HC Deb 19 May 1992 vol 208 cc204-26

Order for Second Reading read.

7.27 pm
The Minister for Local Government and Inner Cities (Mr. John Redwood)

I beg to move, That the Bill be now read a Second time.

The Bill will reduce the non-domestic rates for businesses in England and Wales facing the largest increases in their rates following the 1990 non-domestic revaluation. It honours the pledge given by the Chancellor of the Exchequer in his Budget speech on 10 March. The Budget proposals in question were well received by the Opposition. I hope that the Bill, too, will be welcomed by hon. Members on both sides of the House.

The 1990 reforms have brought substantial benefits to many businesses. Those that have reached their full new rate bills are already benefiting from the limitation of any increase to the rate of inflation. About half of all properties in England and Wales would have experienced rate rises of only 4.1 per cent. this year, anyway—before the Bill was introduced.

For a number of businesses, however, the 1990 reforms would have meant much larger increases this year. That is primarily due to the effects of the large shift in rateable values resulting from the revaluation. For many businesses, particularly shops and offices in the south-east, values have not caught up with the changes in rental values during the boom years of the 1980s.

Many hon. Members will agree that we could not go on using valuations based on the market as it was in 1973. Adjustment was bound to be painful, which is why we are phasing in the changes gradually.

Under the transitional arrangements already in operation, no bill was to rise by more than 20 per cent. a year in real terms. For smaller businesses—those with a new rateable value of £15,000 in London or £10,000 elsewhere—the limit was 15 per cent. For properties with living accommodation attached, we reduced the limit to 10 per cent. from 1 April 1991, on top of the £140 reduction in personal community charge on the domestic element.

I know that the recession has created difficulties for many businesses and some of those that would have faced the largest increases this year have been particularly hard hit in the recession. The Government have therefore decided that their costs this year should not be worsened by any real increases in the business rates.

We propose a one-year freeze to provide a breathing space. We estimate that almost a quarter of a million shops and offices, many in the south of England, will benefit from reductions worth more than £160 million from this measure alone. Manufacturing industry in the north will also benefit. More than 80,000 properties in the industrial sector in the country will receive reductions totalling £25 million. A further 160,000 business premises will gain relief worth £110 million, bringing the total cost of the measure to more than £300 million this year and £200 million next year.

The gains for individual businesses could be substantial. A small business property outside London with a new rateable value just below the £10,000 threshold could save around £1,000 over the next two years in the amount that it has to pay. A property in London with a new rateable value just below the £15,000 threshold could save about £1,500. In each case, the saving is equivalent to about 12.5 per cent. of the full annual rates bill of the property concerned. For larger properties, the gains could be even more substantial. A property with a new rateable value of around £50,000 could save more than £6,000 over the next two years.

In 1955, a new revaluation based on the state of the property market as at 1 April 1993 will come into effect. Given the downturn in the market since 1 April 1988—the valuation date used for the last revaluation—rental values in those sectors which have been worst hit by the recession may be lower than in 1988. If so, rateable values will fall at the next revaluation. That means that some businesses still in transition in 1994–95 towards the highest rate bills implied by the 1990 valuation, might never reach those bills. The present pause in the increases will be especially helpful in such cases, and I am sure that all hon. Members will welcome that measure.

Mr. John Greenway (Ryedale)

My hon. Friend the Minister has touched on a point that is of great concern to many businesses in my constituency, particularly in the shops and hotel sector, where the revaluations introduced two or three years ago mean that it would take about 15 years at the current rate of progress for those valuations to work through. While the pause is very welcome and has been extremely popular, there is a great worry that, in two or three years' time, businesses will face massive increases in their bills. Will my hon. Friend assure the House that that will not occur?

Mr. Redwood

I am aware of the problem. As my hon. Friend illustrates, the problem is not confined to the south. It also affects many towns and settlements in the north. I will repeat the assurance that I have just given. If, on the date of the next revaluation, the values in 1988 turn out to be peak values, and next year's values are lower, that of course will be reflected in 1995 in the bills that businesses in my hon. Friend's constituency will have to pay. They will never have to pay those very high bills based on the 1988 values if those values turn out to be peak values, which, in some cases, I believe will be the case. 1 hope that that reassures my hon. Friend.

Mr. Greenway

Will my hon. Friend assure the House that the phasing will continue? We are likely to face a situation in which even the 1988 values may only be halfway through being implemented. If those values are confirmed in real terms—one expects that there will be valuation changes across the country—businesses are seeking an assurance that the phasing will be continued.

Mr. Redwood

I will answer that nearer the time. I have told my hon. Friend that the important relief that would arise is if the values turn out to be lower at the next valuation. In some cases, I believe that that will prove to be the case. Those businesses will never have to pay the high values based on the 1988 valuation if the current decline in the property market is confirmed at the time of the 1993 valuation.

Mr. David Blunkett (Sheffield, Brightside)

Perhaps we can make sure that we understand this absolutely correctly. Is the Minister suggesting that there will be a permanent transitional period which, ad infinitum, continues like a moving staircase, with no one ever reaching the valuation that was originally set because of the transitional arrangements and because the next valuation will overtake the first one before people have reached it?

Mr. Redwood

I am not making any changes in the transitional arrangements as a result of the Bill, other than having a pause for one year in the introduction of the transitional increases in the way that I have described. I have already been very specific about what would happen in the case of a business property if the value in 1993 to become effective in 1995 turned out to be lower than the value in 1988. Whatever the transitional arrangements, that would mean that that business would never have to pay the full amount implied by the 1988 valuation, because it would have been overtaken by the events of the subsequent valuation. Many hon. Members will welcome that and believe that it is a positive step forward for businesses in their constituencies.

Many businesses which benefited most from the 1990 reforms have had their reductions phased in to offset the cost of protecting those facing increases. The rate at which the gains have been coming through has been increasing since 1990–91, and we have decided to increase them further—by 3 per cent. in England and 13 per cent. in Wales—in 1992–93.

The Bill provides that all remaining gains will flow through in 1993–94. All businesses which gained from the reforms will soon see the full benefits. I hope that the hon. Member for Sheffield, Brightside (Mr. Blunkett) will welcome that. Far from prolonging the transition, where there are winners, we are accelerating it. I hope that the Opposition will welcome that.

We estimate that 60,000 manufacturing properties, many in the north of England, will share more than £40 million in additional rate reductions this year as a result of the measure. Sixty-five thousand shops and offices will also gain, with reductions of more than £12 million. In total, 150,000 business premises will benefit to the tune of around £85 million in the current year. For an individual property with a new rateable value of just under £10,000, that could mean a reduction of about £180 in this year's bill, and for a property with a new rateable value of around £50,000, the saving could be as much as £580.

One further change will provide significant help for a number of businesses which are trying to dispose of property in the recession. At present, transitional protection for those facing rate increases is lost when a property changes hands. The Bill will fulfil our pledge to remove that restriction with effect from 11 March of this year.

Taken together, those measures will mean that no business will face a rise in rate bills this year in real terms. In the 1980s, business suffered from a 37 per cent. rise above inflation under local rates. The Bill provides a much better deal for many. If local rates had stayed, business would have paid £1,000 million more in 1990–91 and £850 million more in 1991–92. That shows the value of the changes that we have made. The Bill would increase benefits to businesses by a further £1,300 million over the next three years. I commend it to the House.

7.37 pm
Mr. David Blunkett (Sheffield, Brightside)

This is my first opportunity to congratulate the Minister for Local Government and Inner Cities on his new appointment. Whatever this philosophical and ideological background, I hope that he will bring fresh thinking and a new spirit of partnership to the relationship between local and central Government. I hope also that he will bring a degree of sanity and clarity to a system that has seen so many transitions, gearings and crankshafts over the past 13 years—

Mr. William O'Brien (Normanton)

No, just cranks.

Mr. Blunkett

As my hon. Friend has pointed out, we have certainly had cranks. We have had nothing as clear cut or as craftsmanlike as a crankshaft, as I know from the production lines in my constituency. Instead, we have had one cobbled-together solution after another.

Although we do not oppose the proposals in the Bill, we are obliged to point out what a shambles the system has been. First, we had a delay in the valuation process which was substantially responsible for ensuring that industries and productive parts of our economy were penalised long after the valuation of the sites and rental values of the premises on which they were reliant had ceased to be relevant in terms of the economy of the north of England, the midlands and Wales.

The need for an urgent revaluation led to considerable dislocations because of the dramatic changes. Attention has already been drawn to the fact that the valuation base was 1 April 1988, at the height of the boom. The hon. Member for Ryedale (Mr. Greenway) validly raised with the Minister what would happen. We had an interesting reply, that given that the transition goes through to the date when the new valuation will apply, and given that next year the new valuation base will apply, property and rental prices could change dramatically and people will never have to pay on the valuation that was adjudged to be right from April 1988.

Given that we are aware of helping the Government to avoid pitfalls and the misfortunes of what is no longer local government finance in the strict sense of the term but centrally raised Government finance for local government, let us surmise for a moment that, under the new valuation, there are such substantial gains for some and such unwarranted losses for some commercial and industrial properties that a new transitional arrangement has to be brought in. Those who were to be penalised so heavily under the 1988 revaluation base and who now find themselves with a revaluation below that level, and who, in the Minister's words, would never actually reach the original threshold, will find themselves so badly penalised in the recession next year that they will be entitled to special help.

Because there are others who are gainers, and because losers have to have their losses phased in, we need a new transitional period in which those who thought that they would gain only slowly, as they have done since the 1990 change, and those who thought that they would lose only in phases in order to protect their businesses, as has been the case since April 1990, the whole dog's dinner will continue through until we reach the base from which the third revaluation will take place. Presumably the merry-go-round will start all over again and the people who thought that they would gain the most benefit will not gain and the people who would incur the greatest losses will be protected from reaching their losses. It will carry on ad infinitum.

That absurdity is brought about by the original lengthy delay, the failure to appreciate the consequences of the revaluation and the failure, until tonight, to acknowledge that there is a major problem arising out of the date chosen, at the height of the property-led boom—a boom which has now been shown to be transitory—and a failed promise of economic prosperity and regeneration. Of course, property prices and the inability to let property, particularly in places such as Canary Wharf and the difficulties that are being experienced in docklands, underline the extent of the collapse in the property market and the real problems of our economy.

I shall never forget sitting on a tube and hearing two people discussing what was in the Financial Times that morning. It is always instrumental to sit on an underground train in the morning, if one can get a seat. The two obvious City finance experts were discussing when they would acknowledge that there was a real problem for the British economy. One of them said that it clearly would not be when industry in the north of England cried even louder and there was higher unemployment. The other said, "No, but a clear sign will be the collapse of the London property market." That occurred some time ago. Olympia and York is an example. What a cockeyed economy it is that is based on such precepts.

Mr. Redwood

I am grateful to the hon. Gentleman for his remarks that were kind towards me—I think that some of them were kind.

Mr. Paul Murphy (Torfaen)

Just a few.

Mr. Redwood

Just a few, perhaps. Does the hon. Gentleman agree with the hon. Member for Dagenham (Mr. Gould), who welcomed the revaluation and said that the Government are taking a very important step? If so, is he now saying that Labour party policy is to have no transitional protection whatsoever? That would be of great interest to businesses which welcome transitional protection. Far from thinking that the measure is a dog's breakfast, they think that it is an essential protection given the increases in values that some of them face.

Mr. Blunkett

Revaluations are not a dog's dinner, it was the system and the way in which the Government implemented it over the past 13 years, including the domestic and non-domestic changes. My hon. Friend the Member for Dagenham (Mr. Gould) rightly said that we welcome the changes. They are long overdue in terms of assisting many hard-pressed areas and ensuring that business does not pay more than it can afford given valuations and the rental of the sites on which its activities are based. Of course we accepted that, given the enormity of the change, there had to be transitional arrangements. We are seeking to get those things right.

At the beginning of October, the Minister's predecessor acknowledged that there were 673,000 outstanding appeals under the unified business rate appeals system. I have no evidence that that level has dropped. Evidence in the early part of this year showed that there was greater awareness by businesses of the problem that they were facing. In February, the London Chamber of Commerce showed quite clearly that three out of four enterprises in London were going to be losers and declared itself to be extremely unhappy with the situation.

We welcome the general approach. We also welcome the Government's ability to find money when it suits them. We welcome the fact that we are talking about £1.3 billion of Government expenditure—only a few weeks, of course, after the Government vilified the Labour party for daring to favour interventions by public resources to help industry and commerce to recover—any resources that would have to be found by the Exchequer to invest in our economy and our country.

The hypocrisy beggars belief. In the six weeks leading up to the calling of the general election, Government spokesmen announced more than £2 billion of new expenditure—we have new expenditure before us tonight —and then attacked the Opposition for being in favour of new expenditure. Regrettably—we and the Government's friends in the media must take some share of the blame —we were responsible for not getting the message across about the hypocrisy which exists on the Conservative Benches when it comes to deciding where public expenditure should go.

We welcome the belated measure to recognise what we have been pressing for all along. I must emphasise that we pressed that those who would gain—it applies to large parts of the country where manufacturing industry and real productive industries are struggling to survive—should be able to have their gains immediately the revaluation came in. They should have been enabled, with a measure that was not interventionist in the sense of distorting the market but was interventionist in terms of helping productive economic capacity, to be alleviated from a fixed cost, which we recognise is difficult in a recession. When we are in a boom and profits are being made, rates are discountable against corporation tax, and when they are not that forms a substantial problem of liquidity for many industries.

It is time that we in the Labour party spelled out an historical commitment which has often been misunderstood. It is time that we spelt out that we are in favour of productive manufacturing industry.

By backing those who use their enterprise and initiative, we follow in the role that was a traditional and vital part of the growth of the skill trade unions and the Labour movement. Tonight I wish to reiterate that by saying that it is an important role for the Labour party of the 1990s to advocate and champion the small business, the self-employed, those seeking self-reliance and self-determination and people who are willing to use enterprise and innovation not merely for their benefit but in the interests of the well-being of the community in which they live. That is our historic role.

We back productive industry against the freeloaders —the people who thought that they could make a quick buck in property development or on the stock exchange. It is our role to back the little man and woman against the vested interests of big business, international finance and corporate interests which know no boundaries and care little about the communities or individuals with whom they deal. If we assert that role more clearly people will understand that we are speaking with them and on their behalf. With the growth of self-employment and self-reliance in the 1990s we shall take on the Conservative party and defeat it.

Our role in defending small businesses is the reason why we advocated rate rebates for small businesses. It is the reason why we said that people who are struggling to get into business and make a living for themselves need help in paying the rates to pay towards community provision. It is why we said that those who were struggling to stay in business should be entitled to a rate rebate and that small shops on housing estates and in villages and towns should be supported and enabled to stay in business in the face of the vagaries of the big shopping complexes with which many local neighbourhood centres have to compete.

Mr. Matthew Carrington (Fulham)

The hon. Gentleman gives a great litany of the advantages that the Labour party would bring to small businesses. As I recall, one of the Labour party's policies for small businesses was to give control over the rate level back to the local councils in which businesses are located. The local council in Hammersmith and Fulham raised the rate by almost 50 per cent. when the Labour party took power in 1986. That was an amazing attack on small local businesses. The hon. Gentleman cannot possibly support giving control of the taxation of small businesses back to spendthrift Labour local authorities.

Mr. Blunkett

It is interesting that the Institute of Directors, which is not known for its radical socialist thinking, and the Association of British Chambers of Commerce are in favour of decentralising the business rate. They are in favour of it because they genuinely believe in partnership. They do not just mouth platitudes. Ministers preach responsibility but deny it. They call for increased opportunity but stifle it. They talk about partnership but withhold the means and motivation to make it possible.

Real partnership means that those who are elected at local level and are responsible to local people must work with their local business community. In the 1980s, people learned and understood that lesson well. When the business rate was centralised there was more partnership in Britain than there had been for many a long year. Breaking that partnership was a foolish and unhelpful act. It diverted the concentration of mind of local politicians from the reality that local business and its community sink or swim together. I remember that time in the 1980s well. Separately, neither can survive, because business needs decent education and training, fit housing, good public transport and an environment in which people are proud to live. The local community needs the enterprise and yield which business provides if social provision is to be a likely proposition.

We need decentralised structures so that people can work together. Of course, if we had won the election and decentralised the business rate, we should have had to fix the business rate for next year. This Bill would have been about the process of decentralising the structures to local level and fostering and encouraging responsibility.

Why is it, I ask the Minister and his colleagues, that other countries in Europe and throughout the world can accept the responsibility that must fall on local people and their elected representatives, but Britain cannot? Are we so immature politically, so inept in our democracy and so lacking in vision or foresight that we must treat local councillors and their electorates as if they were tiny children while we in the House can be seen as responsible, mature, adult people who know best? It is nonsense, and we all know it.

One day we shall have to return to a decentralised structure. I shall tell the House why. The gearing effect of the present structure is causing havoc with the provision of local services and the sensible financing that is necessary to achieve it. The gearing effect is created by the fact that, in England, 86 per cent. of local government expenditure is fixed by central Government. In Wales, the figure is even greater, as my hon. Friend the Member for Torfaen (Mr. Murphy) will spell out later. As we saw last week, even the last 14 per cent. is fixed by the capping arrangements.

When only a small percentage of total revenue can be determined locally, not only is a gearing effect created whereby local councils have to raise a great deal more from that small percentage to take account of even the most modest percentage increase in their expenditure but major distortions are created. That was true in the case of the world student games in Sheffield. Business gained from the investment undertaken but made no contribution to the revenue costs incurred. That was regretable.

A second factor is a lack of ability to compensate for the ills that afflict local communities when major new developments occur which have some beneficial consequences but also have knock-on effects with which we are all familiar. I give one example from my constituency. The Meadow Hall shopping complex is an excellent and well produced development, which cost hundreds of millions of pounds, but the consequences for the city centre have been devastating.

In any sane society, the revenue raised from the new development in Sheffield would have been available to compensate for the action necessary to refurbish and renew the city centre. That would make possible a partnership with the chamber of trade to revamp shopping sites and shopping centres to bring life back to the city centre. As we have seen from north America, that is vital if we are to prevent the decay and decline which leads to the squalor that urban policy is supposed to overcome but which sensible planning and economic policies could avoid in the first place.

Mr. Redwood

On the point that the hon. Gentleman raised about the protection of businesses from high-spending, high-taxing Labour authorities, he might like to remember that, when the hon. Member for Dagenham (Mr. Gould) was asked what would happen if local authorities whacked up the business rate if they were given local control, he said that that might be a problem. Indeed it would be. We saw it before. That is why the changes were introduced. We saw it in Sheffield, where a high tax was imposed on business. We would like to know Labour's answer to that problem.

Mr. Blunkett

I am sorry that the note or whatever the Minister scribbled on reached him so late. I had moved well on from the point about decentralisation of the business rate which the Minister's hon. Friends made. I had moved on to how one aspect of local government revenue raising can compensate for the disadvantages which arise in a complicated local economy where local people know best and can decide for themselves.

However, I shall take the question head on. The responsibility that local people feel about how crucial the wealth-creating aspects of their local economy are to the well-being of the community—in terms of the provision of services—weighed heavily with politicians of all political parties as we reached the end of the 1980s. It reached a point where many people acknowledged that efforts to hold down the rates, and subsequent efforts to hold down the poll tax, were clearly evident. Until 1985, capping did not exist but there was not a calamity. Often the will to do the job together existed. That will must be reintroduced and reshaped in the future. That is why the Institute of Directors, the Association of British Chambers of Commerce and, at one phase, the Confederation of British Industry were in favour of that genuine partnership at local level.

We cannot oppose the Bill, but it is a missed opportunity to do a good job on behalf of businesses and their communities, by getting rid of the gearing impact —in its substantial form—by restoring some sense to local authority finance, by broadening the tax base and decentralising the business rate, by having rebates for small businesses and by ensuring that the gains that companies have had to wait for are introduced immediately.

More importantly, we also believe that, when introducing the council tax next year, the Government should recognise the need to integrate the two systems. There will be a domestic property tax and there will have to be an equalisation formula for the distribution of grant and compensation which is needed to take account of the different rate bases throughout the country.

Some regions have lost heavily. My own Yorkshire and Humberside region lost £289 million in a full year in business income to the local authorities together with the withdrawal of the equalisation grant. That is a large sum of money, for which the local authorities have desperately tried to compensate, even under the poll tax capping regime.

I know that some Conservative Members with expertise in local government will recognise the importance of the reintroduction of equalisation, and unless those things are taken together, we will again have missed an opportunity to get it right.

In the past 13 years, there have been so many wrongs in local government finance. Let us hope that some sense will prevail and that the Government will take the opportunity to listen and to learn.

8.2 pm

Mr. Bill Olner (Nuneaton)

I congratulate the new Secretary of State for the Environment on his appointment and thank you, Mr. Deputy Speaker, for giving me the opportunity to address the House.

I believe that it is in the best tradition of maiden speeches that I pay tribute to my predecessors, and I do so warmly. However, there has only been one previous Member for Nuneaton, because, before 1983 and the Boundary Commission's changes, the constituency was Nuneaton and Bedworth. For many years Frank Bowles, later to become Lord Bowles in the other place, held that constituency. When Frank Bowles retired, Frank Cousins held the seat for a short time. I well remember that. As the voting age was then 21, Frank Cousins was the first person that I was old enough to vote for. I remember him touring our estate in an old, yellow, open-topped Rolls-Royce—very smart it looked too.

Then Mr. Leslie Huckfield became the Member of Parliament for Nuneaton, and I am sure that the House will remember him. He went on to that House over the water for a short spell.

My predecessor was Mr. Lewis Stevens, who was the Member for Nuneaton from 1983. I believe that he was a quiet but hard-working and conscientious Member of the House, and I think that he was well respected on both sides of the Chamber. From looking at the records, I understand that he had the eighth best voting record in the last Parliament. He was a very diligent Member. However, it might have been better for the people of Nuneaton if there had been some more "no" votes in that record—they were all "yes" votes—especially in the votes on the financial strangulations of the poll tax and the discredited standard spending assessments that have burdened local government in the past few years. In every other respect, I believe that Lewis Stevens served his constituents to the best of his abilities and was well respected by them for it.

I agree with the comments of my hon. Friend the Member for Sheffield, Brightside (Mr. Blunkett) on the Bill. I shall certainly not oppose what has been put before the House. However, we should all recognise that all parts of the local community have a role to play to ensure good services and an infrastructure most suited to the community's inhabitants and to the industries and commerce that flourish within it.

Those two links are important. One cannot ignore the fact that people who live in a community are employed there in commerce and in industry. There is an historic and traditional link, started by the Rowntrees, who believed that people needed good services, homes and education, because that was better for the companies employing them. I think that that is still as true as it was then. In the fullness of time, history will repeat itself.

During the past two years, constituencies such as Nuneaton, which is in Warwickshire, have suffered from reduced Government grants and the SSAs, which have led to capping—I asked the Minister a question on capping in this place last week. They have meant some real hardships for people in my constituency, hardships that they are suffering and that they will probably continue to suffer. With the threat of another £6 million of public expenditure being taken away from them, none of my constituents know, with any assurance, what the future means for them.

Some elderly people live in authority-run homes in my constituency, but those homes are now being sold off by the local authority. The police authority has had inadequate resources. I know that one Conservative member of Warwickshire county council had his knuckles rapped sharply in the last round of public expenditure talks, when he rebelled against his group and said that the police authority needed extra money. He was not on his own: his colleagues in the social services and education departments were saying exactly the same about their services.

The fire and rescue services in my constituency are so under-funded that the Home Office, with its formula, is questioning their viability.

Education is one of the great things that we have all benefited from, and the education service is suffering at all levels from inadequate resources, which means fewer teachers, leading to higher pupil-teacher ratios. That, combined with cuts in the budgets for equipment, means that we are denying young people rights to the best education possible. Lest we all forget it, we only come this way once. We are only young once, and it behoves us all to ensure that everyone has the right to equal opportunity in education because that is the key to our future in the Chamber and to the work of commerce and industry.

Not only is that right being denied but this year, for the first time, young people in Nuneaton will be put at risk because many of the professional services that have run the youth service in Warwickshire so successfully for many years will be cut. Youth service leaders have taken people through the Duke of Edinburgh's award schemes year after year, and they are extremely saddened that their future ability to do so will be greatly diminished.

Nothing in the Queen's Speech gave any hope to those constituents who are either homeless or inadequately housed—there are many of them. Nothing in the speech gave local councils the ability to build the houses that would meet the needs of those people and thus create employment in the construction-related industries.

While I am the Member representing Nuneaton, I shall seek to protect and further local government, and to bring it closer to the people, which includes industry and commerce. I remember my years as leader of Nuneaton borough council. Year by year, I faithfully consulted the leaders of industry and commerce before the council set the rate. The leaders of industry and commerce often told me that I was not spending enough on the infrastructure that they so badly needed to make their industries flourish. It is crucial for the democratic process in this country that all parts of the community play a full and cohesive role.

I shall also seek to look after the needs of industry and ensure that they are not ignored or overlooked. I will ensure that the voice of the people of Nuneaton will not go unheard in this Chamber.

8.11 pm
Mr. Nigel Jones (Cheltenham)

I congratulate the Minister on his new role and the hon. Member for Nuneaton (Mr. Olner) on his maiden speech. The hon. Gentleman may not know it, but I have three rather tenuous links with him. First, for my sins, I went to the same school as Leslie Huckfield. Secondly, the hon. Gentleman's Liberal Democrat opponent in the recent election is one of my colleagues on Gloucestershire county council. The third link is that Gloucestershire county council, like Warwickshire county council, faces capping.

It is unlikely that many Opposition Members will argue against the Bill. Any measure that promises to reduce business costs by £480 million this year must be good news, given that business has been so buffeted by the longest peacetime recession since the 1930s. The introduction of the uniform business rate, with its revaluation, came at the worst possible time for business. Interest rates were high and consumer demand was plummeting, but the Government asked some businesses to endure massive increases to their fixed costs.

In Cheltenham, dozens of small commercial units are lying empty. At a meeting at the end of last year, the former Under-Secretary of State for Industry and Consumer Affairs was asked to help the local business community. There was much talk from him about the small business start-up packages, but a good friend of mine, a Cheltenham business man and former Conservative councillor, told the Minister that he needed a business survival package to save his existing small business.

A cut in the UBR now has sadly come too late for many businesses, but it is a welcome recognition of past sins. It is sorely needed by many firms which are still struggling and which cannot see an end to this awful recession. The welcome cut in business taxation creates a dilemma for the Government. They have said that the recession is over. If that is so, why are they hurrying to cut business taxes? On April 28, the Prime Minister told the Institute of Directors that he was more confident than ever that recovery is under way. I hope that he is right. On 12 May, the Prime Minister told the House: Since polling day we have a dramatic change in the confidence of the markets and individuals."—[Official Report, 12 May 1992; Vol. 207, c. 496.] If recovery is under way, why make such temporary reductions? If there has been a dramatic change in confidence, why are the Government spending 'half a billion pounds on boosting business? Either the Government do not believe their own rhetoric on the recession, and they realise, as Liberal Democrats realise, that the recession is still hitting many businesses, or they proposed the cut in the business rate for other reasons.

On 13 March, the Municipal Journal, perhaps mischievously, thought that it knew the real reason for the cut in UBR. It stated: One benefactor from the budget boost to small businesses is forecast to be the former environment secretary and Tory Party chairman Chris Patten, who is defending a slender 1,412 majority in Bath. I am glad to note that, despite the result in Bath, the Government have not decided to drop the proposal, because, as my hon. Friend the Member for Bath (Mr. Foster) will testify, the UBR is still causing small businesses great problems. Any measure designed to mitigate the impact of the recession, however late in the day, must be welcome.

This debate is surely an opportunity to ask where the Government should go with UBR now the election is over and to examine how the Bill could be improved. Ideally, the control of non-domestic rates should be decentralised —or perhaps it is better to say, denationalised. Business rates, whether levied on the property or land, should be raised by local councils and not central Government. This happens in most other European countries which realise that differences in local business tax rates are not as distortive as some people have suggested.

Where there are lower business taxes, land prices and rents will adjust to remove any benefits. Moreover, if business taxes are local, the local authority is far more likely to have a closer relationship with the business community, and therefore to understand the needs of local business. A small business man in Cheltenham has a far greater opportunity to talk to his councillor—he may even be a councillor—than he does of talking to the Minister.

I should not be surprised if the introduction of the council tax does not force the Government into a complete rethink on this issue. With the 1991 Budget switch from community charge to value added tax, councils are now raising only a small percentage of the revenue they spend —only 14 per cent. Therefore, small changes in spending or small changes in their grant allocation inevitably lead to large changes in the local domestic tax bill.

This so-called gearing effect may make the council tax almost as unpopular as the poll tax, and, wary of yet another change in local personal taxation, the Government may then be forced into reopening the business rate debate. For the sake of the strength and vitality of local democracy, we hope that that happens.

Until the furore over the council tax begins, it is perhaps too much to hope that the Government will use the Bill to decentralise the UBR. How then could we realistically expect the Government to improve the Bill? The most simple measure would be to make larger reductions than the Bill proposes. The Liberal Democrat alternative budget proposed an overall reduction, costing £800 million in 1992–93, by simply freezing the poundage increase. That was originally proposed by the present President of the Board of Trade in September 1991.

Our proposal differed slightly in terms of the incidence of the tax reductions. It is possible that the Government's measure is more effectively targeted, although whether it is targeted more on Tory marginals than on areas of most acute distress may be debatable. If the Government's measure is better targeted, how much more effective would any additional help be if the Minister could only persuade his Treasury colleagues to give a little more leeway.

There are many other problems with the UBR that could be tackled in the Bill with some imagination on the part of the Government. The Bill at last recognises the absurdity of the original decision to restrict eligibility for transitional relief to the orginal occupier. That decision caused some ridiculous anomalies, and I will give just two examples.

Firms wanting to cut costs in the recession by moving to smaller premises found that, if they did so, any cost savings were outweighed by the increase in the rates bill that they suffered because their residency in the smaller premises would not be eligible for transitional relief. Firms coming into towns after 1 April 1990 found that their rates bills were far higher than those of a competitor across the street. In some cases, those anomalies further aggravated the already appalling state of the commercial property market.

That anomaly is to be corrected only from 10 March 1992. Why cannot the entitlement to transitional relief be made retrospective? According to a parliamentary answer given on 18 February to my hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith), the cost of such a proposal in England would be about £90 million. Another answer gave the cost in Wales as about £1 million. The Government should at least look at the suggestion.

Another improvement would be the restoration of the right to have a rateable value reduced if it were higher than the market rental value. The commercial property market has been through such an extreme cycle of boom and bust that many rateable values are far above current market rental values. The Government might protest that a revaluation is due within the lifetime of this Parliament. Such a response is no good to a small business desperately struggling to keep itself going. The restoration of that right could make all the difference to some firms and keep many people employed.

The Scottish issue must also be dealt with. Unlike the famous poll tax gap of the 1991 Budget, when the Government failed to apply the cut in the community charge on an equal basis in Scotland, at least on this occasion they have remembered the existence of Scotland. But Scottish businesses are still penalised relative to English businesses through the rating system. The reduction announced in the Budget did not further close the gap between Scotland and England.

While the English business rate poundage is 40.2p, the rate poundage in Glasgow is 63.3p. In Edinburgh, it is 57.6p, and in Dundee and Stirling it is about 57p. The average Scottish poundage in 1992–93 will be 56.6p compared with the English poundage of 40.2p. The Government have two years left in which to harmonise the poundages either side of the border if they are to stick to their previous timetable. The Council of Scottish Local Authorities calculates that they will need to find a further £260 million in that period. This measure would be an opportunity to guarantee Scottish business that the Government will meet their promises on time, if not sooner.

Mr. Deputy Speaker (Mr. Michael Morris)

Order. I should be grateful if the hon. Member would bear in mind the fact that the Bill is restricted to England and Wales. I hope that he will not be developing his argument too far on the Scottish dimension.

Mr. Jones

I understand, Mr. Deputy Speaker.

Although the Bill is welcome, and we on this Bench will be supporting it tonight, it attempts to ameliorate a bad system which has caused hardship and worsened the already awful effects of the recession. If the Government want to make a proper job of atoning for their recessionary sins, there are many ways in which the Bill could be improved in detail, and we shall attempt to do so in Committee.

8.24 pm
Mr. Michael J. Martin (Glasgow, Springburn)

I congratulate you, Mr. Deputy Speaker, on your appointment as Chairman of Ways and Means, the Minister on his appointment, and my hon. Friend the Member for Nuneaton (Mr. Olner) on his maiden speech, which I enjoyed greatly. It is good to have in our ranks another hon. Member with expertise in local government. I have no doubt that we shall hear him on many occasions in the future.

Any measure that can help businesses, particularly small ones, in England and Wales—I hope that there will be a similar Bill to assist Scotland—is beneficial. I have in my constituency many talented men and women who are self-employed and earning a decent living. They have been forced into self-employment because of redundancies, especially in the railway workshops and in other industries in Glasgow.

I have often asked people who have been made redundant, "Why do you not open a shop or some other business and employ people?" The response is often, "Having a shop means having a commitment to pay rates. It means that, whether the trade is good or bad, you know that, come Monday morning, you must find the money for the rates, apart from the other expenses." So I am glad that at least some help is being given to the business community.

I represent a Scottish constituency. I take on board, Mr. Deputy Speaker, your reference to the fact that this legislation covers England and Wales, but I must refer to the deep anxiety that exists in Scotland because the system there has meant that every five years there was a revaluation, and that led to a great gap. Examples have been given, for example, of football pitches in Glasgow and London and other major cities where a big difference exists in the rates.

Non-domestic ratepayers north of the border are bound to feel aggrieved that compensation is being given to ratepayers south of the border because the Government failed to introduce a compulsory five-year revaluation. Had such a revaluation existed in England and Wales, this measure would not have been necessary. So Scottish taxpayers' money is having to be provided for non-domestic ratepayers south of the border. I take the view that what a friend gets is no loss, but others may not share that view.

For years, and particularly in the previous Parliament, some Tory backwoodsmen kept complaining about what they described as whingeing Scotsmen being subsidised. Indeed, even one of their Lordships in the other place complained about what he called over-subsidised, whingeing Scotsmen. We are tonight discussing an area about which complaints might legitimately come from north of the border, simply because the Government failed to get the revaluation completed on a regular basis. What a blow it would have been to shopkeepers and factory owners in the south if it had been completed on time.

Reference has been made to so-called overspending local authorities. I think that I see the Minister nodding in assent over that. We must consider what is happening in areas where the recession is biting deep, as it is in my constituency. I do not accept that Strathclyde arid Glasgow are overspenders. Indeed, if it were not for the local authorities, many more businesses would be going to the wall.

The Government have introduced compulsory tendering because the private sector is experiencing so much difficulty in the recession that it is moving into the public sector and obtaining local government contracts. Were it not for those local government contracts, many men and women would be out of a job.

I clearly recall that, when Margaret Thatcher came to power, a civil engineering company in my constituency was pleased. It went on record as saying that it would cut on town hall work, but within five years, the director of that company was in the House of Commons Lobby pleading for local government work to keep the company alive.

If local government spending were cut by Government edict, savings would be made not by cutting the numbers of young girls working behind the counters in the city chambers and the licensing department and on the word processors and typewriters, but rather by cutting roads contracts. Roads maintenance and street lighting would go.

The Labour party will not oppose the Bill, but if the Government constantly have a go at local authorities, they should not blame people who must pay the rates for having a go at local authorities. The Government must carry responsibility for those rates bills, because they have capped local authorities throughout the country. They should tell business men and women that local authorities are, on the whole, responsible. They are run by dedicated men and women who give their time voluntarily.

Those men and women are not like Members of Parliament. We complain of inadequate secretarial back-up, but they depend on their wives, sons and daughters to answer phones while they are out attending meetings. Their tea, supper and Sundays off are often interrupted because they have volunteered to serve on local government. Yet every time a Minister gets to his feet, he has a go at so-called overspending local authorities.

Tory Governments have always been keen to talk about law and order. Indeed, a maiden speech earlier tonight discussed that subject. However, the Minister must know that, because of Government cuts, the morale in our police force is in a terrible state. In 1979, if I went to a senior police officer and told him of vandalism in a certain corner of my constituency, he would offer to have extra men sent in and some officers working overtime. Consumers benefit from that. Now, officers in my local authority and, I dare say, authorities in England and Wales, say that they cannot employ the manpower necessary to protect people.

The other day in my constituency, a terrible thing happened. A runaway car was running around a housing estate—[Interruption.] The hon. Member for Tiverton (Mrs. Browning) laughs, but it was not funny. Once the young vandals had stolen the car, they pushed it down a flight of stairs in a main street and killed a young woman who was coming from her home.

Mrs. Angela Browning (Tiverton)

I have yet to make my maiden speech, and I had no intention of participating in this debate. The hon. Gentleman is mistaken, because I was not discussing his remarks but a quite different subject. He was wrong to suggest that I was laughing at what I believe to be a serious matter. Will he withdraw his accusation?

Mr. Martin

The hon. Lady should not be engaged in conversation in the Chamber but should be involved in the debate. I understood her to be engaged in, the debate. I accept that she was not laughing, but, if she was involved in a discussion with her colleague, she should not be here. Earlier this evening, hon. Members were taking part in a debate while others were engaged in private conversation. I understood the hon. Lady to be laughing at a serious point.

The so-called law and order party is not supporting the police because it is not supporting local authorities. Although some business people may say, "Three cheers, the Government will give us cheaper rates," because the Bill will provide some respite, the same shopkeepers and factory owners will go to their group leaders, the Lord Provost and lord mayors asking why their companies are being vandalised. They want to know why, when their vans go into housing estates, they are vandalised.

The answer will be that there is inadequate coverage for the police authorities. Although there will be cheaper rates for factories and shops, what will we do about the shopkeepers who sometimes come to us and say that things are so bad that they must stay the night in their shops to prevent them being broken into? What is the point of charging cheap rates when the party of law and order cannot protect the very people whom it claims to serve?

The Minister—there is a new broom in the Department —should meet the leaders of the local authorities. In Scotland, we have a convention of local authorities. I hope that the Secretary of State will meet the equivalent in England and Wales. Instead of trying to score points off one another, with the Government saying that the problems are all caused by Labour authorities and Labour authorities arguing that they are caused by the Government, why do not they get together and do something for consumers? Ultimately, the people who pay the rates, domestic and non-domestic, are entitled to the best possible service from local authorities and the Government.

8.38 pm
Mr. Paul Murphy (Torfaen)

I congratulate my hon. Friend the Member for Nuneaton (Mr. Olner) on a first-class maiden speech. His remarks were generous, and his local government background will offer much to the House. As a former leader of the borough council at Nuneaton, he gave a good survey of local government in his area.

The hon. Member for Cheltenham (Mr. Jones) referred, rightly and wisely, to the cuts in grant to Gloucestershire county council, which have a parallel with the point made by my hon. Friend the Member for Nuneaton about Warwickshire. The hon. Gentleman also referred to the fact that the former chairman of the Conservative party, Mr. Christopher Patten, owes his new job as governor of Hong Kong to the business rate. There is no doubt that he lost his seat on account of the devastating effect of the business rate on small traders and shopkeepers in the city of Bath.

Obviously, we welcome the Bill, so far as it goes, because it means that some of the excesses in the business rate in England and Wales will now be abolished. During the past three years, Opposition Members have said that some of the changes should have been effected immediately. I can clearly recall saying that people who are changing their business should be eligible for relief in the same way as those who have been in business in the same property for some time. The changes are to be welcomed. But I echo the argument of my hon. Friend the Member for Sheffield, Brightside (Mr. Blunkett) that the transitional relief schemes within both the business rate and the poll tax have brought much uncertainty to the way in which local government finance is regarded in Wales and England.

The new Under-Secretary of State for the Environment will have to answer questions about the Principality of Wales. I intend to target most of my remarks on Wales. However, I am sure that he will meet the challenge, as he has done during the years that he and I have served on Standing Committees.

I understand that 30,000 business rate bills in Wales are likely to be frozen as a result of the legislation, 7,000 businesses are to have their reductions speeded up and 35 per cent. of business properties are to benefit. We welcome those improvements. However, as my hon. Friend the Member for Brightside said, we wonder where the money is coming from, as the shortfall in Wales is to be made up by Welsh Office grants—£25 million in this financial year, £22 million next year and £13 million the year after.

The money for some of the transitional relief schemes that we have been told about during the past year or so seems to come from nowhere. We welcome the schemes and the money behind them, but I and other hon. Members, such as my hon. Friend the Member for Glasgow, Springburn (Mr. Martin), wonder why the money could not be found for other important services such as the police force. I echo the point made by my hon. Friend the Member for Springburn about law and order. The whole of south Wales, from the city of Swansea to the Wye valley, has been allowed only one extra policeman for this current year. I am sure that, if the £25 million could be found, the money for more policemen could be found.

My hon. Friend the Member for Brightside referred to rebates. We believe that the business rate should relate to the ability of business people to pay it, as the individual's council tax or poll tax relates to his or her ability to pay it. That is why we argued at the general election, and still do, that rebates of up to 100 per cent., related to the profitability of businesses with an annual turnover below a specific level, would be welcome. The business rate as it stands is nothing more than a business tax. It is not a rate, as it bears no relation to how rates used to operate or the new council tax is to operate. The business rate is a national tax imposed on business people.

Earlier, we heard exchanges across the Floor of the House on the former business rate levied by local authorities. Of course, some local authorities will spend more than others—that is the ways of things—but if we accept that democracy must be genuine, and local, we must acknowledge that all the benefits of a local business rate in linking the local business community with the local community itself are valuable. Local authorities provide an educated work force, roads, infrastructure, firefighters, housing, environmental services and, particuarly in Wales, important developments in relation to local businesses and general economic development.

The business tax seems unrelated to the commercial activity of a given district. Some 20 or 30 years ago, the great Llanwern steelworks was placed in a rural parish in my constituency. It brought jobs and prosperity, but changed considerably the community's nature. It was right and proper that the !coal authority should derive the benefit of the business rate from the enormous steelworks in a part of the world that was changed by its presence.

A local business tax or rate should be set, collected and used locally. I believe that that is the view of local government generally and of many business people in this country. However, in Wales, as in England, the current business rate distorts the local government finance system. Local authority associations, like many others, are deeply concerned about the different changes that local government finance in the business sector has experienced during the past few years. There is a credibility problem. Many people, both within and outside the business community, have lost confidence in the system of local government finance, whether the poll tax, council tax or business rate.

There is another problem: local authorities, strapped for cash, will encounter difficulties relating to the new change to be introduced by the Bill. The recession means that there are many cases of arrears in England and Wales which in turn burden local authorities with extra administrative costs. Only recently, the Local Government Chronicle said that the changes to be introduced by the Bill were unlikely to have an immediate effect due to the complexities of the computer software of local authorities.

It is important that the Bill proceeds as speedily as possible, which is one reason why we are helping it on its way. However, it is also important that local authorities should be given every possible assistance, not just financial —although that is important. They should also be given advice on how their computers and software can cope with the changes.

As my hon. Friend the Member for Brightside said, the Bill's worst consequence for the local government finance system will be on the so-called gearing effect. In Wales, every 1 per cent. increase in expense means an increase of about 9 per cent. in the poll tax or council tax. Only just over 11 per cent. of local authority income is determined by the local council. There may well be advantages, but I cannot see them.

Due to the gearing effect, if a local authority is to have a genuine revenue-raising power, the national business rate—collected in Wales and distributed in Wales from Cardiff—together with the grant system, which is crazy anyway, will mean that local councils can do virtually nothing unless they increase local taxes dramatically. The gearing effect has distorted local government finance and effectively meant that local authorities no longer have a proper revenue-raising function. That has enormous implications for the future of local democracy in Wales and England.

I hope that, when the Bill is passed and the Government set themselves the task of administering the new council tax, they will look carefully at the joint impact of the business rate and the council tax on the proper revenue-raising functions of our local authorities. Without those functions, local democracy cannot function properly.

There is a special case in Wales, as it seems that British local government reform is on the horizon. We have been told, although not yet in the House, that the Secretary of State for Wales intends to reform local government in the Principality fairly soon, a White Paper will be with us in the autumn, and the county council elections in Wales scheduled for next year may even be postponed.

If we are to have a system of unitary authorities in the Principality and if that system is to enjoy any consensus among those in Wales who understand and are involved in local government, there must be alongside it a change in the system of local government finance which means that the standard spending assessments are much more realistic. That in turn will mean that the business rate is related locally to how people raise it and how local authorities spend it.

Mr. Michael J. Martin

I was a councillor when reorganisation took place. Does my hon. Friend agree that the displacement of officials will entail a fantastic cost in terms of redundancies? Last time, and ludicrously, officials made redundant from one authority immediately applied for posts in a new authority. The Government talk about saving ratepayers money, but I fear that we are in for spending another fortune.

Mr. Murphy

I agree. I, too, was involved in the last local government reorganisation in 1974. Of course, it was extremely costly; I rather suspect that the reforms in England have been postponed because of the enormous costs that they would involve. I should be interested to know how we can avoid them in Wales—I assume that they can be avoided somehow. We are told that the reforms will pay for themselves, but I confess that I have never known that happen yet. Whatever happens, the reforms will be upon us fairly soon, so it behoves the Welsh Office to examine local government finance at the same time as it examines the structure and functions of our new Welsh councils.

We cannot keep having changes and reforms in local government: it must eventually settle down. The key word now must surely be stability in local government, and I hope that the Government will think again in the months and years ahead about the importance of returning the business rate to the local authority dimension and of ensuring that local democracy is both local and democratic.

8.51 pm
The Parliamentary Under-Secretary of State for the Environment (Mr. Robin Squire)

If I am a little tardy in congratulating you, Mr. Deputy Speaker, that is because this is my first opportunity to do so. I hope that you will have many happy years in your new post.

I also thank the hon. Member for Torfaen (Mr. Murphy) for his kind words. He referred to shared pleasures of serving on Standing Committees. I have a strange feeling that we will be returning to those shared pleasures on this and other measures as and when they arise.

I sincerely congratulate also the new hon. Member for Nuneaton (Mr. Olner) on what I thought was a first-class maiden speech, delivered with sincerity and conviction. He spoke generously about his predecessor, Lewis Stevens, who is remembered with affection in this House—I do not believe I am being controversial when I say that he is affectionately remembered by hon. Members on both sides of the Chamber.

The hon. Member for Nuneaton wisely highlighted the links in a community between work, housing and education. Perhaps, as a fellow paid-up member of the club of former leaders of councils, I may also welcome his contribution tonight and look forward to hearing from him again. When he mentioned SSAs, I realised that he will be welcomed into an even more exclusive club—those who wish to understand SSAs and to take part in debates on them. He will be welcome in the rarefied atmosphere surrounding such debates.

The Government are encouraged by the wide range of support for the Bill in tonight's debate, even though, perhaps predictably, some hon. Members' comments went just a fraction wider. The Bill is certainly good news for business. In a nutshell, it means that no business, whether in transition or not, will face a rate increase of more than 4.1 per cent. this year; and 150,000 businesses will enjoy reductions of up to 27 per cent.

To those who argue, as did the hon. Member for Cheltenham (Mr. Jones), that we could or should go further, I can only reply that this is already an exceptionally generous package, worth more than £1.25 billion over the three years concerned.

Speaking of the hon. Member for Cheltenham, whose presence we welcome, he asked a couple of questions that I would like to answer straight away. First, he asked why we are proceeding with the Bill if the economy has turned around. The answer is that the Government believe in fulfilling their promises. This was promised in the Budget and we believe that it should be carried out. Realistically speaking, as I am sure the hon. Gentleman will concede, even with the economy turning round, the change will be gradual and many businesses will still face considerable pressures over the next couple of years, so we think it right that they should continue to receive the promised assistance.

The hon. Member for Cheltenham also suggested that we consider back dating the relief for properties that will benefit from having been left empty during the transitional relief stage. That would be a major exercise, and we should have to unscramble every transaction between 5 April 1990 and 10 April 1992. That would not only be chaotic—it would be undesirable, and it would involve retrospective legislation. Many businesses entered into these purchases and sales taking account of the law as it stood, and we think that it would be unfair to change the underlying ground rules now, as I hope the hon. Gentleman will agree on further reflection.

The hon. Member for Torfaen asked me one or two questions which I will try to answer. If I do not, I promise to write to him with such residual queries as he may trace—

Mr. Murphy

In Welsh?

Mr. Squire

Preferably not.

I can confirm that just under 30,000 businesses will benefit under the so-called loser clauses alone. A further 6,800 businesses will benefit by having their gains accelerated. Altogether, about 35 per cent. of businesses in Wales will be affected, at a cost of about £1 million to the Exchequer.

The hon. Gentleman made a passing reference to rates being based on ability to pay. Before 1990, the basis of local business rates was broadly the same as for NNDR, in that they were based on rateable values. To the extent that businesses will not generally be prepared to pay more in rent than they can afford, market rents and hence rateable values are linked to overall business profitability.

The Bill is certainly good news, targeting help on all businesses. If we simply aimed at small ones, we would not have been able to help some of those which face the largest increases under the 1990 reforms and the largest year-on-year changes under the transitional arrangements.

The decision to end transitional protection on a change of owner-occupier is designed to ensure that the occupiers of new buildings and the new occupiers of old buildings are treated the same. It also allows more money to flow to gainers within the total. I have already mentioned that in the Welsh context.

I should like to say a few words on transitional relief in the light of the earlier exchanges involving my hon. Friend the Member for Ryedale (Mr. Greenway) and the hon. Member for Sheffield, Brightside (Mr. Blunkett). If large increases in rates bills emerge from the 1995 revaluation, the Government will certainly consider using their powers to put in place a new transitional scheme after 1995. We have repeatedly given businesses that assurance, and I am happy to underline it again tonight.

We know that, despite the existing scheme, businesses have had problems coping in the recession. The Government have monitored the position, and have listened. We accept that the loss of transitional protection has put some brake on property changing hands; the Chancellor's Budget announcement included an improvement in the transitional scheme, which will help businesses in difficulties with the recession and assist their return to profitability.

Mr. Murphy

Can the Minister tell us how long the transitional period is likely to last? Is there a norm, or do transitional periods go on for ever?

Mr. Squire

I sense that the hon. Gentleman was being less than helpful in that intervention. The answer is, of course, that he cannot expect me to reply to his question from the Dispatch Box tonight—but I can tell him that the Government will examine the way in which businesses are affected from year to year, and will make decisions on that basis. I hope that he will agree that that is the only intelligent way in which to proceed. As I have said, the Government recognise the possibility of a further transitional scheme if we consider such a scheme justified.

Incidentally, that momentary pause for reflection was helpful, in that I realised that I had made a slip of the tongue. I can confirm that the cost of the Welsh proposals will be £25 million in 1992–93, not the £1 million that I inadvertently mentioned a moment ago.

The Opposition parties sought to tempt us back to locally set rates. Conservative Members are not moved; we are committed to protecting business rate payers. Only last week, and again tonight, my hon. Friend the Member for Fulham (Mr. Carrington) drew attention to the enormous rate rise—an increase of over 100 per cent. in local rate, and of 44 per cent. in the general rate—that the borough of Hammersmith and Fulham imposed on businesses in 1987. In 1989–90, poundages ranged from 122p in Kensington and Chelsea to 400p in Sheffield. I know that the hon. Member for Sheffield, Brightside (Mr. Blunkett) is more than aware of that figure. We cannot go back to that.

I noted with considerable interest, and qualified agreement, what the hon. Member for Brightside said in his speech. If what I have just described could be termed the 1970s mode of the Labour party—in those days, a number of its members were quite content for businesses to be soaked, and soaked very heavily—we have now clearly moved into 1990s mode. Now, the Labour party champions small businesses. How that will blend in with the championing of the Transport and General Workers Union and other union paymasters, time will show.

Mr. Blunkett

I shall ignore that rather frivolous throwaway remark. Perhaps the Minister will reflect on where the poundage to which he has referred placed the city of Sheffield on the league table of rates paid by businesses. During the period he mentioned, Sheffield—the fourth largest city in Britain—ranked 61st on the league table. That bore no relation to the actual pence in the pound that had to be levied to raise the necessary revenue to sustain what Her Majesty's inspectorate described at the time as the best education system in Britain.

Mr. Squire

Of course I cannot give the hon. Gentleman the details of the poundages from the Dispatch Box. I can say, however, that over the years I have heard successive Sheffield Members, referring to the old system, bemoan the high cost of Sheffield's rates. I pass that on for the hon. Gentleman's information and possible edification.

We have always made it clear that, although set nationally, proceeds of national non-domestic rate would be distributed fully to local authorities. The approach in the Bill underlines that commitment. The NNDR pool will be fully recompensed for any reduction in rate yield that is due to the Bill. Local authorities will be allowed to net off reasonable costs of re-billing from NNDR payments. We shall look carefully at any evidence from authorities that NNDR payments in the first month of the year have not kept pace with the profile of payments to the Department set at the beginning of the year, and we shall consider adjustments if they prove necessary.

Local authorities will be given plenty of time to prepare for re-billing after enactment by delay in the commencement of the Act by about one month. They will be required to give refunds back to 1 April—or, in the case of transferred property, 10 March—to those who have overpaid, and to adjust future instalments downwards.

I am sure that the House will wish to see the Bill on the statute book as soon as possible, so that ratepayers can benefit from it. It gives significant help to all businesses, big and small, during the current financial year. It does so by restricting increases for all businesses, and by ensuring that those who benefited most from the 1990 reforms receive all that benefit during this year or the next. As my hon. Friend the Minister of State said when he moved Second Reading, no business this year will face a real-terms rise in its rate bills.

We believe that this is an important, targeted and necessary measure, and I urge the House to give it unanimous support tonight.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Committee of the whole House. —[Mr. Mackay.]

Committee tomorrow.