Occupied Hereditaments: Liability

Clause 39 – in the House of Commons at 4:22 pm on 21st April 1988.

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Photo of Mr Robert Hicks Mr Robert Hicks , South East Cornwall 4:22 pm, 21st April 1988

I beg to move, amendment No. 7, in page 23, line 23, at end insert— 'and(c) abating the first £1,000 (or any lesser amount) payable per year by 50%.'.

Photo of Mr Bernard Weatherill Mr Bernard Weatherill , Croydon North East

With this, it will be convenient to take the following: Amendment No. 9, in page 23, line 33 leave out '2' and insert '10'.

Amendment No. 154, in page 23, line 37 at end insert— '(6A) Where subsection 6 above applies, the charging authority may at its discretion remit the liability calculated by reference to the formula in subsection (5) above, and the income it forgoes in so doing shall not be deemed to have been collected for the purposes of calculating its contribution to the National Non-Domestic Rating Pool under section 51 and Schedule 7 below.' Amendment No. 155, in page 23, line 37 at end insert— '(6A) Where subsection (6B) below applies the chargeable amount for the chargeable day shall be calculated in accordance with the formula—

A x B/C x M

(6B) This subsection applies where on the day concerned the ratepayer is a small business.(6C) The Secretary of State may make Regulations prescribed—

  1. (a) the definition of small business
  2. (b) the value for M in subsection (6A) above, and that value is to be between 1 and infinity.'
Amendment No. 10, in page 23, line 38, at end insert— '( ) Where subsection (6) above applies, a charging authority shall have the power to make no charge on the hereditament.'. Amendment No. 172, in schedule 6, page 97, line 5, leave out paragraphs 7 and 8.
Amendment No. 171, in clause 49, page 28, line 15, leave out 'and 1994' and insert
'1994, 1995, 1996, 1997, 1998 and 1999'.
Amendment No. 228, in page 28, line 15, at end insert— '(5) Any non-PLC business that can prove it is solvent and that its taxable profit is less than £20,000 per annum can claim non-domestic rate abatement by completing a form for the purpose which is counter signed by the business's accountant. The amount of the abatement to be set by the Secretary of State annually.'. Amendment No. 270, in page 28, line 15, at end insert— '(5) Any business not paying Corporation Tax at the higher rate can claim non-domestic rate abatement at a level set by the Secretary of State annually.'. New clause 6—Small businesses—'(1) Where subsection (2) below applies, the chargeable amount for a chargeable day as calculated in accordance with section 39(4) and (5) shall be reduced by an amount up to 100% of the sum due, on a basis to be determined by regulations made by the Secretary of State.(2) This section applies where a hereditament is occupied by a ratepayer wholly or mainly for small business.(3) "Small business" is to be defined in regulations, and in defining the term regard shall be had to:
  1. (a) Whether or not the business is in the form of a PLC:
  2. (b) The taxable profit of the business:
  3. (c) The business's asset base: and
  4. (d) The number of employees on the business's payroll.'.

Photo of Mr Robert Hicks Mr Robert Hicks , South East Cornwall

My hon. Friend the Member for Kensington (Sir B. Rhys Williams), whose name heads this amendment, is unfortunately in hospital; hence my undertaking this task on his behalf.

The Government propose the introduction of a uniform business rate as part of their overall reform of our local government finance system. We are all aware of the inadequacies of the present arrangements, both in terms of the domestic and non-domestic ratepayers. Indeed, it has featured strongly in our deliberations in recent days.

The proposal to introduce a uniform business rate has had a mixed reception. If one considers its immediate effects, few of us can fail to be worried about the impact that it could have on the level of economic activity, with specific reference to the smaller business units in our respective constituencies.

As the House knows, I have the honour to represent a constituency in Cornwall, which is not in itself a major industrial county, but is nevertheless dependent upon a wide diversity of economic activity. In Cornwall's case, to bring it into line with a uniform national figure, an immediate increase of about 10 per cent. to 12 per cent. will be needed, but, as we know, that will be accompanied by a revaluation, the first since 1973. That combination could lead to serious disruption and damage to individual business enterprises.

That overall effect worries me. It is significant. All hon. Members have received in their post in the past few days a joint statement issued by the Association of British Chambers of Commerce, the Association of Independent Businesses, the Confederation of British Industry, the Forum of Private Business, the National Chamber of Trade, the National Federation of Self-Employed and Small Businesses and the Union of Independent Companies, about the transitional provisions for the introduction of the uniform business rate.

The business organisations supporting that statement have differing views about the desirability of a national non-domestic rate, but they are all concerned about a specific aspect—that it will lead to serious disruption or permanent damage to the business world as a whole. They have called upon the Government to take note of four particular considerations.

First, during the transitional period, the maximum annual increase in the rate bill of any individual business premises should be restricted to 10 per cent. in real terms. Secondly, the cost of the transition should be met from the Exchequer. Thirdly, the transitional period should be extended beyond the five years from 1990, although revaluations should be quinquennial. Finally, there should be an announcement of the Government's intentions on transition, prior to the implementation of the legislation.

There may be a statement this afternoon that meets some of those requirements. Since Monday night's debate, I have been with the Select Committee on European Legislation in The Hague and in Bonn. This morning I read in several British newspapers that my right hon. Friend the Secretary of State for the Environment has, either formally or informally, made statements to the effect that, first, he is either prepared to extend or is considering extending, the period for which the transitional arrangements will apply and, secondly, that we can expect some concession in respect of the small business sector. I am not sure whether the reports that appeared in the English newspapers obtainable in The Hague this morning are correct. Nevertheless, I hope that, whatever the intentions of my right hon. Friend the Secretary of State, he will clarify them today.

4.30 pm

As I said, it is my wish in moving this amendment to concentrate on the impact that these proposals will have on smaller business enterprises. We are all aware that the Government, in conducting their national economic strategy in recent years, have placed great emphasis on the role of the smaller business unit in assisting the revival of our economy. Various schemes have been introduced, the great majority of them aimed at encouraging smaller business men. Ministers have consistently emphasised the seedcorn principle. Numerous success stories have been held up by my right hon. Friend the Prime Minister and other Ministers as examples for business men to follow.

Many would say that this strategy has been successful. It is often suggested that 1 million new businesses have been created since 1979. These have provided new employment opportunities and they have all contributed to local and regional economies as well as the national economy. We have been successful in creating new business. Of course, this has had some multiplier effects. It has, for one, dramatically increased the demand for office, factory and retail space in many parts of the United Kingdom. This unprecedented demand in certain parts of the country has led to faster than average increases in rent, which will result in higher than average increases in rateable value following revaluation. In addition, where the proposed uniform business rate results in an increased poundage for business enterprises in those areas, existing businesses could suffer still further this particularly applies to the smaller ones, which may be unable to relocate because of the essentially local nature of their business activities.

It is worth reminding the House of the system that governs the non-domestic sector, and works positively to the disadvantage of smaller business enterprise. We all know that in assessing rateable values of business premises, the square footage at the front of that business property is rated at a higher value than the area to the rear of the premises. Since smaller businesses, by definition, tend to occupy smaller premises, it follows that their properties are rated at those higher levels. The figures produced by the Inland Revenue's valuation office property market report 1987 suggest that the smaller industrial units will pay 74 per cent. more in rates per square foot than larger business units. This reflects the fact that rents will be 74 per cent. higher.

The new business rate consists essentially of two elements—the adjustment to a national figure and the revaluation. With regard to the latter, a close estimate of the projected level of the uiform business rate and thus its impact on revalued businesses can be made from the Government's statements. I refer particularly to those made by my hon. Friend the Under-Secretary, who said: Revaluation is likely to mean that rateable values increase on average by a factor of 5, or 6 … The Uniform Business Rate poundage will, however, be reduced by an equal and opposite amount. The Government have repeatedly quoted, both in statements and in responses to hon. Members, a figure of 224p in the pound for the uniform business rate, based on current rateable values and the level of expenditure of local authorities in 1987–88. Reducing this figure by an equal and opposite amount of 5·5 per cent. produces a new figure for the uniform business rate based on revalued rateable values of 41p, which, when increased by the level of inflation—say, 4 per cent. per annum—will result in a level of 46p for the uniform business rate when it is introduced in 1990.

It does not quite end there. If, as expected, local authorities increase their expenditure by more than the rate of inflation over the next three years, the uniform business rate will be that much higher. Various professional organisations and individual companies have produced figures which suggest that there will be an increase of between 45p and 52p. In other words, the statement that businesses will pay about half as much in rates as they do in rents is confirmed.

I do not wish on this occasion to quote examples from various parts of the country, but many hon. Members on both sides of the House are deeply conscious of the effect that the projected figures will have on the level of business activity in their own constituencies and local regions. That is why a suggestion has been put forward that a solution would be an abatement of 50 per cent. in the first £1,000 of rates payable, and that this would most certainly help to redress the incidence of rates on the smaller business unit.

The other advantages of this scheme are that it has no additional administrative costs, no thresholds are involved, and it would be self-financing. I accept that that would mean that the overall level of the uniform business rate would need to be increased a little. However, in view of the great emphasis placed by my right hon. and hon. Friends on the value of the contribution that the smaller business unit has made to the revival of our economy in recent years, we should acknowledge in a tangible way the real fears that small business men have expressed to us and the problems that they think will result from the changes in the arrangements.

There is another side to the coin, as is frequently the case. Many of us will know of business enterprises and business units that find it difficult to survive economically and yet, in our respective areas, perform an important social function. I refer to what one might describe as the village shop scenario. They perform an important social and economic function. We all know that they are under tremendous pressure from supermarkets and cash-and-carry stores and that the Post Office has introduced policy changes in respect of payments made to their proprietors, and so on.

Such businesses make a very important contribution to the structure of our local communities, be they urban or rural. Many are finding it economically difficult to survive and it could be that any significant increase in the level of their rates burden will place their economic viability in question.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline West

I come to this Bill pretty late, and perhaps the hon. Gentleman can explain his intentions. Am I correct in assuming that any redistribution in terms of abatement would place an additional imposition on other commercial ratepayers within that particular orbit of the local government revenue-gathering system?

Photo of Mr Robert Hicks Mr Robert Hicks , South East Cornwall

The hon. Gentleman has summarised the situation correctly. All businesses would be eligible for the 50 per cent. abatement of the first £1,000 for which they were eligible. However, if that fixed amount has to be raised by the commercial sector, it means that subsequently there will he an additional charge placed on the larger business unit.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Energy)

As the hon. Member for Cornwall, South-East (Mr. Hicks) will know, I have put my name to this amendment. Much will depend on the amount of support the Government choose to give. That will be a decision for the Government to make at a later stage; it need not be a problem in respect of the amendment. I am sure that the hon. Member for Cornwall, South-East agrees that the provision is aimed at businesses such as the village post office under threat from others moving into a village and a resulting increase in property values. The same applies in town centres into which multinational or national companies have moved, increasing costs for local and family-owned businesses. There is already pressure on them to leave.

Photo of Mr Robert Hicks Mr Robert Hicks , South East Cornwall

That is the second set of conditions by which smaller business enterprises, which I am anxious to help, will benefit.

This amendment merits consideration by my right hon. Friend the Secretary of State, not only in the context of the very real contribution that the smaller business enterprise has played in the survival of our national economy in rural areas but in terms of the significant contribution it can make socially, as well as economically, to the stability of local communities.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

This large group of amendments embodies many important ideas. I wish to make it clear that we do not accept the principle of a national business tax. I cannot for the life of me understand why many Conservative Members are willing to accept that concept, especially as one of the principal arguments behind the Bill is improving local accountability. How can a national business tax, which is under the control not of the Secretary of State for the Environment but of the Chancellor of the Exchequer, improve local accountability? It will totally divorce local authorities and break the relationship that this Government have rightly sought to build between local authority decision-taking and budgets and local business communities. That was an important and welcome development, but this Bill will destroy it.

Photo of John Butterfill John Butterfill , Bournemouth West

I fail to follow the logic of the hon. Gentleman's argument. It would be logical if businesses had a vote, but they do not. Therefore, the accountability argument does not apply. There will be continuing consultation, as my right hon. Friend has made clear in Committee. That is a different matter from accountability resulting out of taxation.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment 4:45 pm, 21st April 1988

I regret giving way just to hear the vacuous statement that business does not have a vote. Every adult in our plural democratic society, under universal franchise, has a single vote. What is the alternative to what the hon. Gentleman refers, when he says that businesses do not have a vote? Everyone has a vote. I am not aware of any proposal, even from the hon. Gentleman, to change that.

When the Government say there will somehow be an improvement in accountability in local authority decision-taking, that cannot possibly be the case when Ministers are taking powers centrally to determine the level of the tax.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

The hon. Gentleman says, "Rubbish," but that is what is being proposed. It is also proposed that there should be no change in the amount of money collected. We have heard from Conservative Members time after time that businesses have been under crippling financial burdens. The level of those burdens will not be altered in any way by the Bill. The Minister for Local Government made it plain that the totality of the tax being collected will remain exactly the same. He is suggesting that the burdens will be shifted about and that the alleged onerous burdens in the north will be transferred to the south—[HON. MEMBERS: "Hear, hear."] Conservative Members say, "Hear, hear," but I am not so sure that their right hon. and hon. Friends in the constituencies so affected will be saying it with quite the same gusto.

The Secretary of State for the Environment has said—I understand why—that he wants to speak later rather than earlier, no doubt to try to head off a fourth day of revolts by his right hon. and hon. Friends in the Lobbies. We have seen some papers being passed around the Chamber, and no doubt we shall learn more in due course. However, he is now saying that any scheme to mitigate the implications of the proposals on business in the south will have to be paid for by business in the north. In other words, the alleged claim that the burden will be reduced will disappear.

Photo of Mrs Elaine Kellett Mrs Elaine Kellett , Lancaster

There is a substantial burden on business in my part of the world, caused by the huge increase of 36·5 per cent., or 18·5 per cent., in the rate this year. That was something for which those businesses could not plan. Once the business rate is made uniform and rises only in line with inflation, it will reduce the incentive for county councils such as Lancashire to raise the rate, because they will no longer be able to milk business.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

Yesterday we discussed rating increases and local control, and I do not want to reopen that debate. If the hon. Lady is saying that those "huge" burdens are so damaging, she had better address her remarks to her colleagues in Conservative councils around the country. In the constituency of the Minister for Local Government, Tory-controlled Shepway—

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

The hon. Gentleman says, "We have heard it all before." We have heard it all before from the other side of the House—again and again. Apparently, when Labour or alliance councils increase rates by large amounts, that is thought to be disgraceful, incompetent, profligate or extravagant. But when Tory councils do the same, that is somehow different. I do not understand it.

Photo of Edward Leigh Edward Leigh , Gainsborough and Horncastle

I am grateful to the hon. Gentleman—courteous as usual—for giving way. Can he confirm that a Labour Government would revalue business premises and keep the present business rate?

Photo of Mr Harold Walker Mr Harold Walker , Doncaster Central

Order. Can we stick to the amendment? We have enough work as it is without going into other matters.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

At the risk of incurring your wrath, Mr. Deputy Speaker, I shall reply to the hon. Member for Gainsborough and Horncastle (Mr. Leigh). We are committed to keeping a property tax, but that is what the Bill will provide. This is a property tax. I am not sure what point the hon. Gentleman is making.

As I said in Committee, the introduction of a property tax will mean modernising the base on which it operates, and that means revaluation. It would not make sense otherwise. We agree with the Government about that, and I am more than happy to put our agreement on record.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

No, I shall not give way again. You, Mr. Deputy Speaker, have rightly asked me to move on and deal in more detail with the amendment, and that is what I now intend to do.

As I have said, we believe that the Government are creating a nationally controlled tax in the hands of the Chancellor of the Exchequer. That is made clear in Government amendment No. 179, which gives the Chancellor control over the tax. Government amendment No. 104 makes it clear that the tax will be paid into the Consolidated Fund.

Schedule 5(2)(7)(e), states that matters affecting the amenity of the locality of the hereditament (including transport services and other facilities) will be taken into account in the fixing of the tax. That means that if a well-managed local authority—whatever its political control—provides good, effective, efficient services, the result will be an increase in the tax. As the level of provision goes up, the tax is likely to do the same, and there will be nothing that the local authority can do about it other than to reduce the quality of services, or eliminate them altogether. I assume that that is not what Conservative Members, or even sensible business people, want.

As I have also made clear, the Bill as it stands does not provide for a statutory requirement for business consultations between local authorities. I cannot understand why Conservative Members find all this so attractive. Of course, the answer is that many of them do not, and that also goes for many people in business communities.

Our amendment No. 155 and new clause 6 aim to provide for regulations to allow a discount of up to 100 per cent. to be available to small businesses. I recommend new clause 6 to the House for it enshrines an important new principle. I am persuaded, as is the Labour party, that existing burdens on small businesses can be very damaging, and they will continue to be so under the Government's proposals. [Interruption.] I shall happily give way to the Minister for Local Government if he wishes to intervene rather than mutter at me across the Chamber. Apparently he does not wish me to give way.

I cannot understand why the Government, instead of quibbling, do not accept the new clause or produce a similar new clause of their own. Regrettably, they are not persuaded of the case for a 100 per cent. rebate for individuals. As there seems to be far more concern on the Conservative Benches about businesses than about individuals and families, perhaps before we vote they will reflect on that.

New clause 6 spells out the proposal to introduce a 100 per cent. rebate, or at least to make it available for small businesses.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

It is not clear from the new clause who should bear the cost. Does the hon. Gentleman wish it to be borne by the rest of the businesses, or does he seek external assistance from the community charge payer or the Exchequer?

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

My hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker) and I are at one on that. As we have made clear, we think that larger businesses and the Government should contribute to such a scheme. As we said yesterday, we believe that the better off in society should fund a 100 per cent. discount scheme for those on low incomes.

Photo of Richard Shepherd Richard Shepherd , Aldridge-Brownhills

I have some difficulty in understanding the distinction that the hon. Gentleman makes between large and small businesses. Surely the criterion is whether a business is profitable and provides employment. That one firm employs six people and makes a profit of £2 million is surely as relevant as a firm that employs 100,000 and makes a profit of £50,000. The distinction bothers me. I cannot find any credibility in it.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

We have responded in the new clause to discussions which are still proceeding with organisations representing small business people around the country. If the hon. Gentleman, who was not a member of the Standing Committee, had found time to read the report of its proceedings, he would have been able to see in some detail why we reached those conclusions.

Amendment No. 171 would extend the period of phasing in the proposals up to 10 years. The purpose of amendment No. 172 is to point out that Government phasing slows down the rate of benefit in the north to the advantage of business in the south. As I said earlier, the Secretary of State, his Ministers and their supporters have welcomed the proposals, saying that they will bring significant benefits to business in the north. However, the Government's second thoughts now mean the erosion of those benefits.

Amendment No. 154—I said that this was a large group of amendments—deals with charitable relief, which is also affected by the Bill. We tabled the amendment to re—establish the possibility of 100 per cent. relief for voluntary organisations and charities. As the Bill stands, local authorities will not be able to give such relief. The Government say that if they wish to do so, they should do so simply by putting the burden of the concession on poll tax payers—individuals in the community. We do not think that that is fair or reasonable. The relief should come from national taxation, not from individuals' poll tax.

This is an important point. Increasingly, because of the prevailing circumstances, individuals and families are relying on schemes organised by groups such as MIND. I am president of that organisation in my constituency. The funding of MIND, and that of many other groups, benefits significantly from local authority help. The ability to give rebates of up to 100 per cent. should be written into the Bill.

Photo of John Butterfill John Butterfill , Bournemouth West

In Committee I tabled an amendment on this point. Does the hon. Gentleman agree that it would be somewhat unreasonable if his suggestion, that this should come from the Exchequer, were accepted so that there was no charge back to the community? Surely the amount that might be given by discretion of individual local authorities could vary enormously, and it would fall on the general taxpayer. Should not local communities decide whether they wish to assist charitable organisations, in the knowledge that they will have to pay for that help?

5 pm

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

As the hon. Gentleman knows, the totality of these proposals means that 75 per cent. of local government finance will be in the control of central Government. That is unprecedented in this country and is unparalleled in any democratic society. The proposals mean that for every 1 per cent. increase in expenditure, local authorities will have to increase the poll tax by 4 per cent., so a disproportionate burden will fall on individuals. That is the gearing implication of the totality of the proposals.

Of course, I do not suggest that local authorities should be absolved of all responsibility to contribute to such a scheme. We are arguing about the principle of establishing such a scheme in the Bill. We can argue and perhaps disagree about the details.

Photo of Quentin Davies Quentin Davies , Stamford and Spalding

The hon. Gentleman has mentioned the gearing effect. Will he acknowledge that it works equally in the opposite direction and, therefore, establishes a great incentive to keep local government spending down?

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

That is exactly its intention. The Government have made no secret of the fact that they want to use this way of imposing additional heavy personal burdens to achieve their manic goal of more control over everything that local government does. There is a fundamental difference between the Labour party and the Government on this point. That is why we oppose the proposals. I readily acknowledge that this is the Government's intention. In fact, I do my best to make it as clear as I can that that is exactly what the Government seek to do.

Hon. Members:

Withdraw.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline West

On a point of order, Mr. Deputy Speaker. We had an interesting debate last night, to which hon. Members have alluded. I distinctly heard the hon. Member for Gainsborough and Horncastle (Mr. Leigh)—I am sure that lie would not want his comment to be on the record —refer just now to my hon. Friend the Member for Copeland (Dr. Cunningham) as a twister. I am sure that the hon. Gentleman would want to withdraw that remark.

Photo of Edward Leigh Edward Leigh , Gainsborough and Horncastle

I happily withdraw that remark. The hon. Member for Copeland (Dr. Cunningham) is a very experienced and shrewd politician who is always capable of putting the best light on Labour party policies, whatever they may be.

Photo of Mr Harold Walker Mr Harold Walker , Doncaster Central

I do not know what the word means but, whatever it is, it did not sound very nice.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

I guess that everyone is very sensitive about these matters at the moment, but I cannot say that I was made too uncomfortable by what the hon. Member for Gainsborough and Horncastle said. Of course, I accept without reservation his withdrawal, whatever he said. In turn, I accept the hon. Gentleman's compliment that he thinks that I am reasonably able to portray the Labour party's policies and position. That was a generous comment.

In Committee, on 3 March 1988, the Secretary of State made this commitment: 1 turn now to amendment No. 360, tabled by my hon. Friend the Member for Kensington. I understand that the hon. Member for Kensington (Sir B. Rhys Williams) is ill and therefore cannot be present. We send him our best wishes for a speedy recovery. The Secretary of State continued: I am happy to tell him that I am prepared to meet that amendment on Report. He will forgive me if I seek to redraft it. I am certain that under any of the schemes that we have been discussing the transition will not be over for all businesses by 1995."—[Official Report, Standing Committee E, 3 March 1988; c.1215–16.] There does not appear to be any such amendment on the Amendment Paper. I wonder why the Secretary of State has not delivered that commitment. No doubt he will say why, having promised the hon. Member for Kensington that he would table an amendment—perhaps trying to head off yet another revolt—he has not tabled such an amendment.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

Perhaps it will save time if 1 say that we certainly intend to put forward that amendment in another place. It has proved rather more complicated than we thought and redrafting was not completed in time for Report, but I undertake to put it forward.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

The problem is that the amendment will be tabled in another place and we will not have the chance properly to discuss and consider it before decisions are taken and hon. Members vote in this debate. That is less than satisfactory, and I should have thought that a number of Conservative Members would think so, too.

Photo of Mr Robin Maxwell-Hyslop Mr Robin Maxwell-Hyslop , Tiverton

The hon. Gentleman will have noted, of course, that my right hon. Friend the Secretary of State agrees that it is wholly proper for another place to amend the Bill.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

That just shows the virtue of giving way. Of course I agree with the hon. Member for Tiverton (Mr. Maxwell-Hyslop). I wonder whether he heard the speech last night by the hon. Member for Leominster (Mr. Temple-Morris) about the infamous broadcast on "Today" by the Secretary of State on the ability of the other place to amend the Bill. The right hon. Gentleman spent his time talking about these proposals as a "tax" and said that was why the House of Lords should not interfere. But the right hon. Gentleman has spent the past four months telling us and the country that it is not a tax—it is a community charge. Before the other place gets the Bill, the right hon. Gentleman had better make up his mind what advice he is giving. Is it or is it not a tax? Is it a charge? We are confident that, whatever the right hon. Gentleman says it is, the other place will have the opportunity to amend this and other parts of the Bill.

It is not only the Opposition, or even some Conservative Members, who are worried about the implications of the proposals. As recently as yesterday, the Confederation of British Industry issued this statement: The CBI believes that for some businesses the combined effect of the Uniform Business Rate and revaluation will be catastrophic…Towns—like Croydon, Bromley and Bexley, and there are many others—will not be encouraged to attract firms by careful stewardship of resources". That is true. The Bill in this form wipes out any incentive on the part of local authorities to attract businesses in the way that many of them want, whatever their political persuasion.

Groups and individual organisations representing small business people and small businesses generally remain deeply opposed to these proposals. For those reasons, we have tabled our amendments. I hope that it is possible—it will depend on what happens to the various amendments—to have a vote on new clause 6, which introduces the principle of rebates up to 100 per cent. for small businesses.

Photo of Mr Hugh Rossi Mr Hugh Rossi , Hornsey and Wood Green

I was not a member of the Committee so perhaps those hon. Members who spent many hours discussing this Bill will forgive a newcomer, as it were, interposing one or two remarks that I hope will be of some value to the House.

I must say to the hon. Member for Copeland (Dr. Cunningham) that I take a more sanguine view of the uniform business rate that he appears to take. My quarrel, if it is a quarrel, with my right hon. and hon. Friends is that they are adhering too slavishly to the concept of rateable values, with all the consequential distortions that will be caused to business and to the property market.

Amendment No. 270, tabled in my name, has the same intent and objective as amendment No. 7 in the name of my hon. Friend the Member for Kensington (Sir B. Rhys Williams). I am sorry not to see him in his place and I extend to him my good wishes and the good wishes of all my right hon. and hon. Friends and the hope that he has a speedy recovery and return to the House from hospital. I congratulate my hon. Friend the Member for Cornwall, South-East (Mr. Hicks) on the points that he made in support of that amendment, with which nobody could quarrel.

My amendment is possibly closest to amendment No. 228 in the name of my hon. Friend the Member for Billericay (Mrs. Gorman) who, before coming to the House, established a reputation as a champion of small businesses. I recall receiving delegations from small market gardeners in Northern Ireland led by my hon.

Friend and others in London about statutory sick pay. I hope only that my right hon. and hon. Friends will prove as flexible and helpful to my hon. Friend as I tried to be.

I am glad to note from the report of the Committee stage of the Bill that my right hon. Friend has recognised the difficulties of small businesses and is attracted to the idea of giving them help, at least during the transitional period, but I understand that he intends to do so by the use of a rateable value threshold. I do not believe that such an approach will target relief where it is properly needed. The objective of my amendment and those of my hon. Friends is to depart from the concept of rateable value to target relief where it is needed.

The amendment of my hon. Friend the Member for Kensington is directed to targeting relief at particular levels. The amendments in the names of my hon. Friend the Member for Billericay and myself seek to give a definition of small businesses and leave it to the Secretary of State annually to fix the rate of relief. My amendment differs from amendment No. 228 in that it seeks to use a machinery that is already in existence. The Inland Revenue already distinguishes between businesses which are subject to higher and lower rates of corporation tax and it would be relatively simple for it to be confirmed and certified into which category a particular business falls and the collector of rates notified accordingly.

Photo of John Butterfill John Butterfill , Bournemouth West

Does my hon. Friend agree that there is a difficulty in that businesses' profits can vary from year to year and that, particularly for small businesses, profits can vary quite considerably? There might be a problem with fluctuation, particularly for businesses that are on the borderline. One year they might be above the threshold and the next year they might be below it and it would not be possible to verify that until a time subsequent to the year in question.

Photo of Mr Hugh Rossi Mr Hugh Rossi , Hornsey and Wood Green

I think that they will be in difficulty in any case. If they are originally fixed to a rateable value, such businesses may never get out of that trap. In any case, whatever approach we take, there are bound to be difficulties for some people.

I am concerned to try to target the help where it is really needed. One way of doing that is by reference to the level of corporation tax. Another way would be by reference to turnover which might be easier to establish. We already have such a system with regard to VAT and that does not necessarily cause difficulties. Firms know whether they will need to register for VAT usually in advance of the year in question. A certificate of registration for VAT may itself be sufficient to trigger the relief that we are seeking to give small businesses. I am trying to argue that there are better ways of doing it than adherence to a threshold of, say, £15,000 rateable value, which I think was one of the figures discussed in Committee.

I understand on good authority that, if £15,000 rateable value were taken as the threshold, a particular retailer in this country with more than 2,000 stores would obtain relief on 85 per cent. of its outlets. Another retailer with 1,200 outlets would benefit from the lower rate for 84 per cent. of its outlets. Even if the threshold were reduced to £10,000 rateable value, 79 per cent. of one of those chains would still qualify for relief. I am not sure that that is the kind of targeting that my right hon. Friend has in mind when he is trying to devise ways of giving assistance to small businesses.

I suggest to my right hon. Friend that perhaps the distinction that needs to be borne in mind is not between small and large units but between small and large businesses. if he did that, perhaps he would not need to spend so much of his resources on the wrong target.

Having said that, I believe that my right hon. Friend has received a great deal of evidence on the possible effects of revaluation on large and small businesses and on businesses which occupy primary, secondary or tertiary trading positions. I shall not detain the House by going into all the details and technicalities.

Photo of Mr Keith Hampson Mr Keith Hampson , Leeds North West

My hon. Friend leaves out one important category affecting hon. Members with northern constituencies. I know that we are not very well represented tonight but we must consider the fact that the more concessions that are given to other categories the more difficult it becomes for northern constituencies to benefit from the commitment given by the Minister for Local Government that we would be offered a package sufficiently dramatic to enable us to attract many more new businesses.

Photo of Mr Hugh Rossi Mr Hugh Rossi , Hornsey and Wood Green

No doubt my right hon. Friend will answer that point. Nevertheless, if my right hon. Friend is seeking to give relief, it might be suggested to him how that relief might be more accurately targeted. It should not be crudely and arbitrarily targeted so that the money goes in the wrong direction.

I was seeking to make a point about primary, secondary and tertiary positions of trading, which is also extremely relevant. I said that I did not want to bore the House with a lot of technical detail on valuation, but I understand that, for properties in primary sites, revaluation will affect them by a factor of between 6 and 7, whereas for tertiary and secondary sites the factor is between 2 and 4.

Photo of Richard Shepherd Richard Shepherd , Aldridge-Brownhills

As my hon. Friend makes quite clear, these are all national averages. Within areas, there will be vast and extraordinary differences that can reach multiples above 20. That will have such a capricious effect that it will be totally destructive of economic purpose in regional terms.

Photo of Mr Hugh Rossi Mr Hugh Rossi , Hornsey and Wood Green

I take my hon. Friend's point. That is why I am urging, possibly a little late in the day, that the rateable value of business premises is not the best approach. The Committee was unable to persuade the Secretary of State that the balance sheet and the profitability of a business might be a more equitable way of raising tax or a levy of this kind on businesses. We have departed a long way from that concept.

When he considers relief, my hon. Friend should bear in mind the enormous distortions that will result from the provisions. It is absolutely essential that the period during which the transitional provisions will operate and the percentage that a particular business will be required to pay over and above its existing rates should be right.

I would argue that, for businesses both large and small, we should consider a 10 per cent. increase, in real terms, over an extended period of time. Then they would be better able to organise their affairs and plan ahead. I think that my right hon. Friend knows that a group of about 10 of the largest retailers in this country have an investment programme of about £3 billion for the next three years.

By coincidence, that is roughly equivalent to the Government's inner cities development programme. These are extremely large sums of money, which, if injected into the economy, would generate an enormous amount of economic activity. As the money came in and was used by the construction industry, new stores would be opened arid new jobs would be created in areas where they were required.

The uncertainty that my right hon. and hon. Friends have created in the retail industry has led to doubt about whether it should go forward with its expansion plans. Therefore, my last plea to my right hon. Friend is that he should come forward as quickly as possible with his proposals for the transitional period and that he should announce as soon as possible the increased amount that businesses will be required to pay over and above their current rates bill. If he does not do so, he will be doing. a disservice to a great many people who depend upon a viable retail system to provide them both with goods at a price that they can afford and employment. I hope that my right hon. Friend will think very carefully about the way in which he gives the relief that I know he is contemplating should be given.

Photo of Mr Richard Livsey Mr Richard Livsey , Brecon and Radnor

I, too, was not a Member of the Committee that considered the Bill but my constituents will be greatly affected by the legislation. I intend to speak about amendment No. 7, which would provide a 50 per cent. abatement for small businesses, new clause 6, which provides for 100 per cent. relief, and amendments Nos. 9 and 10, relating to charities that stand in my name and those of my hon. Friends.

We are strongly of the opinion that the uniform business rate will mean that local government will no longer be able to set a business rate. The fact that that rate will be set by central Government causes us considerable alarm. The relationship between local government and the rating system ought to be much stronger than it is today. The uniform business rate will undoubtedly penalise small businesses, especially in rural areas. The ability of small businesses in particular to pay the uniform business rate should be considered, just as the ability of individuals to pay the poll tax should be considered. It ought to be recognised that some small businesses do not have great ability to pay.

Typical businesses in rural areas, such as post offices, shops, filling stations and pubs, are under severe stress. The viability of such businesses is very fragile. There will be a 10 per cent. increase in the uniform business rate in Radnor, in my constituency compared with the present rating system, but in other areas the increase will he very much larger. The National Federation of Self Employed and Small Businesses believes that many areas will suffer a 100 per cent. increase, that others will suffer a 200 per cent. increase and that some will suffer even larger increases.

The unknown factor is revaluation. The Secretary of State has ridden into the field on his community charger in a swashbuckling way. The five-year transitional period is supposed to be an amelioration, but I draw the attention of the House to the exchange on Tuesday between the Secretary of State and the hon. Member for Aldridge-Brownhills (Mr. Shepherd). The Secretary of State said: Revaluation has taken place for decades in respect of rates on domestic and business premises. It is never possible to predict the results of revaluation before the revaluation takes place. There is nothing new about having a non-domestic rate revaluation."—[Official Report, 19 April 1988; Vol. 131, c. 779] The last revaluation was in 1973, more than a decade ago. If there is to be only a five-year transitional period, considerable concessions will be needed. I trust that the Secretary of State will make those concessions tonight.

Another worrying aspect relates to shops and post offices, with the people who run those businesses living in the same premises. They will be subject to the uniform business rate as well as to the poll tax. That will hit the traditional family business. The combination of the revaluation and the uniform business rate will cause very great problems for small businesses. The Secretary of State for Wales wrote to me on 14 April about the problems in my constituency and he was honest enough to say: The effect on individual businesses is difficult to predict. I do not believe that anybody can predict precisely what will happen. Within defined areas there may be grave differences between individual businesses and there will be many anomalies that cannot be corrected.

We object to the removal of local accountability. These provisions mean that local authorities will have no power over a large proportion of their revenue, the tax will not be highly visible, and the link between those who pay and those who spend the money will be very weak.

I shall deal now with amendments Nos. 9 and 10 in relation to charities. Many charities could face large increases in their rate bills from the introduction of the national non-domestic rate, largely due to the effects of revaluation on high street shops. Amendment No. 9 seeks to mitigate these effects by increasing the present 50 per cent. rate reduction to a 90 per cent. reduction. In addition, the existing system of non-domestic rating gives local authorities the power to waive the 50 per cent. liability that charities face. The Bill as presently drafted does not make this provision. Amendment No. 10 restores the situation.

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This is a very worrying state of affairs for charities. There are a tremendous number of charities in this country. Representations that we have received from the National Council for Voluntary Organisations stresses these points. At present, with rate relief of 50 per cent. under section 40(1) of the General Rate Act 1967, this totalled £81·7 million in 1985–86. Discretionary rate relief from the rating authority of the remaining 50 per cent., under the same Act, is also available to charitable organisations and various other non-profit making organisations. This totalled £20·4 million in 1985–86.

These large sums of money affect many worthwhile charities. In the places where they operate, the properties they occupy, those include the offices of national and local charities and voluntary organisations, as well as charity shops. I am sure that such shops can be found in the constituences of many hon. Members. Properties include village and parish halls, community centres, day centres, sports clubs and leisure centres, as well as training workshops.

It is very difficult to estimate the total number of properties involved, but there are 158,000 registered charities in Great Britain and at least a further 100,000 non-registered charities. The implications of the measure are very great for charitable organisations. I hope that the Secretary of State and the Minister will pay due attention to these matters. For these reasons we wish to support the amendments tabled by my hon. Friend the Member for Southwark and Bermondsey (Mr. Hughes) and myself as well as amendment No. 7 and new clause 6.

Photo of Mrs Teresa Gorman Mrs Teresa Gorman , Billericay

I wish to follow the points raised by my hon. Friend the Member for Hornsey and Wood Green (Sir H. Rossi). I thank him for his kind remarks about my previous career as a champion of small businesses.

The whole point about rates, as I understand it, is to protect businesses from the depredations of spendthrift councils. We must be very careful with our new proposals and ensure that the increases do not turn out to be depredations. Surely it must be the intention of the Secretary of State to protect small businesses.

I was very pleased to see the Secretary of State's latest press release dated 20 April. He tells us that he has taken on board many of the concerns voiced about this rate, and that he will be phasing it in. He has not yet told us, however, how long that phasing-in process will be. I hope that he will not find it necessary to increase the rates of any business by more than 10 per cent. a year. If he does so, it may present special difficulties to small firms.

I shall give an example of one small business in my constituency. The potential increase in the rateable value can be worked out by reference to rent increases since 1973, when the last valuation took place. It is likely to be somewhere between £2,000 and £6,500, which is an enormous amount of extra money to have to find. Even if that increase were phased in at 10 per cent. a year, such a business would need to find something like £400 every year to meet that increase. I do not think that that is an exceptional example. The point is that in relation to that business, and that family, living from the proceeds from the business, it can be a very large sum indeed.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Energy)

The hon. Member for Billericay (Mrs. Gorman) is absolutely right, as this assumes, even with a phasing-in period, that that business is able to generate more income to meet the increase. For example, rural village post offices, as in my constituency, tend to be flat on income or even squeezed out. No matter how long one spins out an enormous increase, such increases will still have to be found in the end.

Photo of Mrs Teresa Gorman Mrs Teresa Gorman , Billericay

The hon. Gentleman's point is very valid.

Photo of Mrs Teresa Gorman Mrs Teresa Gorman , Billericay

I shall give way in a moment.

This increase, as the hon. Member for Truro (Mr. Taylor) has pointed out, will not be just 10 per cent. in a year, but 10 per cent. every year, plus inflation, in the foreseeable future, and certainly for 10 years. To make the extra profit to meet that increase, that business will at best need to turn over perhaps £4,000 to £5,000 a year more, to give it a net profit of 10 per cent. or £400. In many trades, particularly groceries, there may be a much lower profit margin, so that business may have to generate £8,000 to £10,000 a year more trade. That is very difficult to do year on year.

A small shoe shop or book shop in the town cannot necessarily expect to get that amount of extra custom. Perhaps a greengrocer is in competition with three or four more grocers in the high street. These little businesses, such as a small cafe or a little wool shop, cannot automatically generate that amount of extra trade. Small retailers in particular, perhaps trading in competition with a little bit of black economy, or with the multiples, which can spread costs over a much larger turnover, may well be in special difficulty.

I know that it is not the intention of the Secretary of State to be callous or insensitive to the needs of small businesses. Some people might say, "Well, these businesses have had it good for a long time because the rateable revaluation should have taken place long ago." But that is no help if one has suddenly to dig into one's pocket and find this extra amount of money in a short time.

Photo of Mr Irvine Patnick Mr Irvine Patnick , Sheffield, Hallam

We are working on several assumptions. One is that the rating and valuation court will disappear and that people will be unable to appeal if they believe the rating is incorrect. The second is that there have been no rating increases or revaluations since 1973, which is not the case. Rating revaluation continues to take place. It is possible to appeal and, indeed, to obtain a revaluation.

Photo of Mrs Teresa Gorman Mrs Teresa Gorman , Billericay

My hon. Friend must know something that I do not and I need to have it checked, but I do not think that he has his facts quite right.

Photo of Mrs Teresa Gorman Mrs Teresa Gorman , Billericay

In a moment; let me finish my point.

My point is that the increase must be met out of an income that cannot necessarily be increased very much. Some people might say, "Tough luck, you have had it good, so that is your hard luck," and others might say, "This is the market operating, and therefore market forces should rule."

I give way to nobody in the House in my support of market forces, but of course, paying one's rates is not a question of dealing with ordinary competitive market forces. A business man cannot choose whom he pays to cart away his dustbin or mend the holes in the road. He has to do that through a monopolised system known as the local council. He is not really in a position to influence his expenditure on many things for which he must pay the council.

I hope to live to see the day when everybody pays directly for everything, including education, but that has to come in future Conservative Governments.

What are we going to do to help those small firms? My amendment proposes a safety net. It makes proposals for small firms with a taxable profit of less than £20,000. I appreciate that that will vary, but that amount of money represents the pre-tax profit of the company and is the income of the family concerned. Out of that money they will have to pay the rate increase. Therefore, we are talking about a lowering of their income levels by increasing the rates on their small business. I am proposing that people in that position, producing their accounts to the rating officer, may apply for an abatement. The actual amount would have to be decided, probably by the Secretary of State.

There is a precedent for that sort of system. I have a form that is produced by Macclesfield borough council. It allows people to apply for rate and rent rebates in that area. One of the questions on the form relates to small businesses and self-employed people, who can produce their audited accounts and apply for a rate rebate.

The alternative to us taking on board the plight that small businesses will experience is seeing another exodus of small shops and retailers from our high streets and not so high streets and the banks, buildings societies and estate agents will move in. As I have said, I support market forces. If and when a business goes, new people will know what the rates are and will take on the premises knowing what they are in for. In the meantime, I am sure that we do not want to see yet more empty shops where the rates exceed the rent, which is why they are standing empty. I am sure that we want to avoid that and the way to do it is to phase in the increase which, as I have said, no business could possibly have anticipated. We do not know exactly what the increase will be but we know that in some cases it will be a devastating amount.

Photo of Mr Dafydd Wigley Mr Dafydd Wigley , Caernarfon

I come from a rural area with a scattered population and most of the businesses in my area are small. The question of the impact of the new regime on such businesses is causing considerable concern. The reports that we had earlier this week and the figures that have been quoted on the possible effect on small businesses have led to many of those small concerns starting to express misgivings about the direction in which we are moving.

The hon. Member for Hornsey and Wood Green (Sir H. Rossi) asked whether we should be gearing the revenue from business rates on the basis of property values. I agree wholeheartedly that it should be on the basis of profitability. Indeed, there is an analogy between the impact on businesses and the impact on individuals. We have had arguments and debates at earlier stages of the Bill on the need for a progressive system for individuals, with those with the greatest ability to pay paying a little more while those with less ability to pay would pay less. I believe that that argument is equally applicable to the business sector.

That causes difficulty with some of the amendments in this group. The system that the Government have suggested can be unfair and burdensome for some large companies as well as smaller companies. Indeed, new clause 6, which I shall support as a step in the right direction, gears itself to smaller companies alone.

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In the evidence we gave to the Layfield committee 10 years ago, we suggested that there should be something that we called an incorporation tax. I suspect that that was probably the wrong title. The details of what we were suggesting were that there should be a system of taxation for the corporate sector, for small and large businesses, that was geared to ability to pay and profitability. There could be a threshold level analogous to the threshold that exists for individuals in that there is a threshold that one has to reach before taxation is paid. It should recognise the difficulties of small companies or companies close to the breadline and the contribution to the local exchequer should be in line with profitability.

I accept that there are difficulties in concept to some extent when one is dealing with multi-plant concerns. There is the question how one allocates profitability that may be computed only on a central basis. In passing, there is a strong argument for having profitability computed on a plant basis so that employees identify themselves with the success of their company, measured by the profitability on a plant level. Even if that was not part of company law, on a conceptual basis it would be possible to apportion profitability on the basis of turnover, employees or whatever. Certainly, that would be a better basis than working purely on property value.

The basis of property value is even less fair for businesses than it is for individuals. There are all sorts of anomalies and I recognise the need to move away from a purely property-based revenue system for local government. I have said that before and hon. Members know that my party would like to see a local income tax. However, at least with individuals there is some indication of wealth in terms of the property they hold. That can be totally different for businesses. The land and buildings they take up may be totally out of proportion to the turnover that exists within the framework.

In this legislation, we have landed ourselves with proposals that are not radical enough. We shall wait many years before there are changes to this and it is a shame that we have not taken the opportunity to find a system for local government that is more acceptable.

I am not sure whether the amendment moved by the hon. Member for Cornwall, South-East (Mr. Hicks) goes far enough. The formula it suggests is restrictive. I find the formula suggested by the hon. Member for Billericay (Mrs. Gorman) more attractive as a way of trying to alleviate some of the pressures. However, again one is drawing an arbitrary line and it has the problems associated with drawing arbitrary lines anywhere.

We have a formula within the Bill as it stands that is unsatisfactory and which will cause considerable difficulty. It will cause difficulties for many of the friends of Conservative Members who, for reasons that I would not think of as being valid, have looked to the Conservative party from time to time for protection. I suspect that Conservative Members will face quite a reaction when the truth comes home.

There is also the question of the effect that it will have on regional regeneration. That has been referred to by hon. Members on both sides of the Chamber. For my sins, I am one of the vice-presidents of the Federation of Industrial Development Associations. I know that this is causing concern to those industrial development associations. They are worried about the additional factor that may be a disincentive. One has to handle that with considerable sensitivity and I am not convinced that that has been thought through in the legislation.

I apologise to the House for the fact that there is not an amendment in my name that would bring about a solution to the problems I have mentioned. The amendments that I would like to have tabled, along with others that I tried to table in Committee, were outside the purview of the Bill. An incorporation tax, like value added tax and so on, is outside the definition of what we are allowed to do. However, we should be looking at amendments in those radical terms.

If we do not receive a concession from the Government when the Secretary of State replies, or if the amendments are not carried, we must look to another place to bring forward its amendments to make sure that the imposition we are placing on all businesses, particularly small businesses, is something that they can carry. We must ensure that we do not do ourselves economic damage in bringing about a change that is needed but which, at the moment, does not appear to be on the even basis that hon. Members on both sides of the House would wish to see.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

It might be for the convenience of the House if I intervened now that the amendments have all been moved and spoken to, so that I can make clear the Government's position on these matters, and, if the House gives me leave, reply to any detailed points as briefly as possible at the end. This is a very important matter and I would like to give the House the benefit of my thinking as fully as possible in order to give such reassurance as I can about the Government's intentions.

Only two of the amendments and new clauses explicitly concern the transitional arrangements; the rest are really concerned with a permanent cushion of the effect of rates as a tax on small businesses, however defined.

I share the view that both large and small businesses will need time to adjust to the change in values that will emerge from the revaluation, and we accept that that need is greater for small businesses than for bigger ones. I will come to the details of our proposals later. I discussed them yesterday, as hon. Members have said, with the leaders of the main business organisations. We agreed that there should be gentle transitional arrangements and that businesses would be consulted on the precise details of how those arrangements would be worked out before we came to a conclusion. We further agreed on the need to retain a duty on local authorities to consult business representatives about their spending plans.

The hon. Member for Copeland (Dr. Cunningham) quoted the Confederation of British Industry and reinforced the point as his own view that the link between businesses and local authorities was very important. I agree, but it is almost non-existent in terms of any statutory connection at the moment. First, there are no votes for businesses representing the rates that they pay to local authorities. Secondly, there is no benefit to a local authority that is successful in enticing industry into its area.

It may not be generally realised, but when, say, the rateable value of an authority increases by £1 million owing to industrial settlement in its area, the rate support grant is currently cut by an equivalent amount, removing all benefit from the successful. And I am afraid that the converse is true—that a spendthrift authority that loses £1 million of industrial rating through driving businesses out gets compensated by having its grant increased by a similar amount. So the link does not exist.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

The Secretary of State has just said again that the link does not exist. There is at the moment a statutory requirement upon local authorities to consult, and it is placed on them by the Government. Is he saying that even Conservative-controlled councils are not taking any notice of that requirement?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

That is an unnecessary intervention, because I have already said that we agreed to retain the statutory link to consult. That is quite different from a responsibility under some financial arrangement.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

No, I must get on; I have a lot to say. I may cover the hon. Gentleman's points; I nearly always do.

I want to say something quite important about this, because we have an improvement. The point that was raised was whether the new system would contain any incentive for local authorities to provide businesses with the services that they need. We realised that most of those services to businesses are not revenue services but capital services, such as infrastructure, roads, improvement of the environment and many other such things.

So we agreed that we would use the new capital control system, of which I expect to announce details soon, to make it possible to take account of the need to provide new infrastructure to encourage business expansion. That, of course, could be a very major part of the new statutory consultative arrangements that we propose. I believe that that package of statutory consultation arrangements, together with the use of capital allocations directed to the true needs of industry, could form a much better package than we have at present. I hope that the House feels that that would be an improvement.

All the amendments are concerned with special treatment for small businesses. My hon. Friend the Member for Cornwall, South-East (Mr. Hicks) moved amendment No. 7, in the name of my hon. Friend the Member for Kensington (Sir B. Rhys Williams). We all miss my hon. Friend the Member for Kensington very much. He made a great contribution to the debates in Committee and, although he did not always entirely support the Government's arguments and propositions, I pay a tribute to the thoughtfulness and wisdom that he brought to our debates. I think that the whole House would have wished him to be with us during the past week and hopes that he will be back with us soon.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

Could I complete the argument? I will stop after a hit and have a question time, but I may be going to cover the hon. Gentleman's point. I do not want not to give way; it is just that I want to put a list of serious arguments before the House.

Amendment No. 7 would abate the first £1,000 of rates due on a hereditament by 50 per cent. Amendment No. 155 and new clause 6 in the Opposition's name would do the same—only, unusually for the Opposition, they would leave to my sole discretion the rates of abatement. I am always glad of the competence which hon. Gentlemen sometimes try to thrust upon me and sometimes criticise me for trying to take to myself, but that is another matter.

In other words, amendment No. 7 would mean that everyone would pay £500 less, except that someone would have to pay more to make up for this. The amendment would cost between £0·8 billion and £0·9 billion. That is an estimate; it is not easy to be clear about this. It is clear from the speech of my hon. Friend the Member for Cornwall, South-East that he intends that the rest of business should pay for that.

When I asked the hon. Member for Copeland about this, he said that in his view the cost should be shared between the national taxpayer and other businesses but as he might go up to 100 per cent. relief it seems to me that the general sense of these two amendments is that 50 per cent. relief would be the responsibility of the rest of industry. That would put another 10 per cent. on to the hills of the rest of business and industry, or roughly that.

The main fault in that is that it does not discriminate fairly between the small businesses that will face large increases, those that will end up all square and those that will be the major gainers from the national non-domestic rate. Even those who gained from the introduction and the revaluation would share that exemption. What it amounts to is the permanent subsidising of smaller businesses by larger businesses, and it has nothing to do with transition. That, I believe, would undermine the whole point of a property tax, in that payment would cease to be based on the true value of the property. The amendments introduce a new and permanent distortion—precisely when we are getting rid of so much that is already distorting in the system.

The hon. Member for Copeland insisted that, if we have a capital taxation system, the valuation should be accurate. He quite rightly admitted—I am glad that he did—that he would want to have a business revaluation himself. But if one is having a business revaluation and basing a tax on values, one has to take the values which the valuer reaches, and not change them, as a permanent feature of the tax. It would not make a sensible cushion for the position that small businesses will face in 1990. It is unnecessary to do it that way because the Government are proposing what is already a transitional scheme, which I will come to shortly. So it is not a transitional measure but a permanent weighting of the system.

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Amendments Nos. 228 and 270 in the names of my hon. Friends the Members for Billericay (Mrs. Gorman) and Hornsey and Wood Green (Sir H. Rossi) share the same defect. They would provide for a reduced rate bill for any business which is not a public limited company and which makes a taxable profit of less than £20,000 a year or has a turnover of less than £100,000 a year. Again, the amendments would give me a remarkably wide power—not that I complain about that. The amount of abatement would be as much or as little as I liked; at least, that is how I read the amendments. Again they come up against the objection that they design a permanent solution for a temporary problem.

I shall return to the best way to define small firms. We now have three values—the rateable value, the turnover and the profit. The hon. Member for Caernarfon (Mr. Wigley) added VAT and one or two others, so there are masses of values. I will return to that point, but I think that I should pursue the argument logically in a different way.

There is some evidence that small businesses pay more in rates per square foot than large ones. I agree about that, but I say to my hon. Friend the Member for Cornwall, South-East that I do not think that is because of the zoning system of valuation. The zoning system of valuation is merely a method of comparing one property with another. The actual value is determined ultimately on an appeal to the valuation court. The truth probably is that small premises are more valuable per square foot than larger premises or premises which go further back from the main street. This is simply a technique for measuring that.

I am not entirely clear how values vary, but it seems that rents per square foot are higher for small units in a free market than for large units. That in turn no doubt reflects the judgment of the market that small units are worth more than are large units, presumably because they are in shorter supply relative to demand. Demand in turn reflects business men's judgment of the profit which they are likely to make from one type of premises rather than another. So rates have a clear, if indirect, relationship with profits.

Moreover, if we give a permanent subsidy to small businesses or the buildings they occupy, that might serve only to increase demand for small units, thus benefiting no one but the landlords of those units, and not the businesses occupying them. It is possible that a general reduction in the rateable value of small shops would be a boon to the landlords but not to the business men.

This argument can be carried forward into the whole question of the transitional relief and is of great importance. The effect of low rates on property values in many parts of the south of England is that rents have been more buoyant. In fact, landlords have been the beneficiaries as tenants have been willing to pay more rent because they were paying lower rates. After revaluation, landlords will find that the combined rent and rates bills which their tenants have to pay may be above the market value and that in due course they will have no alternative but to reduce the rents. That in turn will cause the rates to follow rents down at the next revaluation.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

If my hon. Friend lets me complete the point, I shall give way in a moment. I am making an important point which I want all Members to grasp.

I will repeat it. Rents are high in prime sites. They will attract high rates on revaluation, but the combined effect will mean that the high rent cannot be sustained. It will come down and at the next revaluation the rates will fall alongside the rent. That is why the transitional arrangements are needed to cushion the effect. That position may not persist, as is perceived now, because of the very effect about which I have told the House.

Photo of Richard Shepherd Richard Shepherd , Aldridge-Brownhills

Sometimes my right hon. Friend does not acknowledge that some of us are intelligent enough to grasp the proposals which he is making. Most of us who rent property are locked into leases with fixed periods for rent reviews. Modern leases invariably state that there will be no reduction in the rent under any circumstances. We shall come to the transitional arrangements into which my right hon. Friend is leading us but I want him in this terrible, disastrous, dangerous, nasty, miserable, economic measure to have regard to that.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

My hon. Friend is right. But if the two parties to an agreement wish to change it, they are at liberty to do so. It cannot be changed unilaterally, but it can be changed if both sides to the agreement wish to do so. I think we will find that some of them will.

Photo of Mr John Heddle Mr John Heddle , Staffordshire Mid

What my right hon. Friend has said is right. There is a direct correlation between rent and rates total outgoings. Does my right hon. Friend agree that the transitional arrangements should be for a longer rather than a shorter period to enable the normal five, seven, 14 or 21-year lease, to which my hon. Friend for Aldridge-Brownhills (Mr. Shepherd) rightly referred, to balance out on the gross and net outgoings of industrial and commercial enterprises?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

My hon. Friend has made the point which I was about to make. The consequences of what I have said, with which he agrees, are that although one form of transition may be appropriate for the first quinquennium, a different form of transitional scheme might be appropriate after that. Of course, by the time we get to the second revaluation in 1995, perhaps none, perhaps some or perhaps a lot of what I am predicting will have happened. Therefore, we may find that those who thought they would be big losers have turned out at the second revaluation not to be in that position. That is the only point I seek to make.

Photo of Mr Tam Dalyell Mr Tam Dalyell , Linlithgow

This is not necessarily an unfriendly question. We have done our best to follow this. Does it not involve the most enormous potential use of valuers and assessors? Has the Department of the Environment made any estimate of the skilled actuarial and other manpower that will be necessary?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

The hon. Gentleman said that he had done his best to follow the argument; clearly it was not good enough. A revaluation is to be carried out by the Inland Revenue, not by my Department, in 1990, with a further one in 1995. Nothing that I have said adds to or subtracts from the effort involved in that.

Photo of Matthew Taylor Matthew Taylor Liberal Democrat Spokesperson (Energy)

As I understand it, the Secretary of State is saying that if rates rise considerably over time, that will force rents down, and that will sort out the problem. Yet he is introducing a uniform business rate on the grounds that execessive rates increases in certain local authority areas are hitting business badly. I cannot understand how he can argue one point about what happens now and a completely different and opposite point about what will happen in future under his proposals.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

Even if I predict wrongly, there is no harm in making allowance for the possibility that I may be right. The effect that I have described has to be taken into account.

Photo of Mr Anthony Speller Mr Anthony Speller , North Devon

Is my right hon. Friend aware of how important certainty in prediction is for small business? I would welcome the opportunity to support him in every way except that, as a small shopkeeper, I am aware of the importance of what my hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd) said, that once one is locked into an agreement, perhaps with a London property company, the rent will not be reduced however rates may change.

I fear that unless something is done to allow small shopkeepers to predict with reasonable certainty—as they can at present—approximate increases in rates, the Government may well succeed in their aim of assisting business back into the inner cities, but it will only be attracted to the bigger parts. Businesses will be driven away from smaller places and, as the hon. Member for Truro (Mr. Taylor) said, the smaller areas will lose out to the larger. The multinationals will not be hurt, but the smaller areas will be crucified.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I am fully aware of that: I have not yet come to the proposals that I shall put forward. I ask hon. Members to bear in mind that if there is something in my argument—my hon. Friend the Member for Mid-Staffordshire (Mr. Heddle) thinks there is—we should at least allow for it to take place.

Amendment No. 171 would extend the duration of the transitional arrangements from five years to 10, but I believe it would be better to take power to provide for a further and possibly different transitional scheme to cover the five years after 1995. That will take account of any changes that are apparent in 1995 and any increases that may still be to come through by 1990. It will enable us to set a lower transitional ceiling in the first five years than would otherwise have been possible. So we are at one with the principle of the amendment but we shall put it in a different form later on.

Amendment No. 171, which would simply extend the 1990 transitional arrangements, is too inflexible and would mean that we would be forced to continue setting a ceiling for businesses still facing increases from 1990, even if they had gained from the 1995 revaluation. If there are still significant changes to come through, if is far more sensible to have a fresh transitional scheme, such as we propose, to benefit those that might most need it at the time.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline West

I understand that the uniform business rate is intended to apply to the whole of Britain. What are the implications for Scotland of what the right hon. Gentleman has said? We have already had a revaluation. What sort of amendment is likely to be made in another place to the Scottish legislation?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I am not to answer for any special provisions that relate to Scotland. The idea is that the rateable value bases of the two countries should be brought entirely in line as soon as possible so that there is no distortion between arrangements in England and Scotland.

We do not yet have reliable figures or detailed estimates of the effects of the revaluation, and it is possible that once we have them we might need to think again about whether it is practical to finance the whole cost of the ceiling by a cap on gains, or by having also a small premium on poundage. We want to keep both powers in the Bill, but we shall take powers by means of amendments in another place to phase gains as well as losses.

Photo of Mr Keith Hampson Mr Keith Hampson , Leeds North West

My right hon. Friend says that he would take account of the fact that any phasing in in one part of the country of a redistributive system may have effects elsewhere—for example, in the north. We have been promised that this will draw in much new business, and many of us do not want the system to be phased in to the point at which that extra incentive is eroded.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury 6:15 pm, 21st April 1988

I accept my hon. Friend's point. It is important that we should weigh the advantages of the gainers—especially in the north—against whatever transitional relief we give to possible losers in the south.

Photo of John Redwood John Redwood , Wokingham

Does my right hon. Friend agree that it is a more hazardous enterprise to combine a revaluation with a change in poundage to a national average poundage? Does he not concede that it might be better to take the necessary powers to cancel the 1990 revaluation and to move to a system in which rates are revalued when rents are revised, or when leases are changed or freeholds change hands? There could, of course, be a long-stop power to say that if a freehold or lease did not change for seven or 10 years, there would be a revaluation. The argument that my right hon. Friend tried to put to the House earlier—it did not meet with universal approval—about how rates and rents might adjust to each other would then have some force, because a revaluation would take place only when rents changed.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I think that my hon. Friend is inviting us not to proceed with the revaluation; that would be a disaster. All the problems that we are discussing today have resulted from postponing the revaluation for 17 years. It is better to bring valuations uniformly and universally up to their true value so that we start to get back to a property tax that is based on property values.

One of the worries that underlies and obscures much of the discussion on this subject is the premise that a great majority of small businesses, or businesses as a whole, will face large increases in rates as a result of all this. The burden on business will remain exactly the same as it is now. Indeed, in future it will not rise in real terms, which is much better than if the present rating system had been allowed to continue. Naturally, there will be losers and gainers, but relatively few businesses will face large rate increases.

Revaluation arouses more fear than the NNDR, because it is a fear of the unknown. The businesses that face increases will tend to be concentrated in retailing, in prime high street sites, and in the south of the country. In other words, they will be those that have been most successful since the last revaluation 15 years ago, but the figures that are being bandied about apply to only a tiny fraction even of them. The National Federation of Self-Employed and Small Businesses likes to talk as if every small shop will face increases of hundreds of per cent., but that is not true. If they did, there would not be much left for the rest of business to pay.

There was some interesting news on this only yesterday. The NFSESB has been encouraging its members to forecast changes in rate bills by looking at their present rental values and assuming that the new poundage in 1990 will be 50p in the pound. Yet a firm of chartered surveyors—Messrs Herring, Son and Daw—came out with the forecast that the total of all rateable values will increase by a factor more like 7 than 5, and that as a result the new poundage is likely to be of the order of 35p—one seventh of what it is now. If that is true—I stress that it is too soon to say anything about this precisely—the small businesses that have been forecasting their rate bills by the NFSESB method and have come up with some pretty horrid results will find themselves paying 30 per cent. less than they had been led to expect.

Nevertheless, for the few that will face big increases in 1990, we are providing unprecedented transitional arrangements. There will be arrangements in Scotland similar to those in England and Wales, although the details may differ to suit the circumstances. We have already announced that these arrangements take the form of a ceiling on year-on-year rate increases for five years after 1990. As I have already said, we propose to take powers to allow further transitional arrangements for the period after 1995. That will enable us to leave the effect of the largest increases to be dealt with after a substantial revaluation when the rent-rate equation may be better balanced. The largest increases may never happen at all.

Photo of Mr Tony Worthington Mr Tony Worthington , Clydebank and Milngavie

Why are there to be transitional arrangements in Scotland after 1990 when there is not to be a uniform business rate in Scotland after 1990?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

Scotland will move to unified business rate at the English rate poundage after rateable values have been harmonised. No changes to the Bill are proposed, because it is unclear how fast harmonisation can proceed. That is the answer to the hon. Gentleman's question.

We have already announced that, recognising, as I have said, the specific difficulties of those small businesses that will face large rates increases, we agreed in Committee to look closely at the possibility of a special transitional arrangement scheme for small businesses. I am now able to tell the House that we shall take power to have such a scheme and that it will take the form of a lower ceiling on year-on-year increases for small businesses than for larger businesses.

Amendments to provide such a power will be introduced in another place. We shall take a final decision whether to activate the power at the same time that we take a decision on the overall ceiling later this year, when we have more information on the outcome of revaluation. That clearly makes sense. The need for a specially reduced ceiling for small businesses will be less if we find that we can afford a relatively generous ceiling for all businesses.

Photo of Mr John Watts Mr John Watts , Slough

I understand that it is not possible to predict the effects of revaluation until the exercise has been completed, but I do not understand why my right hon. Friend argues that he cannot announce what the maximum ceiling on rate increases should be until the outcome of revaluation is known. As I understand it, we wish to allow such a ceiling in order to ensure that the proposals do not impose intolerable increases in rate burdens on business, such as we are trying to stop by linking increases in the uniform poundage to the rate of inflation in future years. Why cannot my right hon. Friend give some reassurance to the many businesses which are concerned about the impact of the proposals by at least saying that the ceiling will be no lower than whatever percentage he might consider appropriate?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

The lower the ceiling that is imposed, the higher the cap that will be imposed on the gainers and the other half of business and industry, as exemplified by my hon. Friend the Member for Leeds, North-West (Dr. Hampson), who is keen to make sure that whatever the transitional arrangements, they are fair as between the losers and the gainers.

Secondly, I could make an awful mess of this—[HON. MEMBERS: "You have."]—by announcing a ceiling of 20 per cent., 15 per cent. or 10 per cent. now, which could turn out to be unnecessarily high or unnecessarily low depending on whether one is a gainer or a loser.

When we discussed this yesterday with the CBI, the Institute of Directors and the Association of British Chambers of Commerce, they were keen on the conclusion to which we all came that there should be no determination of the ceiling at this stage because they did not know the figures that would emerge from the revaluation and they would very much prefer to know those figures before they calculate what attitude to take to the level of the annual ceiling. I am sure that my hon. Friend would not like me to go against the advice given by those major business organisations yesterday. It would be better to wait until we have the revaluation. [Interruption.] Yes, and the view of small businesses too.

Photo of Mr Michael Grylls Mr Michael Grylls , Surrey North West

I am sure that my right hon. Friend remembers that he was kind enough to receive a delegation of the main business groups representing small firms on 8 February which asked for a spreading of the transitional period and a special ceiling for the smaller firms. My right hon. Friend may be attacked fairly widely because any new tax is bound to be imposed, but the House should recognise that he has given the main small business groups the two pledges that they asked for on 8 February. At least we should be grateful for that. The ceiling should give them the security of knowing that they should not be put out of business. We at least know that there will be a ceiling, even if we do not know the details of it at the moment.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I am grateful to my hon. Friend. I have already said that we shall have two ceilings—one for the larger businesses and one for the smaller businesses. Of course, it is important that the small and large business organisations should be consulted about what those ceilings should be, but all of them are of the opinion that they would prefer to know the rate rises they face before they decide on their attitude to any particular provision.

Photo of Richard Shepherd Richard Shepherd , Aldridge-Brownhills

Does not my right hon. Friend's exposition really underline that this is a most speculative redistributive tax? We do not have a clue how it will hurt or help people. My right hon. Friend cannot give that information for his constituency, for my right hon. Friend the Prime Minister's constituency or for my constituency. We do not have a clue. Would it not be better to withdraw this part of the Bill so that we can look at revaluation and see how a major business tax affects the community?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

If my hon. Friend had his way and we withdrew this part of the Bill, we would have a revaluation of non-domestic assets with no hope of a transitional scheme of any sort whatever. His problem would be infinitely more difficult, because that is the only alternative. Without this part of the Bill, there would be no powers for a transitional scheme.

Photo of John Butterfill John Butterfill , Bournemouth West

I do not wish to prevent my right hon. Friend from getting on and telling us how he will define small businesses, but when the matter was raised in Committee—my right hon. Friend will remember that I moved an amendment on this—he did say that he thought that the differential between small and large businesses should be in the region of 5 per cent. Can he confirm that that is still the sort of differential that is in his mind?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

It is indeed. That might be the right figure. [Laughter.] Labour Members should not be too stupid. I am asked to consult and listen to the views of business. Is it not better to say that I am not sure whether that is the figure that I shall choose if the object of the exercise is to consult and listen to people? I have never heard such stupidity from Labour Members who ask me to listen to what people are saying and at the same time castigate me for having a closed mind.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

All right, but the hon. Gentleman does not deserve it.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

No matter how ungraciously the Secretary of State has given way, I am grateful to him. The laughter, which was at least as loud from Conservative Members as from Labour Members, was because the right hon. Gentleman is asking the House to vote on this matter tonight, yet he cannot even tell us what we are voting about.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

The Government have no amendments.

Photo of Mrs Elizabeth Peacock Mrs Elizabeth Peacock , Batley and Spen

My right hon. Friend will recall that towards the end of last year and earlier this year he and his hon. and learned Friend the Minister for Local Government assured us that business in the north of England in my part of the world would benefit greatly from the unified business rate. We welcomed that fact. There is now some concern that the £700 million gain that we in the north hoped to get will not now materialise. Can he assure us before he finishes speaking this evening that that is what will happen and that the gains in the north, that are so desperately needed in manufacturing industry, will be there?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I can give my hon. Friend that assurance. We are talking about the rate at which the resource transfer will take place. Many of my hon. Friends are suggesting that the rate at which that resource transfer should take place should be slowed down. I am making the point that I do not want to slow it down more than can be helped because I must take account of the points made by my hon. Friend and by other of my hon. Friends whose constituents may be among the losers.

Let me return to the distinction between a large and small firm, with which my hon. Friend the Member for Bournemouth, West (Mr. Butterfill) asked me to deal. The problem with the definition couched in the terms of new clause 6, which is by reference to the structure, taxable profits, asset base and number of employees in the company, is that it would impose a considerable amount of extra work on local authorities because it would require the collection of large amounts of information that they do not at present have or have any need for.

They would also need to be able to verify it. It seems much more practical to make the qualifying test the rateable value of the property. That would give greater certainty and allow the concession to be applied automatically by local authorities and so ensure that all those entitled to benefit would do so.

We should like to set a threshold for relief by reference to the new valuation lists rather than the existing ones, but we shall have to wait a little longer to decide what is appropriate in the light of that revaluation. It would be almost impossible to base the arrangements on profits or turnover, which are sometimes not determined until two or three years after the event. It would be a most complex business to have to go back to past years to give businesses refunds or impose surcharges depending on eventual profits and it would also greatly affect the cash flow of local authorities.

Photo of Mr Stuart Holland Mr Stuart Holland , Vauxhall

Why should it be so difficult to have a local turnover tax? For years after the war most European economies had precisely that—before they moved to value added tax. Such a tax can be estimated on an annual basis.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury 6:30 pm, 21st April 1988

The hon. Gentleman will be in trouble with his Front Bench colleagues, who think that they would like to retain a capital tax for businesses as well as individuals to provide local revenue. I do not think we should be diverted into inventing a new tax at this point in my speech.

I understand businesses' concern to know what their rate bills will be in 1990, but we simply cannot set a ceiling until we have the preliminary results of the revaluation, nor can we make a final decision on the need for special protection for small businesses or on how to administer it. However, we shall do that as soon as we can in the autumn.

Photo of Roger Gale Roger Gale Parliamentary Assembly of the Council of Europe (Substitute Member)

Given the number of imponderables that seem to have been introduced and the decisions that cannot be taken until the autumn, will my right hon. Friend assure the House—for the benefit of those of us who still have mild doubts—that the proposals will be laid before the House in the autumn in the form of regulations and that we shall have the opportunity to vote upon them then?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

Absolutely. I do not know precisely when regulations will be laid, but the Bill would give the powers to make regulations that would then be consulted upon and laid before the House, arid that would be the time at which to decide these matters. Notwithstanding our eagerness to make the decisions, I am sure that the House will agree that we would be wiser to make them on the basis of facts rather than speculation.

Photo of Mr Robin Maxwell-Hyslop Mr Robin Maxwell-Hyslop , Tiverton

Is not the problem that whereas amendments and new clauses can be amended by the House, regulations cannot? Moreover, does my right hon. Friend intend that the affirmative or the negative resolution procedure should apply? If the negative resolution procedure applies, we may not even get a debate on the regulations. If the affirmative resolution procedure applies and we disagreed with and defeated the regulations, there would be no relief, so we should have to accept them faute de mieux.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

The resolution should be an affirmative one. I am certain about that, but we have not even tabled the amendments necessary to bring this about.

My hon. Friend's observations must apply to all regulations, but if there were no regulation-making power, there would be no chance to change what might have been on the face of the Bill. Had I put the scheme in the Bill, it would have been just as unamendable when enacted as an order-making power, but an order-making power can be used to amend an order.

The hon. Members for Copeland and for Brecon and Radnor (Mr. Livsey) asked about relief for charitable bodies. The history of this matter is well known. We accept that it is entirely right that charities should not have to pay the full rates and that in the case of other bodies performing activities which it is in the public interest to encourage to flourish—education, sport, recreation and culture—the possibility of giving relief from rates should be available. The provisions are contained in section 40 of the General Rate Act 1967 and have been developed over many years; they command widespread public support and generally seem to work well. Our policy is to replicate the existing provisions as closely as the change to the new system permits.

Clause 39(5) and (6) already contain provisions whereby charities will have their rate bills automatically rebated by 50 per cent. That is what the factor 2 does in the bottom line of the formula. The provisions that we intend to reintroduce will permit charging authorities to increase that rebate up to 100 per cent. and additionally to give relief of up to 100 per cent. at their discretion to other bodies—in the words of the 1967 Act, relief may be granted to bodies that are philanthropic, religious, concerned with education, social welfare, science, literature or the fine arts and to premises used for the purposes thereof, subject in all cases to the requirement that the body concerned must not be conducted for profit.

We intend to ensure that the full cost of giving relief for charities and for other non-profit-making bodies does not fall on the community charge payers. For mandatory relief, the position is simple: local authorities will be obliged to give this relief, so it will be deducted in calculating their contributions to the national non-domestic rate pool.

For discretionary relief, it is a little more complicated. At present, the whole cost of any discretionary relief that a local authority gives is borne locally, but that cost is spread across local business as well as domestic ratepayers. If we did nothing more, the entire cost would fall on local community charge payers under the new system. That might make authorities less keen to give relief than at present and it would not be as fair as the present system. That is certainly not what we want. We therefore propose that authorities should be allowed to offset half the cost of any relief that they give against their payments into the national non-domestic rate pool. Regulations under schedule 7(4) will deal with that.

The new arrangements will roughly mirror the present arrangements, as just under half the total rate bill, and thus half the cost of relief given now comes from domestic ratepayers. I hope that that is adequate to satisfy the two hon. Gentlemen.

Photo of Dr Jack Cunningham Dr Jack Cunningham Shadow Secretary of State, Shadow Secretary of State for Environment

The Secretary of State has made an important and, on the whole, welcome statement, although we shall have to look very carefully, as always, at the fine print. I welcome at least the commitment in principle to make the change and I am sure that it will also be widely welcomed outside the House. From what I can recollect of the details that he has given, he seems to have met the points in full, and I am grateful to him.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I am not aware that there are any differences between us, but I do not want to claim that until the hon. Gentleman and I are both sure that it is true.

Photo of Mr Richard Livsey Mr Richard Livsey , Brecon and Radnor

I thank the Secretary of State for his concession. If I heard what he said correctly, he is giving 100 per cent. relief to charities. The difference remains between this 100 per cent. and a residual 25 per cent., and the Secretary of State mentioned that there was a differential. As I understand it, there is 25 per cent. left. Where will that burden fall? Will it fall on the local authority and will it be 25 per cent. more than it is liable for at present?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

Setting aside mandatory relief, local authorities at present shoulder about a quarter of the cost of discretionary relief. We suggest that they should continue to do so, although the cost will of course be transferred from ratepayers to community charge payers. Effectively, that leaves the discretion with local authorities, while the financial consequences will remain almost identical.

Photo of Mr Dick Douglas Mr Dick Douglas , Dunfermline West

The Secretary of State has said something very profound about the amelioration of the rate burden. The Scottish arrangements, particularly in relation to sports grounds, are very different from those in England. We are supposed to be seeking harmonisation. What consultation has the Secretary of State had with his right hon. and learned Friend the Secretary of State for Scotland to ensure that we get the same advantages for sports grounds and other recreational facilities in Scotland as he seems to be giving in England and Wales?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

My right hon. and learned Friend the Secretary of State for Scotland and I talk about little else, and we talk about it frequently. I am most concerned that the arrangements for Scotland, and the basis of valuation, should be identical to those in England, so that there is no distortion of competition and so that there is fairness.

Photo of John Butterfill John Butterfill , Bournemouth West

On this question of parity between Scotland and England, my right hon. Friend will recall that certain groups of people, especially those in the mining and extraction industries or others who need to use the contractor test, are very concerned about the decapitalisation rate and the current difference in practice between Scotland and England. Has he made any decisions about what the overall decapitalisation rate will be?

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

I am disappointed at the progress that has been made in harmonising the basis of valuation, both on the formula basis and on the valuation of properties generally, between England and Scotland. I shall see if we can accelerate the process in order to bring equity between the two countries closer as soon as possible. At the moment I have nothing to report to my hon. Friend.

I have spoken for far too long, but that is not entirely my fault because I think that about half of my speech was taken up by hon. Members who intervened. I hope that I have shown that our approach to the transitional relief must be based on having the facts. I think that that is agreed by business. We shall come to a conclusion as soon as we have the facts. There will be consultation about them and the House will be able to express a view and to vote.

It is right to have a special scheme for small businesses to help them through this difficult period. We shall have powers to make another transitional scheme for 1995 after the first quinquennium. I hope that my hon. Friends will feel that that is the wisest way to respond to the very justifiable concerns of business. This will amply meet those concerns, but we must have the facts in order to plan the schemes in detail.

Photo of Jim Cousins Jim Cousins , Newcastle upon Tyne Central

I am a new Member but undoubtedly other hon. Members will have experienced bigger shambles than the one with which we are now faced. Certainly this is a considerable shamble. At the last moment the Secretary of State offers us two thresholds for the definition of large and small businesses, and the definitions will be defined on a basis that will not be known until after 1990. He offers us two different ceilings for transitional arrangements and two different kinds of transitional arrangement—one that will operate from 1990 and the other, if it can be defined, may exist after 1995.

Photo of Jim Cousins Jim Cousins , Newcastle upon Tyne Central

Perhaps the Secretary of State is in difficulty again. No doubt he has a hard time of it because every Thursday lie offers more Maundy money to the people of Britain and every Thursday the stunned people of Britain throw it back in his face. That must be a difficult experience.

This strange structure that the right hon. Gentleman is offering us, of two different kinds of business defined by two different thresholds, operating on two different ceilings and two kinds of transitional arrangements, none of which he has specified, are being offered to us in the great and good cause of giving business men more stability and certainty in their arrangements. At one point in his speech the Secretary of State tantalised us with the possibility that he might be right. Since in his speech he attacked two cornerstones of the legislation, it would be churlish not to agree that for once he might be right.

Far from the allegations on which the legislation is based, the Secretary of State said that high rate poundages are not a free-standing phenomenon. That is a cornerstone of the case for the introduction of this legislation, but now the Secretary of State tells us that high rate poundages may be compensated by wonderful self-regulating mechanisms that link high rate poundages to low rateable values an to adjustments in rent. I do not believe in those wonderful self-regulating mechanisms. If I did, I would wonder why the enterprise zone experiment is a feature of the Government's legislative programme.

Photo of John Butterfill John Butterfill , Bournemouth West

Does the hon. Gentleman not agree that the reason for making these difficult transitional arrangements and for the uncertainty arises not from what is proposed in the legislation—that national non-domestic rates will make a difference between north and south or between east and west of about 10 per cent. at most—but from the failure of successive Governments since 1973 to revalue the base? That is the problem that we are addressing, and it is that and not the legislation that is causing the difficulties.

Photo of Jim Cousins Jim Cousins , Newcastle upon Tyne Central 6:45 pm, 21st April 1988

That intervention brings me to the wonderful revelation made by the Secretary of State when he invited us to consider that he might be right. We spent many weeks in Committee and were continually told that rates have no connection with income. However, in this debate we were told by the Secretary of State that rates have a connection with profits. That answers the question by the hon. Member for Bournemouth, West (Mr. Butterfill) and therein, unfortunately, lies the root of the damage that the Secretary of State has so casually done to the whole structure of his legislation.

Photo of Alistair Burt Alistair Burt , Bury North

I take the hon. Gentleman's point, but surely it is a question of degree. The way in which rates may go up or down in any one year or the amount that they may rise as a result of revaluation, can cause considerable distress, depending on the actual amount. It is a question of degree. We know that rates as a proportion of a company's costs are low, but if they go up by a great deal, especially in a period of stability in other respects, they have a great marginal effect. We are talking about the problem of the degree of rise. That is why there can be a considerable effect and why the Secretary of State is right to talk about concessions.

Photo of Jim Cousins Jim Cousins , Newcastle upon Tyne Central

That is why the hon. Members for Batley and Spen (Mrs. Peacock) and for Leeds, North-West (Dr. Hampson) have departed the field. They have already spotted that we are not talking about matters of degree. They now see that the great promise of huge rate reductions in the north of England on which they were building all their hopes, have been at least severely compromised by what the Secretary of State has said.

Amendment No. 7 is in the name of the hon. Member for Kensington (Sir B. Rhys Williams) and I join in wishing him a speedy recovery. When speaking to that amendment the Secretary of State told us that its cost was equivalent to a 10 per cent. general rise in the uniform business rate. If the calculations with which we are dealing are so sensitive to the effect of amendment No. 7, the hon. Members for Batley and Spen and for Leeds, North-West are correct in supposing that the great promise of huge rate reductions in the north have been severely compromised by the Secretary of State.

Before we come to the architecture of these concessions, I should like to tell the House what the Secretary of State said in Standing Committee. When talking about how they should be financed, he said: the limits on any rate bill increases will have to be matched by the deferral of gains which would otherwise be due."—[Official Report, Standing Committee E, 3 March 1988, c. 1214.] It is not absolutely clear from what the Secretary of State said today whether he is standing by that statement. It looks and sounds as if he is standing by that statement, and the hon. Members for Batley and Spen and for Leeds, North-West certainly felt that. I give the Secretary of State credit for that. Those two Members have now departed because the Secretary of State's great concessions have been postponed to the indefinite future. They are lost in indefinite obscurities that he cannot even define for the Third Reading on Monday. These great concessions, the great reductions for northern business, are now severely compromised.

Photo of Edward Leigh Edward Leigh , Gainsborough and Horncastle

What would be the effect on business rates in the hon. Gentleman's constituency if the present business rating system was kept, there was a revaluation and shopkeepers were required to pay a local income tax and rates based on capital value? That is Labour party policy.

Photo of Jim Cousins Jim Cousins , Newcastle upon Tyne Central

The hon. Gentleman invites me to consider the matter of capital value rates. I remind him that all the exemplifications that we have heard from the Government about the effect of capital value rates incorporate the continuation of resource grant equalisation. If one removed the effect of resource grant equalisation from assessments of what might be rates based upon capital values, the picture would be very different. It might even benefit the people of Canterbury quite as much as it would benefit the people of Newcastle. Perhaps we can return to that point later.

It is a pity that the Chancellor of the Duchy of Lancaster, at his first Action for Cities breakfast in Newcastle, offered the business men of Newcastle a prediction of a 32 per cent. rates cut. I hope that he has been made aware of the Secretary of State's statements tonight. I hope that, at all the future breakfasts, he will incorporate in his predictions of rate reductions in our great northern cities the effect of the concession that has been offered this afternoon to business in the south, as a consequence of a rate revaluation which is part of the Government's policy.

Photo of John Butterfill John Butterfill , Bournemouth West

Does the hon. Gentleman agree—this was a point of common ground between us in Committee—that the shopkeepers in his constituency of Newcastle, Central are likely to suffer dramatically because their rental values have risen above the average, and that they will be as much beneficiaries of my right hon. Friend's announcement this afternoon as anybody in the south? It is by no means clear that this is exclusively a north-south, east-west or any other geographical divide, although, in general terms, the north will benefit.

Photo of Jim Cousins Jim Cousins , Newcastle upon Tyne Central

I shall deal with that point in a moment.

My other point relates to the Secretary of State's remark that special capital allocations would be targeted at the need to create in cities important infrastructure, which would have to be introduced by the local council. At 8 o'clock, we are due to discuss rate support grant and I look forward to the Minister telling us that the revenue consequences of the expenditure on those capital allocations will form a proper part of the new revenue support grant system.

Unfortunately, the infrastructure on which we are invited to spend to assist industry carries with it revenue expenditure. For years, in the great northern cities, we have struggled to obtain a recognition of those central city services into which huge expenditure has been sunk by progressive councils in Leeds, Manchester and Newcastle. We have struggled to obtain proper and adequate recognition inside the rate support grant system of the consequences of the investments that we were making to improve and secure the commercial future of our cities.

If we are to have special capital allocations targeted at that kind of investment, with such consequences, I very much hope that we shall not be tricked again by the non-recognition inside the revenue support grant system of the revenue consequences of that expenditure.

Of course, it is true that in cities such as mine—where investment in the infrastructure has been great and sustained and where, even this year, a rate-capped council is investing in two new car parks, one in the shopping area and another in the commercial area of the city, to attract new opportunities for investment, and is prepared to meet the revenue deficits that accompany such investment—rental values for shops and offices have risen, despite the high rate poundages, faster and higher than in any other area of Britain. Shopping rental values in Newcastle have risen higher and faster over the past 10 or 12 years than in any other area of Britain, including Oxford street. That shows the benefits that can come from linking a concern for business, commerce and opportunity with progressive infrastructure spending in a sustained way through successive local government administrations.

It is precisely those connections that the Secretary of State, through these proposals, is now seeking to break and for which the offer of special capital allocations cannot possibly substitute. The moral of what the Government are doing to that sustained relationship between commerce and local councils is spelt out by the fact that the leader of the city council was not invited to attend the first Action for Cities breakfast. That shows the true value that some Members of the Government—I do not say all—place upon a positive, sustained relationship with local people and local industry.

We are now to face a period of enormous uncertainty as to what the Government's proposals mean. On the basis of what has been said this afternoon, no business man can work out for himself or herself, or for his or her business, the precise consequences of the proposals.

Photo of Mr John Heddle Mr John Heddle , Staffordshire Mid

Does the hon. Gentleman agree that my right hon. Friend's proposals, and the whole thrust of the reform, is to introduce certainty and stability into the commercial rate? Will the hon. Gentleman inform the House what certainty there was for an industrialist or a retailer in the London borough of Waltham Forest whose rates went up by 68 per cent. this year? What certainty was there last year for a business man in the area in which the right hon. Member for Islwyn (Mr. Kinnock) lives, whose rates in the London borough of Ealing went up by over 60 per cent?

Photo of Jim Cousins Jim Cousins , Newcastle upon Tyne Central

If, over the past 10 years, the Government had been willing to offer local councils the same kind of certainty in the working of the rate support grant system that they have now offered business men through the uniform business rate, that confrontation might not have been necessary.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

During the years of high rate increases to which my hon. Friend the Member for Mid-Staffordshire (Mr. Heddle) referred, the rate support grant percentage has not been changed at all. It has remained at 46·2 per cent.

Photo of Jim Cousins Jim Cousins , Newcastle upon Tyne Central

I simply do not understand and I am happy to give way to the Secretary of State yet again. Each year there has been a reduction of rate support grant.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

The hon. Gentleman was complaining that the reduction in the Government's rate support grant had led to those high rate increases, but, during the two years in which those rate increases have taken place, the Government's grant has not been cut. It has been kept at the same percentage.

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Photo of Jim Cousins Jim Cousins , Newcastle upon Tyne Central

No doubt the Secretary of State, with his great vision, could see all the way from Rochdale to Manchester were it not for the houses in between. Does the Secretary of State believe that local government finance is a year-on-year calculation, in which one year can be said to have ended and completely finished when the next year starts? Of course not. I am referring to the lack of stability in the rate support grant system. Even in the last couple of years, when there has been stability in the level of grant there has been continuing instability both in the distribution of rate support grant and in the amazing contraption of penalties and other features which have accompanied it.

I remind the Secretary of State that Newcastle is being rate-capped this year on the basis of a GRE assessment last year which he now admits was wrong. Therefore, if Newcastle had been assessed last year on the GRE it had this year, it should not have been rate-capped at all. That is an example of the instability and uncertainty to which I referred.

I do not want to go on for too long, but, as the Secretary of State has now returned, perhaps he could reassure us about the special capital allocations to which he referred earlier. He did not state the size, but a continuing feature of the Secretary of State's remarks is a lack of precision. Perhaps he will tell us at 8 o'clock that the revenue consequences of those capital allocations will be restricted in the future revenue support grant distribution system. I should be happy to give way to him now so that he can give that guarantee.

The Secretary of State will not say anything. We realise that the uncertainties in the future pattern of uniform business rate are no doubt to become a structural feature of our debates after 8 o'clock, in which the Secretary of State will be unable to be precise about the future pattern of revenue support grant. Businesses in this country, both north and south, face a revaluation which will have unpredictable effects. On the basis of that revaluation, we are to have a new uniform business rate which cannot be specified or defined, the consequences of which for any part of the country or type of business cannot be quantified. This is the sorry state to which we and business have been brought by the proposals for this ludicrous community charge.

Photo of Mr Richard Alexander Mr Richard Alexander , Newark

I have not rebelled against the Bill at any stage, and I support the principle of the community charge. I believe that it is right for the country and the community generally. However, I do not believe that there should be any sacrifices on the altar of getting it right and getting rid of the domestic rate. Many small businesses, particularly in my constituency, believe that they are about to be sacrificed. That is why I put my name to amendment No. 7.

I listened carefully to what my right hon. Friend the Secretary of State said, and I shall be studying his comments later. I do not criticise my right hon. Friend for this, because he is in enormous difficulty, but the situation is very "iffy". I am not sure what I can tell my constituents by way of reassurance on the matters that they have mentioned to me. For example, will the figures that my right hon. Friend is to produce, when the matter is discussed in the other place, be debateable here, or will we be presented with a fait accompli? I do not criticise my right hon. Friend, but I make the point that we should be able to discuss the details in this Chamber.

My right hon. Friend was interrupted frequently, and he gave way on a number of occasions, but there was one point that I would have wished to raise with him when he was telling us about his discussions with the CBI. The CBI has given us all a briefing—I am sure hon. Members on both sides of the House have received it; indeed, the hon. Member for Copeland (Dr. Cunningham) referred to it—in which it says that for some businesses the combined effects of the uniform business rate and the revaluation will he catastrophic. I would have liked to hear from my right hon. Friend whether, after his meeting with the CBI, it was still of that view.

My information is that there will still be harm to smaller businesses. In reply to a letter from me, written on behalf of the Southwell branch of the National Federation of Self-Employed and Small Businesses Ltd., my hon.

Friend the Under-Secretary of State said that my constituents' fears were exaggerated. My right hon. Friend the Secretary of State spoke of generous phasing arrangements. I want to put it on record, as many of my hon. Friends have done, that he ought to be thinking of increases of no more than 10 per cent., plus inflation.

I do not believe that the community charge is a tax and should therefore be geared to one's ability to pay. It is a charge, and as a charge it cannot be regarded by the Government or my right hon. Friend as a tax which has to be borne by the small business community until the whole thing is sorted out.

In his letter to me, my hon. Friend said: We have no reason to expect small businesses to fare worse than large, except to the extent that they are concentrated in the more buoyant retail and service sectors. Our forecasts suggest that most small shops will face modest increases in rateable value, with those over 50 per cent. being relatively uncommon. That must be totally unacceptable for those who are in that position. It will not satisfy me, if I am to pay this charge, to be told that it is relatively uncommon and I will just have to get on with it. A business man will say, "My business is my business and my tax is my tax and you, as my Member of Parliament, must sort it out. If anything that your Government do puts me out of business, I object to it and I object to you, too."

A briefing from the Forum of Private Business tells us that under the present proposals some businesses could be subject to annual increases in community charge well above the rate of inflation, and in extreme cases for 20 years. During the transitional period, the maximum increase should be 10 per cent., after allowing for inflation. Surely that is not too much to concede if we are to have fundamental changes to business men's liabilities as a result of the Bill.

Five years is too short a transitional period. I would like my right hon. Friend to consider a much longer period. It is worth considering the impact of rates as they affect small businesses. I agree with my right hon. Friend that businesses in the front of a building pay more than those at the back. The National Feferation of Self-Employed and Small Businesses Ltd., in its briefing to right hon. and hon. Members, says that shops need to be at the front of buildings and, therefore that they are smaller units. Nevertheless, it means that a business in that location is on a higher basis for rating then any other type of commercial premises. That is why, when these matters are considered in another place we should be looking after smaller businesses.

Photo of John Butterfill John Butterfill , Bournemouth West

That might be the case if one presumes that all small businesses and shops are in prime high street locations, but that is by no means true. A few of them are, but the vast majority are located in secondary or tertiary locations where the values are considerably lower. The organisation to which my hon. Friend referred has rather overstated its case.

Photo of Mr Richard Alexander Mr Richard Alexander , Newark

My hon. Friend may be right. In constituencies such as my own, which have smaller communities, most smaller businesses have what one might call high street sites: they are highly rented and highly rated. However, if I am right in what I have said, it follows that the ratio of rates to income is much larger for he smaller business than for the larger.

The community charge was introduced to bring a measure of justice and fairness to those hard pressed by the present rating system. I return to my preliminary point. I support the idea of the community charge and do not resile from it. Business men feel that their lack of representation, together with their obligation to be taxed, is unfair. They will still have no representation, but they are not looking for any. However, they look to this House for a new system that will be no more unfair than the one that we are trying to replace.

Without the back-up position provided by amendments such as those in the names of myself and my hon. Friends, I believe that there could be unfairness and an effect on small businesses' viability. This Government, above all, have always supported the smaller business men and business women and wished them increased success. I strongly urge my right hon. Friend to ensure that, when the Bill goes to another place, we do not desert them.

Photo of Mr Stuart Holland Mr Stuart Holland , Vauxhall

Rarely in the history of local government can any Secretary of State have asked so many of his right hon. and hon. Friends to follow him virtually blindfold into the Division Lobby over so major a provision as in this Bill. It has been the most remarkable performance.

My hon. Friends have already stressed that there are two threshold levels and a ceiling—a false ceiling, it seems—on differential policies for different types of firms. Nearly all of that is based on a false premise in the first place. The Government have failed to show that there is any correlation between rates and the closure of small or large firms. The Department of the Environment commissioned a study from the university of Cambridge department of land economy which found no evidence that changes in rate levels were linked to job losses. Evidence from enterprise zones has demonstrated that where rates were abolished, business rents were increased to compensate, with very little net gain, if any, to business. It is worth bearing in mind that the overall level of rates as a proportion of the total costs incurred by United Kingdom industrial and commercial firms, is less than 2 per cent.

That argument—so favoured by Conservative Members in the way in which they inveigh against local authorities, nearly all of which, in their lexicon of demonology, are Labour-controlled—is itself misplaced. The main problem for smaller businesses in the inner cities in Britain today, as in the post-war economy, is not local government but bigger business.

7.15 pm

The argument in relation to retailing shows that to be the case. In a series of parliamentary questions that I have tabled since entering this place I have asked what is the number of firms commanding the upper half of the United Kingdom retail trade—the more concentrated, larger firms. I am informed that in 1950 the figure was 4,750. But by 1986 it was only 94. It is the concentration of a larger share of the market in the hands of the multiples in retail distribution that has caused such problems for small firms.

That trend is not an abuse of the market—it is the working of the market. The market rewards the more efficient. The more efficient thereby grow larger and enjoy a bigger market share. They enjoy, as a result, lower unit costs and squeeze the corner shop and the small firm. The small corner shops and firms that continue to survive do so mainly because many of their customers do not have access to transport to visit large supermarkets.

This is the dynamics of the problem that the Government should be addressing, instead of imagining that the problem concerns rates. It is the dynamics of unequal competition, which is quite rightly addressed by my right hon. and hon. Friends on the Front Bench in new clause 6 in their concern to tackle the problem.

Photo of John Butterfill John Butterfill , Bournemouth West

Does the hon. Gentleman agree that the other consequence of the situation that he describes is that profit margins and prices to the consumer in the grocery trade, for example, have been dramatically reduced over the same period? The consumers have been the beneficiaries. It is because they have done so well that the effects that have been described in relation to small businesses have occurred. There is also the phenomenon of the corner shop, run by Mr. Patel or Mr. Singh, where standards of service are so much better and where the loyalty of customers is retained, despite the fact that their prices may be higher. Surely the future of small businesses lies in providing higher standards of service.

Photo of Mr Stuart Holland Mr Stuart Holland , Vauxhall

The first part of the hon. Gentleman's comments confirms my argument. Economies of scale and throughput in the large multiples are such that there is no way that small corner shops or even the routine high street retailer can compete.

The family shop—whether it is owned by Mr. Singh or Mr. Smith—is surviving by using unpaid family labour, often working very unsocial hours. The problems for such shops is not local rates or local government, but bigger business. That is a consequence of the Government failing to restrain the growth of bigger business. If they are not to do that, in terms of the efficiency argument made by the hon. Gentleman, they should compensate smaller shops on social grounds so that they may remain open.

There are strong social arguments for such shops remaining open. A single parent without a car, or pensioners, find it difficult either to get to supermarkets, even on public transport, or to carry back the volume of purchases that would make such a visit worth while.

Photo of Mr Roger Knapman Mr Roger Knapman , Stroud

The hon. Gentleman has said that rate demands are not all that important, because they represent only 2 per cent. of a firm's turnover on average. Should he not look more carefully at the proportion of profit that that represents?

Photo of Mr Stuart Holland Mr Stuart Holland , Vauxhall

If we are considering the proportion of profit of bigger firms, there is some force in the argument that there should be more effective local taxation of that big business which is making supernormal profits. We need more transparency in the differential between the profits of different kinds of firms.

Photo of Mr Roger Knapman Mr Roger Knapman , Stroud

What about small businesses?

Photo of Mr Stuart Holland Mr Stuart Holland , Vauxhall

That is the point that I am making. If we want the corner shops to stay open, faced with unequal competition, there is an argument on social grounds. Often, certainly in inner-city constituencies such as mine, the only lights that are on in the evening are those of the corner shop. If we want access to shopping in local communities, there is a case for a differential in the taxation of small and large businesses.

Another aspect of the underlying fallacy of the Government's approach—their attack on the basis of rates—relates very much to the London area. The reason for the decline in small manufacturing firms in inner London since the war is nothing to do with the rating system. In the 1950s and 1960s, expanding firms needed more size to achieve minimal economies of scale. But it was part of the consensus of the Town and Country Planning Act 1947, and of its industrial development certificate legislation, to forbid the expansion of firms over 15,000 sq ft without permission from the Board of Trade—more recently, the Department of Trade and Industry. For those reasons, many manufacturing firms left inner London and went to the new towns, and many remaining supplier firms were forced to close down.

Another reason is the same theme of unequal competition. A study by the community development project in Canning Town showed that over half the job losses in the area over a 10-year period, up the mid-1970s, were caused not by small firms moving out because of high rates, but by large multinational companies deciding to close down and move either to the new towns or abroad. The Government are failing to address problems of this kind.

The same applies to the transitional problems of the small firms that flourish and succeed. There is evidence, in a recent study by Professor Storey of Newcastle university and others of the death rate of small firms, that of any 100 firms that have started within the last 10 years, 80 are now dead. Of the remaining firms, four on average are responsible for creating half the remaining employment.

The reasons for the failure of those firms often relate to their difficulties in coping not with local rates, but with the transition from being a small family-managed company to being a more modern multi-product, multi-division or multi-regional enterprise. Most do not make the transition, and the Government's industrial policies do not help, because they do not identify or even recognise the problems of that transition.

Such factors are far more important than rates in relation to the difficulties faced by small and medium-sized firms today. We are virtually the only European country without a real policy for small and medium firms. France has an SME policy; Germany has its Mittelstandspolitik. Other Governments admit the problems, but ours do not. They have wrongly identified rates as the crucial factor.

There is a further problem. Where is the incentive for local authorities to provide better services when the responsibility for the revenue is taken from them? [Interruption.] The hon. Member for Aldridge-Brownhills (Mr. Shepherd) made some forceful interventions earlier. If he wishes to intervene I shall be happy to respond, but other hon. Members wish to speak.

Where are the incentives for local authorities to provide decent roads, transport, signalling systems, police, fire and other protection services, environmental health, consumer protection and training if they are not responsible for raising the necessary revenue? That point has been raised by other hon. Members, and it is a forceful one. It is another reason why, in my view, the new clause supported by my hon. Friends is correct, and the Government's rationale is entirely wrong.

Photo of Mr Graham Bright Mr Graham Bright , Luton South

The one dread that most business people feel is that of the rates bill. It cannot be offset, and, however clever his accountant, the ratepayer must pay the money up front. Whenever the future of the rates is discussed, terror is projected into the hearts of most business men, but of small business men in particular.

It has been said this afternoon that there are many views on this issue. That is clear from the various reports by the organisations representing businesses, large and small, and by the valuers. The one factor common 10 them all is that, without doubt, there will be anomalies, and it is those anomalies about which I am concerned.

I am not talking only about retailers. There are many other small firms in our city centres, in areas that are premium sites, sometimes for historical reasons. They may be involved in crafts or in the service industries. Some historically own their premises, so they will not be too worried about rents, but will be very concerned about rates.

I pay tribute to my right hon. Friend the Secretary of State for listening to what some of us have said during recent months, and for his announcement this afternoon. I had prepared a very different speech, because I did not know what he was going to say, but what he has said answers most of the fears that are felt. There is to be a cushioning, and a ceiling is to be imposed. That is important. If we know that a change is to be made, but do not know whether it will be an increase or a decrease—if we just pay five times as much, or what—we obviously feel worried. I should be even happier if I knew what the ceiling was to be, but at least we know that there is to be one. We also know that there is to be a transitional period extending beyond what was originally put in the Bill, and that, too, will allay the fears of many businesses.

More important, my right hon. Friend has recognised that the new rating system could hit small businesses harder than large businesses. I am glad, therefore, that he has introduced a different ceiling for small businesses. Above all, this is the time when the Government should take powers to deal with the problems—although we can argue that we do not know precisely what they will be. We should support what my right hon. Friend has said, because he is taking powers that will be essential when the unified business rate is introduced.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

It may help my hon. Friend on the timing point if I say that I hope to receive the full analysis of the results of the revaluation in August or September this year. It will then be possible to suggest the type of scheme that can go out to consultation. That leaves 18 months before the new system comes into effect. There is therefore plenty of time for people to become aware of what they face. The details of the new valuation lists for individual businesses will not, of course, be available until many months later, but the scheme can be based on analysis of the results.

Photo of Mr Graham Bright Mr Graham Bright , Luton South

That was a most reassuring and helpful intervention.

Although to some extent we are going into the unknown, I am much more confident following this afternoon's statement by my right hon. Friend the Secretary of State. I believe that small businesses and businesses in general can put aside some of their fears. I hope that the organisations which have been campaigning will help small businesses to take account of what is happening and will not constantly pump up fears. I thank my right hon. Friend the Secretary of State for his comments.

Photo of Mr Rhodri Morgan Mr Rhodri Morgan , Cardiff West 7:30 pm, 21st April 1988

I am grateful for the opportunity to raise some points that have not yet been covered. A carrot has been offered to hon. Members who represent the large cities in the north of England: industries there will be better off following the introduction of the national non-domestic rate. Although initially it will possibly have a deleterious effect in the south of England, especially in the service and more buoyant sectors, a big carrot for the north has been presented at some of the working breakfasts which were attended by colleagues of the Secretary of State. It has been said that substantial reductions will be available in the north, especially in manufacturing industries.

Problems will arise in Cardiff, which has some similarities with the large cities of the north in that it is an intermediate area and, therefore, is recognised as requiring incentives to attract more business, jobs and manufacturing. However, in terms of the treatment of the national non-domestic rate, Cardiff seems to fit in more with large areas in the south of England and no concessions appear to have been given. The Cardiff area, its businesses and manufacturing will be substantially worse off, even though the Government categorise it as an intermediate area requiring assistance.

If the non-domestic rate had been in force this year, rates for Cardiff businesses would have increased by 12·3 per cent., which would have meant an additional tax on business of £5 million. An additional tax of £5 million makes little sense in an area designated by the Government as assisted and therefore needing all the assistance that it can get to create new jobs.

The Government will have to spend more money from their regional assistance budget to make good that £5 million tax imposed on Cardiff businesses. To paraphrase the words of the Secretary of State this afternoon, he intends the new system of non-domestic rates to create more small businesses. Some of those businesses were large before he started, but they will be small by the time he has finished.

Have the Secretary of State for the Environment and his Welsh Office colleagues given special thought to the implications of the national non-domestic rate, not just in the north where it has been presented as a carrot, but in parts of Wales which will do worse out of the new system than under the present system? Does Cardiff need an extra £5 million tax from the imposition of the national non-domestic rate?

Photo of John Butterfill John Butterfill , Bournemouth West

Does the hon. Gentleman appreciate the interrelationship between the national non-domestic rate and the revaluation which gives a true guide to what will happen? Since Cardiff in general has had lower rate valuation increases since 1973 than most of the rest of the country in respect of its commercial and industrial activities, it should end up as a net beneficiary of the overall system.

Photo of Mr Rhodri Morgan Mr Rhodri Morgan , Cardiff West

I think that the hon. Gentleman makes unwarranted assumptions which are not based on any local knowledge of Cardiff. I listened carefully to the Secretary of State, who appears to be under the misapprehension that rentals will be a kind of residual at the end of the revaluation exercise and the imposition of the national non-domestic rate. The national non-domestic rate may be imposed first and then, roughly at the same time, the rating revaluation, followed by reassessment of rent.

The Secretary of State said that the rent would probably be determined by what people could afford to pay not to have empty shops or factories. If rent levels are reassessed just before the introduction of the NNDR and the revaluation, the NNDR cannot be adjusted—it is a fixed sum—that could lead to massive brankruptcies. Free market forces combined with the imposition of a national non-domestic rate will, occasionally, benefit firms if the calculations are correct about rent being a residual, but in a capricious way.

Cardiff, as a business centre, has low rates and has been economical in spending public money. It will do badly out of the new system. There will be no incentive to retain the present system whereby, as part of its armoury in attracting new businesses, it has the sixth lowest business rates in England and Wales. With only intermediate area status to offer in Cardiff, there will be no incentive for proper accounting of public money by the county council, which is in charge of economic development.

Photo of Alistair Burt Alistair Burt , Bury North

I am sorry that the hon. Member for Vauxhall (Mr. Holland) is no longer in the Chamber. Recently I picked up at the remainders desk in Stamford public library a copy of his great tome "The Socialist Challenge". I congratulate the hon. Gentleman on it and am sorry that he is not here. I shall content myself with congratulating the hon. Member for Cardiff, West (Mr. Morgan) on his great work in last week's marathon. I hope that the cause for which he ran was well supported.

I echo the sympathy behind the amendments on small businesses and welcome the comments of my right hon. Friend the Secretary of State. As a representative of the north-west, may I say how keen we in the north are that concessions to small businesses are not made too much at the expense of the north. The north stands to gain from the unified business rate, and we are grateful for that. That advantage is much needed.

The north is on the brink of change. It has been through some of the dark days and is looking to a bright future. The vast majority of us know that the north is no longer simply the birthplace of Crompton, Kay and Arkwright and of the industries at the heart of the industrial revolution and Britain's energy in the 19th century. It is the place also where the newer technologies are finding a home and it is at the heart of the change which is affecting Britain in terms of world markets.

This is exactly the time when industry should look to locate in the north and especially the north-west. That is why the announcement of the uniform business rate found such favour with our businesses in the north. It is about time that we said loudly and clearly that there are plenty of reasons, for locating in the north. Location advantages provided artificially by Governments are not always the best reasons, but while they exist full use should be made of them.

Photo of Mr James Couchman Mr James Couchman , Gillingham

Although I can understand precisely why businesses in the north-west should welcome the proposed changes, does my hon. Friend accept that in many places in the south-east there is just as great a depression as in parts of the north? My hon. Friend the Member for Thanet, North (Mr. Gale) is sitting next to my hon. Friend. My constituency is in much the same position as his. There are places other than the City and Thames corridor in the south-east. Many businesses there view these changes with great alarm and apprehension.

Photo of Alistair Burt Alistair Burt , Bury North

I shall come to that point later, as I do not wish to get involved in a colleague-to-colleague battle.

As a matter of general principle, it is recognised by the House that the greatest difficulties that this country has faced since the war have been concentrated in areas which depended on traditional manufacturing industries which have suffered greatly because of industrial change. As we consider the problems of one nation, it is fair that we should examine the advantages for those areas and say, "Thank you very much, this is about time."

I shall say something about small businesses in a moment. Although we gain financial advantage in the north, there are other reasons for supporting the uniform business rate. First, revaluation had to come about. My constituents will face the greatest problems through the change in the domestic local government system precisely because revaluations were fudged for years. If there had been revaluations, we would not be facing such problems with the community charge.

I do not think that those problems should be laid at the door of the Government, in considering the changes in local government finance. The problems of revaluation in the south-east can be attributed to the same cause. We should have had revaluation earlier. We did not, and we will have to pay the price, but we would have had to pay the price sooner or later. It is about time for revaluation.

Secondly, we accept that the present system is so outrageously complex that a change had to come. We appreciate that the change in the system through the uniform business rate will simplify and help, and we welcome that.

Thirdly, little has been said about the prospect of index-linked changes following the creation of the uniform business rate. It has been mentioned only in passing. During the 1970s, when the rapid rise in inflation was causing very large changes in rates for businesses throughout the country, those who lived in the areas which suffered excessive changes in rates year after year will realise—or their businesses will realise—how welcome is index-linking. It is about time that that was introduced, and it will he important and welcome.

Photo of Alistair Burt Alistair Burt , Bury North

My hon. Friend is extremely perceptive. She recognises the importance of this matter. She is usually right, and she is right about this.

I now turn to the matter mentioned by my hon. Friend the Member for Gillingham (Mr. Couchman)—the problem of small businesses. If we talk seriously about one nation, and if those of us in the north recognise that the change to the uniform business rate will help the industrial areas of the north, it is also true that those in the north should be concerned about sudden changes elsewhere. It is not fair that we should take advantage of this measure if there is to be major disadvantage elsewhere.

As my hon. Friend rightly said, not everyone in the south and the south-east is a yuppie stockbroker. Many people in the south-east have problems and many small businesses have difficulties. If we are concerned about our position and if we welcome the changes that benefit us, surely it is right that we spare some thought for those who may be caught in a once-only position because of the revaluation arrangements and the changes in rate poundages. We recognise their difficulties and that is why we welcome the transitional arrangements to assist them. Far be it from us to say no. We shall all benefit sooner or later because problems for small businesses can lead to unemployment and bankruptcy, and we do not want that.

My right hon. Friend announced some sensible concessions. He has made very clear his intention to help small businesses and he knows the concerns of those of us in the north. We do not want to see those concessions made at our expense. My right hon. Friend is well aware of that. He nods in assent to show that he has taken that on board. However, we recognise that he can help small businesses in the south that might be affected badly. Because of the working of the uniform business rate, and because of its sectoral impact, parts of the north where there are many new businesses may face a rise rather than a fall in their rates and may benefit from the transitional arrangements. We recognise that in general we shall benefit, and we welcome what is being done for others.

Photo of Jim Cousins Jim Cousins , Newcastle upon Tyne Central 7:45 pm, 21st April 1988

Some of us from the north are concerned about the effect of the uniform business rate on the depressed Medway towns where there is a projected increase of 28 per cent. How does the Secretary of State propose to index-link rateable values as well as rate poundages?

Photo of Alistair Burt Alistair Burt , Bury North

That is a question for my right hon. Friend the Secretary of State.

Photo of Hon. Nicholas Ridley Hon. Nicholas Ridley , Cirencester and Tewkesbury

The simple answer is that I do not intend to index-link rateable values.

Photo of Alistair Burt Alistair Burt , Bury North

My right hon. Friend the Secretary of State has already announced that there will be a continuing system of revaluation. We have needed that for a long time. The fact that there has been no revaluation for so long has led to a big jump now. The hon. Gentleman missed precisely that point.

I conclude by saying that the changes in the uniform business rate will help many areas in the north and are to be welcomed. Because we are truly one nation, we recognise that we do not wish to cause problems for small businesses in the south who may face difficulties. The changes will benefit us, but we do not wish it to be at the expense of anywhere else. We very much welcome the concessions that my right hon. Friend announced today. We know that he has taken on board the concerns of the north and listened to the problems of small businesses in the south. We look forward to supporting him warmly in the Lobby this evening.

Photo of Mr Tony Worthington Mr Tony Worthington , Clydebank and Milngavie

I shall make only a brief contribution. I was hesitant about contributing to this debate, which is mainly about England and Wales, until I heard with amazement the words of the Secretary of State. I was going to complain that there was not to be a uniform business rate for Scotland in 1990 as there was for the rest of the United Kingdom, but to my amazement the Secretary of State announced that there were to be transitional arrangements in Scotland for a non-existent reform. He did not mention that to the Secretary of State for Scotland and spoke only about the harmonisation of rates, so I very much look forward to hearing from the Secretary of State next week the details of the transitional arrangements for that non-existent reform.

In Scotland, there would be great benefits from a uniform business rate, especially in the poorest areas, but it is not to be. In my constituency, a most deprived region, there would be a transfer of £59 million to Strathclyde. That is not to occur because the major loser would be Dumfries and Galloway, which happens to be in the constituency of the Minister of State, Scottish Office.

I am pleased to see signs of the north-south divide among Conservative Members. They now know what we have been suffering for many years. One of the major problems that will exist because there will not be a uniform business rate in Scotland, in terms of the slow progress of harmonisation between England, Wales and Scotland, is that the present disadvantage of high rateable values in Scotland will be made even worse. For example, the Scottish Exhibition Centre pays the same rates as the National Exhibition Centre, but is five times smaller. The rates for the pipeline which runs from Grangemouth to Wilton halve as the pipeline crosses the border.

In Scotland, the rates are about double what they are in the north of England. It is estimated that when the uniform business rate is introduced in England and Wales, there will be a further subsidy of about one third to the north of England. The implications of that for business in Scotland are truly horrendous. The Secretary of State seems to care not at all about that, which is odd, because he says that the major disadvantage of devolution is high taxation rates. However, he is applying a high taxation rate to Scotland by failing to harmonise the rates in England, Wales and Scotland.

I doubt whether the Secretary of State talks as often as he says he does to his right hon. and learned Friend the Secretary of State for Scotland, but I ask him to have further conversations with his right hon. and learned Friend about the possibility of harmonising the rating values of England, Wales and Scotland much more rapidly than the earliest possible estimate, which is 1995.

Photo of Mr Bill O'Brien Mr Bill O'Brien , Normanton

I have sat through the debate, and it is clear to me that the Secretary of State has lost the argument. It was suggested earlier that the Bill should be withdrawn, and that would be the best course to adopt.

My hon. Friend the Member for Clydebank and Milngavie (Mr. Worthington) has just referred to Scotland. The Opposition believe that further explanations should be offered about what is to happen in Scotland. If what the Secretary of State has told the House is to come about, changes will have to be made in Scotland.

The Secretary of State referred to the survey by the National Federation of Self-Employed and Small Businesses. He derided the federation's survey. On 19 February, the members of the Standing Committee on the Local Government Finance Bill received a letter from the secretary of the federation, saying that the federation was worried about the problems that the uniform business rate would create for small firms and that it had attempted to analyse the position throughout the country. According to the letter, information was supplied to the federation by valuation experts. That information was not supplied, as the Secretary of State suggested, by members of the federation.

It referred also to advice from the Under-Secretary of State for the Environment, the hon. Member for Southampton, Itchen (Mr. Chope), that the revaluation of small businesses would result in rateable value increases, on average, of between 5 and 6 per cent. The Under-Secretary of State also said that the uniform business rate poundage would be reduced—by an equal and opposite amount.

There will be substantial increases throughout the country if the uniform business rate, as outlined today by the Secretary of State, is imposed. We are told that a shop in Doncaster that now pays £1,184 in rates will have its rates increased by 34 per cent. to £1,587. In Barnsley, the rates of an industrial unit will be increased by 23 per cent. In Northumberland, the rates of a restaurant, now £3,500, will be increased to £6,075—an increase of 74 per cent. Many properties will face substantial increases. In Salop, Hereford and Worcester, for example, a furniture shop, whose rates are now £450, will, under the new system, be increased to £1,013—an increase of 125 per cent. Those are the kinds of increases that small businesses will have to bear.

The Secretary of State said that small businesses will need time to adjust to the revaluation. Much more attention needs to be paid to that timing, because small businesses are reeling under the Secretary of State's proposals. I hope that he will be more specific about the transitional period. We welcomed his reference to charities, but we await what the small print will reveal. Throughout his 51-minute speech the Secretary of State's only constructive proposal related to charities.

I have received representations from community and town councils about how they will fare under the distribution of the non-domestic rate. The Welsh community and town councils say that they will fare the worst, as they will receive no part of the non-domestic rate. I hope that the Secretary of State will consider the request that has been made by the town and community councils of Wales.

The hon. Member for Batley and Spen (Mrs. Peacock) referred to the Kirklees and Wakefield chamber of commerce and industry in west Yorkshire, which has written to all Members with west Yorkshire constituencies. It says: This Chamber has steadfastly supported the principles of regular revaluations and the introduction of a Uniform Business Rate…revaluation would redress this imbalance, whilst the introduction of UBR would provide a nationwide equitable system of business rating. The Minister for Local Government bandied about the figure of £700 million for the north of England. We are now told that the north of England will not benefit by that amount. The secretary of the Kirklees and Wakefield chamber of commerce and industry said that the chamber was writing to hon. Members to inform them of its very real concern that these benefits will not now accrue to local businesses. It is far from happy that the Secretary of State and the Minister for Local Government should initially have promised such significant revaluation benefits and the uniform business rate to businesses in the north. It suggests on behalf of industry and commerce in that area, that the Secretary of State should clarify how revaluation and the uniform business rate, will apply to the north.

It certainly seems that support for the unified business rate will diminish, that any promises that have been made by the Minister for Local Government have been withdrawn, and that these proposals will deprive local small businesses in west Yorkshire of £700 million. This situation cannot be tolerated. I hope that there will be a retraction of what the Secretary of State has said, because it is creating problems in the north of England.

Photo of Mr Bill O'Brien Mr Bill O'Brien , Normanton

I am sorry, but I have to say that the Secretary of State has made this clear. [HON. MEMBERS: "Give way."] Conservative Members have shown their reaction to that decision. The presentation by the Secretary of State tonight—

Photo of Mr Bill O'Brien Mr Bill O'Brien , Normanton

Once again, hon. Members have shown that this is an unpopular Bill. It has no support in the House. and it has no support outside. We ask that the House supports amendment No. 7.

Photo of Mr Bill O'Brien Mr Bill O'Brien , Normanton

This will give an opportunity to the House to divide again.

It being Eight o'clock, MR. DEPUTY SPEAKER proceeded, pursuant to the Orders [22 February and 13 April] and the Resolution [18 April] , to put the Question already proposed from the Chair.

The House divided: Ayes 206, Noes 329.

Division No. 271][8 pm
AYES
Abbott, Ms DianeCorbett, Robin
Adams, Allen (Paisley N)Cousins, Jim
Anderson, DonaldCox, Tom
Archer, Rt Hon PeterCrowther, Stan
Armstrong, HilaryCryer, Bob
Ashley, Rt Hon JackCummings, John
Ashton, JoeCunliffe, Lawrence
Banks, Tony (Newham NW)Cunningham, Dr John
Barnes, Harry (Derbyshire NE)Dalyell, Tam
Barron, KevinDarling, Alistair
Battle, JohnDavies, Rt Hon Denzil (Llanelli)
Beckett, MargaretDavies, Ron (Caerphilly)
Bell, StuartDavis, Terry (B'ham Hodge H'l)
Benn, Rt Hon TonyDixon, Don
Bermingham, GeraldDobson, Frank
Bidwell, SydneyDoran, Frank
Boateng, PaulDouglas, Dick
Boyes, RolandDuffy, A. E. P.
Bradley, KeithDunnachie, Jimmy
Bray, Dr JeremyDunwoody, Hon Mrs Gwyneth
Brown, Gordon (D'mline E)Eadie, Alexander
Brown, Nicholas (Newcastle E)Eastham, Ken
Bruce, Malcolm (Gordon)Evans, John (St Helens N)
Buchan, NormanEwing, Harry (Falkirk E)
Callaghan, JimEwing, Mrs Margaret (Moray)
Campbell, Menzies (Fife NE)Fatchett, Derek
Campbell, Ron (Blyth Valley)Fearn, Ronald
Campbell-Savours, D. N.Field, Frank (Birkenhead)
Canavan, DennisFields, Terry (L'pool B G'n)
Carlile, Alex (Mont'g)Fisher, Mark
Cartwright, JohnFlannery, Martin
Clark, Dr David (S Shields)Flynn, Paul
Clarke, Tom (Monklands W)Foot, Rt Hon Michael
Clay, BobFoster, Derek
Clelland, DavidFraser, John
Clwyd, Mrs AnnFyfe, Maria
Cohen, HarryGarrett, John (Norwich South)
Coleman, DonaldGarrett, Ted (Wallsend)
Cook, Frank (Stockton N)George, Bruce
Cook, Robin (Livingston)Gilbert, Rt Hon Dr John
Godman, Dr Norman A.Moonie, Dr Lewis
Golding, Mrs LlinMorgan, Rhodri
Goodhart, Sir PhilipMorley, Elliott
Gordon, MildredMorris, Rt Hon J. (Aberavon)
Gorman, Mrs TeresaMorrison, Hon Sir Charles
Graham, ThomasMowlam, Marjorie
Grant, Bernie (Tottenham)Mullin, Chris
Griffiths, Nigel (Edinburgh S)Murphy, Paul
Griffiths, Win (Bridgend)Nellist, Dave
Grocott, BruceOakes, Rt Hon Gordon
Hardy, PeterO'Brien, William
Harman, Ms HarrietO'Neill, Martin
Hattersley, Rt Hon RoyOrme, Rt Hon Stanley
Haynes, FrankParry, Robert
Heffer, Eric S.Patchett, Terry
Henderson, DougPike, Peter L.
Hicks, Robert (Cornwall SE)Powell, Ray (Ogmore)
Hinchliffe, DavidPrimarolo, Dawn
Hogg, N. (C'nauld & Kilsyth)Quin, Ms Joyce
Holland, StuartRandall, Stuart
Howarth, George (Knowsley N)Redmond, Martin
Howell, Rt Hon D. (S'heath)Rees, Rt Hon Merlyn
Howells, GeraintReid, Dr John
Hughes, John (Coventry NE)Richardson, Jo
Hughes, Robert (Aberdeen N)Roberts, Allan (Bootle)
Hughes, Roy (Newport E)Robertson, George
Hughes, Sean (Knowsley S)Robinson, Geoffrey
Hughes, Simon (Southwark)Rogers, Allan
Illsley, EricRooker, Jeff
Janner, GrevilleRowlands, Ted
John, BrynmorRuddock, Joan
Jones, Barry (Alyn & Deeside)Salmond, Alex
Jones, Martyn (Clwyd S W)Sheldon, Rt Hon Robert
Kinnock, Rt Hon NeilShore, Rt Hon Peter
Kirkwood, ArchyShort, Clare
Lambie, DavidSkinner, Dennis
Lamond, JamesSmith, Andrew (Oxford E)
Leighton, RonSnape, Peter
Lestor, Joan (Eccles)Soley, Clive
Lewis, TerrySpearing, Nigel
Litherland, RobertSteel, Rt Hon David
Livsey, RichardSteinberg, Gerry
Lofthouse, GeoffreyStott, Roger
Loyden, EddieStrang, Gavin
McAllion, JohnStraw, Jack
McAvoy, ThomasTaylor, Matthew (Truro)
McCartney, IanThompson, Jack (Wansbeck)
McFall, JohnTurner, Dennis
McKay, Allen (Barnsley West)Vaz, Keith
McKelvey, WilliamWall, Pat
McLeish, HenryWalley, Joan
McNamara, KevinWareing, Robert N.
McTaggart, BobWelsh, Andrew (Angus E)
McWilliam, JohnWelsh, Michael (Doncaster N)
Madden, MaxWigley, Dafydd
Mahon, Mrs AliceWilliams, Rt Hon Alan
Marek, Dr JohnWilliams, Alan W. (Carm'then)
Martin, Michael J. (Springburn)Wilson, Brian
Martlew, EricWise, Mrs Audrey
Maxton, JohnWorthington, Tony
Michael, AlunYoung, David (Bolton SE)
Michie, Bill (Sheffield Heeley)
Michie, Mrs Ray (Arg'l & Bute)Tellers for the Ayes:
Millan, Rt Hon BruceMr. Robin Maxwell-Hyslop
Mitchell, Austin (G't Grimsby)and Mr. Robert Adley.
NOES
Aitken, JonathanBaker, Rt Hon K. (Mole Valley)
Alexander, RichardBaker, Nicholas (Dorset N)
Alison, Rt Hon MichaelBaldry, Tony
Allason, RupertBanks, Robert (Harrogate)
Amery, Rt Hon JulianBatiste, Spencer
Amess, DavidBellingham, Henry
Amos, AlanBennett, Nicholas (Pembroke)
Arnold, Jacques (Gravesham)Bevan, David Gilroy
Arnold, Tom (Hazel Grove)Biffen, Rt Hon John
Ashby, DavidBiggs-Davison, Sir John
Aspinwall, JackBlackburn, Dr John G.
Atkins, RobertBlaker, Rt Hon Sir Peter
Atkinson, DavidBody, Sir Richard
Bonsor, Sir NicholasGoodson-Wickes, Dr Charles
Boswell, TimGorst, John
Bottomley, PeterGow, Ian
Bottomley, Mrs VirginiaGower, Sir Raymond
Bowden, Gerald (Dulwich)Grant, Sir Anthony (CambsSW)
Bowis, JohnGreenway, Harry (Ealing N)
Boyson, Rt Hon Dr Sir RhodesGreenway, John (Ryedale)
Braine, Rt Hon Sir BernardGregory, Conal
Brandon-Bravo, MartinGriffiths, Sir Eldon (Bury St E')
Brazier, JulianGriffiths, Peter (Portsmouth N)
Bright, GrahamGrist, Ian
Brittan, Rt Hon LeonGround, Patrick
Brooke, Rt Hon PeterGrylls, Michael
Brown, Michael (Brigg & Cl't's)Gummer, Rt Hon John Selwyn
Browne, John (Winchester)Hamilton, Hon Archie (Epsom)
Bruce, Ian (Dorset South)Hamilton, Neil (Tatton)
Buchanan-Smith, Rt Hon AlickHampson, Dr Keith
Budgen, NicholasHanley, Jeremy
Burns, SimonHargreaves, A. (B'ham H'll Gr')
Burt, AlistairHargreaves, Ken (Hyndburn)
Butcher, JohnHarris, David
Butler, ChrisHawkins, Christopher
Butterfill, JohnHayes, Jerry
Carlisle, John, (Luton N)Hayward, Robert
Carlisle, Kenneth (Lincoln)Heathcoat-Amory, David
Carrington, MatthewHeddle, John
Carttiss, MichaelHicks, Mrs Maureen (Wolv' NE)
Chalker, Rt Hon Mrs LyndaHiggins, Rt Hon Terence L.
Channon, Rt Hon PaulHill, James
Chapman, SydneyHind, Kenneth
Chope, ChristopherHogg, Hon Douglas (Gr'th'm)
Churchill, MrHolt, Richard
Clark, Hon Alan (Plym'th S'n)Hordern, Sir Peter
Clark, Dr Michael (Rochford)Howard, Michael
Clark, Sir W. (Croydon S)Howarth, Alan (Strat'd-on-A)
Clarke, Rt Hon K. (Rushcliffe)Howarth, G. (Cannock & B'wd)
Colvin, MichaelHowell, Rt Hon David (G'dford)
Conway, DerekHughes, Robert G. (Harrow W)
Coombs, Anthony (Wyre F'rest)Hunt, David (Wirral W)
Coombs, Simon (Swindon)Hunt, John (Ravensbourne)
Cope, JohnHunter, Andrew
Couchman, JamesHurd, Rt Hon Douglas
Cran, JamesIrvine, Michael
Currie, Mrs EdwinaIrving, Charles
Curry, DavidJack, Michael
Davies, Q. (Stamf'd & Spald'g)Jackson, Robert
Davis, David (Boothferry)Janman, Tim
Day, StephenJessel, Toby
Devlin, TimJohnson Smith, Sir Geoffrey
Dickens, GeoffreyJones, Gwilym (Cardiff N)
Dicks, TerryJones, Robert B (Herts W)
Dorrell, StephenJopling, Rt Hon Michael
Douglas-Hamilton, Lord JamesKellett-Bowman, Dame Elaine
Dover, DenKey, Robert
Dunn, BobKing, Roger (B'ham N'thfield)
Durant, TonyKing, Rt Hon Tom (Bridgwater)
Eggar, TimKirkhope, Timothy
Emery, Sir PeterKnapman, Roger
Evans, David (Welwyn Hatf'd)Knight, Greg (Derby North)
Evennett, DavidKnight, Dame Jill (Edgbaston)
Fallon, MichaelKnowles, Michael
Farr, Sir JohnLamont, Rt Hon Norman
Favell, TonyLang, Ian
Fenner, Dame PeggyLatham, Michael
Field, Barry (Isle of Wight)Lawrence, Ivan
Finsberg, Sir GeoffreyLawson, Rt Hon Nigel
Fookes, Miss JanetLee, John (Pendle)
Forman, NigelLeigh, Edward (Gainsbor'gh)
Forsyth, Michael (Stirling)Lennox-Boyd, Hon Mark
Forth, EricLester, Jim (Broxtowe)
Fowler, Rt Hon NormanLightbown, David
Fox, Sir MarcusLilley, Peter
Franks, CecilLloyd, Sir Ian (Havant)
Freeman, RogerLloyd, Peter (Fareham)
French, DouglasLord, Michael
Fry, PeterLuce, Rt Hon Richard
Gale, RogerLyell, Sir Nicholas
Gardiner, GeorgeMcCrindle, Robert
Gill, ChristopherMacfarlane, Sir Neil
Goodlad, AlastairMacKay, Andrew (E Berkshire)
Maclean, DavidShephard, Mrs G. (Norfolk SW)
McLoughlin, PatrickShepherd, Colin (Hereford)
McNair-Wilson, P. (New Forest)Shersby, Michael
Major, Rt Hon JohnSims, Roger
Mans, KeithSkeet, Sir Trevor
Maples, JohnSmith, Sir Dudley (Warwick)
Marland, PaulSmith, Tim (Beaconsfield)
Marlow, TonySoames, Hon Nicholas
Marshall, John (Hendon S)Speed, Keith
Marshall, Michael (Arundel)Spicer, Sir Jim (Dorset W)
Martin, David (Portsmouth S)Spicer, Michael (S Worcs)
Mates, MichaelSquire, Robin
Maude, Hon FrancisStanbrook, Ivor
Mawhinney, Dr BrianStanley, Rt Hon John
Mayhew, Rt Hon Sir PatrickSteen, Anthony
Mellor, DavidStern, Michael
Miller, HalStevens, Lewis
Mills, IainStewart, Allan (Eastwood)
Mitchell, Andrew (Gedling)Stewart, Andy (Sherwood)
Mitchell, David (Hants NW)Stewart, Ian (Hertfordshire N)
Moate, RogerStokes, John
Monro, Sir HectorStradling Thomas, Sir John
Montgomery, Sir FergusSumberg, David
Moore, Rt Hon JohnSummerson, Hugo
Morris, M (N'hampton S)Tapsell, Sir Peter
Morrison, Hon P (Chester)Taylor, Ian (Esher)
Moss, MalcolmTaylor, John M (Solihull)
Moynihan, Hon ColinTaylor, Teddy (S'end E)
Neale, GerrardTebbit, Rt Hon Norman
Needham, RichardThatcher, Rt Hon Margaret
Nelson, AnthonyThompson, D. (Calder Valley)
Neubert, MichaelThompson, Patrick (Norwich N)
Newton, Rt Hon TonyThorne, Neil
Nicholls, PatrickThornton, Malcolm
Nicholson, David (Taunton)Thurnham, Peter
Nicholson, Emma (Devon West)Townend, John (Bridlington)
Onslow, Rt Hon CranleyTownsend, Cyril D. (B'heath)
Oppenheim, PhillipTracey, Richard
Page, RichardTredinnick, David
Paice, JamesTrippier, David
Parkinson, Rt Hon CecilTrotter, Neville
Patnick, IrvineTwinn, Dr Ian
Patten, Chris (Bath)Vaughan, Sir Gerard
Patten, John (Oxford W)Waddington, Rt Hon David
Pattie, Rt Hon Sir GeoffreyWakeham, Rt Hon John
Pawsey, JamesWaldegrave, Hon William
Peacock, Mrs ElizabethWalden, George
Porter, Barry (Wirral S)Walker, Bill (T'side North)
Porter, David (Waveney)Walker, Rt Hon P. (W'cester)
Portillo, MichaelWaller, Gary
Powell, William (Corby)Walters, Dennis
Price, Sir DavidWard, John
Raffan, KeithWardle, Charles (Bexhill)
Raison, Rt Hon TimothyWarren, Kenneth
Rathbone, TimWatts, John
Renton, TimWells, Bowen
Rhodes James, RobertWheeler, John
Riddick, GrahamWhitney, Ray
Ridley, Rt Hon NicholasWiddecombe, Ann
Ridsdale, Sir JulianWiggin, Jerry
Rifkind, Rt Hon MalcolmWilkinson, John
Roberts, Wyn (Conwy)Wilshire, David
Roe, Mrs MarionWinterton, Mrs Ann
Rossi, Sir HughWolfson, Mark
Rost, PeterWood, Timothy
Rowe, AndrewWoodcock, Mike
Rumbold, Mrs AngelaYeo, Tim
Ryder, RichardYoung, Sir George (Acton)
Sackville, Hon TomYounger, Rt Hon George
Sainsbury, Hon Tim
Sayeed, JonathanTellers for the Noes:
Scott, NicholasMr. Robert Boscawen and
Shaw, David (Dover)Mr. Tristan Garel-Jones
Shelton, William (Streatham)

Amendment accordingly negatived.

It being after Eight o'clock, MR. DEPUTY SPEAKER proceeded to put forthwith the Question on amendments moved by a member of the Government up to the end of clause 81 and new clause 15.