§ Considered in Committee; reported, without amendment. Order for Third Reading read.
4.43 pm§ The Minister for Local Government and Inner Cities (Mr. John Redwood)I beg to move, That the Bill be now read the Third time.
I am grateful to hon. Members for making such rapid progress in Committee with what is an excellent Bill. I am grateful to the Opposition parties, who have appreciated that the relief offered by the measure is greatly sought after by businesses throughout the country and will be welcomed by them.
As we discovered on Second Reading, the Bill offers a further freeze on rate bills for 1993–94 in real terms. It means that businesses are spared increases of 20 per cent. in real terms where they have a new rateable value of £15,000 or more in London or £10,000 or more elsewhere. Businesses with values below those thresholds are spared 15 per cent. increases.
It brings welcome relief to about 470,000 properties in England to the tune of £340 million in 1993–94 and £220 million in 1994–95, on top of the £1,250 million package that' was announced and passed through both Houses last year.
The main beneficiaries will be businesses that have borne the brunt of increases following the 1990 revaluation, with the introduction of the unified business rate. It will include many shops and offices in towns and cities throughout the country, but especially in London and the south-east, where the valuation increases were largest in the valuation based on 1988 values, which turned out to be a high level in the market place. Those businesses can also look forward to the benefits of the new valuation orders on values in 1993, which will come into practice two years later, with parliamentary consent.
The costs of the changes and benefits to business will be met in full out of taxation by the Government making additions to the non-domestic rating pool. Businesses will not experience a change in liability to pay until the commencement date, which we would like to be three weeks after Royal Assent, so giving authorities time to adjust their bills. That is an important reason why I welcome the assistance of the House in making rapid progress with the measure, because it means that businesses are that much nearer to getting the relief that they seek.
The change in liability will have retrospective effect to 1 April, but in the meantime businesses should carry on paying the bills that they have been sent, until the House has completed all stages of the measure and the legislation is brought into effect.
The businesses, as I said, are particularly concentrated in London and the south-east, but there is welcome relief for businesses right across the country which were experiencing quite sharp increases in their valuations as a result of the latest valuation for business premises.
Of the 502,000 properties that will benefit from the measures, about 84,000 are in inner London, 44,000 in outer London, 128,000 in the rest of the south-east, 70,000 963 in the south-west, 30,000 in the eastern area, 31,000 in the east midlands, 25,000 in the west midlands, 39,000 in Yorkshire and Humberside, 35,000 in the north-west and 14,000 in the north of the country.
As the House can see, the measure has something for businesses all over the country which suffered from the revaluation and will be welcome to them as a result. I have pleasure in commending the Bill to the House and I again express my gratitude for its rapid passage.
§ Mr. Doug Henderson (Newcastle upon Tyne, North)I am pleased to say that Opposition Members are continuing to support the Bill. Much was said on Second Reading by my hon. Friends about the need for the measure because of the way in which problems in the economy had made matters more difficult for businesses, particularly small businesses and especially in the south of the country, because they were faced with the largest increases in the business rate.
The need to refer to that on Second Reading was even more evident following visits I paid to areas in the south in recent weeks. I visited places such as Great Yarmouth, Norfolk, Ipswich, Suffolk, Hampshire and Weston-super-Mare. Unfortunately, I did not visit Buckinghamshire. Perhaps I should have done so. The difficulties faced by small businesses became more obvious to me and it was clear that they needed relief from the increases in business rates. The voters in those areas expressed that view firmly last week in the county council elections, where the Conservatives felt the impact in the most damaging way.
On Second Reading we had a thorough exchange of views about the need for the Bill, its content and some of the reservations that hon. Members on both sides had about it.
On Second Reading the House noted that the transitional arrangements for the business rate has applied for two years—for 1990–91 and 1991–92—and that during that period it had been recognised that a further transitional period would be needed to provide additional relief for businesses that had suffered most from the increase in the business rate, which occurred at the same time as the recession. Last year, therefore, the Opposition supported the further transitional arrangements that were made for 1992–93.
The House will have noted that the Opposition supported the transitional arrangements both on Second Reading and in Committee and that we are supporting them again on Third Reading. These arrangements are needed because of the depth and length of the recession. Even if there should be an economic recovery in the next 12 months, further legislation will probably be needed next year and the year after.
A number of worries were voiced on Second Reading and I shall voice them again today. We are worried that the Government will renege on any commitment to maintain, in real terms, expenditure on local authority services that they have identified may be needed in future. The worry is that the Government will be unable to provide local authorities with the resources that they currently receive, which many people believe are already inadequate. As 964 business rate revenue next year is likely to fall, less money will be available to local authorities, which will lead to difficulties over local authority expenditure.
The Government are struggling to maintain the rate poundage at its present level, partly because of the effects of the recession and the transitional arrangements. Small businesses are worried that the Government may be tempted to renege on the 1988 regulations which kept the increase in rate poundage in line with the rate of inflation.
The transitional arrangements will eventually, of course, come to an end. If they were to come to a sudden end, the consequences for a number of businesses which now enjoy the benefit of this relief could be extremely serious. That worry is not addressed by the Bill. Therefore, the small business community is looking for an assurance that there will be no sudden end to the transitional relief scheme.
People are also becoming increasingly worried about the lack of local democracy. Local people are no longer able to make decisions that affect them; they are unable to determine the kind of services that they want for their community and the way in which those services should be financed. It is not only those who were campaigning in the local elections, or Opposition Members, who say that. Many business leaders are saying it, too, as well as the Institute of Directors and the chambers of commerce. They believe that the determination of the business rate should be left to local communities.
The Government should examine the possibility of giving that responsibility back to local communities. I can give the people of this country a commitment: that the Opposition, when in government, will address that important issue.
§ Mr. Deputy Speaker (Mr. Geoffrey Lofthouse)Order. Before the hon. Gentleman says anything else, I remind him that Third Reading speeches are supposed to be about the contents of the Bill. He is going rather wider than the contents of the Bill.
§ Mr. HendersonI am grateful to you, Mr. Deputy Speaker. I did not intend to steer myself away from the Bill's contents.
The business community believes that the effects of the Bill will be beneficial. I predict, though, that similar legislation will be needed next year. Additional legislation will also be needed to deal with the revaluation of business properties—effective from 1995, but based on rental values this year. Revaluation will give rise to a number of anomalies with which the House will have to deal at some future date.
Notwithstanding our reservations, some of which I have intentionally expressed and others to which I referred inadvertently, we are happy to give the Bill a Third Reading.
§ Mr. Eric Pickles (Brentwood and Ongar)Unfortunately, I was not here for the Second Reading debate, though I read the report of it in Hansard. Nevertheless, I attended diligently throughout the Committee proceedings and enjoyed them enormously.
I support the contents of the Bill, largely because of the effect that it will have on my constituency. which has been hit hard by the recession. It is an area that has traditionally enjoyed high employment and a high level of business 965 expansion. The shock of the recession had a disproportionate effect on businesses in my community. That is why the Bill is so welcome. Businesses in my constituency are committed to being among the first to come out of the recession.
Business needs a degree of certainty for its expansion plans. The Chancellor's announcement and the contents of the Bill will go a long way towards providing local businesses with the confidence to make an extra effort and thus reduce unemployment.
The Bill builds upon the provisions of the Local Government Finance Act 1988. Its importance is that it limits the rise in business rates to the level of inflation. I moved from an area where rateable values are traditionally low to one where they are traditionally high. I am only too well aware, therefore, of the effects that a move towards full valuation would have on local businesses.
Firms in Brentwood and Ongar need to be encouraged to take on more staff. I am acutely aware of the fact that 3,056 people in my constituency are unemployed. That figure is very small compared with unemployment elsewhere in the country. Nevertheless, it is my responsibility, and that of the House, to encourage local businesses to take on more people. The Bill will, I believe, encourage local firms to do precisely that.
I can foresee clearly what would happen if the Bill were not passed. In the past, business decisions were taken bearing in mind the effects of local taxation. The Bill ensures that business decisions can be taken which ignore the question of local taxation when considering the siting of an office or a factory. I recall a great disparity between offices in one part of the country and identical offices in other parts of the country. Under the old system, businesses were squeezed by local councils until—to use Lord Healey's immortal words—the pips squeaked. The system gave rise to unfair competition and unbalanced markets. Local firms were forced to look round the country for areas that had low levels of taxation. The Bill avoids that situation. It encourages business people to stay in their local communities.
Let me cite a classic case. I recall a firm that had a site in Kensington and Chelsea and a site in Sheffield. In one case the poundage was 1 17p and in the other it was 34'7p. That sort of situation does not encourage business people to stay in their local communities. I know of business men who literally took factory roofs off to avoid paying rates. That kind of activity does not encourage expansion. The Bill is necessary as it ensures that rate levels can be kept down. I have received from the chambers of commerce in Brentwood and Ongar representations to the effect that they are in favour of freezing the level of taxation.
I have much pleasure in recommending the Bill to the House and hope that hon. Members will feel able to support it.
§ 5.1 pm
§ Mr. Nigel Jones (Cheltenham)I too welcome the measures, which will provide some help for hard-pressed businesses. I am delighted to hear that 502,000 businesses throughout the country will benefit. I thank my hon. Friend the Member for North Cornwall (Mr. Tyler), whose remarks on Second Reading I read with amusement when I was in Cornwall to fulfil some long-standing 966 engagements connected with the county council elections. It is clear from the results of last Thursday's elections that my visit was time well spent.
The only question mark over the Bill relates to whether it does enough. In the corresponding debate last year, the Minister said:
I know that the recession has created difficulties for many businesses…The Government have therefore decided that their costs this year should not be worsened…We propose a one-year freeze to provide a breathing space."—[Official Report, 19 May 1992; Vol. 208, c. 204.] The fact that the Minister is now providing another year's breathing space shows that perhaps not enough was done last year.Sadly, last year's green shoots of recovery faded away. The Government misjudged the situation then and the result was fatal for many thousands of businesses. This year there are signs that the number of businesses going under is beginning to decrease. I welcome that trend. Again we are hearing of the famous green shoots. During the election campaign someone told me that they were election green shoots. It is rather odd that these shoots always appear in the spring. I hope that this year's are real and that they will grow strong. Only when that happens shall we be able to get Britain back to work. Only then will hon Members be able to start to argue about where best to invest the new money, instead of scrapping about where cuts should be made.
With regard to recovery, the jury is still out. While I was travelling down to Cornwall two weeks ago I heard the financial director of Tarmac interviewed on the "Today" programme early in the morning. Having been asked whether there were any green shoots, he replied:
Yes, but we've seen green shoots every spring for the last four years, and they have all faded away.On this occasion I am prepared to give the Minister the benefit of the doubt. Good luck to the green shoots and good luck to the many thousands of businesses all over the country which must survive and grow. I must put this question to the Minister: if, in the next few months, there is any sign that the recovery is faltering, will he come back to the House and announce further measures, including further non-domestic rate reductions, to help companies to survive?
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§ Mr. RedwoodI am grateful to the hon. Members who have contributed to this brief debate.
The hon. Member for Newcastle upon Tyne, North (Mr. Henderson) suggested that we shall need further legislation next year. I hope not. The signs of recovery are most encouraging. Business reports from around the country imply that output is rising and that there are opportunities for more business activity. That is what we all wish to see. I remind the House that this measure will continue to provide substantial benefits next year. Taking last year's provision and this year's provision together, the figure is about £355 million. We hope that that will be enough to do the job.
The hon. Member for Newcastle upon Tyne, North asked about real levels of local authority expenditure and business rate pool compensation. As he is aware, this measure provides for full compensation to the pool for the expense of the concessions made. Details of real levels of local government expenditure for next year will be announced at the normal time and in the normal way. Statements regarding the public expenditure figures that 967 we set out last autumn will give the hon. Gentleman some guidance about Government plans. As he will see there, we are not planning savage cuts in local authority expenditure, as he and some of his hon. Friends like to suggest. There is no intention to renege on the essential 1988 promise that, under the new system, business rates would be allowed to rise only at the rate of inflation. That was the kernel of the new scheme. That was the promise given to and widely welcomed by the business community. It remains the policy of Her Majesty's Government, and it is what the legislation says, with the necessary exception of revaluations—revaluations are always the exception—which have been handled through transitional relief and through this measure.
The hon. Gentleman is aware that transitional schemes have been set out for the most recent revaluation—that of 1988, which came into effect in 1990.I have told the House in the past—I renew the commitment—that, as we know the details of the new valuation based on 1993, and as we think about its introduction for 1995, we shall ask ourselves whether there is any need for a new or further scheme of transitional relief in the event of very large changes which we think would be difficult to implement in one go. I cannot say at the moment. I do not know, and I do not suppose that the hon. Gentleman knows, what changes might occur as a result of that revaluation. We will make our judgment at the time and will put the matter to the House in the usual debate.
I do not know, Mr. Deputy Speaker, whether you will allow me to wander into the area of local democracy, but I should like to say that the retail prices index pledge is important. I am not quite sure how the hon. Gentleman was marrying his wish to sustain the RPI link, which I entirely support, with his wish to give local councils discretion to fix the level of the rate. What discretion 968 would they be given if the level of the permitted increase were specified in legislation? This is a matter that will need to be clarified in another debate or at another time.
I am grateful to my hon. Friend the Member for Brentwood and Ongar (Mr. Pickles) for his strong support for the measure. He has rightly said that small businesses are crucial in constituencies like his own. Indeed, they are crucial in constituencies up and down the country. It is small businesses above all that will welcome the measure. For a small business man faced with an increase in the valuation of single business premises, the cost increase is very big if the full impact of the change has to be taken. It is very likely that large national businesses with a variety of properties do rather better from the averages, or the swings and roundabouts, of the valuation system.
The hon. Member for Cheltenham (Mr. Jones) criticised me for bringing to the House measures last year and then coming back for a second go in the current year. That is necessary, given the way in which transitional relief and the previous legislation worked. I would have hoped that his party would have welcomed the fact that in his Budget the Chancellor rightly saw that business would appreciate a further year's relief on top of the relief already granted.
Towards the end of his speech the hon. Gentleman was less cynical in his comments on recovery and green shoots. I welcome his desire to see recovery grow and strengthen, as we all do. I believe that the recovery is developing and that the measures will make an important contribution to improving business progress and prosperity over the ensuing year.
Therefore, I hope that we will not need to do the same next year, but I remind the House that the benefits of the legislation will live beyond the current year. That will be more than welcome to the business community.
§ Question put and agreed to.
§ Bill accordingly read the Third time, and passed.