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Welcome. I have seen the CBIs broad submission on these issues. We know that the idea of the business rate supplement had some of its germination in the Lyons report, which talks about an appetite for greater engagement with local authorities on economic development. Is there such an appetite in the business sector, and is the Bill the right way to engage business in those issues?
Karen Dee: I would like to say that there is an appetite. Certainly most businesses would accept that they should engage more widely with their local authorities. As an organisation, we think that that would be a good thing. Clearly, there are a number of pressures on businesses, so it has to be meaningful engagement and a good use of their time, to encourage them to do so. At the moment, many businesses probably do not believe that to be the case. Under the right circumstancesyou will know what my circumstances arethe BRS might be a route that could encourage local authorities and businesses to engage in a more constructive fashion.
Karen Dee: Well, there would have to be a vote. That process would bring benefits to both sides, because it would encourage local authorities to make a thorough investigation of the projects that they are seeking to fund and of the business case, and to work hard and engage with businesses to develop that business case. At the same time, businesses would know that they have a financial stake and a clear mechanism, and a potential cost if they do not engage. The mechanism should encourage positive behaviour.
A mechanism closer to BIDs perhaps, where the object of the project is on a broader scale than most BIDsis that how to understand it?
Okay. Can you help me? Have you carried out an assessment of the likely impact of the current proposalsif the Bill is unamended, in effecton your members?
Karen Dee: We have not carried out an assessment as such, but there is a pretty obvious potential increase in costs, added to the existing increases that we are facing anyway, as a result of the business rate increases. The increase is significant and, in the current economic climate, certainly not something that many businesses could contemplate. The other thing is that businesses will have to assume that, in going forward, they have to bear the cost, so they will plan accordingly.
Finally, I want to ask about the threshold that has been talked about£50,000in the light of the upcoming revaluation. Do you have any observations on its adequacy or otherwise?
Karen Dee: We have not taken a specific view on the £50,000, which is not mentioned in the Bill. The CBI is not opposed to the concept of a threshold. We understand the desire to protect small businesses, although, against that background of not opposing it, we would comment that business rates are not necessarily a good measure of a businesss ability to pay or of its profitability. There are some sectors, which are not small businesses, that will find it an equally difficult burden to bear.
Julian Lyon: From the point of view of the £50,000 threshold, or whatever the threshold is, it is important to understand how business rates work in the market to establish whether the threshold is an appropriate mechanism. For example, a six-storey office building might have a major plc occupying two floors, each of the floors being less than the £50,000 threshold and in two separate hereditamentsthe plc would fall below the threshold on both of them. There may be a department that has two floors, but on a single lease or hereditament, it would fall within the scheme. A small business on two floors of the same building would also be caught by the threshold. The threshold itself is relatively arbitrary, particularly when you look at it against the individual hereditaments.
First, I want to come back to the issue of the vote and the scheme parallel with the BID. In our evidence session this morning, we explored with the representative of the British Chambers of Commerce the fact that there would be circumstances in which it would be inappropriate for a business vote to stop a major infrastructure project that had wide support, when the business contribution was relatively small. A de minimis position was thus accepted. We asked for a figure from the British Chambers of Commerce and the witness accepted that the 30 per cent. set in the Bill was probably about right. Would you agree, and if not, why not?
Karen Dee: No. We would not agree with that, and we do not believe that one third is the right threshold for a vote. Our position, which we have come to by consulting all our members through all our regional councils in England, is that the only basis on which businesses will think business rate supplements are acceptable is if they have a vote on every proposal.
But we also, in talking to other witnesses this morning, explored the question of why other parts of the country should not be free to develop a similar model for supporting infrastructure in their area, on a similar basis to Crossrail.
Let us scale it down in proportion to the size of the local economy; I can well envisage a situation in which a city region would want to develop major transport infrastructure that was as important to the region as Crossrail is on a larger scale to London and the south-east. Would you really say it was right to deny it the opportunity to do that?
Do you accept that there would be a point where the business contribution was sufficiently small not to justify putting at risk a major project primarily funded by other bodies?
Karen Dee: I would say that what businesses would be voting on would be making an extra contribution to a project. You have to set it in the context of the amount that is already collected in business rates and business taxation. I do not believe that businesses would vote against a proposal if they could see that it would deliver real benefits. It is not a question of vetoing projects.
As I think the Mayor of London has made very clear, in the case of a project such as Crossrail, the benefits will come in the relatively long term. It is a major project, and it will take a long time to develop. In the short termand we are in difficult short-term circumstancesa business vote could go against something that everyone, including business representative bodies, says is vital to the long-term health of the London and south-east economy.
I think that everyone would say that that is the case with Crossrail. It is a good project and commands support, but despite the support of business bodies, there is no question but that there is a worry that, were there to be a vote, short-term interests might prevail and that hugely important project might not proceed. It depends on all the component financial elements. If one were taken out, it could bring the whole pile down.
Julian Lyon: From my perspective, there are three points that I would like to make. First, in the absence of a vote, companies have to assume that a 2p levy will be made against them, because they have no say on whether that will happen. Under those circumstances, companies will have to take that levy into account in their budgeting. Secondly, if you have a scheme in which the business community was consulted and then ignored, as happened in Nottingham, for example, there will be considerable business unrest, and I am not sure that I would want to see that.
Many of us would be sympathetic to that point, but there is inevitably a wider business community. Not all the wider business community across the whole of London might be as aware as the major business interests are of the strategic importance of an infrastructure scheme such as Crossrail.
You support Crossrail and want to see this finance proceed, but you do not really want to change your principled opposition to a vote in all cases, even though you know that that might destroy the funding of Crossrail. That is not at all, to my mind, a clear position.
Karen Dee: Our position is clear. We believe that business rate supplements must be put to a vote. That is the only basis on which businesses will feel that they have an acceptable basis. Otherwise, you undermine the relationship with the local authority. Crossrail should not set a precedent. That is our clear view.
Karen Dee: I think that you will find that when we discussed it with our London members, there was a majority in favour of Crossrail who would acquiesce in the introduction of a business rate supplement, but there are a significant number who do not support it. On the basis of the majority, however, we support Crossrail, and business rate supplements may be a part of that. If you read on, you would find that we felt that it should be subject to a vote, but we understand concerns about the sheer scale of the project. If the Government decided that that is the case, that should not set a precedent for other projects.
After that interesting exchange, I think that your position is clear. You have already said in your opinion, and that of most people looking at the Bill, Crossrail is unique. There has been lengthy parliamentary scrutiny, and an Act has gone through, which would not be the case for any other scheme, so do you think that that shows that there has been ample opportunity for people to debate it, get involved and make perfectly clear what their opinion is? Do you agree that that makes Crossrail a different example and that you would be in favour of a ballot for everything else?
We heard earlier from the chambers of commerce that there was a possibility that the BIDs scheme could be expanded to take on larger infrastructure projects. I am a little confused about how that might work. Earlier in your submission you said that you thought that that model could work, as long as there is a ballot. How do you see the interaction of BIDs and potential levies such as this one?
Karen Dee: We naturally support BIDs, as do businesses, and those involved in the BIDs schemes think that they are a good idea. That was why we liked the model. Clearly, this is for a different scale of project, but many of those safeguards should read across. We are concerned, particularly with regard to existing BID schemes, that a business rate supplement would come in on top without the automatic right for an offset, because effectively those tied into the existing BIDs would then be forced to pay something else on top. Clearly, if business rate supplements were also subject to a vote, the two may well work in harmony because a business would be able to take a more rational decision about whether they would want to engage in both. They would offset the benefits, rather than what we foresee happening, which is that there would be a reluctance to sign up to new BIDs schemes given the possible threat of not having a say on a business rate supplement and, therefore, thinking, I cannot afford to pay both or I am not sure about both. There is a concern about the dual risk.
Julian Lyon: One advantage of BID schemes is that they recognise the value attributable to owners as well as the costs to occupiers. Business rate supplements principally derive income from occupiers, but often that would be to the owners benefit. There needs to be a measure that allows owners to contribute if they wish. There may be owners who would prefer to enhance the value of their estate by contributing. In BIDs, voluntary contributions are enabled. With BRS, there is a separation of owner and occupier. That needs to be understood.
But what do you think of the idea that BIDs could be a model for carrying out large infrastructure projects? Do you think that it is possible for a single BID to operate across multiple local authorities, for example?
So consultation and the means by which business has a say are the key, rather than the fact that it is a separate scheme.
The point, which Mr. Raynsford raised, about whether there needs to be a 30 per cent. cut off to get around the veto is very important. Do you agree that the lower the business contribution, the easier it ought to be for alternative sources to be found, if the business community decided that it did not want to go ahead and contribute. Therefore, it is not a veto at all; in fact it is really saying, We do not think that this is the appropriate mechanism to fund that project and if other people in the community want to do it, they need to go away and find another way of doing so.
I genuinely do not know the answer to this, but maybe my colleague, Mr. Raynsford, will be able to help as we go through. Some of the knee-jerk reactions concern me, particularly those from the British Chambers of Commercethe oral evidence earlier amended the written submission. Like the minimum wage, there is a knee-jerk reaction and when that settles down some of these policies become part of an accepted consensus that they are a good thing. In this case, nobody will be forcing this on to business.
I have heard the word unique again and you can read the record; it was apparent after questioning the British Chambers of Commerce that Crossrail, by definition, is only unique to London because it is in London. There may be other schemes, which are not worked out at the moment, that may gain support. It would be hard to say to people with a well worked out, innovative transport schemefor example, in Manchester or in my area, north Staffordshirethat we cannot do it because the rules only apply to London.
The British Retail Consortium was, in effect, arguing that more of the burden should be placed on your non-retail members, because its members were paying an excess and there was a prospect of small or medium-sized retailers staging a Poujadist revolt if there was a ballot and a dual key, so that the majority outvoted the larger businesses. Looking at the map of London, although my colleague Mark Field is not in his place, I can see very clearly why, given the predominance of black and dark grey in Westminsterand indeed in Greenwich and WoolwichMark definitely would not want a referendum focusing considerably on his constituency that might scupper Crossrail.
I have a final question for you. You say that in principle, you would like a ballot on Crossrail in London. That sounds to me as though in practice, you, like many other people, would not like one, because it might scupper a project of benefit for all due to certain easily mobilised elements.
Karen Dee: Before I answer your question, I would just like to say that the CBI position is far from a knee-jerk reaction. Going back to when Lyons was first published, we have consistently consulted our members, because it is an issue that comes up time and again at all our meetings around our regions. It has been a very careful consultation process with our business members. It is not a knee-jerk reaction to the proposal, and we are not going to change our view suddenly. We are not opposed to business rate supplements, but they must be subject to the safeguard. That is a position that our members believe is reasonable for them to take if they are going to be asked to make additional contributions.
Karen Dee: But as your colleague said, there has been a separate process. Crossrail is unique. It has been through the House, and it has been debated for a very long time. That is not likely to be the situation with all other projects all around England. For that reason, we believe that the business rate supplement must be subject to a vote.
You mentioned the word reasonable as a reflection of your members involvement in discussions about the Bill. To return to a point made by Mr. Raynsford earlier, the business community would be paying far less than a third of the overall cost, as lots of other interests have been taken care of and moneys sought elsewhere. It will not be paying up to the 2p limit that was set upon it. Would it reasonable for the business community, in its narrow self-interest of not wishing to pay any additional cost even though there might be some benefit to itself, to veto a project with clear benefits for citiesI am not talking about Crossrail now; I want to get away from Crossrailin other parts of the country? Is that a reasonable stance for the business community to take?
But then I come back to Crossrail and the point made earlier. Clearly the CBI sees the benefits of Crossrail, but you are hiding behind the fact that the Government have decided that it will go ahead. No one has complete confidence that if a vote were given to the business community, it would not veto it.
I think that the answer is that you have a much rosier view of what attitude the business community might strike. You do not seem to take into account the fact that many in the business community would look at their short-term interests. In the short term, Crossrail would make no sense to them; the benefits would all come in the longer term. Therefore, quite a lot of businesses looking at it rationally in their short-term interest would not support it.
Karen Dee: But I think that what we are talking about are additional infrastructure projects and businesses making additional contributions. We have very high business tax rates in this country. There is nothing in here about making people take account of affordability. If we simply introduce mandatory new taxes, businesses will go out of business, which is not good for anybody. We genuinely believemany of our members support thisthat if you can introduce an interesting new project delivering genuine economic benefits, and if businesses can see those benefits, they will vote in favour.
Although it falls outside the scope of this discussion, I would like to refer to business rates. It has been the policy of this Government, and a recognised cross-party policyI thinkthat the level of business rates should be restricted to the rate of inflation. That has been in place for a considerable number of years. During that time, the proportion of rates met from the business community has decreasedin real terms it is exactly the same, but overall its contribution has gone down considerably. However, listening to you, and indeed some of the other witnesses, one would think that this was a huge imposition. There does not seem to be any recognition from the business community that others, especially council tax payers, have had to bear a considerable additional burden, because of the perceived view, accepted around this table, that the business community should be relieved of some of the pressure on local government.
Karen Dee: I can talk only about the Business Rate Supplements Bill, although I would say that business rates are quite a significant burden on businesses and impose an additional cost that businesses have to bear. Let us look at the amount to be introduced this year as a retail prices index increase. We will not necessarily assume that the business tax burden is going down, because it is way above the September figure. The business contribution will increase quite significantly.
Karen Dee: I am not sure that we said that. Did we talk about a centrally set limit? I think that we said that we would want any of the proposals that come forward to have a clear limit, so that when any prospectus or proposal comes forward, businesses will know how much it is designed to raise and for how long.
I think that about 84 or 85 per cent. of bids are generally approved by a positive vote. The suggestion seems to be that somehow business will adopt a sort of dog-in-the-manger attitude if given a vote. Do you see any evidence to support that?
Karen Dee: Not in the evidence that we have so far. The attitude of our members has been that they can see a case for making a contribution to additional funding projects, but only if they feel that they have a genuine say. That way they will feel that they can work more closely with the local authorities to ensure that they are the right types of schemes and that they will deliver proper economic benefit.
I suppose that one argument would be that the prospect of a ballot can concentrate the mind of the local authority to negotiate with the business community in the early stages to bring forward a project likely to get approval.
Julian Lyon: Local authorities in that process should consider the economic benefits flowing to landlords. In cases where occupiers might not want to vote in favour of increased costs for a short period prior to the project going livethrough the BRSbut where a landlord will benefit from increased capital value, there needs to be some recognition of where that capital value is going. If all the burden from the business side is on occupiers paying increased rates, you end up in a situation where it is probable that they will vote against it, because they will not get the benefit. That is an important piece that needs to be understood, and that is where BIDs win through.
Let me ask another question then. Is the only way of obtaining the views of your members a consultation whereby their views succeed in influencing the major project? Is it possible to consult somebody and for their view to be in the minority? For example, if the Chairman was to consult members of the Committee, unfortunately the views of some of us would be in a minority. Is that possible in a democracy?
Karen Dee: We support the dual-key vote, where you need a majority by rateable value, so we accept that you should not have a situation where, for example, one particular business is going to hold up the process as a whole. There should be the protection of the majority of rateable value over a minority of businesses.
You believe that there is something special about businesses, that the only form of consultation that they should have is via ballots, and that the statutory consultation that has been guaranteed in every BRS scheme is not adequate for your members?
Neither of you have any experience of being employersfascinating.
My second question is in relation to BIDs and BRS. Do you accept that the sort of project that BIDs are designed for is different from the sort of project that we envisage BRS being used for?
Okay. Do you accept that if you were trying to fund a major project you would like to have diverse income streams and sources of capital for the project, that you would not want all your eggs in one basket? Is that a fair general rule?
I will give you an example. You have accepted that the sort of project that BRS schemes are designed for is different from the sort of project that BIDs are aimed at. You have accepted that, in general terms, when you are funding a project, you should try to get different sources of capital to fund one project, rather than having all your eggs in one basket. In which case, do you accept that it is a problem, when you are trying to get major different income streams to fund a major capital project, for all your other potential income streams to be told that one of the income streams has a veto; that even though those businesses are funding a smaller fraction of the cost of the entire project than everyone else, they can veto it? Do you think that that is likely to encourage or discourage other income streams taking part?
We have an example, which is not hypothetical, with Crossrail. All the evidence suggests, and the Mayor of London, who owes no favours to us, is saying that if we require every single business to be balloted in the way that you want, that will create a real problem for the viability of Crossrail. So we have a live example where my hypothesis proves true. Do you accept that?
Right. So you think that there is nothing in the future that could lead to Manchester, Sheffield or Cardiff having the aspiration and the ambition that the previous Mayor and this Government had for London with regard to Crossrail?
What is your view of the balance of power between central and local government in terms of raising local government financethe ability of local government to raise finance compared with the proportion determined by central Government?
I am asking generally. Does this betray a distrust of local government by the CBIthat you do not think local government can be trusted to act responsibly and sensibly? Would your view be contrary to the Financial Times which said that this Bill is a good thing and that local government has moved on considerably in recent years and should be given the chance to win more responsibility? Does it not betray a lingering distrust of local government and its responsibility?
Karen Dee: Many businesses would have the view that they do not have a good relationship with their local authorities and there is an element of mistrust. That is not the case everywhere, which is probably reflected in our managing to get most of our members to say, We want the safeguard of a vote, but we would be prepared to go along with this additional taxation.
That may be so of some local authorities but there is a general acceptance that since the 80s the relationship has moved on considerably. That is not quite the point in terms of trust that I was making. Are you suggesting that local authorities will come up with some crackpot scheme, which will put a burden on business and drive away jobs from their own areasdrive away the jobs of the very people who vote for them?
Karen Dee: I certainly hope that that would not be the case. I know our members would like a safeguard to ensure that they have a say and that they can work more positively with the local authority to ensure that those schemes are the right ones. Local authorities on their own will not always be able to devise the best schemes. We want to encourage the relationship between businesses and encourage businesses to engage as well. We hope that a ballot would help to achieve that.
Yes. How is this going to operate? Every last business in Barnet or Bromley will create a BID for a localised benefit on a localised project and thereby exempt themselves from the BRS. Do you not see that there would be a massive problem for a like-for-like exemption? Whatever your concerns about BRSand we do share some of themeffectively to avoid the obligations to Crossrail or anything else in that way would surely undermine the entirety of it. It would become a template for every last authority that was far enough away from the route of Crossrail, or Metrolink in Manchesteror whatever other project were put in placeto subvert the whole idea of the general gain.
Order. Sorry to interrupt, Ms Dee, but the deadline has come, so that question will have to remain for ever unanswered. I thank you both for coming here this afternoonwe appreciate the contribution that you have made.
You may have had the opportunity to look at some of the discussions that we have already had with witnesses. One thing that emerged is that the business community likes the BIDs modelit feels that it works. Can you tell us a bit more about that model and what lessons can be learned from it, in terms of the potential for greater funds to be raised locally from business, in order to provide infrastructure schemes, for example?
Dr. Grail: Yes, sure. As I set out in five points in our brief written submission to the Committee, it is twofold: it is not just about the ballot in advance, it is about the running of the scheme as well. Businesses like BIDs because it is run by business for the benefit of business. It is very much focused on being accountable to that clearly defined electoratenot just at the point of ballot, but through the whole life of the scheme, which is a finite period. That gives them a sense of confidence in what is being managed, year on year. There is a commitment in the business plan at the point that they vote about the amount that they are going to be charged during that period. So they have certainty about how much they will be charged and certainty that if the business plan and the delivery organisation seeks to move away and vary from that business plan, there are ways in which they can bring them back on to the focus of that original commitment. It is also about having those funds clearly ring-fenced for the expenditure of that company, which is governed by the business community. It is by business, for business.
With regard to the business rate supplement, we have heard a lot today about the concern with the ballot. We have some issues with that, but it is not just about the ballot and about getting something set up; it is about managing the relationship going forward. One huge value that we have seen coming out of BIDs is that it has truly brought together local government and the business community. A danger about the business rate supplement is that it could rip it apart again. That would be a terrible shame because we are seeing some great value coming out of strong working relationships between the two partners.
Having had the opportunity to look at the Bill as it currently stands, do you think that if it was enacted, would put into practice something based on the lessons learned from BIDs, or are there potential pitfalls there that need correcting before it is fit for purpose?
Dr. Grail: It is important for me to say that we, as an organisation, are not anti the business rate supplementwe can see that it could work, for a host of reasons, in certain locations. But, to get the Crossrail issue out of the way, London is uniquewe accept that. We hear your point and agree that a full offset in London would be a ridiculous and dangerous move and would give an open door to every business community in London to go and get itself a cheaper business rate supplement, which is ridiculous. We have been encouraging the Mayor to consider a partial offset at a value which was reasonable to the business community, but not such that it would enable people a free vote into a bid. So we are asking for 0.25 per cent. offseta quarter of their price of a bid levy.
Beyond that, we can see outside of London all sorts of scenarios where a business rate supplement could work very well. We could certainly see how business communities and existing partnerships in town and city centres might benefit from having part of a budget that has been drawn from a wider area, directed straight into a town centre company via a business rate supplement rather than a BID ballot. So we are not against it, in principle, but there are points of concern. I mentioned the starting point earlier: there will be no control for a business community under the current arrangements in the Bill in terms of the ongoing management of the funding, and no safeguards to give businesses any sense of governance over the ongoing spend of the money. Indeed, without a finite, fixed perioda BID has five yearsthere is no knowing how long that situation might go on.
There is a general acceptance that, in many cases, as someone said, it will become a normal cost to business, which it might, but the problem is influencing ongoing spend. There is a concern about offset outside London and we can envisage scenarios in which we will be in danger of losing the BID concept completely in number of areas. I will give you some of the numbers: in the next three financial years, 51 of the current 76 BIDs will go to renewal ballot; and in London, 14 of the current 18 BIDs will go to renewal ballot by 2012. I am not scaremongering when I say that there is huge concern about the period after 2010, when businesses could be asked for a BID levy, even though you might be able demonstrate value, when they have just been charged 2p, especially in London.
We therefore acceptthis is another point in our submissionthat a full offset in the case of London is not possible, but phasing in a business rate supplement in certain areas of the market is possible. That is in the impact assessment document. In London, if you could consider a phasing in of the business rate supplement to safeguard the businesses in the BID areas that are going to renewal in that tricky period, over two and a half years, you would hopefully safeguard the life of BIDs in London.
It is also very important to recognise that most of the BIDs in London that are going to ballot will be seen as a barometer for the rest of the country, because they are trailblazers and the ones that are going to renewal ballot first. If we start losing the ballots in London, it will put a really negative message out to the rest of the country, which needs to be borne in mind.
Although you have been clear that it is not all about ballots, and that there other concerns, particularly ongoing managementthat useful point has not come up before, so I appreciate that you mentioned itdo you think it likely, bearing in mind what you just said, that if businesses know that they will not be balloted for a potential supplement, they will say no just in case, because they are worried about the overall cost to them? Will the lack of a ballot have an effect on the likelihood that BIDs will continue or come together?
Dr. Grail: Yes, without a doubt. With the layering of occupancy costs, if the only thing that businesses have a choice over is the BID levy, and they are in a tight market, that is what they will choose not to go ahead with.
Having said that, we are trying to design BIDs that are focused on local need and that are of value to the local community. Some of that goes back to the earlier debate on ballots for the business rate supplement, which we might say yes to for major infrastructure schemes across a region when we are dealing with an entirely different issue and project scale. Part of the worry that businesses have about business rate supplementlet us say that we are talking about outside London, because there is a different debate in Londonis that local authorities will seek to use the Bill to fund activities that would be better funded through a BID. That will be a dangerous situation, because you will lose a strong business-local authority relationship, which we have just established, and which I talked about earlier.
May I pursue that point a little? If there were to be a scheme involving, for example, infrastructure investment in a particular city region or area, is it likely that local authorities would enter into a BRS without trying to engage local businesses in a constructive way? They were required by the legislation to consult local businesses, and I would have thought that the likelihood of winning support without such engagement was minimal. Let us remember that if the contribution is more than a third, there has to be a ballot. Do you think it likely that local authorities will simply enter into major projects of this nature without bothering to consult business in the way that you rightly want them to?
Dr. Grail: Well, I do not mean to sound facetious, but we have run a lot of ballots and have been at the coal face of running BID ballots in the past four years. As someone mentioned earlier, a ballot really focuses the mind for both sides on what is deliverable, workable, viable and acceptable. That is very different from a consultation. In a consultation you can ask the questions you wish to ask to glean a particular answer. A BID ballot, or any type of ballot on business, focuses peoples minds on whether there is real value for money in that project. I do not believe that consultations will necessarily achieve that. A cynic will suggest that you simply design your project so that it only reaches less than a third of the project cost, in order not to put yourself through a ballot. If I was on the other side of it, I would do that.
If we take the example of CrossrailI am sorry to go back to it, but it is the only concrete one we havethere was clearly detailed discussion with representative business bodies. Their support was secured. The only evidence we have of a concrete project shows that the public authority did not cynically use the absence of a ballot to push through its plans.
Dr. Grail: That is right. I absolutely agree with that. As we heard earlier, the worry is that we must not make Crossrail the precedent for building the rest of the Bill and the rest of the ways in which this is likely to work. A major infrastructure project of this type with layering of funding is an entirely different situation from an upper tier authority elsewhere in the country looking to fund economic development activity in a relatively small region. It is a totally different scenario.
I accept there are differences but I would have thought we would want to try to learn from the experience of Crossrail and the positive relationships that have been developed between the promoters of Crossrail and the business community in London to try to spread that, in the same way that you are quite rightly trying to spread good practice from successful BIDs to other areas.
Dr. Grail: I am not sure that that experience could be translated down to a local authority elsewhere in the country and its relevant business community. I still spend a lot of time being asked by local authorities how they can get a BID in their area. They argue that we should get those businesses to put their hands in their pockets because they have more money than they have. That is not what the relationship is about. Because you have to go through a lot of hoops to develop a BID and a real reality check to go through a BID ballot, we are seeing the process slowed and we are seeing very carefully crafted BID proposals going out to the business communities. If we did not have the safeguard of the ballot, a great many more BIDs would have tried to come through to the business community and we would see some really poor behaviour.
You know that I am extremely supportive of all that you have done and of the development of the BIDs programme. Can I change the theme for a moment to the slightly different but rather important issue of how you ensure that the landowners who currently do not contribute to BIDs and will not contribute to the business rate supplements may be involved? This is an ongoing issue that has been discussed right from the outset. It has not, contrary to the gloom mongers at the start, destroyed the BIDs programme, but it remains a weakness and it is a weakness with the business rate supplement scheme, in that landowners will not contribute, although they will benefit very considerably from the infrastructure investment. Do you have thoughts on how this particular knotty problem might be resolved?
Dr. Grail: I confess to being one of the gloom mongers at the beginning. I still believe that there is a place to have the option for a provision of a mandatory property owner levy within BIDs in areas where it is appropriate. There are still areas across the country, particularly the bigger cities and the centre of London, where they want to see a mandatory property owner levy to supplement their occupier levy. We have done some forecasting of what might happen to the make-up of a BID budget if you have a business rate supplement and you have pressures on the occupier. The danger is twofold: there is a real pressure to try to force more money on to the owners without the ability to do that in a mandatory way, and to force more charge on to the small businesses below the threshold because they are currently not paying a BID levy. If they are not to pay a business rate supplement either, they will reduce the thresholds in BIDs and put a lot more money on the bottom end.
You say that a lack of a mandatory levy has not been detrimental to BIDs growing. In some ways
Dr. Grail: I painfully agree with you. In one way it has not, and we have seen real growth, but still the property owner position has not changed. Property owners still wish to see a mandatory levy. We now have some concrete evidence thatdespite some early good will by owners investing, particularly ahead of a ballot, to see a BID come into beingthey are dropping out as time goes on. They are dropping out of property sales; there is no commitment for a new owner of a property to carry on that voluntary contribution, and some of the bigger BIDs are losing huge amounts of annual income as a result. With one owner, you may lose £100,000 a year from a previous contribution. That is a real danger, so there is definitely a problem that has not yet been resolved.
We still believe that there is an opportunity to put in a provision for a mandatory owner levy if a BID chooses to use itnot to use it everywhere, but when it is necessary. There are scenarios where it would never be used and never be workable. For instance, with huge disparate ownership it would be far too much of an administrative burden to start charging them; but where you have reasonably large portfolios you could top-slice the top 20, 25 or 30 owners with a threshold, in the same way as we do with occupiers, and raise a reasonable amount in a guaranteed and sustainable way. That, I think, is what BIDs are going to need to have in the longer term if they start having these additional occupier costs.
What is the safeguard against freeloadersthose who evadeif you do not have a rigorous system for identifying all the landowners? Without that, how can you ensure that things will be fair?
Dr. Grail: You would not charge all of them. You do not charge all occupiers, because there are very few BIDsI could probably count them on one handthat charge every single business on a rating list. They have a threshold, dropping a whole load at the bottom end that cannot be identified, or advertising hoardings and so on. They sometimes take people out and cap them at the top end. There is a recognition that a core of businesses can pay an equitable amount.
The same goes for looking at the property perspective. There can be a core groupfor example, the New West End Company, where about 26 owners account for something like 85 per cent. of the ownership of the area. That is an entirely acceptable core group to be charged.
Yes, there are some freeloaders, but there are freeloaders everywhere. This is better than having 100 per cent. of freeloaders. In this case, they have 18 voluntarily at the moment, and are trying to get the additions. You can never have a perfect scenario, but that is far better than what we have at the moment.
You referred to what might almost be called confusion in the minds of many business men about the difference between BIDs and the business rate supplement, although there are some clear distinctions in the way that they should operate. I accept that these are dire economic straits for many in business, both retailers and other businesses occupiers, but surely it is in part your role to make the case for a distinction between BIDs and BRS.
I am used to central London BIDs, where even two or three roads can form a distinct area. However, we gathered this morning that, for instance, the entire city of Coventry is under a single BID. Does that not run counter to what BIDs are trying to do? Indeed, does it not promote the sort of confusion between the BRS route and BIDs? It is counter to the very idea of the BID, which should be very localised, and the whole question of additionality, which I can appreciate is central to many of your business clients.
Dr. Grail: Yes, Coventrys is a city-wide BID. It includes 2,500 businesses, and it is quite different from virtually every other BID. However, that is an unusual case. It is not really the core focus for which BIDs were designed. BIDs are about a local affinity to a local area. Indeed, some BIDs that have gone beyond 1,000 or 1,100 hereditaments have been criticised by business, which does not believe that BIDs should be of that scale. It believes that much of the value of BIDs is their local focus.
Having said thatI know it is different legislation, but it is not far awayDublin went through a ballot last year and is now running with 2,700 businesses. It remains to be seen how accountable that is. None the less, you are right that one of the real values of BIDs is that they are local. There is an optimum number of businessesa manageable amount that you genuinely communicate with on a regular basisand things are therefore genuinely governed by that business community. That comes back to my original point about the concern regarding business rate supplement. There is no safeguard at the moment that businesses could genuinely engage with that process and help to govern the spend of that fund, over an infinite period of time.
But if you are going to maintain the assurances about additionalityI can see that that is very much in peoples mindssurely, from the BID perspective, going down the route of Coventry is presumably in part about you saying, We have x number of businesses that are under the BID umbrella. You are allowing that confusion to come into place. This is a separate
No, I accept that, but presumably it is in your interest to say, Listen, there are an increasing number of businesses under the BID umbrella across the country, instead of having a focus on the additional things. Again, in the London context, it is about having extra uniformed quasi-police officers and generally smartening up the streetscapethose sorts of things.
As I see it, one of the big problems of the BRS, and indeed other measures, is additionalitybusinesses turning around and saying, We are already paying our rates; why are we having to pay this bit more? Surely there is a distinction between a large-scale infrastructure projectI accept that Crossrail in London is exceptional in its magnitude and it will be on a smaller scale in other large cities, let alone in townsand what should be a highly localised smartening up of the area, whereby a few dozen businesses can get together and say, We can do something that is going to make this a special area, and the footfall will then come in this area. Surely you should be trying to draw that distinction, rather than allowing this confusion to reign.
Dr. Grail: I am not allowing it to reign. I agree entirely with you: BIDs work because they are localised. There is no magic number of businesses in a BID area, but we tend to look at an optimum figure of between four and[Interruption]businesses as the main core of communication. But if you turn it around, my point about where the business rate supplement may become confused is that, if it is not on core major regional infrastructure projects but more loosely on economic development, you might see citieswe have already heard of somethat opt
Forgive me. There is a Division in the House so we have to adjourn the Committee. If Members could get back as quickly as possible that would be helpful. We do not have votes in this Committee, but as soon as we are quorate and the relevant people are heremewe can start again.
Dr. Grail: We were talking about the confusion of the breadth of business rate supplement and the focus of BIDs. I was about to say that there is no confusion when you talk about a business rate supplement funding a major regional infrastructure scheme. The confusion comes if the business rate supplement is locally focused, on a small city council, say, which is looking at funding economic development activity instead of running a BID. We have already heard from a number of places in the country that are either putting a halt to entirely or at least postponing the idea of talking about BID development, because they would rather put a business rate supplement in place to fund the types of activity that the local authority would like to do, which is not necessarily the appropriate thing for a business community. That is where some sensitivity comes in and where it is about trying to put the relationship back together, to put a vote in place that would test and scrutinise both sides, in terms of the local authoritys desire to deliver certain things and the reality of what the business community would benefit from in that area.
I think I can assure you that the intention of Parliament here is to have those as two separate and distinct streams. There should not really be any confusion now, except that, practically, the people on the ground are possiblydefinitelyconsiderably less qualified than you are to be able to tell us how it all operates. However, that is certainly the intention. They should be distinct streams in how they are operating.
But do you not agree, Dr. Grail, that another way to confuse is with any sense of an offset? That would help to confuse the issue, if there was a sense of an opportunity to have an offsetwhether of a quarter or a half, whatever the fraction, of your BRS surchargebecause you happen to be part of a BID. That would also go some way towards confusing the very ideas of the two quite separate structures of financing at a local level.
Dr. Grail: If you set the offset at an appropriate level, so it does not give carte blanche for a business community to get a free BIDI agree that that is not the right way to do itand recognises that there is a finite pot of money there. If you do not allow an offset and there is a tight market, and a local authority goes ahead with the business rate supplement, for whatever reason, you are in danger of losing a local delivery body, either now or in the future. That is the reality, but I cannot tell you the evidence, because we have not got it yet. The business community has a real concern that occupancy costs are so tight that the only choice would be a BID ballot.
Another thing that I wanted to mention was raised previouslythe threshold. The earlier paperwork suggested that a £50,000 threshold would safeguard BIDs. Our evidence is to the contrary. We have done detailed analysis of 23 BIDs around the countryall different sizes and typesand 86 per cent. of the BID levy is over the threshold. In London, only one BID is unaffected by the thresholdthat is, it falls so far below it that, in the vast majority of cases, it would be okay. The rest are not safeguarded by that figure at allthe threshold needs to be way higher, to give the majority of BID levy payers a safeguard.
Dr. Grail, you saidparaphrasing youthat having a vote would provide that safeguard but might not be the only way. I have heard a lot today from representatives of business about how there has to be a vote, full stop and that is it. Is there a plan B in your mind?
Dr. Grail: I am not clear whether there is a plan B that can be drawn into the Bill. What I am saying is that there needs to be a sufficient safeguard to enable due scrutiny of a process leading up to a ballot, and then appropriate scrutiny of what goes on beyond that. The ballot is one way of doing that. There may be other ways of doing that.
Dr. Grail: It comes back to accountability and transparency. If you are not doing it directly through a ballot process, perhaps you are doing it through a commitment to have a proportion of the business community managing the process as it goes forward. I started by saying that the reason a BID is supported is not just the lead up to it, but the ongoing management. A major concern is that, under the current arrangements, a local authority would collect that money in exactly the same way as it collects business rates and would do with it as it sees fit. The influences over it could change over time and businesses would have no power over that whatsoever.
There is an opportunity, or perhaps a necessity, for businesses to be involved in the ongoing governance of it, which would provide appropriate scrutiny. If you have to set up a company to govern the spending of the money that is collected, that puts an immediate scrutiny on the procedure before you even get through the consultation, because you would need to set it up ahead of the collection process.
That comes back to the fact that we should be forcing local authorities and business communities together, not pulling them apart. If you put them together into an operational company, they have to work together and reach some compromise to join up in a company before the money is collected.
May I come back to the issue that Mr. Field raised? He talked about confusion of the offset, but when we come up with figures in Parliament we are always asked why, so why a quarter?
Dr. Grail: The reason we proposed a quarter of 1 per cent. was because it is enough to be a reasonable subsidy to the businesses that will incur double costs without being just tokenistic, but it is nowhere near enough to give an opportunity for a carte blanche BID ballot vote. To raise a quarter of 1 per cent. for free and to have to raise three quarters will take hard work. That will not enable the business organisations that want to get through quickly and easily to be able to do so. If you flip it the other way and give them three quarters free, they will push it through somehow. It means that there is still a valid amount of scrutiny on developing a good quality BID while giving a decent subsidy to the business community. I firmly believe that BIDs and their performances are good because of the real scrutiny of the accountable process that they have to go through at the beginning and throughout year by year.
I want to come back to that, but listening to you earlier and to the answer you have just given suggests to me that this is just a bribe to people in the business improvement zone to support the levy for the business rate supplement. Is that not the case?
You are saying that we will reduce it by 0.25 per cent. in order to get them to support what you are trying to achieve, whereas you think that they would not support it if they had to pay the full amount. Is that not a bribe?
Dr. Grail: No, from my perspective, this has nothing to do with whether they support business rate supplement. It is about whether they support the principle of developing a BID for their local area on the basis that they will have to pay an additional levy. I do not give a damn whether they support business rate supplement or not. I am focused on whether they want to make a BID work in their local area.
But there may be people outside the business improvement area who do give a damn about someone else getting a discount or a bribe, whatever we call it. You have a business improvement area where there is a clearly justified reason why business would want to be involved and pay the levy. You have a business rate supplement scheme which one assumes business will support and a clear economic rational for why they would want to do so. The question that I am really asking you is: why should businesses inside the improvement zone get some form of reduction? They are getting an economic benefit in the same way as others, so why should they not pay like everyone else?
But they are not receiving the benefit of the BID levy or of what is happening inside the business improvement zone. A business that sits outside the business improvement area and gets no benefit from it does not pay anything towards it, but when it makes a contribution to a wider scheme on business rate supplement, those businesses on the inside get some sort of discount or bribe, whatever you want to call it. Would that not be objected to by businesses outside, or do you think that they will be happy that others are getting a reduction?
Dr. Grail: That presupposed that those who propose a BID can clearly demonstrate that for every pound they spend they get at least a pound back, and that is difficult to achieve and demonstrate. I am saying that what we are trying to do is look pragmatically at how we maintain a BIDs movement in this country, because we are in grave danger of losing it. That is how we could recognise that there is a compromise that we could achieve, so that the business community is not given carte blanche to create low-level BIDs but recognises at least some subsidy.
I think that it is an entirely different matter whether the business community supports business rates and what the relevance and focus of that is. How do we protect business improvement districts, which are working well in this country? Business communities, when faced with a 2p levy over which they have no choice and a 1p-ish levy on a BID, will vote against it in many cases at the moment. There are ways to try to safeguard that, at least in part.
Blake Penfold: My name is Blake Penfold, and I am a chartered surveyor with GL Hearn, which has offices in London and elsewhere in the UK. I chair a policy panel on rating and local taxation for the Royal Institution of Chartered Surveyors, a body governed by a royal charter. We are not a lobby body; we are here to speak in the public interest in respect of the business rates system.
Your written submission implies that the RICS takes a rather negative view of the legislation. First, in paragraph 5, you say that there is little sound economic reason for introducing supplements and little enthusiasm from the business community for such supplements. Do I take it from that that the RICS is opposed to Crossrail?
Blake Penfold: I will start with a negative, which is a slightly consultant-y way of starting an answer. Our concern about using business rates as a tool to fund Crossrail is that essentially, business rates are, as you will know, a tax on the occupation of property. They accrue on a daily basis, and therefore may accrue over quite a short term. Crossrail is a major infrastructure project by nature whose construction period will be many years and whose life will be way beyond that. We are not satisfied that a tax to do with the occupation of property levied on property occupiers is the correct way to fund a major infrastructure project.
Blake Penfold: No. In 2003, the RICS produced a report with GVA Grimley on funding options for Crossrail. One of those was a supplement on the business rate, but there were a number of others as well. For the reasons that I have tried to explain, we do not see a tax on the occupation of property as the best way to fund a major infrastructure project.
He made the very strong case that that was an unsound argument, because other business taxes are low by international comparisons. If you take things in the aggregate, therefore, the uniform business rate is not uniquely high. It itself might be, but the total package of tax on business is not.
Do you know that the proportion of local government expenditure met by the business rate has fallen from about 25 per cent., a decade or so ago, to about 20 per cent. currently?
So you are quite relaxed about the fact that on the one side is a declining proportion of business rates supporting local government, and on the other you do not want to see any use of that mechanism to support infrastructure? The RICS position appears to be that the whole burden for increased spending on necessary infrastructure or improving the local economy should fall either on the individual council tax payer or on central Government taxpayers.
Indeed, but if the view of the business community in London, of the Mayor and of central Government is that the Crossrail project is fundamental to the economy of London and the nation, and will require additional spending to get there, you would essentially say, Sorry, but we dont think thats appropriate. Is that correct?
Forgive me if I sound a bit exasperated, but you seem to be advocating a position whereby the business rate payer has seen business rates providing a lower proportion of local government spending over the years, as a result of which the burden has shifted to national and council tax payers. When it comes to the need for major infrastructure investments, from which business will benefit hugely, as Crossrail has itself demonstrated, you do not think that there should be any additional contribution from business. That seems to me to be a totally untenable position.
Jerry Schurder: I am not sure that the RICS position is that business should not contribute. We are saying that we do not believe that the rating system is the best mechanism for finding that revenue. The key issue is that it is generally a tax on the benefits of occupation. In the main, but not exclusively, the property system in this country consists of owners and occupiers, and they are not always the samein the majority of instances, they are not. The concernand you raised this issue earlieris that the burden will fall upon the tenant-occupier ratepayer. They might partly benefit from a successful scheme funded by the business rate supplement, but that would take some time to come through. Ultimately, however, the property owner would be the beneficiary of a successful scheme, and they would benefit from increased rental values and increased capital values without contributing to the scheme. The RICS has that concern about a number of the relief schemes that have been used and adopted over time in the business rating system. We do not feel that that is always the best way of targeting relief to what may well be deserving cases. Very often, the relief is targeted at the ratepayer tenant, but at least some of the benefits go to the landlord without them having contributed.
I understand that and I hear the argument. However, that argument was used strongly and forcibly five years ago to oppose the introduction of BIDs. BIDs have come in, despite what we acknowledge may be a weakness, and the scheme has proved successful.
Jerry Schurder: I think there is a significant distinction to be drawn between the BIDs model and the business rate supplements. By their nature, BIDs are generally local and usually fund revenue expenditure, be that additional policing, street cleaning, street furniture or whatever. That brings fairly immediate returns to the tenant, the ratepayer. They contribute and they derive benefit. Some of that benefit may flow through to the landlord through increased values. The distinction that RICS draws with the business rate supplement is that generally these are major capital projects over a long time period. Clearly, there are significant elements of expenditure, and for the tenant to pay up front for a number of yearsthey might no longer be the tenant any more by the time the scheme comes to fruitiondoes not make this the best model or system to get business to assist with the funding of capital projects. It is not RICSs position to say that businesses should not assist and contribute, but we are concerned that the business rate system is not the best measure to use.
So, tell me your proposal in item 10 of your submission as to how we should introduce a scheme instead of this one, which would essentially derive similar benefits from property owners through supplements on them.
Jerry Schurder: That is a very good question and there is no straightforward answer. At the moment, we do not have a register of all property interests within the country. We have a complex scheme of property ownership with freeholders, head landlords, tenants and subtenants and so on, and that makes it very difficult. I appreciate that that does not assist with the answer to the question, but it is an important fact to bear in mind.
The only solution that we can come up with at this stage is our belief that tenants would feel more comfortable with the concept of contributing towards a BRS scheme if they could see equivalent, landlord contributions. It would not need to be one to one, but perhaps people could see that property owners are prepared to put their hand in their pocket. Property owners will ultimately be the beneficiaries and they should also contribute.
How does one achieve that? We cannot impose itwe do not see how we can have a system of imposing that on property owners. However, if there were a vote in all cases, which many of us are clearly calling for, that would focus the minds of those who propose a scheme to be funded by a BRS and ensure that they get contributions and funding from landlords. That would not only help reduce the element to be paid for by tenants, but it would enable the tenant ratepayer to see that their landlord is serious about the project and is playing a fair part. We cannot prove it, but our perception is that that would assist those voting in a ballot in favour of such a scheme. Perhaps the BIDs model, where landlords have come forward voluntarily and put their hands in their pockets, could assist with that.
But unfortunately, there are compulsory ballots in the case of BIDs. We have heard from a number of people, including the British Property Federation, that in practice there are lots of freeloading landlords. The presence of the ballot has not resulted in the high-level contribution that you anticipated it would do in the case of the business rate supplement.
Jerry Schurder: One cannot generalise, but it would focus the mind very much and, indeed, the efforts of the local authority or the levying authority to show tenants, in generaleven if one were not able to show the tenant that his or her landlord is putting their hand in their pocketthat landlords are serious, recognise the benefits of the scheme and are prepared to put forward their money to assist it.
A final question. To concentrate your minds and ours, we have a timetable. We know that the business rate supplement is fundamental to Crossrail because we are told that if the levy cannot begin to be charged from April 2010, Crossrail will not proceed. Given that you have interesting ideas about how alternatives might be developed, but nothing concrete to offer, what would you do in our position? Would you say, Dont pass the Bill because we are not entirely comfortable with it, or Do pass the Bill because Crossrail is too important to sacrifice?
Blake Penfold: Some of the difficulty in answering that question is that we would then be trying to move the Crossrail model much more widely, which is the purpose of the Bill. All our objections would remain. Perhaps a way forward would be either hypothecation within the existing UBR or a scheme devoted purely to the funding of Crossrail.
Your position seems to be slightly different from that of some of the other people we have heard from today. Are you saying that the whole basis of doing it on a property basis and a form of business levy to be contributed to the scheme is entirely wrong? When answering Mr. Raynsfords question about an alternative, you seemed to go back to saying, We would have this, but we would try to rope the owners in as wellor are you saying that there should be an entirely different basis for levying a charge on business other than rental value?
Blake Penfold: For reasons that we have explained, we are unconvinced that it is the right route to funding. My concern is probably that our only concrete example is that of Crossrail, a scheme that is perhaps wildly different in scale from others that might come forward under the Bill. We can certainly see substantial objectionsthose that we have tried to explainto using a system that taxes the occupation of property to fund a major infrastructure project with a life of tens of years.
Right. In your earlier answer to Mr. Raynsford, you seemed to go back to the fact that you will have to live with it, but that you would want to rope the owners in somehow. Am I being fair?
I suppose that we need to address the issue of a ballot, which has been discussed. It seems to be the line in the sand that most other witnesses have drawn on behalf of their organisations. Do you think that that is the important element that is missing? Some witnesses in some circumstances developed the ballot in the Bill, but not in others. Or is that less important to your members in your opinion?
Jerry Schurder: We hear the views of business. We hear the views of others as well. We are a broad church. We represent property and are looking for the interest of fairness within the rating systema system that should work for local government as well as central Government and businesses as ratepayers. We hear the call from businesses for a vote. In many cases, they obviously still feel discomfort with their relationships with local authorities, so that is their driver. They are understandably concerned about costs, and any suggestion of an imposition of costs in such difficult times as we are in at the moment worries them. For those reasons, they feel strongly that a vote is the best safeguard to ensure that, where such schemes come forward, they are asked which will be of benefit to them.
There is a track record, through the BID model, of ratepayers voting to pay more tax because they can see benefits. I can see that they would do the same, potentially, if they were offered a vote on business rate supplements. There would not be many business rate supplements in an area, so it is not as if there would be a large number of schemes to vote on, but it would focus the mind very much. Clearly a vote seems a sensible way forward, given the need to ensure that it was additional spending and that it would truly bring benefits to the local economy and, therefore, business.
Jerry Schurder: We have quite a lot of questions on the threshold. As we understand it, the logic of it is to protect small businesses, which have rates that represent a greater proportion of their turnover and profit than large businesses rates do. I do not think that there is any dispute about that in general. A small business rates relief scheme already exists to protect the genuine small businesses. I do not perceive any need to have or logic in having a threshold, other than to ease the administration by taking many businesses out of having to pay the levy. At the moment the Bill includes a provision for the same level of relief to be given to a business qualifying for and receiving small business rates relief, which seems to be an appropriate way forward.
If there is to be a threshold, we struggle with it being at £50,000, because there is a disconnect between the current threshold for the small business rates relief and that £50,000 threshold. At the moment, a business will qualify for small business rates relief only if its rateable value is below £10,000. If its rateable value is below £15,000, it does not get relief and the small uniform business rates multiplier is used, as opposed to the large multiplier, so there is a benefit. London, where there is a £21,500 limit, is the exception. There is a disconnect between the £50,000 threshold and the £10,000, £15,000 and £21,500 thresholds. There does not seem to be a great deal of logic in using that number. If there is to be a threshold designed to protect small businesses, it ought to be lower, logically. In any event, we do not necessarily need a threshold because we can just latch on to the small business rates relief scheme, as the Bill currently does.
I am tempted to ask you, Mr. Penfold, in relation to your hypothecation scheme, would you intend there to be compulsory consultation of local government? Would local government get a vote on whether a hypothecation scheme should go forward? That is a silly question. I shall not ask you to answer it, but it seemed relevant that you suggested that we bite a huge hole out of local government finances without any hint of the difficulties that might ensue. It annoyed me.
May I ask Mr. Schurder about the landlord contribution that he mentioned? In business improvement districts there is greater cohesion and the businesses see a very direct benefit, as has been mentioned. However, there has been massive abstentionism among landlords in such areas. Is the scheme that you are suggesting a practical reality? I would like a practical answer. How can landlords be made to contribute or pay up in the way that you think necessary to give confidence to the business community?
Jerry Schurder: I am not certain that that is the case because of the point that I made on the nature of BIDs as funding revenue expenditure. The beneficiaries are much more likely to be the current tenant ratepayers. BIDs generally provide low levels of expenditure to fund matters that will perhaps draw more customers into an area. That is less likely to translate significantly into improved rental values than a major infrastructure scheme that changes the face of a locality.
Let me express my frustrations and come on to a practical issue in relation to Crossrail. You seem to accept that Crossrail must go ahead. Do you accept that because of the benefits that it will deliver for Greater London? Do you accept that similar infrastructure work of a transport nature or another nature could benefit business in other parts of the country? Do you think that a method must be found to fund such schemes or do you think that Crossrail is simply a one-off?