Robert
Neill: I know that the Minister will take this in the
spirit of genuine inquiry in which it is meant. Has he had any
representations from Members of either House in relation to the matter
that I just
mentioned?
John
Healey: Not as far as I am aware. Certainly no amendments
have been proposed to the Bill from the other place; no doubt that will
come. I was pleased to hear about the good lunch had by the hon. Member
for Cities of London and Westminster and interested by the reflections
of the people with him. Despite things being tough economically at the
moment, it is something of a mixed picture. I know that better than
most, having been at home last night in Rotherham, where the
constituency faces 713 redundancies at the Corus works at Aldwarke in
Parkgate. Incidentally, it is probably one of the most efficient
steel-making plants in western Europe, producing some of the best steel
anywhere in Europe. It is also true that many other companies are
proving resilient to recession, including, I am glad to say, some in
that constituency. We will return to the points that the hon. Gentleman
was trying to make about the threshold when we reach clause 12,
Mr. Atkinson, as you have encouraged us to do.
Finally, the
hon. Member for Bromley and Chislehurst referred to a concern about the
impact on small companies, and he may recall how, in an earlier
sitting, we dealt with the prospectus—the work, the analysis and
the assessment that will have to be undertaken as part of any case that
a BRS may support. That is where the work on the costs, the potential
impact and the wider economic benefit of the businesses that may be
liable for a BRS will have to be laid out. We are keen to encourage
that. It is clearly an important part of the assessment of the pros and
cons of any BRS and, on that basis, I hope that Members will be happy
to allow the clause to stand part of the Bill.
Question
put and agreed to.
Clause 11
ordered to stand part of the Bill.
Clause
12Rateable
value
condition
Dan
Rogerson: I beg to move amendment 16, in clause 12, page
8, line 21, leave out ‘prescribed by regulations’ and
insert ‘specified in subsection
(1A). (1A) The amount is
£50,000. (1B) The amount
in subsection (1A) may be amended by
regulations.’. We
turn to the question of an amount, £50,000, in connection not, I
hasten to add, with any proposed amendments to the Bill, but with the
threshold that the Government are minded to implement through
regulations. In the debate about the previous set of amendments, I made
the point about being clear to people about what is intended, and the
Minister is absolutely right that he and his colleagues have signalled
that intention throughout. However, it is an important principle that,
wherever possible, as much information as possible be provided in the
Bill.
On the amount,
we heard witnesses from the Royal Institute of Chartered Surveyors, who
thought that the threshold was too high, and Dr. Grail, from British
BIDs, who thought that it was perhaps too low. So, I am not entirely
wedded to £50,000; the point is that, as early as possible, the
Government’s intention should be published in the Bill. However,
on the point raised by a Conservative Member about the amount being
fixed in primary legislation, the amendment would allow it to be
changed by regulation, as is the case in the current circumstances. An
amount would be mentioned to start with, but we could revisit it in
secondary legislation. The amendment’s only significant change
would be the introduction of a starting point. That is an
important principle. These are highly significant changes to the
operation of the business rate in the areas where it will be applied,
and affected businesses will expect not only to be consulted on
individual projects and, wherever possible—although sadly not in
every case—to be consulted through a ballot, but to have every
indication of how the provision will begin to bite, so that they can
begin to plan accordingly. The principle is not that I think
£50,000 is necessarily the right amount for ever, but merely
that it is a starting point that might be amended by regulation;
otherwise, the issue will be left hanging as the Bill makes its way
through the House, and at some point regulations will be introduced. It
is a fairly straightforward amendment, and I should be interested to
hear the views of other Committee
members.
5.45
pm
Robert
Neill: Understanding as I do the motivation behind the
amendment of the hon. Member for North Cornwall, for the reasons I
advanced earlier in relation to previous amendments I am still not
convinced about putting a sum in, even with the caveat of making it
changeable by regulation. That would take us back to where we almost
are anyway, where it can be changed by regulation in any event.
However, the hon. Gentleman raises an important point that we need to
explore. How is the £50,000 figure arrived at? What
magic—or otherwise—is there in that, and what
justification do the Government use for that?
I am conscious
that that figure stems partly from the Government’s impact
assessment and other soundings that it has taken. The impact assessment
was, I believe, signed off on 28 November. However, although it is not
apparent from the document—I am sure that the Minister can help
us here—I imagine that the field work for that would have been
taken among the business community at an earlier stage, when the degree
to which businesses would become hard pressed by the recession was
perhaps not apparent.
What thoughts
have the Government had of reviewing the appropriateness of their
initial estimate of £50,000 in the light of the ongoing economic
developments and downturn that we been discussing? In a sense,
£50,000 is signalling up what the Minister’s starting
point for the regulations will be, and in a way I am grateful to him
for doing so. Without even getting to the stage of introducing
regulations, should he be thinking again as to whether £50,000
is the appropriate starting point—never mind whether we then
need a power to vary it subsequently in the light of further
developments? Have events since that idea came into his mind, and since
the impact assessment, not already given rise to a need to revisit it?
A commitment to do that before the Bill is enacted and the regulations
are brought in would be a welcome reassurance to
businesses.
Mr.
Binley: My hon. Friend the Member for Cities of London and
Westminster referred to retail in Oxford Street. We all know that the
value of the pound has impacted massively on that area. I did not want
to raise the hopes of Government Members in that respect.
I support the
overall thrust of this amendment and the concern behind it. However, my
reason for not being able to support it is that I genuinely think that
it will build into the Bill a level which may well need to be higher.
My concern is that the Government are minded to have a £50,000
limit, and I should like the Minister to say where the information came
from to convince the Government that they should set the limit at that
level. It is a pretty important figure and will impact upon the way
people think about the Bill for many years to come. We are not talking
about a frivolous figure picked from the air; it will have real import
for business for many years.
I am concerned
about that level, not least in relation to when the Bill takes effect,
which is not until April 2010, as I understand it. That coincides
rather nicely with a rate revaluation that is due to take effect that
year. The concern must therefore be that many more businesses than we
might think of at the moment will be caught in the BRS net because of
that revaluation. Whereas £50,000 may seem a sizeable figure at
the moment, it may be that after revaluation it will not seem so at
all. That concerns me enormously, and I would like to hear the
Minister’s thoughts about that situation.
We are not
sure about the Government’s thinking in the longer term and we
are not sure whether they will increase the level in relation to
revaluation. The chances are that, because they have said that they are
minded to introduce £50,000, that will not be the case, so we
can expect many more businesses to be involved. I have an especial
concern in that respect for retail. Section 31 of the impact
assessment, on page 13, states:
“BRS
will be based on the RV of non-domestic properties. Therefore,
businesses likely to have high rateable values, such as retail, could
be disproportionately affected by
BRS.” That
is immensely concerning. It is true that in the big city areas, most of
the town centre businesses in particular, which sit in the areas of
high rateable value in the centres and the main shopping areas of
towns, lease their buildings. Section 31 goes on to tell us
that
“businesses which
do not own their properties are likely to bear significantly less of
the cost than owner
occupiers.” That
suggests that the whole process that has created what many call
“clone Britain” in our high streets will be accentuated,
accelerated and added to by the measure.
There is no
doubt from a retail perspective that it is in the interests of a
retailer not to own the property that they operate from. That is
clearly stated in the assessment. That may be very well for Oxford
street, where the big companies do not own the properties and lease
them, but it is not very helpful for many of the businesses in our
county towns and country towns, where the owner-occupier is the person
who runs the business.
I have been
immensely concerned about the decline of our community hubs in such
towns and areas. Indeed, I had the privilege of heading up a commission
that reported on that last July. There is no doubt that there is deep
concern about the way in which our town centres in such areas are being
denuded. They are being turned into clone Britain in one instance, and
in other instances local businesses are being forced out. The vital
point is that this will bear most heavily on the owner-occupiers
of businesses in such towns, and it could be the
last straw that breaks the camel’s back. If that is the case, we
will do immense harm to those town centres in rural areas by this very
activity. That is why I ask the Minister to consider, in the light of
revaluation, an increase in the level at which BRS becomes relevant, in
order to give some protection and hope to those businesses that will
fall into this net on the basis that they are retailers and also own
the property. It will fall most heavily on that particular group of
business men in this country, to our
detriment. Mr.
Scott: On this occasion I shall attempt to get my words to
the item and I will not deviate whatsoever. My concerns are the same as
those of my hon. Friends. Regarding my own constituency, in the current
economic conditions, I would ask the Minister to look at reconsidering
the level that has been set. I accept that there needs to be a level of
flexibility and that the situation may differ from one region to
another. As we heard from my hon. Friend the Member for Cities of
London and Westminster, areas such as Oxford street and Regent street
are different from my high streets of Barkingside, South Woodford and
Hainault. I am sure that they would like the level of business that
happens in Oxford street and Regent street, even in the present
climate. However, we need an increase on the limit. The figure is not
appropriate at this point. I do not believe that most businesses in
constituencies up and down the country will be able to thrive with such
a figure. We may be able to reconsider that view in the future, but at
this juncture, I ask the Minister to look again at the
limit.
Mr.
Dunne: On the amendment and the figure proposed by the
hon. Member for North Cornwall, it would be helpful if the
Minister—using the work in the impact
assessment—clarified whether the data collected in 2007, which
estimated that 90 per cent. of properties fall below the £50,000
threshold, were primarily used to justify setting the threshold at this
level. If the revaluation, to which my hon. Friend the Member for
Nottingham—
Mr.
Dunne: Indeed; Nottingham is another strong retail town.
If the revaluation gives rise to a significant increase in the rateable
value of properties, has the Minister done any analysis of what
proportion of properties will fall below a threshold if it was set at a
higher
level?
Robert
Neill: In the light of the observations made by a number
of hon. Members, I should like to add some thoughts for the
Minister’s consideration. The points that have been made are
supported by some of the evidence given in the evidentiary sessions. I
am referring to the question about whether the threshold should
initially be set higher than the proposed £50,000. The British
Retail Consortium tends to support the view that the downturn is
disproportionately affecting the retail sector, and that the
£50,000 is not a safeguard against that. Jane Milne said that
over the coming months, it is expecting to see some 40,000 jobs go in
the big chains. Those retailers may well be occupying premises that are
above the current threshold and they will, therefore, be caught. None
the less, they are as liable to be affected by this as any other
organisation. I am talking about their cash flow and the risk to
jobs.
Ms
Milne also raised concerns about the cumulative effect of the measure
together with the annual uplift and the quinquennial review coming up
in 2010. She was thinking of a £1.6 billion increase in business
costs over that period. Some 90 per cent. of that was the result of the
mixture of the uplift and the revaluation. Therefore, is that an
argument for having the initial threshold set at a higher figure,
because it would take more people out of liability?
There was
support for those concerns in the evidence from Julian Lyon from the
CBI. He
said: “From
the point of view of the £50,000 threshold, or whatever the
threshold is, it is important to understand how business rates work in
the market to establish whether the threshold is an appropriate
mechanism.”——[Official Report, Business
Rates Supplements Public Bill Committee, 20 January 2009; c. 34,
Q140.] The
Minister will recall that he gave evidence of what could be an
arbitrary working of the market. Businesses occupying a couple of
floors rated as individual hereditaments could fall below the
threshold, but if they have two floors that are on a single lease, or
on a hereditament, that would fall within the scheme. That could mean
that many high street operations have two separate leases and two
separate hereditaments with a rateable value of—let us
say—£40,000 each, which means that they are not caught.
If they have them on a joint lease, a single hereditament, and their
rateable value is £60,000, they are caught and it will make an
enormous difference to their business. Should that not be a reason for
revising the starting point of the threshold?
Let me refer
to the evidence of Dr. Grail, who was seen as an impressive witness by
hon. Members from all parts of the House. She, too, had a concern. She
said: “Another
thing that I wanted to mention was raised previously—the
threshold. The earlier
paperwork”— I
think that she was referring to things such as the impact
assessment— “suggested
that a £50,000 threshold would safeguard
BIDs.” She
was concerned about the interaction of the business rate supplement
with BID levies and the fact that that might damage the willingness of
organisations to go into BIDs, but she was interested in this case in
whether the threshold had a particular effect. In relation to the
suggestion implicit in the impact assessment that a £50,000
threshold would tend to safeguard BIDs, because many companies would
not be affected, she
said: “Our
evidence is to the contrary. We have done detailed analysis of 23 BIDs
around the country—all different sizes and types—and 86
per cent. of the BID levy is over the threshold. In London, only one
BID is unaffected by the threshold—that is, it falls so far
below it that...it would be okay. The rest are not safeguarded by
that figure at
all”. Her
conclusion was that if we want one of the impacts of the
threshold—I appreciate that it is not the sole impact—to
be safeguarding the viability of
BIDs, “the
threshold needs to be way higher, to give the majority of BID levy
payers a safeguard.”——[Official Report,
Business Rate Supplements Public Bill Committee, 20 January 2009;
c. 53,
Q212.] 6
pm Does
the Minister not think that that evidence, which we heard only last
week, strongly reinforces the arguments advanced today by hon. Members
for revisiting the appropriateness of £50,000 even as a starting
point, never mind what flexibility we build in
later?
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