Local Government Finance Bill (Ninth sitting)

Rob Marris Excerpts

Tuesday 21st February 2017 Public Bill Committees

[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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[Mr Thomas]

It is always a pleasure to see the hon. Member for Swindon North tempted to speak in this Committee. He gave an interesting southern example to complement the example given by my hon. Friend for Oldham West and Royton of the potential benefits of the clause.

We need to understand why we are having to discuss clause 37 and schedule 5. It appears to be because Ministers did not get it right when the Business Improvement Districts (Property Owners) (England) Regulations 2014 were made. That was an opportunity to solve the apparently odd situation whereby property owner-led business improvement districts could be established only where a business rate supplement was in place.

As the Minister hinted, the only place where a business rate supplement is in place at the moment is in London, where the Crossrail supplement is kicking in. The power of the success of the New West End Company, which has already raised £3.2 million just in its first year, is testimony to the potential strength of property owner-led BIDs. It is a sensible change, although it was brought on by Ministers having made a mistake with the 2014 regulations. Nevertheless, it does provide an opportunity to see whether we can do more to help property owners who want to establish a business improvement district.

I fear that one of the key constraints on property owners will be accessing the details of who owns other properties. Some property owners like to hide their ownership.

[Rob Marris]

Offshore.

[Mr Thomas]

Perhaps offshore, through myriad trusts or in other ways.

I wonder whether it is time to require the beneficial owner of property or land to be registered and, therefore, accessible to the billing authority. That has got to be good for tax purposes in general but, in the context of clause 37, it surely has to be good for those property owners who, hearing of the success of what has happened in Swindon, Oldham or other business improvement districts, want to lead an effort in their area for such a district. Surely, we ought to make it as easy for them as possible to contact other property owners in their area.

[Rob Marris]

My hon. Friend will be acutely aware, as will the Minster, that compulsory registration of land title in England and Wales came in under the Law of Property Act 1925, which was effective from 1 January 1926, but was phased in throughout the country, and that phasing ended in the 1980s. Here we are, coming up to the 100th anniversary of that Act. Does my hon. Friend agree that it would be suitable, by that anniversary, to make registration compulsory whether there is a transfer of title or not?

[Mr Thomas]

I have always admired my hon. Friend’s prodigious research efforts before he attends a Bill Committee. He makes the fair point that legislation has been introduced to tackle this problem, but the less scrupulous and those who have something to hide have become more skilled and found new ways to hide their ownership.

I gently suggest to the Minister that if, for the best of reasons, we want to make it easy for business improvement districts to be established where appropriate, surely we need to help property owners by making it easier to access the details of who else owns property in their district. I gently encourage the Minister to reflect on that at length and perhaps to bring forward amendments or at least more information on how Ministers are going to make that easier. I look forward to the Minister’s reply.

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[Rob Marris]

I have reservations about this clause, which will not surprise the Minister. Building on what I referred to when we discussed clause 37 and schedule 5, I understand that a business could face a business improvement district levy, a business rates supplement, a BRS bid, the combined authority levy in clause 38, as well as the infrastructure levy that we discussed in part 3 of the Bill in clauses 15 through 36.

As my hon. Friend the Member for Harrow West has said, there is a risk, which has been raised by me with the Federation of Small Businesses, of a cumulative effect of a proliferation of tax measures on businesses, including medium-sized ones, if there is a common floor of £50,000. That proliferation, without a cap that would prevent repeated additions, is unhelpful to the growth of businesses in our country. I urge the Minister to look again at the proposals and to provide cohesion so that there is no cumulative overspill with five different local measures.

When Professor Sir Michael Lyons was Mick Lyons and barely out of short trousers in the early 1980s, he was chief executive of Wolverhampton Metropolitan Borough Council, as it then was, and he was already well known and obviously going places. Clause 38 would further a system about which I and some colleagues—I do not know about my Front-Bench colleagues—are deeply uneasy.

There are two factors. The first is taxation by referendum, which has bedevilled places such as California where there can be opposing referendums. One referendum might say, “We want the Government to spend less money,” but another says, “We want the Government to spend more money on education.” Opposing referendums would not happen here, but it is a slippery slope if we introduce taxation by referendum.

The second factor marks a step change in the way in which we do things and I am surprised that this Government have proposed it. It was started under the previous Labour Government, but has been much furthered through this Bill, including in clause 38. Effectively, it is hypothecation. There is hypothecation with the business improvement district, the business rates supplement and the infrastructure levy under part 3 of the Bill. Now, under clause 38, there is also hypothecation with the combined authority levy. A taxation system that is based on referendums and hypothecation is a step too far and the Government ought to rethink rather than extend that approach.

Question put and agreed to.

Clause 38 accordingly ordered to stand part of the Bill.

Clause 39

Power to make consequential provision

Question proposed, That the clause stand part of the Bill.

[Mr Thomas]

Briefly, the clause raises the thorny question of the use of statutory instruments by the Executive and whether Ministers think they should be subject to affirmative procedure, requiring scrutiny in Committee, or allowed to slip through under negative procedure. Given the importance of business rates to our economy and the more general concern about them, we assert that if statutory instruments are used by Ministers further down the line to introduce regulations, they should be subject to the affirmative procedure and open for the public to see our debate in the House. The SIs should be introduced under the affirmative procedure. I look forward to the Minister confirming whether or not that will be the case.

[Rob Marris]

Clause 39 is a catch-all, and it is part of a Bill that allows the Secretary of State more than a dozen opportunities to make regulations. As if that is not enough red tape, clause 39 then states, “Oh, if we have forgotten anything, we can make a few regulations about that.” I do not think that that is good enough in a democracy. There needs to be much more clarity. Someone should have looked at the gaps in the clause and we should have had specificity, as we do in at least a dozen other places in the Bill, rather than a general catch-all and comments along the lines of, “Oh well, if we make mistakes, we’ll be all right, because we can rely on clause 39.” Frankly, that is not good enough in a parliamentary democracy.

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[Mr Thomas]

I must gently say that not even we thought that the Government could get this so badly wrong. I want to come on to the question of resources for the Valuation Office Agency, which have been significantly cut and are leading to many delays in appeals by businesses that have genuine concerns about their revaluation, which has not helped either.

There is a more general point. As politicians, we cannot always predict what is going to happen, but we should be willing to react when circumstances change. There is such concern across the business community about the potential impact of the revaluation on small and medium-sized businesses that it is time that we listened to those concerns.

[Rob Marris]

My hon. Friend mentioned a situation I am in. I bear no candle for London, with due apologies, Mr Gapes, but I understand from the Federation of Small Businesses that the Government are really on the back foot. Small business rate relief will benefit 16% of businesses in London but 32% of businesses in the rest of England.

[Mr Thomas]

My hon. Friend makes his point and he may have the chance to expand on it. It is worth listening to the FSB. In a London context, it is calling for higher inner and outer London small business rate relief thresholds to reflect the specific problems faced by small businesses in the capital. In inner London, it argues that the threshold for 100% relief should be a £20,000 rateable value, tapering to £23,000. In outer London, where rateable values have fortunately increased by a slightly lower percentage, it believes that the threshold for 100% relief should be £15,000, tapering to £18,000. It suggests that Ministers might be tempted to look at a system of transitional relief. That has happened in previous revaluations. However, it wants small businesses to have certainty for the future. Although transitional relief would be helpful, its argument is that the system needs a fundamental look-at to reflect the problem properly.

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[Mr Thomas]

Definitely not this clause, but it is important to be aware of that in the context of the need for a full review of business rates. I gently suggest to Ministers that they need to take their fingers out of their ears, listen to the concerns of business, the LGA and others and agree to support amendment 54.

[Rob Marris]

I shall focus on proposed subsection 2(a) as inserted by amendment 54, asking for a review into the future of business rates, and why I think the Government ought to support the amendment and accede to that request. I will make a few brief remarks as to why I think a wide-ranging review is necessary.

I referred earlier this morning to the fact that businesses could be faced with six different and overlapping rates: business rates, business rate supplements, business improvement districts, BRS-BIDs, the infrastructure levy and the combined authority supplement or levy. It is a very complex system, it is getting more complex, and it is overlapping.

Some proposals in the Bill would be delayed were a review brought in. The Opposition asked for evidence from the Government on the rationale for bringing in the changes and what they would in fact do. We asked whether there is evidence that the incentivisation—much heralded by the Government—will take place. In the course of the Committee’s consideration of the Bill thus far, I have made six direct requests of the Minister. My excellent researcher, Imogen Watson, has dug out the number of occasions on which the Government were asked for evidence for the measures that would introduced under clause 42 and their phasing, which would be delayed by amendment 53. The Government could have put forward evidence 33 times, and they singularly failed to do so on every occasion.

We read all over the press about the absolute mess with the evidence, which has been provided to one set of MPs—apparently it has been produced for Government MPs, but not, disrespectfully, for Opposition MPs. Certainly my four hon. Friends in the room have received no such evidence. Also, there is conflicting evidence. The Secretary of State—he is a west midlands MP, like me and the Minister—has put forward figures that seem to be contradictory.

There is light at the end of the tunnel, however. According to The Times this morning, an area that was going to be a winner under the system will, under the second round of figures released by the Government, now be a loser. That area is represented by my parliamentary neighbour and the Chief Whip, the right hon. Member for South Staffordshire (Gavin Williamson). When the Chief Whip represents a constituency that will now be a loser, some of the changes may be altered or delayed, and delay is what amendment 54 seeks.

I agree with the FSB and my hon. Friend the Member for Harrow West that the whole system of taxation on businesses at the local level needs to be revamped. Amendment 54 opens the way for that by asking for a review of the future of business rates. Contingent on that review would necessarily be a look at the broader picture. As the FSB’s letter suggested some time ago, we should be looking at a turnover tax, rather than the bricks and mortar taxes that are reinforced by the Bill’s provisions. They are old-fashioned, and we need a more wide-ranging approach.

[Mr Jones]

I thank the hon. Member for Harrow West for tabling the amendments, which would delay the commencement of the majority of the Bill’s provisions. Amendment 52 would delay the commencement of the Bill until 1 April 2019, making exceptions for

“provisions relating to telecoms relief, guidance about notices relating to non-domestic rates and the provision relating to preparatory expenditure for digital services”.

In amendment 54, the hon. Gentleman takes an alternate position, this time proposing that commencement, with the same provisions excepted, be delayed until after the Secretary of State

“has conducted a review into the future of business rates, and…has assessed the impact of the future of business rates on local government finances.”

We have been clear that the Government’s commitment is to implement the 100% business rate retention reforms for the financial year 2019-20 and to make the associated arrangements ahead of that to ensure that that is possible.

The hon. Gentleman raised a point about the annual local government finance settlement. The finance settlement as it stands will continue to be agreed, as is the case now, for the years up to 2019-20. For 2019-20, we will need to lay regulations in advance to ensure the details of the new system are in place for April 2019. I hope that deals with the concern that the hon. Gentleman expressed.

The Bill also provides the framework for the reformed system. Establishing the framework now gives us the opportunity to continue to work with local government and business in the coming months on the details of the reforms. We know that councils in particular welcome that approach. It ensures that councils have continued opportunity to shape the design and detail of the system on the basis of the certainty put in place by the framework provided by the Bill.

That approach echoes the implementation of the 50% rates retention system. Given the importance of the change, we are allowing more time to work with local government on the detail of these reforms. We will need to do preparatory work to ensure the implementation of provisions is tailored appropriately, including drafting regulations before the start of the 2019-20 financial year. That will be essential to ensure that local authorities are suitably prepared for the changes made by the new arrangements. I am sure that the hon. Member for Harrow West would agree that that is of the utmost importance.

Amendment 52 would not allow for that timely preparation, nor would it allow a timely commencement of a number of other provisions in the Bill that directly support businesses and premises owners. It would delay the introduction in rural rates relief, meaning that local shops in rural areas would pay more. It would also delay our commitment to enable authorities to grant reliefs for public toilets, ensuring that those important local amenities are protected.

Amendment 54 proposes that progress on reforms delivered in the Bill should be halted to allow for a review of the business rates system. As I hope the hon. Gentleman is aware, the Government undertook a review of the business rates system as recently as 2015. In fact, the Bill seeks to implement some of the important commitments that the Government made in response to that review. Amendment 54 would risk the delivery of them.

The 2015 review asked for views on the future of the business rates system and received 269 responses from councils and businesses of all sizes up and down the country, as well as business groups and others with an interest, such as rating agents and think-tanks. A clear message from those responses was a majority in favour of retaining a property-based tax. Respondents agreed with the Government’s view that property-based taxes were easy to collect, difficult to avoid and had a clear link with local authority spending.

[Rob Marris]

I have just checked the Bill. The Minister indicated that were the amendments to be agreed that would delay the implementation of relief for rural shops under clause 7. However, under clause 42, clause 7 would not come into force immediately anyway.

[Mr Jones]

Indeed. The hon. Gentleman is right that it comes into force in April 2018. However, if we took the view advocated by the amendment he supports, that change would potentially not be made until 2019 or later.