Clause 63 - Small business relief
Local Government Bill
3:30 pm
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
This is an incredibly complicated clause that deals with large numbers of formulae. Hon. Members will see that the formulae start on page 25 and go on to page 26. If they are still awake by page 27, pages 28 and 29 will certainly send them to sleep.
We accept that small businesses have higher proportionate costs. We therefore welcome the small business relief that the clause provides. However, we
note that the maximum qualifying threshold E—introduced in proposed new section 44(9) under subsection (5)—is to be prescribed. I understand that the reason for that is that there is a maximum up to which small businesses still qualify for small business relief. I would like to probe the Minister on that maximum.
I understand that the current maximum is £8,000. The Small Business Bureau believes that it should be £10,000, with a buffer of up to £25,000.
Mrs Valerie Davey (Bristol West, Labour)
The hon. Gentleman is right that the clause, and subsequent clauses, are complicated. I tried to understand them myself and was not clear whether the small business relief applied to all ratepayers with properties with a rateable value lower than the thresholds indicated in the explanatory notes, or just to small businesses. If it applies only to small businesses, I am not clear whether that distinction is made under subsection (3), proposed new subsection (4B)(a)(iii).
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
That technical question should be for the Minister, not for me.
As I understand it, the clause relates to rateable value. The size of the business does not matter when one pays non-domestic rates. It is the rateable value of the business that counts. I understand that the maximum rateable value to qualify for small business relief is £8,000.
Mrs Valerie Davey (Bristol West, Labour)
That is an important point. Many hon. Members rent offices in their constituencies on which they pay non-domestic rates, so they will probably benefit from the relief. If that is the case, hon. Members should declare an interest at the beginning of their speeches.
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
The hon. Gentleman asked me a technical question, and I gave him what I perceived to be the answer. If I am wrong, no doubt the Minister will tell me so.
I understand from reading the clauses that the small business relief will be funded from the overall pot. That means that the general non-domestic ratepayer will be paying more to compensate for the small business relief. We have received some representations saying that the relief for small businesses should be funded out of a separate pot, because a separate multiplier and provisions are applied to small businesses. Some larger businesses, which do not receive the relief, are aggrieved at having to pay extra to fund small businesses that may be competing with them. It is a question of equity. Will the Minister comment on that issue?
Sitting suspended for a Division in the House.
On resuming—
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
The problem with small business relief, which we strongly support, is that it has to be funded out of the overall pot of national non-domestic rates. That effectively means that big businesses subsidise smaller ones that receive such relief but might well be competing against those big businesses. It might be prudent to maintain the
discretion—not the duty—to allow separate funding for small business relief. As I understand it, the clause removes that discretion.
I am sure that the hon. Member for Kingston and Surbiton is aware of this, but the explanatory notes reminded me that mandatory rate relief of 50 per cent. is available for properties up to £3,000 of the rateable value and will decline on a sliding scale as the rateable value increases, with no relief above £8,000.
Mr Desmond Swayne (New Forest West, Conservative)
Does that 50 per cent. figure arise from the formula A times D over C times E, or has it been plucked from somewhere else?
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
I am sure that my hon. Friend has had a chance to read the Bill. He will have made up his own mind. Perhaps the Minister will able to clarify the matter. That just shows how complicated these formulae are. Someone asked me on the way here, ''Does anybody understand it?'' There are people who make their living doing nothing but trying to work out these formulae and how they apply to individual calculations for non-domestic rates.
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
They do nothing else. If I responded to a sedentary intervention, it would be go on the record, so I shall not do so. However, it has put me off my stroke. I will have a word with my hon. Friend afterwards. I cannot quite remember where I had got to. [Hon. Members: ''It is complicated.''] Yes, it is incredibly complicated. The Minister will no doubt seek to explain it all.
Mr Christopher Leslie (Parliamentary Secretary, Cabinet Office; Shipley, Labour)
The 50 per cent. figure arises out of the factor to be prescribed with the letter E.
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
Under subsection (5), in proposed new subsection (9),
''E is such amount as may be prescribed''.
I was wondering about that question, and the Under-Secretary has confirmed it. My hon. Friend did the Committee a service by bringing it up. A question arises therefore about whether the Secretary of State may alter that £3,000 in any one year. Will the Under-Secretary say how that sum will keep up with inflation or property inflation?
Mrs Valerie Davey (Bristol West, Labour)
I do not know whether I have to declare an interest, but I rent an office in my constituency and pay rates through the allowance.
The Government are on to a good thing with the small business rate relief, as the uniform business rate hits small businesses disproportionately hard. All the research evidence clarifies that—from both the academic world and business interest groups. It is clear that we need to find a way to reduce the burden of business rates on small businesses; the question is how to do that. The Government have gone for a targeted approach, and to the extent that it reduces the burden on those whom the Government are asking to pay, one might argue that it is fairer a system.
Like the hon. Member for Cotswold, I would have preferred it if the Government had invested some money and reduced overall business taxation with the
relief. The Liberal Democrats have argued for a business rate allowance so that every business that paid the business rate would receive a lump sum off it. That would act fairly, because a lump sum would be like a reverse poll tax, so the poorer businesses would benefit most. The Government have gone for that in a way, but they have tried to claw it back. My concern is that that creates extra complexity.
Business rates work relatively simply for normal businesses. Complications exist at the edges, but overall the tax is well understood. However, there is a danger of making it more complicated by introducing clawbacks and sliding scales. We must scrutinise the proposals to see whether it is worth the complexity to save revenue. Is it worth the candle to add complexity and bureaucracy and force the private sector to spend more time dealing with it? Would it not be simpler to go for a straight allowance system of a lump sum off the business rate bill for every business? I make that policy point not in opposition to the small business rate relief, because cutting the rate bill will attract support from Members on both sides of the House, but I question whether there could be a less complex and more efficient way of achieving the same goal.
However, I want to raise a point that the CBI raised with me. I do not necessarily agree with it, for reasons that relate to what I just said, but it is worth touching on the point, which others have made in other places. The CBI is concerned that, if we reduce the business rate through the scheme, landlords might be the only beneficiaries. Will tenants see any benefits? The idea is that rents go up pound for pound to accommodate the rate reduction due to an equilibrating mechanism in the business rental sector. I do not subscribe to that argument, but I understand it. The CBI and others have said that the Government need to monitor the policy closely to check that that does not happen.
Hon. Members on both sides of the Committee will not want the relief to be wasted, or for it to go to the landlords even though the intention was to give money to tenants and businesses that operate from various properties. Obviously, if the business owner is the freeholder, that point does not apply, but often they are not. Will the Government research the issue and keep the policy under review to check that the relief is not enjoyed by those for whom it was not intended?
Mr Andrew Turner (Isle of Wight, Conservative)
I am interested in the hon. Gentleman's proposition, but how is it possible to prevent a reduction in a tenant's accommodation costs, which would give him more disposable resources, from being retrieved somehow by the freeholder? Obviously, the freeholder would be trying to attract the maximum income from the tenancy.
Mrs Valerie Davey (Bristol West, Labour)
I am saying that I am concerned that that might be possible; I can imagine that in some cases it would not be. For example, there might be rental agreements that last a long time. At the end of that period, there might be some adjustment. There is a timing issue, which will clearly affect whether there is a one-for-one situation and how quickly the market returns to equilibrium.
I am not necessarily convinced by the argument that I have outlined, because if it were true and the rates and the uniform business rate were increased, there would be no effect on the tenants, because rents would have to go down. The argument to the contrary is that there are some very unfair leases in this country and rent reviews are often only upwards. With some leases, there cannot be downward rent agreements. That might preclude the option that I have described.
However, let us say that we made illegal the provisions in leases for only upward rent reviews. The implication of the CBI's analysis is that if the Government pushed up rates, rents would go down and tenants would not be affected. Money would in effect be taken from the landlords. There is a problem with the CBI's analysis, but it raises a fair question. Will the Government monitor the policy in this respect and undertake the necessary research?
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
The CBI did not put that point to us. In any case, I am not sure that it entirely holds water, because rateable value is related to rental levels. If rental levels increase, rateable value increases, so I cannot quite see the point that the CBI is trying to make.
Mrs Valerie Davey (Bristol West, Labour)
In many respects nor could I, although my question about the CBI's analysis was slightly different. That is why I do not oppose the relief, although the CBI wanted us to do so. I think that the relief is a step forward, for the reasons that I have outlined. However, because that very reputable organisation has advanced a different argument, it is incumbent on the Government to consider it and to keep the policy under review as a result.
My next point was taken up by the Select Committee and relates to the thresholds that the Government have said that they will introduce through regulations. We have heard that the mandatory rate relief will be available at 50 per cent. for properties up to the £3,000 level and will then be removed on a sliding scale up to the £8,000 level.
I was concerned to read that the Association of Convenience Stores, which represents many of the small retailers at which the relief seems to be targeted, has argued that, to be viable in the modern economy, a small store needs a turnover of about £4,000 a week. The threshold published by the Government suggests that the relief will apply only to small stores with a weekly turnover of less than £1,400. Organisations that represent businesses that will benefit from the relief are concerned that the threshold is too low. I recognise that there is a balance to be struck between giving the relief to those who will benefit, such as MPs, it appears, and the larger businesses that will have to pay under the Government's proposals. Will the Minister comment on that analysis from the Association of Convenience Stores, so that we can accept that the Government have got the balance right?
Mr David Borrow (South Ribble, Labour)
I should preface my remarks by saying that I shall not oppose the amendments.
Assistance for small businesses is crucial. However, I have spent more than 20 years dealing with rating valuation, listened to many ratings surveyors, read
many books and attended many lectures in which the link between rates payable and rent payable has been part of the fabric of the discussion. The argument that increasing rates reduces rent and vice versa has been part of the culture and the understanding of the rating world for as long as I have been involved in it, which is since the mid-1970s.
I am concerned that, in the long term, the clauses will help not small businesses but landlords, by allowing them to increase their rents. The hon. Member for Kingston and Surbiton makes his points well. Many of the submissions that I have seen argue that we should be making such proposals, but the problem for small businesses is that they pay high rents in relation to the turnover of the business compared with large businesses in large business premises. Rates relate directly to the rents that are paid, which means that small businesses end up paying relatively high rates compared with large businesses.
Mrs Valerie Davey (Bristol West, Labour)
The hon. Gentleman gives the Committee the benefit of his long experience and substantial knowledge of these issues, which are second to none. Does he agree that if the Government want to help this sector, they should abolish upward-only rent reviews?
Mr David Borrow (South Ribble, Labour)
That is another issue, and I am not sure that the Bill should deal with it. Rent reviews have made it more difficult for small businesses. When I first became involved with rating valuation, rent reviews were often conducted every five or seven years. High inflation during the late 1970s and 1980s meant that the period was often only two or three years, and that there were often upward-only rent reviews. When the rental market has dropped and there has been a recession in a particular area, the rents payable have not reduced.
I worked in Liverpool in the 1980s, when many small businesses had only upward-only rent reviews and could not see their rents reduced even though the business was not paying on such levels. Businesses would quite often leave premises and sub-let to other businesses at a lower rent than they were paying as tenants simply to dispose of their interest in the property.
My experience at the end of the 1980s after 17 years of the 1973 valuation list was that, during the boom in the London property market, the proportion of the rent that was payable in rates was trivial. Very often, 10 per cent. of the rent was paid in rates. In parts of Liverpool, the rates paid were often three or four times the rent. There is a direct relationship between rent and rates. After the revaluation in 1990, rates fell in certain areas because there had been no revaluation, and that chemistry between rates and rent came into effect. In other areas, rates went up fairly rapidly because the rate burden had been reduced. There is a link, and it is important for Ministers to ensure that a close eye is kept on the way in which the rental market operates, particularly for small businesses.
The Government seek to give relief to small businesses through these measures, which have been argued for strongly by the small business lobby for many years. That is a good thing, but the Government
must ensure that in four or five years' time they have made a real difference to small businesses and not simply put the money into someone else's pocket.
Mrs Valerie Davey (Bristol West, Labour)
The hon. Gentleman makes an important contribution and I am sure that those on the Government Front Bench are listening carefully. Given his historical analysis, and now that we have moved into a low-inflation environment, does he not think that it is time for the Government to outlaw upward-only rent reviews?
Mr David Borrow (South Ribble, Labour)
If the market operated properly, there would not be rent reviews that are downward only or upward only. It would be interesting to see what the business community thought of such a proposal. I suspect that the Government will be lobbied in different directions by different sections of the business community.
Mr Robert Syms (Poole, Conservative)
Perhaps Ministers can explain why there is a different formula for England and Wales? The explanatory notes on the clauses give details for the scheme in England, but say that the National Assembly for Wales will deal with the details of the scheme in Wales. Is that because rateable values may be different in Wales and the Assembly may wish to vary the scheme in that regard?
The explanatory notes on subsection (7) state that in Wales billing authorities will have the power to grant discretionary relief to top up the mandatory scheme. Is that a new power, or is it in line with the powers that the unitary authorities in Wales already have? That raises the question why, if it is right to give such top-up powers to the unitary authorities in Wales, it is not in England.
Mr Desmond Swayne (New Forest West, Conservative)
I thank the hon. Member for South Ribble (Mr. Borrow) for the enormous service he does the Committee by bringing his experience to the matter. I have learned a great deal from what he said. However, he prefaced his remarks with the bold statement that he was not going to press his independence of mind to the extent of voting against the amendments. The Committee may think that that was a bold statement, but I would like to point out that the Government Whip, the hon. Member for Oldham, East and Saddleworth, was not in the Room at the time—although, of course, he is aware of it now.
Mr Desmond Swayne (New Forest West, Conservative)
Yes. There are, in fact, no amendments for the hon. Member for South Ribble to vote against, which rather defeats the object of his statement.
The situation mentioned by the hon. Member for Kingston and Surbiton is worse than it was painted. The Association of Convenience Stores noted in its evidence to the Select Committee that the proposed threshold suggested a weekly turnover of £1,346, which is less than that required to sustain a viable business. Will the Minister tell the Committee what led the Government to decide on the proposed threshold? What informed that decision, and why did the Government discount the evidence given to the
Select Committee and the recommendation of that Committee that the Government should revise the thresholds in the light of the evidence that had been presented to it? Why did the Government not accept that recommendation?
Will the Minister also give the Committee an exposition of the other matter with which the Select Committee wrestled—the important question of how effective the relief is when there is significant evidence that it tends to benefit landlords rather than small businesses? The Select Committee drew attention to that and I wonder how far its deliberations have informed the Government's decisions on these matters.
Mr Christopher Leslie (Parliamentary Secretary, Cabinet Office; Shipley, Labour)
I shall try to deal with these issues. Like the hon. Member for Kingston and Surbiton, I am tempted to declare my interest as a ratepayer in my constituency office. I suspect that all hon. Members are in the same position. I am not certain, but believe that the customary rules, as applied to a change in income tax, for example, do not require us all individually to declare interests in advance of speaking. It is an important issue to reflect on.
The clause allows rate bills to be reduced for small businesses and ratepayers who pay below a certain threshold of rateable value. I am proud to support such a popular scheme at this stage of the Bill. Research published by what is now the Department for Environment, Food and Rural Affairs in 1995 revealed that the rates were a particularly heavy burden on small businesses, as they represented a significantly higher proportion of operating profits than for large businesses.
The clause amends section 43 of the Local Government and Finance Act 1988. Where specified conditions are met, the rate bill for a property will be reduced by an amount prescribed by the Secretary of State in respect of England and by the National Assembly in respect of Wales. I hope that that answers the hon. Member for Poole's question about Welsh arrangements. If Wales wants to pursue a different scheme, the National Assembly has the power to prescribe its own arrangements.
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
May I draw the Minister's attention to suggested new paragraph 3B(5) of schedule 7 to the 1988 Act? It states, in respect of Wales, that no adjustment can be made under subsection (3) for a financial year beginning before 2006. The clause clearly leaves some arrangements in place until 2006, so why is that the case in Wales, but not in England?
Mr Christopher Leslie (Parliamentary Secretary, Cabinet Office; Shipley, Labour)
I may have lost the reference that the hon. Gentleman made, so I shall answer the point when we reach later provisions on Wales.
In England the power will be used to implement the scheme, as set out in our White Paper, and 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: 50 per cent. for properties with rateable values up to £3,000, tapering off gradually so that properties with rateable values of £6,000 will have
their bills cut by 20 per cent. To qualify for relief, a business will have to apply to a local authority to declare that it occupies only the one property for which relief is being claimed. In England the scheme will be funded by a small addition to the bill of other ratepayers, and clause 64 sets out the means of doing that. We believe that the scheme strikes a fair balance between the interests of small businesses that receive relief and other ratepayers who fund it, while also being straightforward to operate.
Mrs Valerie Davey (Bristol West, Labour)
When does the Minister intend to introduce the regulations, and when will the first rate bills affected by the scheme be applied? Will it be from April this year, April 2004 or even later?
Mr Christopher Leslie (Parliamentary Secretary, Cabinet Office; Shipley, Labour)
I shall endeavour to answer the hon. Gentleman later when I have done some more research, but I would first like to respond to the questions posed by the hon. Member for Cotswold. He asked why the scheme was not more generous to small businesses, and that point was echoed by the hon. Member for Kingston and Surbiton and by the hon. Member for New Forest, West (Mr. Swayne) who asked why the £3,000 figure tapering up to £8,000 had been pipped. We have tried to design a scheme that strikes the right balance between the interests of small and larger ratepayers. Interestingly, there are about 1.7 million rateable properties in England, and almost 1 million have rateable values of less than £8,000, so the majority of rateable properties will be included in some way or another in the scheme. We believe that it strikes the right balance. If the thresholds were set on one side or another, fewer or more would benefit.
The hon. Member for Cotswold asked why other ratepayers should have to pay for the relief. We do not believe that the general taxpayer should necessarily subsidise a particular group of ratepayers. We believe that ratepayers, as the body of persons who contribute to that particular revenue stream, should be responsible for any schemes within that revenue scheme that give relief to small firms and small ratepayers. Cross-subsidisation from the general taxpayer is not a principle that we accept.
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
Does the Minister not see some unfairness in that? It is not particularly fair if the larger businesses have to pay more to subsidise the smaller businesses that compete with them.
Mr Christopher Leslie (Parliamentary Secretary, Cabinet Office; Shipley, Labour)
If the hon. Gentleman is suggesting that the general taxpayer should subsidise the smaller but not the larger ratepayer, I do not believe that it would overcome his question about competition either. I do not believe that there is a particularly difficult competition point.
Mr. Curry rose—
Mr Christopher Leslie (Parliamentary Secretary, Cabinet Office; Shipley, Labour)
But I am sure that the right hon. Member for Skipton and Ripon does.
Mr David Curry (Skipton and Ripon, Conservative)
When business rates bills are dispatched, will those in receipt of assistance have that amount specified? Will those who are paying a premium in consequence have the amount of the premium specified? That would be fair would it not?
Mr Christopher Leslie (Parliamentary Secretary, Cabinet Office; Shipley, Labour)
I doubt whether the bills will specify those amounts, although there is an argument to be had about this.
Mr David Curry (Skipton and Ripon, Conservative)
It is said that the way to start a small business is to buy a large one. A small business that was in receipt of support could, by virtue of expansion, find that it was paying a premium. So over a period of time it equals itself out.
Mr Christopher Leslie (Parliamentary Secretary, Cabinet Office; Shipley, Labour)
I can see the argument that the right hon. Gentleman is making, but it could be very complicated to specify too many details on a bill, particularly in view of the complexity of the calculation for the rate relief. I believe that putting the final amount on the bill would be adequate, but I am open to debate.
Mrs Valerie Davey (Bristol West, Labour)
The Minister has just given the Committee an interesting principle on which to ponder. It is impossible to give relief from business rates to one group in the business ratepayer community without another group paying for it. Somehow the business rate community is hermetically sealed. Can he explain why, when the Government reduced the lower rate of corporation tax that applies to small businesses, they asked the general taxpayer to pay for it and did not increase the corporation tax rate for the larger corporations? Following the principle that he has just outlined, that is what they should have done. The Minister seems to suggest that different principles apply to business taxation depending on which tax we are talking about—corporation tax or business rates. There does not seem to be any consistency in the Government's fiscal approach.
Mr Christopher Leslie (Parliamentary Secretary, Cabinet Office; Shipley, Labour)
The bill will convey information about what the ratepayer is liable to pay. It is public knowledge that the scheme we want to introduce will be in operation at the earliest by April 2004, when the small business rate relief will come into effect—a matter raised earlier by the hon. Member for Kingston and Surbiton. In the usual way, we strike the right balance between providing information and ensuring that the amount due is clear to the ratepayers.
I will consider whether an explanation of the rate relief scheme might be included in the information sent to ratepayers in the same envelope as their bills.
Mr Robert Syms (Poole, Conservative)
After revaluation there will be some transitional relief to businesses. What will be the impact in respect of the reduction for small businesses? Will it occur before or after the transitional relief? How do the two schemes go together? The Minister may want to write to me with answers to those questions.
Mr Christopher Leslie (Parliamentary Secretary, Cabinet Office; Shipley, Labour)
I shall certainly write to the hon. Gentleman on the matter.
Mr David Curry (Skipton and Ripon, Conservative)
Places such as hospitals pay business rates, which means that a hospital would be levied in support of small businesses. A public service might well be levied in support of business activities. Is my interpretation correct?
Mr Christopher Leslie (Parliamentary Secretary, Cabinet Office; Shipley, Labour)
It is true that all large ratepayers above the threshold will contribute to some of the rate relief for smaller businesses. Small public services such as
local council shops and the constituency offices of Members of Parliament, for example, may be a deserving case for a small business rate relief. Issues on both sides of the equation will be of interest to all hon. Members.
Mr Desmond Swayne (New Forest West, Conservative)
The Select Committee and those who gave evidence to it on behalf of small businesses were deeply sceptical about the benefit of the proposal. It is now clear that the costs on other ratepayers are not insignificant, and the Minister should strongly reflect on that.
Mr Christopher Leslie (Parliamentary Secretary, Cabinet Office; Shipley, Labour)
I do not believe that is so, and the hon. Gentleman should himself reflect on the important principles in the system of small business rate relief. If he does so, he will agree that small businesses, more than others, need the most assistance because rates represent a greater proportion of the burden on them than on larger firms. Having a system to support small businesses is the right approach.
Mr David Curry (Skipton and Ripon, Conservative)
One of the most aggravating aspects of small market towns is the number of charity shops, which are often accused of selling items other than those that have been donated. However, they qualify for a significant amount of relief. How will the proposals affect charity shops?
Mr Christopher Leslie (Parliamentary Secretary, Cabinet Office; Shipley, Labour)
The right hon. Gentleman makes a fair point. I suspect that the discount may apply to ordinary ratepayers and not necessarily to those that already receive special rates. It is unlikely that charity shops will have two reliefs, but if I am wrong I will write to the right hon. Gentleman.
I want to make progress and reply to previous questions before I take new ones. However, I will give way to the hon. Gentleman.
Mr Andrew Turner (Isle of Wight, Conservative)
I do not mind in what order the hon. Gentleman answers the questions. His reference to local council shops leads me to ask whether a small shop that is part of a big business gains the relief? A local council is a big business; if a business owns a large number of small shops, does each qualify for relief or, as I assumed on my first reading of the Bill, does it apply only to an aggregation of accommodation that falls within the single formula?
Mr Christopher Leslie (Parliamentary Secretary, Cabinet Office; Shipley, Labour)
The provisions that relate to qualification for the relief—a business will have to apply to a local authority to declare that it occupies only the one property for which it is claiming relief—should answer the hon. Gentleman's question. It was perhaps misleading of me to refer to a council shop, although a council could choose that property to be subjected to the ruling. I can imagine a number of smaller institutions that might be worthy of qualifying for relief.
The hon. Member for Cotswold asked whether the £3,000 threshold for the 50 per cent. relief could be adjusted, and the answer is yes, under proposed new subsection (4B) in clause 63(3). Indeed, as has been done at previous revaluations, we will adjust
thresholds to take account of general movements in rateable values.
My hon. Friend the Member for South Ribble and the hon. Member for Kingston and Surbiton both asked whether, if a rate relief system comes into operation, rents would go up to compensate and, if so, what could be done. The CBI has also asked about that point, which we recognise is important. In the White Paper in December 2001, we stated that we would be keen to monitor the effectiveness of the relief system. We will keep a close eye on the matter, as my hon. Friend suggested would be prudent, and its details are covered by secondary legislation that can be adjusted in the light of experience.
Inspiration has struck me about the question on charity shops, and I recall that I was right at the time. Proposed new subsection (8B) in clause 63(4) makes it clear that charity relief applies, and no small business relief would apply for a charity with a rateable value below £8,000. Charitable relief is already worth 80 per cent. I hope that I have been able to address all the issues raised.
Mr Geoffrey Clifton-Brown (Cotswold, Conservative)
I am sorry to trouble the Under-Secretary with one more point. Clause 63 provides for two different multipliers: one for small businesses and one for the main non-domestic rates. The Government can alter the current balance between small business relief and the increased, or decreased, costs to the main set of ratepayers. Do they intend to keep the main set of ratepayers and small businesses on the current ratio, or would it be possible for the Government to alter the ratio?
Mr Derek Conway (Old Bexley and Sidcup, Conservative)
Before the Under-Secretary replies, I note that we might be straying into the next clause. If it helps the debate, I am happy for him to answer, but we are straying.
Mr Christopher Leslie (Parliamentary Secretary, Cabinet Office; Shipley, Labour)
I suspect that this applies to clause 63 as well as clause 64. We have no plans to make significant changes to the broad ratios, although the clause would facilitate our ability to do that. As I said in reply to my hon. Friend the Member for South Ribble, if experience suggests that we need to shift the balance one way or another, we reserve the right to do so.
At the time, I did not reply to the hon. Member for Poole about whether small business relief applies after transitional relief has been applied. I think that I undertook to write to him, but I can now tell him that transitional relief will apply in its application to small business relief as it applies to all other reliefs. I hope that that is clear, and I commend the clause to the Committee.
Question put and agreed to.
Clause 63 ordered to stand part of the Bill.
Mr Derek Conway (Old Bexley and Sidcup, Conservative)
I am grateful to Committee members for staying in order, because I could not have sorted it out if they had not.Clause 64 Calculation of non-domestic rating multiplier