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Business Rate Supplements Bill – in a Public Bill Committee at 5:15 pm on 27th January 2009.

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Liability of non-domestic ratepayers

Question proposed, That the clause stand part of the Bill.

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

The clause sets out who is liable to pay the BRS. It provides that any person who is liable to pay non-domestic rates for a property is liable also to pay a BRS, subject to certain important exceptions. Crucially, the clause provides that a person is not liable for a BRS if the rateable value of their property does not exceed the amount prescribed by the Secretary of State in regulations made under clause 12. We made it clear in the October 2007 White Paper, and it remains clear, that we intend to set that threshold at £50,000 rateable value. In addition, liability for the BRS does not apply to owners of empty properties where there is a zero liability for non-domestic rates, particularly charities and community amateur sports clubs, or if the levying authority, under the powers given to it in the Bill, has exempted owners of empty properties from the BRS.

Subsections (4) and (5) provide the technical basis for determining the BRS. They explain that it is done by calculating the amount for each day of the year on which the ratepayer will be liable for the BRS and totalling those daily liabilities. Subsection (6) defines the chargeable period for a BRS as the period for which the supplement is imposed. Crucially, subsection (6)(b) prevents the chargeable period starting before the day on which the supplement is introduced; that will prevent retrospective liability accruing before that day. Subsection (7) limits the length of the chargeable period to that specified in the final prospectus unless the period has been extended in accordance with clause 10.

I shall leave it at that, Mr. Atkinson. I hope that the Committee will agree to the clause standing part of the Bill.

Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

I seek to raise two issues with the Minister. I suspect that other hon. Members will wish to speak on them.

We are now, in shorthand, dealing with the question of the thresholds. The Minister will know from the evidence given to the Committee that there is some concern about how a threshold is arrived at. One knows the Government’s intention to set a threshold of a rateable value of £50,000, but we are concerned about what will happen in future, particularly in the light of the fact that there will be a revaluation of business rateable values in 2010. I understand that the base data for that will probably go back to 2008.

Will there be enough flexibility to reflect the changed economic circumstances in a swift and timely manner? The particular concern, of course, is that for many businesses cash flow is now the key to survival. They would not want to be faced with a likely increase in burden simply because of a fiscal drag in the threshold that might suck them in. They will want some reassurance on that point.

Some who gave evidence suggested that the figure of £50,000 should be included in the Bill. Indeed, an amendment to that effect has been tabled by the hon. Member for North Cornwall. I am not convinced, however, because doing so would make it difficult to assist business by raising the threshold to take people out of tax. Primary legislation would be required, which is why I am not particularly attracted to that argument. However, the underlying concern is real; businesses will want a little more detail and more reassurance from the Government.

The second point, which is related, is a genuine inquiry; it may not take us any further. I wonder whether any thought has been given to small companies being treated under the section 382 provisions of the Companies Act 2006, when considering whether they met the other tests for threshold liability.

Photo of Mark Field Mark Field Conservative, Cities of London and Westminster 5:30 pm, 27th January 2009

I wish to follow up the point raised by my hon. Friend the Member for Bromley and Chislehurst, which he made very well. We are clearly in more difficult economic times. The Minister is right—I agree with my hon. Friend in that regard—that it is better to have flexibility in the Bill rather than take up the superficially attractive proposition made by the Liberal Democrats.

What was the thinking behind the £50,000 limit? Was it intended to encompass a certain proportion of business, or is there something else implicit in that sum? It is in no one’s interests to talk the economy down, but if it were to happen in the retail sector, would it have a significant impact by bringing more businesses within the BRS fold? In the Government’s mind, are the provisions currently designed so that a certain proportion of businesses should fall foul of or come within the BRS area?

Let me add that one reason why I left earlier today—some slightly cheerier economic news—was that I had a lunch at the Regent Street Association, a big retail association. Its news was much more positive than some of the more gloomy retail news that one hears. [Interruption.] I would certainly not use that word, and the Under-Secretary would be most ill-advised to use it—hopefully it will not appear on the record.

I had a point, however. Where retailers are flexible, have a quality offering and, in fairness as in central London, have a large tourist market—we have felt the benefit of a lot of European and American tourists coming here, our currency having devalued in recent months—the situation is somewhat less gloomy than many of our newspapers and other media outlets would have us believe. That is not to be in any way complacent, but there is a mixed picture.

I was trying to get to the bottom of the Government’s thought processes. Were they trying to attract a certain proportion of businesses into BRS, or was there something magical in their own mind, at this juncture, about the £50,000 limit?

Photo of Brian Binley Brian Binley Conservative, Northampton South

I do not want to disappoint the Government too much, but I can tell them that the reflections of my hon. Friend the Member for Cities of London and Westminster would not be my reflections from Northampton as to the well-being of the retail sector, frankly. It may be that he represents a slightly more affluent body of electors than I do. That may be the explanation.

Photo of Lee Scott Lee Scott Conservative, Ilford North

Does my hon. Friend agree that, with the announcements that we have seen just in the past 24 hours, such as Barratts shoe shops going into administration with the possible loss of up to 400 jobs, the implications of the business rate supplements are grave for a number of businesses? We should be concerned about that.

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

Order. I urge the hon. Member not to reply. We are not having a debate on the general health of the economy. We are talking about something rather more limited.

Photo of Brian Binley Brian Binley Conservative, Northampton South

I of course accept your guidance and advice, Mr. Atkinson. I dare not do otherwise. However, I seek your guidance because we seem to be straying into clause 12.

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

Indeed. We are in danger of straying into clause 12, and we have an amendment next with which we can discuss the £50,000. Members, bear that in mind, please.

Photo of Brian Binley Brian Binley Conservative, Northampton South

I shall make my remarks on the threshold with that amendment.

Photo of Philip Dunne Philip Dunne Opposition Whip (Commons)

In relation to the clause, during the evidence session with the Minister I asked why exemptions would not apply to public buildings of more than £50,000 rateable value. The Minister gave me a clear reply. I asked if he would look again or explain why, in relation to the exemptions permitted under subsection (3)(a), the levy would not apply to those properties exempted under section 45A of the 1988 Act. That would not appear to cover many properties owned by types of entity that were perhaps not in contemplation under the 1988 Act, because the form of incorporation may not have been established or used for comparable purposes. I am thinking of premises used by entities that may not be charities but which have a charitable purpose, such as social enterprises, not-for-profit organisations or  companies limited by guarantee, which are themselves not for profit. Such organisations should have the benefit of the same reliefs as those that do happen to be established as charities, perhaps for historic reasons. I urge the Minister to consider broadening the exemption from the non-domestic rate in the first place to such categories. If he cannot bring himself to do that in this clause, perhaps he will consider extending the reliefs available under clause 15 when we get there.

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

I will deal with the points in reverse order, if I may, beginning with those made by the hon. Member for Ludlow. I will look at the Official Report, but I was not clear what sorts of organisation or business he was arguing should enjoy reliefs from the business rate supplement when reliefs are not established as part of the business rates system. As I have explained to the Committee, we are trying to build the business rate supplement to follow precisely the terms of the business rate system. It is less complex, more certain and, it seems to me, more equitable to do so.

The importance of the measures in clause 11 that the hon. Gentleman mentioned is that community and amateur sports clubs and charities already have an established relief in mainstream business rates legislation. We propose to carry that over with the business rate supplement. I am not sure that it is consistent or the right place in practice to introduce new entitlements to relief from business rate supplement if those are not already established within the business rate system. As I said, if I might have some clarification about whose interests he was arguing for, I will consider the matter, but that is our approach.

Photo of Philip Dunne Philip Dunne Opposition Whip (Commons)

I am happy to help the Minister. We talked about it in the evidence session. I referred to publicly owned buildings such as schools and hospitals, and he made the same point then that he clarified just now. I was considering entities similar to those exempt under subsection (3)(a), such as social enterprise and not-for-profit organisations.

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

Unless such organisation have an established right to relief within the business rates system as charities—many social enterprises are also registered charities—or community and amateur sports clubs, some of which are also registered charities, it does not seem consistent or appropriate to create new categories of relief within business rate supplement legislation. That is a matter for mainstream non-domestic rates legislation.

Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

That is helpful. The Minister makes the point about not desiring to create new categories of relief. May I take it, then, that no representations have been made to him from any source seeking to create new categories of relief through the Bill? For example, new businesses might be exempt from liability to the business rate supplement under the Bill.

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

I have had no representations sufficiently persuasive for me to believe that the current approach is the wrong one. Clearly, if that becomes a matter of debate, it is a matter of debate, and we will deal with it as and when it arises.

Photo of Bob Neill Bob Neill Shadow Minister (Communities and Local Government), Deputy Chair, Conservative Party

I know that the Minister will take this in the spirit of genuine inquiry in which it is meant. Has he had any representations from Members of either House in relation to the matter that I just mentioned?

Photo of John Healey John Healey Minister of State (Department of Communities and Local Government) (Local Government)

Not as far as I am aware. Certainly no amendments have been proposed to the Bill from the other place; no doubt that will come. I was pleased to hear about the good lunch had by the hon. Member for Cities of London and Westminster and interested by the reflections of the people with him. Despite things being tough economically at the moment, it is something of a mixed picture. I know that better than most, having been at home last night in Rotherham, where the constituency faces 713 redundancies at the Corus works at Aldwarke in Parkgate. Incidentally, it is probably one of the most efficient steel-making plants in western Europe, producing some of the best steel anywhere in Europe. It is also true that many other companies are proving resilient to recession, including, I am glad to say, some in that constituency. We will return to the points that the hon. Gentleman was trying to make about the threshold when we reach clause 12, Mr. Atkinson, as you have encouraged us to do.

Finally, the hon. Member for Bromley and Chislehurst referred to a concern about the impact on small companies, and he may recall how, in an earlier sitting, we dealt with the prospectus—the work, the analysis and the assessment that will have to be undertaken as part of any case that a BRS may support. That is where the work on the costs, the potential impact and the wider economic benefit of the businesses that may be liable for a BRS will have to be laid out. We are keen to encourage that. It is clearly an important part of the assessment of the pros and cons of any BRS and, on that basis, I hope that Members will be happy to allow the clause to stand part of the Bill.

Question put and agreed to.

Clause 11 ordered to stand part of the Bill.