Gareth Thomas
Main Page: Gareth Thomas (Labour (Co-op) - Harrow West)Local Government Finance Bill (Eighth sitting)
Gareth Thomas Excerpts(7 years, 3 months ago)
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Rob Marris (Wolverhampton South West) (Lab)
My hon. Friends on the Labour Front Bench, whose amendments 45 and 46 would have enabled an increase in rates, will be happy to know that schedule 2 allows that. Paragraph 6 of schedule 2, which starts on line 32 of page 42 of the Bill, amends paragraph 3A of our old friend, schedule 7 of the Local Government Finance Act 1988. Paragraph 6 goes through aspects of multiplier discount and refers, in lines 1 and 2 of page 43, to taking
“the sum of those multiplier discounts.”
I cannot see that the Bill prevents a negative multiplier discount, though I stand to be corrected by the Minister. I look around the room at all the MPs on the Committee; they all studied mathematics far more recently than I did—I make no mention of you, Sir David—but my understanding is that if there is a negative multiplier discount, the result is a positive. That would produce the effect sought unsuccessfully by my hon. Friends through amendments 45 and 46.
Mr Gareth Thomas (Harrow West) (Lab/Co-op)
For the record, let me clarify that we were not seeking to change Labour party policy in this area, so my hon. Friend is wrong, unusually, to say that we were advocating an increase in business rates. We were merely seeking an opportunity to raise the suggestion made by the Select Committee on Communities and Local Government—and particularly the hon. Members for Thirsk and Malton, and for Northampton South—which advocated in its report a power for local authorities to increase business rates if they wanted to.
Rob Marris
I am grateful to my hon. Friend for that clarification. I apologise to the Committee if I mis-expressed myself. I was not advocating one course or the other, because I believe in local control and localism, but on my reading, the amendments made by schedule 2 would allow that increase.
The Minister adverted to new paragraph 6B, which is to be inserted into schedule 7 to the 1988 Act; it starts at line 27 of page 44 of the Bill. Under new paragraph 6B(3), the Secretary of State can, as the Minister said, set a maximum. The Secretary of State spoke this morning about incentivising and stimulating, and about local authorities working hard and being flexible to attract business. He referred to tools to incentivise local growth, without, of course, producing any evidence relating to the incentives, or their prospects of success, but we have already been around the block several times on the subject of the lack of evidence, so I shall leave that.
However, while we are talking about localism, sub-paragraph (3) is another instance of a power being reserved, if not grabbed, by central Government—the power for the Secretary of State to set a maximum for a multiplier discount. That does not seem to me to bolster localism. Broadly speaking, if we go along with what the Minister says—with the idea that 100% retention of business rates and so on will incentivise local authorities to be even more pro-business, whatever the colour of the authority—we should let local authorities act accordingly and make what outside observers and indeed some residents may see as mistakes. That is what localism is about: letting local authorities take decisions and bear the consequences.
Mr Thomas
In the interests of speed, I will take the opportunity to speak to the Government amendments now, rather than in a separate clause stand part debate.
If I understand correctly, a small business in a rural area might quality for 100% business rate relief under small business rate relief, but if it also qualifies for the 50% rural rate relief, it has to be given that 50% relief rather than the 100% relief, because of the hierarchy of rate reliefs that exists. As I understand it, the clause intends to deal with that loophole.
As the Minister hinted, a rural settlements list sets out the types of businesses that would benefit from small business rate relief. Those are a public house or petrol station that is the only such business in a rural settlement and has a rateable value of less than £12,500, a food store or general store that is the only one in the settlement, and post offices with a rateable value of less than £8,500. Local authorities have the discretion to top up the 50% rural rate relief to 100%, but not all do so, presumably because of the difficult financial situation that local authorities face at the moment, regardless of their political leadership, given the cuts to revenue support that the Government have been pushing through.
I intervene in this debate to ask the Minister a number of questions. Why does the rural rate relief scheme not cover a wider range of businesses? I ask that in the context of growing concern in the countryside that rural enterprises will be some of the biggest losers in the business rates revaluation that will come into force after April 2018. There have been real concerns that livery yards and riding schools, for example, will go to the wall because of the expected increase in business rates under the revaluation. There is concern that kennels and catteries, polo grounds, racecourses and racing stables will also be among the worst hit. That is of such concern that the hon. Member for Montgomeryshire (Glyn Davies) has raised concerns. Similarly, Sarah Phillips, the director of participation at the British Horse Society, worried aloud—understandably—through The Times that increases in business rates after April would have a devastating impact on livery yards and riding schools. She went on to point out that rural businesses, which typically occupy more space, were being put at an unfair disadvantage by a bricks-and-mortar tax based on premises, not profitability. That prompts a question of Ministers as to why more rural businesses will not be able to benefit from the changes.
Indeed, the many businesses that want to install solar panels are also asking why rural business rate relief will not similarly help them. They also stand to suffer considerably from the business rates revaluation that will come into force after the next revaluation in April 2017. The problem is that, going forward, solar panels will be judged separately from business premises, and it appears that they will not all qualify for small business rates, which is the other potential opportunity for assistance. Given the solar industry’s potential to create good new jobs, why are Ministers not taking advantage of the extension of rural rate relief, perhaps to help out a number of other businesses?
When we debated clause 5, we talked about whether the retail prices index or the consumer prices index should be used. I know that you read Hansard diligently, Sir David, so you will remember that £78 billion will potentially be gained by businesses and lost by local authorities over the next 20 years as a result of the change. Perhaps if Ministers were to take advantage of the flexibility in clause 5 over whether CPI is used, which my hon. Friend the Member for Wolverhampton South West noted, they might be able to find the resources to help more businesses in our countryside to survive.
Bricks-and-mortar businesses—in urban areas, too, but in this context particularly in rural areas—are under growing pressure from the rise in online businesses. One of the great successes of the previous Labour Government, and of Britain more generally, is that we are such a hub for online technology businesses, but those businesses tend to need less space and are therefore less likely to pay high business rates, whether they are in urban or rural areas. Many businesses are saying, “Hang on a second. We have to pay huge business rates every year, and these online businesses are not being taxed in the same way. Isn’t it time for a bit more equality between these two types of businesses?”
The challenges for businesses in rural areas are sometimes even more acute. In Threlkeld, a small village just outside Keswick in the Allerdale Borough Council area, which the hon. Member for North Swindon always likes to be reminded of, there is a new coffee shop run by the community—it is a social enterprise—and a pub. We know that the pub would qualify for 100% rural rate relief, but we do not know whether the coffee shop would. As the coffee shop is part of a community hall facility, it helps the community of Threlkeld to benefit from the existence of that premise, where lots of different community activities take place. Would it be eligible for 100% rural rate relief or not? It is not a post office, a pub or a petrol station. Perhaps Ministers might listen to the concerns of businesses in the countryside a little more and do more to help them.
Rob Marris
If that community centre were classified as a public toilet under clause 9, it might get some relief—as might its users.
Mr Thomas
The last time I visited that coffee shop, which has fantastic views of Blencathra and Skiddaw—two of the great English mountains—although there were toilets there, that was not what the bulk of the premises were being used for. It would be interesting to probe whether it has the potential to get at least some relief under clause 9, but let me not test Sir David’s patience by being diverted down that particular route.
I would like to ask Ministers why, in their view, rural rate relief is so limited and whether there might not be scope for providing more assistance to businesses in the countryside, more generally and also given the rise in online businesses, which do not require such large premises. In particular, it would be good to hear what the Government will do to help the nascent solar panel industry, particularly those businesses seeking to put up solar panels in rural areas.
Mr Jones
Thank you, Sir David, for allowing me the opportunity to respond to the shadow Minister. He mentioned rural rate relief. Clearly, there is a key criterion for eligibility. The idea of rural rate relief is to ensure that key amenities are available in rural areas. He seems to have conflated it—at some length—with the business rate revaluation. As he will know, the revaluation is not a process designed to raise any more or less money for the Exchequer; it is a fiscally neutral exercise meant to ensure that rateable values reflect property rents and changes in those rents over the revaluation period.
In the 2017 revaluation, nearly three quarters of ratepayers will see either no change or a reduction in their bill. The hon. Gentleman seems suddenly to have an interest in rural areas. Most people in rural areas think that the Labour party has generally neglected them when it has been in government, but he now seems to be taking a more significant interest, which perhaps we should welcome. Rural businesses, if their rates have increased, will also be eligible for part of the £3.6 billion transitional relief scheme that we are introducing at the same time. I hope to reassure him that, in its totality, the business rate revaluation will predominantly reduce rate bills in rural areas by an average of 4.4% and in significantly rural areas by an average of 6.4%.
Mr Thomas
I would gently point out that it was not the Labour Government who sought to close hospitals in rural areas, such as the one in Allerdale Borough Council’s area that serves the community of Threlkeld, to which I referred. I suggest that the Minister is being rather complacent about the impact on some rural businesses as a result of the revaluation. Have Ministers considered extending rural rates relief so that other businesses in isolated communities can benefit?
Mr Jones
We keep taxes continually under review. As I said to the hon. Gentleman, we are not complacent. We have put in place a significant package of transitional relief in that regard. He has waxed lyrical about Allerdale. Having been up to that part of the country recently, I know how beautiful it is, but I also observed that the local economy is not just about tourism and related activities. It is also heavily based on the nuclear industry. There are many people in that area who depend on the nuclear industry for their livelihoods. I would say to the hon. Gentleman, very gently, that his party’s policy on nuclear is probably the biggest threat to that particular part of the country. [Interruption.]
The Chair
That was a very clever way of continuing the debate. I think it is best if we move on.
The Chair
That is obviously not a matter for the Chair. It is a matter for the Minister how he responds to the points that are made, but he heard the point made. It is entirely a matter for him whether or not he wishes to respond.
The Chair
With this it will be convenient to discuss the following:
That schedule 3 be the Third schedule to the Bill.
Mr Thomas
Before I open my remarks on whether the clause should stand part of the Bill, having consulted with the registrar of standards, I need to declare that my partner works for a company that certainly manages and I believe installs mobile telecoms infrastructure.
I intend to explore the Minister’s thinking on the case for the clause. In the 2016 autumn statement, the Chancellor announced that the Government would provide 100% business rates relief for new full-fibre infrastructure over a five-year period from 1 April this year. In the context of the significant concern about BT and the way in which Openreach is working, and about the profits it and other bits of the industry have been able to generate, why is that particular provision needed? I ask it as a probing question.
Clearly, there is an opportunity cost to Ministers’ decision to offer full business rates relief for five years. All of us recognise the need to speed up access to the very best broadband telecoms not only in rural areas, in the context of the previous debate, but for businesses and households in my constituency, which complain about slow access to the newest broadband infrastructure. One wonders whether it is not the money, as full business rates relief for telecoms infrastructure will not offer up huge sums of money to those installing such infrastructure. However, there is clearly an opportunity cost in other areas.
Ministers do not appear to be cracking down enough on Ofcom or BT about the speed at which the broadband is being rolled out. How does the Minister see the clause making a real difference in the context of the considerable profits already being generated by the companies operating in this area?
Rob Marris
I hope the Minister can point to this, because I cannot find it, but my hon. Friend referred to the Chancellor’s announcement that mentioned a five-year period. I cannot find a reference to a five-year period in schedule 3. It may be there and I just cannot see it, or it is somewhere else and the Minister can point it out to me.
I see in schedule 3 more than four pages and five formulae. The ever-helpful Library brief cites on page 37 documentation from the autumn statement saying that this measure
“would reduce business rate revenue by £10 million”.
For a company such as BT, £10 million is not a huge amount of money, but for everyone in this room, it is. Nationally and relatively—I stress “relatively”—it is not a huge amount of money, but we get a four-page schedule and five formulae. That strikes me as completely over the top.
We see in schedule 3—on page 46, lines 30 and 31, page 47, lines 37 to 38, and page 48, coincidentally lines 30 and 31 again—the same wording:
“any conditions prescribed by the Secretary of State by regulations are satisfied on that day.”
So here we have the Secretary of State and more regulations. Then when I look at the power to make regulations in paragraph 12 on page 50 of the Bill, it says:
“any power to make regulations conferred by virtue of this Schedule”—
schedule 3—
“includes power to make provision having effect in relation to times before the coming into force of this Schedule”.
I would like the Minister to talk the Committee through that a bit. No doubt he will say something like this happens all the time, but I am a bit uneasy about what seems on the face of it to be a retrospective power in schedule 3, paragraph 12. That is a little worrying. Even though I appreciate it may be a power that would be used or is intended to be used to lessen the tax on a particular business or set of businesses, I still find the retrospection a little troubling.
Mr Jones
The Government intend to support the roll-out of a full-fibre telecommunications infrastructure for all. Full-fibre broadband will deliver a step change in the speed, service quality, security and reliability of broadband services. It will provide important support for a more productive economy and boost the prospects for economic growth.
In the 2016 autumn statement, to which the hon. Member for Harrow West referred, the Government announced £1 billion of new funding to boost the UK’s digital infrastructure. That includes investment of £400 million in a new digital infrastructure investment fund to boost commercial finance for emerging fibre broadband providers. Alongside that package, the Chancellor announced 100% rate relief for a new full-fibre infrastructure in England. Clause 8 and schedule 3 will introduce that relief, which will apply for five years, commencing on 1 April 2017. Hence this part of the Bill will have a retrospective effect. I hope that the hon. Member for Wolverhampton South West understands the principle behind the retrospection.
Mr Jones
I will come to the cost a little later. The schedule provides powers to award rate relief to telecom networks. Some networks appear on the local rating lists held by local authorities and some appear on the central rating list held by the Secretary of State. The schedule therefore introduces the new relief for both local rating lists and the central rating list.
The powers in the schedule will allow the Secretary of State to set conditions on when the relief will apply. Through these powers, we will target the relief on operators of telecom networks that install new fibre on their networks. That will incentivise and reward those operators who invest in the broadband network.
These are concepts that we have not previously defined for business rates. The powers in the schedule will therefore allow us to develop definitions with experts in the telecoms and business rate sectors. By taking this approach we can ensure that we accurately capture in the relief only those parts of the telecoms networks that comprise new fibre. There is a distinction there because it is important—by definition, this is an incentive—that we incentivise the laying of new fibre cable. We are not looking to fund fibre cable that may have already been laid but not switched on, so to speak. I am absolutely clear that this is for new fibre.
Steve Double
I want to make a few comments as someone with a fair amount of experience on this matter. I was the Cornwall Council cabinet member responsible for public toilets when a major review of public toilet provision was undertaken to look at—from the unitary authority’s point of view—the best way to deliver this vital service to the public. As the hon. Gentleman said, this service is important to many people. In Cornwall, it supports not only the tourist industry on our beaches and in our parks, but local people, including the elderly, people with medical conditions and people with young families, who often need to use these facilities.
Steve Double
I am grateful for that intervention. I was going to say that I feel partly responsible for the clause. Along with my colleagues in Cornwall, I lobbied the former Prime Minister and Chancellor hard on this issue, because our experience in Cornwall was that this was a particular barrier for maintaining the provision of public toilets. From my point of view—I cannot speak for the Minister—there is not a one-size-fits-all solution across the country. In different areas, there are different challenges in maintaining public toilet provision. The discretion allows local authorities to set out whether it is a priority in their area.
Let me explain why the measure is so welcome. In Cornwall, which has a large unitary authority covering a very large geographical area, having all those toilets run and maintained by the unitary authority is not the most efficient way to do it. It is far better to devolve the provision and maintenance of those facilities down to local parish councils, town councils or other groups that are better placed to maintain them and keep them open at the hours that the community needs them—that may not be all year round, or all day. Those organisations will be better and more efficient at keeping the facilities clean and well maintained, because people can do it locally, rather than there being a centralised process like the one that Cornwall Council had, with people driving all over the county just to maintain the facilities. Devolving down the running of the facilities to local groups and councils is much more efficient and effective.
In my experience as a cabinet member, one of the biggest barriers to parish councils taking over the running of the facilities was business rates. Often, a fairly small parish council whose precept was only a few thousand pounds a year would consider taking on the cost of maintaining the public toilets, but they would find that the business rate alone on the toilets was more than their whole precept. Deciding whether it was feasible and affordable to take on the facilities was a significant challenge, even if the council recognised that taking them on would be very beneficial to the community. Putting discretion in the hands of the senior authority is sensible, because in the case of Cornwall Council, it can then decide that it sees the value of these facilities across the county. It may want to play its part in helping to maintain them and keep them open, but it may not want responsibility for their day-to-day maintenance and running. It can make the decision to grant that discretion. That would help parish councils with the cost of taking on these facilities, and perhaps enable them to afford to do so. This is a sensible and welcome move, and it has my full support.
Rob Marris
Certain houses of repute with cultural artefacts get a tax break for opening at certain times of the year to the public. My hon. Friend the Member for Oldham West and Royton did not have time to mention that the redoubtable Brian Dean, the gentleman with Parkinson’s, tried every shop in a row of shops, asking if he could use their toilet, and was refused, as is their right. Having desperately tried to avoid it, it was only at that point that he had to soil himself. That is a sad reflection on those shops, but I understand it. I would like the Minister to give some thought to whether it might be possible to structure a business rate relief for private premises, such as a coffee shop in Allerdale, that allow the public access to their toilets, in the way that we allow tax reliefs for certain houses with cultural artefacts. We put something in; there are certain things that they provide; and they get a tax break for providing that service.
As we all know, with our ageing population, it is statistically likely that there will be a rise of near incontinence and urgency. The need for access to toilet facilities among the population as a whole, and the need for those facilities to be fairly readily available, will increase. I say that as one of the patrons of Wolverhampton Mencap. Many adults with learning difficulties get a sense of urgency and need to get to a toilet very quickly. I would ask the Minister to look at a system in which private premises that were not “wholly or mainly” a public lavatory facility, as in the clause, but that had a toilet—perhaps a coffee shop—and made it available to the public for a specified number of hours or whatever got some business rate relief for providing that public service.
Mr Thomas
I rise to make two points. It was interesting to hear the contribution of the hon. Member for St Austell and Newquay on how he thought we got to this point. I commend him for his successful lobbying, but I wonder why Ministers could not have gone a bit further. There are already business rates exemptions for agricultural land, presumably because of its importance to rural communities and to the countryside that we all value. Given the growing concern about the long-term financing of public toilets, one wonders whether it is time to dwell on the question of whether public toilets should be given full business rates relief. I have to be honest; I have not looked into the issue in detail yet, but it is a question worth posing to Ministers.
I come back to the example of the Threlkeld village hall coffee shop, which I spoke about before, and which my hon. Friend the Member for Wolverhampton South West tempted me to flag up on this issue. It has toilets that are used by members of the public, predominantly when they come in to use the coffee shop, but it is the only place in the community other than the pub where they might do so. The village hall is a social enterprise. Would business rates relief be on offer to that part of the premises that has toilets, if members of the public can use them?
Mr Jones
I will deal with the hon. Gentleman’s point in a moment. First, public toilets contribute to high-quality public spaces, and are an important amenity for our communities, as has been said in this debate. They help people, particularly older people, to enjoy what our country has to offer, and to continue to live an active life. That is why we are introducing a measure through clause 9 that will allow local authorities to use their discretionary powers over business rate relief on publicly owned toilets. As my hon. Friend the Member for St Austell and Newquay said, Conservative MPs, particularly in Cornwall, lobbied the Government significantly on this issue. I am sure that he is delighted that the measure is being put into legislation.
Under current legislation, a billing authority cannot grant discretionary relief to properties occupied by a local authority. To pick up on the point made by the hon. Member for Wolverhampton South West, local authorities can grant rate relief to places where owners of private property allow the public to use their conveniences. I hope that that reassures him.
Clause 9 will amend billing authorities’ discretionary relief powers, which are set out in section 47 of the Local Government Finance Act 1988, and will give them the power to grant discretionary relief to publicly owned toilets. The clause will help councils to keep toilets open, and importantly, it will pave the way for savings by parish and town councils, which often bear the burden of maintaining such facilities. Where a billing authority decides to grant discretionary relief, the relevant business rate liability will be reduced or removed altogether.
I will pick up on a couple of points made. I did not catch the name—
Mr Jones
It is kind of the hon. Gentleman to assist me. That sounds to me like it might be a charitable organisation. If that is the case and the property is used wholly for charitable purposes, there is a fair chance that it would qualify for charitable relief, which would reduce the rating liability by 80%. It might be worth him looking into whether that is the case.
I will not go into what the hon. Member for Oldham West and Royton said about the principle of whether NHS hospitals and so on should be subject to business rates. We will debate that fully when we deliberate on a new clause. I certainly took on board what he said about the challenges in some places where there are no public toilets at all; that is a fair point. One of the places that he mentioned was Merthyr Tydfil, which he will know does not come within the remit of the Bill, as it is under Welsh jurisdiction. He will be interested to know that it is my understanding that Wales does not have such a rate relief scheme for public toilets. Perhaps the Labour Administration in Wales might want to take a leaf out of this Parliament’s book and consider implementing a similar scheme.
This is a highly beneficial clause that will support local authorities in keeping valuable public toilets open by reducing the cost of maintaining them, thus preserving important amenities not just for local people but, in many areas, for tourists and visitors. I commend the clause to the Committee.
Question put and agreed to.
Clause 9 accordingly ordered to stand part of the Bill.
Clause 10
Central non-domestic rating: other reliefs
Amendment made: 40, in clause 10, page 12, line 32, at end insert—
‘( ) In section 67 of that Act (interpretation: other provisions), in subsection (7), for “and 54ZA” substitute “, 54ZA, 54ZB and 54ZC”.’—(Mr Jones.)
Section 67(7) of the Local Government Finance Act 1988 provides that certain provisions of that Act apply on a particular day if they apply immediately before the day ends. This amendment extends section 67(7) to cover the new sections 54ZB and 54ZC inserted by clause 10.
Question proposed, That the clause, as amended, stand part of the Bill.
Mr Thomas
I rise to make a contribution that is in the same spirit as those made by the hon. Members for Thirsk and Malton, and for Northampton South, in the Communities and Local Government Committee debate on 100% business rates retention. I will raise the issues that they might feel intimidated about raising, or be reluctant to raise. That Committee heard concerns about the central list and agreed that Government and local authorities could together consider whether properties on the central list should continue to be held by central Government, and how the revenue generated could be better used under 100% retention. It made the point that it had received representations from throughout the local authority world criticising the central list’s lack of transparency and urging that the revenue from the central list be distributed among authorities. A number of councils said that the accounting was opaque, and London Councils suggested that the basis for including properties on the central list was unclear.
That was perhaps most nicely summed up by David Magor of the Institute of Revenues Rating and Valuation:
“The central list is a mystery; no one knows what the central list is spent on. Is it the Chancellor’s central pot?”
Perhaps that is how Surrey is being sorted out. He continued:
“The central list should be distributed to local government because it is part of rate income. There is no logical reason why the central list should continue in its present form.”
The Minister will by now have gone through the Select Committee report and had time to reflect on the Committee’s concerns about the operation of the central list. I express those concerns, but recognise that clause 10 seeks to ensure that properties on the list can qualify in future for charitable, empty property and telecoms relief. What impact will that have on the approximately £1.5 billion raised in business rates annually, and on the central list? Presumably, were the £1.5 billion to be depleted significantly as a result of all those additional reliefs, there might be consequences for the redistribution of resources among councils. I will not go into the concerns about other impacts on the pool of money raised from business rates, or the scale of the cuts to the revenue support grant, but it would be helpful to hear what estimate Ministers have made of the impact of clause 10 on the £1.5 billion pot.
I have received representations from the Charity Retail Association, which is responsible for representing all charity shops in England. It suggests, instead of the 80% charitable relief to which the Minister referred in discussion on clause 9, 100% relief to ensure no postcode lottery. Some charity shops get 100% as a result of the additional 20%, which is discretionary, being given to them by their authority, but not all do. The association asks for 100%. What do Ministers think of that concern?
Rob Marris
Does my hon. Friend agree that 100% relief for charities would be consonant with what someone—I cannot remember who—called the big society?
Mr Thomas
I will not go down that particular route—you might get annoyed with me, Sir David, and I would not want that to happen—but my hon. Friend makes a good point.
It is worth remembering that the central list primarily focuses on utilities or property belonging to the formerly nationalised industries. One thinks about the privatisation of the water industry, for example, where in general water companies are mostly owned by private equity investors that have taken on billions of pounds of debt, often in the form of loans from shareholders, which the chair of Ofwat as recently as 2013 suggested was morally questionable, in order to avoid corporation tax costs. One wonders whether it is entirely appropriate for such companies to benefit from reliefs in the context of concern about water companies and other privately owned utilities not paying as much corporation tax as they might. It is in the spirit of inquiry that I ask those questions.
Mr Jones
This clause, and clause 11, are concerned with the operation of one of the less well known parts of the business rate system: the central rating list. Most properties are assessed for business rates on the local rating list for the authority where they are located. In cases where a property sits over the boundary of more than one local authority, the valuation officer will place that property into the rating list they believe contains the largest part of the property by value.
Those well established and common-sense rules deal satisfactorily with most properties. However, some properties are less suited to those rules. Network properties, such as the electricity, gas, water, railway and telecom networks, may span many local authority areas. It is of course very difficult—or impossible—to say into which local list those networks should fall, and it would be equally difficult to break up the rating assessments into individual local areas. Therefore, those networks are instead placed on a central rating list maintained by the central valuation officer and held by the Secretary of State.
The clause introduces charitable and unoccupied property relief to the central list. I would like to say that these are not new reliefs; the same properties on local rating lists have been entitled to relief since business rates were first introduced in 1990. We are merely replicating those reliefs on the central list. It is of course fair that properties that would be eligible for relief on local lists should also be eligible for relief on the central list. Introducing charitable and unoccupied relief to the central list will therefore allow us to include any properties on the central list that may become eligible for such reliefs.
A couple of questions were asked. First, in relation to charity relief and whether we will look to extend that, as I said a little earlier, all taxes are generally under review, but there are no plans at this time to change the system of charitable reliefs.
The hon. Member for Harrow West asked about the cost of the changes we want to make to the central list. We are not aware of any existing properties on the central list that may be eligible for charitable or unoccupied relief. The canal network was on the central list when it was occupied by the British Waterways Board, but since it has passed to the Canal & River Trust it has been on the Birmingham local list, where it receives charitable relief. The extension of these measures to the central list will allow us, where appropriate, to move on to the central list properties that may be eligible for relief.
Mr Jones
I thank the hon. Gentleman for that question. As I said, we are looking to bring these provisions into line with the provisions on the main rating system and the main local list, but we are not aware of any existing properties that may be eligible for charity or unoccupied reliefs at this time. On that basis, I will leave it there in the hope that clause 10 will stand part of the Bill.
Question put and agreed to.
Clause 10, as amended, accordingly ordered to stand part of the Bill.
Clause 11
Central non-domestic rating lists
Amendment made: 41, in clause 11, page 15, leave out lines 7 to 9 and insert—
“(8B) In relation to England, a hereditament falls within a description or class on a particular day if (and only if) it falls within the description or class immediately before the day ends.”;”—(Mr Jones.)
This amendment makes it clear when a hereditament is to be regarded as falling within a description or class for the purposes of Part 3 of the Local Government Finance Act 1988.
Question proposed, That the clause, as amended, stand part of the Bill.
Mr Thomas
I have some brief questions on clause 11. According to the explanatory notes, Ministers are apparently worried that maintaining the central list would give rise to an increasingly heavy process and regulatory burden. It would be good to hear an example from the Minister to understand the justification for that concern. The fear, rightly or wrongly, is that it could affect the business rates income of a local authority adversely if a large property were moved on to the central list from the local list. What estimate, if any, is there for the likely annual impact on the central list and what arrangements for consultation between the local authority and the Department would there be before a property was moved off the local list and on to the central list?
New section 52A(2), which clause 11 inserts into the Local Government Finance Act 1988, allows separate rateable values for separate types of property to be attributed to separate types of property in the future. Can the Minister give an example of when and how that new power might be used?
Mr Jones
Clause 11 is concerned with the administration of the central rating list. The central list mostly comprises network properties that span many local authority areas and so are less suited to being on local rating lists. The list itself is a public document and is readily available to view on the Valuation Office Agency’s website. It includes ratepayers such as Network Rail, BT and National Grid together with their rateable value. It is clear and transparent which ratepayers and networks appear on the central list and what they pay in business rates. The rates bills on the central list are collected by my Department and directed for the benefit of local government.
When the system was first introduced in 1990 there were fewer companies than now operating a smaller number of large utility networks and infrequent changes were needed to the central rating list. However, we increasingly find that we have to make several minor administrative regulations a year just to maintain the accuracy of the existing central rating list. New operators also continue to join such sectors with new properties and it is proving increasingly difficult to keep pace with these changes using the existing system of regulation. As a result, some of the new network properties, and especially those in the telecoms sectors, have been assessed on the local rating lists instead of the central rating list. The choice of which local list to place such networks on is difficult and often the subject of challenge. In turn, that has created uncertainty and instability for local government revenues. As such, the current operation of the central rating list does not provide us with a solid foundation on which to move to 100% business rate retention.
That problem has been recognised by local government. The sector has called for reform in this area. Therefore, the Government intend to devise and operate a transparent policy for which properties should be appearing on the central rating list and then apply that policy consistently from the outset of the 100% retention scheme. That will provide certainty for both ratepayers and local government and is a reform that has been welcomed by local government.
Mr Jones
The hon. Gentleman raises a very important matter. There has been a catalogue of challenges with IT projects down the years, most notably the NHS supercomputer, which reportedly cost the Government of the day about £13 billion and never worked. We had IT challenges with regard to police and fire control centres—again, the system never worked and was finally aborted. We do have to be careful and cautious, as the hon. Gentleman points out. The measure in the Bill, however, will not lead to a full-blown programme, but will enable HMRC to carry out the early design work and engagement to develop proposals for how that particular principle of providing digital services can be developed. Given the spirit of my explanation, I hope the hon. Gentleman is reassured that this is about early design and engagement rather than entering into a full-blown IT project which, as he rightly pointed out, can often be challenging.
Question put and agreed to.
Clause 14 accordingly ordered to stand part of the Bill.
Clause 15
Power to impose infrastructure supplements
Question proposed, That the clause stand part of the Bill.
Mr Thomas
I support the clause, but will the Minister give some clarity on what seems to be an unfolding situation with a vital piece of national infrastructure: Crossrail 2? According to a report in yesterday’s Evening Standard, Government insiders—we do not know whether they were called Nick on this occasion—revealed concerns about stumping up half the current £30 billion, claiming that Ministers were going cold on the idea. The remainder of the approximately £32 billion cost would be funded by London fare payers, taxpayers and London businesses.
We know that the previous Chancellor, before the current Prime Minister sacked him for incompetence, gave a green light in last year’s Budget but, sadly, without a detailed plan for funding, timing or legislation. You will know, Sir David, that Crossrail 2 would increase the capital’s rail capacity by 10%, bringing an extra 270,000 people into central London while cutting journey times at the same time.
In the context of London’s expected rising population of 1 million over the next 10 years, more investment in London’s infrastructure is clearly hugely important. Data have been released to try to persuade Ministers to continue with the previous Chancellor’s commitment, with the suggestion that without Crossrail there will be a meltdown at a minimum of 17 stations across the tube network. In the context of clause 15, can the Minister give any reassurance to a former Member of this House, now our excellent Mayor of London, Sadiq Khan, that the Government will continue to stump up their 50% for Crossrail 2?
Mr Jones
The Government are paving the way for the election of combined authority Mayors. They will be the focal point for delivering real economic benefits across their areas. Six areas are preparing to elect Mayors in May. This means that, subject to parliamentary approval, a third of people in England will have a directly elected Mayor, like the Mayor of London, on the principle that they will create jobs, improve skills, build homes and make it easier to travel across their areas.
While I am on that point and in response to the hon. Member for Harrow West, the business rate supplement for Crossrail is expected to generate income of about £4.1 billion towards the total estimated cost of that project of £15.9 billion. It is difficult for me to comment on speculation and supposition, particularly from an unnamed and unverified source, so I will not enter into that today, apart from saying the Government have positively supported the Crossrail 2 project from the outset.
The Mayors will work with partners across their areas to bring a louder voice, strong co-ordination and clear accountability for local people. They will be responsible for driving economic growth and regenerating their areas. We are devolving specific power and budgets to help them to achieve just that. One key way that Mayors will deliver on that is through strategic investment in infrastructure. Each mayoral combined authority has a long-term investment fund of up to £36.5 million a year. To boost that investment, we want to give Mayors a powerful fiscal tool to raise up to 2p in the £1 to invest in infrastructure that will benefit local businesses and the broader community. The clause sets out that relevant authorities can impose a settlement and confirm who will be subject to it and for what kind of project it can be used.
Mr Thomas
I beg to move amendment 29, in clause 16, page 17, line 5, at end insert”, or
(c) any other billing authority.”
This amendment would enable any billing authority to impose an infrastructure supplement on non-domestic ratepayers in its area.
Having made clear my support for the power to impose an infrastructure levy, I come to the question of who should be allowed to impose it. It appears that Ministers are determined that only authorities with a Mayor should be allowed to do so. That seems to us to be a grotesquely unfair act of discrimination against local authorities that need investment in infrastructure but have decided for their own local reasons that a Mayor is not a suitable way forward for them.
One thinks in particular of the authority of Cornwall, which the hon. Member for St Austell and Newquay will know has done a deal with the Government without needing to elect a Mayor. Cornwall Council made representations to the Select Committee on Communities and Local Government, on which the hon. Members for Northampton South and for Thirsk and Malton sat. Cornwall Council felt that it would be at a disadvantage if the provision were introduced and it was not allowed to benefit from it.
In addition, the Select Committee received evidence from the Chief Economic Development Officers’ Society. It is worth bringing attention to the significant bit of that evidence. CEDOS said:
“In the move to 100% business retention, it is essential for all areas, as far as possible, to have a level policy playing field on which to drive economic growth. In our view, the intention that only areas with elected city-wide mayors will be able to add a premium to business rates to pay for new infrastructure is fundamentally at odds with this. We believe this power should be available to all areas with the provision that a majority of all businesses should agree, which we think is a reasonable one.”
The Select Committee went on to urge the Government to consider with local authorities whether, by placing areas without a directly elected Mayor at a disadvantage, the proposal conflicts with the aim of 100% retention.
I can think of a number of areas—I return to the example of Allerdale Borough Council—that need significant investment in infrastructure from time to time and where the power to introduce an infrastructure levy could make a significant difference to economic growth in the area. Let us take the example of flooding. In the past, Allerdale Borough Council has had a number of significant floods in its area, and it has been fortunate to secure grants to help with flood prevention measures. However, given the pace of climate change, one could easily imagine a scenario in which funding for further work is required to prevent flooding and to allow businesses to operate effectively. Without the infrastructure investment, the local authority might become less attractive to businesses. It is not impossible to envisage a situation in which businesses wanted to move out of the area. Indeed, one area that was the victim of significant flooding in Allerdale is the area that most large businesses are attracted to as a base.
I offer that as an example—as far as I know, Allerdale Borough Council does not have a Mayor and has not done a devolution deal with the Government, but it will have infrastructure needs. Surely it should not be left at a disadvantage compared with authorities that have a Mayor.
Rob Marris
To give my hon. Friend another example, over in East Anglia, Waveney might suffer from coastal erosion.
Mr Thomas
My hon. Friend makes a good point; it is a shame that the hon. Member for Waveney is not here to help us to think about the impact on coastal areas. When we talk to businesses—as the Opposition do regularly—infrastructure investment is one of the areas that they continue to cite as crucial for future economic growth. We are all aware of the regional inequality in this country and the need to try to generate further economic growth at a faster pace outside London and the south-east.
I am not surprised that the Chancellor of the Exchequer would want to go to Manchester, which is one of the leading districts where Labour authorities are leading the charge to help businesses. However, one needs to recognise that the advantages that Manchester has pursued—rightly, in terms of a levy for the purposes of investment in infrastructure—would also benefit authorities elsewhere in the north, the north-west and the midlands, and no doubt in Cornwall, Northamptonshire and other areas. This is a question of fairness and equality and of investment in areas that do not have a Mayor. I look forward to the Minister’s attempts to justify why authorities that do not have a Mayor should be denied the opportunity to benefit from this type of infrastructure investment.
Jim McMahon
This amendment is one of the most important to the Bill. A number of amendments have been crucial for obtaining information from the Government, but this one is absolutely critical to equality and the ability to grow our local economies.
The town that I represent is part of a combined authority. It has been part of joint working across Greater Manchester since 1986. I was the first leader of the council to sit on the new combined authority that had additional powers from Government; that combined authority is due to elect a Mayor in May. It is playing the game in the way that the Government set out, but that does not mean that every town in that area is able to develop its local economy in the way that it ought to.
Let me give an example. We already agree across 10 boroughs on the priority projects for the city region. The bar is set quite high: the question is, what will benefit 2.6 million people and the wider economy? More localised infrastructure investments never quite make it up the list of priorities, because they do not benefit the wider city region significantly enough, though they are extremely important locally. I am talking particularly about the remediation of brownfield sites that have been lying derelict.
Jim McMahon
I am not suggesting that at all. I am saying that differential devolution is being proposed—there is some devolution to Mayors in combined authorities that is not on offer to other billing authorities—and that does not create a relationship of equals. For instance, in Greater Manchester the Mayor would be able to introduce a 2% infrastructure levy; if the local authority had the same power, that would create a more level playing field and allow a mature debate about how that might be teemed and ladled. For instance, it might be agreed across Greater Manchester that 1.5% could go into the central pot for the city region and 0.5% retained locally for more localised infrastructure investment. Alternatively, under the provisions of the combined authority order, Oldham could choose to opt out of the combined authority. It could decide that the city region was not working for it, give the required notice period and come out. However, it should not then be disadvantaged by not having the retained powers that the Mayor has, when at that point, the Mayor would not be representing the area, while directly elected councillors would. That equality is what we are trying to get to.
My hon. Friend the Member for Harrow West, the shadow Minister, has gone into detail on the number of areas that have perhaps not got over the line and agreed to a Mayor, but there are more than 20 million people living in areas that are not even part of any mayoral discussion. Apart from the areas that have deliberately chosen not to have a Mayor, there are many areas that do not have the access to Government to even have that conversation. Are we saying that their economies are less important because of that? It strikes me as an odd approach, if we believe in localism and growing the economy locally, because let us be honest, the days of an employer opening a massive factory that employs 5,000 people in a community are long gone in many areas. Economies will grow from small and medium-sized businesses developing in the community, and hopefully growing in scale. However, if we do not plant the seeds to enable that, then I am afraid that we are saying that towns such as Oldham, which have weak economies that have not been rebuilt, will be left behind, and that is not good enough.
I can begrudgingly accept that the Mayor is a means to an end—I do not think that having a Mayor should be a requirement of a combined authority deal, although that is the game being offered and many areas are playing it—but I absolutely believe that local freedoms and local economic development powers should be available for every corner of the country, not just the hand-selected parts that have direct access to Department for Communities and Local Government civil servants and Ministers. I put it strongly: this is coming not just from Labour Members, but from a lot of Conservative council leaders, who are sick of this very urban/northern/midlands view of economic development. They feel that their area is being left behind by their own Government.
Jim McMahon
I absolutely agree. I attended the District Councils Network conference, and exactly the same message was coming from our district councils, which are billing authorities as well. They are saying: “We accept that the Government want to grow the city regions. We accept that that will be a priority, and we do not begrudge that. What we begrudge is being left behind and having no solutions for our localised economies.”
Throughout this process, the Government, almost on a point of principle, have refused every amendment suggested, regardless of its merit, the logic or the evidence base referred to. This amendment would galvanise support for the Bill from right across the House and across local government. It is the right thing to do. It would offer every part of the country the chance to grow and develop in line with local circumstances, and it would show everybody that the Government were serious about letting go.
I plead with the Minister; this is what council leaders have told us they want. Of all the amendments that he might want to make concessions on, this is the easiest one to give away. It is the most logical, and would galvanise support across every political shade of local government.
Mr Jones
I hear what the hon. Gentleman says, but I was talking about a combined authority area, not an individual authority area.
We must not lose sight of the other options available to councils for delivering additional benefits to and growth in their areas, though we seem to have done so to an extent in this debate. For example, business improvement districts may be established in every area of England. The Bill also includes provision for property-owner business improvement districts throughout England, not only in London. Going back to the point about elected Mayors in individual authorities, we already have provisions enabling the introduction of a business rates supplement to the levy for investing in projects that promote economic growth and development. Councils already work with businesses using existing resources to deliver a positive economic environment. The local growth fund is another mechanism used by local enterprise partnership areas and local authorities in that regard.
Having reflected on the points that I have made, I am not sure that I will completely convince the hon. Member for Oldham West and Royton, but I encourage the Opposition to withdraw the amendment.
Steve Double
I note with interest the hon. Gentleman’s dig at Cornwall, but Cornwall is incredibly proud to be the only rural area that has had a devolution deal with the Government. We see that as a sign of the Government’s support for and confidence in Cornwall. The deal is not the end of the story. We do not know where it will take us, but in Cornwall, rather than putting down the devolution deal we have been granted by the Government, we celebrate it.
Mr Thomas
I am not doing down devolution at all; I am merely representing the concerns of the hon. Gentleman’s council, in a way that he is not doing, about its exclusion from the ability to levy the infrastructure supplement. I would applaud his representing his constituents and his council’s concerns properly, and his wanting to see the devolution deal that his council has negotiated enhanced in the way that we are suggesting.
The Minister has made an attempt to justify the exclusion from the measure of all authorities that do not have a combined authority and a Mayor. I have to say that it was not a convincing performance. Given the number of representations that we have heard from county councils and district councils that are frustrated with the insistence of the Secretary of State and the Minister that there has to be a Mayor before they may have this power, we will speak for them in a way that the hon. Member for St Austell and Newquay will not speak for his constituents. We will speak for councils in Swindon in a way that the hon. Member for North Swindon will not. We will speak for the residents of Torbay, who need investment in infrastructure, in a way that the hon. Member for Torbay will not.
Justin Tomlinson (North Swindon) (Con)
To be clear, Labour does not speak on behalf of the people of North Swindon, because I gained the seat, and Labour lost control of the council when it put up council tax by 43% in only three years. That disgraceful situation has meant that we have had a blue town since 2003.
Mr Thomas
When the residents of Swindon hear that there was the opportunity for investment in infrastructure but the hon. Gentleman voted against it, I suspect that a red Swindon will be closer. We will vote for equality—we will press for a Division on this amendment.
Question put, That the amendment be made.
Mr Thomas
I beg to move amendment 44, in clause 17, page 17, line 25, leave out paragraph (a).
This amendment would enable funds raised through the infrastructure supplement to be spent on housing.
In introducing the power to introduce an infrastructure supplement, clause 15 states:
“The purpose of imposing an infrastructure supplement is to raise money for expenditure on a project that the authority is satisfied will promote economic development in its area.”
Amendment 44 is completely in line with that stated purpose as it deletes clause 17(3)(a), which explicitly prevents relevant authorities from spending the sums raised through an infrastructure supplement on housing.
Given the fanfare that accompanied the long-awaited housing White Paper earlier this week, it might surprise some observers that, while Ministers claim to be bold and radical in tackling the housing crisis, they are failing to take this opportunity to enable mayoral combined authorities and the Greater London Authority to invest in housing, which would in turn promote economic development. Sadly, it is all too familiar for those of us on this side of the Committee who know that Ministers’ rhetoric does not always match reality.
Committee members know that I like to be pithy and get to the point, and I have checked the dictionary so that I can be precise in my use of language on the amendment. The Oxford English dictionary defines infrastructure as:
“The basic physical and organizational structures and facilities (e.g. buildings, roads, power supplies) needed for the operation of a society or enterprise”.
There is nothing in that that makes me think that housing might be excluded from any appropriate definition of infrastructure spending. Increasingly, businesses see housing as vital to their future growth.
There may be some Committee members who, for some reason, do not take an interest in London’s affairs. They might not have come across a wonderful business membership organisation called London First. Its mission is to make London the best city in the world to do business in. As a London MP, I have always known London First to do an excellent job in reflecting its members’ priorities. Of the two major campaigns that London First is currently running, one relates to the urgent need for action to expand airport capacity in London and the south-east, and the other is a campaign to double house building in the capital to 50,000 homes a year. As London First explains,
“the capital has a serious housing shortage that is starting to limit its competitiveness. Substantial increases in house prices and rental costs mean people from all walks of life are struggling to find accommodation.”
It worked with the Confederation of British Industry and the Federation of Small Businesses to develop the campaign. It is worth dwelling on several of the key findings of their survey of members. Some 68% of the members who responded to the survey were worried about the impact that a shortage of housing and high prices is already having on their ability to recruit and retain staff; 75% were concerned about the future impact that rising housing costs will have on their ability to recruit and retain staff; and 70% believe that the housing crisis will affect London’s future economic success.
Mr Jones
All I can say is that we are damned if we do and damned if we do not. If we do not offer up significant funding streams to support projects for local areas, Opposition Members criticise the Government. When we do offer up significant funding—the £2.3 billion in the housing infrastructure fund is indeed significant—we are again criticised, so I am not sure what the Opposition want. I would encourage areas, as I hope the hon. Gentleman will encourage his area, to look to the fund to unlock new housing that is badly needed across the country.
Having reflected on the points that have been made, I am not convinced that amendment 44 is worth supporting. I therefore ask the hon. Member for Harrow West to withdraw the amendment.
Mr Thomas
I have heard what the Minister has said. I have also heard the response of my right hon. Friend the Member for Wentworth and Dearne (John Healey), who speaks on housing for Her Majesty’s loyal Opposition, who described the housing White Paper, quite accurately, as less a White Paper and more a white flag. That encapsulates the reality of the Conservative party’s approach to housing. The Minister has missed an opportunity by rejecting amendment 44 out of hand, but I do not seek a Division on the amendment at this point, so I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Rob Marris
This is a somewhat confusing clause, because it is entitled “Use of money raised by infrastructure supplements”, but what it goes into, in subsection (3) for example, is what the money cannot be spent on. Now, I understand that. I listened to the Minister—as an aside, I have to say that I was not convinced by what he said about housing and I hope he will reflect on it, but I understood what he said. This is part of the forbidden list, which runs to six factors in subsections (3)(a) to (f). However, to come back from that a bit, we have a problem, in that clause 36—definitions and interpretations—does not tell us what infrastructure is. I hope the Minister can tell me, either now or later, where in the Bill the definition of infrastructure is, because I cannot see it—it might be there, but I cannot see it. At the moment, we seem to have a Bill that does not say what infrastructure is and says only what the money cannot be spent on.
I am aware that clause 33—we will get to it later, Sir David, but I have to refer to it now, as it is very germane—refers to the guidance that can be given by the Secretary of State on what money can be spent on. The Minister gave us a little indication a few moments ago, because he referred to infrastructure projects—the use of the money that would be permitted under clause 17—to create, to quote him, “a better economic environment”. He then said something that, again, I cannot see in the Bill—he may correct me; it might be there, and if it is not, it sounds as if the Secretary of State would be minded to have it in the guidance. The Minister said that the projects would have to be “additional”, and that the money would be spent, to quote him again, on something that would “not otherwise get built”.
The Minister, like me, is a Member of Parliament for the west midlands, although I am in the urban core of the west midlands, directly under the combined authority. Nuneaton is in Warwickshire, which is a bit hokey-cokey about the combined authority, with its local enterprise partnership and so on, but Wolverhampton is squarely in there. As a west midlands MP who is astute about what is going on, the Minister will be aware that a subject of political debate in the mayoral elections for the West Midlands Combined Authority is whether it should buy the M6 toll road.