Moved by Lord McKenzie of Luton
That this House do not insist on its Amendments 1, 2, 3, 4, 5, 6, 13 and 14 and do agree with the Commons in their Amendment 14A in lieu.
14A: Page 22, line 35, leave out paragraphs 19 and 20 and insert—
"19 In an initial prospectus—
(a) a statement as to whether there is to be a ballot on the imposition of the BRS;
(b) if there is to be a ballot, a statement as to whether there is to be one by virtue of paragraph (a) or (b) of section 7(1);
(c) if there is to be a ballot by virtue of paragraph (b) of section 7(1), an explanation of why the authority thinks that there should be one;
(d) if there is not to be a ballot, an explanation of why the authority thinks that there should not be one.
20 In a final prospectus—
(a) a statement as to whether there was a ballot on the imposition of the BRS;
(b) if there was a ballot, a statement as to whether there was one by virtue of paragraph (a) or (b) of section 7(1);
(c) if there was a ballot by virtue of paragraph (b) of section 7(1), an explanation of why the authority thought that there should be one;
(d) if there was not a ballot, an explanation of why the authority thought that there should not be one."
My Lords, I am of course aware that the amendment of the noble Lord, Lord Tope, would reintroduce the requirement on levying authorities to hold a ballot before introducing any BRS or varying any existing BRS. However, as your Lordships will be aware, the other place has disagreed with the Lords amendments requiring authorities to hold a ballot before levying a BRS or making a variation to an existing BRS, except in the case of Crossrail, and has offered this House an amendment in lieu.
During consideration of the Lords amendments in the other place, the Government clearly set out their thinking on ballots. However, for the sake of completeness, I should like to reiterate the key points. In developing BRS, the Government have balanced the need to protect business interests with ensuring that the requirements on levying authorities are practical and proportionate. It is right that where businesses will contribute a relatively large proportion towards the cost of a project they should have the power to vote on whether they should make that contribution. That is why we believe that levying authorities should be required to hold a ballot in those cases where the supplement will fund more than one-third of the estimated total cost of a project.
As an aside, I mention that this goes further than the recommendations made by Sir Michael Lyons in his review into local government and the Communities and Local Government Select Committee. Both considered that the decision to hold a ballot should be left to the discretion of levying authorities. However, the Government decided to require a ballot in certain circumstances to protect businesses and ensure a fair deal. Where a ballot is required, there is a risk that financial institutions and funding partners will be unwilling to commit themselves as one element of the funding package is uncertain. Even where an authority is confident of businesses' support, the outcome of a ballot can never be guaranteed. While the Government consider that it is right that there must be a ballot where the BRS is funding a relatively large proportion of the project, it would be disproportionate for an entire funding package for a project to be put in jeopardy by a ballot on one small element of it.
Holding a ballot will not be a quick or inexpensive process. Making a ballot mandatory in all cases potentially creates unnecessary obstacles to using BRS as a small part of a funding package and prevents levying authorities determining the most appropriate course of action in their area. This could discourage levying authorities from using BRS as part of a funding package in circumstances where a small supplement might make a real and positive difference to an area.
This could have particular repercussions for levying authorities outside London. As your Lordships may be aware, rateable values are typically lower outside the capital. As such, the potential revenue raising power of BRS is lower outside the capital. This increases the likelihood that BRS will form part of a wider funding package. Therefore the potential problems caused by requiring a ballot in all cases could be more significant outside London and deter the use of BRS other than in the capital.
As we made clear during the passage of the Bill, both in this House and in the other place, even if there is no ballot, levying authorities will not have the freedom to levy a supplement irrespective of the views of local businesses. Levying authorities will be required formally to consult businesses and we commit that the statutory guidance will make clear that levying authorities must consider how they will engage with businesses over and above the statutory consultation requirements.
Business interests are also protected though other safeguards, such as the national upper limit of 2p, the £50,000 threshold for liability to a BRS in England and the fact that the supplement can be used only for economic development and to fund additional projects.
We must trust levying authorities to do the right thing. What is appropriate in terms of engagement will depend on the nature of the project that BRS will be funding and the needs of the local area. For this reason, the Bill sets a minimum standard for engaging with businesses, but leaves the rest to levying authorities. This localised approach reflects the diversity of local areas. However, noble Lords and Members of the other place have expressed real concern that there must be genuine engagement with local businesses before a supplement is introduced. In recognition of that, we propose that in those cases where a ballot is not required, by virtue of the fact that the supplement is expected to fund less than one third of the total cost of the project, the authority should be required to set out in its BRS prospectus whether or not it intends to hold a ballot. Importantly, the amendment will also require the levying authority to provide an explanation as to why it proposes that course of action.
While the Government believe that it is right that levying authorities should have discretion as to whether or not to hold a ballot in certain circumstances, we acknowledge that the decision-making process must be transparent to those who would ultimately be liable for the supplement. This amendment will provide local businesses with an explanation of the levying authority's decision, ensuring that authorities are accountable to local businesses for their decision on whether to hold a ballot.
The amendment requires the levying authority to set out its proposed course of action and the reasons for its approach on ballots in the initial prospectus. This gives businesses an opportunity to challenge the levying authority's thinking, should they wish to do so, at the consultation stage. The decision on balloting is not something which should be explained only after a BRS has been imposed. As such, the decision of ballots is as much part of the consultation as the other aspects of the project and the levying authority will have to justify its approach. That will be just as important in cases where, for example, a BRS will fund only 5 per cent of a popular project over a few years—when it will have to justify using its resources for a ballot if it decides to hold one—as in cases where it decides not to hold a ballot. This amendment gives businesses the confidence that the decision-making process on ballots will be transparent and, at the same time, gives levying authorities the scope to respond to the specific circumstances of individual projects. I beg to move.
Amendment to the Motion
Moved by Lord Tope
Leave out from "House" to end and insert "do insist on its Amendments 1, 2, 3, 4, 5, 6, 13 and 14 and do disagree with the Commons in their Amendment 14A in lieu".
My Lords, in moving Motion A1, I thank the Minister for his full and careful explanation, to which we all listened very carefully. I again declare my personal interest; I am still a serving councillor in the London borough of Sutton, as I have been for the past 35 years, and a member of the executive on that council. I declare that interest not just because I need to be open and transparent and declare my interests but because I am not only a friend but very much an active part of local government. It is from that standpoint that I come to move this Motion.
Secondly, once again I place on record that I and my noble friends have, with qualifications, been supporters of this Bill throughout, and certainly support its application throughout the whole of the country and not simply to London and Crossrail. I say that on record to make it clear that this is not in any way intended to inhibit let alone to wreck the Bill. We think that it is a very important principle and a very important and necessary part of the process for approaching this.
We have debated these issues in this House and in the other place a great deal, and there has been very welcome progress during the course of the debate. I recall commenting at Second Reading that I regretted how polarised the two positions seemed to be. On the one hand, we had the business interest appearing to take the view that arrogant, out-of-touch local authorities would impose unwelcome and unneeded taxes on helpless businesses. On the other hand, we seemed to have the local authorities and the LGA equating a business vote to a business veto and saying that under almost no circumstances should there be a business vote. I think that we have moved a long way since that time and all of us recognise that, for any project to which a BRS may apply, whether or not there is a vote, it has to be developed in partnership with the local businesses. They will work together on the concept of the project, on developing a prospectus for the project and developing the budget—and, by the time it comes to a vote, one would hope that the leaders of the business community would be campaigning for a yes vote, such was the support. That may be an idealistic position but, if the partnership is working as good partnerships should, that is what should be the case.
So why do we need a vote? We need a vote, first, to give reassurance to the business community. Whether we like it or not—and personally I do not like it at all—consultation these days tends to have a rather unhappy reputation. There is too much an attitude that consultation means that you tell people what is going to happen and, regardless of what they say, it still happens. That may not be fair—in many cases it is not fair—but it is a very real perception at all levels, local, regional and national. The knowledge that there is reassurance there and that a ballot will come and businesses will have their say is important. Secondly, it is important for the process as well. To know that there is going to be a vote and that you will have to win it and persuade people to vote as you would wish them to is a very important part of engagement. There is nothing that concentrates minds better than to know that at the end of the process you are going to win or lose and that you have a vote to win. Therefore, the engagement is bound to be more meaningful if there is knowledge on the one hand that they have to persuade, not just to consult and, on the other hand, that if they really do not like it, they can stop it.
We need to remember that a vote does not have to be unanimous. There seems to have been some suggestion, particularly in the other place, that a vote is won or lost depending on what 100 per cent do one way or the other. Some of us in politics might wish that was the case, but it is not. It is a majority vote. We are not talking about necessarily having to win over every single business voter—much though one might aim to do that.
I understand very well why the Government have set the limit at one-third of the total cost of the proposed project. Inevitably, that, as any limit would be, is an arbitrary limit. One-third is quite a high threshold. Most likely to be of greater importance to the business, if not to the envisaged project, will be the amount of extra tax that business has to pay, rather than the proportion to which that tax contributes. I suggest that if there is to be a threshold then maybe one-third is too high. Those businesses will be paying an extra tax regardless of what proportion it contributes to the actual project and it may very well be a significantly higher extra tax. If it is, as is likely, to be a significant and substantial project—that is what we are primarily talking about with the Bill—they are likely to be paying it for many years ahead. For those reasons, it is right and proper that they should have an effective say in the decision on whether to levy the rate.
I understand why the Government would not want to see—neither would local authorities want to see—disproportionate cost for a relatively small contribution to a project. It may be that we need to look again at the threshold, but I do think that one-third is too high.
The Commons amendment is a helpful move in the right direction. In as far as it goes I am prepared to welcome that, although, for the reasons I have stated, it does not yet go far enough. However, it recognises that there is an issue of quite proper concern to the business community. I believe that, working together in partnership with local government, which is why I stressed at the beginning where I personally come from, we can still find a better solution and a better compromise that will meet the quite proper and understandable concerns of local business and the equally proper concerns of local government that they should not have imposed on them disproportionate cost and effort for relatively minor benefit.
We are on the way with the Commons amendment. I do not think that we are there yet. I have brought this Motion to your Lordships today in the hope that we will give the Commons an opportunity to continue with their thinking and perhaps to make still further progress. I beg to move.
My Lords, I, too, thank the Minister for his helpful introduction of Motion A standing in his name. I support the noble Lord, Lord Tope, in his Motion. Like the noble Lord, Lord Tope, I place on record my interests in these matters as a director of three companies in the north-east of England that pay business rates.
I have read the interesting debate that was held in the other place on this issue. A number of new points were raised and this revised amendment has been brought forward. That is all very welcome. However, a couple of key points of concern remain. I put these forward in support of the amendment and for the Minister to respond to when he replies.
First, this measure creates an anomaly. The business rate supplements are analogous to the business improvement districts, which have been championed and advocated by my noble friend Lord Jenkin of Roding. In the business improvement districts, there are ballots on each investment. In fact, an integral part of the case being made is that there is going to be a partnership, which would be undermined if a scheme were to be imposed on a business community that was not welcoming of it. Therefore, we are breaking that sprit of partnership in this business rate supplement. We are introducing an anomaly, which may have ramifications when we come to consider the sections that relate to business rate supplement and business improvement districts.
Secondly, some of the language that is being used here and, indeed, in the other place is concerning, because it talks about business not making a significant contribution and having a veto. However, one-third of the cost of a capital project could be a very significant sum—perhaps £10 million, £20 million or £100 million. On Crossrail, the potential contribution is a few billion pounds. The sums could be very significant. It behoves any successful scheme to engage the business community when such a large amount of money is being considered. The notion that a scheme might be pitched by the local authority so that it comes in just below the one-third threshold to avoid the difficulty of having to go through a ballot—a concern quite rightly raised in Committee by my noble friend Lord Cathcart—remains a real concern.
The next point is similar. We are looking at getting business on side, but it is clear that a number of large business organisations, such as the CBI, have expressed serious concern. We are talking about a ballot of a cohort of businesses on which this investment measure, which is designed to improve their lives, may have an impact. That begs the question. Which business on earth would vote against something that was designed to improve their situation and improve economic regeneration? It has to be very much in their interest. Why would a levying authority not want to have the mandate of having business on side?
We are not talking about every business. That is an important point to get on the record. We are talking about a relatively small group. The threshold for those liable to the business rate supplement is a £50,000 rateable value. In terms of square footage and, possibly, the number of employees, a business with a £50,000 rateable value is a pretty significant one. This will probably disproportionately impact a lot of retail businesses. We are not talking about tens of thousands. Therefore, some of the arguments that the Minister has made about the difficulties of undertaking the ballot may not arise. However, tens and hundreds of businesses in an area will be paying a significant amount of money to improve that area. Our argument is that they should be considered.
The Government started from a position of saying, "No, local authorities can be entirely trusted with this responsibility; there is no need to put any obligations on them at all". However, as a result of the Committee and Report stages and scrutiny in the other place, the Government have moved a long way to the position that we have been arguing for. In their amendments in lieu, they say that there should be an involvement. In other words, you cannot just walk away from a ballot; you have to give a reason. They say that there will be a statutory responsibility to engage with local businesses. That is a very helpful point.
The levying authority must also provide assurance that it is not levying a sum that is in addition to. That is an important check of the ballot. One of the great concerns among those of us on this side of the House is that, far from being dreamt up by a great enterprising department as a means of finding new ways of regenerating our inner-city and urban areas, this scheme has been generated by the Treasury as a means of finding new ways of raising money. The principle set out in Clause 3 deals with additionality and says that, in addition, funds cannot be used on housing, social services, education services, services for children, health services and so on. That further restricts the levying authorities' room for manoeuvre.
So the Government have travelled a very long way as a result of the scrutiny that both Houses have brought to this issue. However, they have not moved far enough. That is why Amendment A1 is required. It would provide an additional safeguard. Most important, it would provide a way of involving businesses and motivating them to engage in partnership with local authorities to promote their area. I should think that that will be widely welcomed.
My Lords, I support Amendment A1. I remain in favour of the principle of the Bill—to provide a mechanism for business to make a financial contribution to local infrastructure provision where it is in favour of that infrastructure. But that is the crux: are they in favour? As noble Lords are aware, I am chief executive of the non-profit-making business membership organisation London First. I therefore hear the concerns of businesses from many different sectors every day.
At a time of economic uncertainty it is not helpful to be threatening additional costs on businesses alongside the planned effects of revaluation, loss of empty property relief and a general uplift in rates. Businesses, particularly those disproportionately exposed to rates, which includes most retailers, are very concerned about the prospects of being bounced into paying for unnecessary or even unhelpful projects from well intentioned but sometimes misguided local authorities. A ballot of businesses is the best safeguard to prevent that from happening. I join the noble Lord, Lord Tope, in asking the Government to think again.
I start with the contribution of the noble Lord, Lord Tope, and acknowledge in what he said that he is supportive of the thrust of the Bill. Indeed, I acknowledge his position in local government—with more than 30 years' service, I think, and still going. He made an important point in recognising that the provisions as they stand require engagement with the local business community. There is no prospect of a BRS just being introduced effectively over the heads of local businesses whatever their views. All the consultation guidance makes that clear. I refer noble Lords to the Business Rate Supplements: A Consultation on Draft Guidance to Local Authorities, which we published in January 2009. It sets out the fact that any projects that come forward should relate to and be embedded in the regional strategies that are in place and the local strategies that an area would have. In particular, the paragraph about the engagement of business in some of the assumptions states:
"Ultimately, business will have the scope to challenge prospectus assumptions at the consultation stage and for that reason it is in the levying authority's best interests to ensure the robustness of its business case and to ensure work on the preparation of the prospectus involves detailed discussions with local business and other interested parties".
That must inevitably follow and I believe that that should allay the fears of noble Lords.
I understand that the noble Lord, Lord Tope, was saying that the Government's proposed amendment in lieu was a helpful step and that, of itself, it is something that he would support. However, although he is moving an amendment to say that there should be ballots held in every case, I thought that the tenor of his comments was also that the one-third threshold was too high. I do not know from that whether his position is that, if the threshold were lower, he would have a different view on mandatory ballots. As it stands, the proposition before us is about mandatory ballots.
To a large extent, the arguments have been ranged over in the other place and in your Lordships' House. There are probably no great new points of substance to bring forward, but we have moved in a material way to address noble Lords' concerns by the amendment in lieu that I moved earlier. We hold fast to our objections to mandatory ballots in every case.
The noble Lord, Lord Bates, supported the Motion moved by the noble Lord, Lord Tope. I think that beneath that was support for the thrust of the Bill, notwithstanding our residual disagreement. He says that we have created an anomaly with BIDs. We need to see the substance of that. BIDs are much more likely to be localised projects and, as the history of BIDs suggests, business-led rather than more strategic, local authority-led projects. I have not been through each of the BIDs in operation, but the thrust of them has very much been business-led in more localised areas. As has been discussed before, they are more likely to provide a significant element of the funding than might be the case in some of the BRS situations.
On the argument that we must have a ballot in every case because, if there is a threshold above which ballots have to take place, the authorities will be manoeuvring around it, given the robust approach that must take place—the development of a business case, the consultation on it and the initial prospectus—it would become pretty apparent if anyone was trying to pitch a scheme in a way that circumvented the threshold, wherever it were put. Notwithstanding that, the number of businesses that might be involved in a ballot depends on the scale of the BRS and the particular area; I do not know. However, ballots, even if the numbers are relatively small, do not come cost-free.
The noble Baroness, Lady Valentine, expressed her support for the amendment moved by the noble Lord, Lord Tope, although I understand that she is still happy for Crossrail to be outwith the basic position that we took. However, I take issue with the concept that businesses will be threatened with extra rates. The ethos of the Bill is not about threatening local businesses to extract money from them; it is about trying to identify projects for which additional spend will have beneficial impacts on business development in an area. Together, all the locks that are there to protect local business—the threshold, the 2p cap and it needing to be extra spend—are a genuine series of protections. It is not right to say that the Bill is just about seeking to extract resources from local businesses.
I remember from my days on a local authority, when the domestic rate was set locally, there was a brief engagement with the business community when it was set—normally over a cup of coffee with the borough treasurer. There was not a focus on strategic issues; it was a million miles from that. Local authorities have come a long way with all the engagement through LSPs. I do not have the number in front of me, but a not inconsiderable number of LSPs are chaired by the business community. We are in a different situation. We are not about threatening businesses. For all those reasons, I hope that the noble Lord will feel able not to press his amendment. However, I am not sure that I have moved him sufficiently on this matter.
My Lords, I thank the Minister for his attempts to move me, at least. I remember with nostalgia the days before NNDR, when we did not have to have a consultation with business rate payers. That was made statutory as soon as local authorities had no say whatever over the level of rate, which always seemed to me somewhat bizarre and, to them, even more pointless. However, I digress.
As the Minister said, we have covered fairly exhaustively all the points in this debate, but I should just like to comment on where we have got to. The Minister spent part of his speech taking issue with the use of the word "threat". I understand why, and in a way I very much share his view, but the fact that that word came from, if I may say so, another friend of the Bill—a qualified friend but a friend none the less—is an exact illustration of my point that we need to provide reassurance for businesses in statute. The language should reflect the way that they feel about this and there is a need for reassurance.
Should the vote be mandatory? That is the thrust of my amendment and it is what I believe should happen. As the noble Lord, Lord Bates, pointed out, we are not talking here about every small business that happens to have a business premises or a huge exercise involving balloting every NNDR payer. I took the trouble to find out how many business rate payers would be affected in my own London borough. It is a smallish, outer London borough. It is not a huge centre of business but it has a fair number of businesses. In the London Borough of Sutton, 429 businesses would require to be balloted. I recognise that my local authority would not want to be engaged in something completely disproportionate but, on the other hand, we need to be clear and to understand that we are not talking about a huge, complex and vastly expensive exercise involving a ballot of a large number of people. As I said, in a borough with a little over 4,000 NNDR payers, we are talking about 10 per cent, which I understand to be fairly typical across the country.
I want to ask the House to agree to my Motion. If it is agreed, no doubt there will be further discussions. That was the tenor of what I was saying and, for the reasons that I have stated, I should like to test the opinion of the House.
My Lords, Amendments 11 and 12 were the subject of a comprehensive debate in this House on Report. They were intended to prevent BRS liability increasing retrospectively where a rating list is amended with effect from an earlier day. Members across the House set out their positions and there was a debate about the situation in some ports, where backdated rates bills have been issued. For the Government, my noble friend Lord Davies of Oldham described the key issue of principle; that is, it is right that businesses will be asked to pay the BRS due on their property and to pay at the correct level. My noble friend argued that the alternative is a situation where we have businesses occupying properties at the same rateable value being liable for different bills.
After it was accepted by this House that the amendments will return to the other place for consideration, there was a further lengthy debate on the principle of the amendments. Members from across the House put their positions both in relation to the amendments and the wider issues that they reflect. On Division, the other place voted to reject the amendments.
My honourable friend, the then Minister Sarah McCarthy-Fry, reminded the other place that BRS builds on the non-domestic rating system. She said that rating lists 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; sometimes it can lead to backdated decreases and, therefore, refunds. She acknowledged that there is the possibility of backdated increases in rateable value causing higher BRS bills than businesses were anticipating. However, the practicalities involved in ascertaining the need for changes to a rating list and then establishing what change is required mean backdating is an essential part of the normal functioning of the system. That is why the Government consider it should apply to non-domestic rates and to BRS equally.
The principle of these amendments has been debated fully in this House and in the other place. However, as noble Lords are aware, the Speaker of the other place designated the amendments as infringing financial privilege. As a consequence, the message that has been sent to this House is that the reason the amendments have been rejected is that they affect the levy of local revenue. In those circumstances, as noble Lords are aware, this House cannot insist on its amendments and, bearing that in mind, I beg to move that the House does not insist on Amendments 11 and 12.
My Lords, I cannot welcome that statement from the Minister. I appreciate that he is reading the advice he was given from on high, but it is a shameful way to treat the opinion of this House on a matter that is of profound interest to many businesses in this country. We need to put this in some context. Many businesses are today laying off people or making them redundant not as a result of external trading conditions, the banks or the recession, but of this Government's action in not agreeing to this amendment, which was sent to the other place.
My remarks to the Minister will cover three topics: first, the technical issue of privilege and whether it relevant in this case; secondly, the history of this amendment; and, thirdly—however uncomfortable the reminder may be to him—the impact that this is having on the many businesses that have written to the Minister and to me to draw attention to it.
In the other place, it was pointed out that the amendment is not to do with financial privilege. The wording of the reason is:
"Because it would affect the levy of local revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient".
The answer to that is that this amendment "could", not "would", affect the levy of local revenue if the Valuation Office Agency, as a result of a cataclysmic series of errors and mistakes, did not place on the list businesses that should have been valued, revalued and placed on it. It could have an impact. However, to say that it would have an impact is disingenuous.
Clause 16 already states that where there is an error on the part of the Valuation Office Agency, there should be no retrospective element in non-domestic rates. Our amendment simply continues that principle into the current legislation. That is what is done by an amendment that was passed in this House by a majority of 60. It has nothing to do with financial privilege. We are not costing any money, but rather making sure that a piece of legislation brought forward by Her Majesty's Government is consistent with other legislation brought forward by them on previous occasions. The other place should have acknowledged that, rather than hiding behind a draconian 17th-century technical measure to block further debate on an issue that is causing suffering and hardship to businesses in this country.
The noble Lord, Lord Mandelson, who seems to wield ever-growing influence in the Government, said on
"UK companies are the lifeblood of the economy and it is crucial that government acts now to provide real help to support to them through the downturn and see them emerge stronger on the other side".
With this measure, he does not have to go to the £10 or £20 billion guarantee, or the £5 billion support stimulus package. He merely has to not backdate a measure that should not have been backdated in the first place. That is what we are asking for. It is completely within the gift of the noble Lord, Lord Mandelson, to do this.
In response to the Minister, and with no reflection on his position, I suggest that he puts this case to the noble Lord, Lord Mandelson, to see whether he would be prepared, independently of this debate, to undertake a review of the circumstances under which this error occurred and retrospective liability was incurred. I would be grateful if the Minister would respond to that suggestion.
The noble Lord, Lord Mandelson, is responsible for business. His language on previous occasions has been very supportive of doing everything that he can to support businesses in these tough times. He would—or should—be horrified that this is happening in a Government where he has significant and growing influence. Would the Minister put that proposal to him, given that the possibility of debate in this House is being stymied by a technical provision? As the Minister responsible for government—that was a Freudian slip, because I think that he is responsible for government—or rather, as the person responsible for business, could the noble Lord, Lord Mandelson, be encouraged to hold a cross-departmental inquest into what has happened with the Valuation Office Agency in respect of the retrospective levying of taxes?
That is a serious proposal that warrants consideration. We are talking about the potential impact on 1,600 portside operators in 55 ports around the country that are already suffering immensely because of the global economic downturn, changes in rates and the cost of commodities. To impose a further levy would be wholly terrible. It is an act of political spite—I cannot think of a stronger way to put it. It is equivalent to cutting the nose off the economic face of the nation in an act of political spite, and it sends a dreadful message to many hard-pressed businesses in this country.
This House had expressed a clear view on this issue on not one but two occasions in the Division Lobbies. The ports and the portside operators then heard that there could be closures because of an arcane rule on financial privilege where no financial privilege is at stake. All we are talking about is a mechanism of legislation, which would bring this Bill into line with the way in which other Bills should be, but which was not applied in the case of the portside operators. I urge the Minister to take cognisance of the great anger which is felt out there.
This feeling of anger is exacerbated and not abated by admissions of guilt by the Government. Successive Ministers in the other place, this place and in Committee have come forward with their apologies. They have said, "It has been a dreadful mistake. We have got it completely wrong.". In the non-domestic rating regulations debate, the noble Baroness, Lady Andrews, said:
"I start by saying that the Government are deeply concerned", about the retrospective element. She continued:
'We have consistently said, in the current economic conditions, the Government is concerned about the impact of backdated rates liability on the trading prospects of businesses and we believe that there is a general case to assist businesses receiving large, unexpected backdated liabilities that have to be paid immediately, as the position for a number of port occupiers has demonstrated'".—[Hansard, 18/3/09; col. 299.]
The Government have admitted culpability of the need for action. The amendment which we tabled and sent down to the other place was entirely consistent with that view declared by the Government. The Valuation Office Agency initiated this mistake. Again, I call on the noble Baroness, Lady Andrews, the predecessor of the Minister who will respond today. I mention those remarks just in case he wishes to repeat them. The Valuation Office Agency is not under the control of the department. The noble Baroness made the point that it is in the control of Her Majesty's Revenue and Customs. She said:
"The VOA has acknowledged, in response to the Treasury Select Committee, that there were serious failures of communication, particularly with the occupiers, and by implication that too much reliance was placed on information being provided by the port operators. Andrew Hudson, head of the VOA, indicated to the Select Committee:
'With the benefit of hindsight we have learned a lesson and please God this does not come up again'".—[Hansard, 18/3/09; col. 300.]
It is too late for hundreds of jobs that have already gone in our ports and for the many businesses facing hundreds of thousands of pounds of backdated claims. But Andrew Hudson is saying that,
"with the benefit of hindsight", it will not happen again. Why should it have happened at all? In 2005, a business believed that it was not liable, but found out that it has liability only by accident in 2008 as a result of a court case. Then the sums, which were incorrectly calculated leading to an incorrect assessment, are backdated and the business is required to pay a significant sum—estimated at £200 million.
In our mailbags, we have received responses from the portside operators. It is not me who is making these protests. These statements come from businesses which are at the sharp end and are in very difficult situations. I received a letter from Barry Holt, director of TTS Shipping, who noted that the House voted against the amendment placed before it. He also noted his great affection for his business and the livelihood of his staff. He said that he uses 42 stevedores in Hull who rely on his business and that he employs hundreds of hauliers and contractors on a subcontract basis. He believes that as many as 250 members of staff may now be faced with a backdated claim, which may run into hundreds of thousands of pounds.
I turn now to TransAtlantic, which wrote to the noble Lord, Lord Mandelson, about this. It wrote to say that,
"TransAtlantic is now facing rates bills in excess of £1.1m on the properties that we occupy in statutory docks and harbours in the United Kingdom".
This is something which has had a very significant effect, as was picked up by the Daily Telegraph. It has reported that many people, including the Liverpool Chamber of Commerce, have written en bloc to express their concern about the real impact on Mersey Docks. They have an action group—Mersey Docks Rating Group—which is campaigning about the effect that this is having. Most worrying of all are the many representations from overseas operators who are now making representations to the Government to say, "Listen—we are just going to take our business elsewhere".
The Government may or may not realise—I am sure that they do—that actually shipping is the most mobile of all businesses. They can take their business across to Rotterdam very easily, and they are doing that: there is evidence that that is happening. There were threats that it might happen by DFDS, P&O and other organisations. This is a very serious situation. Sitos has made the following representations:
"The unloading of the ships in Hull is undertaken by Global Shipping Services Ltd at an extremely competitive price to us. As Global have received backdated demands of £1.9m, we fully expect to see a sharp increase in costs to us as they struggle to meet these payments. This in turn we would attempt to pass back to", clients and customers, thereby making it uncompetitive.
The scale of this problem is very significant, and very real, as is the anger which is going to be felt because this amendment—which was passed by a majority of 60 in this House, and which is trying to save real jobs—is being stopped from being debated further in this House because of a technical measure. There are other people who wish to make similar points on this, but I do think it is a shameful way for the Government to treat this House, when the House has considered this issue extremely carefully and arrived at a considered view in respect of these hard-pressed businesses.
The Government should have some guts: if they actually feel that they have the case on their side, they should allow the amendment to go ahead, and for the opinion of the House to be tested again. The fact that they have not got the stomach for that, despite admitting that they were in the wrong, and hearing and acknowledging the siren cries coming from ports around this country about the impact on real jobs, shows a cowardly streak in this Government—one which is deeply offensive and will not be forgotten. Our only hope now is to place this whole case at the mercy of the noble Lord, Lord Mandelson, in the hope that he can exercise some judgment, and intervene on behalf of port-side businesses in this case.
My Lords, my noble friend has made an extremely powerful speech on the merits of the issue we are discussing. As he has said, the reason why we are deprived of the opportunity to reinforce the vote, which we had at an earlier stage, to pass the amendment, is that the Commons has pleaded financial privilege. I took the same point as my noble friend did when he read the words, "because it would affect the levy of local revenue". He said that it really is no more than "could have". It is as weak as that. But I am advised that the final words of the reason,
"the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient", are the traditional words of a House of Commons determined to assert its financial privilege.
The House will not be surprised that I shall touch once again on the issue of financial privilege being claimed by another place. I am delighted to see the Leader of the House in her place. I hasten to say that she is not here to listen to me because she has other business, but I am pleased to see her here. I hope that noble Lords will forgive me if I return for a moment to the previous instance where a claim for privilege on behalf of another place was hotly criticised in this House, or at least to the extent that the rules allow. I should like to bring us up to date on what has happened since then.
I refer of course to what was Part 11 of what is now the Planning Act 2008, which introduced the community infrastructure levy. The Bill provided that only another place should approve the regulations, of which there will be a great many. I do not intend to recapitulate the whole sad history, but the issue came to a head at the Report stage of the Bill in this House when an amendment to provide that both Houses should approve the regulations was defeated by six votes. I moved an amendment at Third Reading which recognised that while we could not oppose the vote by the House on Report, the House should at least have a say. The amendment was carried by three votes, but another place rejected even that modest request.
The significance lay in what was said during the debate in this House on
"Parliament should not accept the use of the privilege amendment in cases of doubt simply to stifle debate".
He went on to say:
"I ask the noble Baroness"— he was referring to the Leader of the House—
"to consider this matter carefully with her colleagues in another place, with Members of this House and perhaps with the Clerk of the Parliaments and his opposite number in another place to see how this issue can be resolved".
The noble Lord, Lord Goodhart, who was working with me on the amendment and who at the time was the chairman of the Delegated Powers and Regulatory Reform Committee of this House, said:
"Whatever the outcome of this debate, however, I believe that today should not be the end of the matter. We are facing a constitutional issue of some real importance and I believe that your Lordships' House should consider the problems which arise from this Bill".
He then went on to mention the Counter-Terrorism Bill where exactly the same point had been made: a Lords amendment returned because it was claimed to be subject to financial privilege. The noble Lord, Lord Howarth of Newport, who I am delighted to see in his place, also made a powerful speech, but he cited the noble Lord, Lord Filkin, the chairman of the Merits Committee of this House, as saying that he,
"notes that we see very many statutory instruments which impose fees and charges which have never hitherto been seen as outside the purview of this House and the Merits Committee".
Coming from such a source, that was a powerful argument. The noble Baroness, Lady Hollis of Heigham, was extremely disturbed and said:
"I find this the beginning of an extraordinarily slippery slope and I am profoundly worried. I hope that my noble friend the Leader of the House can find a way through this".
The noble Baroness, Lady Andrews, who was in her place a few moments ago, had a very uncomfortable time trying to defend what had been put in front of her, but she did so by saying:
"They raise issues that go far beyond the Bill's narrow limits in the precedents they raise".
When I wound up the debate, I said:
"We have established that these wider constitutional concerns are felt in all parts of the House and, as my noble friend Lord Strathclyde said, this issue cannot be allowed to rest. This is unfinished business".Hansard, 25/11/08; cols. 1359-67]
So it is, and that is why I have come back to the issue today.
The noble Baroness the Leader of the House was kind enough to write to me the next day in her own hand, and I have her permission to quote from her letter:
"I recognise, of course"— she said on
"the importance of yesterday's debates in terms of the wider questions of 'respective rights, rules and privileges of the two Houses'".
Those were my words in the debate.
"I will give careful consideration as to how best we can pursue the matters raised".
She was as good as her word. Early in the following Session, on
"The leader made it clear that she is very well aware of the seriousness of the issues surrounding the Commons claims of financial privilege and also of the strength of feeling in all parts of the House following the debates on Part 11 of the Planning Bill last Session. She intends to have discussions with a number of concerned Peers and others in the House before approaching her colleagues in Government. This will include, among others the chairman of the Merits Committee ... She sees her task now to seek to avoid, so far as possible, similar conflicts in future legislation and believes it may make sense to involve, as well as her colleagues in Government, others such as parliamentary counsel. The aim would be to identify, and if possible, head off potential problems at an early stage as possible".
I hope I have recorded accurately the sentiments which the noble Baroness expressed to me on that occasion. The next month, on
The number of amendments that were waived was nearly 300, actually 293; the number where the Commons insisted on it was only 42. The overwhelming number of Lords amendments potentially involving privilege had actually been waived by the Commons. I will come back to that in a moment.
I saw the noble Baroness the same day. She was kind enough to give me advance notice. I quote again from a note:
"She explained that she has raised the issue with Members of the Government and with First Parliamentary Counsel. In future he will draw his colleagues' attention to the matter so that they are aware of it from the outset ... She explained that she is now trying at all times to pre-empt cases where there might be a possible questionable use of financial privilege".
I suggested to the noble Baroness that perhaps a good starting point for this would be the Cabinet Office's Guide to Making Legislation. Thisis a very substantial document indeed. I may be wrong, but I got the impression that the noble Baroness perhaps had not seen it before. It is a detailed compendium of instructions and advice to departments planning legislation. Curious enough, in its 150 pages—I counted them this morning—there is no mention of Commons financial privilege. It is not an issue which the Cabinet Office has thought necessary to draw to the attention of departments. However, the noble Baroness was kind enough to say that she would take this matter up, and my question for the Minister who is replying to this debate is whether the guide has now been amended to reflect the issue of Commons financial privilege. I gave notice of that question this morning.
The case before us has been admirably and forcefully stated by my noble friend. The issue has arisen over the amendment to the BRS Bill. It was not part of the Bill when it was first introduced and, therefore, the pre-emptive strike which the Leader of the House would perhaps otherwise have been able to make could not arise. The issue, as my noble friend explained, is the retrospective application of the business rates legislation to ports operators all over the country. I endorse what he said: I have had a lot of letters, too, from ports around the country expressing their huge disquiet. The amendment was simply to make it clear that the regulations to be made under the Bill,
"may not impose ... retrospective liability to pay a BRS without error or default on the part of a ratepayer".
I, too, have read the debate in the other place. It was significant for the number of government supporters, some of them of considerable standing and experience, who expressed themselves forcefully to be against the Government's position. They were the honourable Members for Great Grimsby, for Cleethorpes, for Brigg and Goole and for Birkenhead—Frank Field—yet the Lords amendment was rejected on a whipped vote. The Commons have given us their reason that it,
"would affect the levy of local revenue".
However, this whole Bill concerns the raising of local revenue by local authorities, so why is it regarded as beyond the scope of this House to debate and vote on a particular amendment that deals with a particular hardship? I shall not repeat what my noble friend said. It seems to be completely absurd, so I have two further questions, of which I have again given notice so that the Minister will have them.
Why was this not amenable to the waiver procedure? The noble Lord, Lord Filkin, whose words I quoted a moment ago from the speech of the noble Lord, Lord Howarth, said that the Merits Committee is always dealing with all sorts of subsidiary legislation which raises charges of various kinds. Given that on the vast majority of potential privilege cases another place has waived the privilege, why could it not do it in this case? Was it because, as my noble friend Lord Strathclyde said, it wanted to dodge an uncomfortable debate and vote?
On my second question, I believe that it has been suggested that the other place, even when it is determined to plead financial privilege, might also give the reasons why it cannot accept the Lords amendment—not just the technical reasons such as it affecting the levy of local revenue or on account of it imposing a charge on public funds but why the substance of it is unacceptable. If it did that, there might be grounds for it to be debated in this House. As it is, we have no option under the conventions but to yield to the Commons plea of financial privilege. It has aroused enormous anger among those to whom I have had to write back to say, "I'm sorry. We can't vote again. The conventions do not allow us to vote again".
My Lords, I am sure that I am not alone in finding this an extremely unsatisfactory procedure.
My Lords, I look forward to hearing the Minister's reply. I add my plea that he and my noble friend the Leader of the House think seriously and urgently about the issues that have been so cogently described by the noble Lord, Lord Jenkin, to whom everyone in this House owes a debt of gratitude for his vigilance in these matters. We must be concerned about the propensity of the other place—indeed, it is of the Government rather than the other place as whole, because I think that most Members of Parliament are unaware of what they have been doing in this regard—to extend the scope of assertion of privilege. I am unhappy, for my part, to see the rights and responsibilities of this House salami-sliced in fits of inadvertence. I hope very much that my noble friend the Leader will resume her excellent campaign to protect the interests of this House.
My Lords, I should declare an interest as an accountant and as a director of businesses paying business rates. I have also been a councillor for 10 years. I was not going to speak to this Motion, but I am afraid that I simply cannot resist.
The Government's position seems to defy all logic in three areas. First, when the Climate Change Bill was going through this House, we debated at length whether to include aviation and shipping within the reduction targets in the Bill. It was decided not to, because of the international nature of the businesses and because it was thought that an international solution was needed. What was agreed, on all sides of the House, was that the carbon footprint from shipping was considerably less than that from aviation. So it is amazing that the Government's policy is to have their foot hard down on expanding aviation, at Heathrow and Stansted, and, with this policy, to drive a nail into the coffin of the ports businesses. Surely the logic should be to nurture shipping and its associated businesses, so that, when we come out of this recession, we have a healthy import and export shipping industry poised to take advantage of the upturn. But no, the Government seem hell-bent on doing the very opposite. I am sorry that the noble Lord, Lord Hunt, is not in his place, because he would be grappling with his conscience over this extraordinary government policy.
The second piece of government logic that I want to question is that, despite the Government's stated policy of supporting businesses and jobs in this time of deep depression, here we have a policy that does the very opposite. The public are getting fed up with the Government saying what they think the public want to hear but then either doing nothing or, as in this case, doing the very opposite. The public are seeing through this and are now browned off, not believing a word that the Government say any more. Surely it is time that the Government put their money—or, rather, our money—where their mouth is. I am sorry that the noble Lord, Lord Mandelson, is not in his seat, because even he might have difficulty squaring this circle. This policy makes a complete mockery of his claims to be helping businesses and saving jobs.
Thirdly, the Government say that they want to win the forthcoming election. Logic would say that they would want to nurture their Labour heartlands, so it is surprising that, with this policy, they are doing the very opposite. It will be interesting to see how those with businesses and jobs in and around the ports, the traditional Labour heartlands, will react to this government policy come the general election. My noble friend Lord Bates talked about the anger out there on this issue. Maybe, since I am speaking from this side of the Chamber, I should be pleased that the Government are pressing their own self-destruct button, but surely this is too great a price to pay. The Government are hell-bent on driving a nail not only into the coffin of the ports businesses but also into their own.
I feel sorry for the Minister, who must defend this extraordinarily illogical policy in a few minutes. Perhaps he will hold up his hand and say, "Sorry, we've got this wrong—we will look at it again", but the Government seem pathologically incapable of ever admitting that they are wrong, so I will not hold my breath. They seem to be acutely embarrassed by all the bad publicity that the policy is getting and, to stifle any further debate at Westminster, as my noble friend Lord Jenkin said, they have now at the 11th hour invoked the privilege amendment procedure so that there is no possibility that the amendment can return to the other place to be further debated, thus prolonging their agony. Is it not ironic that it takes a Conservative amendment, tabled by my noble friend Lord Bates, to try to save jobs in the docks, with the Labour Party in the other place voting against it? What a sorry state of affairs.
My Lords, I agree with everything that my noble friend Lord Cathcart has just said, except in one very narrow instance. He said that we should feel sorry for a Minister, but that flies in the face of proper practice. One should never feel sorry for Ministers under any circumstance. I am not at all sorry that I heard my noble friend's speech, or the extremely forceful speech of my noble friend Lord Jenkin of Roding, who set out all the arguments that we need to have in front of us.
In a few moments we are about to hear a Statement from another place bringing forward proposals for constitutional reform of your Lordships' House. There is no mention anywhere in the Statement, a copy of which has fallen into my hands, of reform of another place and its procedures. I see my noble friend Lord Bates nodding, which is a very great accolade—and I thank him for it. If there was ever a case for reform of the other place happening first, so that procedures are properly treated and your Lordships' House is treated with respect, this is it. I entirely agree with the noble Lord, Lord Howarth, that the Leader of the House has been splendid in what she has tried to do to protect our liberties. I am very pleased that she is in her place. It is up to her now to try to put this right.
My Lords, I associate the Liberal Democrat Benches with pretty well all that has been said thus far in this short debate. The only point on which I would disagree is the description by the noble Earl, Lord Cathcart, of the ports as "Labour heartlands". I am not at all sure that the people of Liverpool, Bristol, Hull or Newcastle would recognise that description any more—but that is a detail.
All the points have been made fully and well. I have no need to make them again and could not do so as well as the noble Lords, Lord Bates and Lord Jenkin, have done, on the use of the privilege on this occasion or the substantive issue that brought about this situation. Like other noble Lords, I, too, have had innumerable representations from various ports. Many have been cited and it probably does not add much to the debate to quote more, but in one instance in Liverpool a company that has already gone into administration faces a backdated demand in the region of £1.1 million, with the consequence of 27 job losses for that company. As I think the noble Lord, Lord Bates, said, the Liverpool Chamber of Commerce described in some detail the desperate efforts of an accountant trying to find some justifiable reason for not qualifying the accounts of the company whose statutory accounts he was trying to prepare, because of the backdated liability. Sadly, it is not reported whether he was successful.
These are not things that might be going to happen or the usual worst-case scenarios that we all plead in aid from time to time. They are actually happening now. I join noble Lords who have spoken already, regretting—though they spoke perhaps in anger rather than regret—that we are not further able to debate these issues or express a view on them today. However, this is not the end of the matter; I am sure that in other ways and at other times we will return to the issue and will look to the Government to find a more satisfactory solution than has been found thus far. In the mean time, I associate these Benches with what has been said. Whether I feel sympathy for the Minister, who is the latest in the long line of people trying to defend the indefensible on this issue, is not relevant. I await his latest attempt in trying to defend the indefensible.
My Lords, two issues arise in respect of these amendments. One is financial privilege and the other is the ports and what happened in the review of how rating impacted on them. So far as concerns financial privilege, noble Lords will be well aware that this is a matter for the House authorities and not the Government. Page 919 of Erskine MayParliamentary Practice, 23rd edition, states:
That was in place long before this Government came into being. In answer to the noble Lord, Lord Jenkin, I say that financial privilege is a matter for the House of Commons. That is why the Cabinet Office does not provide detailed guidance on it for government departments.
My Lords, I was going to go on to say about the guidance that I am not aware that particular changes have been made in this regard, but what I can say to the noble Lord is that it is open for representations on issues and that is where he may wish to pursue his inquiries.
I was about to say that the advice of the House authorities is that all the amendments that were considered in respect of the latest round of debates were considered to be an infringement of privilege. The issue about the ports has been debated in your Lordships' House—and certainly in the other place—on more than one occasion. Therefore, this is not about stifling debate. Is it shameful to adopt this because this place has expressed a view on it? The reality is that the other place has expressed a view on this as well and has not agreed with your Lordships' House. It has a view on this as well.
Let me get to the heart of the matter. This is why I find this whole debate so bizarre. I can understand noble Lords opposite wanting to keep the issue of the ports alive to try to embarrass the Government. I noticed that the noble Earl, Lord Cathcart, was trying to come to the aid of the Government, or so he expressed it. He said that he was not prepared to speak, but he seemed to have a script in front of him when he was giving us the benefit of his views.
Let me be clear. If the amendments passed at this end had been accepted by the Government, they would not have impacted one little bit on the ports issue. The amendments deal with the impact of the business rate supplement. The business rate supplement cannot possibly come in until April of next year. It would have no impact on what happened to the ports in that review in 2006 and 2008 and the adjustments that were made in 2005. To try to use this as a mechanism to open up debates around the ports is entirely outwith how we should be approaching these matters.
As to "would" or "could", the amendments in the Bill in effect impacted on how the rating list and adjustments to it would come about. Anybody who knows anything about the rating system knows that there will be changed situations between one revaluation and another. A property may have been extended, which could impact on its rateable value. If that happens, there is currently no formal reporting requirement on the person who generated that extension, but these things are reviewed by the valuation office. To say that you could not adjust the valuation list if there were no default on the part of the occupier or the person subject to liability would fundamentally change how the valuation list is maintained. Many of these adjustments are inevitably retrospective. When the valuation office comes around to doing its work and identifies that there has been a change, that leads to an adjustment to the valuation list.
That is a general point. There is a separate debate on the issue of the ports but that is not before us today. That issue is not impacted on by these amendments; it is not impacted on by this Bill. The Bill focuses on the business rate supplement, which does not come in until April of next year at the earliest. Apart from the GLA and the Crossrail levy, I understand that nobody has yet said that they are proposing to introduce a business rate supplement.
It is entirely false to have another go at the issue of the ports on the basis that we are perpetrating a great injustice by not accepting these amendments. Had these amendments been accepted, they would not have changed the position one little bit in respect of the ports. Noble Lords may feel that the action that the Government have taken, particularly in relation to the eight-year repayment period for those liabilities, is not what they would like to see. I am always happy to talk to my noble friend Lord Mandelson to make sure that he is acquainted with these issues. However, that is a separate issue from the Bill.
No, my Lords, the noble Lord cannot take that from what I said. I said that I would bring it to the attention of my noble friend. The noble Lord says that this Government should be about supporting jobs and business. That is exactly what we have been about as a Government, sometimes in the face of opposition from the party opposite. We are not going to take any lessons on that issue. There is a whole irrelevancy about the impact of these amendments on the issue of the ports. It is about time that we were very clear about that.
I accept and note that there are concerns generally about how financial privilege is operated. I agree with the noble Lord, Lord Patten, that my noble friend Lady Royall has been assiduous in trying to support and protect Members' interests. I am sure that she will continue to do that.
I have dealt with the issues. There are separate issues around financial privilege. The issues around the ports have become conflated with these amendments, which, frankly, they should not be. These amendments are to do with the BRS. The BRS could not, and would not, operate back to 2006; it will not operate until 2010. If I have not done justice to noble Lords who spoke, I am very happy to try again, but I hope that noble Lords will accept that it is a matter for the House authorities to determine financial privilege. However, there is nothing that I have heard or read that suggests that there was anything inappropriate in that determination. We have not sought to stifle debate around the ports issue; there has been plenty of debate on it. These amendments have nothing to do with that issue anyway.