Clause 16 : Interaction with BID levy
Moved by Lord Davies of Oldham
34: Clause 16, page 12, line 9, at end insert—
"( ) Schedule (BRS-BID arrangements) (BRS-BID arrangements) has effect; and—
(a) subsections (1) to (4) apply in relation to BRS-BID levy (within the meaning given by that Schedule) as they apply in relation to BID levy, but
(b) the rules relating to BRS-BID levy need not be the same as the rules relating to BID levy."
My Lords, I shall also speak to Amendments 37 and 42, which are grouped with Amendment 34. These amendments involve property owners in business improvement districts in areas where a business rate supplement is in place. I think that it would be helpful if I were to give a little bit of background first, so that noble Lords can consider the amendments in context.
One of the recurring themes during the passage of the Bill in this House and the other place has been the important relationship between BRS and BIDs. The debates in both Houses have underlined the strong support for BIDs. There is a genuine desire across all parties that BIDs should continue to thrive after the introduction of BRS. I understand that one of the main concerns of practitioners of BIDs and business supporters is that, if BID levy payers are faced with a BRS on top of any existing levy, ratepayers may be inclined to vote against proposals when they come up for renewal. Fourteen out of the existing 20 BIDs in London are due for renewal ballots by 2012, so there is real concern that the introduction of BRS could have a negative impact on existing and future BIDs.
As a response to these concerns, Nick Raynsford, the right honourable Member for Greenwich and Woolwich, tabled amendments during the Committee and Report stages of the Bill in the other place to strengthen the role of property owners in BIDs and to enable the contributions to the BID to be spread between occupiers and owners, providing an effective offset for occupiers against their BRS liability. Under the current BID arrangements, property owners may make voluntary contributions to BIDs, but they are not entitled to vote in a BID ballot and there is no way of ensuring that, if some property owners in an area make voluntary contributions, others do as well.
The amendments that I will move today deal with the same broad issues that featured in the earlier amendments tabled by Nick Raynsford in the other place and by the noble Baroness, Lady Valentine. The amendments make arrangements for a new type of BID, to be known as a BRS BID. This is to distinguish it from the current BID arrangements. This new type of BID could be established in areas where both a BID and BRS exist and would allow for the owners of property to be involved in BID arrangements. It will be for those proposing BIDs or existing BID companies to decide whether they wish to involve property owners in their BID arrangements—I emphasise that it will not be compulsory.
A BRS BID could fund the same project as the main BID. Revenues from property owners could be used as additional income for the BID project or they could be used to offset the contributions of those ratepayers who are liable for both the BID levy and the BRS. Alternatively, the revenue stream from property owners could be used to fund a different project, quite separate from the BID project. As is the case for BIDs under the current arrangements, it will not be possible for a BRS BID to be established unless there has been a successful ballot on the proposals.
I am sure that the House will appreciate that these amendments are not quite the end of the story. Involving property owners in BIDs raises a number of complex issues. That is why the new schedule contains a number of powers that will allow the Government to include the detail on the BRS BIDs in secondary legislation. The regulations will deal with issues such as who should be considered a property owner, how the rateable value of non-domestic properties should be attributed to property owners for the purposes of the double-lock ballot, and the detailed arrangements for ballots.
In addition, I noted from Grand Committee that the noble Lord, Lord Bates, raised concerns regarding possible cost-shunting between owners and tenants, a concern that the Government share. The noble Baroness, Lady Valentine, when moving her amendment in Grand Committee on the involvement of property owners in BIDs, said that she thought that this would not be a significant risk. Her view was based on the experience of property owners making voluntary contributions under the existing BID arrangements, which she did not feel there was a need to address in the Bill. While I am encouraged by her experience on this issue in the context of voluntary property owner contributions, I recognise that there is some disquiet on the matter. As such, it would have been irresponsible of us as a Government to ignore these concerns. We have therefore taken a regulation-making power in the new schedule so that we can address the issue through secondary legislation if the need arises.
The amendment to Clause 29 provides that several of the powers in the new schedule will be subject to the affirmative resolution procedure. This covers the important issues—for example, the rules on ballots and how votes may be weighted. We will of course engage closely with stakeholders as we develop our proposals for secondary legislation.
There is one specific point that I should raise before I conclude. I have already said that these amendments can apply only in those areas where a BRS is in place. I understand that there was a debate in Grand Committee about whether it would be possible to extend these provisions to BIDs in all areas. It might be helpful to clarify the position on that. We have pursued this matter with the Lords Public Bill Office, which has confirmed that amendments dealing with the inclusion of property owners in BIDs outside a BRS area would not be possible. The term that the Public Bill Office uses is whether an amendment would be "relevant". The BRS Bill has a single purpose, which is to introduce the BRS scheme. The Bill refers to BIDs, but only to the extent that they are affected by the introduction of BRS. However, any stand-alone amendments to the BIDs regime unconnected to the introduction of BRS would not be considered "relevant".
I hope that, with that explanation and with the amendments that I have brought forward, the House will feel that it is able to support the changes that we have made. Accordingly, I beg to move.
My Lords, I welcome these amendments, although I have a few comments to attach. I congratulate the Minister on the way in which he has grasped this complex issue in such a short period. Waiting for this part of the proceedings in the House to start, I saw that he was responsible for answering two Questions on foreign affairs. He has a vast amount of responsibility, so I am full of admiration for the way in which he has grasped the complex detail of this piece of legislation and I am grateful for the way in which he has taken us through it.
As the Minister mentioned, this amendment is a response to one tabled in Committee by the noble Baroness, Lady Valentine, to which my name was also attached on behalf of these Benches. We support this endeavour. I join the Minister in paying tribute to my noble friend Lord Jenkin of Roding, who has continuously played a significant role not only in the development of business improvement districts as a concept but also in fusing together how the business rate supplement, as proposed, would fit in with what is being discussed.
We had a vigorous debate in Committee. It is perhaps most striking that, when the noble Baroness, Lady Andrews, accepted the proposal in Committee, it took two lines in about two pages of debate, yet these amendments run to some six pages in the schedule. A significant amount of a parliamentary draftsperson's time has gone into putting this together. I do not want to be uncharitable, given that this is a concession from the Government, but tabling such a lengthy amendment and schedule at such a late stage in the process has made it quite difficult for people to get to grips with this and how it will work on the ground. We reserve the right to come back at Third Reading to look at it in more detail.
We are dealing with a great many regulation-making powers. As this has not been built into primary legislation, we would like reassurances about when it might come in. It is crucial that it is brought in as soon as possible because the BRS Bill will soon be an Act—sadly, from our point of view. Business improvement districts and property owners who want to contribute in this way need that protection as soon as possible. Can the Minister clarify those points? I give notice that we will touch on this at Third Reading.
My Lords, as this is the first time that I have spoken at this stage in the Bill, I must again declare my interest as an executive councillor in the London Borough of Sutton. As the Minister pointed out, these measures are of particular relevance and importance in London, although not with my council. Also, I have been asked to give the apologies of my noble friend Lady Hamwee. Like everyone else, she was not expecting to be here this afternoon and unfortunately has an unbreakable commitment outside London. I know that she is deeply sorry not to be with us for these continuing proceedings, although that gives me the chance to speak on this.
I welcome these proposals as far as they go. Following on from the noble Lord, Lord Bates, we understand the reasons why they have been tabled late in the day, but we have had relatively short notice of what are complex provisions. I am grateful to the Minister for his careful explanation. Would he consider not moving these amendments today but bringing them back at Third Reading? That would give people—particularly those outside this Chamber, ourselves and those who cannot be here because we were not expecting to be doing this today—more opportunity not only to consider the amendments but also to read and understand what the Minister has said. We can consider what further comments we—and they—may wish to make.
My Lords, that is an inspired idea and I wish that I had thought of it. I certainly want to be associated with it and join the noble Lord in his call.
My Lords, I am grateful to the noble Lord, Lord Bates. This is probably the first time in a long political career that I have ever inspired a Conservative. It is never too late.
I ask the Minister seriously to consider my suggestion, not because we are opposed to this proposal—I am sure that we will not be; indeed, I welcome it—but because it would allow more time for understanding and consideration and would be a better way of bringing back any further questions and points that might be necessary next week.
The Minister explained carefully why it is possible under the Long Title to apply the amendment only to those areas with BIDs that will have a business rate supplement. We have to accept that limitation but, as the Government have now accepted the wider principle, it would be helpful to know what they will do—and when will they do it—to cover that wider principle for areas that are not currently covered by the Bill.
I have a few other, more detailed questions, which I will ask in the expectation of a reply not so much today as when the amendment is moved again at Third Reading, as I hope will be the case. Does paragraph 2(5) of the proposed new schedule restrict local discretion in terms of offsetting? Does paragraph 5(7) mean that, if an owner and an occupier vote, the rateable value is double for the purpose of the double-lock ballot? Can the Minister confirm that paragraph 6(4) requires a precise mathematical calculation and that the rating is not arbitrary or discretionary? In paragraph 7(2) on the regulations prescribing matters relevant to the veto, will this exactly replicate the veto arrangements provided by Section 51 of the Local Government Act 2003?
Perhaps asking those questions illustrates why it is a good idea not to continue to deal with the amendments today but for the Minister to move them at Third Reading and come back with the answers to those questions if he is not able to do so today. We welcome the amendment, despite the late stage of the Bill.
My Lords, I am very grateful for the generous remarks made by the Minister and my noble friend Lord Bates. Yes, we have been arguing this case for some time. However, by arguing the very simple proposition that owners as well as occupiers should be entitled to take part in a BID—something which appears to have been achieved by one and a half lines of print in the proposed new schedule under paragraph 2(6)—we are faced, as my noble friend Lord Bates said, with more than six pages of print in the amendment. I was quite shocked when I saw how much this involved and immediately sought advice. I am sure that Ministers who have been in this position before will recognise that if an amendment is tabled late one week with a view to being debated on the following Monday—in this case, Tuesday—it is exceedingly difficult to get advice over the weekend from those who are concerned with operating the legislation. I am sure that I am not the only one who fired off a lot of e-mails and left telephone messages to try to find out what happened.
I declare an interest as a joint president of London Councils; indeed, I was presiding at its annual general meeting this morning. The Minister will recognise that we have here in London a two-tier system for BRS. The levying authority will of course be the Greater London Authority, with the express purpose, as has been said throughout the Bill's passage, of getting a substantial business contribution towards the Crossrail project. The authority is the levying authority but the boroughs will be the billing authority, and it is very important to draw the distinction between those two functions. It is the London boroughs, represented by London Councils, that are now expressing considerable anxieties about this amendment because of its apparent complexity and, in some cases, obscurity. I bow to the expertise of the noble Lord, Lord Tope, in being able to identify a series of specific questions. However, I discussed this matter this morning with members and officials in London Councils, and they are faced with a considerable problem. This amendment imposes on them as the billing authorities a whole new range of functions and duties once the Greater London Authority, in the person of the mayor, has decided to levy a BRS. That is what is causing me some anxiety.
Like my noble friend Lord Bates, I think that the proposal put forward by the noble Lord, Lord Tope, is a good one. During the morning I have been thinking: if the amendment goes into the Bill now, how can we bring the Bill back on Third Reading without in fact tabling more amendments? Perhaps we will want to table amendments, but it is too early to say. The experts in London Councils are busily poring over this to see how it will work. The question they asked me this morning—I could not answer them—was how it is intended to work. One only needs to look through, as I have been doing at the weekend and more recently, the complexities of all the paragraphs in this new schedule. I cannot answer the question of how it will work. I am not sure that I am any the wiser this afternoon despite the Minister's very patient explanation of what it is about. He told us what it is intended to achieve but he has not been able to tell us—in the time available, as we are anxious to get on to other things—how it will work.
I believe that we have a date pencilled in for Third Reading. However, I really do ask that we should have enough time with all the various bodies. That includes not only London Councils. The British Property Federation is an obvious body to consult. The Greater London Authority is clearly involved, because it is relying on the London boroughs as the billing authorities. I have also been in touch with various other bodies. These bodies have been overwhelmed trying to grapple with this very substantial schedule in a few days over the weekend when people were not in the office. The boroughs will inevitably act as pathfinders on these provisions, because once the Bill gains Royal Assent and the mayor has made his proposal for a BRS, it is the boroughs that will be under the time pressures to bring the legislation into effect. Even at first sight, they said that they will be very hard-pressed indeed to get the new systems and software in place to meet the deadlines. The addition of these provisions adds to the uncertainty and threat of delays in an already very tight schedule.
I therefore ask the Minister—this might be something that we will need to come back to in more detail on Third Reading—whether he can give an undertaking that this will not extend the time limit or add extra time and cost burdens for the London boroughs acting as billing authorities. I was told this morning that London Councils has been in touch with the Scottish and London BIDs, which have told him that it is not straightforward to consult owners. I have said ever since I introduced the original Private Member's Bill that I think that it is right that there should be an option to bring in owners. However, I have been told by those who will have to operate this scheme—namely the billing authorities—that this is not wholly straightforward. Suddenly to be confronted, as they were late last week, with this substantial, six-page government amendment, in order to achieve this one little change adding owners to occupiers for the purposes of a BID, makes them feel very hard done by. The Minister needs to recognise that.
I have sought to defend the proposal on the grounds that we wanted the option of adding owners to occupiers in BIDs. However, I could not possibly have anticipated that it would take six pages of legislation which was presented to this House less than a week—indeed, five days—before we were expected to debate it. This is not the way to legislate.
The Minister made it perfectly clear in Grand Committee that the Government have been minded to do this since Nick Raynsford moved the amendment in another place. Therefore, there seems to have been an astonishing dilatoriness in getting the amendment before this House. In those circumstances, I support the suggestion that the Minister might feel it right not to press the amendment on Report today but to re-table it, perhaps in the light of discussions that he and his officials may have over the next few days with, for instance, London Councils, so that we might consider it within a reasonable timescale and add it to the Bill before it receives Royal Assent. That is the least that we can ask in the circumstances.
I apologise if I appear to be overcritical but, having been faced this morning with the anxiety of London Councils—of which the noble Baroness, Lady Hamwee, the noble Lord, Lord Graham of Edmonton, and I are the joint presidents—I feel it right that we should represent to the House the very real anxieties that it feels about the administration of this complex schedule. I hope the Minister will be able to respond to the valuable suggestion of the noble Lord, Lord Tope, so as to give us more time to consider these details.
My Lords, my noble friend Lord Jenkin of Roding fears that he may be overcritical, but the Minister may be reassured to hear that I may be undercritical. I have a particular admiration and sympathy for the Minister in that, as I said yesterday when I made my first contribution and I had my first exposure to the Bill, I am conscious of the enormous burden he is carrying by taking over responsibility for the Bill in the absence of the noble Baroness, Lady Andrews.
Arising out of that admiration, I would not think that anybody who has taken part so far in our proceedings on Report would not regard it as totally reasonable for the Minister to take this proposal away at this juncture. I cannot help feeling that the quality of the Bill would be better if he, like me, had a little more time to grapple with the issues.
My Lords, I am a little disappointed. As the noble Lord, Lord Bates, indicated when he first spoke, we are giving effect, in principle, to strong positions adopted in Committee and amendments that were tabled then. I think the noble Lord, Lord Tope, was also prepared to recognise this, as of course was the noble Lord, Lord Jenkin. The amendments followed those that were tabled in the other place. The Government have accepted the principle proposed by these amendments. The Committee stage was over a week away. We tabled these amendments last Tuesday.
I sympathise with the noble Lord, Lord Jenkin, about the difficulties, in opposition, of responding to government legislation. It is a little while since I was last in opposition, and may years go by before I experience opposition again. From the dim and distant past I have a memory of the difficulties of responding to government legislation, but it as not as though the Government are involved in some sleight of hand to advance government policy against the wishes of the House—far from it. The Government are responding to pressure from the House, and tabled amendments, to adopt this principle. I apologise to the noble Lord, Lord Jenkin, if giving effect to a simple principle involves a fairly substantial schedule. That is the way of the world, as the noble Lord, Lord Jenkin, knows rather better than I do, particularly with regard to local government. He will forgive me if I am not too exercised about that. I respect the anxieties of noble Lords.
I make the obvious point. If noble Lords are saying that they may feel obliged to raise the issue again at Third Reading if the Government press ahead today, I am modest enough to think that it probably does not matter what I say at the Dispatch Box at present. Third Reading beckons and so, no doubt, do a few amendments, as they should if noble Lords are anxious. It is right that the Government should respond to pressure from the Committee in the passage of the Bill. It is also right that I should protect the timetable for the Bill. There is nothing exceptional about the timetable. We are following Report stage, after Committee stage, for the proper duration. The noble Lord, Lord Tope, knows only too well that Third Reading will take place at its duly appointed time.
I understand the anxiety of the noble Lord, Lord Jenkin, about the mechanics, problems and burdens of implementation. If he asks me to give some assurance that there will be no burdens, of course I cannot do so. Of course such legislation imposes burdens on local authorities as billing agents. I recognise the validity of his point that, where local authorities are merely the billing agents, rather than the developers of policy, they may have rather more reservations because they have no direct say in resource allocation. That is true of local authorities in many instances, whether they are involved in billing arrangements for a superior authority or not. As an issue of principle, it is built into local government structures.
What can I say to noble Lords? I am not prepared to withdraw the amendments because we have not broken any issue of timetable. The principle behind these amendments is not only accepted in the House. The Government were persuaded of the principle and not the other way around. In responding as we have—on Report, at the proper stage—we are only fulfilling our duty. I understand that we will sustain a risk and I will enjoy the debate that I probably have to look forward to at Third Reading, when some anxieties may still be expressed on this matter. I am not prepared to withdraw amendments that are in line with what I detect the House to support in principle, and to which the Government are, in principle, giving effect.
A great deal of the noble Lord's anxieties concern the mechanics of implementation. I agree with him that it is important that local authorities should have a full understanding of how the provision is meant to work. My department will give its fullest support to local authorities in working through these issues. However, we are not talking about implementation next week. The Bill must proceed to Third Reading, be considered further by the Commons and receive Royal Assent. The noble Lords, Lord Tope and Lord Bates, referred to regulations. We hope to deliver these in the autumn. However, that timetable is conditional on the fullest consultation with those who will have to give effect to this matter. Of course, we will consult on these matters and we have several months in which to do so. Given what the noble Lord, Lord Jenkin, his noble friends and the noble Lord, Lord Tope, indicated, I have no doubt that views will be expressed fairly freely by those who will have to implement the legislation. However, our task today is to produce a Bill that gives effect to the will of the House, as the House sees the issues of principle.
I venture to say that although issues relating to the mechanics of implementation are not unimportant—I do not seek to dismiss them—if I thought that the Bill would arbitrarily impose duties for the day after tomorrow which people could not possibly fulfil, of course I would change my perspective on it. But we have time to deal with these issues. I emphasise that we have support in both Houses. I emphasise again that the British Property Federation fully supports these amendments. The noble Lord, Lord Jenkin, has a very proud history of work in this area and recognises that the principle that we are putting forward is one to which he has long been concerned to give effect.
I recognise that it is a function of diligent and effective opposition never to frustrate the will of a duly elected Government. However, sometimes it is proper for them to delay processes to enable further consideration to take place. We still have Third Reading when these points of detail may be considered further. However, these amendments give effect to an important principle that represents a government concession to representations that have been made to us during the course of the Bill—a principle which it seems to me is supported on all sides of the House. It is always tempting to make life a little easier by agreeing with the opposition Front Benches and with the forceful contribution of the noble Lord, Lord Jenkin, to say nothing of the noble Lord, Lord Brooke, who speaks with such knowledge on these issues. However, these amendments were tabled at an appropriate time—Tuesday of last week—and give effect to a principle which is widely supported. It is a beneficial and helpful development with regard to the Bill. Accordingly, I commend the amendment.
My Lords, before the noble Lord sits down, does he recognise that if this amendment is included in the Bill—despite our arguing that it could be postponed until Third Reading and the Government making it clear that they will not do that—we shall have no alternative but to table amendments to it in order to bring it back at Third Reading? There is no debate to agree a clause or a schedule at Third Reading. Given the procedural rules of the House, we can achieve this only by tabling amendments. There may be quite a number of amendments because we will want to look at the individual clauses in the light of the advice that we will get between now and then on the practicability of the scheme which the Government have embodied in this complex schedule.
If the Minister recognises that that is the process towards which he is now steering us, all well and good, but he has to recognise that if the billing authorities, which will bear the whole burden of the ballots and of sending out the billing notices and so on, are to be satisfied that this is a workable scheme, then his officials and the officials of London Councils will have to work very hard over the next few days in order to reach that position. That is where we have got to. We will have to do it by amendment and not by being able to discuss the clause.
My Lords, I understand the position but the noble Lord, Lord Jenkin, has never avoided hard work and neither have the Government; nor should others in bringing benefits to the communities that we serve.
Amendment 34 agreed.
Amendment 35 not moved.
Clause 22 : Administrative expenses
Moved by Lord Tope
36: Clause 22, page 14, line 26, after "incurs" insert "(including expenses incurred in preparation for collection or recovery)"
My Lords, Amendment 36 stands in my name and that of my noble friend Lady Hamwee. I have already declared my interest but I think that I should make it specifically clear here. I am a member of the executive—known elsewhere as the cabinet—in a London borough council which will be directly affected by these proposals.
The purpose of the amendment is to make it absolutely clear and beyond doubt in the Bill that the subsection in Clause 22 that refers to the costs of collection or recovery also includes the set-up costs—the costs of implementing this procedure. As has already been said, London borough councils are the billing authorities and the GLA is the levying authority. We know that if and when the Bill is enacted, as I am sure it will be, London borough councils will be billing within a very short space of time. Indeed, the president of London Councils, the noble Lord, Lord Jenkin of Roding, has already made clear the considerable anxiety—certainly not unwillingness; on the whole we welcome this—in the organisation about the very short timescale for implementing all this and also about the additional costs of doing so. Most London borough councils are what are called "floor authorities"; in other words, although their grant entitlement may increase, the actual money that they receive will not. They will therefore be under particularly great financial pressure in the coming years, given the financial outlook, and that can only increase anxiety concerning the costs that will be incurred.
It is stated in the Bill, and reasonably so, that the costs of collection or recovery will be met from the levy raised, but it is not clear—and we want it to be made clear now—that the initial costs, which will probably be quite considerable, in setting up and initiating this proposal will also be met in that way. That can be made clear beyond doubt by including this amendment in the Bill.
A further issue arises. There may well be, let us say, differences of opinion between the levying authority—in this case, the GLA—and London borough councils collectively or even individually as to what are reasonable costs either of recovery and collection or, perhaps even more likely, of setting up the process. How does the Minister foresee those differences ultimately being resolved? I am sure he will say that with good will they should be resolved between the levying authority and the billing authorities. Of course that is the case, but I think that those of us who are realistic know that that is not always achievable. Does he foresee any role for the Government in quickly resolving any outstanding disputes about those additional costs?
I hope that the Minister can give us some comfort on this. There is considerable anxiety among London councils about the very short timescale for resolving all these issues, for carrying out the implementation and for recovering in full all the costs involved in so doing.
In moving this amendment, I have spoken specifically and exclusively about London because we know, without doubt, that London authorities will be the pathfinders for this. It will happen in London before it happens anywhere else. They are pathfinders, the only pathfinders. It will apply, in due course, to all other parts of the country that find themselves in a position of having levying authorities that are not also the billing authorities. I hope that the Minister will feel able to accept this amendment and, on that note of optimism, I beg to move.
My Lords, I am not quite sure whether I should support this measure. The noble Lord managed to inspire me as part of his previous contribution. At this stage of the Bill, reaching Clause 22 on administrative expenses, he has probably done something towards the opposite in terms of talking through on this amendment on collection or recovery.
There is an entirely serious point wrapped up in the amendment. It gives us an opportunity to talk about what the administrative costs would be. Clause 22(3) states:
"If the chargeable period of a BRS begins, or a variation of a BRS takes effect, later than the first day of a financial year, the levying authority may not, in respect of that financial year, act in reliance on provision made by virtue of subsection (1)".
That will therefore probably be coterminous with the collection period for the business rates in general. As boroughs are the collecting authority, one would hope that efficiencies would be introduced so that costs could be minimised. Therefore, the maximum amount is made available to go into the given project by combining business rates into one bill. I am happy to listen to what the noble Lord says in response to that point, and I will lend our support if needed.
My Lords, I am grateful to the noble Lord, Lord Tope, for moving the amendment. It enables me to clarify the issue that he raised, which the noble Lord, Lord Bates, also emphasised. It is an important issue and I recognise it to be so. It enables me to step a little way back from looking like I had no concern about billing authorities with regard to the previous amendment. I wanted to defend the positions set out in the government amendments. However, in representing that argument, I did not want in any way to present the problems facing the billing authorities as not being ones that the Government need to consider.
I want to reassure noble Lords that we recognise that certain costs could initially fall on building authorities. They do not want to be out of pocket for those costs. Clause 22 of the Bill gives the Secretary of State the power to authorise the billing authorities to use a prescribed proportion of BRS revenues to meet their collection and enforcement expenses where the levying authorities levy the BRS for the beginning of the financial year. That is what we expect to happen in most cases. The noble Lord, Lord Bates, said that he hoped that it would happen in all cases. That might be expecting a little too much. He is right, however, that we would want that to be the norm.
Where BRS is levied part of the way through a financial year, these costs cannot be recovered from BRS revenues. Instead they would have to be met by the levying authority. Clause 22 provides that the Secretary of State may make regulations prescribing the proportion of BRS revenues that may be retained by billing authorities when the supplement is collected as part of the normal billing round. Where costs have to be met by the levying authority, the Secretary of State may cap the amount that the levying authority is required to reimburse the billing authority. Amendment 36 would enable billing authorities to recover the costs they incur in preparing for the collection and recovery of BRS.
We have issued a consultation paper with our proposals for secondary legislation, which will clearly be needed to enable BRS to be levied. The consultation paper covers the arrangements for the collection and enforcement of BRS, including the costs of collection, and envisages that those costs will cover set-up costs as well. The consultation paper floats different options for calculating the costs of collection. It invites views on whether those costs should be a fixed percentage of the annual total amount of BRS to be collected by the billing authority or whether they should be a fixed amount. A third option is for it to be agreed locally between the levying authority and the billing authority, subject to an upper limit to provide reassurance for business. The noble Lord, Lord Tope, suggested that there might be agreement between the authorities on that, although he may be sceptical of it being obtained in every case.
Our intention, subject to the outcome of that consultation, is that the billing authority should be able to recover its reasonable costs incurred in preparing, collecting and enforcing BRS. The three-month consultation period will give stakeholders the opportunity to express their views on those options or to come forward with alternative ways to address the issue—or any of the proposed arrangements for administering BRS. That gives scope for the point emphasised in the previous amendment: we will not set out to implement the legislation until we have had that full consultation.
I should draw attention to another provision where costs may initially fall to the billing authority as part of the preparatory work involved in establishing a BRS. Clause 25 enables levying authorities to obtain certain information from billing authorities for the purposes of setting a BRS and drawing up a prospectus. Such information may include the addresses and rateable values of non-domestic properties in the area. The costs of providing that information may vary according to the type of information requested by the levying authority. We have therefore provided in Clause 25(3) for billing authorities to make a charge for providing that information, but it will be for the billing authority to decide whether it would be appropriate to make such a charge.
I therefore hope that the noble Lord will accept that we have considered the issues. In discussing the previous group of amendments, I did not intend to be cavalier about implementation—and I hope that I was not—in seeking to defend the amendments. This amendment has given me the chance to show that the Government have thought about the issues. There will be full consultation. There will be options with regard to collection. I hope that the noble Lord feels that he can safely withdraw his amendment.
My Lords, before the Minister sits down, I am very grateful to him for that response. We have already made it clear that time is now very tight. Can he say more specifically when the Government expect to be able to give their response to the consultation? He said in reply to the noble Lord, Lord Jenkin, "the autumn". We know from experience that autumn, like any other season, can extend for quite a long period. I know that the Minister is aware of the very tight timescale in London. I hope that he may be able to say now that, at the very least, it will be early autumn, not late autumn.
My Lords, the noble Lord appreciates that we are offering a period for the consultation process. He is asking me how quickly the Government will be able to be definitive in their conclusions on that. We all have an interest in getting the legislation effective as early as possible.
My Lords, autumn is later than the summer, and the noble Lord knows why it is not possible for us to deliver that this summer. Given the period of consultation we need and the necessity of evaluating that consultation, autumn is the best that I can do for him.
Amendment 36 withdrawn.
Moved by Lord Davies of Oldham
37: Before Schedule 2, insert the following new Schedule—
1 (1) This Schedule applies in the following four cases.
(2) The first case is where—
(a) a levying authority whose area is in England imposes a BRS, and
(b) at the time of the imposition, all or part of the authority's area is comprised in a business improvement district.
(3) The second case is where—
(a) a levying authority whose area is in England may impose a BRS (the conditions in section 4 having been satisfied), and
(b) all or part of the authority's area is comprised in a business improvement district.
(4) The third case is where—
(a) a billing authority whose area is in England makes BID arrangements, and
(b) the business improvement district in respect of which the arrangements are made comprises all or part of an area in which a BRS has been imposed (and the imposition has not come to an end).
(5) The fourth case is where—
(a) a billing authority whose area is in England makes BID arrangements, and
(b) the business improvement district in respect of which the arrangements are made comprises all or part of an area in which a BRS may be imposed (the conditions in section 4 having been satisfied).
2 (1) The billing authority may make arrangements under this Schedule ("BRS-BID arrangements") in respect of the business improvement district.
(2) For that purpose, it does not matter whether the BID arrangements in respect of the district are yet in force.
(3) The purpose of BRS-BID arrangements is to enable—
(a) the projects specified in the arrangements to be carried out for the benefit of the district or those who live, work or carry on an activity in the district, and
(b) those projects to be financed (in whole or in part) by a levy ("BRS-BID levy") imposed on persons who have a relevant property interest.
(4) A project specified in BRS-BID arrangements need not be a project that is specified in the BID arrangements.
(5) Where a project specified in BRS-BID arrangements is a project that is specified in the BID arrangements, the ways in which the project may be financed by BRS-BID levy include offsetting the amount of a liability for BRS-BID levy against the amount of a liability for BID levy.
(6) A person has a relevant property interest if the person has an interest of a prescribed description in a hereditament that is—
(a) situated in the district, and
(b) shown in the local non-domestic rating list maintained for the billing authority.
(7) "Prescribed" means prescribed by regulations; but the regulations may prescribe only freehold, leasehold or commonhold interests.
3 (1) BRS-BID levy may be imposed only for periods falling within—
(a) the chargeable period of the BRS, and
(b) the period in which the BID arrangements are in force.
(2) The length of a period for which BRS-BID levy is imposed, and the day on which it begins, are to be such as may be specified in the BRS-BID arrangements.
(3) The amount of BRS-BID levy for such period—
(a) is to be calculated in such manner as may be provided in the BRS-BID arrangements, and
(b) may be different for different cases.
(4) Regulations may make provision as to the manner in which the amount of BRS-BID levy is to be calculated; and sub-paragraph (3)(a) accordingly has effect subject to such provision.
Liability for BRS-BID levy
4 (1) BRS-BID arrangements must specify the description of persons who are to be liable for BRS-BID levy for the period for which the levy is imposed.
(2) A person is to be liable for BRS-BID levy for that period if the person comes within that description at any time within that period.
(3) Amounts paid to the authority by way of BRS-BID levy must be credited to the revenue account kept by the authority under section 47(1) of the 2003 Act for the purposes of the BID arrangements.
(4) Regulations may provide that a person who would, but for this sub-paragraph, be liable to pay each of the BRS, BID levy and BRS-BID levy in respect of the same hereditament is instead to be liable to pay only—
(a) the BRS, and
(b) either BID levy or BRS-BID levy.
(5) Regulations may make provision for securing that a tenant of a hereditament is not required by reference to the tenancy to make payments the effect of which would be to reimburse the landlord to any extent for amounts payable by the landlord by way of BRS-BID levy.
Approval in ballot
5 (1) BRS-BID arrangements are not to come into force unless proposals for the arrangements ("BRS-BID proposals") are approved by a ballot of those who are to be liable for the proposed BRS-BID levy.
(2) BRS-BID proposals are not to be regarded as approved by a ballot held for the purposes of sub-paragraph (1) unless the following two conditions are satisfied.
(3) The first condition is that a majority of persons voting in the ballot have voted in favour of the proposals.
(4) The second condition is that A exceeds B.
(5) "A" is such amount as is calculated by reference to rateable value in the manner prescribed in regulations and is attributable to persons who voted in favour of the proposals.
(6) "B" is such amount as is calculated by reference to rateable value in the manner prescribed in regulations and is attributable to persons who voted against the proposals.
(7) Regulations making provision for the purposes of sub-paragraphs (5) and (6) may, in particular, provide for the amounts in question to be calculated by aggregating the rateable values of each hereditament in respect of which a person voted in the ballot.
(8) Sub-paragraphs (1) and (2) are subject to provision made in regulations under paragraph 10(1)(g).
Combination with ballot on BID proposals, etc.
6 (1) Regulations under paragraph 10(1)(g) may, in particular, provide for a ballot on BRS-BID proposals—
(a) to be combined with a BID ballot;
(b) to be held at the same time as (but not to be combined with) a BID ballot;
(c) to be held within such period from the date of a BID ballot as the regulations may prescribe.
(2) Regulations making provision for a case within sub-paragraph (1)(a) may provide for one or other of the following—
(a) for the BRS-BID proposals to be regarded as approved if conditions prescribed by the regulations are satisfied in relation to them;
(b) for the proposals to be regarded as approved only if conditions so prescribed are satisfied in relation to them and conditions so prescribed are satisfied in relation to the matter on which the BID ballot is held.
(3) Provision by virtue of sub-paragraph (2) may authorise the person entitled to draw up the BRS-BID proposals to decide which of paragraphs (a) and (b) of that sub-paragraph is to provide the basis for the assessment of whether the proposals may be regarded as approved.
(4) A condition prescribed for the purposes of sub-paragraph (2) may, in particular, involve weighting a person's vote by reference to the extent of the person's liability to BID levy or BRS-BID levy.
(5) A "BID ballot" is a ballot held for the purposes of section 49 or 54 of the 2003 Act in relation to the BID.
(6) Nothing in this paragraph is to be taken as limiting the power conferred by paragraph 10(1)(g).
7 (1) This paragraph applies where BRS-BID proposals are approved by a ballot held for the purposes of paragraph (5)(1).
(2) The billing authority may, in such circumstances as regulations may prescribe, veto the proposals within such period from the date of the ballot as the regulations prescribe.
(3) In deciding whether to exercise the veto, the billing authority must have regard to such matters as the regulations prescribe.
8 (1) Regulations may authorise the disclosure of information to a billing authority so as to enable it to identify persons who, as regards a hereditament of the description given in paragraph 2(6), have an interest of a description prescribed for the purposes of that paragraph.
(2) Regulations may for the purposes of this Schedule confer on a billing authority such power as an acquiring authority has under section 5A of the Acquisition of Land Act 1981 (c. 67) (power to require information); and for that purpose the regulations may apply (with or without modification)—
(a) that section;
(b) section 5B of that Act (offence);
(c) paragraphs 5A to 5E of Schedule 9 to the 1988 Act (civil penalty);
(d) provision made by virtue of paragraph 5F of that Schedule.
(3) Provision by virtue of sub-paragraph (2) may not modify a provision so as to impose a penalty greater than that imposed by the provision being modified.
(4) A billing authority—
(a) may not use information provided to it by virtue of this paragraph except in so far as is necessary for the purposes of this Schedule, and
(b) may not disclose the information (except in accordance with an enactment, in pursuance of an order of a court or with the consent of any person to whom the information relates).
Application of Part 4 of the Local Government Act 2003
9 (1) The following provisions of the 2003 Act apply to BRS-BID arrangements, BRS-BID levy and BRS-BID proposals as they apply to BID arrangements, BID levy and BID proposals—
(a) section 43 (additional contributions and action);
(b) section 44 (duty to comply with arrangements);
(c) section 46(3) and (4) (liability);
(d) section 51(4) to (6) (veto);
(e) section 52(1) (appeal against veto);
(f) section 53 (commencement);
(g) section 54(1) to (3) (duration).
(2) For the purposes of sub-paragraph (1)—
(a) a reference to a chargeable period in relation to BID levy is to be read as a reference to a period for which BRS-BID levy is to be imposed;
(b) a reference to a ballot for the purposes of section 49 of the 2003 Act is to be read as a reference to a ballot for the purposes of paragraph 5;
(c) a reference to the two conditions in section 50 of the 2003 Act is to be read as a reference to the two conditions in paragraph 5;
(d) a reference to a veto under section 51 of the 2003 Act is to be read as a reference to a veto under paragraph 7;
(e) a reference to an appeal under section 52 of the 2003 Act is to be read as a reference to an appeal by virtue of sub-paragraph (1)(e);
(f) a reference to non-domestic ratepayers liable to a proposed BID levy is to be read as a reference to persons liable to a proposed BRS-BID levy.
(3) Section 47(3) of the 2003 Act (revenue account) applies as if after "BID arrangements" there were inserted "or BRS-BID arrangements".
10 (1) Regulations may make such provision for the purposes of this Schedule as may be made in regulations under any of the following provisions of the 2003 Act—
(a) section 42 (joint arrangements);
(b) section 47 (revenue account)
(c) section 48 (administration);
(d) section 49 (proposals);
(e) section 52 (appeal against veto);
(f) section 54 (duration);
(g) section 55 (ballots).
(2) Regulations under this paragraph may amend, or apply (with or without modification), a provision of regulations made under—
(a) the relevant provision of the 2003 Act referred to in sub-paragraph (1);
(b) section 56 of that Act (further provision).
11 In this Schedule—
"the 2003 Act" means the Local Government Act 2003 (c. 26);
"business improvement district", "BID arrangements" and "BID proposals" each have the meaning given in Part 4 of the 2003 Act."
Amendment 37 agreed.
Schedule 2 : Accounting
Amendment 38 not moved.
Clause 27 : Special introductory provision
Moved by Lord Davies of Oldham
39: Clause 27, page 17, line 5, leave out subsections (2) and (3)
My Lords, I shall speak also to Amendments 40 and 41 which are grouped with Amendment 39. In Committee, the noble Baroness, Lady Valentine, brought forward an amendment to exempt the Crossrail project from the requirement for a ballot. That amendment clearly had the support of the Committee and, in response, my noble friend Lady Andrews said, on behalf of the Government:
"I have listened to the repeated calls in your Lordships' House and during the passage of the Bill in another place for an exemption for Crossrail. I certainly agree with the argument that it brings major benefits across the capital, commands wide support, and is already underpinned by an Act of Parliament. Therefore, with the agreement of the Committee, I would like to accept the noble Baroness's Amendment 62".—[Official Report, 18/5/09; col. GC 532.]
This group of amendments makes only minor adjustments to the amendment proposed in Committee. My officials have worked with parliamentary counsel and I am advised that, to be absolutely confident that the amendment achieves the aim that the Committee clearly supported—that is, to give the Crossrail project even greater certainty against challenge or arguments for a ballot, which would in turn import possible delay and risk to the project—these adjustments are, indeed, necessary. With regard to the ballots, there has been no change between the outcome that the amendment of the noble Baroness, Lady Valentine, would have achieved and the new subsection that the Government have tabled.
Finally, we have taken the opportunity of extending the exemption from the ballot requirement for Crossrail to cover the additionality requirement in Clause 3 of the Bill rather than leaving it to regulations. To ensure consistency with the position for ballots, we are making it clear in the Bill that the additionality requirement will not apply to Crossrail. That is to give certainty to the Crossrail BRS, a project which, I know, enjoys the support of the whole House.
My Lords, as the Minister said, this relates to a debate that took place in Committee on an amendment proposed by the noble Baroness, Lady Valentine, which I supported as a co-signatory. We were grateful for the concession given, which recognises the importance that we all attach to the Crossrail project. Indeed, our argument throughout the Bill, as a point of principle, is that the Bill should have been attached to the Crossrail Bill as it relates particularly to that project, which we support. The amendment will ensure that that important infrastructure project can go ahead safely.
In contrast to our previous debate on the government amendments, it is noticeable that whereas this amendment embraces a simple concept that results in a series of amendments running for six lines, a previous one embraced a simple concept and turned it into a schedule of six pages. That is a big difference. We do not want to sound ungrateful but that is a bit like somebody giving you £20 and you feeling quite happy about getting a £20 note when the other person is actually giving you £20 in penny coins. You would just want to take the time to count that on the way out.
With no distrust intended on the Government, in these chastened times we want to make sure that we have everything that we wanted in the previous amendment. However, the Minister did not grant that concession and we are therefore forced to take it on trust and count it before Third Reading. We certainly welcome these amendments and are grateful for the spirit in which they were offered. They are certainly the right thing to do and we are happy to be behind them.
My Lords, perhaps I may place on the record that we, too, welcome these amendments, although we made it clear at previous stages that we do not share the Conservative view that the Bill should be restricted only to Crossrail. Nevertheless, we welcome the amendments.
My Lords, I am grateful to both noble Lords for their support.
Amendment 39 agreed.
Amendments 40 and 41
Moved by Lord Davies of Oldham
40: Clause 27, page 17, line 27, at end insert—
"( ) Sections 3(1)(b), 7(1) and 10(7) do not apply to a BRS that the Greater London Authority proposes to impose, or imposes, in reliance on subsection (4) if the chargeable period of the BRS begins on or before
41: Clause 27, page 17, line 28, after "make" insert "other"
Amendments 40 and 41 agreed.
Clause 29 : Regulations etc.
Moved by Lord Davies of Oldham
42: Clause 29, page 19, line 3, at end insert—
"( ) regulations under paragraph 4(5), 5, 6 or 8 of Schedule (BRS-BID arrangements) (BRS-BID arrangements: liability, ballots, disclosure of information);
( ) regulations under paragraph 10 of that Schedule which include provision within sub-paragraph (1)(f) or (g) of that paragraph (BRS-BID arrangements: alteration etc. of arrangements, ballots)."
Amendment 42 agreed.
Moved by Lord Bates
43: Clause 29, page 19, line 10, at end insert—
"( ) A statutory instrument containing regulations under this Act may not impose on a ratepayer retrospective liability to pay a BRS without error or default on the part of a ratepayer."
My Lords, these two amendments, which have been tabled in my name and that of my noble friend Lord Cathcart, are designed to provide an important guarantee to avoid retrospection in business rate supplements taxation and to highlight a staggering injustice that continues to be waged against portside industries in this country by virtue of the change in valuation procedures. The effect of these two amendments is simply to restrict the liability affecting business rate supplement if an alteration has been made due to an error that was not the fault of the business rate supplement payer. If it was not the fault of the BRS payer, there should be no retrospective collection of tax or levy under this Bill.
I hope that that statement seems obvious to all sides of the House. If there is no fault, how on earth can retrospection be imposed on businesses? These amendments point out an injustice that has resulted in just such a situation. There was a change in the way in which valuations were operated following a review carried out in 2006 by government tax inspectors at the Valuation Office Agency. Each port used to pay a single levy for all the businesses operating within the port area. Following the 2006 review, the Valuation Office Agency decided that each firm in a port area was in separate occupation. Therefore, from 55 ports in England and Wales, the levy would now be made on 1,600 portside operators. Rather than giving advance warning to those businesses of the change, the Valuation Office Agency retrospectively backdated the next tax bills not to 2006 but to 2005. As a result, portside operators, which are already on the brink and in many cases clinging on for dear life as viable businesses, were landed with an additional tax of £124 million.
In introducing this retrospective tax, the Government disregarded their own rules. The rules that they contravened were that there should be an impact assessment, but none was made; that there should be a consultation exercise with those affected, but no such exercise was carried out; and that there should be an assessment of the impact on the wider economy, but no such assessment was undertaken. The policy also contravenes the Treasury's own guidance on retrospective taxation.
The Government have admitted that this was a mistake. In fact, John Healey acknowledged that during a debate in another place, when he said that it was a regrettable mistake. As evidence of regret over the nature of the mistake, the Government introduced a small concession, whereby payment of the backdated bill could be spread over eight years. They felt that that would be sufficient to deal with the problem.
However, that is certainly not the case. Many businesses face huge increases in their bills. I wish to mention a couple of the businesses that have come to my attention and made representations to me. Andrew Dixon of Freshney Cargo in Grimsby talked about his additional rates bill taking his annual business rates bill from £48,000 to nearly £900,000, which is an additional £850,000. Even spread over eight years, that is still an additional £100,000 per year, which needs to be found at a time when all other sorts of business rates have been increased and when trade is sinking dramatically.
The impact of this has led to many people losing their jobs. Victoria Ayling has done an outstanding job in drawing attention to this injustice, highlighting a number of cases in the Grimsby area. She recalled an instance where a father had just been made redundant as a result of this tax and his son had to take a forced reduction in his number of hours. She pointed to the impact on companies such as Conoco and DFDS. It has a huge impact on the car industry. I know from my own experience of visiting the CAT depot at Teesport that it has a huge impact, as CAT occupies a large space of land for allowing landing vehicles into this country.
This was debated in this House when my noble friend Lord Attlee ably proposed a Motion on it. In that debate we heard from a number of highly experienced and knowledgeable people about the impact on businesses. I will give some of the examples that were mentioned. In the port of Hull, the effect of this backdating amounts to £25 million. In Liverpool, it amounts to £22 million. In Immingham it is £19 million; in Goole it is £6.5 million; and in Grimsby it is £4.8 million. The Minister lamented yesterday as to why his party was failing so poorly compared to the Conservative Party in Wales. Here might be one of the answers. In Cardiff, the bill for this additional tax has increased by £1.6 million.
This is a spectacular own goal when the Government are trying to introduce measures to save jobs. Here is a very simple measure. It does not cost the £50 billion to bail out the banks; it only costs £124 million to correct something that had nothing to do with the businesses themselves. It was not their fault; it was the fault of the Valuation Office Agency, which has contravened at least five of the commitments that the Government gave about retrospection. This amendment, by guaranteeing that such a series of events could not recur in the context of the Business Rate Supplements Bill, further raises the pressure on the Government to step forward and address this serious injustice. I beg to move.
My Lords, as the noble Lord, Lord Bates, said, this issue has been debated at least twice in this House, albeit not in relation to this Bill. He has again made the case very well and very clearly. The Government, not the businesses, are responsible for the mess. It is quite wrong that the businesses should be penalised for mistakes that the Government and their agency have made. It is especially wrong and regrettable that they should be penalised in the current financial climate.
The Government have to find a way of resolving this issue. They have so far said that they will allow back-payments to be spread over eight years but, as has been made clear, that is a very limited concession—if it is a concession at all—and has still left unresolved issues in respect of companies' balance sheets and liabilities.
I am not sure that these amendments are the full solution to the problem—I do not think that they are intended to be—but they are part of the solution. For those reasons, we shall certainly give our support should the noble Lord wish to seek the opinion of the House on the amendment. I hope that that will add to the pressure on the Government to resolve the mess that they have got themselves into but from which the ports, a vital industry, are suffering.
My Lords, I support the amendment. It comprises a single sentence in plain English, which is quite a change from some of the discussion on the Bill. It is quite evident that it is desirable to put it into the Bill because of the history referred to by the noble Lords, Lord Bates and Lord Tope. I was present in the discussion when the noble Earl, Lord Attlee, raised this point before and I was extremely unhappy about the way in which the businesses in the ports were treated; I thought that it was quite wrong, but that our ability to correct it was also very limited. A minor correction was made by deferment of some of the charge, that is true, but, in my view, that was not good enough. The advantage of the amendment is that it makes quite explicit in the Bill that we are not going to have retrospective liability imposed on a ratepayer when there is no error or default on his part. That seems to me self-evident. You might think that it is so self-evident that it should not be put in the Bill, but I would like to see it in the Bill. I will certainly vote for the amendment if we are invited to do so.
My Lords, I am grateful to my noble friend Lord Bates for moving his amendment. He referred to the debate that I initiated on this issue when we considered the non-domestic rating legislation. What he forgot to mention was that the House agreed with me and approved my Motion of regret. The amendment is sensible and equitable. It ensures that the costs of errors in the collection of business rates are borne by those responsible for the errors and not by the innocent parties. It promotes the efficient and timely collection of business rates, which is critical to the maintenance of public finances both now and in the future. I urge the Minister to agree to my noble friend's amendment and, if necessary, to support it in the Division Lobby.
My Lords, I declare an interest, somewhat improbably as someone who has never worked within the City of London, as an honorary fellow of the Securities and Investment Institute. I am going to take the liberty of quoting briefly from its most recent quarterly Investment Management Review, in an article entitled "Devastation in Shipping". It states:
"The scale of the drop is manifest in two separate statistics. The Baltic Dry Index, the index of shipping costs for dry bulk commodities (iron ore, coal, graphite and grains), fell to a 22-year low of 663 on
Those two paragraphs are an index of the scale of the problem that is facing ports at the present time.
I, too, have had representations such as my noble friend, Lord Bates, reflected in his intervention. I shall not delay your Lordships' House with the details at such a time, after my noble friend's eloquence, but for the businesses that have written to think that it is worth while raising these issues with me, who has no background in this matter, is an index of their seriousness. If, despite all this, the Government regard this matter as a storm in a teacup, as was implied by the Minister in Committee, we are, of course, all aware that Lord Sugar, as he not yet is, is riding to the aid of SMEs and I hope that we can be confident, on issues like this, that, if the sugar gets into the teacup, it will be—to coin the phrase—shaken and not simply stirred. I support my noble friend's amendment.
My Lords, I congratulate my noble friend on moving this amendment and on the arguments that he put. He mentioned that the Government think that they have solved the problem by deferring the rates and allowing them to be paid over an eight-year period. However, as the noble Lord, Lord Tope, suggested, while that might help cash flow in the short term, it does not solve the problem, which is that the total of this huge tax liability must, by law, be booked immediately in the accounts of the businesses as a deferred liability and their auditors will need to be satisfied that this deferred liability is matched by sufficient assets, otherwise they must declare the business technically insolvent. What bank in their right minds will lend money to a company that is technically insolvent? This just compounds the problems for these wretched businesses round the ports. Even the Government's own Insolvency Service is warning Ministers that this could push many firms into insolvency.
My Lords, this is an important pair of amendments and I want in my response to distinguish between two features of the debate. I shall come on to the question of the ports in a moment, but let us consider first the issue of principle. The amendments would prevent BRS from being levied retrospectively as a result of a change in the rating list. I am all too conscious that, if there is one word that threatens to dog Ministers in this noble House, it is "retrospection". I had the blissful experience of defending the concept during the banking legislation and the scars will stay with me for a considerable time, although the House was persuaded of the justifiable nature of retrospection in that legislation.
However, I do not have the same inhibition with this Bill—very far from it. I understand why the amendments have been prompted by the difficulties in the ports, which I shall come on to. However, BRS builds on the non-domestic rating system. In particular, liability to BRS and the level of liability in respect of any given property will be based on the rating list entry for that property. Rating lists, as the whole House will be aware, can be changed by valuation officers to ensure accuracy and, with that, the accuracy of rates liability. Sometimes this can lead to backdated increases in rates liability. That is a fact of our rating system, so I am not prepared to have the amendment moved as if the Government were, at this stage, introducing an element of retrospection that no one had been aware of. After all, it is also the case that the other aspect is true—"retrospective" might mean that there is a reduced liability for rates, and refunds would be paid out in such a case.
There is the possibility of backdated increases in rateable value causing higher BRS bills than businesses were anticipating, but we are faced with the practicalities involved in ascertaining the need for changes to a rating list and then establishing what change is required. Backdating is an essential part of the normal functioning of the system. Let us disabuse ourselves of the idea that there is anything exceptional about what the Bill proposes with regard to BRS.
In introducing his amendments, the noble Lord, Lord Bates, has given an instance. It does not clarify the issue, though; rather, it clouds it. Not that I am saying that he does not have the right to introduce the concerns of the ports, nor am I going to resile from the fact that my noble friend confessed to an element of fault that had occurred with regard to that position.
The port issue does not, however, affect the principle. It is only right that businesses will be asked to pay the BRS that is due on their property and to pay at the correct level, otherwise we are going to have businesses occupying properties of the same rateable value being liable for different bills. It would be unfair to those businesses that have been paying the correct supplement if others were paying a smaller bill due simply to an inaccuracy on the rating list and because they were not asked to pay the correct supplement. It is also worth reiterating that BRS bills, like rates bills, will go down as a result of a change to the rating list in certain circumstances. This is a normal function of the system.
With regard to the ports, the Chancellor announced in the Pre-Budget Report that the Government will legislate to give businesses more time to pay in certain circumstances because we recognise the problems that port businesses face. Legislation has been passed so that businesses facing such bills in those circumstances will not be required to pay their backdated liability within the financial year at present but will be able to do so in equal interest-free instalments over eight years.
I heard what the noble Earl, Lord Cathcart, said about the problems for businesses faced by this bill. However, if a business that had arrived at this position because of backdating had ensured, operating under legislation constructed to make this possible, that the liability should obtain over eight years, it would be a very odd judgment by a bank or by anyone else doing business with it that it was not a viable business because of this particular feature.
Although the review of ports, and the subsequent separate assessment of a number of new properties within ports, highlighted the issue of the impact of backdated liability, the legislative changes implemented will apply to all ratepayers occupying properties that meet the criteria, including those in ports that meet the criteria, to benefit from a schedule of payments for backdated liability. The legislation is working. As at
To conclude, the provisions in the Bill are entirely consistent with the national business rate system. They ensure that the liability to business rate supplements is fair to all. We had a particular problem with the ports, which the Government have addressed. That issue is not relevant to the principle obtaining on our business rating system in this country. This Bill is fully consistent with the ratings system that we operate. Accordingly, I hope that the noble Lord will feel able to withdraw his amendment.
First, the Minister says that this is entirely consistent with other business taxation. It is not. The businesses being impacted and blighted by the levying of this backdated tax were not liable. It was not the case that they had the incorrect rating or had somehow made the wrong declaration themselves. They were not liable at all for this taxation. It has been introduced this year and backdated to 2005. That is an entirely different thing. Of course there needs to be the backdating element, but it needs to be kept where the fault is with the business itself.
Consider for a moment the implication of what the Minister is saying. It removes all pressure from the Valuation Office Agency to take responsibility for its actions. It can go on in the clear knowledge that it does not have to keep an up-to-date list or advise people in a timely way. It can go on ad infinitum and backdate measures at any level that it requires.
Secondly, on the impact on real businesses and real jobs, trading conditions will come and go. They have been referred to in this debate. This is not something that is the result of trading conditions; it is the result of an acknowledged mistake, an error by the Valuation Office Agency and the Government, which is costing people in this country their jobs and causing businesses to close at a time of recession. It is a spectacular own goal on the part of the Government. One would have hoped that they would respond more favourably to it.
My Lords, of course I accept the point that the noble Lord is making. My noble friend apologised in Committee for the mistake that gave rise to this situation. The Government are making reparation. Yet we are discussing a Bill about the business rate supplement; this is an amendment to that Bill. I maintain that the Bill follows the normal pattern of business rate levies in this country and I fail to understand why one instance—a mistake that produced detrimental consequences to which the Government have responded—should jeopardise the arrangements in this Bill when the Bill follows the pattern of business rates across the country.
My Lords, I am sorry that the Minister is so agitated about people pointing out the harsh facts of what government mistakes are costing in jobs and businesses in this country. This matter was debated and referred to in this House. The result was that the Motion put forward by my noble friend Lord Attlee was supported by 77 votes to 69. Despite all the evidence, the Government continued to make no response. Despite all the apologies, to which the Minister has added liberally today, there has been no acknowledgement that there need to be reparations that say to valuation officers that they cannot backdate in this instance, that they made a mistake, that they must put it right and that they must not take it out on hard-pressed businesses and hard-working families around this country. The Minister has not convinced me at all. In fact, he has reinforced my view on this matter. I want to press the amendment and test the view of this House.
Moved by Lord Bates
44: Clause 29, page 19, line 10, at end insert—
"( ) For the avoidance of doubt, it is hereby declared that Regulation 14(6) of the Non-Domestic Rating (Alteration of Lists and Appeals) (England) Regulations 2005 (S.I. 2005/659) (which provides that the alterations made to correct inaccuracies in local rating lists shall have effect from the day on which alteration is made) shall apply to any lists affecting the liability to pay BRS; and where such an alteration affecting liability to pay BRS is made, it shall in no case have retrospective effect without error or default on the part of a ratepayer."
Amendment 44 agreed.