetite of the Government for a look at how the business rate appeals system operates in practice and who it is there to support.
I tabled new clause 5 because I am deeply concerned about the fact that at the moment more than 100 NHS trusts are appealing their business rate liability to their local authority. I know from my own local authority that that means many millions of pounds being put in reserves pending the appeal, just in case it is successful and the trust is entitled to backdate it.
We all accept that when a public sector business rate payer pays business rates, it is effectively money moving around the public sector and transferring from one public sector agency to another. There is no loss or gain to the public sector; it is just churn through the system. What is different is that when an NHS trust appeals its business rate base where an external agent is employed, the external agent will be charging a percentage fee for the successful appeal, and that could add up to many, many millions of pounds. It is very difficult to understand exactly how much it is, but I know from my own local authority that the rating appeal could be about £5 million —that is just for one local authority. There are 100 NHS trusts with appeals in across the country. Even a 5% fee on that could lead to many tens of millions of pounds being taken away from the public sector as a fee to the private agent representing the NHS trust. That is a net loss to the taxpayer.
New clause 5 tests the appetite of the Government for a new approach. We have framed it so as to restrict private agents from acting on behalf of public bodies—I think that has merit and is worthy of discussion—but it could well be that a public arbitration system could deal with the appeal more quickly and remove the uncertainty from the system, and that that would also remove the requirement for a private sector agent to act on behalf of the public sector body. To be clear, this is not about bashing the private sector or the agents who act on behalf of public sector bodies; it is just a pragmatic reflection. If a percentage fee is being taken out of the system, that is a net loss to public services in this country. The Government should step up and provide some level of certainty.
New clause 6 is intended to probe the appetite of the Government for a differential appeal system, depending on the rateable value of the property involved. We know from many local small businesses that the business rate bill is a significant part of their outgoings. Business rates generally come soon after rent and staffing costs. They are significant. If a small business has been assessed at the wrong value and it is successful at appeal, the value of that appeal backdated could be the difference between whether they survive or go to the wall, because their finances are so restricted.
We ought to debate and discuss whether we should differentiate between the small, local business trying to make its way in the world and the big square-footage ratepayers, such as Tesco and other supermarkets, B&Q and the big sheds, where rateable values can easily be more than £500,000 a year—in many areas £1 million a year. When they lodge a national appeal, that can send a shockwave through the whole business rates system across the country.
New clause 6 is a probing amendment to test the Government’s appetite for reducing the backdating period to six months if the rateable value is over £500,000 a year. Local authorities would not have to hold as much in reserves as they do at the moment. It would reduce the risk to council budgets and of course reduce, the amount of money the Government have to put in their levy pot to cover any potential loss of income. More important, it would also—I hope—provide more of a level playing field, where small and medium-sized independent businesses are given a fighting chance, and we do not have one system that disproportionately benefits large supermarkets and warehouses.
That is the essence of the two new clauses. New clause 5 tests the appetite for a different way of assessing public sector appeals. New clause 6 tests the appetite for a system that protects local authorities from large ratepayers, potentially reducing backdating to six months. I recognise that we are pushed for time but I welcome the Minister’s hopefully constructive approach to the consideration of those options.
Peter Aldous (Waveney) (Con)
I was not intending to speak on these measures, but as an ex-chartered surveyor I will say a few words. I commend the hon. Gentleman for the spirit in which he presented the new clauses.
Rating is very complicated for a chartered surveyor to carry out. In many ways, it is abstract from the real world. I concede that there appears to be two types of surveyor who get involved in ratings appeals: there are people who have enormous expertise in these fields, but there are also, I dare say, ambulance chasers chasing opportunities and abusing the good will of businesses. I am uncomfortable with new clause 5 because it would bar public sector organisations from getting the highest quality expertise from those expert surveyors. The way forward would probably be to look to the Royal Institution of Chartered Surveyors to set down a scale fee that fairly reflects the work the surveyors do on a job.
Local Government Finance Bill (First sitting)
Debate between Jim McMahon and Peter Aldous(7 years, 9 months ago)
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Peter Aldous
Q Minister, you said at the beginning that incentivising growth is at the centre of this Bill. As I said on Second Reading, I am concerned that there may be local authorities that wish to incentivise growth but, for reasons of location, the geographical make-up of their area or issues such as site contamination, may not be in a position to do that. Can you outline how you are going to support those authorities?
Mr Jones: You make a good point, Mr Aldous. We have been clear from the outset that, in developing and introducing this new system, there will need to be a form of redistribution across local authorities to make sure that we do not leave behind those that start off with a far lower business rate. The new system will also include incentives for local authorities to invest in things such as land remediation to bring forward new developments that will expand their business rate base. Local authorities will also be offered the opportunity to have local growth zones, which will be very powerful in terms of giving an area the opportunity to retain more of the additional business rate, and to have that part protected when we get to resets of the system.
Peter Aldous
Q For the record, I am chairman of the county all-party group, for which the County Councils Network provides the secretariat. Mr Soulsby and Councillor Borrow, you very much emphasised the importance of the needs-based review of the fair funding formula being synchronised with the implementation of the provisions in the Bill. Do you think there is a case for including that in the Bill?
Councillor David Borrow: It is unusual that the two things have been separated. The timing of both parts of this change needs to be as close as possible. If they have to be done in two separate pieces, they need to be co-ordinated. Clearly, until we have sorted out the funding formula, we cannot really move ahead with 100% business rates, and getting that right is fundamentally important.
Graham Soulsby: It will be okay if the co-ordination is done properly, given that this is more of a framework. One of the things that the working groups at DCLG are working with local government on is the much longer gestation of the needs-based side of it. We have been trying to argue that the timescale needs to be brought back a bit and it needs to be done more quickly. That definitely needs to happen. Whether it needs to be part of the Bill, I am not sure, to be honest.
Jim McMahon
Q My question is for Mr Ware and London Councils. The Bill provides for business rate pooling arrangements to take place. We are in a borough where the band D council tax is £672 a year, looking at a borough across the road where the band D council tax is nearly twice that. Does London Councils have a view about the potential for council tax pooling, and have any discussions taken place with the Government?
Guy Ware: The short answer is no, there is not a clear view and there are no active discussions about council tax pooling. However, the two things will be closely interrelated. We in London would argue—this will apply in other parts of the country—that we should do this by arrangements that we devise for ourselves, but that is a slightly separate question. The two things will be interrelated because the definitions of the needs and therefore the business rate baselines that determine the top-ups and tariffs that will redistribute business rate resources between authorities will also be informed by the capacity to raise council tax. There is a whole set of quite difficult issues that sit behind that around why council tax can be very different, as you say, between two neighbouring boroughs or authorities in other parts of the country, which is bound up in previous political decisions, previous funding decisions and so on, so it is not straightforward.
We would argue that in the medium term, council tax and business rates should be reviewed together. The London Finance Commission, which reported just last Friday, certainly argues—I think persuasively—that fundamental reform of the way that property taxation is undertaken is really important. Trying to do each of those taxes independently is not necessarily the best way to go about it, because they are interrelated and affect transactions in the market and individual business rate and council tax payers.