§ (Fourth Day)
§ Wednesday, 11th June 2003.
§ The Committee met at half past three of the clock.
§ [The Deputy Chairman of Committees (Viscount Simon) in the Chair.]
§ Schedule 2 agreed to.
§ Clause 43 [Arrangements with respect to business improvement districts]:
§ Lord Jenkin of Roding
moved Amendment No. 113:Page 20, line 2, after "work" insert ", investThe noble Lord said: With this amendment, we shall also discuss Amendments Nos. 114 to 116, 118 to 124 and 132. It is a large group of amendments which have been tabled in the names of various noble Lords. No doubt, we shall spend a little while this afternoon debating them. I shall open the debate by speaking primarily to Amendments Nos. 113 to 116, 120, 123, 124 and 132, which are in the names of my noble friend Lady Hanham, the noble Baroness, Lady Hamwee, the noble Lord, Lord Rogers of Riverside, and myself. I am particularly grateful to the noble Lord, Lord Rogers of Riverside, for adding his name and authority to the amendments.
The amendments are intended to provide that owners or lessors of property in a business improvement district shall have a role in the processes for establishing a BID alongside the occupiers, the non-domestic ratepayers. I know that the noble Lord, Lord Rooker, does not like the name "BIDs", but the full name is so long. I hope that he will be happy with that.
I start by repeating the welcome that I gave to this part of the Bill at Second Reading. I welcome the fact that the Government have chosen to proceed by means of BIDs as the instrument whereby businesses can pay to improve and enhance their local area. It is clear that the BID concept has attracted wide support from the representative bodies of business and property interests, including bodies such as the Association of Town Centre Management, the British Retail Consortium, the British Council for Offices and the British Property Federation, as well as a long list of others.
It would not be appropriate for me on this occasion to rehearse all the details of the scheme. They were well described by several noble Lords, including the Minister, at Second Reading on 3rd April. However, I remind the Committee that the essence of a BID scheme is that the proposers, in consultation with the local authority and in relation to a defined area, should 114GC draw up proposals to raise a levy for improving the area by means of facilities over and above those that the local authority already provides. There was some discussion of that at Second Reading. Such proposals might include measures to enhance the environment, strengthen security, improve the infrastructure and provide a range of services. The proposals are then put to a vote of non-domestic ratepayers—the occupiers—and, if they are approved by a majority, the scheme goes ahead. All must pay, not only those who voted for the scheme.
Wisely, the legislation allows for much flexibility in, for instance, defining which occupiers should contribute, and allows for variation in the rate of the levy for different classes of occupier or for the exclusion of small businesses. It is up to the proposers of a BID scheme to decide how they will deal with that. As a last resort, the local authority has the power to veto the scheme, if it decides, for any reason, that it cannot support it. One of our amendments was tabled so that we could explore what that might mean.
There is a gaping hole in the legislation. There is no provision for owners who are not occupiers—lessors or freeholders—to be brought into the statutory scheme. The amendments to which I speak aim to fill that lacuna. Before I come to the detail of the amendments, I shall make three important points. The first point, which was made by several noble Lords at Second Reading, is that it is clear that, in most cases, a BID scheme will simply not get off the ground, unless it is promoted by the property owners and they are involved from the outset. Property owners have a key long-term interest in urban management, whether through a BID scheme or by the continuation of existing voluntary schemes. The benefits of a successful scheme—higher property values that may, in turn, lead to higher rents—will often be felt most keenly by the owners of property, not necessarily by those who occupy it. Landowners have initiated and funded most of the voluntary BID-style arrangements to date. There is a broad consensus among organisations representing landlords—such as the British Property Federation—and tenants and among bodies representing small businesses.
The involvement of owners in schemes developed under the Bill should be more clearly encouraged and facilitated. That is the experience in the United States, where the BID concept originated. There, the liability of a BID levy sits with the owners of a property. In many cases, at least part of the cost is passed on to the occupier through rent reviews and service charge negotiations. Generally, that happens only after the benefits of the BID have been demonstrated.
If the current proposals in the Bill are adopted, the cost to an occupier will be borne, first, through the BID levy, secondly, through increased rental levels as a result of rent review negotiations, and, thirdly, through increased business rates following the increases in rental levels. It may be felt that occupiers are unlikely to vote for such a scenario or to have the motivation to initiate a scheme without the total commitment of their landlord.
115GC That fact is well recognised by the Government—I come to my second point—as evidenced by the explicit statements in the draft guidance produced by the Minister's department, the Office of the Deputy Prime Minister. Although noting that, under the Bill—this is what we are complaining about—owner contributions can only be voluntary, the guidance lays some emphasis on the owner's role. In section 2 of part 2 of the guidance, under the heading "Motivating Key Partners", there is a whole page about the role of owners. I was tempted to read the whole page into the record at this stage. In this Parliament, we do not have a system of reading documents into the record simply by handing them in. I resisted the temptation, although we may have to come back to it later. I shall read just one or two sentences. I have, however, placed copies of the whole page about property owners at the back of the Committee Room. They are available to any Member of the Committee who wishes to read the whole thing.
Under the heading "Property Owners", the ODPM has said:Property owners will have a vital role to play in the success of Business Improvement Districts".We should note the words "vital role". It also says:For many, enhancing their local area will be a key objective because it will result in an increase to the value of their property. For this reason, businesses will need to ensure that property owners are a part of the BID process from the earliest stages. Once property owners are convinced that the BIDs objectives are beneficial to the area, they are likely to be willing to invest in the scheme".It goes on:There are ways in which property owners can contribute financially to BID schemes".The first way mentioned is the voluntary contribution to which I have already referred. The second way is through negotiation with tenants. The document says that the property owner may be willing to remit some rent if the tenants on his property agree to vote in favour of a BID. The third way is by,paying the additional BID levy on behalf of tenants. In an area where a property owner is particularly keen to endorse the BID, they could agree to pay the additional levy on behalf of their tenants in return for the support of tenants",in the ballot—that is, under the scheme set out in the Bill.
The document spells out other ways in which the property owner could be included in BID schemes. It says that it would be good to have representative property owners on the BID board. That seems sensible. It goes on to say:Property owners have an important role in 'selling' individual BID schemes to other interest groups".There is much more in the same vein.
Given the quite explicit statements in the draft guidance—I recognise that it is only draft—produced by the ODPM, owners still have no statutory role. They have no right to vote on the BID scheme, and their contributions can only be voluntary. That is what I call a gaping hole in the legislation. The key point is exactly the same as with occupiers. If occupiers vote 116GC for a BID scheme and achieve a majority, there can be no free-riders. All occupiers in the BID must contribute to the levy because they will get the benefit of the improvements to facilities and services and to the environment or whatever. Why does not the same apply to owners? What about the free-riding owner who says, "I'm not going to contribute to this. If others want it, let them go ahead". He gets all the benefit of the scheme, while contributing nothing to help finance it. That cannot be fair.
The third point is that I have evidence that Ministers are trying to find ways in which owners can be brought into the statutory scheme. They blow a bit hot and cold. I have a letter from a senior manager in Boots, and I shall quote one paragraph from it. There was a launch of the BIDs pilot in February, and the Boots executive wrote to me to say:I find it interesting that after the presentations, Nick Raynesford came to me and asked how we could find a way of formally including landlords in the process".I found it encouraging to read that. This is Mr Raynsford's Bill, as he is the Minister of State in charge of it. If he is trying to find a way, we may be pushing at an open door. I know, however, that there have been other meetings at which the doors have been firmly closed.
I will summarise. The owners' involvement is essential, and the Government fully recognise that. Apparently, the Government are searching for a way to achieve it, but there is nothing in the Bill. I hope that our amendments will show a way ahead.
Amendment No. 113 would simply add the word "invest" to Clause 43(2)(a), which identifies those whom a BID may benefit as,those who live, work or carry on any activity in the district".We would include those who invest in it. Amendments Nos. 114 and 115 are, in effect, paving amendments for the substantive amendment, Amendment No. 116, which would insert a new clause, headed "Superior property interests". The word "superior" has a legal meaning and does not imply any moral superiority.
Subsection (1) of Amendment No. 116 requires the details of superior property interests to be set out in the BID arrangements. Subsections (2), (3) and (4) contain the heart of the system. The bid arrangements must describe how the owner's share of the levy is calculated. Obviously, that is a key issue. It defines that share as "the allocated proportion". They must then specify how much is left to be paid by the occupiers, which is defined as "the residual proportion", and the clause ends by stating that the sum of the allocated proportion and of the residual proportion must not exceed what would be paid if the occupier alone were paying. There cannot be more because there are two paying—it is simply a question of how the share is calculated. I will return to how this would work, but first I would like to complete my references to the rest of the amendments to which I am speaking.
117GC Amendment No. 120 states that no person should have more than one vote. This is intended to ensure, for example, that the owner of a shopping arcade—a shopping centre, even—with a great number of shops would not have more than one vote in respect of his superior interest. To do otherwise would tilt the vote very unfairly—or it could.
Amendment No. 123 is consequential on the new clause, making it clear that in calculating the outcome of the vote, an owner is to be treated as voting in respect of his "allocated" share and the occupier in respect of his "residual" share.
Amendment No. 124 sets out how the local authority should approach its decision whether to veto or not. In particular—and this is a very important point—local authorities must be satisfied that the arrangements are "fair and equitable". I am assured by the lawyers that there is ample statutory precedent for that.
Amendment No. 132 is a new clause entitled:Restriction on reimbursement of levy".It would prevent an owner from recovering his share of the levy from his tenant. It also deals with a case where new interests are created after the bid scheme has come into force.
Those are the amendments, but before I sit down—I may be disappointing the noble Lord, Lord Rooker, in that the afternoon is yet young—there are three further points I must touch on. First, the amendments are drawn up in a form that makes the levy by property owners a charge in the sense that what they pay is directly attributable to the benefits that are to be provided. As such, they create a recoverable debt which the BID managers can recover by civil action. Like the occupiers' levy, it is not a tax.
Secondly, we envisage that it will be for the local authority to use its powers under Section 16 of the Local Government (Miscellaneous Provisions) Act 1976 to secure details of the ownerships of property. There will probably need to be added to the Bill, at some stage, regulations to set out how this should be done. This is necessary because there is real commercial value in establishing precise ownership patterns, rental payments and other lease terms, and these powers should not therefore be given to BID managers.
Thirdly, and most importantly, there is the issue of how the apportionment of the levy between "allocated" and "residual" shares should be done. Our proposals envisage that it would be done by the BID proposers, based on information supplied by the local authority and by the owners and occupiers. The calculation could be done for each hereditament and would depend on the terms of the lease, the rent paid, and so on.
I have in my hand the executive summary of a very interesting report prepared for an umbrella body for BID proposals, the Circle Initiative, about which I am sure the noble Lord, Lord Rooker, has heard. The report has been prepared by a leading firm of property consultants. Jones Lang LaSalle. It suggests two possible models, as they call them—the formula model 118GC and the broad-value approach. Both models seek to achieve the objectives which are stated in the report. It says:We consider that the Model needs to be:Based upon a business plan that will fulfil the requirements of both property occupiers and owners within the BID area; implementable/deliverable; cost and time effective to implement; simple and transparent i.e. readily understandable; as fair and equitable as possible".The report describes the formula model in these terms:The Formula model is based on an apportionment between owners and occupiers based on:i) a banding of interests by reference to lease length (which should be adjusted to reflect the BID business plan and services);ii) apportionment of the owner levy between owners on the basis of net rent receivable and lease length subject to a threshold test of sufficient economic interest.The Formula model relies on a simple calculation based on these two measures of "value". This has the advantage of being transparent in providing an objective explanation of how individual assessments have been reached".Under the heading, "An Alternative Approach", the report describes the broad value approach as follows:We have also considered the potential for a less complex approach where occupier and owner interests could be assessed in relation to relative broad value bands (rather than measured in absolute financial value terms).Accordingly, we have developed the 'Broad Value' approach which categorises property interests through a subjective assessment of the same key ownership factors for individual property interests as we have used in the Formula approach, namely term of interest and net rent receivable.The Broad value approach, however, works on the basis of the BID manager's assessment of the appropriate value band for the individual interest. This relies on a more subjective assessment than the Formula approach".I hope that this demonstrates that there has been a great deal of very skilled professional work to establish the workability of the apportionment that would he required by the amendments to which I am speaking. It is, in fact, a perfectly feasible operation. Yes, there will be some cost, put by one commentator as perhaps as high as £50,000. But in the context of a BID which may be aiming to spend several million pounds over a period of five years, £50,000 may not seem very much as the price of getting the owners statutorily involved in the scheme. Indeed, they describe it as an entirely reasonable cost.
To sum up my case, I make six points. First, the approach offers choice. The proposal allows each BID to choose whether to involve property owners. It does not force them to do so. In some cases, where the focus is on short-term services, a BID may simply seek to charge occupiers. Conversely, where the works proposed by the BID are of a capital nature, the bulk of the charge would probably be borne by those with longer term interests. The proposed mechanism would allow that.
Secondly, the approach allows local decision-making. Each BID would have to decide for itself whether the investment in establishing a property register is worthwhile. There will, as I have said, be a cost attached; in some cases the benefit will not justify it, but in others it will. In other cases, it may be sensible 119GC just to seek to charge property owners with a "significant" property interest, with the level of significance agreed locally. If the proposals meet the "fair and equitable" test, this, too, should be acceptable.
Thirdly, the approach is simple. It builds on the proposed measures in the Bill and ties any payment to the rateable hereditament. There will never be a situation where the combination of occupiers and owners of any hereditament pay more than a single occupier would pay. All that is suggested is that in relation to each hereditament the BID levy should be fairly allocated between the immediate occupier and the owners—if any—standing "behind" that hereditament.
So we have choice, it is local, it is simple, and my fourth point is that it is fair. Nobody will be asked to pay without being able to vote. Anyone being asked to pay any amount will get a head count vote. Everyone being asked to pay will get a value-related vote, with the "weight" of that vote being directly proportional to the percentage of the total value of the hereditaments in the BID area.
Fifthly, there are no disadvantages. There is wide business support. There is small business support and there is strong local authority support. There is national and international experience suggesting that it is the most sensible approach.
Sixthly, there is a real risk that without statutory property owner involvement, BIDs will tend to concentrate on short-term fixes with limited imagination. While they may succeed in securing initial support—and perhaps one is entitled to be a little sceptical, given the "freeloader" concern—the view is expressed that they will be very likely to fail to secure a second term.
These amendments seek to fill the gaping hole to which I drew attention at the start of my speech. I commend them to the Committee. I beg to move.
§ 4 p.m.
§ Baroness Hanham
I support what I was about to call this very competent speech, but that sounds very patronising when someone has as much expertise as my noble friend. He has raised one of the most important lacunae in this legislation.
I have worked in an area where there has been voluntary co-operation between businesses, local authorities and voluntary organisations—in fact, BIDS in everything but name. It would have been impossible without the support and influence of the local major landowner. When that scheme started, there was no reason to suspect that the landowner would join in—it was a purely voluntary arrangement. I think that was serendipitous. We were very fortunate that we were able to have that voluntary contribution. But I know that had that big business landowner not been involved, the scheme would have been severely jeopardised. Therefore, there is no real expectation that these BID schemes will work if any major 120GC landowners in the area are not involved and not required to be involved. That is the point that my noble friend Lord Jenkin has been making.
The code of guidance is very clear that this could be a voluntary intervention—in fact, that seems to be the expectation. But in real life, the statutory noose might be a helpful tension to ensure that landowners were part of the scheme from the outset and expected to be part of the original BID decisions, with statutory involvement thereafter.
There is also another side to this. If legislation requires landowners to be involved, the occupiers will be more interested in the scheme. There will be less concern about becoming involved. It will be very important that occupiers are signed up to this, otherwise it will not work. Some people see benefits to some and not to others.
I very much support the amendments. I am extremely grateful to my noble friend Lord Jenkin for taking on the burden of ensuring that the matter was explained so thoroughly and clearly. I hesitate to cloud the issue, which the noble Lord presented very well.
My name is attached to four amendments in this group. I worry about the order of the Minister's speaking notes, but would it be appropriate for me not to move the four amendments now and to regroup them further down the list? They are not germane to the problem of landowners' involvement. If regrouping the amendments would make life difficult for the Minister, I shall speak to them now, but they are slightly outside the scope of the subject. I am in the Minister's hands; he can tell me that his notes are so tied to the amendments that a regrouping would muck them up. I would not want to inconvenience him.
§ The Minister of State, Office of the Deputy Prime Minister (Lord Rooker)
I came here today in a really positive frame of mind. I was as happy as Larry when I left last night, as there was no regrouping. I said that I did not mind if amendments were regrouped but that that must be done early in the morning. The response was, "No, no! Everything will stay the same; it is perfectly OK". Frankly, I don't give a damn. The noble Baroness can continue as she started or she can change. I will respond to all her amendments, but the trouble is that they may be answered at different times.
§ Baroness Hanham
I am reluctant to waste time, which is what is suggested would happen if I regrouped amendments. The trouble is that my amendments relate to Clause 52, which is about the voting system and not this important new area. I was worried that, if I did not regroup, it might make matters more difficult or complicated.
I shall move the amendments now, and we shall have to discuss the whole matter. Amendments Nos. 118, 119, 121 and 122 focus on Clause 52. The Explanatory Notes comment on Clause 52, stating that the clause,provides for the requirement that must be satisfied in a ballot to secure the approval of a BID. There will be a two-part vote. A majority of those voting must vote in favour, and the total rateable value of the properties of those voting for must be more than that of those voting against".121GC Our amendments challenge that system of voting. First, we have problems with the first conditions set out in subsection (2). For a BID to be established, a majority of those who would be liable to pay the levy must first vote in favour. We do not feel that a simple majority is a satisfactory trigger for a BID levy, bearing in mind the number of ratepayers who would be liable. Amendment No. 118 would ensure that a BID levy would not be approved unless two thirds of those who vote in the ballot vote in favour.
Amendment No. 119 also states that a ballot will not be valid unless 75 per cent of people eligible to vote turn out to do so. We want there to be a concerted vote of approval by a substantial majority of those eligible to vote, not a mere 50.1 per cent majority in a vote with a 35 per cent turnout. We have had many long, involved debates about voting majorities in the context of another Bill and balloting systems. But, on matters of such importance, it is legitimate, in the interests of democratic accountability, to impose a higher majority and turnout cut-off point.
Amendment No. 121 makes a very simple point: should those who own two properties that qualify for the levy, and subsequently the ballot, get one vote or two? We should bear in mind that there is some discussion about property owners becoming involved in the BID arrangements, which my noble friend has just put forward. Many people might have two residential or business properties within one BID area.
Amendment No. 122 challenges the rather complicated mechanism that is to be the second condition under Clause 52(3). Can the Minister clarify how the calculations will be made in practice—in the real world, not in the legislation world? We propose simply that a majority of those entitled to vote turns out to do so. It is a straightforward test. I appreciate that these amendments are not entirely associated with those that my noble friend Lord Jenkin moved, but no doubt we will get round to discussing them at some stage.
§ Baroness Hamwee
My name is attached to the amendments moved by the noble Lord, Lord Jenkin of Roding. I mentioned previously that we had attached only one name to them to leave a space for a fourth name from elsewhere in the Committee. I am glad to see that that has worked on this occasion. I am beginning to wonder whether the Government have a cunning plot to feed petrol fumes into the Chamber so that we all fall asleep. The same thing happened at around the time that I first stood up yesterday.
The noble Lord, Lord Jenkin, has brought the matter very effectively to the attention of the House previously. I am glad to see that his work now appears to be about to bear fruit. I congratulate the organisations involved. They have clearly put a lot of effort, not only into these proposals, but into the ongoing pilot schemes. We support the proposals. We want to see them given a sound legislative basis and to see good practice.
It is notable that property owners wish to be involved. We do not often hear a clamour from people wishing to pay when that is not initially proposed. I 122GC conclude that property owners also see the scheme as an investment rather than a form of tax. The noble Lord, Lord Jenkin, and the noble Baroness, Lady Hanham, talked about the importance of property owners' involvement. One can look at that involvement on several levels. The first is the legislative level. Another is that of human behaviour and psychology—I apologise for straying into psychobabble language—involving "ownership" of a process. The very involvement that the noble Lord proposes we should provide, makes the process much more meaningful—I am using more psychobabble—to those who will be affected. That is an important ingredient. I shall try to be topical: the noble Lord's six tests, rather than five, have been satisfied, as he has demonstrated.
Amendments Nos. 118, 119, 121 and 122 return to the issue of thresholds and turnout. Our response is no different to the one that we give when the topic occurs in the context of elections and referendums. One should encourage people and campaign to achieve a majority. There is no inherent reason why there should be a bigger turnout. After all, one wants to achieve the necessary turnout, but if people do not exercise the right to vote, it is their lookout.
In this situation, there are protections that I hope would satisfy the noble Baroness. They include the double-lock on voting and the local authority veto. As a matter of principle, we do not support the amendments, but I do not think that the situation is as worrying as the noble Baroness might read it. I am unclear whether there is a difference between Amendment No. 120, tabled in the noble Lord's name, and Amendment No. 121, but that may not be important today.
§ Lord Graham of Edmonton
I am the vice-chairman of the All-Party Retail Group. As the Minister will know, the British Retail Consortium broadly supports the thrust of the proposals. I continue to have a close association with the Co-operative group, which is also a member of the BRC.
I have heard the noble Lord, Lord Jenkin, speak on the matter in general many times in the House, long before the concept of a BID was received so favourably. Having listened to him put forward the case, and bearing in mind that the name of the game in many aspects of legislation is a partnership between the private and public sectors, I will listen with interest to the Minister's response. I will be interested if he tells us that the concept of seeking to involve property owners, in addition to the other interested parties, cannot be supported at this time.
If we want to improve the value of town centres—or however BID areas are delineated—we must look at new concepts. I am puzzled by the concept of excluding property owners or treating them less comprehensively than other interested parties. I am absolutely certain that the Minister will have taken good advice, and he has long experience in local government as a constituency member, but I would 123GC welcome a response from him that the concept of a BID is acceptable as it is part of the legislation. We seek to improve on the legislation.
I am certain that, if the amendments in general are not accepted today, they will come forward in another form as the BID concept is put into practice. Is the Minister not prepared to consult meaningfully and widely with the interests that the noble Lord, Lord Jenkin, enumerated? I am certain that he will have carried out ample consultation. But I imagine that some people outside the House, on the basis of their own experience, wish the Minister to succeed with this legislation. The noble Lord, Lord Jenkin, said that the BID concept would not get off the ground unless property owners were involved. That was slightly menacing but it was realistic, too. The noble Lord tells us that, for people to be involved, they must have some say.
I am heartened by the reminder given by the noble Lord, Lord Jenkin, that local authorities virtually call the shots. They can initiate, shape, include or exclude matters. The noble Lord and I are joint-presidents of the Association of London Government as part of which we participated in a meeting yesterday. We keep in touch with local authorities. I will be very interested to know whether the Minister has a view from the collective voice of local authorities. I cannot believe that they will resist involving property owners who will then be able to help keep down the cost.
I wonder whether the Minister is considering the possibility that because the big property owners are powerful people, they are able to use muscle and do things that the small owner cannot. These are matters that should come out not just in guidelines, but in strictures which are placed in legislation. Therefore, I look forward with interest to what the Minister has to say. I very much hope that he will not give a complete negative to the concept of involving property owners. I am speaking, in general, for the Co-operative movement, which has a great interest in property owning, especially in town centres. It has given me the nod to support these amendments, and I very much hope that the Minister will be as helpful as he can.
§ 4.15 p.m.
§ Lord Rooker
On listening to the noble Lord, Lord Jenkin, when he introduced his amendments, I was reminded of the number of times that the boot has been on the other foot. I moved amendments to Bills when the noble Lord was Secretary of State, and he was always polite—unlike some of his colleagues. We always thought that he was a real gent—unlike some of his colleagues—except for the girls, of course! He always said, "No", at the end of the day. That is no reason for me to come here and say, "No", but I have decided positively to get off on the wrong foot. I have good news and bad news, and I might as well give the bad news first.
124GC In order that there is no misunderstanding, which is absolutely crucial bearing in mind what my noble friend Lord Graham has just said, I must say that, if there was any thought at another stage of this Bill—namely, on Report—to press any of these amendments to a vote and the Bill had to be changed, Nick Raynsford, the Minister for Local Government and the Regions, has made it clear that because of the thrust of the rest of the Bill, ping-pong would not be allowed and Part 4 would be removed from the Bill. That is not a threat. I am just spelling out the facts. Well—
§ Lord Rooker
No. It is right. I do not want to be accused of misleading the Committee. I say that only because of what was said both by my noble friend and the noble Lord, Lord Jenkin, about future stages. This Bill is important. Business improvement districts—that is the first and only time I shall say that; I shall stick to "BIDs" from now on—are also important. But they are not so important that we could contemplate delaying Royal Assent to this Bill. Everyone here knows that there is a target date for Royal Assent in order to get the new system of local government financing operating from the next financial year—that is, next April. It is crucial that we meet the agreed date for Royal Assent. Ping-pong is not even on the agenda. It is as simple as that. As regards the comments made by the noble Baroness, in some respects the introduction of the amendments by the noble Lord, Lord Jenkin, was like a mini-Second Reading. I am happy to encompass the amendments on the voting.
There is a further issue that I should clear up because it sets the tone of my comments. I know that people have been taking advice on this—I have read some of the documentation—but obviously I am not the policy Minister so I will not claim to have read everything. A question raised was: is the BID levy a tax? The answer is, "Yes, it is a tax". We are not denying that it is a tax. It will be paid through, in effect, the council tax and the business rate, which are taxes. But the BID levy is accounted for as a tax by the Treasury and will be recorded as such in the national accounts. That is because a tax is defined as a payment that is made when an individual payer does not receive an individual service in proportion to the amount that they are charged. This is in accordance with international guidelines—ESA 95—which we are bound to follow by law.
All ratepayers will contribute towards projects that will benefit them collectively. They will therefore be paying a tax. We do not hide that it is a tax. The question arises: do we want a new tax? That is the implication of the thrust of the amendments tabled by the noble Lord, Lord Jenkin, but not those from the noble Baroness. Do we want a new tax? The answer is, "No". That is all the bad news really—just to sour it to start with.
§ Lord Jenkin of Roding
I wonder whether the noble Lord might give way to allow me to put this question to him at this stage because I shall certainly want to return to this issue of whether it is a tax. I have been doing my homework introducing the European System of Accounts 1995 and I have been in touch with the people in the ONS. If it is a tax for the owners, why is there a tax on the occupiers?
§ Lord Rooker
The Bill proposes that the occupiers, who already pay a tax, will pay the levy—a tax. The owners do not pay a tax at present.
§ Lord Rooker
It has everything to do with it. I shall explain. We are not in the business of introducing what would be a new tax. I shall explain the details as to why, although I am also prepared to say that this is not the end of the matter. Nick Raynsford is having meetings constantly. There was a meeting last week with the British Property Federation and I know that he will be writing to them in the next couple of days. While we are saying that in respect of the Bill, we cannot find a way to accept the amendments, that is not to say that in the future, these matters will not be considered. However, Nick Raynsford will be writing to them in the next few days following the meeting.
From now on, I shall stick to my notes, but I just wanted to get all that bad, souring news up front so that the context in which I am speaking can be understood. I shall now turn to the individual amendments.
Amendments Nos. 113 to 116 relate to the role that property owners play in business improvement districts. That is something to which a great deal of thought has been given, both when drafting the Local Government Bill and during discussions in another place.
I should say at the outset that the arguments put by the noble Lord, Lord Jenkin, are incredibly seductive. I remember at the Urban Summit in Birmingham last year, I was walking across one of the promenades at the International Convention Centre. A man stopped me, took me on one side and started to explain. I said that it sounded incredibly sensible. I went away and took further advice and my learned friends in the department said, "It might sound sensible Jeff, but it won't work in practice". It is seductive and I can understand why people see it that way.
We recognise that property owners will play a key role in developing, encouraging and taking forward business improvement districts. But we think that the Local Government Bill, as drafted, gives property 126GC owners ample opportunity to be involved at every stage of the BID process. I shall qualify that, because they will not get a vote.
§ Lord Rooker
I read that at the time and I thought that it could not be right; they cannot be involved at every stage because they have not got a vote. But there are plenty of other things that they can do. Clause 45 enables the property owners to make voluntary financial contributions to BIDs. Many property owners would like to make mandatory contributions in the same way as non-domestic ratepayers—that is, existing taxpayers. However, there are significant practical difficulties in extending a BID levy to property owners outside the rating system. Simply, that would create a wholly new tax on property ownership. That would be a very significant change in taxation principles in this country and would have far-reaching consequences that go well beyond the BIDs issue. By the way, most of the points that I shall make are practical. These are not ideological or political arguments; they are practical arguments.
Bringing in the property tax would seem difficult to justify when experience suggests that voluntary contributions are successful and many town centre schemes have succeeded on the basis of voluntary contributions from landlords. The suggested amendments not only provide for a wholly new tax on property ownership, but also allow the BID proposers to have discretion about whether or not this tax will apply to property owners or simply to business ratepayers.
This would set up a dual system that would be inherently unfair to ratepayers who will be obliged to contribute to the BID levy should a majority vote in favour of the scheme. It would be extremely costly and difficult to administer. We do not know on what basis a BID proposer will decide whether to include a property owner in the levy. Additionally, creating a new tax on property would create a significant new burden on local authorities. Local authorities would have to put together a database of property owners in their local area and come up with new systems of collecting and enforcing the payments of the BID levy from property owners. By basing the business improvement districts on the existing non-domestic rating system, we seek to minimise costs to local authorities and to make the BID framework suitable for all locations.
We are also concerned that the definition of a "superior" interest in a property, as set out in Amendment No. 115, could provide further complications. This definition means that the BID levy could extend to superior leaseholders, as well as to the freeholders of a property, making the system even more confusing to administer. We have recently issued a working draft of guidance on business improvement districts which is available in the Library—I believe that it is available in this room at the present time. In this document, we detail a variety of different ways 127GC that property owners can contribute to BIDs without implementing a cumbersome new tax or making the system unduly expensive to administer.
Clause 43 currently provides that a business improvement district can be established for the purpose of enabling "projects" to be carried out for the benefit of,those who live, work or carry on any activityin the BID area. Amendment No. 113 to Clause 43 seeks to ensure that a BID can be used for the benefit of anyone investing in an area as well as those working or carrying on any activity in the area. However, to "invest" in an area is "to carry on an activity" there. The amendment is therefore redundant because it adds nothing to the meaning of the clause.
We have concerns about Amendment No. 116, which relates to the apportionment of the BID levy. First, the administrative burden of identifying the individual with the superior property interest and then calculating the proportion of the levy paid by ratepayers and property owners respectively, would be detrimental to setting up a business improvement district. Ratepayers' rateable values are identified on the rating list drawn up and made by the Valuation Office. The local authority already records ratepayers' addresses for billing purposes. It will not cost a BID money to identify the ratepayers or to work out their rateable values, as this list is already publicly available.
If the BID or the billing authority is compiling its own list of owners, that would be a significant fiscal and administrative burden. If the money used to identify owners is later recouped through the BID levy, that would leave less money for the BID to spend on improvements in its local area. If a BID simply received voluntary financial contributions from landlords, it would not have to offset the identification and collection costs, leaving more of the levy to spend on local projects.
As the Bill stands, Clause 52 requires that for a BID ballot to be approved, two tests must be met. First, at least a simple majority of those voting must vote in favour. That is basically the principle of the voting system in this country. Secondly, those voting in favour must represent a majority of the rateable value of those voting.
Amendment No. 118 seeks to amend Clause 52 so that two-thirds of those ratepayers voting must vote in favour for a ballot to be successful and Amendment No. 119 requires that 75 per cent of the ratepayers in the defined area turn out to vote.
These additions to the balloting process are unnecessary and make the voting process much more cumbersome. The principle behind much of this legislation regarding business improvement districts is to provide adequate protection to ratepayers, who will be liable for the additional levy, within a permissive framework—a framework that will encourage partnership and co-operation without excessive legislation to complicate the process.
128GC Sufficient protection for small businesses is provided through the "dual key" voting mechanism which was specifically designed to protect the interests of ratepayers without making the criteria for a successful ballot too difficult to meet. I assume it is taken for granted that the system set out in Clause 52, which comprises the A and B formula, cannot work if there is a secret ballot. So we are not talking about a secret ballot. You have to be able to identify the voters in favour so that you can cross-check their rateable values. I refer to the practical point about which the noble Baroness asked. All this information is publicly available; that is, what the rateable values are and who the occupiers are. Therefore, once it is known how they voted, it will be possible to calculate A and B to ensure that the "dual key" system works. That is not a new point. I understand that it was referred to during the Bill's passage in another place.
Amendments Nos. 118 and 119 create additional complications that are felt to be unnecessary. A simple democratic principle in this country is that democracy involves the right to vote rather than the obligation to vote. This should be the same within a business improvement district, especially as protection for small businesses is already written into the voting mechanism.
Amendments Nos. 120 and 121 concern the number of votes an individual may cast in a ballot on a BID proposal. Amendments Nos. 120 and 121 seek to limit each person voting in the BID ballot to no more than one vote. That discriminates against the ratepayer who occupies a number of properties in the defined area by limiting him to one vote. If an occupier pays rates on an hereditament he is entitled to a vote relating to that hereditament as he will have to pay the additional levy on that hereditament.
If property owners were allowed to vote in the BID ballot, we would need to decide whether an owner-occupier had one or two votes. This issue merely illustrates another of the complexities of granting property owners the right to vote.
Amendment No. 122 would remove the second test of the dual key: that those voting in favour must represent a majority by rateable value of the hereditaments of those voting. It would replace that test with a turnout threshold for the vote. This does not protect the interests of small businesses against the interests of larger businesses or businesses against the interests of larger businesses or vice versa as the "dual key" mechanism was designed to do. This safeguard is essential if businesses are to have the confidence to support business improvement districts. This safeguard has been embedded since the districts. There is an interesting gap in that sentence. I have to assume that the sentence should state: this safeguard has been embedded since the business improvement districts were first a gleam in someone's eye. The word processor did not work properly. The same thing happened with an earlier sentence.
§ 4.30 p.m.
§ Lord Jenkin of Roding
I have every sympathy with the difficulty experienced by the noble Lord in reading his brief. However, he managed to avoid the solecism of one Minister who read to the end of his brief which stated: "This is not much of an argument but it should do for their Lordships".
§ Lord Rooker
I have read the brief a couple of times. I noted where the full stop occurred and wondered about it but neglected to inquire about the gap in the sentence. As I say, the measure that we are discussing is not a new process. The "dual-key" mechanism is designed to win acceptance for small businesses. That is important. The "dual-key" approach has given great reassurance to many involved in the consultation process. The removal of the second condition involving rateable values, while being easier to administer, would not be favourably received by large business interests—interests that are crucial to the success of a BID.
A turnout threshold simply makes it more difficult for the BID proposal to meet with overall approval. It does not safeguard the interests of different business groups. It also goes against the democratic principle that people should be given the right to vote, not be compelled to do so by a threshold.
Amendment No. 123 suggests that if property owners were included in the mandatory BID levy, they should be able to vote in the BID ballot. The vote of a property owner would he in proportion to the financial contribution that he makes. For example, should the owner be required by the BID arrangements to pay 80 per cent of the BID levy, his vote will count as 80 per cent of the rateable value of his property in the BID ballot. Once again, this would confer a huge administrative burden for the local authority conducting the ballot and over-complicates an already technical voting system.
Amendment No. 124 relates to the power of veto. Clause 53 gives a billing authority the power to veto a business improvement district under circumstances that the Secretary of State may prescribe. Amendment No. 124 seeks to define those circumstances and states that the billing authority must have regard to the interests of property owners and the manner in which they are contributing to the BID levy when deciding whether or not to exercise the veto.
Amendment No. 124 makes billing authorities a watchdog for BIDs that may have compromised the interests of property owners because they may have been included in the mandatory levy. This not only places yet another burden on the billing authority's time and resources but is also against the spirit of business improvement districts.
BIDs aim to foster partnership working between local authorities and other local stakeholders. If the local authority is responsible for scrutinising the BID proposals in detail before it allows a BID to go ahead, the partnership will be unbalanced and the voting mechanism will be undermined.
130GC Amendment No. 124 also implies that the primary focus of the billing authority in deciding whether or not to exercise its veto is the interests of property owners. In fact the primary use of the local authorities' veto should be to safeguard the interests of the whole community, in particular the residential population and anyone who is not fully represented on the BID board. It would be inappropriate for the local authority to place the interests of property owners or ratepayers higher than those of local residents or other interested groups when deciding whether or not to exercise its veto.
Amendment No. 132, which comprises a new clause, sets out that a property owner cannot pass on the liability for his BID levy to his tenant or leaseholder unless a new lease is negotiated during the life of the BID, or a new tenant or leaseholder moves into the premises. In those circumstances, the contract drawn up between the landlord and the tenant would specify who would pay the BID levy. This new clause would allow landlords to pass on their contribution to the BID to their tenants whenever a lease comes up for renewal. It also fails to prevent landlords from passing on the cost of the BID levy to their tenants by raising rents or through any other mechanism. This is not sufficient safeguard for ratepayers and it does not solve any of the fundamental administrative problems with including property owners in the mandatory BID levy.
I hope that all the arguments and reasons that I have given are practical; none of them is ideological or politically inspired. We welcome the eagerness of property owners to become involved with BIDs—I make that absolutely clear—and we strongly believe that the framework set out in the Bill will be sufficient to engage and maintain that interest.
However, having listened to the concerns of the property industry, we shall review business improvement districts once there is a sufficient number up and running to make sure that property owners are properly engaged in the process. If we find significant cause for concern, we shall look again at the BIDs mechanism to see whether changes need to be made. That is not a throw-away afterthought; it is part of our considered response.
I hope that my comments have satisfied my noble friend Lord Graham. I meant what I said about there being no ping-pong. Nick Raynsford will write to the British Property Federation following the meeting which I believe took place on 2 June in a spirit of constructive engagement and partnership. We want BIDs to work; there is no question of that. However, there are some real practical problems with regard to property owners. We might have—this may negate slightly what I have said—a political reason not to want to introduce a new tax. The Treasury may say, "No new taxes". But even if we were to go down that route, the practical problems would be massive.
We should bear in mind how far we have progressed in regard to BIDs, and that the relevant information is already available on local authority computers. They know who to bill for non-domestic rates as they have 131GC the names and addresses of occupiers and know the relevant rateable values. However, we have no information whatsoever on owners. I am not saying that that information would be impossible to find but one would have to put together a register of property owners and set up a billing system, which would have to include sanctions for non-payment. We already have all that, of course, as regards non-domestic ratepayers—the people who pay what I still refer to as the council tax for business ratepayers. That system is tried and tested after having been in operation for many years since the introduction of the infamous poll tax legislation. No one argues that that system does not work.
We can, therefore, get cracking as regards BIDs. I do not carry in my head the proposed timetable but there is nothing to stop us getting cracking on BIDs. The good will is there as is the ability for property owners to pay voluntary contributions and our willingness—pressure, if you like—to get them involved on a voluntary basis, albeit without the relevant vote. We want to get them set up in areas where people want to go ahead. There is no barrier to that in terms of time. If we wanted to introduce a new tax, that would introduce enormous delay. But we do not have a tax on property in this country. The matter goes well beyond the BID areas and property owners. Such a tax would be an innovative process which I do not think at the moment the Treasury and the Government are minded to introduce. As I say, it would be impractical in any event.
I do not seek to avoid the tax issue but the tax is already payable. We are introducing it as a top-up on the existing tax. We have an existing system with a database but we do not have the relevant information on property owners. Therefore, it would be a brand new tax in that respect. As I said, if there is significant cause for concern, having reviewed BIDs when a sufficient number is up and running, we shall be prepared to see whether we can change the mechanism to meet that concern. I hope that with that explanation Members of the Committee will reflect on it and withdraw the amendments. Members of the Committee are free to return to the issue on Report and at Third Reading when I hope to provide much more precise arguments. As I say, my points are essentially of a practical nature. There is nothing ideological here.
I refer to the way in which the noble Lord, Lord Jenkin, introduced the amendments. So far as I am aware I have not said anything that Nick Raynsford did not say in another place. Therefore, my comments should not be news to those who promoted the amendments that we are discussing. It is unusual for Ministers to be faced with lines of people queuing up to pay a new tax. We are not used to that. I am not saying that we would not embrace it but it would be novel. "Tories for new taxes" is a new slogan. I am sorry, I should not have said that. It just popped out. That has introduced a wholly negative note when I am 132GC trying to appeal to the good will of noble Lords. I deserve a slap on the wrist for that. I had not written it down anywhere.
This is an unusual situation. But it underlines the importance that property owners put on this. I understand that. They say they want to be part of the mandatory system. I understand that. I am not criticising them. The good will that they have shown has been very positive and we welcome that. A sign of that good will is that they want to be part of the process of paying what would be a new tax. I am saying that it is impractical to do that even if we were in the business of introducing a new tax on property, which in this Bill we are not.
§ 4.45 p.m.
§ Baroness Hanham
My noble friend Lord Jenkin and I do not want to comment further on the substantive part of these amendments. However, I want to ask a couple of questions on the amendments in my name, regarding the voting, those who have a right to vote and the percentage of votes. We have tangled before with the argument about the number of people who should vote on anything to demonstrate their full support for it. This is perhaps another example, like the referendum for regional assemblies. This has a very direct relationship with money raising. This is voting for Christmas. It is a new tax on occupiers of businesses. Therefore it seems to us that a higher test is required than perhaps is normal.
I want to comment on the test. By the time I had worked out the A plus B over C minus D and multiplied by X I had given up. It became apparent to me that this will not work—the Minister described that very effectively—unless there is a majority of the rateable values in favour. While I was listening to the Minister's inspiring words I was thinking about that. One could find an area—there are plenty around, such as town centres—where there is a very large supermarket, a very large chemist shop, a very large department store, a very small jewellery shop, some very small butchers' shops and a very small vegetable shop. There will be others round and about, but in that case the rateable values of the three or four major stores in the area could completely swamp the small businesses. To the three or four major stores it may be of enormous benefit for a BID programme to be carried out, but for the very small shops it may not be at all beneficial. They will be completely swamped. I am trying to remember my thesis. It could be that the small shops could be completely overwhelmed. Is that right?
§ Lord Rooker
That is right on one half of the formula. The other half of the formula is that the majority of those voting are in favour. On what the noble Baroness says, there will be many more small businesses than large ones. The big ones will be small in number but huge in size. The small businesses will be large in number but small in size.
The first part of the dual key is that the majority of those voting have to be in favour; therefore, the small businesses have the dual key to balance the high 133GC rateable value. In other words, there is a protection. If all the small businesses were against it, the chances are that there would be more votes by individuals against it than there would be votes in favour by the big boys. That is where the dual key comes in. The noble Baroness is right in what she says on one half of the formula, but that is balanced by the dual key in the other half. The votes of the small businesses with low rateable values count individually on a first-past-the-formula basis. In effect, they have to support the scheme anyway; if they do not they can stop it.
§ Baroness Hanham
I knew I should sit down and that I was wasting my time. I thank the Minister for that explanation. 1 shall leave this matter for this afternoon and leave my noble friend to deal with his amendments. I may return to the matter in the future.
§ Lord Jenkin of Boding
I have listened with interest and with not too much surprise, but with some disappointment to the general thrust of the Minister's argument. I shall turn in a moment to the matter of taxation as I have been looking at an interesting study and discussing this with officials of the ONS.
My first point is that the Minister and the Government underestimate the degree of support that there is for adding owners—lessors—to the statutory part of the scheme so that they do not just come in under Clause 45 as "any other person". It is a fairly small peg on which to hang what may be very large contributions to BID. I was going to say "my noble friend", but my co-president of the Association of London Government, the noble Lord, Lord Graham of Edmonton, who has now left, quoted from a paper from the British Retail Consortium which I also have. I mentioned ATCM, the British Council for Offices, the Property Federation, the Retail Consortium, the Corporation of London, the London Borough of Lambeth and the Westminster City Council. Those local authorities have joined in supporting the amendment. I believe that the Minister greatly exaggerates the problems that would exist for local authorities if they came in.
I do not believe that anyone would quarrel with the cost of compiling the property register for the purposes of a BID, but the cost would clearly have to come out of the proceeds of the levy. I do not see why the general body of council tax payers should bear that. It must be part of the cost of setting up. I mentioned Section 16 of the Local Government (Miscellaneous Provisions) Act 1976. That has been on the statute book for over a quarter of a century. It states:Where, with a view to performing a function conferred on a local authority by any enactment"—clearly this would be such a provision—the authority considers that it ought to have information connected with any land, the authority may serve on one or more of the following persons, namely—Local authorities have been using those powers for a quarter of a century without stirring up the kind of hornets' nest that the Minister has suggested, no doubt on advice, would be the problem for local authorities in doing this. They have the power to look behind the ratepayers. There is no suggestion that the exercise of the powers of Section 16 of the Local Government (Miscellaneous Provisions) Act has given rise to anything approaching the difficulties on which he has laid such emphasis. I hope that he may be prepared to talk to some local authorities that support the amendments to see whether they would regard the issue as such an insupportable burden and one that they would find intolerable.
- "(a) the occupier of the land: and
- "(b) any person who has an interest in the land either as freeholder, mortgagee or lessee or who directly or indirectly receives rent for the land; and
- "(c) any person who, in pursuance of an agreement between himself and a person interested in the land, is authorised to manage the land".
On the basis of advice, I quoted an outside figure of £50,000 for a substantial BID to compile the property register. That would be against the £1 million that would be raised by the levy in that BID, which suggests it is a relatively modest cost. It would be a one-off cost. I understand it would not have to be kept up to date. I honestly believe that the Minister's department is substantially exaggerating the problem that would be imposed by bringing property owners in under that head.
On whether it is a tax, perhaps I can go back a little. This matter was raised in relation to my Bill in 1998 when the noble Baroness, Lady Farrington of Ribbleton, who was performing the same function in responding to my Bill, said:It is clear that under the provisions of the Bill"—my Bill—businesses in an area will have to pay a certain amount if there has been a local vote to that effect. Although individual businesses will have the opportunity to vote, they will not have a choice on payment of the charge if the decision is taken to implement the draft scheme. As I am sure the Committee will recognise, I his is exactly analogous to the taxation system in any democratic country. We can influence the level of income tax via the ballot, but there is no choice on whether or not to pay. This is, by definition, a tax and spending of the income received would count as public expenditure".—[Official Report, 27/2/98; col. 887.]The noble Baroness went on to quote Section 2.68 of the European System of Accounts as used by the Office for National Statistics to make it clear that it would be public expenditure. The discussions that I have had this morning suggest that, whether or not this is a tax, Section 2.68 of the ESA does not have anything to do with it. Whether or not it is a tax comes under a completely different section of the ESA. Section 4.14 deals with taxes on production and imports. There is then a reference that I do not understand, "D/". It says that taxes on production and imports consist of compulsory unrequited payments in cash or in kind. I ask what "unrequited" means. Interestingly it means what the Minister suggested: that one pays into a pool but it does not necessarily mean that one receives as much out of the pool as one puts in. That is the purpose.
I put this question: if there is, unusually, a BID with one participant, who has a big industrial estate like Park Royal, who pays into the pool for the benefit of 135GC extra security around the premises, that is fully requited because the entire benefit accrues to the person paying the levy. But if there are two people, the benefit cannot be apportioned between the two, so it becomes a tax. In the first case it is a charge and in the second it is a tax. I find that a very strange argument indeed.
Before the noble Lord entered the House of Commons, we were arguing about the selective employment tax. There was an argument about dental assistants. The noble Lord, Lord Hattersley, who was then a parliamentary under-secretary in the Department of Employment, argued that if a dentist had one dental assistant there was no selective employment tax, but if he had two there was. The noble Lord, Lord Hattersley, had sufficient grace to recognise that that was an untenable position and he withdrew the regulations. They were brought back in a different form. We have the same situation here. If there is one property it is a charge and if there are two it becomes a tax.
In a sense this is becoming a meaningless argument. Five years ago I believe that the noble Baroness, Lady Farrington, was trying to tell me—then we were mostly referring to the occupier as most of that Bill concerned non-domestic ratepayers—that it was a tax. The noble Lord, Lord Rooker, has confirmed that this afternoon. I believe that the noble Baroness referred to the wrong section in the ESA, but she is not here to defend herself. Then it was a tax on the occupiers.
The noble Lord, Lord Rooker, has confirmed that this is a tax on occupiers. I rang the Public Bill Office in another place to find out what the supporting money resolutions were that support the new tax in Part 4 of the Bill. I was referred to a money resolution. It was agreed that,for the purposes of any Act resulting from the Local Government Bill, it is expedient to authorise…the payment out of money provided by Parliament of any expenditure under the Act of a Minister of the Crown".That clearly is not the case. The resolution continues by referring to,any increase attributable to the Act in the sums which under any other enactment are payable out of money so provided; and…the payment out of the Consolidated Fund of any increase attributable to the Act in the sums which under any other enactment are payable out of that Fund".Clearly that does not have anything to do with the BID levy.
A ways and means resolution was passed at the same time with a majority of 264 votes against 22. Members of the Committee should bear in mind that it was after 10 o'clock at night. It stated that,for the purposes of any Act resulting from the Local Government Bill, it is expedient to authorise the payment into the Consolidated Fund of…any sums received under the Act by a Minister of the Crown…any increase attributable to the Act in the sums payable into that Fund under any other enactment; and…any sums received by a valuation officer by way of penalty".—[Official Report, Commons, 7/1/03; col. 139.]None of those conditions refers to the levy.
136GC If we have a tax, why do we not have a necessary resolution to support it? I suspect that the answer is that there are two different kinds of taxes. First, there is the kind that the Treasury raises. I was Financial Secretary for a number of years. One has to have the necessary money resolution to support the Finance Bill, which is then a money Bill. Then there is what for some other reason is described as a tax. I see that the noble Lord, Lord Rooker, has got his explanation from the wizard behind him, that such taxes do not require a specific resolution. My riposte to that is that if that is right for occupiers, why can it not be equally right for owners? Then one is thrown back on the other argument—is it so horribly difficult to take the action to bring the owners in that one cannot contemplate it?
That brings me to the noble Lord's third point. He is prepared to contemplate that action. What was his phrase? I scribbled it down. He said that if a sufficient number of BIDs were up and running, the Government would be prepared to review the BIDs. One is grateful for that small mercy; that makes about 99 per cent bad news and 1 per cent slightly less bad news. I take what the noble Lord said entirely seriously and as entirely genuine—that it is not merely dust thrown into the face of the Committee and that it will happen; I trust him.
If in the light of the experience of the BIDs, and the warnings given about the opportunity of catching the freeloaders among the freeholders and owners—they are turning out to be rather short-term and lacking imagination and real substance—the Minister may be prepared to reconsider the question—he would be prepared to find a mechanism for bringing owners into the system rather than using a provision hung on a subsection about "any other person".
The Minister has made a great many arguments. We will certainly want to look very carefully at what he said about the drafting of some of the amendments. I hope that he will agree that his officials could have another meeting when parties outside have had the opportunity to study the Hansard report of the arguments of Members of the Committee. I too had a note of the meeting with Mr Raynsford and officials. One question that will be asked is about the fact that it was said on that occasion to the British Property Federation, "It is a tax because the Treasury says that it is a tax". We need a written statement from the Treasury setting out exactly why it makes that argument.
The Minister laid huge emphasis—coming back to it again and again—on the fact that there would be a new tax on property owners and—surprise, surprise—some of them seemed willing to pay it. Then he said something about the Tory government, which I am not sure that I heard correctly being a rather deaf old man. The argument obviously weighs heavily with Ministers. However, we have a long list of representative bodies that recognise the advantages of BIDs—which the Government have recognized—the role of property owners—the Minister's department has spelled it out in the guidance—and that the provision could perfectly well be used.
137GC In the end, we come to what the Minister said was not a threat— that if the amendment or anything like it were made on Report or on Third Reading, the Government would, in another place, simply remove the entire part of the Bill. I find that quite a distasteful way to legislate. We are only in June. By the time that we have reached that stage, most of the rest of the Bill—the new financial system that my noble friends have debated and will continue to debate at some length—will be pretty well settled. Then there was the threat that we might have an extra two or three weeks deciding whether we are to add owners into BIDs. The Minister shakes his head. He said that it positively was not a threat, but it sounded remarkably like one to me. If we want to exercise our right to vote an amendment in at some later stage, it is a threat to say, "My God—look what's going to happen".
I hope that the Minister will reflect on the matters before later stages of the Bill. I hope that he will agree that his officials could have a detailed meeting on the drafting of the amendments. After all, he would have to have a new Bill, so perhaps we could include at some stage a power to extend Part 4 to owners by statutory instrument. I am merely suggesting the possibilities, all under the rubric that he said that, if there were a sufficient number of BIDS in operation at the time of the review, it would be proper for the Government to reconsider the line that they were taking.
If the Government did so, we might be able to get a lot further over that line and not trip over the Minister's tripwire. What worries me is that the provisions may have more to do with Section 28 than anything else. We might be able to make a good deal more progress at a later stage. In his response to my remarks, I hope that the Minister will agree that we can continue discussions on the matter with the representative bodies, to see whether we can provide a scheme that would overcome some of the hurdles, many of which have been exaggerated, as the Minister identified.
There is clearly a great desire outside the House that the owners should be in the scheme. I have talked to a lot of people in the past few days, and they find it extremely difficult to see why there is such resistance from the Minister's department to that happening. The problem is not the practical difficulties. We have ratepayers and non-domestic ratepayers, and we are being asked why cannot we be satisfied with that. We are not satisfied with that. We think that owners should be statutorily involved in the process and come in with the voting system, and we do not have that at the moment.
§ 5 p.m.
§ Lord Rooker
I shall respond briefly to the noble Lord. He made a point about the money resolution. I am pleased to announce that the piece of paper that I was passed only repeated what I said. Non-domestic rates are a tax. The levy is a tax on the occupiers. Because it is an existing tax on existing occupiers, there is no reference to it in the money resolution or the ways 138GC and means resolution. If it were extended in the Bill, certainly to property owners, it would require a reference in the money resolution.
When the BID levy is paid by occupiers, it is a tax, but they already pay the rates, so it is not a new tax on that group of people. That is the point, and I made it. It would be a new tax on a different set of people for a different purpose if it were on the property owners. I made a caveat towards the end of my remarks that, while we did not have any ideological reasons, there may have been what was in part a political reason not to introduce a new tax. However, the main thrust of our argument was the practicality, not the politics.
I want to make a point about my so-called threat. The Bill cannot wait. It cannot spill over the end of the Summer Recess without Royal Assent. Everyone understands that or, if they do not, they have to from now on. It is no secret. If the new system of local government finance implicit in the first two parts of the Bill is to come into force next year, as all parties in local government wish to happen, we cannot wait for Royal Assent until October. The Bill needs Royal Assent in July, or in the two weeks in September when the new parliamentary timetable ensures that both Houses sit. It is a small amount of time.
I assure Members of the Committee that the problem is not really to do with the Bill, but the rest of the programme. If the Bill is affected by ping-pong, there is no time to bring it back. That is the problem with this unreconstructed and unreformed Chamber. Another place has reformed itself and sends legislation down on a conveyor belt, a lot of it not scrutinised properly.
§ Lord Rooker
I have made my opposition clear since I came to this place. The level of scrutiny here is much greater, but we have not reformed sufficiently. The consequence of that is that, if there were to be ping-pong on the Bill, the only way in which we could protect the main thrust of the Bill is not to proceed with that ping-pong. This House will not have time, so Part 4 would be removed. That is not a threat as regards the Bill, but a consequence of the logjam that arises this summer.
Meetings go on all the while. I have to say, for the avoidance of doubt, that if anyone wants to write, the address is, "The right honourable Nick Raynsford, Minister of State for Local Government and the Regions, 26 Whitehall, Office of the Deputy Prime Minister". Nick had meetings with the British Property Federation only last week, well after Second Reading in this House. He is about to write to it. I do not need to repeat the words—the noble Lord did not misquote me—but if, when the BIDs are up and running and there is a sufficient number, we find out that the property owners are not properly engaged and there is sufficient cause for concern, we will look at the BIDs mechanism to see whether changes can be made. I do not know what kind of changes would be envisaged, because the system has to be as open as that. In other words, we have not closed the door once we have them up and running.
139GC In so far as major changes to the Bill are concerned, at this stage in the timetable and given what I have said about attempting to get Royal Assent, I suspect that there is not even scope to put an enabling clause in for property owners. That might sound okay, but once Parliamentary Counsel get hold of an idea like that, another 10 clauses will go into the Bill. We can forget that—it simply will not happen. There is no time to do it. The reason why we are in the Moses Room today and not the Chamber is part of the answer. We are sitting in parallel. There is no time in the Chamber to consider the Bill in Committee. That makes my case; I wish I had thought of that earlier, because it is a better example.
§ 5.15 p.m.
§ Lord Graham of Edmonton
I listened carefully to what the Minister said in response to the point that I made. I never had in mind an exercise in ping-pong. I had in mind what the Minister said. He told us that he was convinced that the process, as laid out, would work. I raised doubts as to whether it would. The Minister said that if, in the light of experience, it seemed that the process could be improved along the lines that we have suggested, he would be prepared to consider such improvements as might emerge. The Minister has been fair to the Committee, and I thank him for it.
§ Lord Jenkin of Roding
I do not want to get involved in an argument about which House conducts its affairs more effectively. I suspect that there would be few people in either House who would not agree with what the noble Lord said in the past few minutes. We have to do the work that another place simply does not do because it has decided that it wants to go home and live with its family. It breaks up early, and large parts of Bills arrive here completely undebated. We are discussing Bills in the Moses Room on the promise that important Select Committee debates would be held at prime time on Tuesdays or Wednesdays. Have they been? No, not one.
I do not know what has gone wrong, but that was part of the process. I said in the debate that I would support it on those grounds. More fool me, I suppose; I was a sucker. We have not had a Select Committee debate other than on a Monday or a Friday. That is not what was offered. However, I will not go into that.
We will have to come back to this, and I am sorry that the Minister did not say that he would continue to discuss the matter with the relevant interests in the mean time. That could be helpful. I am not sure that I necessarily agree with the Minister that, if we had a clause that gave a power to extend the process to owners, it would need to be as elaborate as he suggested. Perhaps that, too, might be explored.
I was surprised that—I was going to say, "My noble friend", but I could call him, "My noble co-president"—the noble Lord, Lord Graham of Edmonton, felt that a review would be sufficient. If it came next year, it would be helpful, but would we need fresh legislation, against the background of the 140GC Government's congested legislative programme? Whole pieces of legislation, such as the Planning Bill, have gone now, and it is not likely to be any better next year. How long would we have to wait? If there were a power in the Bill, the matter could be dealt with by delegated legislation. I would like that option to be explored between now and the next stage.
I am not prepared to abandon the issue now on the basis that I am afraid that the Government might find themselves in difficulties in September. We have made a strong enough case. I am sorry that the noble Lord, Lord Rogers of Riverside, has not been present; I know that he would have spoken firmly and strongly in favour of the amendment. He asked whether he could put his name to it, and I encouraged him to do it. The initiative came from him. With the support of the noble Lord, Lord Graham of Edmonton, we have, in a sense, had all-party support for the amendment. I would have hoped that the Government would have given rather more weight to it.
It is clear, however, that we will make no progress on this this afternoon, so I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 114 and 115 not moved.]
§ Clause 43 agreed to.
§ Clause 44 agreed to.
§ Clause 45 [Additional contributions and action]:
§ Baroness Hamwee
moved Amendment No. 115A:Page 20, line 23, leave out "or requiredThe noble Baroness said: Following that discussion, Amendment No. 115A is something of a minnow.
In Clause 45, we find a list of those who are to be allowed to make financial contributions to enable BID arrangements to be carried out. Apart from billing authorities and county and parish councils in relevant areas, that includes,any other person authorised or required to do so in accordance with the arrangements".My amendment, which would leave out the words "or required" is designed to probe what is meant by the term.
In another place, the Minister, Mr Leslie, said, first, that he imagined that there might be circumstances in which a local authority might be a tenant of a property in a town centre and a ratepayer and, thus, bound to make a contribution in an area. Secondly, he said that he "suspected" that the provision would give power to public bodies to pay, if they wanted to do so.
If we are talking about public bodies other than the local authorities that I mentioned, why does the Bill say "required", if they are empowered? I would be grateful if the Minister could clarify the language. I beg to move.
§ Lord Bassam of Brighton
The noble Baroness seeks to find out what we mean by "required". The clause allows voluntary contributions for the BID to be received from anybody authorised or required to make a contribution in the BID arrangements. Certain 141GC public bodies are unable to make voluntary financial contributions to BIDs without expressly being required to do so. That is because of their accounting and auditing procedures. Such bodies may include, for example, police authorities.
The power will not allow the BID arrangements to force voluntary payments from organisations that are reluctant to contribute to the levy. It is simply aimed at allowing all organisations to give money to a BID if they wish but do not otherwise have the power to do so. Clause 45(1) makes it clear that bodies may make a voluntary contribution. Subsection 45(2) is supplementary to 45(1), so, even if the body is required by the arrangements to make a contribution, it is not required by subsection (1) to make that contribution; it merely has the power to do so. I hope that, with that hit of further elucidation, the noble Baroness better understands the clause.
§ Baroness Hamwee
I think that we are being told that the little words change the vires of some public bodies. The Minister did not shake his head. In that case, I find it interesting that the word "or" is not the word "and". The arrangement is an admirable one, and we support the BIDs process. I forgot to say that some of the major amendments in the previous group to which the noble Lord, Lord Jenkin of Roding, spoke were tabled by my honourable friend the Member for Kingston and Surbiton last time. However, the two little words "or required" mean that a public body such as a police authority must contribute, even if it does not want to. That is what the clause seems to say. I am happy to come back to this next time, unless we can get some more clarity.
§ Lord Bassam of Brighton
The noble Baroness is right in her first proposition. It changes the vires, and there is no doubt about that. We are trying to ensure that—how can I best put this?—even if a body has to match the requirement, by virtue of subsection (1), to make a contribution, it merely has the power to make that contribution.
We are trying, in a sense, to get the best of both worlds. The noble Baroness is unhappy with the response, and, having listened carefully to her, I can see where she is coming from. We will need to make sure that we have got it absolutely right. I think that we have, but she has raised a point that I would like to look at a little more closely.
§ Baroness Hamwee
I am grateful for that. I was trying to work out how to make a sceptical noise that would appear in Hansard. I would like to be more satisfied about it than I am, but I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Clause 45 agreed to.
§ Clauses 46 to 48 agreed to.
§ [Amendment No. 116 not moved.]
§ Clause 49 [BID Revenue Account]:
§ Baroness Hanham
moved Amendment No. 117:Page 21, line 21, leave out subsection (5).142GC The noble Baroness said: I can be quick about this. We are unhappy with the unlimited provision set out in subsection (5) of Clause 49. Subsections (1) to (3) set out the arrangements for the BID revenue account to ensure that it is used for legitimate BID purposes. We, of course, welcome those provisions. Subsection (4) allows the Secretary of State to make further provision in relation to the BID revenue account. That is, doubtless, a necessary subsection to allow for flexibility in the management of the BID revenue account as the system gets up and running. However, we see no reason for subsection (5), which gives the Secretary of State unfettered authority to amend,any enactment (whenever passed or made)".Our concerns were confirmed by the report from the Select Committee on Delegated Powers and Regulatory Reform. On Clause 49(5), the committee said:The ODPM's memorandum provides no explanation of the need for this provision and states, at paragraph 48, that it has no current intention to use it. In the absence of an explanation and given the Henry VIII power contained in clause 58 to make further provision in relation to any provision (including clause 49) made by or under Part 4 of the bill (see paragraph 6 below), we conclude that clause 49(5) is an inappropriate delegation of power".I am much encouraged by the fact that the Minister has put his name to my amendment. Quite possibly, he also sees that the Select Committee has a point. I am delighted to move the amendment, and, presumably, the Minister will acknowledge that he supports it. However, he might like to explain why the subsection was there to start with. I beg to move.
§ Lord Bassam of Brighton
There is no problem here. It was a great speech, to which I listened with interest, but we should move on. I understand that we have simultaneously tabled amendments to comply with the recommendations of the Select Committee on Delegated Powers and Regulatory Reform.
§ Lord Bassam of Brighton
We could haggle over whose it is, but I will not do so. We are grateful for the noble Baroness's support for our amendment.
§ On Question, amendment agreed to.
§ Clause 49 agreed to.
§ Clause 50 [Administration of BID levy etc]:
§ Baroness Hamwee
moved Amendment No. I 17A:Page 21, line 34, leave out subsection (3).The noble Baroness said: I, too, have been having trouble with the groupings. I did not ask for Amendment No. 130A, which is exactly the same, to be moved out of this group, but, somehow, it has gone wandering.
The amendment would leave out of Clause 50 the following words:Nothing in subsection (2) is to be taken as limiting the power conferred by subsection (1)".I tabled the amendment to probe the Government on why that is necessary or desirable. "Desirable" may be the appropriate term.
143GC Yesterday, the noble Lord, Lord Rooker, said that it was a golden rule when drafting legislation not to repeat a provision that is in another Act because somebody would challenge the position if there were differences. I fully agree with that, and it forms the basis of the amendment. Other provisions in the Bill say that certain things may happen and may include what is set out in Clause 50(2). However, such provisions do not limit the power to make regulations. The first example of what I am discussing is found in Clause 3; it refers to making regulations under subsections (6) and (7), but does not include this further provision. So I do not know whether there is anything special about Clause 50. I am sorry to be a bit picky, but that is what we are here for. I beg to move.
§ 5.30 p.m.
§ Lord Bassam of Brighton
Perhaps I should explain what Clause 50 does. It gives the Secretary of State the power to make regulations concerning the administration and collection of the BID levy. The amendment seeks to restrict the power of the Secretary of State so that the regulations made under the clause can only set out a system for the collection and enforcement of a BID which mirrors the existing system for non-domestic rates.
We have always made it clear that we intend the BID levy to be collected and enforced through the existing business rates system. We should not, in our view, be inserting restrictions that would not allow alternative systems to be developed.
While the BID levy will be primarily collected through the rating system, BIDs and local authorities may wish to send out a separate bill for the BID levy in addition to the bill for non-domestic rates. This is because rate bills are issued at specific times of the year and the rates are collected in instalments.
A BID may not wish to collect its levy in instalments or at set times of the year. In this case, the Government would have to make provisions allowing local authorities to collect the levy in a manner that was compatible with their local circumstances.
These powers would be used to ensure that the mechanism for introducing BIDs is flexible. The BID levy will be enforced in the same way as non-domestic rates but some parts of the collection procedures may need to be adapted so that BIDs work effectively.
The clause relates to the collecting mechanism and is designed to have that flexibility. I hope that explanation satisfies the point that the noble Baroness is concerned about.
§ Baroness Hamwee
With respect, I think it was irrelevant. Clause 50(2) says that the provision which the Secretary of State can make by regulation includes paragraphs (a) and (b). I am therefore asking why it is necessary to say that nothing limits the power when the word is "includes". It does not say the provisions which may be made by regulations "are" those in 144GC paragraphs (a) and (b). That is my point. Again, we do not need to waste time reading this now because I am sure we shall be able to deal with it at a later stage.
§ Lord Bassam of Brighton
We are possibly at cross-purposes in discussing the matter. We both need to reflect on what we have said, but I respect the point that the noble Baroness makes.
§ Amendment, by leave, withdrawn.
§ Clause 50 agreed to.
§ Clause 51 agreed to.
§ Clause 52 [Approval in ballot]:
§ [Amendments Nos. 118 to 123 not moved.]
§ Clause 52 agreed to.
§ Clause 53 [Power of veto]:
§ Baroness Hamwee
moved Amendment No. 123A:Page 22, line 29, at end insert "by regulations approved by an affirmative resolution of both Houses of ParliamentThe noble Baroness said: Clause 53 gives local authorities the power of veto. Clause 53(2) provides that the billing authority can exercise a veto in the circumstances that are "prescribed", to quote the Bill. The regulations dealing with the matter seem particularly important, as one might almost say that the billing authority is being given a veto to say yes or no to primary legislation. I might be putting it at a slightly high level, but it seemed worth suggesting that the regulations should be approved by affirmative resolution of both Houses. That would be the effect of Amendment No. 123A. I beg to move.
§ Baroness Hanham
Amendment No. 125, which stands in my name, is grouped with Amendment No. 123A. It refers to line 32 of page 22. At present, the circumstances in which a billing authority may exercise its veto under Clause 53 are to be prescribed and are not included in the Bill.
Our amendment picks up the point made by the noble Baroness, Lady Hamwee, on subsection (2), which states that the billing authority may veto proposals within a period that will be prescribed. We wish to probe how long the period is intended to be. Will the Government consider including in the Bill a three-month limit, for example, which we feel to be sensible? We would not like an indefinite period, as that would be damaging for everyone involved in the BID process.
§ Lord Bassam of Brighton
The clause gives the billing authority the power to veto a business improvement district under circumstances that the Secretary of State may prescribe. Amendment No. 123A seeks to make any regulations concerning the BID ballot subject to affirmative resolution. The Government have already tabled amendments to put in place the recommendations of the Select Committee on Delegated Powers and Regulatory Reform. The committee did not recommend affirmative resolution for those powers. We have a habit—a good one, I 145GC think—of following, by and large, committee recommendations. We do not think it necessary to adopt the noble Baroness's suggestion. The committee has not recommended approval by affirmative resolution, because we have already set out clearly in the BIDs guidance the circumstances under which a veto will be exercised.
Amendment No. 125, which would limit the time in which a local authority can veto a BID proposal following a successful ballot, is also unnecessary. Perhaps more importantly, it hinders what should be essentially flexible powers to allow BID arrangements to be as innovative as possible.
In the Bill, the Secretary of State has taken powers that allow him to make regulations governing the circumstances in which a local authority can veto a BID and the period in which the veto can be exercised. The circumstances in which local authorities will be able to exercise their veto are also set out in the draft guidance on business improvement districts. As we have stated, the local authority can veto a BID where it can,demonstrate that the proposed BID would conflict with locally adopted plans made under statute, or otherwise formally adopted by the council.Otherwise, the veto will rarely be exercised. After all, BIDs, as we have heard voluminously today, are about partnership between local authorities and local business communities. Where the local authority thinks that the BID will conflict with its other plans, it should state that long before the BID ballot takes place. We make that clear in the guidance.
In the rare cases that a veto is used, the Secretary of State will have the power to prescribe the period in which it may be exercised. We see no particular need to include those periods in the Bill—in primary legislation. We want to learn from the practical experience of those who have set up BIDs before we put the specific periods into regulations. The BIDs provisions are supposed to allow maximum flexibility to allow for different circumstances.
The amendments run counter to the spirit of the legislation. We want the flexibility, and we want to put it into secondary legislation. Obviously, we want to learn from practical experience—the sort of experience that the noble Baroness talked about earlier—and there will need to be some consultation before we finalise what the time-gap might be for the veto to be exercised. That is where we require the flexibility.
I hope that those responses answer the two adjacent points that were raised.
§ Baroness Hanham
I will not pursue the matter today. We have a lot more work to do. None the less, the Bill is littered with references to how things will be delivered by regulation. It does not say that here, and all that we are doing is to suggest that there should be a time by which an announcement must be made to the people who have taken part. That is not an onerous responsibility, and it does not require regulations, whether made by the affirmative or negative resolution 146GC procedure. It would give some indication of the time by which an announcement would have to be made. For today, I will withdraw the amendment.
§ Baroness Hamwee
My reaction is broadly the same, except that I would add that the fact that the Select Committee did not take the point does not stop constructively critical Members of your Lordships' House doing so. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ The Deputy Chairman of Committees (Lord Tordoff)
I remind the noble Baroness, Lady Hanham, that she cannot withdraw an amendment that has not been moved. She can decide not to move it at the appropriate point.
§ [Amendments Nos. 124 and 125 not moved.]
§ Clause 53 agreed to.
§ Clause 54 [Appeal against veto]:
§ [Amendment No. 125A not moved.]
§ Clause 54 agreed to.
§ Clause 55 agreed to.
§ Clause 56 [Duration of BID arrangements etc]:
§ Baroness Hanham
moved Amendment No. 126:Page 23, line 41, leave out subsection (4).The noble Baroness said: Last time, the Minister said that he had tabled the amendment first, when he put his name to mine. This time, we have a slightly different amendment.
Here, again, we see a subsection that gives the Secretary of State power to use regulations to make provision for altering BID arrangements, including terminating them. Can the Government explain the need for the provision? In what circumstances would the Secretary of State be likely to exercise the power?
On a separate point, subsection (5) goes on to explain that the provisions in subsection (4) may also prevent or restrict the alteration or early termination of BID arrangements. Subsection (6) then says that subsection (5) will not limit the power in subsection (4). That is confused and clumsy drafting. Perhaps, the Minister could add some clarity. I beg to move.
§ Lord Rooker
I shall speak to Amendment No. 127 and move it at the appropriate time.
The amendment would make subject to affirmative resolution the power of the Secretary of State to make the regulations regarding the alteration and termination of BID arrangements in accordance with the recommendations of the Select Committee on Delegated Powers and Regulatory Reform.
I know that I am the new boy in this place, but I also know that, unlike another place, there is a Select Committee that looks at such things. People are free to raise any issue that they want, but the Select Committee spends time going through the Bill and issues a report, giving a considered view on whether the secondary powers should be beefed up. Members can table amendments, but the Government have a view. In the two departments that I have worked in, I 147GC have always reported back to the powers-that-be. It is an important committee, and, whatever it recommends, we had better toe the line because the House will have the support of the Select Committee.
In some ways, it is a bit barmy to come along and second-guess the committee, when it has looked at the Bill. People are free to raise whatever point they want, but, if the Select Committee makes a recommendation, the Government's inclination, by and large, is to accept it. If it does not give a view, we are entitled to say that there is sufficient lack of comment to conclude that it is satisfied with what we have arranged.
The regulations will be important. They set out the criteria on which a BID can be terminated before the date set out in a BID proposal—for example, an emergency that affects a BID, such as fire, flooding or foot and mouth disease. In view of that, it is understandable that the Select Committee sought the affirmative resolution procedure.
Amendment No. 126 would remove the power. That would seriously hamper our ability with the circumstances described. Parliament will have plenty of opportunity to scrutinise the regulations under the affirmative resolution procedure. I hope that, with those reassurances, the noble Baroness will withdraw her amendment. I will move Amendment No. 127 when we come to it.
§ Amendment, by leave, withdrawn.
§ 5.45 p.m.
§ Lord Rooker
moved Amendment No. 127:Page 24, line 6, at end insert—( ) No regulations under subsection (4) shall be made by the Secretary of State unless a draft of the statutory instrument containing the regulations (whether containing them alone or with other provisions) has been laid before, and approved by a resolution of, each House of Parliament.
§ On Question, amendment agreed to.
§ Clause 56, as amended, agreed to.
§ Clause 57 [Regulations about ballots]:
§ Baroness Hanham
moved Amendment No. 128:Page 24, line 8, at end insert—( ) No regulations may be made under subsection (1) unless a draft of the regulations has been laid before and approved by both Houses of Parliament.The noble Baroness said: In moving the amendment. I shall speak also to Amendments Nos. 129 and 130.
Amendment No. 128 is a straightforward amendment. Any regulations made under subsection (1) in relation to ballots should be subject to affirmative resolution, so that the House has a chance to see what is being done. Subsection (2) gives some idea about what might be likely to be prescribed under subsection (1), although it is not an exhaustive list. Regulations may be made that deal with the question, the timing and those eligible to vote, among other matters. Those are important issues that deserve more 148GC detailed scrutiny than they would receive under the negative resolution procedure. Would the Government consider using the affirmative resolution procedure instead? I would be enormously grateful if the Minister did not say that the deregulation committee did not recommend anything about it.
Amendments Nos. 129 and 130 aim to probe the Government on two specific matters that the list in subsection (2) makes it clear could be prescribed by regulations made by the Secretary of State. We are not convinced that it would be advisable for the non-domestic ratepayers entitled to vote in a ballot to be subject up to the whim—perhaps I should say discretion—of the Secretary of State. We are yet more unconvinced that he should also have the authority to suggest what people the billing authority may legitimately approach to refund the cost of the ballot and under what circumstances.
We feel uneasy about those two specific matters of regulation. Why is it necessary for them to be relegated to secondary legislation rather than being set out clearly in the Bill? In particular, who are the poor likely suspects whom the Secretary of State may earmark to finance the ballot? Will they be able to appeal against footing the bill? I beg to move.
§ Baroness Hamwee
I tabled Amendment No. 130A, which is in the group. I make exactly the same point that I made with regard to Amendment No. 117A. Clause 57(2) provides that provisions to be made by regulations include the eight matters listed. Clause 57(3) states that those are not exclusive—that there can be more. I make the distinction that I made earlier between that and other provisions in the Bill that do not spell out the fact that to list what can be included does not exclude other matters, which is what I would understand in any event.
§ Lord Bassam of Brighton
I had better speak first to Amendment No. 131, a government amendment. As usual, it reflects the recommendation of the Delegated Powers and Regulatory Reform Committee. It will make the Secretary of State's powers under Clause 57(1) subject to affirmative resolution. In that case we have complied, as we attempt to in nearly all circumstances, with that committee's important work.
I shall work through the opposition amendments. Amendment No. 129 seeks to remove the power of the Secretary of State to make regulations regarding those ratepayers who may vote in a ballot. That power would be used to clarify which individual had a right to cast a vote in the BID ballot—for example, the person casting the vote must be the non-domestic ratepayer of a hereditament situated in the BID area.
I imagine, although I cannot be sure, that Members of the Committee opposite have tabled this to provoke debate about delegated powers, which we have discussed before, or because they assume that property owners will be included in the BID ballot and they do not want the Secretary of State's power to be confined to defining the ratepayers alone. If it is the first reason, that is fine. If it is the second, we have had a great debate about that too.
149GC It is important, however, that this power remains in the Bill to provide clarity and authority to the voting procedures which will have to command the respect of ratepayers. They could otherwise be subject to legal challenge and undermine the local authority's power to impose the BID levy.
Clause 57 also gives a billing authority the power to recover the costs of conducting the BID ballot from the BID levy, once the BID is up and running. Amendment No. 130 seeks to remove the ability of the billing authority to recover the costs. We think the amendment is unreasonable and would impact negatively on the relationship between the billing authority and the BID stakeholders.
A business improvement district, as we are all agreed, is a partnership. We see from that perspective the importance of its making a contribution, but that does not prevent a billing authority from contributing to the cost of setting up a BID by paying for the BID ballot to take place. However, we do not believe it is right to enable external stakeholders—to use the jargon—to impose a requirement on billing authorities to undertake work on a BID without giving them any opportunity to recover the costs.
The billing authority cannot refuse to take part in a BID ballot, so you cannot properly compare its role with that of other stakeholders in the BID, who would be subject to different circumstances and no doubt pressures, and would stand to gain significantly from the BID projects. However, if the billing authority can regain its costs, it will not suffer detriment from being involved in BIDs. It is actually more likely to make them more of a willing partner in the schemes. That is how we would all see it working.
In addition, billing authorities may be asked to take part in more than one BID arrangement. The question could properly be posed—I think I would have posed it as a leader of a local authority—as to how many BIDs it might take for a billing authority to have to look for savings elsewhere. We are not sure that that would be desirable. Obviously it is a matter for local consideration.
Finally, we understand that Amendment No. 130A seeks to limit the power to make regulations on BID ballots to those topics that are listed in subject 2. The noble Baroness, Lady Hamwee, shakes her head.
§ Baroness Hamwee
I am sorry, I thought I had made this clear. The amendment seeks to ask whether the word "includes" means "includes only". It is exactly the same point as was made in Amendment No. 1 17A. If it has to await further consideration, I am happy for it to do so, but I wanted at least to speak to it because the same point arises.
§ Lord Bassam of Brighton
I understand the point entirely. A question was raised as to whether people could complain that they have to foot the bill. The answer to that is simple: no. Of course, they can vote in the ballot and that gives them the opportunity to participate in the process. They can make complaints publicly and campaign loudly, but their primary route 150GC is to participate and to be involved. If they disagree with the project in hand they have the right to vote. It is important for them to exercise that right.
§ Baroness Hanham
I thank the Minister for his reply. I believe he has replied to one more question that I asked. Subsection (2)(b), one of the areas about which I complained, concerns the domestic ratepayers entitled to vote in the ballot that will be identified by regulations not subject to the affirmative situation. That raises a point that I raised earlier about who is entitled to vote. There may be more. It was suggested that the ratepayer would be the person who would have the vote—I think that was the suggestion. The ratepayer may have three properties in the same road.
I do not believe we have the draft regulations, but it would have been helpful to have them so that in such a situation we would know how that matter will be identified. We will not be able to discuss that any further beyond today. I presume that the regulations will be available before a BID is started so that the billing authority is able to identify who will pay the bill. That lines up with what the Minister has said regarding the fact that the authority will know from whom they have to raise the money. I presume that the regulations will be available at some stage.
§ Lord Bassam of Brighton
I want to make a point. By putting the matter into the regulations in the way in which we suggest—we have some sympathy with the point made—we will be able to carry out some further consultation so that further thought can be given to the matter. I do not know whether that helps, but we are trying to be as helpful as we can and to understand the point being made.
§ Baroness Hanham
I always worry when the Minister says that he is trying to understand the point I am making. I hear what he says about consultation and I hope that that is correct. In the mean time, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 129 and 130A not moved.]
§ Lord Bassam of Brighton
moved Amendment No. 131:
Page 24, line 23, at end insert—( ) No regulations under subsection (1) which include provision of the kind mentioned in subsection (2)(b) shall be made by the Secretary of State unless a draft of the statutory instrument containing the regulations (whether containing them alone or with other provisions) has been laid before, and approved by a resolution of, each House of Parliament.
§ On Question, amendment agreed to.
§ Clause 57, as amended, agreed to.
§ [Amendment No. 132 not moved.]
§ Clause 58 [Power to make further provision]
§ Baroness Hanham
moved Amendment No. 133:
Page 24, line 30, at end insert—( ) No regulations may be made under subsection (1) unless a draft of the regulations has been laid before and approved by both Houses of Parliament.151GC The noble Baroness said: I am looking to see whether the Minister has his name attached to this amendment. I am told off all the time so I have to carry out some self-preservation here. In moving Amendment No. 133 I shall speak also to Amendment No. 134. Amendment No. 133 reflects the concerns voiced by the Delegated Powers and Regulatory Reform Committee and its comments on Clause 58 will be familiar to the Minister. I was going to read them out but I shall not because I believe that the Minister will say that the Government always follow what that committee says. We believe that we need that on the record. Can the Minister confirm that he will be adopting the recommendations of that committee on that point and, if not, why not?
Amendment No. 134 will leave out subsection (2) from Clause 58. I feel strongly that that undermines the parliamentary scrutiny. I am happy to see that there are so many Henry VIII powers scattered throughout the Bill. The Delegated Powers and Regulatory Reform Committee has drawn attention to them and we have tabled amendments in relation to all of them to ensure that attention is drawn to the fact that they are there. Can the Minister explain why Clause 58 is necessary? I beg to move.
§ 6 p.m.
§ Lord Rooker
I will speak to government Amendment No. 135 and move it formally at the appropriate time.
Amendment No. 135 reflects the recommendations of the Delegated Powers and Regulatory Reform Committee. The amendment will make the Secretary of State's powers under Clause 58(1), where it includes provision for amending an Act subject to the affirmative resolution. It is necessary to build flexibility into the BID arrangements, but I accept that in this case it is reasonable and sensible for Parliament to scrutinise the regulations. We are very happy to make the change, as recommended by the Committee.
Amendment No. 133 appears to seek to go further than recommended by the Committee; it would make all the regulations under Clause 58 subject to the affirmative procedure rather than just those which contain provisions amending an Act subject to the affirmative procedure. This is a question of balance and of finding a way of providing BIDs with sufficient flexibility while retaining the safeguards. The Committee's recommendations safeguard earlier enactments with affirmative resolutions, which seems sensible, but we are not convinced of the merits of going further.
Amendment No. 134 seeks to remove subsection (2) which gives the Secretary of State the power to amend legislation in order to give full effect to the business improvement district provisions. But the subsection is necessary to allow supplemental, incidental and transitional changes to previous legislation that will ensure that the provisions of this part of the Bill and any subordinate legislation work properly. I emphasise that it does not allow the Government to 152GC amend legislation for any other purpose. As government Amendment No. 135 will require the affirmative resolution for the relevant regulations, we could not make any changes without the consent of Parliament. I hope that explains it.
Reading subsections (1) and (2) of Clause 58 on their own, I fully accept that it looks like the Government could do anything to a lay person, but that is not the case. I took advice on this when the noble Lord, Lord Jenkin, was still here, because I thought if he reads Clause 58 he might think that there is a way of dealing with the owners already in the Bill. However, I am assured that that is not the case because the Clause refers to giving full effect to,any provision made by or under this Part".The owners are not included under this part, so this is not a catch-all to enable the Government to amend Acts of Parliament. Government Amendment No. 135 makes it clear that Parliament will have to approve any changes anyway.
§ Baroness Hanham
I thank the Minister for that explanation. It is a pity that legislation that includes provisions such as this then needs such explanation. If the Delegated Powers Committee had not drawn our attention to this, it might have slipped through without anybody raising questions about it and any explanation having to be given. At least the explanation is now in Hansard so people outside the House will at least know what the Government mean and that the provisions and regulations under Clause 58 will be made by affirmative resolution. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 134 not moved.]
§ Lord Rooker
moved Amendment No. 135:Page 24. line 32, at end insert—( ) No regulations under subsection (1) which include provision amending an Act shall be made by the Secretary of State unless a draft of the statutory instrument containing the regulations (whether containing them alone or with other provisions) has been laid before, and approved by a resolution of, each House of Parliament.
§ On Question, amendment agreed to.
§ Clause 58, as amended, agreed to.
§ Clauses 59 to 62 agreed to.
§ Clause 63 [Small business relief]:
§ The Earl of Caithness
moved Amendment No. 136:Page 27, line 13, leave out subsection (5).The noble Earl said: We move now from BIDS to rating, a slightly esoteric subject for many Members of the Committee but one of great importance. I have to declare my interest: I am a surveyor. I am a consultant to an independent residential property company in London, but it does not do ratings so there is no financial benefit to me or my firm from any provision in this part of the Bill. I hope that that covers any declaration of interest or non-interest, and that I do not need to repeat it.
153GC Rating is a very simple tax. It is brilliant in concept because it is very easy to establish, levy and collect—and then the Government step in and make it horrendously complicated. On behalf of all my friends in the rating profession, may I thank the Government for all the extra work they will cause them and how much fun my fellow surveyors will have in the coming years as a result of the Government's actions? If the Government stuck to the "KISS" principle, that would make things very much more simple and speedy—businesses would know where they stood, the Government would be happier and doubtless local authorities would be too. But that is not the way of the world.
Clause 63 introduces a small business relief. I am not against that in principle, but it needs to be considered. Why the Government wish England to take so long to follow Scotland in introducing its small business relief, I do not know. Why they have specified a different figure and a different rateable value, I am not sure. Perhaps the Minister could explain.
Why the attempt to make the small business relief self-financing? The Government parade the idea that they want to help small businesses, but they are not helping them at all. They are allowing small businesses to receive something with one hand and taking it away from large businesses with the other. Of course the Government are not helping—the taxpayer is not helping. The Government have yet again issued forth a load of spin in this area.
Why is this revenue-neutral? Why is it revenue-neutral in one year? Why is it not spread over the whole period of the list? Why make it so much more complicated for businesses, large and small, some of whom will benefit and some of whom will be grossly disadvantaged by this? I beg to move.
§ Lord Bassam of Brighton
It is worth spelling out what the impact of the amendments would be. I am grateful for the declaration of interest. No doubt when the previous Government scrapped rates and introduced the poll tax, there was much grief in the estate agency world. They were denied the prospect of further work until council tax was introduced. As the noble Earl, Lord Caithness, said, it makes work for the estate agency world.
The formula for the calculation of small business relief is to be found in Clause 63(3). It is clearly set out with the letters "D" and "E", which are defined in Clause 63(5). "D" is the rating multiplier to be applied to a property receiving small property rate relief and "E" is the amount by which the resulting bill will reduce by the, and through the, application of relief.
Amendment No. 136, by striking out subsection (5), would leave "D" and "E" undefined. On its own, it would wreck the clause and destroy the small business relief scheme. Research published by the old Department of the Environment in 1995 showed rates to be a specially heavy burden for small businesses, accounting for a significantly higher proportion of operating profits than in the case of larger businesses.
154GC In this clause, we are trying to implement the relief scheme set up in England, as set out in the White Paper published in December 2001. The mandatory rate relief will be available for properties with rateable values of less than £8,000. The percentage of relief will be on a sliding scale. There will be 50 per cent relief for properties with rateable values up to £3,000. The percentage of relief will then taper off gradually so that, for example, properties with rateable values of £6,000 will have their bills cut by 20 per cent. To qualify for relief, a business will need to apply to the local authority, declaring that it occupies only the one property for which it is claiming relief.
In England, the relief scheme will be funded by a small addition of no more than 2 per cent to the bills of other ratepayers, so there is a recalibration, a rebalancing. The means by which this can be done are contained in one of the provisions in Clause 64.
Obviously, this is about striking the right balance between different classes of ratepayer. It is also about affordability. We believe that the scheme we have devised for England strikes a fair and not unreasonable balance between the interests of small businesses which will be receiving the relief and other ratepayers who will be funding it, while also being straightforward to operate. The noble Earl said it was a straightforward scheme, and it certainly is. That was the beauty of the old domestic rating scheme too.
The purpose of Amendment No. 137 is to set in concrete, effectively, the amounts of relief to be provided by writing these into the primary legislation. The level of relief in the amendment is more generous than that proposed in the White Paper. Properties with rateable values of up to £10,000 would benefit as opposed to the White Paper proposal that the relief should end at £8,000. This amendment would remove any flexibility. At the last revaluation in 2000, rateable values rose on average by about 20 per cent. We therefore raised most relief thresholds accordingly. The amendment would prevent us from doing so in the future in the case of small business rate relief. Perhaps that is not the intention of the movers of the amendment, but that is the effect, and it needs to be understood.
The amendment might, on the face of it, look more generous to businesses, but in practice, because of my point about flexibility in threshold raising, it may not be. It would require a further Act of Parliament to increase the threshold following any future revaluation. As I am sure the noble Earl will accept, that is a cumbersome mechanism with which to make those sort of adjustments.
I hope that that explains the points raised. On the general issue of why this is revenue-neutral, we are looking at a particular class of taxation. I think the noble Earl may be suggesting that the taxpayer at large should fund a scheme of bigger benefit to small businesses. We are ensuring that there is a rebalancing 155GC within one system of taxation which is applied locally and collected for national benefit. I hope that deals with the points raised by the noble Earl.
§ The Earl of Caithness
I am grateful for that reply, but I thought that the Minister dealt rather in generalities—he spoke of large businesses and small businesses, saying that the Government thought they had a happy medium. But there was no explanation of why the Government had decided on £8,000 as the rateable value threshold. Why is it different from the £10,000 rateable value in Scotland? Why will the Government penalise anybody just above the £8,000 limit? Why is it revenue-neutral? Why is there not some help from the taxpayer? Why are the Government not fulfilling their obligations or their statement of help to small businesses? Perhaps they do not want to help small businesses after all.
The effect of the amendment is, as the Minister said, to leave the introduction of small business rate relief in place but allow for the taxpayer to pay for it. I hope that the noble Lord will have a little more to say. Will he comment any further?
§ Lord Bassam of Brighton
The only comment I can really make with regard to the noble Earl's point about the Scottish situation is that that is a devolved matter. It is for the Scottish Parliament to determine. If that is what it wishes to do within its own arrangements, that is fine. But we have to act for England in this case, and we have designed this scheme as fit for the purpose that we see as appropriate.
The noble Earl and I can disagree about relative generosity, but the Government think that the clause begins to address some of the problems on which we agree. Perhaps in the past there has been more of a burden on the smaller business ratepayer than the larger business ratepayer. This is the scheme we have come up with—we can disagree about it. We certainly disagree about where the burden should be placed. We think it should be placed within that class of taxation rather than on the taxpayer at large. But this is the scheme we are proposing, and we have taken soundings on it in the past. That is why it is in the Bill.
§ The Earl of Caithness
I am grateful for that. I warn the Minister that I will come back to this in more detail on Amendments Nos. 139 and 140. That gives the fifth cavalry the chance to come to his aid.
I will want to know the reason for deciding on £8,000. I will also want to know what the Minister estimates as the cost in terms of benefit for small businesses as a result of the existing list. But we can deal with all that when we come to Amendment No. 139. In the mean time, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 137 not moved.]
Clause 63 agreed to.
§ 6.15 p.m.
§ Lord Phillips of Sudbury
moved Amendment No. 138:After Clause 63, insert the following new clause—