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Business Rate Supplements Bill

My Lords, the amendment stands in my name and that of my noble friend Lord Cathcart. The amendments in this group have been retabled for the good reason that we were not satisfied with the answer that we received in Committee. Therefore, we sought to revisit the amendments on Report. First, I shall briefly run through what we propose. Amendment 31 means that where a person is liable for a business improvement district, or BID, levy, and is subject to a business rate supplement imposed by that authority, the chargeable amount payable in reference to the business rate supplement will be offset, as stated in subsection (2). Amendment 32 follows on from that and would leave out, ""to the extent specified in the rules"." Amendment 33 would leave out subsection (4), which states how the rules must be made. As the Bill stands, the levying authority is enabled to make rules on what to do when a person is liable for the business improvement district levy and is also subject to the business rate supplement. Our amendments remove the levying authority’s right to make rules about it and instead specify that the liability for business improvement districts will be offset against the amount that the person would pay for business rate supplement. Amendment 35 would mean that this section does not apply to Crossrail for the reasons which we touched on earlier. The first tranche of amendments deals with offsetting the bid levy. This was debated in another place in Committee on 27 January at cols. 181 to 186 of Hansard. We do not want to risk harming business improvement district schemes, which by and large seem to be working well around the country. We have received a number of representations from business improvement districts, including the West End Company and many others, where they seem to be doing excellent work. We want to support that initiative. We are none the less cognizant of the huge pressure being put on businesses at the moment. This is an issue to which we return time and time again. It is a question of good legislation being a matter of timing. There could not be a worse time for levying further charges on business, particularly where a business has willingly and voluntarily engaged in a business improvement district and then finds that, in addition to the contributions it is making at that level, which in reference to Amendment 16 may or may not be tax deductible, it could potentially be faced with a business rate supplement of up to 2p in the pound. That is on top of the business rates which are already levied, currently at a rate of about 48p in the pound. These are substantial sums of money and effectively take business rates to 50p in the pound on rateable value, which is a significant sum. Although I do not want to run foul of tolerance in terms of procedure, I refer to the previous debate as an example. Take an empty property which has a rateable value in excess of £50,000—a property which has been declared empty because the business has gone bankrupt. If the property has to potentially stump up £25,000 a year, notwithstanding that the owner is not getting any rent, that seems to be unsympathetic and unhelpful to business, in contrast to what the Government tells us that they are trying to do. In many ways, the concern that levying authorities will raise the business rate supplement by a low enough threshold so that the ballot will not be triggered has been eased, providing that, when the amendment and the Bill make their way back down the corridor, those important amendments and the express will of this House are honoured in another place. Because businesses are under so much pressure at the moment and are not able to vote against business rate supplements, they will be forced to vote against business improvement districts. This is in addition to—this was a fair point raised by my noble friend Lord Jenkin of Roding—the community improvement levy, which has not been exercised and which they do not have a vote for. The best way to prevent this situation is to allow an automatic offset of bid levies. This is necessary reassurance to business so that they will not be hit be a double or potentially even a triple whammy at a very difficult time. Our Amendment 35 makes sure that Crossrail is exempt. For the reasons we have given, we have always taken the view that Crossrail is an exceptional case. We have acknowledged that; we are supportive of it and our argument throughout has been that we should not turn something exceptional into something normative. On business improvement districts, the Bill allows a levying authority to decide whether to offset the payment of BID levies against the business rate supplement liability, provided that the approach is consistent with all BIDs in the area. In London, the mayor does not intend to exempt BIDs from paying Crossrail a business rate supplement for the reasons that I shall set out. I want to spend a moment dealing with this because, for those observing the amendments, there may appear to be a slight inconsistency here. In the case of Crossrail, we are supporting the fact that there is no offset because, if there were, a strong incentive would be created to establish business improvement districts for the sole purpose of avoiding the business rate supplement, and we would be concerned about that. Business improvement districts contribute towards local improvements such as street cleaning, security and public area improvements. They are unrelated items of expenditure and, in our opinion, it would be a mistake to offset funding for one against the other. Another reason is that many voluntary associations which are not formally set up as business improvement districts will have to pay the Crossrail business rate supplement. Without the revenue from businesses in business improvement districts, Crossrail would have a funding shortfall, particularly as large parts of the West End, including Oxford Street and Regent Street, which are likely to be among the biggest beneficiaries of Crossrail, would not be required to pay the Crossrail business rate supplement. I make that point simply in the hope of heading off any charge that the amendments do not quite square up to our position. For those reasons, the mayor opposes offsetting the payment of business improvement district levies against the Crossrail business rate supplement liability. However, he will work with the boroughs and the business community to ensure that the impact of the Crossrail business rate supplement is minimised. Business improvement districts, the British Property Federation, London First and other organisations have long argued that BIDs should have the power to decide whether to include property owners in business improvement districts, subject to this being approved by a ballot. They are currently exempt from paying any BID levy, although many property owners have contributed voluntarily to BIDs. However, some of the uncertainty now surrounding the tax status has been a cause for concern. Why are we debating this again after we covered the matter in some detail in Committee? We are grateful that the Minister has tabled government amendments, which we will reach in the next or a later group, that will allow the burden to be shared between property owners and occupiers. That should go some way towards helping to alleviate the weight of taxation on businesses, which this Bill will increase. However, we are still concerned. In Committee, the Minister could tell us only that an automatic offset would impose rules on local authorities rather than devolve responsibility to them. She quoted the example of the South Bank Employers Group, which said: ""The fact that businesses have chosen to contribute to this fund of local additionality … should not in any way relieve them of the obligation to contribute to a major pan-London project like Crossrail"." It seems to us that the Government must admit that our amendments achieve just what the Minister was seeking to achieve and which she articulated in Committee. She also said that the chief executive of British BIDs, Dr Julie Grail, had said that, ""a full offset in London would be a ridiculous and dangerous move".—[Official Report, 18/5/09; col. GC 553.]" Again, our amendments show that we are very much listening to what the business community and business improvement districts want. The Minister then argued that the crucial point is that the levying authorities can use their discretion on whether or not to have an offset. We would argue on the side of businesses, the crucial point being that they should not be hit by two levels of taxation. The Minister knows that we disagree with the Bill on a point of principle, but our amendments at least try to make sure that businesses are protected in some way. I beg to move.