Business Rates (North-East)

Debate between Mary Glindon and Lord Wharton of Yarm

Tuesday 25th October 2011 Westminster Hall

[James Wharton]

The hon. Gentleman makes a valid point, and I will touch on that later in my brief comments. We are consulting on how the policy would work, and there is a challenge for the Government to ensure that the areas that promote a manufacturing base as the driver for economic growth are not disadvantaged. It is a valid point, but we must not jump the gun and assume that it will be a problem, because we do not yet know what the framework will be—it is a matter for consultation.

There are weaknesses with the current system, such as accountability, which I have touched on, and a weakness in the freedom of local authorities to respond, because they are so dependent on central Government grants. We have seen, over many years, the problems of the central Government grant funding system, which include its complexity and how it often plays out in ways that cannot be easily predicted and are not necessarily to local benefit. There is also a problem regarding the incentive that it gives to some local authorities and councils, which may perceive that they can get more benefit for their area by lobbying central Government for more support than by focusing on promoting growth and improving their area.

What are the Government doing? The first and most important point, which some hon. Members, to give them their due, have touched on this morning already, is that there is a consultation, which is an opportunity to feed in, talk about and outline proposals, and to ensure that the concerns of local authorities in places such as the north-east, where there is a genuine fear that they may be disproportionately disadvantaged by any move towards local retention of business rates, are properly taken into account.

[Mrs Mary Glindon (North Tyneside) (Lab)]

It is well known that the Tory mayor of North Tyneside always supports Government policies. However, on this occasion, she supports the Association of North East Councils’ criticism of the consultation. Does that not show something?

[James Wharton]

The excellent Conservative mayor of North Tyneside, Linda Arkley, who is doing a superb job and is no doubt looking forward to her re-election by popular acclaim next year, has raised some concerns as part of the consultation process on behalf of the people whom she represents. I do not accept that it is a criticism of the consultation; it is feeding into the consultation in the hope of influencing the result in a way that will benefit the people whom she represents. The good mayor that she is, she is doing the right thing. I am delighted that the hon. Member for North Tyneside (Mrs Glindon) has given me the opportunity to raise that point.

Another important point, apart from the consultation, is that there should be no effect on what businesses pay. When the policy is introduced, we will not see business rates rising. Levels will be set, as I discussed briefly in an exchange with the hon. Member for Hartlepool, to ensure that the funding that councils receive at the point at which the policy is introduced is kept level. No council should initially be disadvantaged by the introduction of the policy. [Hon. Members: “Initially.”] I fully accept that. It will then be a responsibility for local authorities to engage—within a framework that we must all see as fair and to which we must contribute to ensure that it is fair, so that the rules do not disadvantage any area—with that new system, grow their local economy as best as they can and reap the benefit.

What are the Government going to do? They will set a baseline, tariffs and top-ups. Tariffs and top-ups will mean that wealthy areas—we have heard of some of the wealthy areas that take a lot of money in from business rates—will see some of that money taken away from them and redistributed, often to councils such as those that many of us here today represent in the north-east. The top-ups will be the benefits that some of our authorities receive.

There will be a levy for disproportionate benefit, so if a council sees a huge rise in its business rates that is disproportionate to the benefit that that council should receive, that will be redistributed again in some way.