HC Deb 15 February 1989 vol 147 cc315-26 3.30 pm
The Secretary of State for the Environment (Mr. Nicholas Ridley)

With permission, Mr. Speaker, I shall make a statement on business rates.

The Local Government Finance Act 1988 provides for a uniform business rate in England and in Wales and for a revaluation of non-domestic property. These changes will take effect on 1 April 1990. The new arrangements will mean the end of wide variations in rate poundages between different areas; and rateable values will be brought up to date to reflect accurately the relative benefits of different types of property in different locations. This will provide a welcome incentive for businesses to expand in the currently less economically buoyant areas.

My right hon. Friend the Secretary of State for Wales and I have considered the Inland Revenue's preliminary sample survey of the likely combined effects of the 1990 revaluation and the introduction of the uniform business rate. The results of the survey must be interpreted with caution: they give only a general indication of possible changes in rate bills from 1990. Subject to that important qualification, the survey suggests that rateable values will increase from 1973 levels by around seven and a half times on average in England and by around eight times on average in Wales.

It is our intention to fix the business rate poundage in 1990–91 so as to raise in real terms broadly the same amount of rates from private business and nationalised industries as in 1989–90. So this increase in rateable values by seven to eight times does not mean that rate bills will go up by seven or eight times. That is because, to secure the same overall yield as in 1989–90, the rate in the pound will fall to between one seventh and one eighth of the present national average poundage. On this basis the poundage would be in the range 30p to 35p if the business rate were introduced today. This means that the average rate bill payable by businesses will be the same as before the change in real terms. But there will, of course, be wide variations in actual bills, depending upon how the rateable value of the particular property changes relative to the average, and whether the present local rate poundage is above or below the average.

The survey suggests that the broad effects of the uniform business rate and the revaluation, taken together, will be that businesses in the north and midlands will tend to pay less, and businesses in southern England will generally face increases. As a general rule, factories and warehouses will tend to pay less, while shops and offices will pay more. Overall, business in the north and midlands is projected to enjoy rate reductions of some £800 million once the transition is complete. In Wales businesses in the valleys will tend to gain, but the shift in burden between the valleys and the rest of Wales will not be very large.

To give businesses time to adjust to their new rate bills, we are proposing transitional arrangements to introduce the changes gradually. Those arrangements will be self-financing. There will be limits on the percentage by which the rate bill for any property may change from one year to the next, for the first five years of the new system at least. For properties in England and Wales facing increases the limit will be 20 per cent. generally, but to help smaller businesses there will be a lower limit of 15 per cent. for small properties, those with new rateable values below £7,500 in London and £5,000 elsewhere. Arrangements in Scotland are, of course, a matter for my right hon. Friend the Secretary of State for Scotland, but he proposes comparable protection for business ratepayers facing increases in rates as a result of the revaluation in Scotland in 1990.

For properties in England due to benefit from rate reductions, I shall decide finally on the percentages by which changes will be phased when I have fuller information in the summer, but present projections imply that limits on annual reductions of 15 per cent. for small properties and 10 per cent. for large would offset the cost of the protection for losers. My right hon. Friend the Secretary of State for Wales will, similarly, base his final decisions on phasing of reductions for Welsh ratepayers on later information, but present projections indicate that slightly higher limits would be sufficient in Wales to offset the cost of protection for losers.

Compared to present rate bills, the percentage increase for losers is greater than the percentage reduction for the gainers because the losers as a group have substantially lower rate bills at present. All these limits are net of the annual change in the rate poundage resulting from the link to the retail prices index, and they are compound, in that, after the first year, the maximum percentage increase or decrease would be calculated from the rate bill in the preceding year.

We wish to give the highest possible priority to preparing fully and promptly for the new business rating system, and have therefore concluded that it would be right, in order to reduce the incentive for business ratepayers, to propose changes in the old 1973 rating list, if the sole purpose is to secure a slightly better position under the transitional arrangements. We therefore propose that in 1990–91 the base liability, to which the transitional limits will be applied, should be calculated using the rateable value in the list today, adjusted only for any changes resulting from ratepayers proposals to amend the value received by the valuation office by yesterday.

Ratepayer proposals to amend the 1973 list received by the valuation office today or in the future, including those posted before today but not received until today, will not be reflected in the transition. Any changes in rateable values in the 1973 list resulting from existing or future proposals made by the valuation office will, however, be taken into account in the transition.

Ratepayers will still have the right to propose changes to the 1973 list, and, if such proposals lead to reductions in value, will get the benefit until March 1990, but not thereafter. They will, of course, have the right to make proposals in relation to the 1990 list.

We believe that business ratepayers as a whole will welcome our intention to concentrate on getting the new system right and thus to discourage further attempts to change rateable values which have stood for up to 16 years.

The powers in the 1988 Act to make regulations are inadequate to facilitate transitional arrangements of the kind I have described. We shall therefore propose amendments to the 1988 Act in the Local Government and Housing Bill. In order to give businesses and local authorities as much certainty about the transition as possible, it is our intention, after consultation, to bring forward amendments setting out the arrangements in the Bill itself rather than in subsequent regulations.

We are today issuing and placing in the Library a consultation paper, which includes the results of the Inland Revenue survey referred to earlier, setting out the details of the transitional arrangements and inviting comments.

Dr. John Cunningham (Copeland)

The Secretary of State has made a long, on the whole vague and generalised statement which is apparently meant to calm fears about what is in store for business ratepayers, particularly in the south of England. It will not do so, because it leaves people in the dark. It does not take us any further, except that the Secretary of State has admitted that the 1988 Act is inadequate to deal with the scale of the increases in their taxes that business people will face.

The idea of a national business tax was always a bad one, but does not the Secretary of State recognise that within one year of the reality of change business people still have no clear or accurate idea about what will hit them as a result of the Government's proposals?

The Secretary of State carefully and partially mentioned a reduction in bills of £800 million in the north. He was far less candid about who would pick up the tab for that. Nor does his statement mention exactly what the increases in bills will be for people in the south. Is it not clear from his proposals that many business people will see their bills double, treble or even quadruple as a result of the proposals?

Why does not the Secretary of State publish exemplifications, or perhaps he will be able to tell us that they are included as worked examples in his consultation paper, which we have not yet seen? I hope that one way or another, either in the consultation paper or in some other way, he will publish real worked examples about the implications of his national business tax. If he argues, as he and his colleagues have done, that rates increases drive out jobs, what are the implications of the increases in London and the south-east for employment in businesses?

Can the Secretary of State say what size of property in London will benefit from his proposals for small businesses? Is not he really talking about an office which will accommodate simply one or two people? Judging by the scale of the figures in the statement, it certainly would not be much bigger than that. Will multiple shop and office owners or occupants gain on each of their premises, and will not that be a distortion of the idea of what he is proposing—to help small businesses?

When the reality of the increases on businesses is realised, there will be uproar. Will the Secretary of State assure the House that the Chancellor of the Exchequer will not use his powers set out in the poll tax legislation to give business a tax holiday at the expense of poll tax payers?

Mr. Tony Favell (Stockport)

What about Cumbria?

Dr. Cunningham

Cumbria does not want the poll tax or the national business tax: I can tell the hon. Gentleman that for nothing.

Is not all this the reason why the Confederation of British Industry says that it cannot support a national business tax, and why the Institute of Directors says: A good local tax must be fair and accountable and the proposal for a uniform business rate runs totally contrary to that principle"? Is not that why the National Chamber of Trade says that a uniform business rate is not acceptable to it, and why the Forum of Private Business says that the Government's rate reform proposals will have a disastrous effect on most of the United Kingdom's small business sector? Is not that why the National Federation of Self-Employed says that a national business tax is most unwelcome?

The Secretary of State should recognise that there is not a scintilla of support for any of this in the business community.

Mr. Ridley

The hon. Gentleman confessed, despite the fact that he had the statement an hour or so ago, that he was in the dark about what it meant.

Dr. Cunningham

That is not true. I did not have it an hour ago, and the right hon. Gentleman knows it. That is a lie.

Mr. Ridley

That was the case yesterday. Yesterday the hon. Gentleman had had the Bill for 10 days, but he 'was still in the dark. He is short on argument—[Interruption.]

Mr. Speaker

Order. I draw the attention of the House to the fact that we have a Committee stage under the guillotine later today, so I must limit the time on the statement. Will the Secretary of State get on with the answer, please?

Mr. Ridley

The hon. Gentleman is short on argument and long on adjectives.

Mr. John Watts (Slough)

On a point of order, Mr. Speaker. I distinctly heard the hon. Member for Copeland (Dr. Cunningham) use the word "lie".

Mr. Speaker

That is unparliamentary, but I did not hear it myself.

Dr. Cunningham

Further to that point of order, Mr. Speaker. The hon. Gentleman is right. In a moment of anger, I used the word "lie" because the Secretary of State said that I had had the statement for an hour. That is not true, and he knows it. I have had the statement for 25 minutes. I withdraw willingly my use of the word. However, I hope that everybody is now well aware of the way in which the Secretary of State deliberately uses misleading statements in the House.

Mr. Ridley

The hon. Gentleman says that he has had the statement for only 20 minutes—[HON. MEMBERS: "Twenty-five minutes."] If he cannot understand it in 25 minutes, he is no damned good—[Interruption.]

Mr. Speaker

Order. I must repeat to the Secretary of State and to the whole House that we have a timetable motion today on the Official Secrets Bill. I hope that we can get on with the substance of the statement, rather than seeking to score party points.

Mr. Ridley

I was hoping to do so, Mr. Speaker. I shall now answer the questions.

First, the Local Government Finance Act 1988 is not inadequate to deal with the problem except in relation to the legal powers contained in it to bring in the transitional schemes. Secondly, the reduction of the rate bills in the five midlands and northern regions, based on this year's figures, would be about £800 million after the transitional period and in the north-west region, part of which the hon. Member for Copeland (Dr. Cunningham) personally represents, it would be £310 million.

I do not know whose side I he hon. Gentleman is on. It is his Labour councils in the north-west that have been extorting that amount of money from business, with disastrous effects on the economy and employment, which are Labour's legacy in the north-west. Our proposals will release business and workers in the north-west from the tyranny that Labour has imposed on them for its expensive and expansionist policies.

All that I have sought to do with the new business rate is to base the tax paid on genuine capital values. The Labour party's policy is to base the taxation of domestic ratepayers on up-to-date capital values, so it can hardly complain because we seek to base business taxation on up-to-date capital values. The survey is in the Library at the moment, so the hon. Member for Copeland can see the information currently available to the Government from the Inland Revenue.

The hon. Gentleman asked about the small business relief. It will be £7,500 rateable value on the new lists in London and £5,000 elsewhere. Businesses included in that will be 60 per cent. of total ratepayers. That is not the small minority that the hon. Gentleman suggested. Of course, it will include multiples because there is no way of separating them out from those who have single small premises. Nevertheless, it would be churlish and stupid of him not to realise that the added transitional relief for small businesses will be welcomed.

Several Hon. Members


Mr. Speaker

Order. I remind the House of my earlier comments. I shall allow questions to continue until quarter past 4 because of the timetable motion. I draw the attention of the House to the concluding remarks of the Secretary of State when he said that the consultation paper was being placed in the Library and that comments on it would be invited. We shall undoubtedly return to this subject on other occasions.

Mr. John Heddle (Mid-Staffordshire)

Will my right hon. Friend acknowledge that industry and commerce in my constituency and in the west midlands will be grateful for the transitional arrangements? Will he confirm that if the Labour Government had not fudged commercial revaluation in 1978 these transitional arrangements might never have been necessary? Will he further confirm that as this increase in rates will be absorbed ultimately in a stabilising of rents at a time when commercial and industrial tenants will have to absorb VAT on rent, fuel and power despite a robust defence against that in the European courts, the five-year provision should be read with at least flexibility?

Mr. Ridley

My hon. Friend is absolutely right. The likely reduction in the rates bill in the west midlands will be about £200 million per year after the transition. My hon. Friend's other point—that the 1978 revaluation should have been undertaken—is absolutely sound. If we do not have revaluation, how can we possibly have a property tax because we shall not know the value of the property?

I confirm what I said in Committee. If at the end of the first five-year transitional period there are still major anomalies and large increases pending at the second revaluation for a significant number of businesses, we have the power to introduce a second transitional scheme for the second quinquennium. Indeed, as it is no concern of the Labour party, I am quite prepared to think of one for the third, fourth or fifth quinquennium, when no doubt we shall still be responsible for such matters.

Mr. Matthew Taylor (Truro)

Does the Secretary of State accept that many smaller businesses will be disappointed that the transitional protection is to limit increases to between 15 and 20 per cent. when they have been pushing for a limit of 10 per cent.? Does he agree that it is difficult for smaller businesses to make up that sum annually, especially if they are shops? Will he accept that he was wrong to suggest that only areas in the north have problems of poverty, because many rural areas also have such problems and they have deliberately held down the national business rate and their provision of services to help with employment? Businesses in Cornwall will be disappointed that the national business rate will mean that they will not only have to pay increased rates but continue to sacrifice services.

Mr. Ridley

If we had a tax based on property—after all, rents tend to be based on property values—we would achieve a better distribution of business if we valued the property and charged the rent, and in this case the rates, on the true value of the property. I do not believe that small businesses will suffer with the transitional arrangements because those that are paying far too much at present are severely disadvantaged against their competitors. It is right from the point of view of fair competition that small businesses, in whatever part of the country they are located, should pay the tax based on the true value rather than the value of 16 years ago.

I realise that the south-west is not a gainer from this. However, my point is a true one. If we are talking about a property tax and the Social and Liberal Democratic party is not averse to property taxes, that party cannot quibble at the thought that a property tax should be based on the true value, just like income tax.

Mr. Michael Grylls (Surrey, North-West)

Does my right hon. Friend agree that most sensible businesses throughout the country will recognise that the introduction of a universal business rate is a good step forward and that it will give small independent firms, especially in Labour-controlled areas, protection from irresponsible Labour councils, which have so often done their best to put such firms out of business?

I thank my right hon. Friend for listening to the representations made by the small firms organisations that I brought to see him. The fact that he listened and has introduced these transitional arrangements is something to be pleased about. However, if there are any problems with this, will my right hon. Friend listen again to any representations that are made on his consultative paper because obviously he, I and everyone else do not want to damage any of the firms that are, at last, doing so well in this country?

Mr. Ridley

I entirely agree with my hon. Friend, and I am grateful for what he said. It might bring the point home if I say that the reduction in rates in a local authority such as North Tyneside will be as much as 26 per cent. after the transitional period. Rates are one of the chief reasons for the appalling unemployment problems in such an area. I also agree that it was right to make a specially slower transitional period for the smaller businesses, and Conservative Members who have argued that case have made the case sufficiently well for the differential that I have announced today.

Mr. Donald Anderson (Swansea, East)

As there is a separate business rate for Wales, was there any reason in principle why there should not be a separate statement for Wales? The Secretary of State said that the shift in burden from the valleys to the rest of Wales will not be large. Can he give some sign of the scale of that shift? Does this imply a substantially reduced phasing period?

Mr. Ridley

My hon. Friend the Minister of State, Welsh Office will have heard what the hon. Gentleman has said, but I hesitate to say much more about Wales. Little other than crude data are available, either for England or Wales, because we are working only on summary figures from the Inland Revenue. I think I am right in saying that changes in Wales are unlikely to have a great effect on any by-elections taking place there at the moment.

Mr. Robin Squire (Hornchurch)

Will my right hon. Friend confirm that the central purpose behind the introduction of the unified business rate was to reduce rates in areas of relatively cheap property, if only to provide an extra incentive for investment in those areas? Will he also confirm that in recent years, in two parts of London alone, Ealing and Waltham Forest, the increase that businesses faced was massively more than the maximum increase that he has announced today will be faced by businesses?

Mr. Ridley

My hon. Friend is right. The advantages are to those in areas where there has been a deliberate policy of exploitation due to Labour councils trying to extort money from defenceless industry, which cannot even vote. This relief will be welcome in such areas. Its incidence is different in different parts of the country, and in some council areas in the south of England, which are also pressing their business men, there will be benefits as well.

Mr. Harry Ewing (Falkirk, East)

Is the Secretary of State aware that the reference in his statement to Scotland is a gratuitous insult to Scottish Members of Parliament? The Secretary of State for Scotland should have made that reference. It reveals the extent of the betrayal of Scottish industry by Scottish Office Ministers. When the Secretary of State talks about the Labour Government's failure to revalue in 1978, he should bear in mind that he has had 10 years to revalue in England and has done nothing about it. With the revaluation in 1990, Scotland will have had four revaluations as opposed to one in England and Wales. The Secretary of State should be aware that his Scottish Office colleagues have put the petrochemical industry in my constituency at a serious disadvantage compared with petrochemical industries in the rest of the United Kingdom, and the same is true of other industries. Scottish Office Ministers should resign en bloc today for their betrayal of Scottish industry.

Mr. Ridley

I am sure that my right hon. and learned Friend the Secretary of State for Scotland will take note of what the hon. Gentleman has said. Perhaps it will be some comfort for him to know that we are pressing on with aligning the basis of assessment for rates as between Scotland and England, which is the fundamental problem in this respect, and it will not be long before I am able to announce changes to the decapitalisation rate, which is again different as between Scotland and England. I hope that those two moves will, between them, be a big step towards achieving a better balance between the treatment of businesses in Scotland and Wales.

Mr. Allan Stewart (Eastwood)

Does my right hon. Friend agree that Scottish Office Ministers have the fullest support of Conservative Members? Does he also agree that the reason why certain sections of Scottish industry have problems is that we have somewhat perversely pursued an independent and separate rating system? Opposition Members should bear that in mind. Can my right hon. Friend say anything more about the progress that is being made in the joint talks between the assessors in Scotland and the Inland Revenue in England? There is some concern that progress has not been as fast as it might have been.

Mr. Ridley

I confirm that the two problems with which we are grappling in relation to the difference between Scotland and England are the basis of assessment and the decapitalisation rate. As I have said, the Government hope to make a reasonably early announcement about the latter. However, the former requires two different sets of valuers or assessors to reach an agreement about the best practical means of going about their business. I do not have direct control over that. I hope that the two sets of valuers will hear what my hon. Friend said and will speed up their discussions to agree a common basis. I am sure that the English would not wish to have the Scottish system imposed upon them any more than the Scots would want the English system imposed on them.

Mr. Andrew Welsh (Angus, East)

The Secretary of State said that there will be a comparable measure for Scotland. Will he confirm that that would still leave Scottish businesses with a massive disadvantage built into the system? Is he aware of the effects of water rate changes which will add burdens of 100 per cent. or more to Scottish businesses in comparison with their English competitors? Does he accept that the measure that he is bringing forward is bad news for Scotland because of the failures of the Scottish Office? When can we expect a statement from the Scottish Office?

Mr. Ridley

If the hon. Gentleman looks carefully at the figures, I suspect that he will find that there is another problem. Scottish local authorities spend even more than Labour-controlled English authorities.

Mr. John Butterfill (Bournemouth, West)

I thank my right hon. Friend for honouring the commitment which he gave me in Committee on the Local Government Finance Act 1988 when I withdrew my amendment about small businesses. Many small businesses will be pleased to hear my right hon. Friend's statement, but he will appreciate that the rateable value limit which I suggested in my amendment was somewhat higher than the one he has suggested today. I know that my right hon. Friend's figures are based on estimates, but if there are anomalies in the valuation and some areas suffer much worse than others, will he consider not confining his exemptions simply to London, but include other areas which need to be singled out for special treatment?

Mr. Ridley

I pay tribute to my hon. Friend for having the foresight to move his amendment on the transitional basis suggested and for including a special provision for small businesses, which the Government thought was exactly the right way to proceed. This is only a consultative document and we will listen to what people say about it. It is based on a survey by the Revenue which is by no means more than a summary survey. It does not include vast numbers of individual properties which we could consider in detail.

It is certainly right that there should be flexibility when we design the final scheme. I am sure that my hon. Friend will agree that some finality is also necessary so that when we include an amendment in the Bill we have the opportunity to give business men the full knowledge of the situation. On the information available, we have got the balance about right for larger and smaller businesses.

Mr. John Battle (Leeds, West)

Will the Secretary of State clarify his statements? He said twice that the position was based on capital values, yet in his original statement he said that it was based on rental values. Does he understand his statement? It seems that the proposal is a cushioning of the worst impact of the unified business rate. It is now a misnomer to call it a unified business rate because of the distinction between the service economy and the manufacturing economy which is built into the statement. Is it not the case that a company like McDonald's will do slightly better while manufacturing industries in constituencies like mine will suffer as a result of the statement and will not gain?

Mr. Ridley

The hon. Gentleman is technically right. Rates are based on rental values, but in terms of business premises they are closely and directly allied to capital values, as he is aware. That is the basis which the Labour party has selected for one part of its system of local taxation of domestic consumers.

The hon. Gentleman said that there is a distinction between retail and manufacturing businesses. That is not right. Businesses are valued according to the value of their properties, not according to the nature of their activities. However, we have attempted in the consultative document—which is in the Library—to analyse the relative effect on different classes of businesses such as retail, industrial, wholesale and offices. That is not because we single out those activities, but because the apparent results of the survey show that those activities have moved in their values in different directions.

Sir Peter Horden (Horsham)

Is my right hon. Friend aware that, unpalatable though his proposals may be to the south-east, they are manifestly fairer than the present system, which is based on an out-of-date valuation? It is extraordinary for the Labour party to complain about shift in resources amounting to £800 million to the regions, which badly need it. During the process of consultation, will my right hon. Friend take into account the need for an adequate transitional period? Will he also consider the effect of the new rate support grant proposals which are under discussion and that they must be based on ability to pay rather than on some obscure system?

Mr. Ridley

My hon. Friend is entirely right. I receive a welcome—sometimes qualified—from my hon. Friends who have businesses in their constituencies which will be asked to pay a little more, while the Opposition are so deep in their desire to oppose at any price, that they seem to resist benefits to businesses in areas where the Opposition are strongly represented which are of considerable importance to prosperity and employment in those areas. That is carrying the principle of opposition beyond the call of duty.

My statement does not deal with the basic concept of the unified business rate. It deals with the transition to moderate the influence of the UBR on the areas which are adversely affected. Today's proposals should benefit the area represented by my hon. Friend the Member for Horsham (Sir P. Hordern).

The needs grant, as we like to call it, must be adequate to meet the needs of every area because the combination of the needs grant and the effect of the UBR will mean that if every local authority spends according to the Government's standard the community charge will be the same in every local authority. Therefore, the citizen will be able to define whether the local authority is extravagant or economical. As my hon. Friend has said, it is most important that we get it right.

Mr. Speaker

Mr. Maxwell-Hyslop. No, Mr. Campbell-Savours.

Mr. D. N. Campbell-Savours (Workington)

There is a slight difference, Mr. Speaker.

How can the Secretary of State guarantee Cumbria that there will be a reduction in the business rates paid when he knows that it is impossible to set out the position of west Cumbria until the revaluation is finished? He is producing mythical figures. He cannot give that guarantee. Is not the simple truth that, if any businesses in west Cumbria will benefit from the changes, the people who will pay will be those in west Cumbria who will pay double, treble or quadruple their present rates by way of higher levels of poll tax? They will pay for this nonsense.

Mr. Ridley

The current rate poundage in Allerdale is 286p and it is that in Copeland as well. If the unified business rate were in existence for 1988–89, in Allerdale and in Copeland there would be a reduction of 16 per cent. in the business rate poundage. On revaluation, it is likely that the north-west region will lose £300 million of its rate burden. If the hon. Member thinks that those figures are anything but good for his constituents, he is causing needless concern among them—because his pathological desire to oppose is greater than his interest in his constituents.

Mr. Speaker

I apologise to the hon. Member for Workington (Mr. Campbell-Savours). It is a good thing that the House does not know what goes through my mind all the time.

Mr. Gary Waller (Keighley)

Is my right hon. Friend aware that businesses in the north of England anxiously await implementation of the revaluations? To the extent that the transitional arrangements extend the period beyond which businesses are unable to compete on a level playing field, will my right hon. Friend resist calls to prolong the process unreasonably?

Mr. Ridley

Companies that have been overcharged by Labour authorities in the north, and which see relief coming through the national business rate, will not relish the transitional agreement—any more than will those businesses that have to pay more. We sought to get the balance right between the gainers and the losers, but it is intolerable when the gainers—who, apart from my hon. Friend, are represented mainly on the Opposition Benches—will not accept the benefits that the Government have brought to their constituents and to their chances of gainful employment. That is indeed callous.

Mrs. Ann Clwyd (Cynon Valley)

As the right hon. Gentleman's statement has been particularly obscure in respect of the valleys of south Wales, can he give some optimistic figures for my constituency? Cynon Valley is the poorest district in the whole of Wales, and its second largest town, Mountain Ash, has no new industry and declining commerce. Three major retail chains—Boots, Dewhurst and Woolworth—are pulling out of the town. Can the right hon. Gentleman produce figures to prove that my constituents have cause for optimism resulting from his proposals?

Mr. Ridley

I do not have breakdowns for particular local authority areas or constituencies, because the Inland Revenue has not yet done that work. I understand from my hon. Friend the Minister of State, Welsh Office that the valleys will benefit from the transitional arrangments I announced—though the amount of benefit to each business will depend on when the revaluation is made.

Mr. Tony Favell (Stockport)

Will my right hon. Friend confirm that, if Opposition Members do not want the £800 million he mentioned earlier, he will redirect it to Conservative-held seats in the north where people do not look a gift horse in the mouth?

Mr. Ridley

My hon. Friend's suggestion is both slightly improper and impracticable. I am not sure how many seats in the north will be held by Conservatives; on 5 May there may be many more of them.

Mr. Tam Dalyell (Linlithgow)

Is the Secretary of State aware that members of the all-party retail group were the guests this morning of David Sieff and of senior management of Marks and Spencer? Is he aware also of their concern about certainty in business? They ask, as do many other businesses, why the rate cannot be set earlier than two weeks before it is likely to be implemented. Is there any reason why it cannot be set sooner?

Mr. Ridley

I was not aware of that meeting or of Mr. David Sieff's remarks. However, in future the rate will be set by the Government on a national basis, and it cannot be set at a higher level than is dictated by the increase in the retail prices index. The only uncertainty will be whether the increase will be at the level of the RPI, or a little lower. That arrangement is a vast improvement on having the business rate at the mercy of a local authority, which may announce an increased rate in March for payment in April. I feel sure that the retail group to which the hon. Gentleman refers and Mr. Sieff will unanimously welcome that vast improvement—against which the hon. Gentleman voted.

Sir George Young (Ealing, Acton)

Is my right hon. Friend aware that the business community generally is grateful to him for the long notice that he gives of 1 he rate for 1990–91? Such advance notice was not available under the present system. The figure of 30p to 35p that my right hon. Friend mentioned is at the lower end of the forecast, which will bring pleasure to the business community. Can my right hon. Friend say whether, because of transitional relief, businesses in Ealing already facing a 35 per cent. rate increase next year will be penalised in future years, because that high rate will form the basis on which transitional relief will be given? Will businesses in Ealing have to pay for next year's rate increase for another five or six years hence?

Mr. Ridley

I am grateful to my hon. Friend for his comments. He is right to say that we are trying to give businesses as much notice as we can of every part of what is a complicated picture—and my statement today is evidence of that. I believe that it will surprise many businesses that the unified rate will be between 30p and 35p, because many people forecast a much higher poundage rate.

My hon. Friend is also right to say that, if a local authority behaves extravagantly in setting its rate for next year, while that will not affect the basis on which a business starts on the new rate basis in 1990, it will affect the totality of the business rates pool. Some local authorities may imagine that they can increase the total business rate pool by imposing extravagant rate increases next year, but the Government are not bound to base the first year of the business rate on the yield of 1989–90—and possibly, if we thought that local authorities were trying to do something that silly, we would not allow the full increase in rates to feed through.

Several Hon. Members


Mr. Speaker

Order. I am sorry that, for reasons that. I have already given, I have not: been able to call every right hon. and hon. Member wishing to speak—but I shall certainly bear them in mind when we next debate this matter.

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