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Business Rate Supplements Bill

My Lords, I am grateful to all noble Lords who have spoken in this brief debate. I noticed one or two cross-currents in the debate: I heard the noble Lord, Lord Bates, say that he was broadly in favour of the spirit of the amendments, but he then produced some hefty reservations about Amendment 29 which I actually share. Noble Lords have argued, though, that there should be potential in the future to use BRS funds to invest in a wide range of community interests, which is what Amendment 2 seeks to do, rather than simply being limited to economic development, although, as noble Lords appreciate, "economic development" can cover quite a wide range of possibilities. It has always been the aim that the business rate supplement would be a pool that could be used to promote the economic development of local areas, hence the link to business rates as opposed to other forms of rating revenues. That is a clear theme that runs through the Government’s subnational review, the White Paper that preceded this legislation and now the legislation itself. The link to economic development provides an important reassurance to local businesses that BRS will not be used to fund services that have little or no relation to them. BRS is intended as a tool that can be used to fund joint projects between local businesses and local authorities. It will be a means of raising additional revenue from businesses. I accept the point that the noble Lord, Lord Best, made: it is not a tax but the raising of funds for joint enterprise in which all wish to share and the outcome of which is meant to be for the benefit of the locality. It is logical that the BRS should be linked to the aspect of the local community that will be of most interest to local businesses, which is, inevitably, economic development. That is the premise behind the Bill. The concept of "economic development" is clearly understood. It has been explored in the subnational review and, subsequently, when appropriate implementation of the actions put forward by that review was being considered. We should not overlook the fact that the term "economic development" gives levying authorities and local businesses adequate scope for innovation, which is what we want to see from the Bill. Outside the core services that levying authorities should provide, BRS can be used flexibly and constructively to promote economic development in the local area. We did not limit the use of BRS to only one kind of project; instead, we have acknowledged that what is necessary will depend on the judgments of the local area, so there is considerable flexibility behind the concept of the legislation. Amendment 2 would risk distorting the unique purpose of BRS. Depending on the regulations laid under the amendment, BRS could be used on projects for aims more aligned to cleaner, greener or safer agendas which, while they would bring some indirect economic benefit, would not in the normal sense of the term be "central" to economic development, which is the thrust of the legislation. Of course businesses already contribute to the provision of services such as social services and street cleaning through the national business rate, but BRS is meant to be a new tool for raising revenue to invest in local areas over and above the provision of services and projects already provided. The Bill already provides local authorities, working with local businesses, flexibility in how they use these resources to tailor the project to maximise economic development for their local area. I agree with the sentiment behind Amendment 5. It is vital that legislation is reviewed so that if something is not working as well as we had hoped, identified and appropriate action can be taken. As the noble Baroness, Lady Hamwee, was generous enough to indicate, the Government are already committed to post-legislative scrutiny, so that all Acts must be reviewed between three and five years after Royal Assent. This requirement applies to all Acts that received Royal Assent during or after 2005, and this Bill when it becomes an Act will fall within that framework. The review will involve considerable activity on the part of the department submitting a memorandum to the relevant Commons departmental Select Committee. It will include a preliminary assessment of how the Act has worked in practice, relative to the objectives identified in the Bill. Following consideration of the memorandum, the Select Committee could then decide that a fuller post-legislative review of the Act was required, which would be carried out in the same way as other Select Committee inquiries. So we do not need an amendment to scrutinise Bills subsequent to their enactment. As I indicated, I did not think that the support of the noble Lord, Lord Bates, for Amendment 29 was whole-hearted and nor is mine. The amendment seems reasonable enough. It would allow the Secretary of State to vary the supplement’s upper limit to reflect the state of the economy. During the good times, businesses might be expected to pay higher BRS than during a recession. However, the Bill needs to balance protecting the interests of business with the ability of levying authorities to raise meaningful sums of cash. The 2p limit strikes a balance between reassurance and meaningful practical application, bringing necessary resources forward. A set limit guarantees businesses the maximum that they can be expected to pay. If the amendment were accepted, businesses would no longer have the assurance of a maximum level, as the upper limit would potentially be subject to change over time. What about projects already under way? They might be subject to the potential for flexibility in resources available to them, increasing uncertainty. I therefore hope that the problems with that amendment are appreciated. My noble friend Lord Graham asked about consultation, which I dealt with in an earlier amendment. He will know that provision for statutory consultation is written into the Bill and how important that is. He is right: local authorities are the actors in this situation, which is why we need to make sure that they are fully apprised of their opportunities. However, we are going beyond that by producing additional guidance to strengthen consultation to ensure that local authorities know what their obligations and opportunities are and that they consult adequately with the interests whose support they need to attract. Inevitably, very important among those is the business community, because it is being asked to contribute the business rate. I want to give my noble friend reassurance on that score. These are interesting issues, which I know are being raised as part of a constructive approach to the opportunities that the legislation envisages, but we think that we have got the balance right. I hope that the noble Baroness now thinks that the Government have thought about these issues and that she can safely withdraw her amendment.