Local Government Finance

Lord Shipley Excerpts

Monday 18th July 2011 Lords Chamber

[Baroness Hanham]

My Lords, I know of the noble Baroness’s interest in this. A consultation is a consultation, and if people have ideas about how wide they want the tax increment financing to go they will be able to say so in the consultation. I do not think there is anything in the consultation questions that would prevent that from happening. I am not in a position at the moment to say what my response will be to the amendment tabled by the noble Baroness, Lady Valentine.

[Lord Shipley]

My Lords, while welcoming the Minister’s announcement, it is important not to misinterpret what is being proposed. While this is being billed as being about the repatriation of business rates from 2013, that is strictly speaking not the case because firms will see no difference in the way in which they pay tax, or in the way in which the tax is set, as a result of these changes. In this sense, therefore, this is not about repatriation. However, for all the reasons that my noble friend Lord Jenkin identified, it is very important that the repatriation of business rates is seen to be fair by the firms and businesses that are paying these rates. For this to be maintained at a national level is, at least for the foreseeable future, the right thing to do.

What matters in this proposal is that it encourages growth and enterprise. For this reason, it is important that the deal that has been announced is seen to be fair and does not simply redistribute from poorer areas to richer areas. Setting an insurance scheme against shocks enables poorer areas to do more for themselves and to generate income that will make them richer. In that sense, a virtuous circle can be created.

The consultation is very welcome. I have been a firm advocate of the repatriation of business rates now for many years, so I welcome the direction that the Government are setting.

Finally, I have one question about tax increment financing. There is no date in the Minister’s Statement for when tax increment financing will come into play. I assume that it will be in 2013, but it is very important that, as part of the whole package of repatriation of business rates from this date, tax increment financing is part of it.

[Baroness Hanham]

My Lords, the answer to the noble Lord’s final question is that the Government are committed to introducing tax increment financing as soon as possible and will move as quickly as possible to deliver it. It is being introduced through the local government finance Bill alongside the local retention of business rates. Once again, I thank the noble Lord for his support for this.

On the repatriation of tax revenue for business rates, while businesses will not see an immediate change to the way they pay the tax, they will see a greater interest from local authorities in the rates. They are important anyway, but I expect and hope that they will be even more important because there are lots of incentives for business not only in the Localism Bill but in the consultation that has been announced today. Yes, this is absolutely all about encouraging growth and enterprise, and the expectation and the ability to keep extra business rates in areas that need to do more to encourage business will do exactly what the noble Lord, Lord Shipley, has said: they will help the poorer areas perhaps to try to generate a little more business activity in the areas they represent.