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Thank you hugely, Mr. Speaker, for the kindness you have shown to us all and for the work you have done over the years. I join everyone else in wishing you, Mary
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and the family the best for the future. I am not going to say “in retirement”, because we hope that we will still see you and still be able to partake of your judgment and friendship over the years to come.

Mr. Speaker: Before I put the motion, I am reminded of an incident involving a councillor who had served a long time in the Cowlairs ward, which the Prime Minister mentioned. We decided to give him a farewell dinner, at which so many good things were said about him that he stood up and said, “I didn’t realise how much you liked me; and I think I will stay on.” [Laughter.] I can say that your Speaker is demob happy. I am very touched by the tributes, particularly those to Mary and my family. I now put the motion to the House.

Question put and agreed to.

Resolved, nemine contradicente,

Business Rate Supplements Bill (Programme) (No. 3)

Motion made, and Question put forthwith (Standing Order No. 83A),

Question agreed to.

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Business Rate Supplements Bill

Consideration of Lords amendments

Mr. Deputy Speaker (Sir Alan Haselhurst): Before I comment on matters of privilege, I would like to say a few words. Deputy Speakers may not take part in debates and have to be silent during them, but I wish to abandon impartiality for a moment and say that Sylvia Heal, Sir Michael Lord and I entirely endorse the sentiments expressed in the previous motion and on so many sides of the House about Mr. Speaker. Words such as “humanity”, “kindness” and “generosity” are ones that we closely associate with Speaker Martin through our work with him over the years. We, too, wish him well.

I draw the House’s attention to the fact that privilege is involved in Lords amendments 1 to 8 and 10 to 14. If the House agrees to any of those amendments, I shall ensure that the appropriate entry is made in the Journal.

Clause 1

Power to impose a BRS

2.34 pm

The Parliamentary Under-Secretary of State for Communities and Local Government (Sarah McCarthy-Fry): I beg to move, That this House disagrees with Lords amendment 1.

Mr. Deputy Speaker: With this it will be convenient to discuss the following: Lords amendment 2 and Government motion to disagree.

Lords amendment 3 and Government motion to disagree.

Lords amendment 4 and Government motion to disagree.

Lords amendment 5 and Government motion to disagree.

Lords amendment 6 and Government motion to disagree.

Lords amendment 13 and Government motion to disagree.

Lords amendment 14 and Government motion to disagree, and Government amendment (a) in lieu.

Sarah McCarthy-Fry: The Bill was amended in the other place on Report, so a ballot is required before any business rate supplement can be levied or any existing business rate supplement can be varied. Due to amendments 8 and 9, which we will come on to, a ballot will not be required for the BRS that will form part of the Crossrail funding package.

The Government recognise that the BRS will not work unless there is a strong and effective partnership between the levying authority and local businesses. Throughout the passage of the Bill, we have made it clear that we expect levying authorities to engage with local businesses in the development of the BRS and to continue engaging with business once the project is under way.

To provide further reassurance on this point, we committed on Report to the statutory guidance making it clear that levying authorities must consider how they will engage with businesses over and above the statutory consultation. The appropriate approach to engagement, however, will depend on the nature of the project that
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BRS will be funding and the partnership arrangements that already exist between levying authorities and their local businesses. For that reason, we should leave levying authorities to work responsibly with their local businesses in developing BRS projects, rather than prescribing from Westminster how this should be done.

We should trust our local authorities. During the Public Bill Committee evidence sessions, Councillor Knight, speaking on behalf of the Local Government Association, said:

The Government’s position is that a ballot should be held in those cases where the supplement will fund more than one third of the estimated total cost of a project and it ensures that where businesses will be contributing a relatively large proportion of that project, they will have the power to vote on whether they make that contribution. If business votes against, the BRS will not happen. However, when businesses will contribute a smaller, although important, element towards the costs of a project, a judgment should be made locally on whether a ballot is appropriate. That is proportionate and reasonable, given that BRS revenues will contribute the lion’s share of a project’s funding in some cases, but a relatively small proportion in others.

Requiring a ballot, even in cases in which the supplement is funding a relatively small proportion of a project, potentially places undue emphasis on one aspect of a project. For example, a levying authority might propose to fund 10 per cent. of a project through a BRS. If the authority engaged with businesses at an early stage about the proposed project and business rate supplement and secured their support, and if that was then borne out through consultation, it would make no logical sense to require the authority to go through the process of holding a ballot.

It should be made clear that a ballot will not be a quick or cheap process. There should be no need for a ballot on a short-term business rate supplement that will fund a relatively small proportion of a project supported by business. The expense would be disproportionate, and in some cases simply could not be justified. That could result in a totally artificial discouragement to levying authorities to use BRSs in cases in which doing so would make a real and positive difference to an area.

Robert Neill (Bromley and Chislehurst) (Con): I am interested in what the Minister is saying, but I am trying to reconcile the logic of her argument with that adopted by the former Minister for Local Government, the right hon. Member for Wentworth (John Healey) on Second Reading and in Committee. Later we shall deal with BRS-BIDs—I note that the right hon. Member for Greenwich and Woolwich (Mr. Raynsford) is present—and I am happy with the Lords amendments in question, but the earlier argument was that business improvement districts were by and large short-term projects, and that the BRS frequently related to longer-term projects. It is difficult to reconcile that argument with the Minister’s current argument.

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Sarah McCarthy-Fry: I am merely giving a possible example. In the broad sense, obviously we expect the BRS to be much wider and to cover a much longer period. We are not necessarily talking about relative BIDs specific to a five-year period. We could be talking about a period of between five and 30 years.

Mr. Nick Raynsford (Greenwich and Woolwich) (Lab): The hon. Member for Bromley and Chislehurst (Robert Neill) may have slightly misrepresented the position taken by the then Minister, my right hon. Friend the Member for Wentworth (John Healey), who strongly advocated the policy that is implicit in the Bill as presented to and agreed by the House of Commons that there should be a ballot as long as expenditure is over 30 per cent., but that there should not be an automatic ballot in other circumstances which could, as my hon. Friend the Minister has rightly said, involve unnecessary expenditure for relatively limited benefit. The distinction between BIDs and the BRS is that the BRS is for much larger capital investment, and BIDs involve far more local schemes, which may well go on for a long time. They are not necessarily limited to five years, as the hon. Member for Bromley and Chislehurst suggested. They could last for 20 years as long as there was support for them.

Sarah McCarthy-Fry: As ever, my right hon. Friend’s considerable knowledge of local government shines through.

As Lord Davies made clear, even if there is no ballot, levying authorities will not have a free rein to use the BRS to fund their pet projects regardless of the views of local businesses. They will be required to consult businesses formally, and that consultation will be over and above any preparatory dialogue in which they engage.

Dan Rogerson (North Cornwall) (LD): I am grateful to the Minister for being so generous in giving way. What reassurance can she give business that such consultation will be any different from many other recent consultations, such as the one on post office closures? Is not the problem that, sadly, consultation has become a somewhat devalued concept and that people seek a greater safeguard? Would not a ballot constitute such a safeguard?

Sarah McCarthy-Fry: The hon. Gentleman can take comfort from the evidence given by organisations such as the Local Government Association. I think that the point was made then—it was certainly made in Committee by my right hon. Friend the Member for Wentworth—that we have moved on from the old-fashioned view that local authorities just wanted to get money out of businesses and were not prepared to consult them. I hope that the hon. Gentleman is confident, on the basis of the local authorities known to him, that authorities nowadays work in partnership with business and are committed to consultation of that kind.

Businesses have a guarantee that the BRS can be used only on additional projects that are aimed at promoting the economic development of the area. As such, BRSs are limited for use on additional projects that will be relevant to local businesses. Businesses also have a guarantee on the maximum level of the supplement with the national upper limit of 2p per pound of rateable value, and a guarantee that properties with a rateable
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value below £50,000 will be exempt from paying the supplement. It was right for us to include those safeguards. However, if a ballot is required in all cases, there will be a danger that financial institutions and funding partners will not be willing to commit funding when one element of the funding package is uncertain owing to the need for a ballot. That risks destabilising such funding packages, and makes the BRS a less attractive option for projects funded from multiple sources.

2.45 pm

Robert Neill: The Minister is being very generous. I hope that I shall not need to intervene again.

In the context of certainty, has the Minister seen a copy of the letter from the director general of the Confederation of British Industry dated 12 June and sent to her right hon. Friend the Secretary of State? The letter states that only mandatory ballots can give businesses the certainty that they desire. When will the Secretary of State respond to that letter?

Sarah McCarthy-Fry: I will ascertain from my right hon. Friend’s office when a response will be forthcoming, but I am sure that today’s debate will constitute an element of that response.

We do not want to limit the BRS as really only an attractive option for use as the sole funding mechanism for a project. That limits levying authorities in terms of the amount of revenue they can raise, and means that the BRS cannot be used in conjunction with other funding streams to fund larger, more ambitious projects aimed at promoting local economies.

The effect will be particularly pronounced outside London. Properties in the London typically have higher rateable values than those outside the capital. Under the current proposals, properties in England with a rateable value of £50,000 will be exempt from paying the BRS. That threshold will exclude a higher proportion of properties from paying the supplement outside London than in the capital, which means that outside London there is an increased likelihood that the BRS will form part of a wider funding package. Therefore, the difficulty created by the ballot in cases in which the supplement will form part of a wider funding package will be more pronounced outside the capital. That makes the BRS less attractive as a funding mechanism to promote economic development outside London.

In requiring a ballot in certain circumstances, the White Paper and the Bill go significantly further than either the Lyons review or the Communities and Local Government Committee. Both recommended that the decision to hold a ballot should be left to the levying authority.

For the reasons that I have just given, we do not think that a ballot should be required in all cases. We consider that it should be required only in cases in which the supplement will fund more than one third of the total projected costs. However, because Members in both Houses have expressed real concern that there should be genuine engagement of local businesses before a supplement is introduced, we propose that in cases in which a ballot is not required by virtue of the fact that the supplement is expected to fund less than one third of the total cost
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of the project, the authority should be required to set out the BRS prospectus whether or not it intends to hold a ballot, and—importantly—to explain why it proposes that course of action.

I want to make it absolutely clear that the Government do not consider that a ballot should always be held. The amendment requires authorities to state why they think a ballot should, or should not, be held. It does not ask them to justify their decision only if they decide not to hold a ballot; there is not, as such, a presumption of a ballot. For instance, the BRS might be used to fund a small proportion of a project over a short period such as six to 12 months. In such cases, the costs of running a ballot might be considered to be disproportionate, given the contribution that would be made by the supplement. If an authority wanted to hold a ballot in such cases, taxpayers, including local businesses, would justifiably be interested in its reasoning.

The amendment provides important transparency in the decision-making process relating to ballots. We think it right for levying authorities to have discretion on whether to hold a ballot when the supplement is expected to fund less than one third of the total cost of the project. However, we acknowledge that the decision-making process must be transparent to those who will ultimately be liable for the supplement. The amendment will give businesses confidence that the decision-making process on ballots will be made clear. It allows levying authorities flexibility to do the right thing by their communities while ensuring that local businesses understand why the authority has taken a particular course of action.

For those reasons, I invite this House to disagree with the Lords amendments, and commend the Government’s amendment in lieu to the House.

Robert Neill: This is the first time that I have had the pleasure of doing business on local government issues with the Minister. As a member of a shadow team that has been in place a little longer than the Government team, I welcome her to her new post, and look forward to doing further business in the future.

I am sorry that we will have to start on a note of disagreement, but such is life. The Minister has set out much the same arguments in resisting the Lords amendments as Government spokesmen used in the other place. Their lordships were not convinced, and with every respect to the Minister’s persuasive skills, I have to say that I am not either.

The key issue is that if the BRS is to be successful, it has to have wholehearted buy-in from, and the consent of, the business community, otherwise it will not achieve the stated objectives. It is well known—I repeat this point merely for the record, without elaborating on it—that the official Opposition would not have introduced a BRS at this time in an economic cycle, in the midst of a recession; the only exception in our case was the Crossrail project. That point has been well rehearsed and well debated, but I mention it to set the context. At a time when businesses are under more pressure than ever, the introduction of BRS—and without a ballot—would in our judgment be an unjustified and unduly onerous imposition on them. Businesses are already struggling; they are finding cash flow ever more difficult, and the costs of borrowing money to meet cash flow and other requirements are ever higher.

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