Considered in Committee.
[Sylvia Heal in the Chair]
Unoccupied hereditaments: chargeable amount
I beg to move amendment No. 6, page 1, line 2, at beginning insert—
‘(1) In section 45(1)(c) of the Local Government Finance Act 1988 (c. 41) (unoccupied hereditaments: liability) after “year” insert—
“(ca) none of the conditions in subsection (1A) applies”.
(2) After section 45(1) of that Act insert—
“(1A) The conditions are that—
(a) the whole hereditament has, subject to subsection (1B), been unoccupied for a continuous period not exceeding three months;
(b) its owner is prohibited by law from occupying it or allowing it to be occupied;
(c) it is kept vacant by reason of action taken by or on behalf of the Crown or any local or public authority with a view to prohibiting the occupation of the hereditament or to acquiring it;
(d) it is the subject of a building preservation notice as defined by section 3 of the Planning (Listed Buildings and Conservation Areas) Act 1990 or is included in a list compiled under section 1 of that Act;
(e) it is included in the Schedule of monuments compiled under section 1 of the Ancient Monuments and Archaeological Areas Act 1979 (c. 46);
(f) it is a qualifying industrial hereditament;
(g) its rateable value is less than £2,200;
(h) the owner is entitled to possession only in his capacity as the personal representative of a deceased person;
(i) there subsists in respect of the owner’s estate a bankruptcy order within the meaning of Parts VIII to XI of the Insolvency Act 1986 (c. 45);
(j) the owner is entitled to possession of the hereditament in his capacity as trustee under a deed of arrangement to which the Deeds of Arrangement Act 1914 (c. 47) applies;
(k) the owner is a company which is subject to a winding-up order made under the Insolvency Act 1986 or which is being wound up voluntarily under that Act;
(l) the owner is entitled to possession of the hereditament in his capacity as liquidator by virtue of an order made under section 112 or section 145 of the Insolvency Act 1986.
(1B) Where a hereditament which has been unoccupied becomes occupied on any day and becomes unoccupied again on the expiration of a period of less than six weeks beginning with that day, then for the purposes of ascertaining whether the hereditament has been continuously unoccupied for the period mentioned in subsection (1A)(a) it shall be treated as having been unoccupied on that day and throughout the period.
(1C) For the purpose of subsection (1A)(a), a hereditament which has not previously been occupied shall be treated as becoming unoccupied—
(a) on the day determined under paragraph 8 of Schedule 1 to the General Rate Act 1967, or
(b) on the day determined under Schedule 4A to the Act, or
(c) where neither (a) nor (b) applies, on the day for which the hereditament is first shown in a local rating list,
whichever day first occurs.
(1D) In subsection (1A)(f)—
“qualifying industrial hereditament” means any hereditament other than a retail hereditament in relation to which all buildings comprised in the hereditament are—
(a) constructed or adapted for use in the course of a trade or business, and
(b) constructed or adapted for use for one or more of the following purposes, or one or more such purposes and one or more purposes ancillary thereto—
(i) the manufacture, repair or adaptation of goods or materials, or the subjection of goods or materials to any process;
(ii) storage (including the storage or handling of goods in the course of their distribution);
(iii) the working or processing of minerals;
(iv) the generation of electricity; and
“retail hereditament” means any hereditament where any building or part of a building comprised in the hereditament is constructed or adapted for the purpose of the retail provision of—
(a) goods, or
(b) services, other than storage for distribution services, on or from the hereditament.”.’.
What joy we are going to have debating this Bill this afternoon! It is my pleasure to move amendment No. 6 and, first, I declare an interest: my entry in the Register of Members’ Interests shows that I am a director of a property company and a building company and a fellow of the Chartered Institute of Building. When the amendments were tabled, an “R” should have appeared after my name to signify those interests. Could those with a pen please append an “R” in brackets after “Mr. Robert Syms”? I apologise to the Committee for that omission. The Bill has proceeded fairly quickly; it had its Second Reading only last Thursday, amendments had to be tabled earlier this week and we are dealing with the Committee stage less than a week later. I am sorry that my registered interests were omitted in all that haste.
The Government committed themselves to making this change in the March 2007 Budget, as a result of the Barker review of land and planning that was produced in December 2006. There are different views about the benefits or advantages presented by Kate Barker. The Government also asked the Lyons inquiry to look into this matter, and when it published its report at the same time as the Budget, it broadly supported the measure.
Today, we are trying to amend this extremely short Bill. Essentially, it has only one clause—we have seen many examples of one-clause Bills—and that is a cause for concern for many of those affected by it. We tabled amendment No. 6 because the implications of the Bill are far-reaching. According to the Government papers explaining the Bill, it is expected that the changes will raise £1 billion—no small amount. Indeed, business rates in their entirety raise half as much as the total corporation tax take, so this is very big money in terms of what the Treasury raises. We are not talking about small change. The exemptions that the Committee must consider are very important.
Before my hon. Friend turns to the exemptions, may I take him up on his good point about the amount of money that the provisions are likely to raise? Is he satisfied that those who represent the people and companies affected by the provisions were properly consulted before this Committee stage? It seems to me that the Government are rushing this measure through.
My right hon. Friend makes a good point.
Amendment No. 6 deals with exemptions, which would affect the amount of money raised by the provisions. Money will therefore be a key part of the debate on the amendment. There is no doubt that the Bill has been introduced relatively quickly. As I said earlier, the Barker review, the Lyons inquiry and the Budget all contributed to it, but there has not been full and proper consultation. That is regrettable. As we go on to explore amendment No. 6 in more detail, we shall see that the Bill will affect a wide range of individuals. A consultation process would have benefited the Government and, certainly, the Opposition. It would also have created much more awareness of the legislative agenda in Parliament. Sometimes people do not appreciate what measures are going through the House until they become law, and they do not therefore have the opportunity to influence Government and Opposition Members when we are framing legislation.
The amendment is about exemptions. It is a pity that there has not been widespread consultation, because it means that we might not have sufficient information on the bits and pieces that we are debating today and cannot fully appreciate how strongly people feel about these topics. As I said in my opening remarks, £1 billion is a lot of money, and has a big impact on businesses and our constituents. It is therefore a pity that the consultation has not been fuller.
Although the Bill is short, with essentially one clause, its schedules also cause concern, especially given that the Government are going to change some of the ways in which property has historically been valued. With regard to paragraph 4 of schedule 1, concern has been expressed that people might do things to their property to try to avoid the business rate. As a result, the CBI, the British Property Federation and the Royal Institution of Chartered Surveyors have raised concerns about definitions and how that aspect of the Bill will be implemented.
As we are dealing with a fairly short Bill in a short time span and without full consultation, many questions remain unanswered. The Minister has a great opportunity today to set out more fully how the provisions will operate, especially paragraph 4 of schedule 1. Will properties that have been flooded, burned down or bombed be affected by the definitions? If a firm moves out of a property, and a roof or wall must be taken down to extract machinery to move it elsewhere or to put it up for sale, will that be caught by the scope of paragraph 4? That point will be of great concern to people up and down the land.
RICS has said:
“The Government attempts to deal with the deliberate vandalising of property by introducing Paragraph 4 Schedule 1 of the Bill which disregards changes in the state of a property. RCIS is concerned that this clause fundamentally changes the basis for rating valuations, rather than simply preventing deliberate vandalism of empty property. It is a long established principle that rating valuation is based on the actual property to be rated and the property must be valued as it is.”
I hope that the Minister will acknowledge the need to sort out those concerns. Within the narrow scope of the amendments and the limited time for debate, we have an opportunity today to explore some of the issues and get things on the record from him.
“This throws up a range of potential issues to do with the removal of plant and machinery or the removal of a tenant’s changes to a building after the lease has expired. It would appear that under the proposals it would be acceptable for a tenant to take these actions while the property was occupied but would be unacceptable once it becomes vacant.”
That is a key point. It went on:
“Individuals could potentially be penalised for not doing something which becomes a particular concern when the occupier is in financial difficulty. This part of the Bill is likely to lead to increased litigation and an increase in the number of appeals to Valuation Tribunals.”
RICS is particularly exercised about that part of the Bill.
Amendment No. 6 was crafted and tabled by my hon. Friend the Member for Surrey Heath (Michael Gove), who will join our deliberations a little later. It is important to get the proposed exemptions and, in that regard, we have a concern. I have a lot of time for the Minister; we have served in Committees for many happy hours together.
Only two more weeks.
I note the Minister’s comment. I remember a famous interview between Sir Robin Day and Sir John Nott, in which Sir John Nott took off the microphone and marched out when he was accused of being a “here today, gone tomorrow” politician. Between the time when the Bill is passed and the regulations are made by statutory instrument, we may have a fresh—or older—face; I do not know. The Minister may even retain his job. There is concern, however, that a change of personnel will mean that the regulations will be brought in by a different individual. The Opposition have therefore tabled a detailed amendment that would put the provisions in such regulations on the face of the Bill.
If I may, I will go through my hon. Friend’s amendment in detail. It states:
“Clause 1, page 1, line 2, at beginning insert—
(1) In section 45(1)(c) of the Local Government Finance Act 1988 (c. 41) (unoccupied hereditaments: liability) after “year” insert—
“(ca) none of the conditions”—
Order. It might be easier if the hon. Gentleman just quotes the reference on the amendment paper.
I can certainly present the amendment in a less specific way. It has been tabled in extremely fine detail; every punctuation mark is important for Her Majesty’s Opposition.
The amendment covers several aspects. The Opposition want certain important conditions to appear on the face of the Bill to ensure good, decent legislation. The first of those conditions is proposed new subsection (1A)(a), which refers to the condition that
“the whole hereditament has, subject to subsection (1B), been unoccupied for a continuous period not exceeding three months”.
That is an important aspect—that is what applies at present, but it is not on the face of the Bill. We therefore have concerns, because consultation has not taken place.
What is magic about the period of three months? I envisage a situation in which a family have an unoccupied property, perhaps because a business has folded, and the family, who are not particularly wealthy, intend to put the property on the market. They might have to deal with a liquidation or bankruptcy of one of the partners, and there might be a delay in marketing the property. In many cases, a good argument could be made for the exemption to run for six months.
My right hon. Friend makes a good point. Some of the legislation goes back many years. More recently, in the 1980s, the period was three months for most property, and six months for industrial property. There has been long debate about the right length of time for an exemption before the tax kicks in. Clearly, if there had been public consultation before the Bill was introduced, we would have more information. Her Majesty’s Opposition have picked the current period, but if it were extended beyond three months—the amendment would not do that—that would have an implication for the overall tax take and the additional £1 billion that the Government are trying to raise.
I suspect that three months is not long enough; a property might have to go through new planning permissions or be marketed by estate agents, and sometimes people drop out. It is a tight timetable, but, historically, it has been the normal period for most categories of property, so we opted for it. I suspect that there is not much difference between the Government and the Opposition on that point, which is why we have tabled the amendment. The provision ought to be on the face of the Bill.
Proposed new subsection (1A)(b) is the second provision that should be on the face of the Bill. If an owner cannot occupy a property for a legal reason, he should be exempt. That is the existing situation. It is important that that is made clear for the many thousands of people who will be affected by the Bill. The exemption should be specified.
I was critical of my hon. Friend for drafting paragraph (a) too narrowly, because three months is inadequate. However, I am concerned that paragraph (b) is drawn too widely. For example, an owner may be regarded as prohibited by law from occupying his property if he is serving a prison sentence. The sentence might well be in relation to defrauding the business that used to occupy the property, so why should he be exempt in those circumstances?
My right hon. Friend makes an extremely good point. We have drafted the amendment on the basis of existing legislation. I am not tempted down the road that he suggests, because we want to make progress and need to speed up. However, his point is reasonable and now on the record. If someone cannot occupy a property for a legal reason, it would be sensible for them not to pay the business rate.
Paragraph (c) sets out what has always been the position and it is important that it is stated on the face of the Bill. The exemption should remain part of the legislation. Paragraph (d) is also important. As Members of Parliament, we all know the importance of conservation and listed buildings. Many of them are in prominent areas of our towns, and we are lucky to have many beautiful and historic towns. Our legislation has always been ahead of the legislation in many other countries in that it recognises an exemption for such properties.
Will my hon. Friend confirm that although agricultural buildings are not rated under the business rating system—I must declare an interest as an owner of agricultural buildings—one of the recommendations of the Lyons inquiry was to bring them within this tax? In those circumstances, many buildings in the countryside that might be listed or might contribute to the rural environment would come under the empty buildings regulation. That could result in increased pressure on farmers or demolition of the very buildings that people want preserved.
My hon. Friend makes an important point. Substantial changes have been made to the position of agriculture in legislation overall. Many buildings were de-rated in the 1930s as a result of the depression and the hard time that agriculture experienced then. There is an argument for change, but that is not part of the amendment. I wish that he would not tempt me off the amendment, because some important points need to be put before the Committee.
I do not want to interrupt my hon. Friend’s flow, but will he clarify whether a particular example would be caught by his amendment? A building in the town of Craven Arms in my constituency has been unused, unoccupied and unsafe for decades. It is situated in a prominent part of the high street and has been a blight on that town for many years. The reason for that situation is that the ownership of the property is uncertain. It was believed to have been donated from one body to another a number of years ago, but neither will accept—
With great pleasure, Mrs. Heal. I apologise for extending my example. To conclude, the building in question was supposedly donated by the railwaymen’s union to the Labour party, which in Craven Arms is effectively defunct, unloved and unwanted, and it will not take responsibility for the building because of the cost of its upkeep.
We all know that a number of buildings are in a state of disrepair and would fall under the Planning (Listed Buildings and Conservation Areas) Act 1990. It is important to exempt them, and we want that to be clear by stating it in the Bill. Sometimes local authorities or a range of organisations have to give grants to do up such properties. If they were not exempt, renovating them and ensuring that they are saved, salvaged and enjoyed by future generations would be a far more difficult task.
My right hon. Friend makes a good point, and shows his experience as a Member of this House. Nevertheless, it is important to have paragraph (d) in the Bill.
Paragraph (e) is equally important. We are blessed with a lot of monuments and archaeological areas. Many of us enjoy watching people on television digging up part of our towns to see what our ancestors built. The exemptions in the amendment are important. All of those who enjoy our heritage would demand that the Government include such exemptions in the Bill. It is important to consider paragraph (e), and I hope that the Minister will say much more about it when he responds.
Paragraph (f) deals with the qualifying industrial hereditament, and proposed paragraph (g) refers to a rateable value of less than £2,200, which is the cut-off point for business rates.
I do not think that there is any great disagreement between the Opposition and the Government on those things, but there is uncertainty. We pretty much know for a fact that we are going to have a change of Prime Minister, and that the Government will be reshuffled between the time the Bill and the amendment are considered and when the various regulations and statutory instruments are introduced. Therefore, it is important to put some of the exemptions on the face of the Bill so that the rating legislation landscape that people have been used to is not changed. No doubt the Minister will have an opportunity to consider and answer my specific points.
Paragraph (h) sets out an important exemption. We all know the difficulty that arises if a relative is deceased or if someone has responsibility for dealing with a friend’s estate. The exemption should be on the face of the Bill, and made clear so that those who are in that situation and worrying about the Bill are not caused undue hardship or given undue concerns.
There are many important and intricate points to the amendment. I am glad that the Committee is listening to my argument and that it will have a much fuller debate about those things. The range of issues is amazing. Rating legislation is highly complex, and we need only look at the algebra in clause 1 to realise how complex this Bill is. I have great sympathy for the civil servants who must—no doubt very efficiently—deal with the legislation and advise the Minister. The Minister’s contribution to rating reform will no doubt prove legendary. Much of this sort of legislation stays on the statute book for a very long time. As amendment No. 6 demonstrates, it tends to be “a little bit here, a little bit there”, but it builds up into important case law.
The Bill involves a good deal of money. As I said earlier, business rates raise half as much as corporation tax, and are often the subject of disputes leading to legal actions and tribunal hearings. It is therefore important to make exemptions clear in the Bill rather than awaiting the uncertainty of regulations at a later stage, when another Minister may be in charge.
The Insolvency Act 1986 is important legislation, and is undoubtedly part of the reason why we won the 1987 general election. Insolvency means a traumatic time for many people, and those people need reassurance. Although I was a county councillor at the time and not yet a Member of Parliament, I remember the 1986 Act as ground-breaking legislation. I hope the Minister will accept the provision in paragraph (i), or, failing that, will explain in detail why he cannot do so.
The argument can be taken a stage further. It is already unacceptable that the state insists on being paid first, before those who may be in a much worse position. This is another example of circumstances in which the state’s grabbing comes before the needs of the individual.
My right hon. Friend makes an important point. There is concern about the impact of that arrangement on the community, including our constituents.
Paragraph (j) refers to the Deeds of Arrangement Act 1914. The year, of course, was seminal, yet the imperial Parliament of the time passed the Act. No doubt the legislation was debated fully; no doubt it embodied the hopes and aspirations of many people. Now, 93 years later, we are contemplating inclusion of this provision not in the Bill, but possibly in a statutory instrument or regulation. The Act has stood the test of time. Perhaps the Minister will explain why what some have described as key legislation should not apply to the Bill.
Paragraph (k) returns us to the Insolvency Act 1986. The Government have not done justice to that important Act in their one-clause Bill—a Bill which, however, is not small in terms of the money that it will raise: £1 billion. That is why a clear exemption is needed.
We can only marvel at the number of hours that Parliament must have spent considering all the legislation to which we have referred today. In those days there was no programming. Debates were often open-ended, and most parts of the legislation would have been considered in great detail by many people.
So far my hon. Friend has taken me with him, and I am minded to support the amendment. I agree that exemptions should be made clear in the Bill. However, I am slightly puzzled by the wording of paragraph (k). Why should a company that is being wound up voluntarily be exempt? The owners of a company may well wind it up voluntarily to avoid paying their dues under the Bill, then form a new company with a different name and effectively continue to trade as before.
My right hon. Friend’s intervention shows his experience as both a Member of Parliament and a business man. As we all know, people sometimes misuse legislation, but most of those affected by the Insolvency Act are in that position involuntarily rather than voluntarily. A winding-up order is usually made because the company is owed a lot of money and is trying to get some of it back, or to put a company out of business. However, I do not want to digress, Mrs. Heal.
Paragraph (k) shows how complex and difficult insolvency law is, and how it interacts with the problem of business rates. The Bill is being progressed fairly speedily so our discussions are time-limited, but it is important that we debate this matter fully. The Minister must respond in detail on amendment No. 6. I hope that when he replies, he will talk about the Insolvency Act 1986 and the Deeds of Arrangement Act 1914, and why he thinks that the amendment should not be made. We need answers. It is important that the Government clearly explain their position. Why have they introduced what is essentially a one-clause Bill? Why are they not prepared to include our proposals on this complex subject in the Bill?
The amendment would also add:
“Where a hereditament which has been unoccupied becomes occupied on any day and becomes unoccupied again on the expiration of a period of less than six weeks beginning with that day, then for the purposes of ascertaining whether the hereditament has been continuously unoccupied for the period mentioned in subsection (1A)(a) it shall be treated as having been unoccupied on that day and throughout the period.”
There has usually been an exemption for a property that is occupied for only a short period. I suspect that the Government would prefer to deal with that matter by statutory instrument and regulation, rather than include it in the Bill. I would like the Minister to explain where the Government stand on that matter and why, as it is important.
The issues and concerns that I am raising are key and require deep thought. It is a pity that there was no consultation—I have said that before, but it bears repeating. If we had had a full consultation, the public and the business community, and those affected by specific aspects of the Bill—such as accountants, surveyors or lawyers—would have had a much fuller opportunity to feed in their views. That would have given us an opportunity to address their concerns and talk about whether aspects of the business rate that have historically been in law ought to be continued with or amended.
There is an entire area of exemption to do with “qualifying industrial hereditament”, including buildings that are
“constructed or adapted for use in the course of a trade or business”,
and those that are constructed or adapted for various other uses, including
“the manufacture, repair or adaptation of goods or materials…the generation of electricity…the working or processing of minerals”.
Therefore, the exemptions in our important amendment No. 6 would affect a surprisingly wide range of activities, including electricity generation, mines and quarrying.
Has my hon. Friend noticed the importance of proposed new subsection (1D)(b)(iv) in respect of the decision that most people have now made that electricity must be generated on a much more local basis? The measure will become much more important than it would previously have been as we begin to disseminate electrical generation. Although many of my hon. Friend’s examples and measures have been historical, this one is important for the future.
My right hon. Friend makes a good point. The measures are historical in that most of the legislation that contains them was passed during the last century and has been woven long ago into rating legislation. However, progress and technology changes the impact of measures. My right hon. Friend raises a point that I had not thought about when producing the amendment. In the past electricity has been generated in, and transmitted from, large plants or large substations. There has been exemption from rating legislation, and we are keen to include that in the Bill. However, if microgeneration increases and there are more small generators for people’s homes and for estates, what impact would the amendment have on the properties concerned? Because of the point that my right hon. Friend has raised, I am now having a few concerns about my amendment. A person or business who generates electricity from their own property might be exempted. Can the Minister reassure me that this historic legislation is still relevant, given the changes in the electricity market, such as the move to microgeneration?
My hon. Friend is making a good argument. In view of his expertise in this area, which he outlined at the beginning of his speech, can he explain when a property is deemed to be empty? If someone has a storage warehouse that has nothing in it, but which has a windmill fixed to the roof generating electricity, could a tax inspector argue that because electricity is being generated from that building, it is occupied?
A startlingly large number of issues and subjects could be raised as relevant to the amendment. Every intervention throws up an important point that I shall have to reflect on. The generation of electricity is usually exempt. If there are concerns about this area, the Government might have to reconsider it if they do not accept the amendment and we do not then win the vote on it.
There is a wide range of issues and concerns. One needs only to read slowly through the amendment to understand how many people and activities are affected, such as insolvency, ancient monuments, electricity generation, mining and quarrying. The Deeds of Arrangement Act 1914 is a key part of the overall legislation that ought to be exempted. There is concern about these matters because we did not have a consultation, and because people are unsure about how they will be addressed in regulations, as there will soon be a change within the Government. The Opposition are therefore anxious that measures should be included in the Bill.
I meet constituents in my surgery who are faced with legal action; some of them are faced with cases and appeals. They are unsure about what will happen, and they feel angst. The proposed legislation will lead to a wide range of appeals, and it will cost many of our constituents a lot of money in trying to sort out whether they are liable. It is important that we make the situation as clear as possible by including measures in the Bill.
It is important that when the Minister replies to the debate he gives a full explanation of why the Government went for a one-clause Bill that does not address the intricacies of this area of legislation, and why he might wish to reject the detailed, considered, thoughtful and beautifully crafted amendment tabled by Her Majesty’s Opposition. If he were to accept it, that would save a lot of anguish, angst and difficulty for those affected by the proposed legislation. We heard earlier that it will raise £1 billion. That is a lot of money. There will be a considerable impact on many of our constituents. It is important that we have a debate on the range of exemptions, and that we have answers.
Some people say that Parliament no longer matters. I disagree. The debates that we have, the questions that are raised, and the heated and detailed discussion about amendments that we have are an important part of shaping legislation, and the country that we love. Therefore, it is important that we fully debate these aspects of the Bill. If the Government do not accept our important and carefully considered amendment, they should make it clear why not. Our constituents think that it is important that they should know what the situation is.
The legislation has been introduced relatively rapidly and it has substantial implications. It will raise a lot of money, but it will also lead to appeals and much case law. It is therefore important to put more information into the Bill. I look forward to the Minister’s detailed response to my questions about why the Bill is so limited and why we cannot consider all the important issues it raises. I know that my hon. Friends who wish to speak are determined to stand up for the interests of their constituents. I know that the Minister has listened carefully to what I have said, and I hope that he will also listen carefully to my hon. Friends.
I rise to speak on two principles. I am very much on the Government’s side on the rating of empty buildings, because we have been too lax in the past. Given our serious housing problems, we need to ensure that all the buildings we have are properly used, because the alternative is to build yet more in unsuitable places. I am therefore in favour of the principle behind the Bill. However, a second principle means that I am worried about the form of the Bill. I am sure that the Minister, for whom I have considerable admiration, will understand when I say that the difficulty with what appears to be easy, environmentally friendly legislation is that it sometimes leads us to move so fast that we do not consider the implications.
The first principle is the rating of empty properties and I agree with the Government’s intention. The second principle is that we should have the debate. A problem that is frequently raised in my surgeries—I am sure that other hon. Members have the same experience—is that bits of Bills have unintended results, with sometimes serious results, because they were never debated properly. That is why my hon. Friend the Member for Poole (Mr. Syms) made the point that we would speak on this occasion especially in defence of the interests of our constituents. I raised, for example, the single issue of the effect of the Bill on microgeneration and the extension from the large generating centre to many smaller ones, which is very much the purpose of the commission that I chair on behalf of the Leader of the Opposition. Without revealing anything new, I can say that we will certainly recommend a radical move towards microgeneration. Even raising the issue in this debate has done some good.
It is possible that the issues can be addressed in the regulations, but that will not provide an opportunity for a debate in this House. I recognise that the issue has not been the biggest draw for the Chamber and the Government Benches are empty apart from those who are here in their official capacity and the ornamental presence of one Back Bencher. He is a substantial figure, but his presence does not suggest that the Labour party is thrilled by this debate. However, on our side of the House, several hon. Members wish to talk in detail about an issue that will affect their constituents.
I mentioned two principles. The first is wanting to have this legislation and the second is wanting to ensure that it is properly debated, because that is what Parliament is about—
I will do my best to—indeed I will have to—follow your guidance. I shall turn specifically to illustrate those principles through the details of the amendment. The first few examples in proposed subsection (1A) are intended to ensure that we do not have situations that no one thought about. That is my worry with this type of broad-brush legislation. It is only when one starts discussing it that one wonders what might happen if an owner wanted to occupy a building, but could not do so because the law stopped him. Unless the Bill states specifically that in those circumstances the owner would not have to pay the tax—which he would be prepared to pay if only the law did not stop him benefiting from the occupancy of the building—I suspect that the regulations will also miss the point. I have often thought that I have had a good answer to some political point, but have then discussed it and discovered that those who come at it from a different direction are able to think of several new and difficult questions.
Does my right hon. Friend share my view that new Subsection (1A)(b) is too widely drawn? I shall give him an example. Let us say that a husband and wife jointly occupy a property. The husband assaults the wife and the judge makes an order that by law he is not to return to the property as long as his wife is there. He is then by law prohibited from occupying the property. Why should he escape paying rates?
My right hon. Friend is right to give that example. At the opposite end of the spectrum, if there is no reference to such issues, there is even more likely to be a difficulty. The point is that we need to have the discussion. I suspect that the Minister will not accept the amendment, although I would be pleased if he did so.
The purpose of this House is to have the kind of interplay that we are having. Those in the Box, to whom we are not allowed to refer, will at least be thinking that when they prepare the regulations they will have to get that issue right, although they may not have thought of the point that my right hon. Friend raises. I must confess that I had not thought of it myself.
The next example in paragraph (c) raises similar problems. If the local authority to which the money would be paid has itself stopped the building being occupied, it would be perverse for it also to be able to demand the money from the people who are not able to occupy it. Unless we make that clear, I can think of some local authorities that, either from perversity or by accident, would end up in that position. They would say, “Well, Parliament did not make any reference to this point, so we have decided, given the generality of the rules under which we operate, we are going to charge. So you, Mr. Jones, you can’t use your property, but you’ve got to pay for it.” That would be manifestly unfair, and the possibility ought to be excluded.
I am especially concerned about proposed subsection 1A(2)(d) in the amendment. I declare an interest in advice on planning matters, especially in respect of listed buildings and conservation areas. One problem with the present system is that the time taken to deal with building preservation notices has been extended in recent years. The people involved are extremely pressurised and often have to act precipitately to stop irredeemable and irrevocable changes. That is the nature of that sort of order and it may mean that the time involved is very much longer than what is envisaged in the Bill, with the result that, for good community reasons that the House would favour, people may not be able to enjoy the use of their premises in that period.
My right hon. Friend’s excellent speech is dealing in detail and authority with the amendment’s proposals, but does he agree that proposed paragraph (d) of amendment No. 6 is especially important? I know that he has been devoted to the cause of ensuring that our high streets remain healthy. Is not respect for diversity of provision at the heart of a healthy high street? In Chester, one of our most attractive and historic city centres, commercial enterprises operate out of listed houses or buildings of historical note—
Thank you, Mrs. Heal. Does my right hon. Friend agree that, when we are considering empty properties in which commercial activity is going on, it is vital that we should not neglect the built environment and buildings of historic distinction in particular?
My hon. Friend is right. The matter is important for a second reason, which is that historic buildings must have an alternative use if they are to be maintained. Empty historic buildings, and especially the domestic type used for commercial purposes that would be covered by the proposal, do no one any good. In addition, I imagine that there will be more such properties, as wireless technology for example makes it possible to use previously unusable buildings.
I have a problem with proposed subsection (1A)(e) of amendment No. 6, as I am not sufficiently well versed in the Ancient Monuments and Archaeological Areas Act 1990 to be able to imagine how many monuments would be caught by the legislation. I suspect that few are rated, but I have done the Minister’s job and he will agree that it is amazing to discover what peculiar things turn out to be rated under our system. I believe that bus shelters can be rated, so it would not surprise me to find out that some monuments would attract a rate. If none are, there would be no need for the proposal in the amendment, but if some are, the proposal becomes very important.
Proposed subsection (1A)(f) is important, if we manage to define “industrial hereditament”. It is interesting that we have retained a word that is more difficult to say after dinner than it is after a sober lunch.
The Minister is right, but I bet strongly that neither of us could define precisely what it means today, or what it used to mean. That is what makes it such a good legal word.
Proposed paragraph (h) is the most controversial in the amendment. I can see what my hon. Friend the Member for Poole is getting at, but want to offer the following example. A person who finds that his Aunt Agatha has died may not have seen her for some time or realised that he was her executor. He might not find it easy to sell her property because she did not do much with it for a long time. Consequently, her nephew has a lot to do, but the probate system takes such a long time that he might easily find himself paying money out of his own income to cover the circumstances.
I am at present dealing with a constituent in exactly that situation. There is money in the estate involved, but complications with the will and the nature of the person concerned mean that probate is taking a long time. My constituent therefore has little choice but to meet the financial demands from his own resources.
I appreciate what my hon. Friend the Member for Poole is trying to do, but I agree with what my right hon. Friend the Member for East Yorkshire (Mr. Knight) said earlier about drawing proposals more narrowly. Many properties in this country, domestic and otherwise, are owned by people who do not live in Britain. No one could accuse me of being anti-foreigner, but the people living abroad who own those buildings want to hang on to them because their value is rising all the time. They do not want the hassle involved with letting the properties, so they are not rented out.
That is bad, and why I said earlier that this is a necessary Bill. If the proposal in the amendment is accepted, we need to be careful about how long the period should be. I can see that it might be longer than what we have at present, but I am unhappy about it being as open ended as it is in the amendment.
I am not sure that the proposal is all that open ended, as it states that
“the owner is entitled to possession only in his capacity as the personal representative”.
If a deceased person’s personal representative becomes the owner of a property when the estate is wound up, his status under the amendment would change. It is grossly unfair for the state to impose a tax on a person merely because of probate delays caused by the same state.
My right hon. Friend makes a sensible point, but I am worried about the fact that some people may use the delay for their own advantage. If we can find a way to close off that option, I would be pleased but, on balance, I prefer to have the change rather than not.
I turn now to the owner’s estate bankruptcy order and the Insolvency Act 1986. I agree that that is a good Act and that it has clarified matters considerably, but we have reached the crux of the problem. The Government are right to want to ensure that empty properties make a proper contribution to the cost of services, but they must make sure that the provisions do not run counter to other legislation, and bankruptcy is a serious problem in that regard. If people are forced to pay to the state money that would otherwise go to people who have a prior demand, a prior requirement and in my view a prior right, they have a right to feel aggrieved.
I would take it further, as I suggested in an intervention earlier. It is utterly wrong that the state, which can carry these things more adequately, has used its power to make laws to protect itself against the interests of individuals, for whom bankruptcy is a greater disaster. If I am a small business man and someone goes bankrupt, my bills are paid only after the bills owed to the state are paid. I find that unacceptable. The state is able to know how much it is likely to lose over any year and make proper provision. Unlike many individuals, it can carry that loss because it deals with such a large number of bills. All of us in our constituencies have seen cases of individuals who have suffered considerably as a result of bankruptcy. If we add to that the fact that, before creditors’ bills are paid, the local authority will be able to take money for a property which is empty due to bankruptcy, it would be entirely unfair. I commend my hon. Friend the Member for Poole for putting that issue in such a clear way in the amendment.
Proposed new subsection (1A) (j) is just as important. It becomes more important in a sense because the present Government have made arrangements, which I supported, to take a broader attitude to bankruptcy—in the past, we have been too tight about it. The Americans have a better way of looking at it and as a result have been able to create many jobs; unlike us, people there have been prepared to take risks. Under the Government’s arrangements we will have more deeds of arrangement so the subsection becomes the more important.
That is also true of paragraph (k), which seems to complete the trio that covers everyone who might be affected by bankruptcy. I repeat that I am not seeking to support or protect the bankrupt. I am concerned about people who will be affected by a bankruptcy, a deed of arrangement or a winding-up order. The terms of the paragraph would mean that we were not providing circumstances in which the local authority could get its fingers on money that would be more properly used to redeem someone’s debt.
Paragraph (l) relates to the person in his capacity as a liquidator. I am involved in representing a constituent on such a liquidation. The ownership of the property is extremely important to any chance of my constituent getting a reasonable amount of the money that he is owed for medical supplies. His happens to be a very sad case. The fact that he has suffered in one of the longest liquidations in history, mainly as a result of actions taken by the previous Conservative Government, saddens me a great deal. If the liquidator in this hugely difficult process were to pay rates on empty buildings, I doubt whether by now there would be any money left for the people for whom the liquidation technically has taken place.
I use my constituent’s example because, were I in the Minister’s place, I would think that paragraph (l) was not terribly important because in normal circumstances liquidations are relatively quick. Where things are owned abroad, liquidations can take a very long time. Although I am sure that chartered accountants have their uses—sometimes I wonder what they are—there is no doubt that they are not the fastest of people when it comes to liquidations. I hope that the Minister will take the terms of the paragraph seriously because it could have extremely serious results.
In most cases, although the local authority may not be the place where I would put what money remained in anything that amounted to a bankruptcy, the process is likely to be relatively quick. The amount paid to the local authority will not be too dreadful and money will be left for the real creditors. In the very long liquidation to which I have referred, the effect of the Bill could be very serious, so I hope that the Minister will take the amendment seriously.
It is a pity that the Opposition have had to go to the difficulty of producing the list of examples of those things that should be exempted. I am sure that my hon. Friend the Member for Poole will not mind my saying so, but Oppositions are not professional in terms of such matters. These are matters that civil servants—much maligned under this Government—are very good at handling. If the civil service had produced a list of exemptions for the Bill, many of the issues that we have raised would already have been dealt with. We could have discussed many other issues much more sensibly if the Government had done that work on the exemptions using their powers, opportunities and resources.
In speaking in favour of the amendment, I want to say that it ought to have been significantly better and I am sorry that the Government did not take the opportunity to do the work. By saying that, I do not in any way cast doubt on the work done by my hon. Friend and his colleagues.
The fact that we have produced so many questions in the short time that we have had to prepare the amendment, and after such a lack of consultation, argues for better consultation on such matters. Not only would the terms of the amendment have been improved had they been included in the Bill presented by the Government, but the attitude towards the issue among the public, for whom the amendment will be an effective step, would have been greatly improved.
The amendment is about ensuring that there will be fewer cases of people feeling hard done by by the system under which they labour. That issue above all brings me back, but in order, to the key concerns of principle. Taken together, this series of amendments would ensure that the legislation is seen by the public as fair, reasonable and knowledgeable, not merely thrown at them as so much legislation has been over recent years. Will the Minister be kind enough to take a message—I hope from the House, but certainly from me? One of the problems that has beset his Government is their unwillingness to go through these processes in detail, some may say boring detail, as we have tried to do in this case. They have put on the statute book primary legislation and, I regret, badly thought out secondary legislation and regulation, with the result that people are increasingly unwilling properly to accept Bills such as this one.
The Government are right to introduce the Bill. They are right to rate empty properties and to insist that people contribute to the cost of services. They are right to ensure that all properties are available for use at a time when climate change must be fought at every level. What is wrong is that they have not given the House proper opportunity to debate the real issues—small though they may be—that affect our constituents.
I support the amendments and I am particularly grateful to my right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer) for concluding his remarks with a complaint about the manner in which the Government chose to introduce the Bill to the House. I remind the Committee that it is the fourth largest revenue-raising measure announced in the Budget, yet it has been dealt with inadequately, as is evident by the scale of the amendment.
The inadequacy lies not least in the amount of time given to the House to consider the measure, which was not part of the Finance Bill, but also in the fact that we have had no sight of the regulations that might, had they been produced before Committee, have enabled us to consider reducing the scope of the amendment. That is not to say that the proposals are not important in themselves, because they would include exemptions in the Bill rather than leaving them to be introduced under regulation. It is symptomatic of the way in which the Government try to conduct their business that they mask their true intent by not providing regulations in good time, as we are considering the legislation. The Minister looks quizzical—does he want to correct me?
The Minister is being naive. If we change the time, the way in which the legislation will affect the various categories changes, too. If the categories are not in the Bill, or if we do not know what the regulations are beforehand, we cannot defend our constituents against them.
As so often, my right hon. Friend makes his point clearly.
I want to discuss two aspects of the amendment. Other speakers have touched on them, but I want to reinforce my concern that the issues are properly addressed in the measure and in regulation. My first concern relates to proposed subsections (1A)(d) and (e), the exemptions relating to listed buildings and ancient monuments.
I hope that the listed buildings exemptions will be the same in regulations under the Bill as they were in previous regulations. However, as a result of the Government’s efforts to tighten up on the risk to revenue from the deliberate destruction of buildings to make them uninhabitable, I am concerned about the many buildings in our constituencies, which have historical qualities and may be listed, ancient monuments or neither, that need exemption from the empty buildings rating regime. I shall give some constituency examples of ruined castles to illustrate my point.
I live along the Welsh border and the western half of my constituency borders Wales—an area particularly richly endowed with castles that were built originally to mark the boundary between England and Wales and to ensure the protection of English citizens from the marauding Celts. In my constituency there are a number of castles in a state of what can best be described as disrepair. I am thinking, in particular, of Clun castle and Hopton castle, which are both in my constituency, and Wigmore castle and Brampton Bryan castle, which are just outside my constituency, in the valley where I live. Each of those is, in effect, a ruined castle without a roof.
I am most grateful to my right hon. Friend for suggesting that the amendment should have been even longer. That thought occurred to us when we were discussing what to include, but it also occurred to us that, given the shortage of time between Second Reading and Third Reading, it would not be possible to ask all Members of Parliament to list all historic buildings of that kind. We therefore deliberately decided not to include a full list of all such buildings.
Some of the buildings that I have mentioned are owned by English Heritage and have been in receipt of lottery grants for large amounts of money to restore them as ruins—not as buildings for business use. Some of them receive visitors and so there is some income to be generated from them, but often they are visitor attractions run by volunteers and do not generate sufficient income adequately to recompense the cost of keeping them going. Adding to the burden placed on such buildings, through additional rating duties, would be most unwelcome and would help to put some of them at risk. It is important that such buildings are exempted from business rates in their entirety.
I should have declared an interest in the case of Hopton castle, because I have the distinct privilege of having been appointed patron of the Hopton castle restoration fund. We have succeeded in securing a grant from English Heritage of approaching £1 million to restore the property to a state in which it could be opened to the public. To highlight the difficulty, I should point out that Hopton Castle is in a village. In fact, it is barely a village; it is a collection of houses with, I think, 45 inhabitants. It would be quite impossible for that group of people to maintain the property from their own resources. The rates would represent a considerable cost in the event of their applying to the property. It is important that exemptions for such properties are spelled out in the Bill and subsequently in regulations.
Secondly, I want to touch on what happens when properties are empty and the ownership is uncertain or unclaimed—an issue that I raised in an intervention earlier. That will be a relatively rare occurrence, because most properties have a value and most people who have a claim on such property are likely to seek to be identified with it. However, there are properties where, because of the nature of their decay and dilapidation, the cost of acknowledging ownership would be too prohibitive for likely claimants. I hope that the Minister will respond to the suggestion that there are certain categories of property where ownership is uncertain and where business rates should not apply.
I can think of an example of a property that, rather like its former occupier, is unloved and unwanted. Nobody is able to pay for its upkeep. I am not seeking in any way to assist the Labour party out of its financial difficulties, but given that the last occupier was the Craven Arms Labour club, which, as far as I am aware, has not existed in my lifetime—and long may that be the case—the property provides the Minister with an interesting example of the problem that I have identified, and I would like him to help us, in the generality, to find a solution. In particular, perhaps he could help the inheritors of the Craven Arms Labour club—Ludlow Labour party, I believe—to get out of their difficulty by exempting them from business rates on unclaimed property.
I do not really need to declare an interest, unlike my hon. Friend the Member for Poole (Mr. Syms), but I believe in erring on the side of caution, so I shall start by saying that I am a non-practising lawyer and the owner of some property, all of which is occupied, mainly with classic and historic motor vehicles, but of course that may not always continue to be the case.
My great concern about the legislation is the time scale. It is at the very least odd that the Government are proceeding with the legislation at such a pace; and at the very worst, it shows a disrespect for the public and Parliament. Now that we are in Committee, which followed so soon after Second Reading, we are forced to ask why the Bill was not subject to pre-legislative scrutiny, and why there was not wide consultation with interested parties and groups before the House was asked to make a decision on the matter. That is a relevant point to raise, because the Minister is seeking to hurry the legislation through at the very time when the Leader of the House, who chairs the Select Committee on Modernisation of the House of Commons, is telling us that he wants the Executive to have greater respect for Parliament, and to allow greater parliamentary scrutiny.
Order. It pains me to have to tell the right hon. Gentleman that I do not agree with his assessment of the relevancy of those remarks. I do not think that he should make them in debate on amendment No. 6.
Amendment No. 6 has my support, imperfections and all. I am surprised that the Minister has not yet intervened to say either that he accepts the amendment in its entirety, or that he accepts its spirit. Nor has he said that he will deal with the exemptions by putting them in the Bill. My right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer) said that the Government might take action later through regulations, but clause 1(2), which we have not yet discussed, contains some exemptions, for which there will be zero rating. They include cases in which
“the ratepayer is a charity or trustees for a charity”
and in which
“the ratepayer is a registered club for the purposes of Schedule 18 to the Finance Act 2002”.
If the Minister has seen fit to put those two exemptions in the Bill, why has he not seen fit to indicate to the House that he will accept amendment No. 6? It seems only right and proper that the exemptions itemised in the amendment be added to the Bill.
So that the Minister cannot say it, let me make the point that the exemptions may, of course, be additional to those currently in the legislation. However, if that is the case, surely it underlines the point that we made earlier, which is that if the time scale changes, all the exemptions must be reconsidered by the House.
That is absolutely right; I agree with my right hon. Friend, and it is right and proper that we consider each and every one of the exemptions today.
I have some doubts about the cut-off period of three months mentioned in proposed new subsection (1A)(a). I can understand why the provision is there—it is because we want to achieve a balance between being fair to the owner and seeking to bring a property back into use. In some instances, however, there may be good reasons why the property is vacant for more than three months, and I should have preferred paragraph (a) to allow the owner to plead cause beyond that period. I regret the fact that my hon. Friend the Member for Poole chose not to include such a provision. That is a minor criticism of the drafting, however, and I none the less support the amendment.
Paragraph (b) of proposed new subsection (1A), however, is rather curious, and I am not entirely happy with the drafting. I gave my right hon. Friend the Member for Suffolk, Coastal an example of a situation that may arise when a violent husband attacks his spouse and is subject to a court order that prevents him from re-entering his property. In those circumstances, paragraph (b) would exempt him from paying any rateable charge, which I am sure is not what we intend to achieve. Perhaps the Minister will give us his thoughts on the matter when he responds to the debate.
Paragraph (c) of proposed new subsection (1A) is an essential exemption. A property may be kept vacant by the Health and Safety Executive, acting on behalf of the Crown, because a staircase is unsafe. If the property is a listed building, specialists may have to be brought in to carry out alterations to the staircase before it can be safely used. In the interim, the owner, who is using all his endeavours to improve the property, should not face a rates bill, so paragraph (c) is vital. I hope that the Minister accepts it, but if he does not, I hope that a similar exemption will apply.
Turning to paragraph (h), I had some experience when practising as a solicitor of dealing with the winding up of estates. Sometimes that is easy and quick to complete, but that is not so if there is no will or, if there is one, if the family do not know where the beneficiaries live. Documentation may be missing, so probate sometimes takes far more than a year to complete. In the interim it is wholly unfair to charge the personal representative, who may be a family member and not a well-paid solicitor who can reimburse himself for any charges by charging the estate. Why should the widow or widower who has to deal with the estate in a time of emotional stress and difficulty suddenly find that they have to pay, in addition to any duties payable by the estate, a rateable charge on an empty property? I therefore hope that the Minister will accept the fairness and common sense of the exemption in paragraph (h).
Some of us wonder why there is a need for the Bill at all. If the Chancellor and the Prime Minister had not given away part of our EU rebate to Europe, we would not need to collect £1 billion from this piece of legislation. The Bill should not have been introduced, but we are, however, considering it. We are trying to make it better, so I hope that the Minister accepts amendment No. 6.
I had not intended to speak in this debate, and I certainly do not intend to do so for as long as some of the preceding speakers. Having listened to their contributions, however, I believe that amendment No. 6 is a useful provision, at least in spirit—the phrase used by the right hon. Member for East Yorkshire (Mr. Knight)—because it answers one of the main concerns expressed by groups who have lobbied us on the Bill, even those who are well disposed towards it. I recall the evidence from the Federation of Small Businesses, which supported the Bill but said that what was needed to improve it was a better definition of how to exempt groups of property owners who were genuinely trying to occupy their property. That is what the various proposed exemptions try, in their different ways, to do.
I shall group the exemptions, rather than discuss them individually. The conditions in paragraphs (h) to (l) are designed to help people who are trapped in legal processes entirely beyond their control. That might arise as a result of death or of bankruptcy or insolvency. The legal mills will not grind any faster because the Government have changed the tax procedures. However hard people try, they will none the less be penalised unless some exemptions are provided.
The second group of cases is covered by the exemptions in paragraphs (b) to (e), which deal with cases in which official authorities have created obstacles to use. That might arise because of historic buildings and, in some cases—this applies to the exemption referred to in paragraph (c)—where there are difficulties with the planning process.
In a typical case that I have encountered several times in my constituency, shopkeepers find that their shops are no longer viable. They start using the shop as an office or a burger bar and planning officers come down on them quite heavily for improper use. Enforcement orders are issued, followed by appeals against enforcement orders and applications for permission. The planning staff say that it must be demonstrated over a substantial period that the shop is not viable as a shop. A long process is involved, and the owners are barred from using the premises in the meantime. Such practical situations arise on many occasions.
I have listened to the speeches and I believe that amendment No. 6 is helpful in setting out many of the practical circumstances in which a property owner is entirely genuine in trying to use property but is unable to do so. If the amendment is not acceptable to the Government, I hope the Minister will explain how he would address the problem that the Federation of Small Businesses outlined very well.
I congratulate the hon. Member for Poole (Mr. Syms) on tabling an amendment that prompted such a comprehensive and thorough debate. The Committee owes him its gratitude. I have been enlightened by what I have learned this afternoon, such as what was said about the castles and ruins in Shropshire—ruins that do not pay rates anyway, but we have heard about them. Genuine congratulations are due to the hon. Member for Ludlow (Mr. Dunne). What he has achieved with the restoration of a castle is welcome and will be noted.
We also learned in the debate, which is on a tightly drawn amendment and not on Second Reading or Report, about the collection of classic cars in East Yorkshire. I was hoping that the right hon. Member for East Yorkshire (Mr. Knight) would tell us what they were, but I suspect, Sir Alan, that you would have stopped him, just as you are about to stop me now, so I will move quickly to the amendment.
The problem with the amendment is not the justification or otherwise for the exemptions that it proposes, but a misunderstanding of what the amendment would do if it were written into the Bill. Let me explain why that is the case. I think that that will satisfy right hon. and hon. Members who have raised in depth concerns that were expressed on Second Reading. It is important that we respond to those concerns.
When I read the amendment, it looked very familiar. As I looked into it, I realised that the amendment, subject to minor tweaking, is taken from the wording of the Non-Domestic Rating (Unoccupied Property) Regulations 1989, as amended. The regulations flowed from the Local Government Finance Act 1988, and it is the 1988 Act that the Bill seeks to amend. Putting the 1988 Act regulations into the Bill would insert into it exemptions that are already in place in such a way that we would not be able to change them, should we want to, without primary legislation. In other words, the exemptions are already there.
The right hon. Member for Suffolk, Coastal (Mr. Gummer) made an intelligent and quick-witted point. I increasingly realise why he served in government for such a long time. In fact, I think that he was the longest-serving Local Government Minister, so I take what he says very seriously. Over the summer, we will consult on the regulations to take on board the points that interested parties, including hon. Members, may make. Putting the existing regulations into the Bill would not achieve what right hon. and hon. Members want to achieve.
Hon. Members have referred to several problems. I could use the Aunt Agatha analogy, which is a good one. The hon. Member for Twickenham (Dr. Cable) mentioned planning issues, which were also raised on Second Reading. Those and other problems already exist under the current time scale and rate of collection, and they would continue to exist whatever the algebraic formula in clause 1. I am sorry that the hon. Member for Bromley and Chislehurst (Robert Neill) is not here to hear that, but those points are not relevant to the Bill, although the amendment has given us the opportunity to explain the position.
It might be of interest to Opposition Members, and indeed to my hon. Friends, to learn that the authors of the 1988 Act and the 1989 regulations were the late Sir Nicholas Ridley and his then Under-Secretary, the hon. Member for Christchurch (Mr. Chope). I will contact the hon. Gentleman, who is a distinguished member of the Chairmen’s Panel, to explain how his right hon. and hon. Friends have been trying to undermine his beautifully crafted laws and regulations. Indeed, I am doing no more than repeating the process that was undertaken by Sir Nick, whom I remember lobbying as a student. I always found that he gave us a very fair hearing although he was ideologically opposed to us. I do not know what he would have made of the smoking ban—I imagine that he would have been outraged.
Section 45 of the 1988 Act sets out the liability of unoccupied hereditaments for business rates, and subsection (1) determines to which of those the liability applies. The liability includes, among other things, all hereditaments that fall within a description prescribed by the Secretary of State by regulations. In other words, the 1988 Act gave the Secretary of State the power—subject of course to the passing of the necessary regulations—to determine the exact classes of unoccupied hereditament that should be subject to empty property rates. By means of some rather convoluted double negatives, the effect of the regulations is to include within the empty property rates regime all unoccupied hereditaments except those falling within certain specified classes of exemption.
Will the Minister clarify the position of cemeteries? As someone in that line of business, I know that valuations have been carried out throughout the country that are aimed at rating cemeteries as businesses. At what point does a cemetery become unoccupied? Is it a hereditament? Cemeteries are obviously occupied for a long time after burials. People who run private sector and local authority cemeteries would like to be reassured that they will not pay rates in perpetuity, despite the fact that those buried are there in perpetuity.
I congratulate the hon. Gentleman on the ingenuity of that point. I do not know whether he has just thought of it or whether the matter featured in his postbag. It worries me greatly when a Conservative Whip starts to talk about cemeteries—I do not know what lies behind that. However, the point is not relevant because the Bill does not deal with exceptions and exemptions from rates, which the 1989 regulations already tackle. Let me repeat that, although the points have been interesting and some of the questions have been ingenious, they are not relevant to the Bill.
The Minister is making an interesting case. He argues that it would be wrong to include exemptions in primary legislation and that they are suitable for regulation. However, as my right hon. and hon. Friends have pointed out, sporting clubs and charitable organisations are specifically exempt from the Bill. That exemption is in both secondary legislation and on the face of the Bill, and the Government have invited support for it. We are happy to support it and we applaud its inclusion, but we must also mark the Minister down on logic because if he can include one exclusion in the measure, why cannot he include others?
The hon. Gentleman makes a good point and I congratulate him on spotting it. He is right. The answer to his question is that the exemption to which he refers is already in primary legislation. I therefore have to deal with it in primary legislation rather than in regulations. Indeed, I asked the very same question of my officials when I read the first draft of the measure.
The first question is on a point of logic and the second makes an important point. The exemptions relate to the time period for them—that is why they are in the Bill. The hon. Member for Bromley and Chislehurst spotted that the variables below the dividing line cannot exceed two. If they did, I would have the power to increase the rate by more than 100 per cent. However, the time period is the important factor.
The right hon. Gentleman’s second point is important. It relates to matters that affect listed buildings and so on. I am surprised that he and others did not mention the exemption for agricultural buildings.
Indeed, the matter did come up—I had forgotten. There is no intention in the Bill to change policy on exemptions. However, partly because of the point that the right hon. Gentleman made and partly as a matter of good governance, we intend to consult on those matters in the summer.
To provide the flexibility that Sir Nicholas Ridley needed and that is still required, it would be wrong to include the exemptions in primary legislation because it would lock them in and not allow us to decrease the rates as well as increasing them.
I would have to come to a judgment on that. The flexibility exists for local authorities to go further in respect of the amount of the exempted rate, but the problem would then be the same as the one that our predecessors faced in 1988—that the overall tax take has to be considered at some point in time. The hon. Member for Poole chided me for the alleged lack of consultation on the Bill. It is, of course, a finance measure that has developed out of the Budget and I would argue that consultation took place through the Barker and Lyons reviews. The regulations will also be consulted on, but this is a finance measure being dealt with, after consulting the House authorities, through a Bill to be considered by a Committee of the whole House, rather than through a Finance Bill Committee. This is a matter of local government finance.
I hope that I have given adequate time—I certainly had until today—to debate the Bill. I felt that the consultation that flows from it on account of it being a finance measure would be better done this way. The right hon. Member for East Yorkshire raises a reasonable point, but it is a question of balance. I have to do what anyone in my position has to do, which is to protect business rate payers from too many exemptions. One can envisage circumstances in which many organisations could argue for exemption—the agriculture industry did so successfully, for example, and there may be others—so it is a question of balance. He raises a reasonable point, but I disagree with it.
I hope that I have explained the logic of our opposition to the amendment. I genuinely believe that it achieves the opposite of what it intends. I studied the amendment carefully and saw that that was the case. I hope that our debate on the exemptions does not cloud the fact that this Bill is about the time period for the exemptions for empty property rates, not about the exemptions themselves. On that basis, I hope that the hon. Member for Poole will withdraw the amendment.
We have debated a detailed and wide-ranging amendment, covering subjects as broad as castles, historic cars, violent husbands, labour clubs and cemeteries. That has demonstrated the Bill’s impact on communities. My hon. Friend the Member for Ludlow (Mr. Dunne) made the point that the provision in the Bill is the fourth largest revenue raiser in the Budget, so it is bound to have a large impact. That is why it is important to debate the exemptions thoroughly.
I was pleased by the Minister’s reasonable response to the debate and he dealt with many of the concerns of hon. Members. Regretfully, however, I still feel that we should press the matter to a vote. Bills with only one substantive clause may be short, but because of the range of concerns expressed today, I believe that the Committee should have the opportunity to vote. I therefore press the amendment.
Question put, That the amendment be made:—
With this it will be convenient to discuss the following amendments: No. 3, page 1, line 9, after ‘(4A)’, insert—
‘Where subsection (5) applies, the chargeable amount for a chargeable day shall be calculated in accordance with the formula—
(A x B) divided by (C x 2)’.
No. 4, page 2, line 3, at end insert—
‘(2) For subsection (5) of that section substitute—
“This subsection applies where on the day concerned, the hereditament is the subject of—
(a) a planning application,
(b) an application for approval of reserved matters or for the approval of details under a condition of a planning permission, or
(c) an appeal under section 78 of the Town and Country Planning Act 1990.
No. 5, schedule 1, page 5, line 20, at end insert—
‘(1A) For the purposes of any regulations, the state of any property shall not be deemed to have been changed by the carrying out of operations in accordance with a planning permission.’.
It is a pleasure to serve under your chairmanship, Sir Alan. I thank you for the advice that you and your office extended to me, and to my hon. Friends, in framing and tabling the amendments.
I apologise for not having been here for the opening of the Committee stage. I spoke in the debate on the Ways and Means resolution, and also on Second Reading, and opposition to the measure and scepticism towards it are close to my heart. I was genuinely sorry that I could not be here for the beginning of the remarks of my hon. Friend the Member for Poole (Mr. Syms). I know that he made an admirable and cogent case, but I am afraid that I was detained elsewhere on family business.
The amendments fall within two groups. They deal with the broad question of planning and land use, but amendments Nos. 2, 3 and 4 are naturally grouped together, because they form part of one coherent argument, and amendment No. 5 is separate, because although it deals with planning matters, it relates to a different part of the Bill and is meant to deal with a different specific eventuality.
Amendments Nos. 2, 3 and 4 are essentially tests of the Government’s integrity. Amendment No. 5 is an attempt to achieve the Government’s intentions more effectively than we believe the Bill itself is capable of achieving them. In that respect, whether the Government accept amendment No. 5 is a test of their sincerity. If Ministers genuinely want to achieve the goals stated in legislation and argued for by them in earlier debates, we believe that they will have to accept the amendment.
Let me briefly explain why we tabled amendments Nos. 2, 3 and 4. They deal with a new and specific exemption that we wish to introduce. In our debate on amendment No. 6 we discussed the whole question of exemptions, their appropriateness, and whether they should be contained in primary legislation or in secondary regulation to be presented at a later date.
The Minister accepted that there were exemptions that should be included in primary legislation. We had a brief exchange on the subject when I intervened on him. I am afraid, however, that his customary authority lapsed at that point, because he presented us with a circular argument. We pointed out that we wished to introduce a whole set of exemptions that were entirely in accordance with custom, practice and previous legislation. Cases for all those exemptions were made with exemplary clarity by my hon. Friends. The Minister’s case against the exemptions was that it would be inappropriate to deal with them in primary legislation, but he accepted that the Bill contained exemptions for charities and sporting ventures—because, he said, they were in primary legislation.
That is a circular argument. The Minister is saying that an egg is an egg is an egg, because he says that it is an egg. I am afraid, however, that this combination of yolk, albumen and shell is not an egg, because it does not pass muster with me. There is no logical reason why one exemption is in primary legislation and another set of exemptions are considered appropriate for secondary legislation, other than precedent and ministerial edict.
We know that the Minister is capable of logic, reason and fluent argument. We have seen him display that capability many times at the Dispatch Box. It is incumbent on him now to explain to us why certain exemptions must be in primary legislation while others are fit only for regulation. It will not be good enough to argue, as he did earlier, that a period of consultation is necessary before we introduce exemptions. That argument would strike at the heart of the Bill. On Second Reading and in the Ways and Means debate, Conservative Members argued for consultation. Why? Because when Sir Michael Lyons introduced the idea of removing or amending the relief for empty properties, he argued explicitly that there should be consultation before business rates were reformed, probably in about 2010. The Government chose not to engage in that period of consultation. Instead, they decided to legislate precipitately in what was characterised in the previous debate as a rush to plunder.
The Minister, and the Government, cannot have it both ways. They cannot say, “We need to consult on the exemptions before we produce secondary regulation. All that can happen in good time, my dear man”, and at the same time say, “We need to produce this legislation quickly.” They cannot say, even by implication, “I am afraid that when he requested consultation, Sir Michael Lyons was insufficiently seized of the importance of legislating quickly,” and then, when it is convenient to them, say, “We believe that Sir Michael Lyons was wrong to call for consultation then, but we need consultation now.”
The Government must explain why when consultation occurs, it is always on their terms and never on anyone else’s. They must also explain why, having gone to the trouble of asking Sir Michael Lyons to make a series of recommendations on this measure and on local government finance in general, they accept only the measures that they can introduce quickly, and which automatically yield revenue, and why they have not given adequate consideration to those other thoughtful—and perhaps more complex, but none the worse for that—series of arguments that enjoined on them a degree of caution in proceeding. [Interruption.] The Financial Secretary to the Treasury asks from a sedentary position, “What about the amendment?” As I am sure he is aware, there are in fact three amendments—Nos. 2, 3 and 4—which come together, and there is also amendment No. 5. Amendments Nos. 2, 3 and 4 deal with planning and land use. The Financial Secretary and his junior—although perhaps not junior for much longer—the Economic Secretary put it to us in the original Ways and Means debate that the principal aim of the Bill was the more efficient use of land.
That cause is dear to the hearts of all Members present. My hon. Friend the Member for Wellingborough (Mr. Bone) serves on the board of a housing association, and my hon. Friend the Member for Poole is greatly interested in housing matters, and I know that they are keen that land should be used more efficiently, whether for housing or commercial purposes. However, the suggestion that the Bill is all about the more efficient use of land was undermined by the presence at the Ways and Means debate and on Second Reading of the Economic Secretary and the Financial Secretary. Why were they invited in to make the case for Department for Communities and Local Government legislation? Did the Treasury have no confidence in DCLG Ministers? Did the Treasury feel that the Secretary of State and the Minister for Housing and Planning were not capable of making the case? Heaven forfend.
Thank you, Sir Alan, for your helpful advice.
The reason why Treasury Ministers spoke was not any lack of confidence in ministerial colleagues, but the fact that this measure is palpably a straightforward tax demand. It is not about the more efficient use of land. It is about the more efficient—or, rather, the more rapid—acquisition of revenue for the Exchequer.
These amendments put the Government to the test. If they are genuinely willing for land to be used more efficiently, and if they genuinely believe that the measure is about encouraging regeneration, they will have no hesitation in accepting the amendments, because they would exempt from the scope of the legislation properties that are empty specifically because they are going through the planning process. They would exempt properties that are in the middle of a regeneration programme, such as those for which planning applications have been made or which are awaiting the result of a planning appeal. Such properties should be specifically exempted.
Let me explain why this specific exemption is worthy of this set of amendments. The amendments relate to the ideal of regeneration and, as we explored in previous debates, regeneration is a difficult process for those engaged in commercial property. When addressing regeneration in areas of past urban blight that require new commercial enterprises for new life to be breathed into them, we must recognise that people who are prepared to invest in those areas are taking a risk. Almost by definition, any area that is not currently a thriving business area—any area where additional commercial investment is clearly required or where we wish to encourage regeneration—is an area where the market fundamentals are not yet in place to attract the investment that we would all wish.
Therefore, when someone brings forward a specific regeneration project, they do so with a close eye on the balance of advantage and the balance sheet. As they look at any particular regeneration project, they might look at a balance of sites in any particular city or town. They will try to get together a critical mass of land in the right areas to allow them to proceed with a regeneration project that will give them a satisfactory return on capital. As we all know, in the commercial property world sites can come up rather more slowly than one would wish in order to maximise the efficiency of a project. Nevertheless, in order to try to ensure that a project is both successful and genuinely transformative, an enlightened investor will wait and exercise patience until the exact portfolio of sites comes into alignment. As they wait for that to happen, it will of necessity be the case that some of those sites are left empty. They are elements in what will be a transformed landscape that cannot be transformed piecemeal. The developer has to wait until all those areas are available before he is ready to move.
If the legislation is not amended, an additional tax will have to be paid on many of the parcels of land waiting to be packaged together, because the current relief on rating will no longer exist. That could mean that potentially viable regeneration projects would be rendered unviable as a result of the tax change. It stands to reason for every business that if it faces an increased tax bill, its economic activity will be penalised. As mentioned earlier, that is a not a hypothetical consideration, but a real-life concern.
In an earlier debate, I mentioned the specific case of Palmer Capital Partners, which has, as reported in Property Week, already had to abandon regeneration projects because of the anticipated tax hit of this legislation. I am afraid that my accent meant that I did not pronounce the “r” at the end of Palmer sufficiently; the name is Palmer as in Huntley and Palmer, or Harry Palmer. The reason why that is relevant is that the Minister interpreted me to mean Palma, the capital of Majorca, the principal Balearic island, so he thought that the company was some sort of Mediterranean fly-by-night enterprise. That was an opportunity for him to suggest, with his characteristic sprezzatura, that the only people who were complaining were the villains whom he had previously identified in the property market—commercial property organisations that deliberately leave properties empty. I hope that he will take this opportunity to reassure Palmer Capital Partners that he appreciates that it is an entirely reputable organisation. He has the lifebelt of being able to say that it was my curious Aberdonian accent that lured him into making that mistake.
It could have been my Lancastrian hearing. I did mishear the hon. Gentleman and thought that he had said “Palma”, but I certainly intended no slur against the company involved, or the good people of Majorca. In fact, a study of the regeneration of Palma, especially in the mediaeval city centre, would give us an example of a fantastic property development and regeneration project, from which we could certainly learn a lot.
I am grateful to the Minister for taking that opportunity to clarify the position. I knew that he meant no ill by his comment. If anything, his comments in the previous debate were evidence of his ludic wit, not a reflection of any desire to condemn the operation of Palmer Capital Partners, or any other company. I am sure that the Minister’s experience of Palma is greater than many other hon. Members’ experience, and I am glad to know that when he went to Majorca his principal aim was to investigate how successfully it had regenerated itself economically. I suspect that that regeneration has been most successful in the catering, leisure and hotel sectors, and some UK cities should learn from that.
It is appropriate to acknowledge that Palmer has had to abandon certain projects, because that is a real-life example of a company prevented by the Bill from going ahead with regeneration. Other companies in a similar position would benefit from the amendment. When properties are deliberately left empty to secure regeneration benefits, an extension of relief while planning permissions are dealt with would mean that the companies involved could bring forward projects that would not occur otherwise. If the Government are willing to stay their hand in a few cases, the resulting economic benefits would be enjoyed by everyone, but especially by people in the areas most in need of economic and commercial development.
On Second Reading, we discussed the north-east as a case study of the effects of the Bill. The Minister referred to Eldon square in Newcastle, where rents are significantly higher than in other parts of the city, and implied that there was a dysfunctionality in the planning or local government finance systems that only the Bill could put right. However, it is impossible to gauge how effective the economic regeneration of the north-east has been without taking account of the fact that industry there has made its unhappiness with the proposals very clear.
The Minister may not be familiar with Evans Easyspace, which operates out of North Shields in north Tyneside. A new commercial operation that it opened in July 2005 contains 17 small offices, and the same number of workshops. They are let to new and start-up businesses—exactly the sort of enterprises that a Government committed to regeneration would want to support.
The centre is a success, having reached an optimum occupancy of 91 per cent., although the Minister will note that Evans Easyspace is already taking a hit because some properties on the site are not occupied. The company argues that if the changes proposed in the Bill had been in place when it was conceiving its enterprise, it would have had to pay an additional £53,000 in empty property rates. It says that that is a conservative estimate, and that the sum of money involved might have made the difference between deciding to going ahead with the project and staying its hand.
There is high demand for jobs in north Tyneside, so how can the Government put forward a Bill that companies in the area consider to be entirely counter-productive? What would the Minister say to Evans Easyspace and other enterprising companies that choose to locate in areas where their services are most needed, and which are explicitly concerned about the potential effect that the Bill as it stands will have on future investment?
I accept that when developers gather parcels of property for regeneration, the seriousness of their intent to use all the sites that they have amassed in that geographical area can be open to doubt. It may well be that some of those sites are meant to form part of a regeneration project, but other sites, offices or premises may be left vacant for longer than would otherwise be wise or prudent. That is an extremely unlikely eventuality. As I explained on Second Reading, I do not believe that there is widespread economic masochism in the commercial property sector. I believe that most people who have chosen to take a risk and invest in commercial property recognise that it is appropriate to ensure that there are tenants in the property generating income which can make their investment worth while.
However, I will allow that it is theoretically possible that land on which a return could be made is not used to maximum efficiency at a given point. That principle is accepted in the broader debate on land use when we come to talk about land banking. I can see the hon. Member for West Ham (Lyn Brown) nodding thoughtfully. As a member of the Select Committee that scrutinises the Department for Communities and Local Government, I know that she has been doing some work on the subject. Individuals, for whatever reason, choose to stockpile land that is developable and hold it back off the market in the hope perhaps of making a capital gain rather than to see it used in the most efficient way.
It is appropriate that we get land banking in context. I am sure that the Minister will be aware that the principle of deliberately holding land back and not seeking the maximum return on it is at the heart of the Bill and it is something that we question. There is some useful evidence that calls into question whether such hoarding of space that could be more effectively used economically takes place. A letter was published in the Financial Times today from the executive chairman of the Home Builders Federation, who points out that in 97 per cent. of developments that have implementable planning permission builders have been on site within three months. That reinforces the truth that most operators are only too eager and willing to see the land on which they have secured planning permission used for commercial ends.
We accept that in certain circumstances people might conceivably hoard land. The amendment ensures that in any case in which that suspicion might arise it can be effectively erased. It covers those organisations or individuals who are in the planning process. They might have had planning permission turned down and are waiting for the planning inspectorate in Bristol to give its ruling so that development can go ahead. Given that seeking planning permission is of itself prima facie evidence of an intent to develop, and it is not a cheap process or one that anyone would undertake lightly, if a planning application has been made for a site, it is pretty clear to us that the individual or organisation who owns that site wants to see it used in a healthy, vibrant, commercial fashion. They should therefore not be penalised in the way that the Bill proposes.
The Government have introduced the Bill in the hope that land will be used more efficiently. What better test could there be of the willingness of individuals and organisations to see land used efficiently than the fact that they have sought planning permission for that site? If the Minister’s original thesis is correct that some individuals deliberately hold back property on which they could earn a useful commercial return, whoever these wicked individuals are, they are clearly not people who are seeking planning permission or waiting for the result of an appeal from the planning inspector. So whatever wicked individuals the Minister wishes to catch with this legislation, the amendment will ensure that the virtuous are not affected.
The Minister may argue that the inevitable cost of accepting the amendment will be taxation revenue forgone. However, I invite him to think about the cases in which such taxation revenue might be forgone: when properties remain empty and under-utilised because an individual is waiting for planning permission or for the planning inspectorate to rule. The answer to any lack of revenue that may be consequent on the passing of the amendment thus lies directly in the Government’s hands. If they ensure through their reforms, which we are discussing in the context of the planning White Paper, that the planning system as a whole is effectively simplified and streamlined, it will ensure that, working hand in hand with local government, there will be no undue delays in the planning system. It will quickly be found that the change of use properties required to achieve maximum commercial return is granted. Industry will benefit. Users of those services will benefit and of course the Government will benefit because we will not have properties caught in limbo awaiting the result of a planning application and, consequent on the amendment, not paying tax.
The challenge for the Minister is to explain why a Government who have introduced the planning White Paper, and hope to legislate this autumn to simplify the planning system, have insufficient confidence in their legislation to accept our amendment. If they are telling us the truth about the planning White Paper and the planning system there is no problem; there will be no delays—certainly none greater than three months—in granting planning permission and beginning development.
As the Minister knows, specific targets have been brought in for planning applications; they vary depending on the size of the development and are measured in terms of weeks, but they are indicative guidelines only; some local authorities are better at meeting them than others—it is notable that Conservative local authorities are often more successful in that regard than Labour. Party politics aside, however, we recognise that the Government have through the planning delivery agreement system sought to incentivise the speedy processing of planning applications. There is, however, a problem with the PDA system; as it sometimes incentivises speed over the quality treatment of planning applications, it can lead to the premature rejection of planning applications because a local authority is anxious to meet its PDA targets. Good planning applications, which should be accepted, are peremptorily rejected. As a result, planning applications have to go to appeal and the whole process is elongated and made more complex.
If the Government simply rely on PDA and existing instruments to guarantee that properties are not left empty and undeveloped for too long, we fear it will be insufficient. It is only through prompt implementation of changes to the planning system that the benefits that the Minister has described, and we recognise are required, can be brought about. I hope that when the Minister replies, he will explain the changes in the planning system that will ensure effective and prompt transfer of land from redundant and uncommercial use to successful commercial use. If he is as persuasive as he normally is, his arguments in favour of the planning White Paper and planning reform will in effect be arguments in favour of amendments Nos. 2, 3 and 4.
I have not yet talked about amendment No. 5, which is grouped with amendments Nos. 2, 3 and 4 for the convenience of the House because they deal with planning overall. However, amendment No. 5 is what might be termed a guards van to the rest of the train of my argument—it is connected, but it serves a different purpose. Amendment No. 5 deals with a specific part of the Bill that the Government have introduced following gentle pressure from the Opposition.
In the Ways and Means debate, we contended that the Government were running a risk. When changes were made to empty property rating relief and when reliefs were withdrawn in the 1970s—I regret to say by Sir Edward Heath, but that is a separate matter—unfortunate and perverse, although almost certainly unintended, consequences followed. We had the unfortunate example of individuals who suddenly found that their empty properties were liable for full rates who felt that they had to vandalise their own property. Rather than pay—rather than pony up—for an empty site on which no commercial activity occurred and from which no commercial return could be secured, they defaced their own property. They pulled down the roof, stripped out the floor and damaged what would otherwise have been a commercially useful investment.
When we put the reality of history—and therefore the real dangers of choosing to legislate again in the same manner—to the Government in the Ways and Means debate, they were to an extent dismissive. They said that they felt that the risk was being exaggerated. However, a few weeks later when we had the Second Reading, the Government, who had been a little dismissive at first, accepted that we had a good point and attempted to deal in the Bill with just such a perverse consequence. They said—I hope that I will not paraphrase them inaccurately—“If we have a commercial vandal who does violence to his own property, we will judge the rates payable on that property on the state it was in before the individual engaged in that act of economic self-harm and harm to the broader community and economy.”
On Second Reading, we raised some concerns about that. We could understand why the Government, having accepted our arguments, sought to legislate to deal with the issue, but we were concerned about proving intent. How can one be certain whether any changes that have occurred to a property are tax avoidance or whether they are legitimate? How can one make a window to a commercial property developer’s soul?
Amendment No. 5 is intended to provide the Government with a lifeline. We still think that the Bill is unnecessarily loose, so we have attempted to tighten it by a few notches to make sure that those whom it captures are smaller in number and more likely to be genuine commercial property vandals. The amendment would ensure that anyone who makes changes to their property in accordance with planning permission is not whacked in the same way by the Bill. It would allow an organisation or individual who had stripped out floors or taken off roofs as part of a commercially sensible or far-sighted change to continue to enjoy exemptions. It would include in the Bill clear protection for individuals who want to change their property in a way that is consistent with maximising long-term benefits from it.
Amendment No. 5 deals with a separate part of the legislation, and a specific change that the Government have introduced, so it does not relate to the same clause as amendments Nos. 2 to 4 do. If we take several steps back and look at the train that is amendments Nos. 2 to 4, and the guard’s van that is amendment No. 5, from an appropriate distance, so that we can see them all together and can attempt to judge them, or at least present them, to the House together, we see that one of the things that unites them is an attempt to ensure that the legislation covers only those people whom the Government have said that they intended it to cover. What all the amendments seek to do is to give effect to the Minister’s stated intentions. If the Government are sincere in their belief that the legislation is all about the more effective use of land, and the more prudent development of commercial property; if it is all about ensuring that regeneration can proceed, and that small retailers and other small business have the opportunities that they should have; if that is the Government’s stated intention, how can they willingly penalise owners who are seeking to improve their commercial property?
If the Government choose to reject the amendments, they are rejecting their own logic, and are deliberately setting out to punish people who are taking a risk in the interests of the wider economy because the Government’s primary aim is simply the acquisition of revenue at all costs. In that respect, the group of amendments goes beyond the scope of the Bill and strikes at the heart of the Government’s intentions over the next two years. Will they legislate in the national interest? Will they take a sufficiently enlightened view of representations from citizens and other interests within our nation? Will they listen and learn, in the words of the Chancellor of the Exchequer, and will they take a genuinely holistic view of the well-being of the nation, or are they narrowly focused on what is currently in the Treasury’s interests? That broad question—I submit that there can be no broader question—lies at the heart of these tightly framed amendments. It is because the amendments have been framed in the way that they have been that they give rise to that profound question.
If the Minister is intent on promoting not just the health of the commercial property sector and regeneration in areas that need it, but on good policy formulation, he will have no problem accepting the amendments. However, if, as I fear, he is simply doing his new master’s bidding, and is picking the pockets of the commercial property sector and its tenants in order to deal with the black hole that has been left after 10 years of improvident stewardship of the nation’s finances, he will reject the amendments. We will shortly hear the Minister explain the reasoning behind his reaction to the amendments, but by tabling them, we have set a clear test. It is a test of intent, sincerity and policy, and it is a test on which we will judge—
I am grateful for that direction from the Chair, Sir Alan, although I was waiting to hear how amendments Nos. 2 to 5 could get us from planning permission to the future of the British economy; I thought that we might soon move on to foreign affairs, too.
The hon. Member for Surrey Heath (Michael Gove), whose speeches I always enjoy, clearly never had a train set as a young boy. His education is incomplete, because the purpose of the guard’s van, as any young boy or, I would imagine, young girl would know, is to put the brakes on and slow the train down, not to round it off.
The hon. Gentleman commented on the consultation, on the relationship between Her Majesty’s Treasury and my Department, and on the important issue of regeneration and the way in which the Bill interacts with those matters. Again, he put words in my mouth when he claimed that I described speculative property developers as wicked individuals. May I repeat that the Bill is not based on the premise that there are deliberate attempts to construct buildings that remain empty? It does, however, give people an incentive to put buildings into the market. None of those matters, however, are dealt with in the amendments.
At the core of the debate is the issue of planning, and the hon. Gentleman contended that buildings that are subject to planning application or which are awaiting decisions should be exempt. If we accepted the amendments, every sensible business person in the country—and business people are sensible—would whack in a planning application, and the non-domestic rating system would collapse, because people can submit such applications as often as they want and for as many different schemes as they want to. The amendments would therefore not achieve the objective claimed by the hon. Gentleman.
I listened carefully to the hon. Gentleman’s argument about planning delivery incentives. If we followed his logic, businesses could exempt themselves from rates by submitting a planning application, and most of them would do so. Consequently, local authorities would face a funding crisis, because the amount of money they receive from business rates constitutes, off the top of my head, about 20 per cent. of their income. They would therefore have to deal with applications in a matter of seconds, public consultation would go out the window, and the vicious circle would continue. Of course, that is hypothetical and would not arise, but that is the logic of the hon. Gentleman’s argument, so the amendments would not achieve what he said they would. He tempted me to describe our planning law proposals, but I will resist the temptation because, first, it is outside the remit of the amendment and, secondly, I am not daft. He will therefore have to wait to see the proposals.
The Minister is indeed not daft, but he is unnecessarily evasive. As he kindly acknowledged, the amendments deal specifically with a requirement that properties that are the subject of planning applications should be exempt. The Government are about to undertake one of the biggest upheavals to the planning system, perhaps since 1991 and certainly since 2004. Given that they say that the planning system will be made more efficient as a result of those changes, it is irresponsible of the Minister to leave that gaping void at the heart of the debate.
If the hon. Gentleman listens to the whole argument, he will find that I answer that point. First, however, I shall attempt to answer his specific questions. He raised the issue of self-vandalisation and companies that deliberately take the roof off, as it were. In discussions with industrial organisations and representative bodies, including the British Property Federation, the Royal Institution of Chartered Surveyors, which is often prayed in aid, and the Rating Surveyors Association, we were told that the phenomenon of taking the roof off, albeit important, was rare. However, representations by those bodies prompted the anti-avoidance measures on which we will consult in detail next month. To repeat my argument about the consultation, the Bill arises from a finance measure, but its provisions are not part of the Finance Bill, because they deal with local government finance. The usual consultation periods have therefore been changed. However, I assure the hon. Gentleman that full consultation on the “taking the roof off” issue will take place. We listened to representations on that.
I note the gracious way in which the Minister has acknowledged that consultation will take place on the “taking the roof off” issue, but he will remember from Second Reading what we might characterise as the “windy night” debate. I should say, for the benefit of Hansard, that that is “windy night” as in a night when it is windy, not Wendy Knight, whoever she may be—[Interruption.] From Palma, no doubt—a Balearic dance queen, perhaps.
The windy night debate was all about intent. Amendment No. 5 seeks to protect those whose intent to take a roof off is clear. May we have an assurance that intent will be taken into account?
The hon. Gentleman raises a fair point. I shall come to that.
I shall deal first with the reason why charities and community amateur sports clubs are exempted in the Bill. Section 45 of the 1988 Act placed those two categories in primary legislation. I imagine—I do not say this to impugn the intention of the Secretary of State at the time—that he wanted to highlight those exemptions, so he wrote them into the Bill. If I got my newspapers from 1988 back from the Library, I am sure there would be headlines such as “Government exempts charities and amateur sports clubs”. It is because they were specified in the Act and because we are reducing the rate from 10 per cent. to 0 per cent. that we must amend primary legislation and cannot deal with that in regulations. I should have made that clearer before, and I am sorry I did not do so.
Amendments Nos. 2, 3 and 4 would together have the effect of granting a 50 per cent. relief from rates for any owner of an empty property who makes any planning application or appeal. The intention of the amendments, as the hon. Gentleman explained, is to protect owners from having to pay full rates when they are redeveloping an empty property in order to bring it back into use, which is a desirable objective. That is the overall purpose of the Bill. Let me therefore reassure the hon. Gentleman that, under the existing system, in most cases owners of empty property will not pay any rates while permitted development work is under way. From the point that a builder lays a hand on an empty property to start development work, the property can generally be removed from the rating list, and the owner’s rates liability will be zero. The Government have no intention of changing that.
The amendments seek to offer relief from empty property rates from the point at which a planning application is made, rather than the point at which the work to develop the property begins. The effect would therefore be to subsidise owners to keep property empty throughout the planning process, however long it takes, and regardless of whether the owner genuinely intends to redevelop the property. That would provide a huge incentive for owners of empty property to make a planning application even if they did not intend to redevelop the property, in order to avoid rates. That would not only create a massive loophole, enabling avoidance of empty property rates on a major scale, but would generate a huge volume of spurious planning applications, potentially clogging up the system and slowing down decisions for those who have made genuine applications.
I appreciate the concerns expressed by hon. Members about the time it can take to gain planning permission to redevelop empty property, which we have discussed in previous debates. The Government, to be fair—I am always keen to be fair to the Government—set out proposals to improve the speed and responsiveness of the planning system in the planning White Paper published in May. The hon. Gentleman tried to tempt me down that road. However, there is no case for subsidising owners to keep property empty while it is the subject of a planning application or appeal. Until development work actually begins, empty property is quite capable of occupation by an active business, and owners should therefore be liable for the full reformed empty property rate to provide a strong incentive for them to re-let the property, on short-term, flexible terms if necessary.
On Second Reading, my hon. Friend the Financial Secretary to the Treasury drew the House’s attention to the views of a firm that attempts to place small businesses into available commercial property. Let me remind the Committee that in that firm’s professional opinion, the reformed empty property rate will create new opportunities for smaller companies and more innovation and flexibility on the part of landlords.
The amendments would create a loophole that would wreck the benefits of reform, in terms of lower rents and better access to premises, that are anticipated not only by the firm that I mentioned but by the Federation of Small Businesses, Sir Michael Lyons, Kate Barker, the Government, and the right hon. Member for Suffolk, Coastal (Mr. Gummer), who in the previous debate expressed his support for the principal aim of the Bill. The amendments would subsidise owners to keep property empty and place an equivalent burden on to other taxpayers, and they would enable rates avoidance to take place on a major scale. For all those reasons, I have great difficulty with them. Although I accept the Opposition’s objective in seeking to smooth the planning system and to ensure that delays do not cause undue financial penalties on companies, I fear that the proposal would have the opposite effect.
Amendment No. 5—the guard’s van amendment, as the hon. Member for Surrey Heath described it—also deals with planning matters. It relates to paragraph 4 of schedule 1, which inserts new section 66A into the 1988 Act. Let me briefly explain the purpose of that new section. It empowers the Secretary of State and Welsh Ministers to make regulations to deal with rate avoidance tactics that could potentially be employed by owners of empty property, such as the removal of roofs, which we have already discussed. The amendment deals with the application of anti-avoidance regulations in circumstances where property is altered in the course of permitted development work. I assume that the hon. Gentleman wants to prevent the application of anti-avoidance measures if an empty property is damaged when it is genuinely being redeveloped to be put back into use. Let me assure him and the rest of the Committee from the outset that the Government wholeheartedly agree that work carried out under planning permission should not be classed as avoidance activity.
The hon. Gentleman may be surprised to hear that the amendment would achieve the opposite effect of what he and I now agree we want to do. It would require anti-avoidance measures to be applied to properties that were being redeveloped with planning permission, meaning that the valuation officer would have to disregard the change in the state of property for rating purposes. If the amendment were accepted, owners of properties that were being redeveloped could end up paying more in rates than they otherwise would. The amendment has highlighted that point, and I am grateful to the hon. Gentleman for that. However, I reassure him, on the main point of his argument, that the Government agree that work carried out under planning permission should not be classed as avoidance activity. That will be made clear as the weeks go on. On that basis, I ask him to consider withdrawing his amendment.
I am grateful to the Minister for making his case, but he invites us to take on trust his assurances about amendment No. 5 and to accept his argument on amendments Nos. 2, 3 and 4. We cannot do that. He accepts that amendment No. 5 serves the purpose about which we agree, but prefers us to wait for subsequent secondary legislation, while we want the provision to appear in the Bill.
I am grateful to the hon. Gentleman for accepting that we agree about the purpose that we are trying to achieve. However, the way in which the amendment is drafted means that it would provide for the opposite, because development issues would be perceived as anti-avoidance measures. That is my fear.
That is merely a variation of the argument that the Minister powerfully deployed against amendments Nos. 2, 3 and 4, which is that planning would be used as an anti-avoidance measure. We contend that no one would willingly go through the planning system unless they had to, given the system’s scale, complexity and cost, notwithstanding the changes that the Government will try to make—in good faith, I am sure—to planning legislation.
Given that the amendments will provide some protection to those who honestly make changes to empty property to the benefit of the wider economy, we stand by them.
Question put, That the amendment be made:—
I beg to move amendment No. 1, page 2, line 22, at end insert—
‘(4) The third case is where—
(a) the ratepayer is a community owned village hall or community centre, and
(b) it appears that when next in use the hereditament will be wholly or mainly used for community benefit.’.
We have had a long and detailed debate about exemptions this afternoon. A key part of the Bill is the Government’s exemption for charities and sports clubs. We tabled amendment No. 1 because, although 86 per cent. of village halls are vested in some kind of charity, a number still might not fall within that definition. Even if 86 per cent. are covered as charities, an awful lot of village halls and community centres are still not covered.
We have had many debates in the Chamber about the importance of keeping communities together and of village halls and community centres, particularly in rural areas but also in many urban ones. They are of real value to our constituents. The purpose of the amendment is therefore to make it explicitly clear that such halls should not be caught by the Bill.
For a number of years, I was a rural county councillor. I was always amazed by the sometimes bizarre and unusual methods by which people get village halls. Sometimes, farmers give a piece of land and build a village hall for the community. While, effectively, it is the village hall, its ownership might still be vested in a local landowner or prominent member of the community. That is why we moved the amendment.
Such facilities are greatly valued. People often put a great deal of time into painting, upkeep and ensuring that the facilities are available to the local community. It would therefore be a pity if the Bill, a major revenue-raiser of more than £1 billion—the fourth largest raiser of money in the 2007 Budget—were to catch the small proportion of community and village halls that are not registered as charities.
The Minister has a useful opportunity, before the end of play, to set out why the amendment should not be accepted. The amendment would reinforce the good aspects of the Bill, and, as we have heard, charities and sports clubs are covered by it. By slightly broadening the provision, it would ensure the survival of valuable community facilities. The Government should not intend those facilities to be affected by this revenue-raising change. I look forward to hearing his comments.
I appreciate the motive behind the hon. Gentleman’s amendment. I readily confess that my argument is a difficult one, but I shall explain my logic for not supporting his amendment.
The motive of the amendment is to extend to community-owned village halls and community centres the zero-rating liability that the Bill provides for empty properties owned by charities and community amateur sports clubs, where those properties appear likely to be next used for charitable purposes or for the purposes of the club. In essence, the problem is one of definition, as well as of trying to determine where the boundaries of exemptions from rates should lie.
The amendment seeks to protect facilities owned by the community. The hon. Gentleman referred to his experiences as a rural county councillor, and I represent an urban and rural area that has many community and village halls. Once one scratches the surface, however, it is apparent that ownership, and the definition of community ownership, is not always that clear. I remind the Committee that community amateur sports clubs are well defined.
My next argument is that a great many of our village halls and community centres are held by charitable organisations and will benefit from the zero rating of empty properties held by charities. Therefore, that provision does not need amending, and I would have had some difficulty had that not been the case. In addition, the opportunities for charitable registration have recently been improved by the Government.
I remind the Committee of the wide support that the Government are extending to community organisations as part of our strategy of reconnecting with the public, which the Local Government and Public Involvement in Health Bill and other measures address. For example, the £30 million community asset fund has been announced. In addition, on 7 June, we published the departmental third sector strategy, of which a key proposal, subject to the comprehensive spending review, is to support community-owned village halls, community centres and other such facilities. We want to stimulate and develop enterprise by transferring assets to community ownership and management through the expansion of earned revenue. The Quirk report is about exactly that. We are creating more community-owned assets, which makes the issues covered in the amendment more pertinent, and the hon. Gentleman is right to raise them.
Perhaps hon. Members are concerned to ensure that parish councils and other bodies that own community facilities, as well as the community itself, enjoy zero rates liability when the facilities are empty, as charitable bodies will by virtue of the Bill. However, the practical effect of any exemption would always be to remove any incentive for owners of an empty property previously used for a community purpose to bring it back into use. We have concluded that in the particular case of charities, whether they own community facilities or any other type of property, the case for exemption does, exceptionally, outweigh our general presumption that all owners should be subject to empty property rates other than in cases where an exemption is already available. I remind the Committee—again, this is an important point in meeting the hon. Gentleman’s concerns—that properties with a low rateable value of less than £2,200 are exempt.
I might have misheard but, in trying to follow the Minister’s logic, I fear that I might have misunderstood him. Is he genuinely asserting that owners of community facilities, such as those who are responsible for village halls, would wilfully keep those premises empty and would need the goad of the Bill to ensure the efficient disposition of their assets? It seems bizarre that we would have the situation that he appears to have described.
I do not think that there would be examples of people wilfully keeping premises empty, but I can envisage how a bill landing on a doormat might prompt change if a community asset has not been used for a number of years, perhaps because the committee members or the activists who kept things going have moved on. The general presumption of the policy is to give incentives to owners of empty properties to put them back into use. There is a balance to be struck in the case of charitable organisations that outweighs the exemption, with the £2,200 threshold and charitable status covering many village and community halls.
It is much more difficult to extend new zero rates to different types of owner, such as public bodies. Here the problem of definition comes into play. We could all invent exemptions for types of owner and types of building: we could come up with a list of worthy causes as long as our arm. The purpose of the regime proposed in the Bill is to give owners an incentive to return their empty properties to active use, whether they are vacant city offices or rural halls. We do not wish to subsidise properties to lie empty. The application to public buildings, including parish halls and community halls, creates a very difficult situation in which the definition of a community or village hall would make the legislation unworkable.
As I have said many times, we will examine the issue of exemptions in the summer, and I therefore ask the hon. Member for Poole to withdraw his amendment. I congratulate him on tabling it, because it reflects a real argument that will take place in communities, but I think that, on balance, it is likely to foster circumstances whereby community halls would be allowed to lie empty rather than be put to good active use. Nothing is more visible and more likely to damage a community, whether it is a village or an urban neighbourhood, than an empty hall at the end of the road that is usually covered in weeds and graffiti. We want to return such buildings to use for the benefit of the community, and I fear the amendment would not achieve that.
I thank the Minister for the way in which he responded to the debate. The problem is that when certain exemptions are included in a Bill, the question arises of where the boundaries should be drawn, and the arguments are always difficult to deploy.
I have often seen housing developments on the edge of villages or in towns that have included community facilities as some of the planning gain. That leaves the problem of older halls that might need redevelopment and remain empty. A new hall might not be 100 per cent. provided by a developer: it might need new chairs, or redecoration. This tax proposal could well affect the ability to provide first-class facilities for communities that badly need them and that would use them.
I am sorry to tell the Minister that we will press the amendment to a Division; it is one of those afternoons. I hope that, in due course, he will take account of the arguments, particularly in his consultation.
Question put, That the amendment be made:—
It being after Five o’clock, The Second Deputy Chairman of Ways and Means, proceeded to put forthwith the Questions necessary for the disposal of the business to be concluded at that hour. pursuant to Order [this day]
Clauses 1, 2 and 3 ordered to stand part of the Bill.
Schedules 1 and 2 agreed to.
Bill reported, without amendment.
Order for Third Reading read.—[Queen’s Consent, on behalf of the Crown, signified.]
I beg to move, That the Bill be now read the Third time.
In earlier debates on this Bill, my hon. Friends the Economic and Financial Secretaries to the Treasury and I explained why the Government consider this Bill to be such an important piece of legislation. The current policy on the rating of empty properties is based on a set of economic circumstances that simply does not exist in the UK today, and which does not fulfil the requirement for the efficient use of property and the regeneration of brownfield sites to meet our housing needs.
The Government’s commitment to regeneration and to meeting those needs cannot be faulted, and I assure the House that that will remain the case, but I have also made it clear that devoting more than £70 million in tax relief every year to the owners of empty properties in Westminster is simply unjustifiable. Consequently, it is time to reform the blanket relief extended to empty commercial property. In place of that relief, the Government are moving their support for regeneration and renewal towards a brand new, and much better targeted, 100 per cent. capital allowance for the renovation of property in our assisted areas. I strongly believe that that meets the points made by hon. Members such as my hon. Friend the Member for Stoke-on-Trent, North (Joan Walley), Opposition Members and Liberal Democrat Members in interventions and in speeches.
We have introduced this new allowance now, so that owners of unlet property in these areas can take advantage of the new incentive before the changes to empty property rates. Furthermore, we have consulted on a wider application of land remediation relief to a much broader range of contaminated and derelict brownfield sites specifically in order to promote efficient use of our developed land and to help protect greenfield sites. I believe that those two measures allow policy to meet the reasonable and correct objection made by a number of hon. Members on both sides of the House that there are different types of market in different parts of the country. That point was made by constituency Members of Parliament as well as by hon. Members speaking on a wider policy agenda. I ask the House to consider the other measures that I have mentioned in the round with this measure. I hope that my hon. Friends, and Opposition Members, will see that the Bill is part of a much wider package of measures, supporting regeneration but also meeting the needs of business and our communities for active property markets and efficient use of land.
We have decided that for charities and community amateur sports clubs there will be 100 per cent. relief from empty property rates. These organisations play such a key role in our society, often leading regeneration efforts, and the Bill offers substantial additional help to them. For the rest of the business community, this Bill will reduce rents and provide opportunities for new companies, expanding companies and companies wanting to join the most successful economy in the G7.
I repeat what I said in the Ways and Means debate and on Second Reading. We have the successful policy of linking business rates—or non-domestic rates as they are properly called—to the retail prices index cap. As that business rate is based on rental value, not capital value, the successful implementation of the policy in bringing rents down over the years will indeed, as the Red Book acknowledges, see a diminution in the revenue that it generates, the more successful it becomes. That is the serious answer that my hon. Friend the Financial Secretary gave to the serious objection that the hon. Member for Surrey Heath (Michael Gove) has raised.
This is, of course, a revenue-raising policy. It was a policy announced as part of a Budget package and its process through the House has been unusual. I am grateful to the House authorities for their guidance and advice in this regard. However, it is far from the case that the Bill is simply a matter of raising revenue. It also embodies a policy on land use and properties, and our own Red Book acknowledges that there will be a diminution in the revenue raised. As the cap on business rates exists, the total yield from business rates cannot rise higher than inflation.
It is undoubtedly the case that my right hon. Friend the Chancellor has made a huge contribution to growth in the UK economy and to moving it into a state fit to compete with the best in the 21st century. He has provided research and development tax credits, a boost to science budgets and lower rates of corporation tax—which of course have to be taken into account when considering the proportion of revenue raised from business rates, because corporation tax has come down, and come down again this year. In addition, there are new investment allowances for all firms. Those are all parts of an economy that can also deliver a minimum wage, expanded support for child care and greater protection for the elderly and most vulnerable in society.
There is one league table that we are not willing to sit atop—the ranking of rents paid by firms to locate in our towns and cities. High rents might be a sign of companies recognising the attractiveness of locating in the UK, and to some extent a marker of how successful we are, but in a global economy they are not the measure of success we want, nor something we can afford in the long term. Let me reiterate: we are not saying that high rents are a result of landlords deliberately playing the market. We recognise the value and importance that property investment and property developers play in our economy.
Nevertheless, we have been presented with recommendations from the Barker report—Kate Barker is one of the country’s top economists—and from Sir Michael Lyons, the leading expert on local government finance and incentives, both of which pointed to what my hon. Friends at the Treasury would call the supply side advantages of reducing tax relief for empty property, so as the Chancellor made clear to the House on Budget day, we are introducing the Bill both to answer criticisms that supply is distorted by the current relief and the different treatment of types of property, and to provide new opportunities for start-up and expanding firms.
However, we are not insensitive to the possibility that conditions can change, which should not be seen by the hon. Member for Surrey Heath as a weak link or an admission that we are heading for recession. That would be unfair and ridiculous, but of course I know that he would not say such a thing. I pick up The Times every day to see what he has written. I enjoyed his column about “Big Brother”, and strongly agreed with him; I was grateful that he did not write about the Bill—although not as grateful as his readers will have been.
Unlike the last time such a policy was considered, I am not suggesting to the House that the rate of tax be set in stone so that it is impossible to respond to changing situations. That is why we took the approach in the Bill—the point came out during our debate on the first group of amendments. Similarly, we know that leaseholders holding unwanted property are an important group for special consideration; hence our agreement to consult on how best to introduce in the tax system recognition for payments made by companies to rid themselves of onerous leases. Nor are we attempting to remove the returns from property that many investors enjoy; a Government with a track record of introducing real estate investment trusts, providing a framework for parallel treatment of property held by authorised investment funds and maintaining the stable growth in the economy that is the basis of strong demand for property could not fairly be accused of that.
I hope, therefore, that our willingness to look at the issue in the round and to be flexible in our legislation, as well as the package of measures and ongoing consultations, will serve as proof to the House that this really is a measure to expedite change for the better, and that we will continue to provide help where it is most needed. This is a short Bill, but it will deliver important economic, social and environmental results so I hope that Members on both sides of the House will wish it speed. I commend it to the House.
It is a pleasure to take part in the Third Reading debate, as it was to take part in the Ways and Means debate, Second Reading and Committee stage. It has been a particular pleasure because of the calm, courteous, always amusing, helpful, thoughtful, lucid and authoritative contributions of the Minister for Local Government.
I am moved to compliment the Minister on his choice of newspaper. I did not know that he was a reader of The Times, and I am grateful that he enjoys that newspaper, as we all do. However, I must commiserate with him on the conclusion of the paper’s leading article on the question of who should be deputy leader of the Labour party, and in due course Deputy Prime Minister. The Times plumped for the right hon. Member for Salford (Hazel Blears) as deputy leader of the Labour party.
Order. I know that the hon. Member for Surrey Heath (Michael Gove) has been led slightly astray by the Minister, but we are on Third Reading of the Bill, and the debate should be about the Bill’s contents.
I am grateful for that guidance, Sir Michael. I was simply directed by the knowledge that the Minister has been playing a part as campaign manager for one of the candidates in the deputy leadership race. There is another campaign manager for another candidate in the Chamber at the moment—whose interest in the Bill I am grateful to see at this stage.
As well as hearing from the Minister for Local Government, we have been fortunate to have the case for the Bill made by the Financial Secretary and the Economic Secretary. As I remarked in Committee, their presence in our earlier deliberations—and the presence of the Financial Secretary now—is welcome, but revealing. In a way, we have seen the hand of the puppeteer. We have seen the real moving spirit behind the legislation, in the presence of Treasury Ministers.
It has been our contention throughout that the Bill is not about the right way to incentivise the use of commercial property; it is about providing the Chancellor of the Exchequer with roughly an extra £1 billion a year to dispose of. The presence of Treasury Ministers is a powerful piece of evidence to underline that case, but there is also the fact that when we asked for evidence from the Government to prove that there are individuals who are deliberately and wilfully keeping property vacant, that evidence was never produced. For all the vaunted eloquence of Treasury Ministers and Ministers from the Department for Communities and Local Government, we lack evidence that the Bill is required or will change the behaviour of people in the commercial property sector in a beneficial way.
When we were discussing the last amendment in Committee, the Minister said that the Government did not wish to subsidise buildings to lie empty. It is a view shared across the House that wherever possible, buildings should be put to effective use, but we profoundly differ from the Government over the contention that the Bill would ensure that land and buildings were used more effectively. Although we were treated to a number of ingenious, entertaining and informative arguments at each stage of the Bill’s progress, we were denied any proof—certainly any proof that would convince anyone with a knowledge of the commercial property sector—that the Bill would ensure that property was better used.
It was striking that, as the Bill made its way through the House, people outside the House who have an interest made their view known in a powerful way. On Second Reading, the Minister sought to convince us that because the Federation of Small Businesses—
And the Evening Standard. The Minister sought to convince us that because the FSB had supported a change in the legislation we should accept what he was trying to bring about. However, on Second Reading we heard from my hon. Friends that the case made by the Federation of Small Businesses was much more nuanced than the Minister might have led us to believe.
Even if the Federation of Small Businesses might appear to be a supportive, if equivocal, witness on the Government’s behalf, the weight of its testimony was overborne by the weight of testimony from other organisations, which were critical of what the Government sought to put forward. The Royal Institution of Chartered Surveyors, the Confederation of British Industry, the British Property Federation and the British Retail Consortium all felt sufficiently moved to argue outside the House that what Ministers were advancing was directly contrary to the commercial interests not just of their members but of the country. However, Ministers did not address their arguments head on, or accept that the competitiveness and flexibility of the commercial property market would be hit by the measure. Because they failed to acknowledge that, I have to say that—however eloquently they defended their position—the case was not made.
I suspect that the question “Why do properties lie empty?” is at the heart of the Department for Communities and Local Government’s aim in bringing forward the legislation; it is certainly at the heart of what the Minister claimed was its aim. On Second Reading, Opposition Members brought forward a compelling narrative that explained why vacancies and voids occurred. Vacancies and voids are a natural consequence of a healthy market; we made the point that in the commercial property sector they sometimes last between 12 and 24 months, as one business winds down and a new business is put in place. We said that the legislation, which will end relief after three months, takes no account of the pace and tempo of operations in the commercial property sector. Furthermore, in debate on the Ways and Means resolution, on Second Reading and in Committee we pointed out that the real reason why properties lie empty and unused when they could be put to good commercial use derives from the planning system.
In our previous deliberations, I remember my hon. Friends the Members for Salisbury (Robert Key), for St. Albans (Anne Main), for Ludlow (Mr. Dunne) and for Bromley and Chislehurst (Robert Neill) pointing out a variety of examples, taken from their constituency casebook or furnished to them by interested parties, of cases in which commercial concerns wished to see their properties filled, but were prevented from filling them by the operation of the planning system.
When we discussed the Bill in Committee, we put it to the Minister that he should seek to amend the legislation to take account of the weaknesses in the planning system. We said that he should, at the very least, furnish us with evidence that the planning White Paper and the legislation consequent on it would deal with those problems. Regrettably, he once again disappointed us. He certainly showed—I am grateful for his sensitivity in acknowledging it—that he was aware that our case was not ill-founded, frivolous, or made in a spirit of partisan wrecking. He acknowledged that all the points that we made were genuine and rooted in the experience of our constituents or commercial organisations with genuine expertise. He acknowledged that, and we thank him for it, but he did not provide any measure of intellectual relief, as it were; he did not show how the changes that the Government would make to the planning system would ensure that property was used in the most effective way.
When talking about planning and the justification for the measure before us, the Minister prayed in aid Barker and Lyons. They were the two presiding deities in whose name the Bill was introduced—but again, one of the things that he failed to acknowledge throughout our debates was the fact that he had been quoting selectively from the Barker review and the Lyons report. The Barker review made it clear that when considering non-domestic rates, it was important to acknowledge that relief was a balancing mechanism; relief is there to ensure that when no commercial activity is taking place, no taxation penalty is exacted. There has been no reflection of Barker’s acknowledgment of that balancing mechanism either in the case that the Minister made or in the legislation.
As for Sir Michael Lyons, the Minister calls him perhaps the greatest expert on local government finance whom we know. I respectfully submit that when it comes to authorities on local government finance, my right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer) and my hon. Friend the Member for Brentwood and Ongar (Mr. Pickles)—and the right hon. Member for Greenwich and Woolwich (Mr. Raynsford), for that matter; I am happy to concede that point—are entitled to take their place alongside Sir Michael. Nevertheless, we both agree that Sir Michael Lyons is a pretty big cheese in the world of local government finance. Why is it, then, that the Government are prepared to take only the crumbs that they consider savoury, and push the rest to the side of the plate?
Sir Michael Lyons made it clear that changes to non-domestic rates should be taken in the round, should be introduced after consultation, and should not be made before 2010. As we have pointed out at every stage, the changes are piecemeal, and they are being introduced early, after inadequate consultation, simply so that we can ensure that the Treasury is satisfied with its yield.
The Minister mentioned his hon. Friends in the Treasury, which put me in mind of the television series “Our Friends in the North”, because the Opposition inferred that the legislation was introduced by friends in the north, who were the heavy mob. In the presence of the Financial Secretary by the Minister’s side, we see a representative of management who is here to ensure that the legislation delivers what it was meant to deliver: a tidy sum into the coffers—no questions asked, squire—to ensure that the big guy in No. 11 gets what he wants. It is for that reason that we find the legislation profoundly unsatisfactory. It has been introduced to balance the books, which an improvident Chancellor over the past 10 years has failed to balance in the nation’s interests.
I should like to develop some of the comments that I made in the Ways and Means debate, which were consolidated by my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) on Second Reading.
Time sat rather heavily on us this afternoon. It was enlivened by some erudite shafts of wit from the hon. Member for Surrey Heath (Michael Gove) and some rather nice turns of phrase that we may hear again on “Newsnight Review”, but apart from that, it was rather heavy going. I want briefly to recap the basic arguments about the Bill, at the heart of which is a perfectly sensible proposition about providing an economic incentive to use property more efficiently. We have three basic reservations, which have been partly, but not entirely, alleviated. The first concerns the process, particularly the consultation; the second concerns the Government’s motives, particularly the revenue aspect; the third concerns unintended consequences and special problems arising from the fact that there is no such thing as a uniform property market, as that market is complex and variegated.
It is true, as the Government argue, that if we impose an economic penalty on unoccupied property, business has an incentive to use property more intensively and cut rents to fill it. The model is obviously sensible in a simple market framework, but the position is a little more complicated than that. I reread the Lyons report and what Barker had to say. It was interesting that Sir Michael Lyons quoted Stiglitz, one of the top global economists—I am not sure whether he is a Nobel laureate, but he has certainly been lined up for that prize—who tried to set out the basic economic arguments about empty property and taxation. He made the point that the property market is different from markets in apples and pears, or in cars, because entrepreneurs have to build property ahead of demand—that is the nature of the business—so a certain amount of spare capacity is built in. There is a risk associated with that, particularly if there is a risk of being penalised for creating excess capacity. The economic argument is that there is a good case for empty property taxation relief, because risk sharing is involved. Without that relief, investment would never take place. At issue, therefore, is not the principle but the period within which it is sensible to create empty property relief to encourage the healthy growth, as well as the balancing, of the property market.
The first of our three main concerns is about the process. It was clear from the Lyons report that Lyons himself envisaged a much longer period of consultation before his recommendation was put into legislation. The Government are consulting about exemptions, and they are consulting separately about particular problems with leases, which is welcome. That is welcome, but the fundamental point, which has been made several times by the hon. Member for Surrey Heath, is that when the results of those consultations bear fruit, they will take the form of secondary legislation, which will not be subject to the same extensive scrutiny as the Bill. The process is therefore not as satisfactory as it could be.
Secondly, it is clear that the Bill is a revenue-raising measure. Ministers have turned that to their advantage as a debating point by saying to the Opposition parties, “Well, if you’re against the Bill, how would you raise the £950 million?” That is a fair debating point, as far as it goes, but it raises the obvious question about who pays that £950 million. I have never been clear who the Government think would pay it. They would argue that it is not paid by the tenants of commercial property, because they argue that rents will fall. When Ministers were challenged, from the Liberal Democrat Benches I think, about the potential impact on institutional investors who have extensive property portfolios, they said that those investors would not lose anything either, because there would be an increase in profits in the sector.
So how will the miracle happen whereby the Government acquire substantial revenues—£950 million, although admittedly those would be regressive as rents fall? Who will pay? No one, apparently. There is something odd about the logic. If the Government were a little more honest and accepted that there will be serious losers in the property sector, at least we would be clear about their thinking. The Government could argue that, to a degree, nobody is a loser if the whole system becomes much more efficient and the British economy becomes more efficient. That could indeed be the case, but I have not heard it explained what the Government’s objectives are.
We know from the helpful tables at the back of the Library research paper that the average level of voids is about 9 per cent. in England and Wales. Sophisticated property companies probably operate on a 6 to 7 per cent. basis. It would be interesting to know what the Government think the natural level of vacancy should be, and how realistic it is to expect that to be achieved. Unless the level falls, the property sector will pay more, and that will be paid by the owners, who are usually institutional investors, or by tenants, directly or indirectly. Somebody must pay.
The third set of issues relates to the exemptions and the special difficulties, which fall into two parts. The first was debated extensively today, and I will not review all the arguments, which were well made, about the problems associated with legal difficulties, planning and historical buildings. Those will have to be dealt with. The second set of issues, which has not been debated, involves the differences between different parts of the country. In the Ways and Means debate and on Second Reading we argued about the particular problems that were said to be likely to accrue in areas like Wales, where there have been many factory closures, and parts of west Yorkshire, which are subject to regeneration, and the difficulties that those areas have.
Regeneration often takes place in the industrial sector by advance building, with an expectation that property could remain empty for a considerable time. It relies very much on speculative building on industrial estates, so those areas could be penalised. One of the difficulties that I have in trying to understand what is going on is connected with the differences between different parts of the UK. Perhaps the Minister can explain. I am not trying to make a point. I am trying to understand what is going on. There are big differences between different local authority areas.
It was not surprising that the biggest area of unused property in Britain, let alone in London, is Hackney, because Hackney is an extremely problematic area with serious regeneration difficulties. There are some strange anomalies. My own borough, which is quite prosperous and is rapidly growing, has a vacancy rate of about 6 per cent. Next-door Hounslow, which is equally dynamic, has a vacancy rate of about 14 per cent. Manchester and Birmingham, which have problem areas, have very high vacancy rates. Newcastle, which has the same problems, has a very low one. Why these enormous discrepancies occur, and what the impact of the Bill will be on them, is not clear to me. The Government have expressed their willingness to be flexible—if, for example, there is a period of recession—but how flexible can they be in recognising the differences in different parts of the UK and in allowing regional exemptions? Many of those issues will be pursued in the other place, as there are clearly a lot of unresolved questions.
Question put and agreed to.
Bill accordingly read the Third time, and passed.
On a point of order, Mr. Deputy Speaker. I know how much Mr. Speaker deprecates ministerial statements being given to the media before they are made to this House. Yesterday, rather uniquely, the Home Secretary made a ministerial statement and admitted that he had briefed the press in advance, and in fact appeared in television studios. What can be done to ensure that in future, hon. Members are informed before the media?
The hon. Gentleman is right: Mr. Speaker feels very strongly that any important ministerial statements should be made to this House before they are discussed elsewhere. It is, of course, down to Ministers to observe that rule. The hon. Gentleman has made his point, it is on the record, and I have no doubt that Mr. Speaker will take note of it.