Rating (Agricultural Premises and Rural Shops) Bill

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Mr. Gray: The Minister made a good point about the revaluations happening every five years, but it does not apply to new businesses, which are valued on the date on which they come into being and which might therefore have a higher rateable value.

Ms Armstrong: The rate valuation office will assess a new business as if the date were that on which the value was set. A new business might be above or below the threshold. Hon. Members need to understand the purpose of the Bill, which is to enable farms and farmers to diversify. It is not meant to give relief to every single business that might be set up or to challenge the way in which the market works; it is there to support small businesses and this clause relates to small businesses that might be set up on farms as a means of diversification.

Anyone setting up a fairly large business would have to accommodate the necessary rate in making the business case for it. If it were large enough to have a significant rateable value, then it would be odd for the Government to support it for five years on the ground that that was absolutely necessary, and then to stop doing so—which is what the legislation is about. If the business were not sustainable in the first five years, it would be unlikely to be sustainable after that time—if it were a big business.

In addition, we have to think about the market, and about how competition works in rural areas. The measure is designed to give rate relief not to every business, but to small businesses linked to farming. We know that farmers have been having difficulties, that, for farming to continue, it will have to diversify more than ever before and that we need to encourage and enable farms and farmers to diversify. We do not pretend that we shall support every business in a rural area through this measure. That would be far outside of the intention of this legislation and would, I suggest, attract opprobrium from a number of businesses in rural areas that are already established and would not be eligible for new relief.

Mr. Gray: We are discussing two points, one of which is the nature of a small business and whether it is worth £6,000 a year or £12,000. The right hon. Lady said that, because of the valuation process, we need not worry about the annual revaluations proposed in amendment No. 12. Can she not imagine a period of severe inflation—which will happen if there is another Labour Government after 7 June—with rents going up sharply over a five-year period? Because of the way in which the provision is drafted, no account would be taken of that.

Ms Armstrong: The hon. Gentleman flies into fantasies. It is this Government who have managed to reduce inflation to its lowest point for a generation, although there has not been a Labour Government in power for all of the time in question. I was trying to be accommodating to Opposition Members, but the hon. Gentleman drew me into that little political spat.

I shall respond to the issues raised in the other two amendments, which the hon. Members for Ashford and for Somerton and Frome mentioned, namely why different levels have been set for different aspects of rate relief. A rateable value limit of £6,000 will cover most small businesses that might be established on farms. Individual rateable values vary according to the precise nature of the property and, as the hon. Member for Somerton and Frome says, the local rent or market. Typically, that level would be sufficient to cover a farm or craft workshop, office or commercial premises, or a food processing unit of about 100 sq m in the south of England. In the north or west of England, it would cover premises of 200 sq m. It is not our intention to help large-scale businesses that set up on former farm premises.

In different circumstances, we have used different thresholds for other rate reliefs. The village shop rate relief scheme allows discretionary rate relief for properties up to a rateable value level of £12,000, as that allows local authorities to help properties that are in need of relief but are above the £6,000 threshold for mandatory relief. For the new mandatory relief for village pubs and petrol stations in England, we have set the threshold at a rateable value level of £9,000, because those more specialised properties tend to be larger and have higher rateable values than shops or most other small business premises.

Our additional financial support to councils to meet discretionary hardship relief for businesses affected by foot and mouth disease is set at the higher £12,000 level used for discretionary village shop relief, to ensure that a wider range of smaller businesses in hardship is covered. We know that that will cover 77 per cent. of businesses in rural areas.

A rateable value level of £6,000 is at the top of the target range of the rate relief for all small businesses in England that was proposed in last year's local government finance Green Paper. However, that scheme was proposed on a different basis, with relief on a sliding scale, tapering from 50 per cent. relief to a rateable value level of £3,000, to zero at the higher level of £8,000. That will apply to all small businesses throughout England, so the effects at the margins of the threshold are more significant, hence the taper.

I have tried to argue that there are rational reasons for different levels. We are confident that the level of £6,000 will cover the majority of small businesses that are likely to be set up through farm diversification. It will give an incentive to diversify into small businesses, but people in other rural businesses will not feel that their businesses are badly affected by those on farms having a superior advantage.

Mr. Green: I sense that the Minister is reaching a conclusion. Before she does so, I invite her to address the vexed issue of whether third parties would be eligible. I shall accept an assurance that she will tackle the subject later.

Ms Armstrong: I was going to deal with that in the clause stand part debate, but I am not sure what your feeling about that is, Mr. Benton. The subject is not directly relevant, but I am happy to deal with it now if that is what you decide.

The Chairman: I think that it would be appropriate to wait until the clause stand part debate.

Ms Armstrong: I am happy to reassure the hon. Gentleman that what I said in the House stands up, because the rate affects the building, not the person. I shall deal with the matter in detail later.

I hope that hon. Members understand that we are not simply trying to be awkward by saying that amendments Nos. 1 and 12 are not necessary. I also hope that I have given an explanation for the level of the limit that hon. Members find acceptable.

The Chairman: I call Mr. Gray.

Mr. Green: I am Mr. Green.

Mr. Christopher Fraser (Mid-Dorset and North Poole): And we are all blue.

The Chairman: I apologise for my colour blindness. I am sure that the Committee will forgive me.

Mr. Green: We bring a rainbow coalition to the Opposition Front Bench.

The Minister gives a full explanation of why she rejects the amendments, but it is not convincing. I understand that the relevant part of the clause does not deal with shops, but the NFU says that farmers should be encouraged to bring forward the most appropriate diversification projects, and that setting the level too low would frustrate the quality of the objective behind the legislation. That applies to whatever business is introduced under a diversification scheme. We are not talking simply about shops, which, as the Minister said, are dealt with under clause 3.

The Minister's second point was that reviewing the threshold will be constantly in the Government's mind, but that is not good enough either. It is the classic response of an administrator, not a parliamentarian, to say, ``Don't worry, the Government have got everything under review.'' That is not the most reassuring phrase for those who run businesses that are struggling on the edge of survival or for those who are contemplating setting up newly diversified businesses and who are wondering whether it is worth taking that risk in the terribly difficult economic circumstances that hold sway in the countryside. Hearing that the Government have got everything under review in Whitehall will not encourage people to diversify.

11.30 am

It is important for Parliament to have a say annually, even if the Government have decided that no change is necessary. Hon. Members might want to have their say, especially if they represent constituencies where diversification is needed to keep businesses in being. Such debates would be good for Parliament, apart from anything else.

The Minister said that the Government's purpose in the Bill is not to support every business, which is, of course, right. However, she is setting up a straw man to some extent. We are not suggesting that the rate relief should support every business, which is why we suggested the option of two limits to the rateable value. We are not suggesting that any big business should be supported, but that levels should be more realistic and consistent with the Government's view of what a small business is. The Minister rightly made a distinction between big and small businesses. Her elaborate and ingenious defence of the definition of small business in the Bill as opposed to that in other Government documents does not wash. I can see why the DTI might have wanted to apply a taper scheme to the small businesses that it suggested supporting in the Green Paper. Nevertheless, the limit on a small business in that part of the Government's mind is a rateable value of £8,000, while the limit in the part represented by the Minister's Department is £6,000. That is simply inconsistent and incoherent, and I did not find that part of the Minister's explanation satisfactory. In the light of that, I shall press the amendment to a vote.

Question put, That the amendment be made:—

The Committee divided: Ayes 5, Noes 9.

Division No. 1]

AYES
Fraser, Mr. Christopher
Gray, Mr. James
Green, Mr. Damian
Heath, Mr. David
McIntosh, Miss Anne

NOES
Ainsworth, Mr. Robert
Armstrong, Ms Hilary
Borrow, Mr. David
Cawsey, Mr. Ian
Edwards, Mr. Huw
Hughes, Mr. Kevin
Keeble, Ms Sally
Organ, Mrs. Diana
Temple-Morris, Mr. Peter

Question accordingly negatived.

 
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