Business Rates (North-East)

Debate between Lord Wharton of Yarm and Helen Jones

Tuesday 25th October 2011 Westminster Hall

[James Wharton]

The excellent Conservative mayor of North Tyneside, Linda Arkley, who is doing a superb job and is no doubt looking forward to her re-election by popular acclaim next year, has raised some concerns as part of the consultation process on behalf of the people whom she represents. I do not accept that it is a criticism of the consultation; it is feeding into the consultation in the hope of influencing the result in a way that will benefit the people whom she represents. The good mayor that she is, she is doing the right thing. I am delighted that the hon. Member for North Tyneside (Mrs Glindon) has given me the opportunity to raise that point.

Another important point, apart from the consultation, is that there should be no effect on what businesses pay. When the policy is introduced, we will not see business rates rising. Levels will be set, as I discussed briefly in an exchange with the hon. Member for Hartlepool, to ensure that the funding that councils receive at the point at which the policy is introduced is kept level. No council should initially be disadvantaged by the introduction of the policy. [Hon. Members: “Initially.”] I fully accept that. It will then be a responsibility for local authorities to engage—within a framework that we must all see as fair and to which we must contribute to ensure that it is fair, so that the rules do not disadvantage any area—with that new system, grow their local economy as best as they can and reap the benefit.

What are the Government going to do? They will set a baseline, tariffs and top-ups. Tariffs and top-ups will mean that wealthy areas—we have heard of some of the wealthy areas that take a lot of money in from business rates—will see some of that money taken away from them and redistributed, often to councils such as those that many of us here today represent in the north-east. The top-ups will be the benefits that some of our authorities receive.

There will be a levy for disproportionate benefit, so if a council sees a huge rise in its business rates that is disproportionate to the benefit that that council should receive, that will be redistributed again in some way.

[Helen Jones (Warrington North) (Lab)]

The hon. Gentleman should accept that we should be specific. The Government’s proposal is to take back not the disproportionate benefit, but a share of the disproportionate benefit, which is an entirely different thing.

[James Wharton]

That is a fair point. As part of incentivising growth, it is important that local authorities are able to keep some benefit. Residents who have a large industrial complex built in their back yard may feel entitled to a share of the income that that brings to the Exchequer. There will be a levy that will allow for a redistribution of disproportionate benefit and for a safety net. For example, one of the questions raised by hon. Members was, what if a large industry disappears or if a large manufacturer or retail site closes down in the north-east? What about that potentially catastrophic effect? There is already in the consultation a potential mechanism for addressing that through the levy, which will create a pot of money that councils that find themselves disadvantaged will be able to tap into. We look forward to hearing from the Government how they will administer that and what their proposals for that are.

There will also be five-year revaluations to ensure that the system is seen to be and remains fair. Hon. Members have raised concerns about the frequency of revaluation, and the Government should look at those. The Government should also consider the balance between providing an incentive and ensuring adequate funding, and more frequent revaluation could form part of that formula. We have discussed the difference between the business rates brought in by retail and manufacturing. Again, that is a fair observation and should form part of the consultation, and I hope the Government will pay attention to that. We have also discussed dependency on small numbers of large businesses; I have just touched on that in my comments. I would like to see more detail of how a levy for disproportionate benefit will help those areas when a large industry or business closes down and potentially impacts local government finances.

Overall, however, the Government are pushing power back down to people, empowering local authorities and communities to take control of and responsibility for the areas in which they live, and incentivising councils to create and foster growth. That should be welcome in the north-east, where we need to see greater private sector growth. I hope that we can have a constructive engagement with the consultation to deliver the best for our region, not simply to score political points, which may appear on Tyne Tees later this evening—one never knows.