I beg to move,
That this House expresses concern over the above-inflation rises in business rates since April 2009 and plans for the 2010 business rates revaluation; notes that all rate-paying businesses have already been hit by five per cent. above inflation rises and that the withdrawal of transitional relief has disproportionately hurt small businesses already struggling to cope with the recession; further notes that regulations relating to the business rate partial deferral scheme are yet to be placed before the House; observes that the additional burden of empty property rates further undermines struggling businesses; expresses disappointment at the failure in the Budget to help businesses and local authorities by making small business rate relief automatic as in Wales; believes that councils should have the power to levy local business revenue rate discounts and be rewarded for local regeneration and business rate growth; and further notes that the retrospective business rates being imposed on firms in ports, many involved in the car industry, will hit firms with a £124 million increase in taxes, risking insolvency and job losses.
Today’s debate is of real importance to businesses across Britain, because the problem relating to business rates and business rate rises is so acute. This country has been in recession since last year, and the impact on businesses and employment has been dramatic. In fact, the most recent figures from the Federation of Small Businesses show that, every day 120 small businesses close down . Above all, in the credit crunch even firms with perfectly good business models are going bust, not because they are loss-making but just because they cannot get the liquidity that is needed. We recognise the problems with cash flow, which is why we have been pressing Ministers to go for our bigger and bolder national loan guarantee scheme to help provide certainty for businesses that are lending credit to one another.
Members would have thought that Ministers in the Department for Communities and Local Government who look after business rates would have taken particular care in their decisions that affect businesses, but they would have been wrong. In the past few months, when it comes to business rates, struggling businesses across Britain have seen Ministers press ahead with decision after decision that can only make their liquidity situation worse. First, at the end of last year, Ministers confirmed that all companies paying business rates would see a 5 per cent. inflation-busting rise. By the time it was due to hit businesses and our economy, economists were discussing whether deflation was a concern, and the Bank of England was embarking on its quantitative easing. However, Ministers refused to reconsider their decision. In fact, they even refused to prepare an impact statement that considered how such massive, inflation-busting rises would hurt businesses, employment and the economy.
Will the hon. Lady please tell the House how Ministers could have changed the formula, which her party introduced when in government, given that, on revaluation, it requires the yield to be maintained, with no discretion for the Government to take a different decision?
I am grateful for the right hon. Gentleman’s intervention. Much as I respect him, I think that people in businesses listening to that will find it a classic “computer says no” attitude to getting through this recession. We have heard about the do-nothing party; I think we have suddenly found which is the do-nothing party in this Chamber tonight.
I will make a little more progress, but I will give way shortly.
Ministers are refusing to reconsider their decision, as we have heard. In fact, they soldiered on for months with their heads in the sand. That was bad enough for businesses that were trying to cope with the recession, but Ministers did not stop there: next down the track came the withdrawal of transitional relief. From what data there are, it is clear that some businesses were hit far more severely than people expected by the withdrawal of transitional relief, which had cushioned the impact of the 2005 rates revaluation for many businesses, but Ministers should have known about the impact that that would have. At a time when so many businesses were on their knees, Ministers again kicked away what could have been a final, extra year of transitional relief, and the impact has been huge. The FSB surveyed members in London and found that of those paying business rates nearly two thirds faced rises of 6 per cent. or more, and nearly one in 10 faced a rise of over 20 per cent. That masks the fact that a minority in that group faces much bigger rises. I shall come to that shortly.
Can the hon. Lady explain her party’s policy on transitional relief? By definition, at some point that comes to an end. Is she saying that it should always last for five years, instead of four? Does she accept that, given the ability to defer part of the rate increase, 60 per cent. of the transitional relief, which ends in the fifth year, can be deferred to the next two years?
It is interesting that the last time the revaluation took place, in 2000, the hon. Gentleman’s party chose to adopt a five-year transitional relief. The option to do that again was dismissed by his Government. I have asked the Government what they plan to do in the 2010 revaluation, and we still have no response from them. Part of the problem is bad information. I am happy to send to him parliamentary question after parliamentary question in which I have asked how many companies were affected by transitional relief, but received no answer.
The last time any assessment seems to have been done on the impact on businesses of the withdrawal of transitional relief was in 2004. At that time there was no recession. Now we have a recession, but Ministers have not been prepared to revisit any of their decisions. Again, we hear their defeatist attitude: “We cannot do anything to help small businesses. Let’s just push on with the plan that we already have.”
Is the hon. Lady saying, as her initial remarks suggested, that she would change the legislation on the basis on which the business rate is determined, with reference to the retail prices index; that contrary to everything that has happened since 1990, she would change the arrangements relating to transitional relief; and that she would change the arrangements relating to the raising of the business rate itself? Can she confirm that that is her party’s policy from now on?
I am pleased that the hon. Gentleman is talking to me as though I am already the Minister looking after this brief. We should look at those aspects to see what we can do to help business. He seems already to have gone into Opposition MP mode.
There is no doubt that for smaller, more marginal companies business rates are one of the largest parts of their cost base, and they are levied whether or not those companies are making profits. We know that more than other businesses small businesses are prone to be hit proportionally hardest by Government decisions on business rates. One would have thought that that mattered to Ministers, but it did not. Given that they were deciding to put through massive business rate hikes in the teeth of a recession, one would have thought that Ministers might take the time to understand the impact of business rates on more marginal businesses, but they did not. They made no effort to understand how their decision to raise business rates would hurt communities, hurt businesses and cost jobs.
On the withdrawal of transitional relief, Ministers have known of the pressure of rates on many thousands of businesses since 2004. As I said earlier, in their own consultation paper they even identified the problem. The paper states that at the time, Ministers said that they had been warned that:
“There are some groups representing rate payers who expect significant rises in their rate bills and who are pressing for a five-year scheme”.
Ministers ignored those concerns.
Businesses are therefore concerned about business rates rising at the end of transitional relief. Those concerns were raised even before the recession, but even when the situation has got worse and we are in a recession, it does not seem to occur to Ministers to reassess their approach. Who is penalised for the Government’s incompetence? Small businesses, which are worst hit because of their size. That often means that they are far more vulnerable to a recession and, as I said, to Ministers raising business rates.
Many of those small businesses are local shops, and often parades of shops, which provide employment and support communities. They include the newsagent, the laundrette and the corner shop. They are all fighting to stay in business and they are put under more pressure by Government decisions to hike up business rates. Surely the harshest aspect of the withdrawal of transitional relief was its impact on businesses that had played their role in regenerating their communities. They were doing exactly what the Government asked of them. They took risks and set up their businesses in areas that desperately needed better facilities and shops.
The hon. Lady clearly believes that the root of the problem is the Government. Given that she and her party seem to be espousing localist principles, will she now declare whether or not she will return decision making on business rates to local authorities and give them the discretion to set the rate?
I am pleased that the right hon. Gentleman is giving me the opportunity to make sure that the House is aware of our policy of letting councils that can raise business rate take over the next few years keep that increase. That is how we can incentivise local communities and local authorities. [Interruption.] The right hon. Gentleman says that that is not the question. He asked me what we can do to make sure there is more local impact on business rates and more incentive for local councils. [Interruption.] If he would let me finish—
Thank you, Madam Deputy Speaker. It is hard to explain to Government Members when they constantly shout. Had the right hon. Member for Greenwich and Woolwich (Mr. Raynsford) not shouted, I would already have been able to tell him that our other proposal is that we should give local authorities the chance to levy a business rate discount. I hope he will be happy with that, and perhaps intervene again to congratulate my party on what will no doubt be an excellent policy.
I am sure my hon. Friend agrees that small business and enterprise was the backbone of our economic success as a nation in the 1980s and 1990s, and will continue to be so in this new century. The fact remains that businesses, not Government, create jobs. It is the job of a Government to create the environment in which business can thrive. This Government have singularly failed to recognise the needs of businesses in the economy when the chips are down.
My hon. Friend is right. The backbone of our economy has been our small businesses. We have been described as a nation of shopkeepers. There is a reason for that: our economy has been based on, and has thrived on, small businesses. Many of those businesses provide vital services to the community. A little anecdote, which Members may laugh at, says it all. I was at a meeting with some of my elderly constituents. One lady mentioned that a laundrette had shut down. She lived on the 14th floor of a tower block and did not have room for a washer in her flat. She would now have to take two buses to get to the laundrette.
Those are vital facilities for people. When I spoke to the owner of my laundrette on Danebury avenue in Roehampton, he told me his business rates would be more than his takings every month. That is what the Government are doing to businesses. It is untenable to say that we cannot reconsider business rates because the legislation and the regulations are already in place.
I shall make some more progress. I want to make sure that others have a chance to contribute to the debate.
I was speaking about a group of businesses that have been badly hit, a subject that I hope matters to all hon. Members. Those businesses have gone into areas and tried to help them regenerate by setting up there and encouraging other businesses to do the same. They have done exactly what we all want them to do, which is to get in and provide jobs and facilities in areas that do not have them. Many of those companies have been successful and other shops have opened. What has been their reward? Their rateable value has gone up so they have lost their reliefs, especially in London, as we have heard from the Federation of Small Businesses. What has then happened to them? They face eye-watering business rate hikes.
I am sure we can all quote examples. Here are a few from my London borough, Wandsworth. Shops on the Old York road in central Wandsworth have had massive hikes. The newsagent Masumin’s business rates last year were £260 a month. This year they have shot up to £1,006 a month. The motorcycle business just down the road saw bills rise from £280 a month to £914 a month. The florist’s business rate bills went up from £477 a month to £715 a month. The Northcote road, another well-known Wandsworth community built around its shopping areas, is full of independent stores such as the Bolingbroke bookshop. Its rates have gone up from £570 a month to £875 a month.
It is as if Ministers were looking for a way to hurt regenerating areas most. Surely these are the businesses creating jobs and providing facilities in areas that need them. We should be applauding and supporting them, but not this Government and not these Ministers.
Ministers seem to have had an awareness bypass when it comes to helping companies, especially the smallest and most vulnerable, to survive the recession. We have had the withdrawal of transitional relief, the lumping of inflation-busting rises on businesses and no assessment of how either will affect businesses and jobs throughout Britain. It took a chorus of voices, from the Opposition, the Federation of Small Businesses and local authorities, to puncture Ministers’ obliviousness to what was going on.
That is why my hon. Friend the Member for Mid-Worcestershire (Peter Luff) introduced his private Member’s Bill in March—to give the existing 50 per cent. rate relief for the smallest, most vulnerable companies automatically. Currently, they have to fill in a form to claim it, but only about half of eligible businesses do so and local authorities have to put resources into processing their request and doing outreach work to business communities to improve the take-up of the relief. We supported that Bill, along with the Federation of Small Businesses and many local authorities, which knew that they would save administration costs and be able to put them into helping businesses to develop. When it came to the debate, however, the Government opposed the Bill.
I am grateful to the hon. Lady for her generosity in giving way, but her tone of wounded outrage lacks credibility, given that her party’s policy is to remove £3.7 billion a year of relief on capital allowances for business. That is a huge take, and it would adversely affect, for example, laundromats trying to replace their washing machines.
We do not need to take any lectures on supporting small businesses from a Government who upped their corporation tax rate and had to be almost shamed into deferring—only deferring, mind you—the final 1 per cent. of a 3 per cent. rise on small businesses’ corporation tax. I am sorry if I do not sound very sympathetic to the hon. Gentleman’s point, but to make a party political point when I have just talked about the problems and the business rates rises facing small businesses throughout Britain is really beyond the pale.
No, I am not going to give way. We have had enough from the hon. Gentleman tonight.
In the Chamber, we all had a chance to support the private Member’s Bill from my hon. Friend the Member for Mid-Worcestershire, but that chance was thrown away by the then Under-Secretary of State for Communities and Local Government, the right hon. Member for Tooting (Mr. Khan). In explaining why he would not support the Bill, he said that
“we are not in a position to be certain that this choice”—
the private Member’s Bill—
“would deliver the highest and/or fastest benefit to small businesses from the package of wider options on the business rate.”—[Official Report, 6 March 2009; Vol. 488, c. 1145.]
That was after all that time—all those months and almost a year after the recession began. The Government could have headed off the problem months ago. Ministers threw out that option, and instead the Chancellor finally announced the business rate deferral scheme to help businesses on 31 March—the week after local authorities had issued new annual business rate bills to companies throughout the country.
My hon. Friend is making a very fine speech and I am sorry to interrupt, but she gives me the chance to give notice to the Minister for Regional Economic Development and co-ordinate that I intend to press her on that point. I withdrew my Bill in the face of Government opposition because of clear assurances that they would take on significant elements of it, at least. That has not happened, and I am very disappointed.
I could not agree more. We all hoped that the Budget would contain some genuine measures to help businesses immediately, and the fact that it did not, in spite of the assurances that the Minister provided on the day, was very disappointing—more so for businesses than for MPs.
Ministers were clear about the objective of the business rate deferral scheme. In their press release, they said:
“The Government announced today…that it will bring forward regulations to enable businesses to defer payment of 60 per cent. of the increase in their 2009-10 business rate bills until 2010-11 and 2011-12.”
However, that scheme is already unravelling, because one thing that we can assess is that the promise to be able to defer 60 per cent. of the rise in business rates—Ministers’ key claim—is not likely to be kept. Until the scheme is operational, businesses have to pay the full rise, and those that have already forfeited the right to pay in instalments cannot take part in the scheme at all. Businesses that have already struggled most with paying the higher rates and need most help to improve cash flow will have no access to the scheme. The logic is completely flawed. We do not know how things stand for businesses that are already subject to recovery action; perhaps the Minister can tell us whether those businesses will be eligible to participate in the scheme.
As I am sure Members are aware, business rates are paid in 10 instalments, so businesses will have already paid 40 per cent. of their rise by July’s payment this year, but Ministers have admitted in answers to my parliamentary questions that their regulations will not even be in place until the end of July. So, how long after that will it take local authorities to issue business rate bills with deferred rises? The local authority representatives to whom I have spoken tell me that it is unlikely that they will be able to go through that process in anything less than five to six weeks, and that is the most optimistic timetable. They need time to write to businesses; businesses need time to decide what to do, to get financial advice, to fill in the relevant form and send it back to the local authority; and local authority and billing agencies need time to change the details on their billing system and then to reissue their bills.
By the time all that has taken place, we will almost certainly have passed the August payment date, so businesses will have already paid 50 per cent. of the rise and there will be no 60 per cent. left to defer. All that work, which we expect local authorities to do at the last minute, will take place in August, when most people are on annual leave. Again, the Minister might like to confirm our presumption that, as businesses gradually get around to claiming their deferrals, local authorities will end up with different businesses deferring different proportions, which will in turn lead to real complexity in billing, because the situation will depend on how quickly the business fills in the form and has it processed. Some will be able to claim 50 per cent. deferral, some 40 per cent., some 30 per cent. and so on. Ministers have met local authority representatives, so they must know that.
Will Ministers therefore today finally say that they will bring forward their business rate deferral scheme regulations faster, so that they can really deliver on their 60 per cent. deferral promise? Will they promise all businesses that they will be able to defer 60 per cent. of their business rate rise? Even now, more than two months after the scheme was announced, we have very few details of how Ministers expect their scheme to work.
For example, rebilling by local authorities for a second time will cost millions of pounds of taxpayers’ money, but Ministers say that they do not know how much taxpayers’ money will be spent on it. On 1 June, in a parliamentary question, I asked what I thought was a pretty straightforward question of the then Secretary of State for Communities and Local Government. I asked what estimate her Department had made of the cost to central Government and to local authorities in implementing the business rate deferral scheme, but I did not get a straightforward answer. I got a load of gobbledegook, telling me that I would have to wait until the impact statement had been prepared and the regulations laid, and that I would then get to see the impact statement. It did not answer the question at all.
It was gobbledegook, because on 8 June I then asked whether any provision had been made in the 2009-10 departmental budget, as outlined in the Red Book, to fund local authorities’ administration of the scheme, and I was given a completely different answer about whether an estimate had been made of costs. In that case, the answer was:
“The figures cited…setting out the Departmental Expenditure Limits for Communities and Local Government cover costs associated with implementing deferral of business rate payments.”—[Official Report, 8 June 2009; Vol. 493, c. 755W.]
Which answer is the right one? Is there an estimate or not? Why cannot the Government be transparent for once? If there is an estimate, why cannot Ministers just be open about it—whatever the cost? If it is in the region of what it cost local authorities to administer the last-minute requirement—another one by Ministers—to put efficiency savings information on council tax bills, it will be about £4 million to £5 million. Surely, that money would be better spent on supporting businesses directly. Instead, it will be spent on dealing with another Government cock-up that undermines businesses throughout Britain. What about the liability of businesses that defer rises and then go out of business or move to a different location? Will they still be liable for payment of the deferred rise? I shall be interested to hear whether Ministers have reached a conclusion on that one.
Above all, will Ministers admit that the initiative was really a last-minute decision made to give the impression of doing something and that, in reality, it has achieved nothing of substance months later? Will they admit that they had no consultation with the business community or local government until after the initiative was announced? Ultimately, the scheme is too little, too late. It will not help the worst affected businesses and it is still not in place. On what basis can Ministers possibly think that the business rate deferral scheme is a better option than the Bill introduced by my hon. Friend the Member for Mid-Worcestershire?
All that is bad enough, but businesses that thought that some of the rises suffered this year were crippling should know that Ministers have even more lined up for them next year. The 2010 revaluation will be based on rateable values in April 2008—the very time when values were at their peak. Given the bust that we are now in, do Ministers really think that taking rateable values from the peak of the boom will lead to a sensible, fair conclusion on business rates? Do they still plan to go ahead with the revaluation? It is costing the Valuation Office Agency alone £51 million. Ministers may not have done an impact assessment for ending transitional relief, but have they made any assessment of where the worst 2010 revaluation rises will hit businesses and by how much? Alternatively, will we see another rerun of the dangerous shambles that we have had this year, with the transitional relief and the inflation-busting business rates rise?
Surely the hon. Lady recognises that, at the end of the day, the effect of the revaluation is neutral. It is simply a matter of distributing the total business rate to be collected between the various properties. The fact that the revaluation was carried out during an economic boom will not lead to more money being collected in rates.
Try telling that to some of the businesses that end up paying more. The hon. Gentleman seems to be living in a dream world. He should go and talk to some of the businesses across London that face huge rises. Ministers have to be careful. He may think that the revaluation should take place, but he surely agrees that that has to be done on the basis of knowledge of how it will impact on businesses. He is right to say that the revaluation is not intended to raise business rates, but if it is badly implemented, with no understanding of how it will work in practice, the danger is that it could do just that. It could put companies out of business, and then they will not pay business rates at all. Dare I say it, but Labour Members are showing their lack of knowledge about how business rates actually work.
Some information might help the hon. Lady as she makes her argument. I am not sure whether she is taking the same approach as she does to council tax—that is, to say that the system is rubbish, but it should be based on a series of valuations that are decades out of date. According to the information provided to businesses, they will be sent draft rateable values in October. Does she not feel that that will give them the opportunity to make representations and understand perfectly the impact that the revaluation will have? Difficult though the issue may be, it is a fair way of going forward.
I take the hon. Lady’s point on board. My question is not to businesses; I have no doubt that they will make their representations. I am asking Ministers whether they will do the work beforehand and understand whether the proposal is good or bad. All the evidence from transitional relief is that no work will be done to understand the impact on businesses. Ministers will simply say, “Here’s your new rateable value—do you like it or not?” Lo and behold, companies seeing a benefit from the revaluation will say that it is fine and the many companies with an increase will have real concerns. I presume that they will all be ignored once again.
I could have spent time on the retrospective ports tax, but we will have time in the House later this week to discuss that. That tax has put our nation’s ports and many businesses involved with the car industry under pressure. Yet Ministers are pushing on, with their heads in the sand. The inflation-busting rises, the early withdrawal of transitional relief, the pressing ahead with a 2010 revaluation that will raise bills further for many businesses and the carrying on with a retrospective port tax that puts more pressure on the car industry and our ports businesses are all happening because Ministers have been asleep on the job, oblivious to how their business rate hike would kill businesses.
Will the hon. Lady give way?
I will not.
The now-departed Secretary of State was, to use a phrase, too busy rocking the boat and deciding how to knife her incompetent Prime Minister. She is off the playing field now, but has since admitted that she could not even get that decision right. Businesses all over Britain are going bust every day and thousands of people are losing their jobs, but the right hon. Lady disgracefully and perversely prioritised her own political interest above her vital Government role on business rates.
In conclusion, many businesses are fighting for their lives, yet the Government have sleepwalked into a business rates fiasco that has tipped many businesses over the edge into insolvency. I am thinking of family-run businesses, often built up over years, whose failure has a catastrophic effect on household income and worklessness. They are all paying the price for the Government’s utter incompetence and inward-looking myopia on business rates. The Government have turned their back on businesses’ cry for help, but we will not. Businesses may not have a vote, but if they did, they would surely vote to consign to history the Government and their shambolic attitude towards small businesses.
I beg to move an amendment, to leave out from “House” to the end of the Question and add:
“notes that the Government is providing real help to businesses, with targeted support through the £20 billion working capital scheme, the Enterprise Finance Guarantee Scheme making available £1.3 billion of Government-guaranteed lending, an aim to pay Government suppliers within 10 days, a cut in the main rate of value added tax to 15 per cent., a deferral in the increase in the small companies’ rate of corporation tax, free business health checks, over £100 million towards debt advice, the HM Revenue and Customs Business Payment Support Service benefiting over 100,000 firms by spreading a total of £2.5 billion of tax payments, and the extended rate relief for empty properties; recognises the Government’s commitment to the annual Retail Price Index cap means there has been no real terms increase in business rates since 1990; welcomes the Small Business Rate Relief scheme providing £260 million of support in 2007-08; supports the fairness achieved by revaluing properties every five years with transitional arrangements to phase in significant changes in rates bills; welcomes the deferral scheme enabling payment of 2009-10 rates increases to be spread over three years to be brought into force by regulations in July; further notes the Local Authority Business Growth Incentive Scheme has provided funding of almost £1 billion since 2005-06; welcomes support for businesses, including in ports, receiving unexpected and significant backdated rates bills by the introduction of an unprecedented eight years to pay; and believes these measures provide certainty, fairness and appropriate relief for businesses.”
I ask the House to support the Government amendment, because the Opposition motion and the speech made by the hon. Member for Putney (Justine Greening) show scant regard for the facts of how the business rates system operates and breathtaking ignorance of the actions that we are taking to help small businesses—actions that, on many occasions, the Conservative party has opposed.
The Government are taking real action to help businesses through the current economic downturn—often, as I send in the teeth of Conservative opposition. The Government have recognised the effect that the downturn can have on small and medium-sized businesses, as well as on large businesses. We are taking action at international, national, regional and local levels. The Government have put in place a mechanism through which businesses can defer tax payments. We have introduced the enterprise finance guarantee and additional funding for SMEs through the European Investment Bank, and are providing support for small businesses during the economic downturn.
We continue to take measures. For example, in the Local Democracy, Economic Development and Construction Bill, which is being discussed in Committee, we are considering giving local authorities specific powers to help local businesses in the economic downturn. Every clause, however, has been opposed by the Conservative party, as my right hon. Friend the Member for Greenwich and Woolwich (Mr. Raynsford) will acknowledge.
The Government raised great expectations for small businesses through all the schemes that they broadcast left, right and centre, but they forgot to manage the process itself. In so doing, they did not provide the support in the sort of time required by small businesses. Many such businesses went to the wall because the Government did not understand management. Does the Minister recognise that fact?
I am surprised that the hon. Gentleman says that, particularly when so much of what we have tried to achieve has been opposed by Conservative Members.
Let me give some facts. Her Majesty’s Revenue and Customs has agreed with 100,000 businesses the deferral of more than £2.5 billion in business taxes. The enterprise finance guarantee has provided an initial £1.3 billion of bank lending to SMEs. So far, 26 lenders, representing 90 per cent. of SME lending, are signed up. Eligible applications from more than 3,600 small businesses, totalling more than £400 million, have been assessed, are being processed or have been granted. That does not seem to be an indication of a lack of action, as opposed to the do-nothing attitude of the Conservatives.
The right hon. Lady talks about help for businesses. Will she, through her Department, give a breakdown, constituency by constituency, of how many businesses have benefited from any or all of the schemes to which she refers? I cannot see where that help is coming from, and nor can companies in my constituency. We need the reassurance of seeing the statistics that she has given broken down by every constituency, so that we can go back to our constituents and tell them where the money is coming from.
I would be extremely surprised if businesses in the hon. Gentleman’s constituency did not have, for example, access to free business health checks or the ability to apply for many of the schemes that I have outlined. However, I am more than happy to take away his request and to come back to him with information about the schemes that are available, which will be helped by local authorities or the regional development agencies. In so far as I can, I will also look to get specific information about businesses themselves.
The Minister has given us some figures about what is happening. In a genuine bid to be helpful, I again ask her to break those down for all of us, constituency by constituency, and to give information, which I cannot get, on the companies that have actually received benefits from the schemes that she has mentioned.
The hon. Gentleman needs to bear one or two things in mind when he makes that sort of request. We would not always give the individual names of companies, because they do not necessarily want that information published, but we can look at the statistics in terms of numbers of companies. As for going right down to individual companies, I will see whether that is possible, probably working through the regional development agency. I do not know whether it will be possible for every constituency, but I will certainly take away his request and write to him about it.
I am grateful to the Government for their recognition of the importance of SMEs. Can the Minister please find a way to ensure that the 2010 revaluation will shift the burden of business rates away from small businesses on our high streets and trading estates and towards much larger businesses, for which business rates are a much smaller proportion of turnover, and often profits?
I assure the hon. Gentleman that I will address some of those issues later in my remarks. I think that he needs to separate out the process of revaluation and some of the different types of reliefs that can be made available to small businesses, but I hope that all will become clear as I move through my speech.
The Minister was kind enough to offer—I am not sure whether it was just for the constituency of my hon. Friend the Member for South-West Norfolk (Christopher Fraser) or on a constituency-by-constituency basis—as much information as possible about how many businesses, not necessarily which businesses, have been helped. Rather than just writing to my hon. Friend, could she put that information in the Library so that it is available to all Members?
As I said, I am more than happy to take away requests that have been made for that information, because it is important that we are able to show the help that has been available. Perhaps Conservative Members would like to make a guesstimate of how many businesses would have been helped by opposing all the measures that we tried to take. It would be interesting to see whether they were content to admit that if one says that one is going to do nothing, that is what happens to businesses.
I think that the current business rates system is a fair way of ensuring that the burden of tax is fairly distributed across all businesses. As several of my right hon. and hon. Friends have said, before 1990, rates were set and collected locally. The problem that was seen with that approach was that many businesses felt that they had little or no certainty over their business rate bills: they complained that they might be paying different rates in different areas, and that they might be told of their liability only a few days before the start of the financial year. The system that came into effect in 1990, which was enshrined in legislation introduced in 1988 by the previous Administration, changed the way that business rates were collected, bringing greater certainty, not least because businesses know that between revaluations the multiplier will not change by more than inflation. Many of the issues that we are debating are an integral part of that system.
In 1990, we saw the first business rates revaluation of property since 1973. Before that time, values had become hopelessly out of date; that is why the new system requires revaluations every five years. The point of that, for a business, is that rateable values and therefore rates bills are based on up-to-date information, so the yield from the rates is spread fairly across different ratepayers.
The Minister is speaking at great length about how she thinks that the re-rating system is a fair one. Does she think it is fair that so many businesses in ports have been landed with a huge retrospective rates bill because of Government incompetence?
I come later to the fact that we have listened to what representatives of the ports have said. My predecessor, my right hon. Friend the Member for Wentworth (John Healey), listened to what was said about the liability and changed the system so that the payment back is now spread over something like eight years. I do not know whether the hon. Lady is committing her party’s Front Benchers to completely abolishing any responsibility for liability, and I do not know how that would be paid for, but I shall come to the changes that we have made.
On top of what happened in 1990, since 1997 we have introduced measures to improve the system further, including the small business rate relief scheme, which provided more than £260 million a year of help by 2007-08. There has been some mandatory relief, particularly for community amateur sports clubs, and the business rates deferral scheme will allow 1.6 million businesses to defer liabilities totalling about £600 million this year.
I acknowledge that the Government have tried to address the major problem imposed on businesses in ports because of the retrospective, backdated rates, but does my right hon. Friend agree that that is still a major problem for those businesses? Will she agree to re-examine that important matter?
May I press the right hon. Lady a little more on the deferral scheme? Surely, as my hon. Friend the Member for Putney (Justine Greening) pointed out, as the Government’s amendment mentions the introduction of the implementing regulations only this July, the reality is that small businesses will be able to defer less even than the 60 per cent. of business rates that the Government have been talking about.
I will come in due course to the details that the hon. Gentleman refers to. He is leaping ahead of me.
I return to the comments that have been made about the current system, which, as I have said, was introduced by the previous Administration. It was subject to a thorough review by Sir Michael Lyons, which reported in March 2007. Sir Michael concluded that business rates were a
“successful and stable property tax”.
He felt that there was no case for changing the retail prices index cap on annual charges in the national rate of tax.
It is widely accepted—except, it appears, by Opposition Front Benchers—that the business rates system that the Conservative party introduced is an effective, fair form of taxation, and I have to say that it has been improved by the Labour Government since 1997. If the hon. Member for Putney and the Opposition believe that the system needs changing, it is important for them to explain not only the proposed structure but how any changes would be made. I remind the House that the current system raises £20 billion a year, which goes towards services from which businesses benefit at local government level. If the system is to be done away with, it would be interesting to know the costings for the suggested changes.
Does the Minister think that it might be worth considering the inflation measures that the Government use? They have a whole series of measures of inflation, and in this case we had spot inflation in September, which is what has caused the difficulty.
As the hon. Lady will know, there are different methods of calculating what the increases will be in pensions and other areas. As she knows, under existing legislation business rates are adjusted every April in line with the retail prices index for the previous September, but I should point out that in the Budget the Chancellor forecast that RPI inflation would fall to minus 3 per cent. by September 2009. The impact of uprating if RPI is negative will obviously be to reduce total business rates in cash terms in 2010-11.
We must understand all the implications of linking to RPI. However, that is the point at which we can consider action that Government could take—as we did—in recognition of the spike in inflation that occurred in September. That is exactly why we introduced the deferral scheme, which will allow business rate payers in England to defer around £600 million for 1.6 million properties and around 3 per cent. of the 5 per cent. increase in 2010-11 and 2011-12.
The Opposition also referred to the plans for the 2010 business rates revaluation. As I said earlier, regular revaluations are an important part of the ratings system because they maintain fairness between all taxpayers. Rental values provide the basis of rateable value, so revaluation ensures that each business contributes, based on up-to-date information. The current rating list dates from 1 April 2005, based on the property market at 1 April 2003. The next revaluation will take place from April 2010, based on rental values at 1 April 2008. However, although the property market has changed since 1 April 2008, the important protection for business is that the revaluation is not intended to raise extra revenue because the overall national multiplier is set to ensure that the average business rate stays the same, allowing change only for inflation. I think that the hon. Member for North Cornwall (Dan Rogerson), whose attention I am trying to get—he is ignoring me; okay, fine—asked about that.
Some rate bills rise and some fall after revaluation, but the average national bill changes only with the rate of inflation. That is how the revaluation would work.
It is kind of the Minister to allow me to intervene. Does she understand that the Valuation Office Agency legislation in 1998 led to desktop revaluations? The hon. Member for Liverpool, Riverside (Mrs. Ellman) made a good point. One of the major problems underlying retrospective revaluation for ports is that it is a desktop revaluation and, although all the ports have been encouraged to appeal, it will cause untold damage to business because that revaluation process is theoretical. When revaluation took place in Wales—a pilot that was not followed through—it was not budget neutral and more revaluation led to more people having their tax increased than those benefiting from a reduction.
No, not at all. Has she had an opportunity to assess the impact of the empty properties rate on businesses? Several companies in Sunderland face ruin as a result of it. I know that the Government have introduced a concession for properties with rateable values of less than £15,000. However, for example, two business men came to my office last week who employ 80 people and have just been faced with a bill of £130,000 on a property that is empty and unlettable. The business has been running for 50 years and they will have to close it unless some way can be found around the problem.
I can assure my hon. Friend that I will come to the issue of empty property rates.
To return to the new valuations—this also picks up on the point that the hon. Member for North Cornwall made—they were completed at the beginning of this month. We are looking at the results, and I hope to be able to say a little more in the next few weeks. However, we can expect those sectors and locations that have done well in recent years to see increases in bills, whereas those that have not fared as well are likely to see reductions. That addresses some of the points that the hon. Gentleman made.
All the rateable values will be published at the end of September. At the same time, we will provide a business rates calculator to help ratepayers estimate their rates bills for 2010. That is something that we introduced in 2005, and it has been helpful to businesses that wish to plan ahead. Under the previous system—this relates to my earlier point—there was a problem, because people did not know what their rates were likely to be, sometimes until the last few weeks of the financial year. However, the excellent business rates calculator will help people to plan ahead. We introduced it because we know how important it is for businesses to be able to plan ahead.
We will make even more improvements to the business rates calculator, so that by October business rate payers will be able to estimate their 2010 rates by using their 2010 rateable values. In addition, for those ratepayers who face increases in the 2010 revaluation, we will introduce transitional arrangements to phase in those increases. Again, although not resiling from the system that was introduced, we are looking at ways of helping people where specific problems have arisen, first, from the 5 per cent. increase and, secondly, from some of the revaluations, and as I have said, we will consult on those.
At the last revaluation, in 2005, we introduced a transitional arrangement scheme, which lasted for the first four years of the five-year rating list. The idea was to ensure that all ratepayers paid their normal rates bills for at least one year of the rating list. Those ratepayers affected will have had four years to plan for their 2009-10 rates bills. The hon. Member for Putney said that the Government had ignored the responses to the 2004 consultation paper. There were 66 responses, and although nine favoured a five-year scheme, 44 favoured a four-year scheme ending on 1 April 2009, so we did listen to the responses in 2004. We also listened, again, to businesses when they faced increases, and that is why we introduced the deferral scheme. With respect to the ending of the transitional relief scheme, we listened to people, and that is why we introduced the transitional relief scheme for the increases for 2005 to 2009.
With respect to the laying of regulations for the business rates deferral scheme, I can assure the House that we are working on introducing the necessary legislation for the scheme by the end of July, as we explained on 31 March, when it was first announced. Those regulations will cover the deferral of the 5 per cent. retail prices index increase and the deferral of increases faced by those businesses losing transitional relief from 1 April 2009.
My hon. Friend the Member for Sunderland, South (Mr. Mullin) and others have raised the question of empty property reliefs. I am sure that hon. Members will recognise that, previously, landlords had no incentive to find tenants for their empty properties. As a result, rents in UK cities ended up being higher than they might otherwise have been. That is why we removed many of the exemptions and reliefs for empty properties. To reintroduce such a relief would cost as much £950 million a year, which would have to be found from other areas of taxation or through public spending cuts.
I do hope that my right hon. Friend will have a look at this, because this is a much more serious problem than the little note that she has just received from the Box makes out. The Pallion engineering company in my constituency is the last surviving shipyard on the Wear, and its rates are going up from £55,000 a year to £234,000. The Treasury will not get that £234,000, however, because that rates bill will put the company out of business, along with the 200 people who work there. I appreciate that my right hon. Friend has not had much time to get to grips with these issues, but I do hope that she will talk to her opposite numbers in the Treasury about the folly of what is happening.
We have tried to listen to the concerns that have been expressed by property owners. That is why, for 2010, all empty properties with rateable values of up to £15,000 will be exempt from rates. Of course I understand the concern that my hon. Friend has expressed, however, and I know that he tries to reflect in the House the concerns of businesses in his area.
I thank the Minister for giving way; she has been exceptionally generous, and I am sure that the House will understand if her speech goes on a little longer because of all the interventions she has taken. The matter of empty property rates is a very serious one, especially for businesses that have no choice but to get out of their premises. In my constituency, for example, the Buncefield oil depot exploded in 2005, and some of the damaged buildings are still unsafe for people to go back to work in, yet the companies concerned are being charged the full rate for buildings that they cannot go back into. Surely that is a ludicrous anomaly in the legislation.
I think that I have addressed a number of issues on this subject. I shall briefly move on to talk about the small business rate relief scheme that was introduced in 2005. One of the issues relating to automaticity is that, because a local authority does not necessarily know which businesses occupy multiple properties, the ratepayer is asked to apply to confirm that they meet the criteria for the relief. I know that my right hon. Friend the Minister for Housing was sympathetic to the points raised by the hon. Member for Mid-Worcestershire (Peter Luff), but, under his proposal, it would be difficult to avoid placing a considerable burden on local authorities, which would need to establish whether a ratepayer was occupying more than one property. However, we are looking into what more we can do to improve the take-up of small business rates relief and we have already taken steps to amend legislation for 2009-10, so that all eligible businesses in new properties can receive rate relief from their first date of occupation.
As John Cleese remarks in “Clockwise”,
“I can take the despair. It’s the hope I can’t stand.”
The Government keep on holding out a tantalising fraction of hope. I must tell the Minister that if she is looking for an excuse not to act, that is a pretty pathetic one. There are some very good and compelling reasons for taking action and there are perfectly practical solutions to all the objections raised by the Treasury. I urge the Minister to be utterly robust in her discussions with the Treasury. The time has come for this measure, and her Department—both her Departments—know it. She should not be cluttering us up with excuses, but looking for solutions.
Let me briefly address the issue of levying local—[Interruption.] Well, I think I have addressed the hon. Gentleman’s points and the real issues around them. I do not see the point of repeating it all again. I have been pretty clear about where we believe the difficulties lie.
As regards councils having the power to levy local business rate discounts, I have said that we already have several rate relief schemes targeted at businesses, amounting to something in the region of £900 million in 2008-09. Further discounts—this is a point that the Opposition need to answer—would mean that the amount collected would be smaller, so we would have to ask local authorities to contribute more, which would have an effect on council tax payers.
This Government have a great track record in delivering funding and policies that will play a major part in regenerating our cities and supporting our local authorities to ensure regeneration and economic renewal. It is absolutely clear that we understand the impact of the business rates system on businesses and that, particularly because of the international credit crunch and economic slowdown, we are looking at the effects on people and businesses.
I shall very briefly touch on the issue of businesses in ports. As I have said, my right hon. and noble Friend the Secretary of State has already taken action. As to the allegation that the revaluation was somehow a desk-top exercise—it was made by the hon. Member for Meriden (Mrs. Spelman), who I see is not listening to a word I am saying, but there we are—it was, in fact, based on more than 300,000 actual rents collected by the Valuation Office Agency and analysed for the revaluation. I wanted to clarify that point.
Finally, it is the Government’s package of measures—the introduction of the business rates deferral scheme, the small business rate relief scheme, a fairer revaluation scheme and so forth—combined with the real help offered to businesses through structured support at local, regional and national levels that will make the difference. In contrast, the Opposition offer nothing but ill-thought-out ideas and empty promises. That is why I urge the House to reject the Opposition motion and support the Government amendment.
I think that hon. Members of all parties would agree that we are living in unprecedented economic times and that many small businesses probably feel as if they are facing an onslaught from all sides. We have already heard that an accountancy firm has predicted that nearly 34,000 small businesses—120 a day—will close in 2009 and that difficulties paying their business rates may well be a factor for some of them. However, it may be that businesses have suffered from falling incomes, unaffordable rents, delayed payments from suppliers or trouble paying their tax liabilities. Their difficulties might be compounded by personal economic problems, too.
If Back Benchers get the opportunity to contribute to the debate—if I carry on for as long as the two previous speakers, we will move straight into the concluding speeches—I am sure we will hear about similar experiences from businesses all over the country. The motion at least provides us with an opportunity to raise constituency experiences.
I find it slightly odd that the Conservatives’ motion is drafted so narrowly. It deals specifically with business rates, rather than with all the other issues that might interact to cause difficulty to businesses. What I also find rather bizarre is the similarity of the wording of this motion to that of a motion that was debated on a Conservative Opposition day on 25 March this year. That motion also referred to the above-inflation increases in the business rate, the ending of transitional rate relief, support for a move to automatic business rate relief, and the 2010 revaluation. It condemned the ending of empty property rate relief, and highlighted the issue of the ports.
I think that there can be only two reasons for that. It is possible that the Conservatives’ current spokesperson was not in her post on the earlier occasion, and has either been doing her homework very assiduously or did not realise how similar this motion was to the earlier one. Alternatively, it may well be that the Conservatives have so little positive policy that they have to rotate it, so that it comes around every couple of months on their Opposition days.
This is clearly a significant issue, but it would be more helpful if Conservative policy had moved on since that debate at the end of March. That leads me to wonder whether the Conservatives considered the issue to be the main factor affecting businesses, or whether they simply have nothing to say about anything else. I am not entirely sure of the answer to that question. Judging by the last Opposition day debate that I sat through—on housing—I suggest that the Conservatives simply have nothing to say.
What the Conservatives have to learn is that if they want to say with credibility that they can form the next Government, they cannot just oppose things; they must propose things as well. It is clear that the motion will not take the debate about local government finance any further forward. I think that, if anything, it will increase confusion rather than providing clarity. It is a critique of the Government’s failure to address problems relating to business rates, but it also criticises measures that the Government have tried to take to address those problems.
For example, the Minister described the deferral scheme that the Government want to introduce. What the Government had not realised was that the problem had been caused by a double whammy: the very high increases in inflation combined with the end of the transitional scheme. I did not catch what the Conservatives said that they would do differently. They attacked the ending of empty property rate relief, but they did not say what they would do themselves.
Another issue was not raised. In some areas, the problem is not just that businesses are in accommodation that will be very expensive if the empty property rates continue. In my constituency, the problem is risk aversion. A massive regeneration scheme is taking place there, part of which involves new accommodation for businesses. What investors will take the risk if they think that a property will be left empty, and that that will cost them a huge amount?
What we also heard from the Conservatives was an interesting critique of how the port rating process had gone wrong. Again, however, we gained no clear sense of what they would have done differently, or of how they planned to put the wrongs right.
I fully intend to do so. However, we must debate the Conservative motion and the alternative presented by the Opposition. [Hon. Members: “The Government.”] I mean the Government.
We have been debating the motion for about an hour or so, and I have been speaking for four minutes. I think the hon. Gentleman should give me a chance to get my points across.
What we did hear from Conservative Members was the new thinking about flexibility for councillors to reduce business rates, and to allow areas to benefit from economic growth. That is similar to the approach that the Conservatives have taken to council tax. It is clear that very few of the Conservative-run councils that have come forward would benefit from their council tax freeze proposal. The fact is that, at a time of huge economic pressures, every council will find it incredibly difficult to deliver. If the Conservatives had real confidence in local authorities, they would give them the discretion to consult their businesses, and I am sure that, in some areas there would be a possibility of the improvements that businesses want.
May I finish what I am saying?
Later we will discuss the business rate supplement scheme. The Conservatives have sought to prevent any local authority from participating in it. The Liberal Democrats have said that they are more than welcome to do so, provided that there is proper consultation with businesses and that businesses have a say in the improvements that they want to see. I am sure that many businesses would like to see reductions, but businesses must also be allowed to have the opportunity to support improvements. The Conservatives appear to be offering only a one-way street.
No; instead I will try to make swift progress so as to give the hon. Gentleman a chance to make his own contribution.
We think that the automated business rate relief is a sensible idea, but it is not an entirely original idea because it has already been achieved in Wales. I was disappointed by the Government’s justifications for not introducing it. The reality is that half of all eligible businesses do not claim the relief, and automating it will therefore make the whole process more efficient, not more costly.
Although there is, perhaps, consensus on this issue, I am not entirely sure what the hon. Member for Putney (Justine Greening) committed her party to. The Leader of the Opposition continually calls on people to vote for change, but the evidence at present suggests that it would be a vote merely to change the labels on the same tin. There is no radical rethink. If we really want to understand what is going on in this regard, the name of the party gives the game away: the fact that they are called the “Conservatives” means that they generally want to change things back to the way they were before—and therefore they do not want to revalue, nor to set business rates according to inflation, nor to change anything with regard to the way business rates work. We heard nothing about anything they would do differently. As I have said, their approach is intellectually incoherent. It is consistent only with the way they look at another aspect of local government finance: council tax. Their approach is that the system is broken and unaffordable, but the way to solve that is, apparently, not by revaluing, and we will therefore end up having a system of local taxation based on property values that are decades out of date. They should either say that the system of council tax is bust and that they will replace it with something else, or defend the council tax system and offer a revaluation. [Interruption.] The hon. Member for Putney asks from a sedentary position about my party’s position. Our position is very clear. It involves changing the balance of funding so that more that is spent locally is raised locally. That will partly be achieved through localising business rates entirely and moving to a system of local taxation based on the ability to pay. We are very clear about that, and we are very happy to explain how we will achieve it. The Conservatives, however, have not said what they would do.
No: I wish to make progress as I am aware that there is very little time for Back Benchers to speak.
The Government’s response to the Opposition motion is equally inadequate. The exchange this evening echoes one outside the Chamber in which the Conservatives and Labour are trying to blow chunks out of each other’s spending plans. Instead of having a debate about what the level of future funding should be and what difficult decisions need to be taken, we have two parties arguing at cross-purposes. While the Conservative motion is so narrowly drawn as to be highly limiting, the Government response is merely to produce as long a list as possible of all the things they have done or have said they might do at some point in the future. What we did not hear from the Minister is whether these measures and pronouncements have been effective. That is unsurprising as, to put it charitably, the results have been patchy. They praise themselves for righting wrongs that were their responsibility in the first place. They also praise themselves for extending the relief for empty properties, but fail to point out that they did so only in response to extreme pressure, and that at the end of the day that is only deferring pain for another year. Moreover, in terms of their proposals to defer payment for some of this year’s inflation-busting 5 per cent. increases in business rates, they have not acknowledged that the whole process of trying to address this is still causing pain for businesses, which are having to make those payments as we speak. The Government motion says that their behaviour has provided “certainty” and “fairness”, but it is very difficult to see how either has been delivered.
The Government praise themselves for policy proposals that have had a limited impact. They say that they
“aim to pay Government suppliers within 10 days”.
I am not entirely sure what that has to do with business rates, but their performance in that regard is patchy even within Government Departments. Whereas the Department for Communities and Local Government has managed to hit 88 per cent. of payments, the Home Office figure is just 50 per cent. They therefore have a lot to do to improve their own record.
The amendment praises the regional development agencies for being at the cutting edge of supporting businesses. Again, that is nothing to do with business rates, and the reality is far from what is claimed.
The Minister will know from our discussions in the Committee considering the Local Democracy, Economic Development and Construction Bill, that the South West of England development agency has unilaterally decided to cut more than £50 million of projects, which are in place to support and create jobs in the region, including in my constituency. The RDA has done that without any consultation, yet the Government’s amendment contains praise for some of the activities that are going on.
Many have reported that they think that the benefits of the enterprise finance guarantee scheme and the working capital scheme have been limited. Nine out of 10 of more than 2,000 entrepreneurs and business owners surveyed stated that the Government are not supporting small and medium-sized enterprises sufficiently, and the majority of respondents were not even aware of the schemes that were designed to support them. More than half of all SMEs have never heard of any of the schemes, and eligibility, red tape and issues relating to efficiency are creating an insurmountable barrier for many, yet the Government’s amendment has the audacity to claim that the VAT cut has helped people. Once again, instead of permanent solutions to make the tax system fairer and to support businesses, we are seeing a deferral of more pain later and billions of pounds being wasted on something that most businesses say has not benefited them or has actually cost them money.
If the Conservatives’ approach is to say as little as possible, the Labour approach is to produce as long a list as possible, irrespective of how effective any of the measures have been on the ground. I wonder whether there is a parallel with the First Secretary of State, Baron Mandelson of Foy in the County of Herefordshire and Hartlepool in the County of Durham, in that the longer and grander his title and the more Ministers serving beneath him, the more effective he thinks he is. Such an approach has also been taken in this Government amendment but it fools nobody.
This argument at cross-purposes has missed the fundamental point: local authorities are already doing a huge amount on the ground to support businesses, they understand what the problems are and they are best placed to tackle them. I could cite examples of how local authorities have been examining their procurement of services and instead of just setting an arbitrary figure of 10 days in which to pay their bills, which probably would not be hit, as is the case with the Departments, they are trying to create a level playing field for contracts that allows consortiums of local businesses to get together to make their bids. It is that kind of thing that will make the real difference, not press releases.
More should be done to push down the budgets of regional development agencies to make decisions on spending more accountable, and we should be freeing up councils to reinvest in housing. These are all things that would help not only to tackle this country’s affordable housing crisis, but to support the economy and jobs. Both the Conservatives and Labour have failed to realise that what is needed is not tinkering around the edges or a long list of initiatives; but a fundamental change in the relationship between central and local government, which is essential if people’s confidence in those institutions is to be restored.
Lots of politicians have been keen to jump on this particular bandwagon and to make the connection between MPs’ expenses and the need for constitutional reform, but people have not realised that if businesses’ and individuals’ trust in all levels of government is to be restored, there needs to be a clear statement of the terms of the relationship and work at the grass-roots level to rebuild that relationship. At the national level that might mean constitutional reform, but change needs to take place at the bottom too. That is not only about ensuring that there is proper participation and that decisions about how public money is spent are accountable, but about making a much clearer link between the local taxes that people and businesses pay and the services that they receive in return.
That link does not exist at the moment. On average, council tax funds about 25 per cent. of the services that are provided locally, and although business rates are collected locally they remain centrally distributed despite the fact that most businesses think their taxes are directly paying for the services that they receive locally. Both aspects of taxation need to be fundamentally changed to make the relationship clearer and to ensure that there is a much stronger link between what is raised and spent locally. As I have said, that means moving away from a regressive council tax system to one based on the ability to pay. Alongside that, business rates must also be localised. Only if those changes are taken together will that stronger link be made clear and will people be able to see what they are getting and how they are paying for it.
The last thing that is needed are the temporary measures that the Government have announced—deferring corporation tax increases, deferring empty property rates, deferring business rate increases and introducing temporary VAT cuts—which provide no certainty and will do nothing to give people confidence. Instead we need permanent changes to make the system fairer and clearer to everyone, individuals and businesses alike. But neither Labour nor the Conservatives are prepared to face up to that fact, let alone engage in the debate. That is the biggest disappointment of all.
When I saw that the Opposition had raised the question of business rates, I thought we would be having a thoroughgoing, wide-ranging debate on the principles behind business rates and how we might do better. Instead, we had a niggardly and rather empty proposal criticising various aspects of the mechanics of the current system. I was surprised that the party that is now supposed to believe in localism did not go for something a bit more radical.
I am also disappointed that the Minister for Regional Economic Development and Co-ordination, with whom I agree on most issues, was not prepared to be more radical. I agree that we need constitutional reform in this country, and one of the most important aspects of that is to improve the balance of power and responsibilities between central and local government. We need to ensure that there are more powers and responsibilities at local level, and I commend to the House the report recently produced by the Communities and Local Government Committee, on the balance of power between central and local government.
If we are to get the balance of power right and push out more responsibilities and powers locally, we have to ensure that we get the balance of funding right and give local councils more responsibility for raising the funding that pays for their services. I noticed that the words “local income tax” did not pass the lips of the hon. Member for Falmouth and Camborne (Julia Goldsworthy). I wonder whether there is a shift in policy coming from the Liberal Democrats. The easiest way to transfer more powers for raising money to local government would be to localise the business rate and put it back to where it was before the poll tax led to the changes.
Of course, the Government need sufficient resources so that they can equalise the situation, on the basis of resources and need, between councils with different abilities to raise money and differing needs. The estimate is that the Government need to control about 30 per cent. of the money spent at local level to do that, not the 75 per cent. of money that they control now. Transferring business rates would actually give local authorities the right to raise about 50 per cent. of their own resources directly, and that would be a significant change, which I would commend. I know that the Lyons report looked at that, but did not recommend it. The report did recommend the supplementary business rate, and the Government have introduced that in principle, although they have not gone as far as Lyons wanted. I know that the Government are also looking at measures such as the community infrastructure levy, which will provide some powers at local level to raise the additional resources for councils to spend.
There is a fundamental problem, however: not merely with the gearing of council services, because local authorities raise so little of the total money that they spend at local level—only a quarter—but with the disconnect between development, the costs that it brings and the extra resources that are provided for an area. This country differs from many others in the EU, such as Germany, which has a much bigger incentive to look positively at development because the benefits of the taxes generated by it come back to the community in which it takes place. That is a big issue that needs addressing.
My right hon. Friend dealt adequately with the other issues. Yes, 5 per cent. inflation looks like a large increase, but there is the possibility next year of a minus 3 per cent. figure for the retail prices index, which shows that the linkage is right. Over the years, businesses have had a good deal. Since the council tax was introduced, the amount that it contributes to local authority resources has risen from 21 to 26 per cent. At the same time, the amount contributed by the business rate has fallen from 28 to 20 per cent. Over the long term, council services, even with efficiency savings, are always likely to need more money spent on them year on year than RPI, because wages at local council level are likely to go up faster than RPI. If the business rate is held down at RPI, it is likely to contribute a smaller and smaller amount towards the payment of council services. That is why, over time, businesses have not done too badly.
I am sorry, but I have not got time to give way. I normally would, but I had only five minutes and have only one minute to go.
Revaluation is just another red herring. The hon. Member for Putney (Justine Greening) simply does not understand. Revaluation is not a way of raising in total additional money for Government or anyone else. It is simply a way of ensuring that, in light of current circumstances, the amount that is going to be raised is properly raised and spread between the various businesses in the country. That is all that it does. Once a Government fall behind with revaluation, postpone it and put it off, that simply means that the next time they do it, the dislocation is even greater. I have to say to the Government that that is exactly the problem that we now have with council tax revaluation. It has been postponed and postponed, and we have got ourselves in a real mess. The system of property tax will have credibility only when it is based on current values, not on historical values that people simply do not understand.
I have tried to keep to the five-minute limit and to deal with some of the important points in this debate, but I think that the Opposition missed a big opportunity. Their commitment to localism is obviously very thin indeed.
May I welcome the Minister for Regional Economic Development and Co-ordination to her position tonight? It is good to see her here. I was hoping that we might hear from her about a change of Government direction regarding the issue on which I want to spend my time this evening: automatic rate relief for small business. The Minister disappointed me enormously, but there is still time. She is new to the job and therefore prepared, I hope, to listen to argument. If so, I hope that by the end of this evening the Government will change their mind. Let us see.
The Minister will know that I was a sponsor of the Bill on this matter promoted by my hon. Friend the Member for Mid-Worcestershire (Peter Luff). Indeed, the Government seemed to support the main thrust of the Bill on Second Reading. We were very optimistic. The then Minister, the right hon. Member for Tooting (Mr. Khan), said that although he was not privy to what his
“right hon. Friend the Chancellor may put in the Budget report…I do know that robust consideration is being given to what is the best method of support for businesses, and the private Member’s Bill of the hon. Member for Mid-Worcestershire has, no doubt, driven the matter even further up the agenda.”
He went on to say that
“I must emphasise that we have not ruled this out as an option for the future…Clearly, Government should support the aims put forward today by the hon. Gentleman with the support of the FSB”,
the Federation of Small Businesses. He concluded:
“Between them, they have come up with a proposal in which there may well be merit.”—[Official Report, 6 March 2009; Vol. 488, c. 1144-45.]
Those were the remarks made by the then Minister in the last debate we had on this subject.
We had every reason to be hopeful that that Minister would therefore urge the Chancellor to put automatic payment of rate relief to small businesses in the Budget. We listened to the Budget with great dismay, and heard not a word—not a mention. After all those fine words, after all that encouragement and after all those intimations that the Government might well accept the Bill—on the basis of which my hon. Friend the Member for Mid-Worcestershire withdrew the Bill on Second Reading, and did not push it any further because he was so encouraged—sadly, they did not act. We found that very disappointing.
No provision was made in the Budget and no proposal has appeared since then. I do not need to go into the reasons why small businesses are in the plight that they are, other than to say that cash is king—I keep on saying that. Small businesses are fighting on every front to remain viable, and the payment of rates represents the third largest payment to a given area of budgetary control that small businesses have to pay out. That is the truth of the matter. They need the cash. How much cash? They need £1,200, but it would mean a great deal to the many hundreds of thousands of very small businesses up and down the country if that could be given automatically.
Why is not given automatically? Simply, it depends on how the local authority treats the issue. Businesses benefit when they are in local authorities that take an interest in the matter and advertise the availability of rate relief, but those elsewhere do not get the chance to claim. [Interruption.] I see the Minister turning up her rather pretty nose—I am sorry, Mr. Deputy Speaker, I hope that that was not too personal—so I shall give her some figures by way of explanation.
In Essex, only 27.1 per cent. of businesses in the Thurrock unitary authority claim small business rate relief, whereas the figure in Tendring district council is 72.7 per cent. That is a massive difference between councils that are very close geographically, and it is due to the fact that one makes an effort and the other does not. It is very simple: 52 per cent. of small businesses across the country do not claim the relief to which they would be entitled if they knew about it.
So why should the relief be given automatically? The Minister said that that did not happen because it was too difficult to put into effect—what nonsense! It has been put into effect in Wales with no problems whatsoever, and local authority treasurers have told me that they would rather the relief was a right than to have to get people to apply for it. With respect to the Minister, her response was nonsense.
I therefore urge the right hon. Lady—in the nicest possible way, as I was rather rude to her earlier—to look at the matter again. Making the relief automatic would save money for local authorities, and it could allow very small businesses still to be here this time next year. That is their objective.
I suggest that there is probably a lot of support for what the hon. Member for Northampton, South (Mr. Binley) has just said and that making the relief automatic would help in several ways. However, time is brief and I want to put to Ministers a specific proposal for saving some money for small companies in the city of Coventry at this difficult time.
Coventry’s Business Improvement District company has been referred to already today. It is full of good intentions, but unfortunately it has proved to be inadequate and delinquent in its duties. Electoral reform is much in the air at present, and all forms of voting are subject to review, so I put it to my right hon. Friend the Minister for Regional Economic Development and Co-ordination that she could have another look at the requisite level of approval from small companies that these BID projects need. The one in Coventry was passed with just 18 per cent. of the companies being taxed actually voting in favour, and that is a very low figure indeed.
A lot of false promises and representations were made by the BID company that have simply not been met—in respect of security and CCTV cameras, and of broadband, to which the Government and all businesses are very committed. The provision of broadband is running over a year late already, while the CCTV system— which was promised with back-up policemen and all that sort of thing—covers only a small percentage of the premises that are paying for it.
The local authority supports the BID project, but it has been mooted that some rebate would be in order. This is a terrible time for small companies in the city of Coventry, and the payments are still strongly resisted, as I shall describe in a moment. I put it to my right hon. Friend the Minister that both a rebate and a deferral could be used to gear the payments, and that that would be absolutely in order and very necessary.
The extra tax, of course, is levied on charities, but supermarkets and leisure centres are exempt. That makes no sense at all. The charities affected include the British Heart Foundation and Coventry’s Ring and Ride project, both of which are being made to pay the tax. I think that the bailiffs are being sent in to the 140 companies that are unable to pay, so the full force and rigour of the law are being brought to bear for no better purpose that I can see than to expose the inadequacies of the BID company.
In addition, rates are being levied on small companies to fund CV One, which is a Coventry city council initiative—a very admirable initiative, I am sure—to boost the image of Coventry. In many respects, the city suffers from a relatively poor image, despite its many advantages. A select group of companies has been picked out for the privilege of paying £400,000 a year, when the whole of Coventry is meant to benefit from the initiative.
I ask my right hon. Friend the Minister and the Government please to get in touch with the BID company. I beg her to ask the company to answer my questions, which it refuses to do with an arrogance that one cannot believe. Please may we push through a deferral—that is very much at the heart of the Government’s rates proposals—and a rebate to the companies in question?
I ask the new Minister for Regional Economic Development and Co-ordination to listen carefully to the points that I will make. In an intervention, I tried to raise a serious issue that has a massive effect on the business community in my constituency. It has to do with empty property rates, which have changed so that the exemption from them drops after six months. It is absolutely ludicrous, if not immoral, that businesses that have no choice—none at all—but to be outside their premises should be caught by the rates on empty properties. In my constituency, the main reason for that happening was the Buncefield disaster that took place in November 2005.
Lord Newton, who did the best that he could in the inquiry undertaken on behalf of the Government and the Health and Safety Executive, said in his conclusions that there needed to be a special economic status for places such as Hemel Hempstead, which was badly damaged by a disaster that was not its fault. Through no fault of their own, businesses were literally blown out of their premises. Some of the businesses have actually demolished their premises—levelled them off—so that no business rates are due. The sites are lying fallow. Nothing will be built on them until after the civil case before the High Court is heard, and until the criminal prosecution has taken place. I will not talk about that, because those matters are sub judice.
The premises of businesses that do not have the money, or whose insurance companies have not paid out, are sitting there, derelict. 3Com is a good example; its premises are in the middle of my constituency, right next to Buncefield, and they are completely derelict. The company is liable, believe it or not, for business rates. The disaster took place in 2005; we are now entering the summer of 2009 and it is not the companies’ fault that they cannot return to their premises. It is not the fault of my local authority, which has done a fantastic job in helping businesses to get back into some of the premises. It is the fault of some of the insurance companies, which were, frankly, slow or belligerent in paying out. However, the biggest problem is that we still have two huge court cases going on—one for compensation, and one a criminal prosecution. The businesses are stuck; they are in limbo; they cannot move back into their premises.
Obviously, some businesses are paying business rates, rent, and mortgages on new properties. The insurance companies have helped out with the new capital costs, but the businesses are liable to pay business rates on premises that are derelict, and they cannot move back into them. Some of them are not willing to move back into their premises simply because they have a duty of care to their employees, and they are not happy about moving back in until the Government have made decisions about the safety of premises that surround oil depots such as Buncefield—the recommendations are yet to be made—and until the two court cases are concluded.
Surely, in such a debate, the Minister could have said, when I intervened, that it was difficult to answer my question straight from the Dispatch Box. Instead of ignoring my intervention, she should have done me the courtesy of saying, “I will write to you about the matter; it is a very specific issue.” Instead, very unusually for the Minister—I have worked with her before—she completely ignored my intervention, which was on an issue that means a huge amount to my community and for business confidence in my constituency. Our enormous plight cannot be ignored. There is a recession going on, and there is a blight on my local business park. That is not our fault; it was the fault of the oil companies, from whom we are trying to get compensation. In the meantime, I would have thought that a little help from the Government would not have gone amiss.
We are addressing a serious issue this evening—how businesses may get the best help possible through the recession, which has been sudden and in many instances relates to circumstances that changed rapidly last year. We should consider various types of help, a number of which have been mentioned. However, as hon. Members have pointed out, the Opposition chose to address not that wider issue, but the specific and narrow topic of business rates, which is one of the issues, but by no means the only aspect of support for businesses in a recession.
The motion, concentrating on the business rate, states that
“businesses have already been hit by five per cent. above inflation rises”.
If one chooses to make the focus of the debate so specific, it is essential to have some answers to the questions that arise from such statements so that the debate can be taken seriously. If one says that businesses have been hit by above-inflation increases, one presumably has to say that it would be a much better idea if businesses were not hit by above-inflation increases, in which case one must presumably refer to the original legislation on business rates passed by the then Conservative Government, which stated that a retail prices index indicator should be put in place to determine business rate increases each year.
The question then arises whether the solution is to change or abolish that legislation. Should there be no increases in business rates, or smaller increases? Both of those would require the original legislation to be changed. If one goes for no increases, one must answer a further question. Each year that formula raises about £1.3 billion in business rates, which goes towards the local government pot, so to speak. If that element is removed, one has to decide how the pot is to be replenished. Will the general taxpayer have to pay an additional grant towards the local government settlement, or if no one is to pay, will there be a cut of £1.3 billion in local government spending? One ought to be straight about that, if that is what is proposed.
I have attempted to find some answers, and not just for the purposes of the debate. I listened carefully to the presentation from the hon. Member for Putney (Justine Greening), but I got no answers from that at all. Indeed, there was obfuscation about the proposals. I read an impressive-looking document entitled “Control shift—returning power to local communities”, the Conservative policy on local government. It is a long document, 23 pages in 10-point type. In it there is not a word about business rate construction, how business rates might work in the future, whether the RPI formula would be adhered to or whether changes would be made to it.
There is not a word about revaluation or how it might be changed. Revaluation has taken place every five years since 1990 and each time transitional arrangements have been put in place. There is one line about discretionary power to levy business rate discounts, and the document states that that can be given to local authorities
“as long as they can fund them from other local income or avoided costs”—
that is, can they find the money from somewhere else, perhaps the council tax payer, or perhaps by cutting services? The document contains no answers.
If it is decided not to change the legislation, deferring business rate increases is a logical step to take. Next year’s RPI is likely to be negative, and businesses that know that will be able to decide whether they wish to smooth the increase out over a couple of years, take a greater discount now and a lesser discount later on, or go for no discount now and therefore receive a substantial decrease in their business rates for the following year. Businesses will make that logical move if they have the answers to the basic questions. If one does not know what is happening to the basic nature of business rates, and one appears to be unaware that the increase arrangements and transitional arrangements are enshrined in legislation and if one is unaware that revaluation is the basis on which one redistributes—and not increases—the pot, businesses will say other things. That is essentially what has happened tonight.
There are real issues with the business rate, and I have concerns about port rates and empty property rates, too. I am very concerned about help for businesses in the recession, but an Opposition party that wishes to form the Government at some stage is misleading businesses and is not being straight with them if it purports to help businesses in the recession, but does not provide them with basic information about what it will do to stabilise their arrangements.
Tonight has been a shocking missed opportunity to discuss the real issues. Instead, some Members have discussed a number of peripheral issues that, although important, not only do not constitute the whole issue of how we help businesses but serve to obscure the true lack of substance in Conservative policies on local government.
We have heard much about the challenges that many of us have seen in our surgeries when representatives of small business have chatted to us. I had a meeting with people from the Essex branch of the Federation of Small Businesses who told me about the challenges that their members face, with margins being squeezed, banks not supporting them and so on. They raised the issue of rates: rates seem to be rising above inflation, which brings challenges, and the organisation has expectations of how local councils can help its members.
There are three issues to do with local business rates. One that has been highlighted for me was the difficulty that small businesses have in paying them. The Local Government Association has warned that, as it is,
“More than half of all councils (56 per cent.) are reporting that firms in their areas are having difficulty paying business rates to local authorities”.
It has also warned:
“Eight out of ten councils are reporting an increase, or anticipated increase, in businesses requiring support.”
Businesses are being driven away. A business in Witham in my constituency is being charged £200,000. It can move its whole operation to China, and is doing so—with the loss of 100 jobs. With that £200,000, it can have the whole businesses run elsewhere. That is a great shame; our towns are being gutted and businesses are being driven to close down. Councillor Margaret Eaton, the chair of the Local Government Association, said:
“The recession is claiming around 85 small businesses every day and many need every single last bit of help and support to get through tough times. There are examples where businesses are going to see their rates bills double or even triple—this just isn’t acceptable.”
I totally agree.
What are the solutions? We heard one today from my hon. Friend the Member for Mid-Worcestershire (Peter Luff), who proposed his own private Member’s Bill, the Small Business Rate Relief (Automatic Payment) Bill, which would have rendered the relief automatically payable to eligible businesses, as it is in Wales. In another example, Braintree district council has proposed spreading rate payments over 10 points in a 12-month period, and breaking it up into 10 per cent. pieces over 12 months is a good solution. There is also the flexible rates solution, whereby local councils have discretionary powers. That idea does not mean that they have to make up the money from elsewhere, and allowing for some flexibility on rates will help draw in new businesses.
As the hon. Members for Sheffield, Attercliffe (Mr. Betts) and for Falmouth and Camborne (Julia Goldsworthy) said, we want local businesses to have a say. I chaired a meeting in Braintree to make sure that local businesses there had a say; local business people met local council representatives to say what they wanted to be done, and that was important. I also want to mention the Essex bank, which will support local businesses. It is a creative solution from Essex county council, whose work I applaud.
In the last 10 seconds, I should like to make one final plea, which echoes the words of my hon. Friend the Member for Hemel Hempstead (Mike Penning) and the hon. Member for Sunderland, South (Mr. Mullin). I ask the Government to review the pernicious charging of rates on empty properties, which has led to properties being destroyed.
The fact that this subject has been chosen by Her Majesty’s Opposition for our allotted half day demonstrates how important to our economy we consider the business sector, particularly small businesses which can provide a path out of recession. No Labour Member has mentioned that business rates are a fixed cost, the pain of which has a bigger impact in a recession. We Conservatives believe that the Government’s policies—especially those on business rates—are inflicting significant damage on the business sector. The strength of feeling across the House reflects the fact that many of the 4.7 million small businesses in our constituencies are experiencing unprecedented grim times.
We began with an excellent speech from my hon. Friend the Member for Putney (Justine Greening); it was a polished and forensic demolition of the Government’s lamentable record. I am sorry that the right hon. Member for Greenwich and Woolwich (Mr. Raynsford) was not able to make a speech. However, he made an intervention that showed a “computer says no” and a “It’s not me, guv, it’s the formula” approach to the policy. We heard about the impact of above-inflation rate rises. The ending of transitional relief was also mentioned; Ministers disregard the impact of that on local small businesses. My hon. Friend talked about the impact on sustainability and on small businesses such as the launderette, post offices and small shops in her constituency.
We heard an intervention about uniform business rates, but although the Government have been in power for 12 years they have not altered the system that obtained when they were elected. Mention was made about the failure of the Government to honour their clear objectives and undertakings to my hon. Friend the Member for Mid-Worcestershire (Peter Luff) on the automatic payment of small business rate relief; I hope that the Minister will touch on that issue in her response.
We also heard about Government incompetence and the over-complex and bureaucratic system of business rate deferral schemes, particularly for marginal businesses. The Government’s complete inability to come up with a clear answer about the estimated cost was also discussed. There was an interesting discussion on the rate revaluation in April 2010. My hon. Friend the Member for Meriden (Mrs. Spelman) put forward empirical evidence about the impact of the relevant legislation in respect of the Valuation Office Agency, particularly in Wales.
A game effort was made by the Minister for Regional Economic Development and Co-ordination, new to the team. She did well in trying to persuade us that this zombie Government are still alive and making a difference. Many of her remarks, however, were clichéd platitudes based on discredited dividing lines—the facile, do nothing schtick that we expect from the Labour party. There was no recognition of the gravity of the recession, which is the worst since the second world war. In particular, and in stark contrast to the hon. Members for Liverpool, Riverside (Mrs. Ellman) and for Great Grimsby (Mr. Mitchell), the Minister showed a complacent attitude to the ports tax. We knew that she was in trouble, because she was citing the predictions of the Chancellor of the Exchequer, and people are always struggling when they have recourse to that resource.
We heard a number of key points from hon. Members from across the Chamber. The Minister failed to convince the hon. Member for Sunderland, South (Mr. Mullin) about empty property rates and failed to persuade the House about the business rates deferral scheme. Furthermore, she failed to persuade my hon. Friend the Member for South-West Norfolk (Christopher Fraser) that she can provide any meaningful, demonstrable data about the help that the Government schemes have given to individual businesses. I would be interested if the Under-Secretary could shed some light on that.
My hon. Friend the Member for Mid-Worcestershire prayed in aid John Cleese and “Clockwise”, but this Government are clearly more akin to Monty Python’s dead parrot, as we are well aware as each month goes on.
The speech by the hon. Member for Falmouth and Camborne (Julia Goldsworthy) was proof positive, if it were needed, that the Liberals remain at best a wholly owned subsidiary of the Labour party, and at worst a complete irrelevance. She avoided a straightforward commitment to local income tax, and effectively spent 17 minutes saying not very much.
The hon. Member for Sheffield, Attercliffe (Mr. Betts) gently chided the timidity of his Front Benchers, but himself took a rather nonchalant approach to how local businesses across the country are struggling in this recession. We heard an excellent and knowledgeable contribution by my hon. Friend the Member for Northampton, South (Mr. Binley), and a rather esoteric discussion of business improvement districts by the hon. Member for Coventry, North-West (Mr. Robinson).
That doughty champion of his constituents, my hon. Friend the Member for Hemel Hempstead (Mike Penning), raised a vital point about the impact of empty property rates on involuntarily empty properties, at Buncefield in particular. We had a rather, if I may say so, tedious parody of a party political speech from the hon. Member for Southampton, Test (Dr. Whitehead); I am glad that I never had to suffer in his university lectures. Finally, we heard an interesting speech by my hon. Friend the Member for Braintree (Mr. Newmark), who talked about businesses’ practical experience in his constituency and the fact that this Government’s policies are losing businesses to overseas locations.
My party has responded intelligently and sympathetically to the plight of businesses struggling through the recession. Less than three months ago, we initiated a debate that focused on the key issues affecting entrepreneurs and small and medium-sized enterprises: the poor take-up of small business rates relief; empty property rates; the failure of the local authority business growth incentives scheme effectively to promote business growth; the need to allow local authorities devolved autonomy to apply local business rate discounts; and, most importantly, the rise of 5 per cent. in business rates and the end of the transitional rate relief scheme. My party has outlined detailed and fully costed proposals designed to assist businesses in the current climate, not least a national loan guarantee scheme, a cut in corporation tax and payroll taxes for small companies, and deferred VAT for small businesses.
Given the time, I probably will not be able to discuss those matters in detail, so it might be appropriate to deal with the desperate spin of this Government in claiming that the Conservatives have no policies to deal with the recession. That comes from a party that secured the support of 15.7 per cent. of the electorate less than two weeks ago. Indeed, the conceit that the Labour party was pro-business was never supported by any demonstrable evidence. For Labour, business has always been a milch cow to fund its hare-brained schemes, fiscal mismanagement, bureaucracy and debt boom. Last week, the Prime Minister appointed Sir Alan Sugar, the born-again Labour supporter, as the enterprise tsar, but a poll in The Independent found that 81 per cent. of business leaders believed that that was
“a desperate attempt by Gordon Brown to boost his public popularity”.
As we know, the words “Gordon Brown” and “public popularity” are oxymoronic.
It is no wonder that the Labour party cannot even give away tickets for its business fundraisers. The business community has lost what little faith and trust it had in this tired, discredited, washed-up Government, who have always governed in their own interests, not those of the people of this country. They cannot even get their spin right, as we saw today in the spat between the Chief Secretary and the surrogate Chancellor of the Exchequer, the Secretary of State for Children, Schools and Families. The Government’s public expenditure and taxation plans are incoherent and incredible, just at a time when business desires clarity and leadership.
This Government have never understood that without a thriving business sector based on sound Government finances, lower taxes and falling public debt we cannot deliver real long-term improvements in our public services. They have had 12 years to harness the talent, flair and genius of our wealth creators, but they have comprehensively failed, leaving the ambitions of thousands in tatters. Once again, as in 1979, it will fall to a Conservative Government to rescue our economy, restore our mercantile spirit and repair the calamity of Labour’s dozen wasted years.
It is with enormous pleasure that I wind up the debate. In response to the hon. Member for Peterborough (Mr. Jackson), let me say that it is only too clear that only this Government have been helping businesses through the current economic recession, and only this Government are prepared to take action now. In her opening remarks, my right hon. Friend the Minister for Regional Economic Development and Co-ordination eloquently made the point that we fully recognise the impact of the current economic climate on businesses across the country. That is why we have taken real action now to help business through this economic downturn.
The hon. Member for Falmouth and Camborne (Julia Goldsworthy) took us through her contribution at breakneck speed. I appreciate why she did that, but it was sometimes difficult to keep up. I agreed with her critique of the Opposition motion, and I, too, noticed the striking similarity with the motion tabled on 25 March. I am sure that we all accept the importance of business rates, but I agree that the motion is narrow and ignores other issues about help for businesses.
I am afraid that that is as far as I can go in agreeing with the hon. Lady. I do not accept that our actions are tinkering at the edges, because I believe that they are giving real help to businesses now. I was disappointed that she mentioned our VAT cut, because despite the complaints from both Opposition parties, which did not believe that it would be effective, Office for National Statistics data show that the cut has been passed on to consumers in around two thirds of prices and has contributed to recent falls in inflation. In January, the Institute for Fiscal Studies said that the VAT cut had had the same effect as a 1 per cent. cut in interest rates, and in February Goldman Sachs said:
“The VAT cut appears to have had a clear positive impact.”
My hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts) made a thoughtful and knowledgeable contribution, and I particularly welcome his comments about revaluation, which put the record straight after the opening contribution by the hon. Member for Putney (Justine Greening).
The hon. Member for Northampton, South (Mr. Binley) made his contribution in his inimitable way, and he confined his remarks to small business rate relief. This Government introduced the scheme in the Local Government Act 2003, because we recognised the disproportionate burden that rates can have on small businesses. I am disappointed that the Opposition did not support that Bill on either Second or Third Reading.
The hon. Gentleman made a point about making small business rate relief automatic, which was suggested in a private Member’s Bill introduced by the hon. Member for Mid-Worcestershire (Peter Luff). Such a scheme would present considerable challenges for local authorities, as they would themselves need to establish whether a ratepayer occupied more than one property. I cannot see how local authorities could do that if the ratepayer’s property crossed local authority boundaries. There are difficulties with transferring that responsibility from businesses to local authorities, and we must consider whether it would be an administrative burden.
The hon. Member for Northampton, South also mentioned Wales, but the system is not totally automatic there. It is only partly automatic, and the scheme is different from ours. However, we are sympathetic to the aim of finding ways to support small businesses through the economic downturn, and we have been considering what more we can do to improve the take-up of small business rate relief. We have already taken steps to amend legislation for 2009-10, so that all eligible businesses in new properties can receive rate relief from their first date of occupation. We are discussing with the Local Government Association the practical concerns—they are genuine practical concerns—to avoid an automatic scheme, which would award relief to businesses that are ineligible because they occupy multiple properties. I am happy to meet the hon. Member for Mid-Worcestershire to explain the position further. I believe that there is an outstanding meeting, at which he was due to meet my predecessor, and I am more than happy to take that up.
My hon. Friend the Member for Coventry, North-West (Mr. Robinson) spoke about a business improvement district project in his constituency. I do not have the details, but I am happy to discuss it with him further outside the debate.
I assure the hon. Member for Hemel Hempstead (Mike Penning) that his concerns were certainly not ignored. There was a concern that not all Back Benchers would have the opportunity to speak, and I am glad that the hon. Gentleman had the opportunity to make his point. To respond to it, it is generally the case that property must be capable of beneficial occupation before it can be brought into the rating list and be liable for empty property rates. The issue is obviously so important that the hon. Gentleman is not even listening. There are some exceptions to what I outlined. When the property is close to being complete and building work has stopped, the general rule is that property not capable of beneficial occupation is not rateable. I am more than happy to meet the hon. Gentleman and discuss his concerns further. However, I repeat that the general principle is that, if the property is not capable of beneficial occupation, it is not rateable.
I am grateful for the considerable knowledge and expertise of my hon. Friend the Member for Southampton, Test (Dr. Whitehead) on local government finance. I was heartened by his exposing the holes in the highly selective Opposition argument.
The hon. Member for Braintree (Mr. Newmark) raised concerns about businesses’ ability to pay their business rates. That is precisely why we have introduced the help with cash flow.
Many hon. Members mentioned the deferral scheme. We recognise that businesses need help now to ease their cash flow when money is tight. That is why we introduced the deferral scheme for business rates. It is designed to smooth the effects of the inflation spike of 5 per cent. in September 2008, which would have meant an impact on businesses’ cash flow this year. In the Budget, the Chancellor forecast that RPI inflation would fall to minus 3 per cent. by September 2009. The impact of uprating if RPI is negative would be to reduce total business rates in cash terms in 2010-11.
The hon. Member for Putney asked how the full deferral of 60 per cent. could be delivered if the scheme is introduced halfway through the year. The deferral scheme will come into force at the end of July—that was made clear when it was announced. The scheme will offer the full deferral of 60 per cent. of the increase due to inflation and transitional relief by adjusting the instalments of business rates that remain outstanding.
My hon. Friend the Member for Sheffield, Attercliffe mentioned revaluation. Regular revaluations are an important part of the rating system as they maintain fairness between all ratepayers. Revaluation ensures that each business contributes, based on up-to-date information. As my right hon. Friend the Minister said, all rateable values will be published at the end of September. At the same time, we will provide the business rates calculator to help ratepayers estimate their rates bill for 2010. By October, ratepayers will be able to estimate their 2010 rates bill, using their actual 2010 rateable value. [Interruption.]
For ratepayers who face increases at the 2010 revaluation, we will introduce transitional arrangements to phase them in and consult during the summer about the shape of those arrangements, which will benefit businesses in 2010-11.
The Government have recognised the problems that many businesses face. We are committed to doing all that we can to help businesses through the testing times. We are providing targeted, short-term support to aid business cash flow. We will continue to support businesses through the difficult economic times, and I commend our amendment to he House.
Question put (Standing Order No. 31(2)), That the original words stand part of the Question.
The House proceeded to a Division.
Question put forthwith (Standing Order No. 31(2)), That the proposed words be there added.
Question agreed to.
The Deputy Speaker declared the main Question, as amended, to be agreed to (Standing Order No. 31(2)).
That this House notes that the Government is providing real help to businesses, with targeted support through the £20 billion working capital scheme, the Enterprise Finance Guarantee Scheme making available £1.3 billion of Government-guaranteed lending, an aim to pay Government suppliers within 10 days, a cut in the main rate of value added tax to 15 per cent., a deferral in the increase in the small companies’ rate of corporation tax, free business health checks, over £100 million towards debt advice, the HM Revenue and Customs Business Payment Support Service benefiting over 100,000 firms by spreading a total of £2.5 billion of tax payments, and the extended rate relief for empty properties; recognises the Government’s commitment to the annual Retail Price Index cap means there has been no real terms increase in business rates since 1990; welcomes the Small Business Rate Relief scheme providing £260 million of support in 2007-08; supports the fairness achieved by revaluing properties every five years with transitional arrangements to phase in significant changes in rates bills; welcomes the deferral scheme enabling payment of 2009-10 rates increases to be spread over three years to be brought into force by regulations in July; further notes the Local Authority Business Growth Incentive Scheme has provided funding of almost £1 billion since 2005-06; welcomes support for businesses, including in ports, receiving unexpected and significant backdated rates bills by the introduction of an unprecedented eight years to pay; and believes these measures provide certainty, fairness and appropriate relief for businesses.
Driving Instruction (Suspension and Exemption Powers) Bill [Money]
Queen’s recommendation signified.
I beg to move,
That, for the purposes of any Act resulting from the Driving Instruction (Suspension and Exemption Powers) Bill, it is expedient to authorise the payment out of money provided by Parliament of any expenditure incurred by the Secretary of State in consequence of the Act.
That also covers any increase attributable to the Act in the sums payable under any other Act out of money so provided.
On Second Reading, it was the will of the House that the Bill—introduced by the hon. Member for Dunfermline and West Fife (Willie Rennie)—be discussed in Committee. It will introduce a power for the suspension of driving instructors who pose a threat to members of the public.
The Bill will have expenditure implications for the public purse, which will relate to compensation payable to driving instructors who have been suspended but whose permission to give paid driving instruction is not subsequently revoked, or whose permission is reinstated on appeal. The level of expenditure is unlikely to be significant, as it is expected that very few cases will result in the awarding of compensation. However, approval for a money resolution is needed before the Committee can debate the issue fully. The hon. Member for Dunfermline and West Fife has previously explained to the House that he has a particular interest in the issue as a consequence of concerns raised by one of his constituents.
The overwhelming majority of driving instructors, having satisfied the registrar that they are “fit and proper” persons, remain so throughout their careers. Unfortunately, a small number do not. Hon. Members will be rightly anxious for adequate safeguards to cover circumstances in which persons are prevented from following their profession. To that end, I wish to reassure the House that the Bill provides for a satisfactory statutory compensation scheme for the reimbursement of losses suffered by a suspended instructor whose suspension is subsequently lifted, and who is permitted to resume giving paid instruction. That is why we need the money resolution, and on that basis I commend it to the House.
We are experiencing a rare moment of genuine cross-party consensus. I will therefore keep my comments brief, not least because I do not wish to delay those who are waiting to hear the Adjournment debate, which will be opened by my hon. Friend the Member for Mid-Bedfordshire (Nadine Dorries).
I commend the hon. Member for Dunfermline and West Fife (Willie Rennie) for his tenacity. I also commend his constituent Lesley Anne Steele, who brought the issue to his attention and who played a pivotal role in bringing the Bill to this stage. I thank the Under-Secretary and his Department for bringing the Department’s resources into play in sorting out the complex legalities and financial instruments that we need to discuss, particularly as the measure offers no real political advantage to the Labour party. In fact, if anything the advantage would be with the Liberal Democrats in a marginal seat. I also thank my colleagues on the Tory Back Benches, and some on the Labour Benches, who, as the perennial awkward squad, can often be relied on to block any private Member’s legislation, for seeing that this is what is termed a no-brainer as it involves realistic and sensible measures, and who therefore made sure we got to this stage today. We will be able to address the details in Committee on Wednesday, but the Bill closes an important loophole and means that a balance can be struck between the rights of approved driving instructors convicted of an offence and whether they can be considered a “fit and proper” person to be alone with a young learner, and our obligation to protect these young people.
Thank you, Mr. Deputy Speaker.
The provision for compensation for those who are suspended and then subsequently cleared will probably be in the region of £60,000 per annum, given that maybe five or six people a year will be in such a situation. Consideration has been given to others such as school bus drivers, where the balance to be struck must be different. A person who has even just been arrested for an offence is to be immediately suspended. While I can see why the measure under discussion might have been taken a step further, given that we are not talking about vulnerable children or vulnerable adults with problems such as those we often encounter in care homes I think we have got the balance right. In cases where people are arrested as a result of investigations such as Operation Orr, the forensic examination of computers often takes many months, and in such cases the appeal would be much more expensive. I am very pleased that we have managed to reach this stage, and I look forward to debating the matter further in Committee on Wednesday.
I am grateful to the Minister for bringing the money resolution before the House this evening. I shall keep my remarks brief, as it is 10.20 pm already, which is well past my bedtime. This issue arose from the case of Lesley Anne Steele in my constituency. She was sexually assaulted by a driving instructor, but the very next day after he was convicted he was out teaching another young girl to drive in the very same community. She came to me and we worked together to try to find out how this could possibly have happened. We discovered that there was a loophole in the law that allowed driving instructors to continue to operate for a further 45 days.
If we gain the power to suspend, this money resolution funds a compensation package so that on the rare occasion we get things wrong, compensation will be available. That is not unreasonable, as some people will lose in terms of both reputation and finance, as this might be their only source of earnings. We must have a compensation scheme to support those people who are wrongly suspended or who successfully appeal against their suspension. I am grateful to the Minister for bringing this measure before the House. The Bill is important, and I hope we can discuss its measures in more detail in Committee on Wednesday.
Question put and agreed to.
Driving Instruction (Suspension and Exemption Powers) Bill [WAYS AND MEANS]
I beg to move,
That, for the purposes of any Act resulting from the Driving Instruction (Suspension and Exemption Powers) Bill, it is expedient to authorise—
(1) the imposition of fees in connection with exemptions from prohibitions concerning registration, and
(2) payments into the Consolidated Fund.
I kept my remarks on the money resolution brief, but I also put on record our thanks to the constituent of the hon. Member for Dunfermline and West Fife (Willie Rennie), Lesley Anne Steele, in coming forward in what must have been difficult circumstances, and thereby bringing this matter forward to where we have reached today.
For the purposes of any Act resulting from the Driving Instruction (Suspension and Exemption Powers) Bill, it is expedient to provide a power in uncommenced provisions in the Road Safety Act 2006 to charge a fee for the costs incurred as a result of the exemption arrangements that enable partially qualified driving instructors to provide instruction for payment. The Bill amends uncommenced provisions in the 2006 Act, in particular those affecting sections 124 and 129 of the Road Traffic Act 1988. Section 129 enables trainee driving instructors to apply for a licence that permits them to offer instruction for payment. The registrar of approved driving instructors, who is an employee of the Driving Standards Agency, may charge a fee in connection with such an application—that fee currently stands at £140 per licence granted.
The existing trainee licence scheme is quite rigid in terms of its entry requirements. Applicants must have passed the first two of the three approved driving instructor qualifying tests. However, the 2006 Act envisaged more flexible qualifying arrangements for trainee instructors. Trainee instructors will obtain practical experience of providing tuition through the granting of exemptions from the requirement to be registered, as provided for in the uncommenced provisions of the 2006 Act. Unfortunately, that Act does not provide for a fee to be charged in connection with these exemption arrangements. The DSA needs to be able to continue charging trainee driving instructors a fee in connection with applications to give paid instruction while working towards admittance to the register of qualified instructors.
If the DSA were unable to pass on to applicants its costs for processing those exemption requests, they would fall on the agency’s other customers and I am sure that the House would agree that that would be unfair. Alternatively, the DSA would not commence the new provisions and would continue to rely on the existing trainee licence regime. That would deny trainee driving instructors the more flexible qualifying arrangements envisaged in the 2006 Act.
We shall be introducing an amendment to the Bill to provide for the charging of fees in connection with the exemption from this registration. It is intended to replace the fee-charging provision that supports the existing trainee licence scheme. It is for this reason that the Ways And Means resolution is being introduced and, on that basis, I commend the resolution to the House.
This Ways and Means resolution is eminently sensible. We need an arrangement in place whereby we can assess the trainee driving instructors as well as the registered ones, because it is pointless to do one part of this without addressing the full picture. I am grateful to the Minister for introducing the resolution, because it will allow us to have a much more comprehensive package of registration arrangements to ensure that people are fit and proper to be driving instructors in one way or another.
Question put and agreed to.