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Baroness Hanham: My Lords, I briefly want to support my noble friend Lord Caithness as regards the
amendment. I remember very well the last revaluation of business rates that took place. All I can recall is that not only was the issue terribly complicated, but it was very widely misunderstood and resented by business.Having seen the four pages in the Bill that deal with this matter I think that there will be even more resentment. I do not suppose that anyone will be able to understand it, however hard they try. This seems to be an easily understood method of ensuring that a revaluation involving changes to people's tax, either up or down, is implemented in a way which shows fairness—which I do not think that the previous revaluation of rates ever absolutely managed to demonstrate. So I think this is a very neat way of dealing with the issue, and I very much hope that it will have the Government's support.
Baroness Maddock: My Lords, we, on these Benches, at previous stages of the Bill supported the noble Earl, Lord Caithness, in his efforts to deal with this very difficult issue. We continue to do so at this stage of the Bill.
The situation is particularly disappointing because the House of Commons' Select Committee inquiry into this Local Government Bill warned the Government about fettering their ability to contribute to the costs of transition. It pointed out the difficulties that the Government could get into if there was a downturn in business. But this Bill completely removes their ability to support transitional relief.
As the noble Earl said, it is disappointing that the Ministers at ODPM have not been able to persuade the Treasury as they did with sport because I consider this to be a similar kind of issue: it is about local matters, it is about small local businesses. We all know that our successful large businesses started as small businesses. I regret that the Government feel unable to keep an open mind and to give themselves the ability always to support small businesses.
Lord Bassam of Brighton: My Lords, Clause 64 assures ratepayers that there will be a transition scheme to accompany future revaluations. The existing provision in the Local Government Finance Act 1988 simply confers a power to establish a scheme, but does not impose a duty to do so. Business, including the CBI, has stressed the necessity of transition schemes.
The details of a future scheme—the annual increases and decreases in bills—will be decided in the run-up to the revaluation concerned, when the impact on individual rateable values will be known and more certain. But, as we stated in the White Paper Strong Local Leadership—Quality Public Services, any future transition scheme will need to be self-financing. There is no reason why the general taxpayer, as opposed to the ratepayer, should meet the cost of transitional relief. Accordingly, Clause 64 requires that the total rate yield for any year is not to be affected by a transition scheme.
The clause allows for flexibility in how schemes may be structured so as to be self-financing. The methods likely to be used include having a transition scheme
which balances the rates lost through phasing in increases in bills against the rates gained by phasing in decreases. Such phasing of decreases in bills as well as increases has been a feature—as I am sure all noble Lords will acknowledge—of past schemes.In addition to providing for a scheme which balances rate income lost through phasing in increases and rate income gained through phasing in decreases, this clause allows for an addition to rate bills generally as a means of making good the loss of rates resulting from phasing in increases in bills.
This clause also allows for a scheme which is funded by a combination of phasing in decreases and an addition to rate bills generally. This will allow us to put in place a fair and workable scheme.
The effect of these amendments is to make transition revenue neutral over a five-year period—instead of year by year as set out in the Bill—with the Treasury making a contribution to the cost of the scheme in the first years. The Treasury would need a way to recover in later years what it had paid in the early years. The Exchequer would also need to recover interest on what it had paid out in the early years of the scheme, and would need to recover a sum to offset the effects of inflation between paying out the sums concerned and recovering them. All this would make for a complicated calculation—the noble Baroness, Lady Hanham, said that it would be simple—which would also introduce an element of uncertainty for ratepayers.
A five-year revenue neutral scheme would be much more complicated to operate and far less intelligible to the ratepayer than a scheme which was revenue neutral year by year. Furthermore, it is our view that it is difficult to see any reason for such a scheme. Why should the general taxpayer in effect give a loan to ratepayers at the start of each transition scheme?
Transitional relief means that we are easing the burden on ratepayers. We do not believe that the general taxpayer should cover the cost of this. It seems fair to us that ratepayers in general should pick up that bill.
An attempt to make a scheme revenue neutral over the five-year life of a list would mean that at each revaluation complex estimates would need to be made in advance of announcing any transition scheme. If at the end of the fourth year it was discovered that the Treasury had not recouped the money it had contributed in the early years, rate bills would have to be increased to balance the scheme. That would create uncertainty for the ratepayer.
The noble Earl, Lord Caithness, asked why the general taxpayer should not pay for the transitional relief. As I have made clear, this scheme could cost billions of pounds. That would be a heavy burden on general taxpayers. He cited the previous amendment in aid of his case. The cost of relief to sports clubs will of course be far less; more importantly, it will be of tremendous benefit to non-profit-making bodies. Businesses, by their very nature, do not fall into that category. The cost of the relief granted is significant
but minuscule by comparison to the potential costs of the general taxpayer funding the transitional relief proposition contained within the amendments.I hope that, having listened carefully to what I have said—although we may still disagree on this issue—that the noble Earl and the noble Baronesses who have spoken in favour of the amendment will think again and withdraw it today.
The Earl of Caithness: My Lords, I listened with great care to the noble Lord. I have to say to the noble Lord that it is only the Government—not the practitioners, not industry and not businesses—who think that their proposal will be less complicated than the one that I have submitted. Virtually everything the noble Lord said refers to the Government scheme and not to our scheme. Our scheme is more certain for businesses. It is much fairer for businesses. The Government's scheme will certainly cause mayhem. As a chartered surveyor I would say to the Government, "Thank you very much". Many of my colleagues will make a huge amount of money out of this by advising businesses. I want to do them out of some of that money. I want to make the scheme simpler, more straightforward and more transparent. I want to get rid of the uncertainty that the Government are creating.
The noble Lord said that the general taxpayer should not contribute. Overall, I totally agree. The general taxpayer will not contribute under my scheme. By the end of the five-year period, all the money, together with interest and inflation, will be reclaimed by the Treasury.
I am very grateful for the support of the noble Baroness, Lady Maddock, and my noble friend Lady Hanham. This is now the occasion to test the opinion of the House.
5.29 p.m.
On Question, Whether the said amendment (No. 9) shall be agreed to?
Their Lordships divided: Contents, 139; Not-Contents, 119.
Addington, L.
Alderdice, L.
Allenby of Megiddo, V.
Anelay of St Johns, B.
Astor of Hever, L.
Attlee, E.
Barker, B.
Beaumont of Whitley, L.
Biffen, L.
Blackwell, L.
Blatch, B. [Teller]
Bridgeman, V.
Brooke of Sutton Mandeville, L.
Brougham and Vaux, L.
Burnham, L.
Buscombe, B.
Caithness, E. [Teller]
Campbell of Alloway, L.
Carlile of Berriew, L.
Carlisle of Bucklow, L.
Carnegy of Lour, B.
Chalfont, L.
Colwyn, L.
Cope of Berkeley, L.
Crathorne, L.
Crickhowell, L.
Dahrendorf, L.
Deedes, L.
Denham, L.
Dixon-Smith, L.
Dundee, E.
Eden of Winton, L.
Elliott of Morpeth, L.
Elton, L.
Falkland, V.
Feldman, L.
Flather, B.
Fookes, B.
Freeman, L.
Gardner of Parkes, B.
Geddes, L.
Gilmour of Craigmillar, L.
Glenarthur, L.
Glentoran, L.
Goodhart, L.
Hamwee, B.
Hanham, B.
Hanningfield, L.
Hanson, L.
Harris of Richmond, B.
Henley, L.
Higgins, L.
Hodgson of Astley Abbotts, L.
Holme of Cheltenham, L.
Hooper, B.
Howe, E.
Howell of Guildford, L.
Hurd of Westwell, L.
Jacobs, L.
Jellicoe, E.
Jenkin of Roding, L.
Kimball, L.
King of Bridgwater, L.
Knight of Collingtree, B.
Lamont of Lerwick, L.
Lane of Horsell, L.
Liverpool, E.
Livsey of Talgarth, L.
Lucas, L.
Luke, L.
Lyell, L.
McAlpine of West Green, L.
McColl of Dulwich, L.
MacGregor of Pulham Market, L.
Mackie of Benshie, L.
McNally, L.
Maddock, B.
Maginnis of Drumglass, L.
Mar and Kellie, E.
Marlesford, L.
Mayhew of Twysden, L.
Miller of Chilthorne Domer, B.
Montrose, D.
Mowbray and Stourton, L.
Moynihan, L.
Murton of Lindisfarne, L.
Newby, L.
Newton of Braintree, L.
Noakes, B.
Northbrook, L.
Northesk, E.
Northover, B.
Norton of Louth, L.
O'Cathain, B.
Onslow, E.
Palmer, L.
Park of Monmouth, B.
Parkinson, L.
Pearson of Rannoch, L.
Peyton of Yeovil, L.
Phillips of Sudbury, L.
Plumb, L.
Plummer of St. Marylebone, L.
Rawlings, B.
Reay, L.
Redesdale, L.
Rees, L.
Rennard, L.
Roberts of Conwy, L.
Rodgers of Quarry Bank, L.
Roper, L.
Rotherwick, L.
Russell, E.
St John of Fawsley, L.
Saltoun of Abernethy, Ly.
Sandberg, L.
Scott of Needham Market, B.
Seccombe, B.
Selsdon, L.
Sharman, L.
Sharp of Guildford, B.
Sharples, B.
Shutt of Greetland, L.
Skelmersdale, L.
Stewartby, L.
Taverne, L.
Thomas of Gwydir, L.
Thomas of Walliswood, B.
Thomson of Monifieth, L.
Tordoff, L.
Tugendhat, L.
Ullswater, V.
Waddington, L.
Wade of Chorlton, L.
Wakeham, L.
Wallace of Saltaire, L.
Walmsley, B.
Warnock, B.
Williams of Crosby, B.
Acton, L.
Alli, L.
Archer of Sandwell, L.
Ashton of Upholland, B.
Barnett, L.
Bassam of Brighton, L.
Berkeley, L.
Bernstein of Craigweil, L.
Blackstone, B.
Boothroyd, B.
Borrie, L.
Brooke of Alverthorpe, L.
Burlison, L.
Campbell-Savours, L.
Carter, L.
Chandos, V.
Chester, Bp.
Chorley, L.
Christopher, L.
Clarke of Hampstead, L.
Clinton-Davis, L.
Cohen of Pimlico, B.
Corbett of Castle Vale, L.
Craig of Radley, L.
Crawley, B.
David, B.
Davies of Coity, L.
Davies of Oldham, L. [Teller]
Dean of Thornton-le-Fylde, B.
Desai, L.
Dixon, L.
Donoughue, L.
Dormand of Easington, L.
Dubs, L.
Elder, L.
Evans of Parkside, L.
Evans of Temple Guiting, L.
Falconer of Thoroton, L. (Lord Chancellor)
Farrington of Ribbleton, B.
Filkin, L.
Fyfe of Fairfield, L.
Gale, B.
Gavron, L.
Gibson of Market Rasen, B.
Golding, B.
Goldsmith, L.
Goudie, B.
Gould of Potternewton, B.
Graham of Edmonton, L.
Grocott, L. [Teller]
Harris of Haringey, L.
Harrison, L.
Haskel, L.
Hayman, B.
Hilton of Eggardon, B.
Hogg of Cumbernauld, L.
Hollis of Heigham, B.
Howie of Troon, L.
Hoyle, L.
Hughes of Woodside, L.
Hunt of Chesterton, L.
Hunt of Kings Heath, L.
Irvine of Lairg, L.
Islwyn, L.
Jay of Paddington, B.
Jones, L.
Judd, L.
King of West Bromwich, L.
Kirkhill, L.
Layard, L.
Lea of Crondall, L.
Lipsey, L.
Lofthouse of Pontefract, L.
McCarthy, L.
Macdonald of Tradeston, L.
McIntosh of Haringey, L.
McIntosh of Hudnall, B.
MacKenzie of Culkein, L.
Mackenzie of Framwellgate, L.
Mallalieu, B.
Mason of Barnsley, L.
Massey of Darwen, B.
Merlyn-Rees, L.
Mishcon, L.
Mitchell, L.
Morgan, L.
Morris of Aberavon, L.
Morris of Manchester, L.
Nicol, B.
Orme, L.
Patel of Blackburn, L.
Pendry, L.
Peston, L.
Pitkeathley, B.
Prys-Davies, L.
Radice, L.
Ramsay of Cartvale, B.
Randall of St. Budeaux, L.
Rea, L.
Rendell of Babergh, B.
Richard, L.
Rooker, L.
St. John of Bletso, L.
Sheldon, L.
Simon, V.
Smith of Leigh, L.
Strabolgi, L.
Symons of Vernham Dean, B.
Temple-Morris, L.
Tomlinson, L.
Turnberg, L.
Turner of Camden, B.
Varley, L.
Wedderburn of Charlton, L.
Whitaker, B.
Whitty, L.
Williams of Mostyn, L. (Lord President of the Council)
Williamson of Horton, L.
Woolmer of Leeds, L.
Resolved in the affirmative, and amendment agreed to accordingly.
5.40 p.m.
The Earl of Caithness moved Amendment No. 10:
- Page 33, line 5, leave out subsection (10) and insert—
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