Lord Stoneham of Droxford
Main Page: Lord Stoneham of Droxford (Liberal Democrat - Life peer)Enterprise Bill [HL]
Lord Stoneham of Droxford Excerpts“Repeated complaints: late payments
(1) Where—
(a) the Commissioner determines that a particular respondent has been the subject of repeated complaints relating to the late payment of invoices,(b) the respondent concerned is a large business,(c) the Commissioner has considered the complaints and made a determination which has included recommendations to the respondent, and(d) the respondent has repeatedly failed to make changes recommended by the Commissioner,the Commissioner may request that the Secretary of State propose a fine on the respondent.(2) Where a request is made by the Commissioner under subsection (1), the Secretary of State must issue a fine to the relevant respondent unless the Secretary of State considers such a fine would be damaging to the long-term viability of the respondent’s business.
(3) The Secretary of State may by regulation make further provisions to support the effective functioning of this section including, but not limited to—
(a) the definition of “repeated complaints” for the purpose of this section,(b) the definition of “large business”,(c) the maximum level of fine that may be levied,(d) whether a different maximum level should be prescribed based on the size of the respondent’s business, and(e) the test by which the Secretary of State should consider the long-term viability of the business.(4) Regulations under this section must be made by statutory instrument, and may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”
Lord Stoneham of Droxford (LD)
Amendment 11 would give additional power to the commissioner to recommend to the Secretary of State a fine when a large business has been subjected to repeated complaints and has refused to make changes recommended by the commissioner. We asked in Committee and I ask again: what will happen without some form of sanction for repeat offenders? We believe that this is necessary to give some power to the commissioner and provide a deterrent to those who refuse to co-operate with his work. We think that it could be set up by regulation and that it is important to give some authority to the body. I beg to move.
Lord Cope of Berkeley
My Lords, there are two amendments in this group. As the noble Lord has just explained, the first is about a persistent offender or repeated complaints, and it proposes a fine. The way that the fine is introduced is very unusual in comparison with most times when we introduce a fine into statute. I do not so much complain about that—it is perhaps a drafting matter—but there it is.
Amendment 15 would give very wide powers to the Secretary of State, on the advice of the commissioner, to make an enormous number of very complicated regulations—also leading, incidentally, to a fine if they are not complied with. That is the wrong thing to do, certainly at this point in the development of the Small Business Commissioner role. As we said earlier, he or she should focus on the issue of late payment, and introducing all this machinery changes the nature of what is happening. I do not support Amendment 15 in particular.
Lord Stoneham of Droxford
I thank the noble Baroness for taking us through the arguments against these amendments. I remain somewhat unconvinced that this body will have real authority and clout without some additional powers, but in the light of what she has said, I am prepared to withdraw Amendment 11.
“Report on the impact of cuts to public services on the functioning of enterprise
(1) Within 12 months of the passing of this Act, the Secretary of State must lay before Parliament a report on the impact of cuts to funding of public services on enterprise and economic growth in the UK.
(2) A report under subsection (1) must include, but is not limited to, an assessment of—
(a) the impact of reductions in Government spending on further education on the availability of skills in the UK;(b) the impact of cuts to skills funding, and of any levy on companies to provide for apprenticeships, on the quantity, quality and level of apprenticeships offered by companies;(c) the impact of reductions in the funding of the Department for Business, Innovation and Skills on advanced manufacturing;(d) the ability of Her Majesty’s Revenue and Customs to supply a comprehensive service to business customers; and(e) the impact of reductions to the Local Government Finance Settlement on the ability of local authorities to support small businesses and promote economic growth.”
Lord Stoneham of Droxford
I shall not move this amendment, as it has been overtaken by events today.
Lord Stoneham of Droxford
My Lords, I somewhat regret that we are down to the last 10 people standing in the Chamber on what I regard as probably the most important issue to involve small businesses that we have looked at tonight. This amendment deserves some consideration because it is important. I think that the Government are going off in completely the wrong direction.
Clause 22 opens up information for local authorities and the Valuation Office Agency, but it does not go back to the legislation of 2005 and open up that information for ratepayers. That is the simple issue. The problem is that the Government are trying to overcome a large number of appeals made against rate assessments. There have so far been more than 850,000 challenging the 2010 rateable values. It is no wonder that the Government want to do something about it. We know that this ties up resources dealing with what the Government consider to be some unnecessary and frivolous claims, given that 70% of appeals lead to no change, but why is this happening? All the experts tell us that it is mainly because the only method to extract information from the Valuation Office Agency is to appeal. We ought to listen to them. I think the assertion—which I agree with—is that if the Valuation Office Agency shared more of this information up front, it would deal with much of this problem, and the ratepayers and small businesses would be much more satisfied with their clarifications.
We have a consultation at the moment, with the Government looking to set up a three-stage appeal procedure: check, challenge and appeal. The check stage ought to be where businesses can check the evidence that the Valuation Office Agency is using, but all they are allowed to validate is information that they already have about their property and the current occupier’s rent. They will know that themselves, so that is hardly very helpful. This stage can take up to 12 months, and it then takes three years to complete the process for making an appeal. There are even more requirements on ratepayers to provide even more information and more grounds for appeal. It is very bureaucratic.
The Minister told us in Committee that the information that the ratepayer wants is confidential and therefore difficult to provide. But this information is known to landlords and their agents; it is simply information that is not available to the small businesses and the ratepayers, who do not have the resources to get it. We heard the quote from Graham Zellick, the recently retired president of the Valuation Tribunal for England, but it is worth quoting him again in this debate on this very important issue, because we think the Government are heading off in the wrong direction. According to the Estates Gazette, to which he gave an interview recently:
“The problem, he explains, is that the ratepayer is never given the full explanation for the valuation. As a result, every time there is a new rating list, ratepayers initiate a challenge … partly to protect their position but chiefly to ‘flush out’ more information”.
He says in that interview:
“Unless information is given up front, the system will remain defective and unsatisfactory and unjust. I don’t know any other tax that can be levied where the taxpayer doesn’t understand in full down to the last detail the basis on which the taxman has calculated the tax due. It’s unprecedented, it’s unique and it’s wrong.”
What are the Government doing? They are doggedly refusing to require the Valuation Office Agency to help businesses by making this information available. Instead, the entire burden of proof is being shifted back on to businesses. We have a cumbersome series of administrative steps, with targets and timescales in the way, failure to meet any of which can invalidate the whole appeal. This is not the direction in which the Government should be going. They need to have a good look at the direction they are taking: they are not helping small business and they need to change course. It may be too late now to do it in this House, but by goodness, if anybody is interested in small businesses, they ought to address this in the Commons.
Lord Mendelsohn
My Lords, I express our side’s strong support for Amendment 64 and will also speak to Amendments 66 and 67. This is one of those issues which seems small when it is first presented but then grows and grows as the significance of it becomes ever more apparent and as the voice of the people whom it impacts starts to find its full volume. I strongly associate myself with the speech of the noble Earl, Lord Lytton, which I thought was absolutely outstanding. It set out all these issues extremely clearly and demonstrated the quite extraordinary consensus that there is on this subject in every quarter—except in the Valuation Office Agency and, it would seem, in the Government. I also congratulate the noble Lord, Lord Stoneham, on an extremely impressive speech and a great summation of the issues, including a view on how check, challenge and appeal could actually work more sensibly.
I also declare an interest and an experience. Recently, at the business that I set up and where I spend a lot of time, surprised that our rates were significantly in excess of our rent, we decided that we would try to see why that was and what the situation was. I had never really dealt with this issue in any of my other businesses, and I did not know the answer. So we tried to find out what it was. We were given short shrift by pretty much everybody and were set the challenge that we would not find anything until we appealed. So we were invited to appeal by the very agency that is not happy about the level of appeals, because that was the only way we could find out information. We thought about whether we should do it. The hurdles were considerable—I do not think anyone does it particularly lightly in the first place—and we took the view that we had better things to do and that a full calculation of time and value would probably show that it was not worth it. So we left it.
Along came a chap knocking door to door in our building who said to us, “We do rating appeals. In fact, we have done most of the area and you, I am sure, are eligible to pay less”. We asked how he could be so sure. He said, “I will tell you what everyone else is paying”—and he did. He said, “I have done most of their appeals and I have won. I think that you and others in this block should appeal. I’ll tell you what: I am so confident, I’m not going to charge you anything; I will just take part of the upside”. We thought that sounded fantastic. So I am one of those people currently in the queue waiting for an appeal. I am coming up to my one-year anniversary of absolutely nothing happening, except that I have now found out that there is a whole group of us who have either been through or are going through the experience in a particular geography.
In fact, I met someone who is in a block that I consider to be considerably plusher than mine—underground car park, very fancy and much, much newer—and who is paying less than I am, in what I consider to be a somewhat rum building but we call it our office. They said to me that they appealed because someone else in another building who was paying more thought that they were due to pay less. It seems that a lot of people have a certain level of knowledge and a lot of appeals are generated as a result.
I have experienced that myself. I know that a huge number of people—the noble Earl, Lord Lytton, said that it is 250,000—are waiting for an appeal. That is a considerable number given the overall number of business premises. I would be very interested if the noble Baroness could give us more detail about the people waiting for an appeal, particularly the ageing profile—that is, how long they have been waiting for their appeal to come through.
There is a complete misapprehension that 70% of cases lead to no change and that therefore there is a problem with vexatious appeals. You do not find out any information until you appeal and then you make a judgment as to whether it is worth pursuing. The system has created the wrong question, which has then been given the wrong answer. That is where we stand.
Non-domestic rating is a highly significant form of revenue for the public sector, as well as having a high impact on business. Naturally, in the new digital economy it is easier to tax anything with a physical presence. Retailers alone are paying £2.40 in business rates for every £1 in corporation tax.
However, our question is about who benefits at what level and whether it is the right system; it is also about the operation of the current system. Some experts have concisely highlighted the problem facing non-domestic ratepayers. Individual valuation officers are the sole judge of what is proportionate. Ratepayers are still denied the details of how their valuations are calculated for classes of property, and they lack the capacity to make a proper, sensible judgment through a denial of information.
I am very tempted to add to those noble Lords who have quoted the distinguished professor and Queen’s Counsel, Graham Zellick, who, as the former president of the Valuation Tribunal for England, provided the best possible quote to summarise the situation. I have such a high regard for Professor Zellick that I agree with it without much hesitation, but the evidence of my personal experience is also strong.
Not only is the existing system unfair but it is hugely counterproductive. The lack of transparency has only resulted in more appeals, further burdening an overstretched process and creating a backlog which delays appeal results. In its current form, the Bill does not address the information deficiency between the ratepayer and the Valuation Office Agency.
The noble Baroness has previously stated that information cannot be shared with the ratepayer because assessments of other ratepayers are confidential commercial information. Let me be clear that we do not advocate the Valuation Office Agency sharing commercially sensitive information which may create some competitive or other advantage—or lead to the collapse of Western civilisation. We are not calling for the disclosure of individual commercial assessments which will never see the light of day in any other circumstances, but the information to contextualise a decision about the rate paid is important for the tenant.
As it happens, I do not agree with the assessment that there is such a thing as confidential information in this situation. The person who is deficient in information is usually the small business, the tenant, because larger companies and landlords can be provided with details of almost all the other deals in the area—a fact that I did not know until recently. I now declare another interest: I chair an advisory board of a property investment business. It specialises in residential property. I was shown a building needing refurbishment and we were able to get from all the agents—the estate agents and the large valuation agents—every detail of every deal in the surrounding area to make our commercial calculations. If it is good enough for other interests—particularly the landlords—why is it not good enough for the tenants? I really do not understand.
The inclusion of Amendment 65 is a matter for concern. I am grateful to the Minister for giving me an indication of why it is there, but I am rather more persuaded by the assessment that it prevents a sensible flow of information. It creates a new statutory bar to apply to identifiable taxpayer information that has been shared by the Valuation Office Agency under Clause 22, so the protection from disclosure under FoI is not lost with transmission. I am very concerned that we are just adding hurdles for the individual ratepayer.
I am inclined to believe that the check-stage process has some positive features—such as offering opportunities for more dialogue between stakeholders—but it does nothing to resolve the underlying issue that ratepayers enter into discussions with the deck stacked against them. They are expected to enter into a time-consuming and potentially costly endeavour with little knowledge of where they stand—unless they are fortunate enough to meet someone so confident and with such a strong record that they will do it for free. The amendment resolves the information asymmetry, enhancing considerably the check stage while protecting commercially sensitive ratepayer information.
Amendment 66 is designed to establish performance targets for the Valuation Office Agency. The timescales for the check, challenge and appeal process are unclear, and this ongoing lack of precision will further entrench a climate of uncertainty into the rate review and appeal process.
In Amendment 67, we are firmly against the imposition of any upfront fee for appeals. If the rationale for that is to discourage ratepayers from making appeals, penalising businesses and diminishing their access to justice is surely the wrong way to go about it; providing information seems much more sensible.
At its very core, in business rates, your liability depends not on your property but what is being paid by lots of other people, and you have no right to obtain that information or the context of their deals, while others have ready access to it. It is clear that there is a beneficiary from the measures—and we should play “hunt the beneficiary”. The Local Government Association and the treasurers in local government see benefits neither for themselves nor for business. Experts and commentators suggest that these measures achieve little and do nothing to help enterprise or business, so who do they help? They help the Valuation Office Agency by making its exchange of information easier within government and by raising the bar on appeals. Surely this is not right. If the Bill was called, “Making the Valuation Office Agency’s Life Easier at the Expense of Enterprise” then I would understand it. But this is the Enterprise Bill and it is meant to help businesses.
What is the calculable benefit to enterprise of any of these measures? If it is filling in one form, which has previously been suggested, then what we now have is a procedure that will require much more work, time, effort and resource—including cost—for businesses to pursue. Given that we have strong support for Amendments 66 and 67 from the Federation of Small Businesses—from the experience of small businesses— I hope that the Government will take these matters seriously.