Skip to main content

Grand Committee

Volume 710: debated on Monday 11 May 2009

Grand Committee

Monday, 11 May 2009.

Business Rate Supplements Bill

Committee (1st Day)

If there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung, and resume after 10 minutes.

Clause 1 : Power to impose a BRS

Amendment 1

Moved by

1: Clause 1, page 1, line 5, at end insert—

“( ) A levying authority has the power to impose a business rate discount where the levying autority has sufficient low income or avoided costs in order to fund it in full.”

It is perhaps appropriate to repeat and to put on the record my interests as a director of three businesses in the north-east of England, all of which pay far too much in business rates, which will be a recurring theme that I shall come on to.

The first amendment, we hope, sets the tone for our argument in relation to the Bill. The amendment allows the levying authority power to impose a business rate discount where the levying authority has “sufficient local income”. We have made a flying start, because that is not on the Marshalled List, which actually states “low income”. The intended wording is,

“local income or avoided costs in order to fund it in full”.

As well as having the power to increase and to impose a business rate supplement of up to 2 per cent on local businesses, there should in certain circumstances be an opportunity to have a mirroring capability to reduce business rates in a given district. The arguments for this are clear, in that reducing business rates would make that location more attractive to potential investors, retailers and businesses. Bringing those businesses into the area would help.

In her Second Reading speech, the Minister welcomed this Bill, saying that it was another power for the local authority toolkit to build strong foundations for the future— we understand that perspective—and that, even in this time of very difficult economic circumstances, it was right to do so, because the Bill was about releasing investment for mutual benefit across the community. If the intentions behind the Bill are really to help local businesses and to invest in local communities at this time, why not include an enabling power to levy a business rate discount? I am not sure whether “levy a business rate discount” is the right term, but for want of a better one, we shall leave it as it stands.

Under the Local Government Act 2003, local authorities already have a discretionary power to levy council tax discounts, which they fund. We advocate the introduction of a similar discretion to offer reduced business rates in whatever form local authorities choose, as long as those reductions can be funded from local income or avoided costs. This would allow councils to apply local solutions to local problems, and would give them greater flexibility. Authorities would be able to work together to fund it, whereby the billing authority would not have to bear all the cost. This is important, because we want to reward businesses and thereby encourage and stimulate business growth and prosperity, particularly as we go through very difficult economic times. This would be part of the new financial framework to give local authorities a share in local growth, as was mentioned in the Green Paper.

There is concern, because economic crises and the lack of incentives to encourage business mean that landlords are being deterred from converting buildings to business use. In rural areas, farmers are not choosing to convert redundant agricultural buildings because they are likely to face significant empty property rates for the period when they take over as tenants. We will come back to the issue of empty property rates later at the appropriate point in our amendments, and to the general revaluations taking place, particularly in ports, but also generally among businesses at a very difficult time.

We ask the Minister to consider this proposal to help local communities and businesses in need, and we do so recognising that we are asking not for exceptional treatment but for something very much in line with other aspects of local government finance.

As this is the first opportunity to speak in Grand Committee, I should declare my interest as joint president of London Councils. This must be the first Bill dealing with local government where one of my fellow joint presidents, the noble Lord, Lord Graham of Edmonton, is not present.

Yet. I was going to say that the noble Lord, Lord Jenkin, was a third, but I mean the first; he is indeed here, and I would be the third. I am also a former London borough councillor and member of the Greater London Authority, with the consequent loyalties to both those areas that one retains; and am director of a charity, the Rose Theatre in Kingston, which is a business paying business rates.

I should say to the noble Lord, Lord Bates, that I will start by being negative, but I shall end by being positive; that is probably the right way round. I do not see how the amendment would operate. What is sufficient income? That seems quite a subjective phrase. Is it sufficient in an account dealing just with the BRS project, or overall? It could be interpreted in a number of ways. I am not sure what “local income” means in this context. I realised that there was a typo in the amendment; I just assumed that the word should not have been there at all so that we were talking about “sufficient income”. If it should be “sufficient local income”, I have to say that local authorities do not have that much local income; the amount has varied over the years. We on these Benches say that what is raised locally is not enough, the balance is all wrong, and so on, but I will not embark down the policy road. I am unclear how the two words would affect the noble Lord’s objective.

The noble Lord is right to raise the issue. I had assumed that Clause 10 covered a variation in the amount of business rate supplements, and that it could be varied up or down. There certainly needs to be a mechanism to reduce BRS during a project if it turns out to be less expensive than had been thought or circumstances change. Schedule 2 provides for credits and refunds, but only at the end of the project. I recall seeing somewhere in the debates in the Commons that the Minister, Mr Healey, said that refunds were provided for, but I cannot see where. I look forward to exploring how we can achieve something, even if I do not quite go along with this amendment.

I welcome everyone to the Grand Committee on a shorter Bill than the last one, but no less significant. I am sure that we will have the usual vivid debates. I am pleased to have kicked off with a general debate on the disposition of the BRS itself. I am also grateful for the clarification, because we struggled; we thought that a subtlety in the amendment had evaded the combined experience of officials and Ministers, but I now understand more what the noble Lord is getting at. Certainly, the crucial word is “discount”. I will not repeat anything that the noble Baroness, Lady Hamwee, said about the issues raised by the amendment, but this is an opportunity for us to debate the general principle. The noble Baroness is right. As regards the BRS, local authorities will be free to levy up to 2 per cent. There is flexibility within that, although it is slightly different from that raised by the noble Lord in his amendment.

The amendment proposes that levying authorities be given a power to reduce business rates. As I understand it, the noble Lord argued that as well as being able to raise BRS for projects that will enhance economic development, they should have the flexibility to use BRS as a trigger to reduce business rates for smaller businesses. That was the background to the general argument about whether that would be a plausible and sensible thing to do. It is an interesting point.

It is worth just giving a brief outline of where the current rating arrangements derive from. As noble Lords will know, they have been in place since 1990. They ensure that business rates are collected by billing authorities and transferred to central government. For many years, we have followed the principle of equalisation according to local need and resource, and redistributed to local authorities for them to provide local services. I believe—as did Sir Michael Lyons, the last person to have a serious look at the systemic nature of this—that it ensures that businesses that benefit from those local services contribute towards them. Although the system has its critics, it is fair.

Nevertheless, the noble Lord raised a good question about whether there should be scope for local authorities to be able to use BRS to reduce business rates. It was in that context that this question was raised in the discussions around the 2007 White Paper. Paragraphs 2.43 to 2.50 developed that argument, and I will take the issue on from there. It was acknowledged that, while there had been widespread debate of the issues that surround allowing local authorities to raise a supplement on business rates, there had been less discussion of the arguments for and against permitting authorities to reduce their local rate below the current national level.

The White Paper raised the theoretical possibility of allowing local authorities a broader discretionary power to lower their local rate if this were in the economic interests of the area. As the noble Lord said, an authority might want to do this to attract inward investment or to deal with other local economic challenges. In the White Paper, we said that we would discuss the case for allowing local authorities in the context of BRS to reduce rates with business, local government and other stakeholders, which is what happened.

We held meetings between officials and representatives of business interests, including the CBI, the British Chambers of Commerce, the British Retail Consortium, local government, the LGA and London Councils. We invited views on the proposition and asked stakeholders to consider how such a measure might work in the context of BRS and some of the implications. These included the impact on local services, how local authorities might use the power, what safeguards might be put in place to protect council tax payers and the implications for tax complexity.

This was a thorough discussion but, significantly, the outcome was that there was little appetite to pursue that further. Businesses and local government could not see how this would work without a general negative impact on local services and council tax payers. So they debated it in the round in that context. Given the response, I am very happy we have had this debate on the record. It would be perverse of the Government to bring forward such a measure and, clearly, it would be perverse if we were to support it.

However, let me reassure the noble Lord that local authorities already have the power to provide discretionary hardship relief to businesses which would otherwise suffer hardship, provided it is reasonable to do so having considered the interests of council tax payers. This is because part of the cost of providing hardship relief must be met by local taxpayers. I know that the noble Lord’s argument was in the context of economic incentives and ways of promoting local economic activity, but in order to complete the debate it is worth saying that hardship relief is given in the most extreme circumstances.

I am grateful to the noble Lord for raising the issue, and I hope he will feel able to withdraw his amendment.

I was not going to speak to this amendment, but before I do so I declare my interests. I have been a councillor for more than 10 years, and I am also an accountant. I say that because I have received comments from accountants and the Institute of Chartered Accountants in England and Wales, of which I am a member. I am also a director of a number of companies that pay business rates.

I have a question for the Minister that was sparked by the noble Baroness, Lady Hamwee. What would happen if the actual cost was lower than the estimate? Would a refund go back to business? If, for example, the estimate was £1.5 million and the business rate supplement was £300,000, there would be no vote because the figure was less than 30 per cent, but if the actual cost was only £1 million and therefore reduced by one-third, there probably should be a vote in that instance. If the figure were reduced by one-third, would a third of that go back to the businesses that had put in the £300,000 originally?

Local authorities and business together will have to show in their partnership document, the prospectus, what they anticipate the total cost of the project will be. If it becomes clear at some stage that the cost has been underestimated or overestimated, they will have to have a way of dealing with those contingencies that is expressed in the original prospectus. They will have to show that they have anticipated some contingency if things do not work out quite as expected.

The noble Earl asked about refunds. I am afraid that I do not have an answer, and I suspect that we will not find one in the Bill or the guidance, but I will write to noble Lords with a little more detail.

On the ballot, if it turns out that there has been a gross misrepresentation—an underestimate or whatever—the prospectus would have to be re-presented, and there may have to be arrangements for a ballot at some point. I am not entirely certain that I have got that precisely right, but I will write to the noble Earl.

I am grateful to noble Lords for their comments, to which I shall refer in turn. I thank the noble Baroness, Lady Hamwee, for her observations on the amendment. Perhaps I should have explained it at the beginning in fairly simple terms. If the project that was the subject of the supplement was aimed at reducing the business rates in a given area, it would work in the same way by paying money into a fund that could then be used to reduce the overall tax rate in that area. Given that business rates, to which we will come later, are often the third greatest cost that many businesses face, that could be attractive. Under previous Governments—I am not sure whether this happened when my distinguished noble friend Lord Jenkin of Roding was at the former Department of the Environment—we introduced the concept of areas, such as development areas and enterprise zones, which were free from business rates. They did tremendous good by drawing people in, because business rates were a major barrier to investment. They are again reaching a high level at this difficult time. Offering a discount might be more successful in attracting business to a locality than trying to entice it with a new road or new infrastructure. We would very much like to see such a measure.

I am grateful to the Minister for her comments on the measure’s wording. I am interested in the extensive discussions that she mentioned had been held with the CBI, the British Retail Consortium and the British Chambers of Commerce. However, she also mentioned that a lack of appetite appeared to be shown. Was that lack of appetite shown by the business organisations—that seems strange given what a burden they consider this issue is and the lobbying that we have received from those organisations on it—or was it on the part of Ministers?

My noble friend Lord Cathcart asked about the system of refunds. The Minister said that it was not on the face of the Bill. If the levying power and the levying structure are on the face of the Bill, perhaps the refund system ought to be there, too. I hope that the Minister will reflect on that. I beg leave to withdraw the amendment.

Amendment 1 withdrawn.

Amendment 2

Moved by

2: Clause 1, page 1, line 7, at end insert—

“(2A) Regulations may amend subsection (2) so as to add to or vary the purpose of projects for which money may be raised by a BRS.

(2B) The appropriate national authority shall consult on the draft of any regulations proposed to be made under subsection (2A)—

(a) representatives or membership organisations of persons who are non-domestic rate payers;(b) representatives of local authorities;(c) such other persons as the national authorities think appropriate.”

I also speak to Amendments 7, 12 and 65. I thought that Amendment 2 would give rise to a spate of lobbying against me on the part of business organisations. I am not sure that it has but I would like to explain why I am seeking to allow the opportunity to extend the scope of the business rate supplement. The Bill is completely focused on economic development but it will, by definition, have to last longer than some other legislation. Life changes and priorities change. Businesses do not necessarily have more of a stake in economic matters than they do in social or environmental matters in their area. Indeed, social and environmental considerations can affect the way in which business operates. Promoting economic development in area A may not greatly affect a business in that area but economic development in areas B and C outside the immediate local authority might well do so. This could be part of a much bigger picture than the Bill seems to allow for. Amendment 2 seeks to allow regulations,

“to add to or vary the purpose of projects for which money may be raised”

This is an amendment for the long term. I am not seeking an immediate extension of the purposes. I propose that there should be regulations to implement this, and that they would follow consultation of representatives or organisations of business rate payers, local authorities and others.

It has occurred to me that by tabling this amendment I may be arguing against my own cause, as it is probably possible to argue that almost any activity promotes economic development if you analyse it down to the last detail. But if that was the case, Clause 3(3) would not be required, so it is not the basis on which the Bill has been drafted. I should also say at this point that later amendments have been tabled regarding ballots. They are not unrelated to this if regulations to extend the purpose are introduced. We believe that there should in any case be a ballot on each project so that businesses have the opportunity to express their opinion.

Amendment 7, by taking out the restriction in Clause 3(3)(a), would allow for money to be spent on housing. I am puzzled that this restriction is included because housing so obviously supports economic development. The consultation on the draft guidance published by the Government in January states in the section on the kind of projects it might or might not be appropriate to fund that:

“It may be considered appropriate to levy a BRS to fund a place-marketing programme to attract investment into a local area”.

One cannot attract investment into an area if the environment—I use the word in its widest sense—is not in itself attractive. In order to bring business into an area, those who are going to work in it need to have access to decent housing. If an authority proposed to use a BRS to spend on housing, it would have to pass the additionality test, so I do not seek for this to substitute for other sources of funding. The consultation on the draft guidance rightly states that it will be quite complex to deal with the test, although of course at the moment funding for local authority housing is not in great supply in any sense. Amendment 65 is consequential and would provide for the affirmative resolution procedure to be used or the regulations I have already mentioned.

Amendment 12 would insert a new clause seeking a periodic review and a report to Parliament on the use of money raised by BRS with the opportunity for representations to be made and a report then produced. The clause has been suggested by the Federation of Small Businesses, which rightly says that business is being asked to contribute and therefore should have some reassurance that it will be heard so that the Government can get the benefit of business experience in delivering projects of this kind. There is no doubt that local businesses, given that they are so strongly engaged with economic activity, should be given the opportunities that the amendment would provide. The federation also points out that the amendment should ensure that the business rate supplement is used for the Government’s intended purpose of promoting economic development. I have to say that that is probably a matter for the auditor and does not need the provision I am suggesting here.

However, I have more reasons than the federation for arguing for this amendment. Business rates are national and this local element is only local in some aspects. To my mind, the amendment would not deal with the detailed assessment of individual projects so much as become a general review enabling businesses and business representatives to contribute to a review of the criteria used and the principles behind it.

The review should extend to the interests of all those who are involved, not just those who pay. The billing and levying authorities, having operated the system, are likely to have a view either that it is going well or that alterations in the arrangements are desirable. That is of particular concern in London. I shall leave my noble friend to argue for his first amendment, because I can see that he has marked up exactly the same words in the briefing as I have, so I shall not steal his thunder.

I think that that exhausts my arguments for the moment. I beg to move.

In general, we regard this group of amendments to be helpful in drawing attention to a number of key issues about the Bill, but we have some reservations, which are born of our consistent view that we are suspicious of the motive behind it. We believe that it could be a means to delegate commitments and responsibilities that should be in the preserve of central government to local government as part of the current adverse economic and fiscal position. We are very concerned about that; we will obviously come back to that when we consider additionality. That is why we would not want to follow the amendment that extends the list into housing. Housing is for central government and for private sector commitment for development. That should be allowed and it would not be appropriate to be covered under the Bill.

The amendment helpfully highlights the fact that, curiously, we have a Bill that identifies what the business rate supplement can be used for by listing what it cannot be used for. Clause 3(3) lists housing, social services, education services, services for children, health services or services that the local authority provides in the discharge of functions that Planning Acts provide. Then there is the very broad term of economic development. I share the concern of the noble Baroness, Lady Hamwee: most things fit into economic development. At Second Reading, the Minister was generous in giving a number of examples of what could be used, but it would be useful for that phrase, “economic development”, to be spelt out. That would give comfort to businesses, which may be fearful—the noble Baroness referred to the briefing from the Federation of Small Businesses, which we have also read and agree with.

Amendment 12 raises a very important issue: how are people who may have contributed to be kept involved in the project all the way through? It proposes a review and a report to Parliament. That is a very good idea. We welcome that. I have only one question for the noble Baroness, which is whether five years is too long and whether annual or triennial reporting would be more appropriate given the major projects that are being considered. That discipline of having to report back to people would be very helpful.

It is also very important to keep businesses involved in the process. We have received briefings from all the business organisations about this. They are very worried, first, that there will be a whole raft of measures that are carefully crafted not to require a ballot and which the organisations will be levied to fund if their businesses have a rateable value of more than £50,000 per annum. Secondly, they are worried that they will be denied any say in the process of paying that levy and that they will have no involvement in the project itself. We all know what a healthy incentive it is for organisations, particularly businesses, when profit is determined by the ability to keep to the budget and to be on time. In the absence of that profit motive, it would be wise to have businesspeople very closely involved at every stage in the implementation of the project for the perspective that they bring and for the transparency which they can elicit from the people who are project-managing the exercise.

I have one question about Clause 1(2). Can a levying authority exempt certain areas from paying a business rate supplement? In Norfolk, if the project under consideration was the dualling of the A11, it would certainly promote economic activity in the area of Norfolk—certainly from Breckland and Thetford and all the way out to Norwich and beyond: to Yarmouth and so on—but it would be of very little benefit to King’s Lynn and north-west Norfolk. The question is therefore whether levying authorities can exempt certain areas in their area from paying the BRS.

I shall have to leave that question until the end of the debate. That will give me time to think about it, too. As the noble Lord, Lord Bates, said, very important issues have been raised in our debates on these amendments. I was particularly struck by his saying that we have defined the investment that the BRS will prompt by what it does not cover rather than by what it does. We were very wise to do so, because throughout this whole process we have been trying to avoid any flavour of prescription while at the same time being clear that there are criteria that will be fundamental to the way in which the BRS can command complete partnership and complete credibility and help to deal with some of the fears among businesses, especially small businesses, which the noble Lord spoke of and which I can understand. That is why I am happy to put as much as possible on the record in Committee. I hope that, by doing so, I can put a lot of those fears to rest.

Amendments 2, 7, 12 and 65 are clearly asking about the use and purpose of the BRS. This is fundamental: what can the BRS be used for and not used for, and why? In essence, Amendments 2 and 65 would give the Secretary of State, and Welsh Ministers in Wales, powers to extend the use of the BRS beyond the promotion of economic development. The amendment to Clause 1 would allow the Secretary of State to make regulations to add to or vary the purpose for which the BRS might be raised. These regulations would be subject to the affirmative procedure.

The crucial question that we have been asked is what we mean by economic development. In essence, the best account of why the focus is so firmly on economic development is given in the White Paper in the first part of the chapter that introduces the idea of the BRS and explains why it is a relevant and important opportunity. I shall give a little history and explain the economic capability of local authorities now.

We are facing situations where we still have gross regional inequalities and local inequalities which need to be confronted. Over recent years, given that we are facing globalisation and the competition that comes through that, which impacts on location of skills, enterprise and investment, that combination has genuinely led to a situation where for a range of reasons with different agencies the Government have tried to give local authorities a much firmer grip on the levers of economic power. We saw that recently, during the passage of the Bill that we have just finished, in terms of economic regeneration, the configuration of regional and local economic capacities, the economic assessment and the sub-national review, which has led to those configurations and so on.

Essentially, the argument is that there are different strengths in different places and that local authorities need, in a way that they have not before, to take a grip on what can be done in terms of their economic prospects and productivity now and in the future; that is, planning locally for greater prosperity. This serious agenda was reinforced by the Lyons inquiry, which obviously considered reforms to business rates. He recommended a new local flexibility to set a supplement on the current national business rate, which we are debating. That was reinforced by the SNR. I take the point that “economic development” is hard to define because of what constitutes direct and indirect economic development. It makes sense if we look at it in that context, bearing in mind the journey that has been made and the focus that we are trying to give.

In responding to the Lyons recommendations, for example, the Government stated that,

“a local supplement has the potential to support local economic development, but would need to be subject to credible accountability to rate payers and real protection to any businesses—particularly SMEs—that might be disproportionately affected”.

That argument was taken up by the SNR, which talked about,

“a powerful new tool for local authorities to invest in infrastructure to support long-term economic growth in their areas, backed by mechanisms to ensure that there is a strong voice for business and supplements are introduced only where they can command support from all those affected”.

The lobbies representing business need to know the term “command support” and that people are very serious about that notion. All the subsequent discussions we have had with industry have been on the basis that there is a clear commitment to promoting economic development and economic growth, which is their core business and what they do.

The concept of economic development clearly is commonly understood. There is no single definition of the term. As we set out in the guidance, it may be considered that the projects to promote economic development are likely to focus on supporting the productivity and prosperity of the area. From the first, we been clear that that is what it should be. But we have also said that there must be scope for innovation as to how the local area, the local authority and local business interpret what is best in terms of economic development and how innovative it can be. Basically, we want to encourage innovation, provided that both partners of the contract are in agreement. It is not just about what the levying authority thinks will best promote economic development, it is about what business thinks too.

I completely understand why the noble Baroness has raised the amendments, because there is a genuine debate around these issues. As she says, these are long-term issues. This journey to give local authorities more grasp of local economic development has been a long journey already. From what the noble Lord, Lord Bates, and I are saying, she will not be surprised when I say that I cannot accept the amendments because they deflect and distort away from the single purpose of the BRS. Essentially, and as the noble Baroness herself admitted, the amendment would mean that the BRS could be used for anything ranging from tackling crime to housing improvement to climate change issues, because all can bring some indirect economic benefit if they are properly managed. However, they are not central to economic development in the normal sense.

The noble Baroness said that the thinking behind the amendment is the need for greater flexibility and to recognise that communities are in themselves successful economic entities. Having dealt with that argument, I shall move on to her second point. We are also looking at a potential compromise in the consideration of additionality. Schemes aimed at housing—the noble Lord, Lord Bates, mentioned housing—the greener, safer agenda or health issues all have statutory funding mechanisms and form part of what the community expects to fund, as well as being the recipients of specific grants. But the same is not true of strategic economic development, and this Bill is intended to boost the ability of local authorities to raise revenue for investment in economic development.

That brings me to the third reason for the difficulty here. We need to return to the primary purpose of the Bill. Businesses already contribute to the provision of services such as street cleaning and social services provision through the national business rate, and I do not think that they would take kindly to funding more of the same. The BRS is essentially a new tool aimed at raising revenue to invest in local areas over and above the provision of services and projects already in place, and since it will be a method of securing additional revenue from local businesses, it should be used to fund aspects of the community that are of most interest to those local businesses. We made it clear throughout our preparatory documentation for the Bill that any supplement will have to be subject to strong safeguards. Businesses need to know that they are not going to be asked to fund projects that are not relevant. That is important to the credibility and integrity of the proposals. Indeed, businesses should not see this as something being done to them, but as a shared enterprise at every stage right through from being a gleam in the eye of the partners to its implementation. The Bill ensures that, within the broad remit of economic development, there is scope for innovation depending on the nature of the local economy. Communities are different and there must be flexibility in order to foster creativity through these proposals.

My first reaction to Amendment 12 was to say that these are local activities so we should not have a national review mechanism. However, having heard the arguments of the noble Baroness about the criteria and national context, and having taken note of what the noble Lord, Lord Bates, had to say, I am minded to take it away and think about it. I cannot promise anything, but the noble Baroness has made an interesting case for the concept of a review mechanism, and I take the point made by the noble Lord about the involvement of business partners. Indeed, we shall come on to that when we talk about consultation.

I turn now to Amendment 7. Although the noble Baroness knows that I have argued in the context of other legislation that housing is an economic function, in this context it is not of the same order of economic development. I echo again the noble Lord, Lord Bates, that a broad range of funding already goes into housing through the vast sums distributed through, for example, the Homes and Communities Agency, as well as substantial private funding. Therefore, although housing is very much part of what makes a community successful, in the context of BRS it is not different from the other services. I could argue, for example, that the health service services the local community because it keeps people healthy and active in their workplace. I could argue that without education we would have nothing in the way of economic development. Those are both persuasive arguments. To come back to the main point, though, it is important that we keep the focus on economic development and the connection with business, which can be robustly promoted. As I said, businesses already provide and contribute towards core services, and should not be asked again in a different way to contribute. We would have problems with the notion of additionality.

The short answer to the question of the noble Earl, Lord Cathcart, is no. This will be worked out not by geographical area but, essentially, on the scope of the distribution of businesses within the area of a levying authority. That is what will define the criteria. One would hope that, within the scope of Norfolk, if something were to be offered through BRS it would be sufficiently strategic that even some of the more outlying areas would get some benefit from it. It would depend on the nature of the local project, the consultation and the scope of the commitment that went into it.

I have spoken at some length on that amendment. I hope that the noble Baroness will feel that she is able to withdraw it.

I would like to press the Minister a little further on this because it might be the only chance we get to look at the important term “economic development” and whether it is the right one, or whether “development” is just too broad a term and allows local government officers to dream up lots of pet projects for the private sector to fund. What would be the effect of replacing “economic development” with “increasing economic output”, “maximising economic productivity” or “creating wealth”? These are all the kind of objectives that business is looking for, especially at present; it has the objectives of increasing shareholder value and generating profits. If this is about business and raising funds from business to help business, perhaps we ought to mirror its objectives and have something that is more succinct and to the point. I appreciate that the Minister might want to reflect on that, but what is her response?

As with most of the language that we have to contend with when we are making policy, sometimes the choice means choosing broader terms that encompass most of those elements. As the noble Lord has picked out, “development” includes output, productivity and wealth, but it also includes the implications of community wealth, growth, progress and so on. The term is fairly commonly understood; it is certainly in common currency. We use it, for example, in the sub-national review of economic development. If we were to take single aspects of development we would be challenged. If we chose “output”, for example, we would have four opinions for every one economist, I would imagine. “Productivity” is certainly a subjective term, depending on which side of the line you are on, and I would hesitate to use the concept of “wealth” in legislation.

I understand what the noble Lord is getting at, though. Something we might think about, in our guidance or advice to local authorities, is that when they came to describe their projects they underpinned the broad notion of “economic development” with a precise statement of what they meant by it, what they expected to get out of it and whether or not, in these terms, there would be specific outputs and benefits. In the prospectus, they will be required to give a detailed account of what costs and benefits their project will deliver. That is the place for some of this language to be employed.

The noble Lord has asked a good question, and I hope that we can find some other ways of digging into it at different stages as we implement the BRS.

It has been an interesting debate. Both noble Lords who spoke raised interesting questions. I wrote down the noble Baroness’s phrase “commanding support”—that the project has to command support. I wrote down “ballot”; we are going to keep coming back to that, are we not? It is certainly necessary for the levying authority to demonstrate how the project will contribute to economic development. It has to win the argument before it wins a vote, of course. The noble Earl’s question was really interesting. In a big area or one that is diverse, that question will cause a lot of heart-searching; it already has in London.

On housing, the Minister referred to the range of bodies that have statutory duties, but I am not sure that that is an answer to the question. We know that those duties are not adequately delivering, and we know about the interchange. I do not disagree with her about health services, education and so on, but the lack of housing is a problem within economic development issues. She distinguishes the power that local authorities have from a duty in the area of economic development; I think that is what it really comes down to. I thought yesterday, but forgot when I came in this morning, that I should have a look at the Regional Development Agencies Act, because my recollection is that RDAs have a limited opportunity to provide housing to support their projects. Has that provoked anybody? If it is the case, as I am pretty certain it is, it would at least support an argument for a limited power to provide housing. I shall certainly pursue that. I do not think that we have exhausted the area, but I beg leave to withdraw Amendment 2.

Amendment 2 withdrawn.

Clause 1 agreed.

Clause 2 : Levying authorities

Amendment 3

Moved by

3: Clause 2, page 1, line 16, at end insert—

“( ) a London borough council;”

The amendment stands in my name and that of my noble friend. It seems to have been the practice this afternoon to declare past interests as well as current ones, so let me say that I too enjoyed eight years as a Member of the London Assembly on the Greater London Authority, like my noble friend.

Well, I enjoyed them, even if my noble friend did not. It was probably my enjoyment that she enjoyed least. More relevant to the Bill may be that, for those eight years, I chaired the finance committee of the Metropolitan Police Authority, so was responsible for the huge property estate that the Metropolitan Police has throughout Greater London and beyond, on which it of course pays business rates. Rather more currently relevant, I must again declare that I am a London borough councillor—that is particularly relevant to the amendment—and a member of the executive in the London Borough of Sutton. Indeed, I led that council for 13 years. It is perhaps also relevant to note that, according to the GLA’s guidance, Sutton is the London borough that benefits least from the coming of Crossrail. That coincidence enables me to say, as I did at Second Reading, that it in no way weakens my personal or my party’s commitment to Crossrail. Anything that I say, do or propose should not be taken as any wish to delay or jeopardise that long-needed project, which I have been considering for pretty well all my adult life in London politics—a very long time.

The purpose of this amendment is very simple; it is to add London borough councils to the list of levying authorities. London borough councils are substantial unitary authorities, and have been for a very long time. They have all the duties of local government that pertain to local government in this country. They are now the major drivers of economic development in their area. Their relationship with local businesses has changed enormously in the past 15 or 20 years, probably without exception. All London boroughs work in very close partnership with the business community. That is probably even more the case as regards the relatively small part of the business community that will be affected by the Bill. Those are in the main the other key employers with a local authority in a London borough. The partnership is now strong and in many cases is mature, certainly in my borough.

Sitting suspended for a Division in the House.

I was speaking of the very important role that London borough councils now play in partnership with local businesses and in particular the major businesses, which tend to be the key employers in those boroughs, in driving the economic development of those boroughs. Therefore, it seems quite wrong that those major authorities should be excluded for all time from the Bill and from being levying authorities.

I am certain that no London borough council is clamouring now to introduce an additional business rate supplement. Of course they are not, but to cite on Second Reading—funnily enough, arguing why other parts of the country should have the same powers as London—the Minister said:

“If and when the time is ripe and the partnerships agree and want to work on something exceptional that crosses different local authorities, why should they not have this opportunity?”.

That was said in the context of authorities outside London, but it applies at least as much to authorities within London—London borough councils. As we know, the Bill when enacted will last for many years. We talk about 2035. At some stage during that time, there will be economic recovery. At some stage, some—probably not all—London boroughs will have a project that they want to go ahead with in partnership with local businesses. We will keep returning to the question of what “in partnership” means and reassurances to local businesses, but all that ought to apply to London borough councils as it does to all other first-tier authorities in the country. The time may be right one day and we need the provisions in the Bill for when that time arrives.

Another point of great concern to London borough councils now is that they will be the billing authorities for the supplementary rate. We know that that will apply in London and why it will apply. They have been anxious for some time to know exactly what that will mean on implementation. Again, I cite the Minister at Second Reading, towards the end of her speech, when she said:

“We intend to consult shortly on the policy that will underpin the regulations. Even if we do not have the regulations in front of us, we will have the substance of the regulations to enable us to have an intelligent debate, and we can do that as soon as possible. We aim to issue the consultation paper on our proposals for secondary legislation very soon. With that in mind, I hope that we will be able to proceed before, if not during, Committee stage with a map in front of us of what implementation will look like”.—[Official Report, 22/4/09; col. 1534-35.]

I have to ask the Minister: where is the map; why, when it was so confidently expected three weeks ago, is it still not with us; and when will it be?

As it is not before us, I hope that the Minister will give some commitments: that London authorities, as billing authorities, will be able to recoup all additional costs of administering, collecting and enforcing the business rate supplement on behalf of the GLA; that if the London authorities are involved in a BRS consultation process, if there is one, the costs to them will be fully funded by the levying authority, in this case the GLA, although I suspect that that may not apply if it is going to be used only on Crossrail; and that the Government will undertake that they will review the operation of BRS in London—a commitment for the future, at least, if it cannot be forthcoming now. Most particularly, we would like to know the details of implementation and when this map is going to appear before us. I beg to move.

I had not intended to join in the debates today because my interest in the Bill, which the Minister is aware of, relates primarily to BIDs. However, I want to put my interests on record, as one has to; like the noble Baroness, Lady Hamwee, I am a joint president of London Councils, which represents the boroughs and, if one has to declare one’s past interests, a great many years ago—more than I care to contemplate—I was a member of Hornsey Borough Council. Noble Lords may be surprised to learn that there ever was such an animal as that council; the territory it covered is now part of the London Borough of Haringey.

The noble Lord, Lord Tope, knows a great deal more than I do about this because he has for such a long time been a member of the executive of the London Borough of Sutton, as he told us, but I wonder whether breaking the pattern of Clause 2 is a wise thing to do. The intention of Ministers in Clause 2 as it stands is to ensure that at any level of local government there is only one tier that can impose a BRS. That is a good principle, otherwise one will land businesses with multi-tier additions to their national domestic rates.

I ought perhaps to add that I was the inventor of the national non-domestic rate, which was part of the Bill that introduced what was called the community charge but the press always referred to as the “poll tax”. Although the poll tax disappeared, the national non-domestic rate survived, and it is part of the system today. That is a single-tier tax. It may be levied by the boroughs, but only because that is the way the system works. The noble Lord’s argument—that the boroughs should have the right to impose their own BRS because, after all, they are going to raise it for the Greater London Authority for Crossrail or whatever—does not follow at all. It so happens that they are the bodies in London that have the capacity to levy a rate, and therefore that is what they do and what they will do under the Bill. Notwithstanding my support for London Councils—I greatly admire what it has been doing in recent years; it is an admirable body—a two-tier business rate supplement system would be a dangerous step. I say so with some regret because the noble Lords on the Liberal Democrat Benches may feel that they are speaking for the London boroughs, but one has to look at this pattern as a whole, and, as a whole, to have one single tier raising the BRS is right.

The noble Lord, Lord Tope, went on to argue that the boroughs were not bursting to do anything now. No, they are not, because they are desperately trying to keep their council tax down. If they can add as little as possible to the national non-domestic rate, they will justifiably be very proud of that. Therefore, I do not think they will want to add more to the businesses in their areas, which is what the amendment implies. The noble Lord, Lord Tope, says that they may want to in the future. So be it. I hope that at some stage—perhaps when we have considered a number of amendments, including those that will be moved by the noble Lord, Lord Best—we can consider providing a review mechanism not just for limits or amounts but to look at the BRS as a whole so that if changes are necessary they can be introduced through secondary rather than primary legislation. That would be the time to look at this, but in the mean time I believe that the principle in the Bill of having only one tier of local government raising the BRS is absolutely right. Therefore, I am afraid that I do not support the amendment.

I will be brief as all that needed to be said on this issue has been said far more eloquently and succinctly by my noble friend Lord Jenkin of Roding. He put his finger on the nub of the issue; the amendment, which may be a probing amendment, would introduce the potential for double charging the business rate supplement, levying up to 2p on the London business rates for Crossrail, and would allow local authorities—the boroughs—to initiate projects which could levy another 2p. I understand that if the amendment were accepted, similar dual charging possibilities could apply across the country wherever two-tier authorities exist. In places that may be close to our hearts at the moment, such as Lancashire, the county council could levy a charge and presumably a district council such as South Ribble could also levy a charge. This comes back to the point we have made throughout our discussion on the legislation; namely, that the Bill may have been conceived two years ago when the economic climate was completely different. It might have seemed a good idea then but this is about the worst possible time to introduce it. It has one purpose—to enable the development of Crossrail—and that should be the limit of its scope.

I do not think that I can add much to what has been said but I offer good news to the noble Lord who asked me about the guidance and the map. I had hoped that we would have the map for today, the first Committee day. That was not possible despite the outstanding officials’ extremely energetic efforts, but it will be published this week. Therefore, we shall certainly have it for the second Committee day. We hope that it will be a great help. I shall certainly ensure that Members of the Committee receive it as quickly as possible.

The noble Baroness has told the Committee a rather astonishing fact. It has been known that this Committee stage was going to start today and originally would have had a second day on Wednesday. Therefore, the Committee stage would have finished by the end of Wednesday’s sitting. Now the noble Baroness has told us that the map, to which she referred at length at Second Reading—I have read the whole of the Second Reading debate—will not be available until later this week. Why is it not available for the Committee stage? This seems to me an astonishing way to proceed.

I am sorry that we have not been able to. An awful lot of work has had to be done. This policy crosses several government departments and outstanding discussions on issues are still going on, so we have done our very best. I would have loved to have had the map available to noble Lords today. We might well have had it available for the second day of Committee, if it were to have been on Wednesday. We will do our very best to make sure that noble Lords have the map as soon as possible. I really ought to pay tribute to officials who have worked extremely hard and very fast to do this in time.

I have every sympathy with the Minister and DCLG officials for the difficulties that they may be encountering in cross-departmental arrangements. It is not the first time that we have heard about such problems. It would be helpful if we received the draft map, in whatever form it takes, before the second day. However, perhaps it is now appropriate to say that noble Lords will not wish to be committed to anything simply because we receive a draft very close to the second day, not least because the authorities affected will not have had a chance to look at it. I am simply saying at this stage that, although the map will be received with gratitude, it cannot be thought that we will respond to it in any way other than by quoting bits of it back to the Minister, as one does with these pieces of paper.

No, I accept that. The whole intention is that it should be as useful as possible. It is the way of these things that it may prompt more questions than it answers, but we stand ready to respond in whatever way will be appropriate next week, or in the interval between now and Report. We can certainly have conversations outside the Chamber.

This map has now gained some intrigue, because the Minister said that issues were still to be resolved and that there were matters between the DCLG and other departments. Can she say any more about what the issues are which are causing the delay?

No, I do not think I need to say anything about that. It is just that when one is working across government on a set of detailed regulations and issues to do with implementation, there have to be lots of meetings between officials from the departments. That is why we get good government; it is because we actually talk together and make sure that the final product commands consensus. The map will come as quickly as possible and it will be as helpful as possible.

I turn to the broad arguments. I thought that noble Lords opposite made an extremely good fist of explaining why the GLA will be the levying authority in London, rather than the boroughs. The noble Lord, Lord Jenkin, pointed out that the important principle throughout the Bill is that one tier is the levying authority. The dog that did not bark in the contribution of the noble Lord, Lord Tope, was that if the London boroughs had a power to levy BRS, it would be a power “on top of” and a double opportunity to levy rates on business. The important thing is that while the role of the London boroughs is as important as the noble Lord made out, what we have had to consider is that the BRS should be levied at the right special level. The point about London and its unique characteristics of extraordinary complexity is that there has to be a strategic city-wide approach. Therefore it is only right that the GLA should be the levying authority, not just in terms of London, but because of its role in the economy of the south-east and concentration of jobs there in terms of the country as a whole.

We have tried to ensure that London is treated in the same way as the rest of the country for BRS, but the spatial level at which the supplement is levied needs to be considered in a different light in London. I detect an inevitable tension because the noble Lord is the great champion of the boroughs but, with his experience on and commitment to the GLA, he understands its strategic role in promoting economic development across London. It is clear that the projects that the GLA can undertake with a London-wide BRS will have a much greater strategic impact on London than could be achieved with separate contracts carried out by an individual borough or even a group of boroughs. If noble Lords cast their mind back a short while—although it seems a long while—to when we were debating the GLA Act and the planning powers given to the mayor, they will remember our debates on the strategic imperatives of London and the need to strengthen that capacity.

We have had a very good debate. I hope that on that basis the noble Lord will not feel too injured and will be able to withdraw his amendment.

All that needs to be said has been said about the very unsatisfactory situation in which we find ourselves, coming towards half way through Committee by the end of today without the promised guidance. I feel pretty confident that no one present today is directly responsible for that delay; it is just unfortunate that the Minister has to bear the brunt of explaining why we are in that unsatisfactory situation. We look forward to receiving the guidance within a day or so and regret that the Government have been so distracted during the past week that they have not managed to produce it by Monday instead of Wednesday.

I was of course interested in what the noble Lord, Lord Jenkin of Roding, had to say and his declaration of interests. It struck me that the most important of them, although it was not strictly a declaration, was that he was responsible for nationalising the business rate—something that Labour was committed to repealing but for which we are still waiting. I seem to recall that he was a prominent part of an Administration that got rid of one whole tier of government in London at a sweep. Had that prevailed, we would have lost the argument today.

I am a warm supporter of the present structure of the government of London. When I first congratulated Mr Livingstone on being elected mayor—in a television studio, as one might expect—his riposte was absolutely typical. “Oh, Patrick”, he said, “you made it all possible”.

I will resist the temptation to renew the debate from 25 years ago, much though I might love to on another occasion.

Of course I understand the points being made; I hope that, equally, others understand my points. London borough councils are not to be equated with non-unitary district councils. They are larger; they have hugely bigger budgets; they are very different players in local economies. That is not in any way to belittle the role of non-unitary districts—I would say the same if my noble friend Lord Greaves was sitting next to me. There is no equation there.

I said before that no one is clamouring for the power now—clearly the time is not right—but some time during the next 25 years or so for which the Bill is likely to apply, the time may well be right. Whatever the provisions of the Bill when enacted, it would not be done unless it had the consent of the businesses affected.

I use a local example. If the London Borough of Sutton, which is on the borders of Surrey, wanted to engage in a project with Surrey County Council—as any outer London borough might with its neighbouring county—why should it not be able to levy a supplementary business rate, assuming that the businesses involved are in favour of it? This may well be the worst time to be introducing such a Bill, but I am not responsible for its timing. The Bill is here; all I am saying is that it is regrettable that London borough councils are being treated as if they are non-unitary district councils and being excluded for all time from the Bill.

In the second part of my speech, I asked for a commitment from the Government on various aspects of implementation. I suppose that the Minister's answer is that we will have to wait until the long awaited map is published, in which case it is very likely that we will be returning to similar points for greater clarification on Report, once we have seen the guidance. In the mean time, I beg leave to withdraw the amendment.

Amendment 3 withdrawn.

Amendment 4

Moved by

4: Clause 2, page 1, line 17, leave out paragraphs (b) to (d)

These amendments basically follow an argument I touched on when speaking to Amendment 3, which is our belief that this is important legislation in terms of delivering Crossrail and therefore for the Greater London Authority, but that that is as far as it should go. We should not seek to roll out what was an exceptional case of infrastructure development and turn it into normative practice in terms of raising additional local government finance. One of the arguments I pray in favour of this case is that in a briefing from the Local Government Association for our Committee stage, the point was made that local government works closely with local businesses. It understands and shares concerns about placing excessive burdens on enterprises. The association goes on to make in bold print the assertion that:

“Councils are not sitting eagerly waiting to levy new supplements as soon as the legislation is enacted. A recent survey of the Chief Economic Development Officers’ Society did not find a single local authority that is planning to use the power to apply an additional supplement during the recession”.

I believe that the briefing makes my point for me. It explains that this is a piece of enabling legislation that would allow an additional levy to be placed on business, but goes on to make the clear assertion that chief economic development officers are not sitting back and waiting for that to happen and, by implication, do not feel that it is absolutely necessary. No one is planning to take an initiative like this during a recessionary time, so this is quite a damning indictment of the Bill from the Local Government Association.

Amendment 4 would remove from Clause 2 the designated geographic areas other than the Greater London Authority. This issue was raised in the Commons when the Opposition wanted to decline to give the Bill a Second Reading because it fails to limit the application of supplementary business rates to the Greater London Authority and the Crossrail project. Crossrail is a unique proposal because of its size and extent. It is a one-off project of exceptional economic importance and should not be used as an excuse to roll out a supplementary rate nationally. The funding of Crossrail has been the subject of much negotiation for some time and should be treated in a different way from the funding of infrastructure projects elsewhere in the country. Further, businesses in London have been deeply involved in Crossrail, and groups such as the CBI support the Bill as it relates to Crossrail, but not as a national scheme. The issue also forms part of the debate surrounding the mayoralty of London; in the case of Crossrail, Londoners have already had an opportunity to express a view.

On 27 January during the Bill’s Committee stage in the Commons at col. 127 onwards, a more specific concern was raised that I echoed in the debate on Second Reading in this House: this proposed legislation is somehow being used to cover the Government’s tracks in terms of cutting the amount of funding being made available for local authority business-growth incentive schemes. The money available for those schemes is to be reduced from £1 billion over the past three years to £150 million. That is a significant cut in a proposal aimed at economic development, growth, productivity, wealth creation or whatever we decide to call it. The money was committed and is now being reduced because of the current economic climate. Surprise, surprise; we now have this legislation that is going to be extended elsewhere.

It was also discussed on Report in the other place on 11 March, where it was argued that it was incredibly bad timing for businesses which were already suffering with a range of additional taxes. At the point at which Members in the other place were discussing this, the business rates were going to increase by 5 per cent. Now, of course, there has been a magnanimous climbdown to 2 per cent by the Government, but the 3 per cent will have to be repaid next year. A rating revaluation was also under way; ports, crucially important to economic regeneration and growth, are to be levied by having to fund a revaluation of backdated rates.

We are at one with the case for the Greater London Authority having the capabilities laid out in the Bill to raise funds, which I think are in the region of £3.5 billion, as its contribution towards Crossrail, to ensure that that major infrastructure project goes ahead, which we support fully. That has had a democratic test at the ballot box, and the people of London have expressed a view that is supportive of Crossrail. We believe that matters ought to be left there, however; if there are issues that demand this kind of measure, they ought to be brought back at a time when the economic climate and the general mood may be more receptive. I beg to move.

It must be self-evident, in view of the amendment that I have just spoken to, that we cannot support this amendment. It is clearly not the time for local authorities to be introducing a supplementary rate; it is hardly surprising that the LGA should be reporting that no one is currently planning to do so. Had we been dealing with the Bill 12 months ago, the situation might well have been different. Probably more importantly, in the years to come, when the Bill will apply, we hope the situation will be very different.

Noble Lords on the Conservative Benches who spoke as they did at Second Reading seem to be assuming that, as soon as the Bill is enacted, local authorities across the land will be falling over themselves to impose more taxes on business. As I commented at Second Reading, most of those authorities are actually Conservative controlled, and that scenario will not happen. The powers in the Bill will apply beyond the foreseeable future to when times will improve. Probably the best answer to this was given by the noble Lord, Lord Smith of Leigh, at Second Reading, when he said—I paraphrase slightly—“If it’s good enough for London, why isn’t it good enough for Manchester?”, or, “If London can have it, why can’t Manchester or indeed any other part of the country?”. As I have said before, I speak as a Londoner and, as a London councillor, I wholly endorse that.

As the Bill and the opportunity are before us, these provisions should be available for local authorities throughout the country when the time is ripe. That time is not now, but it will be some time during the life of the Bill when enacted. Those provisions should be there; they will be invaluable not just to local authorities but to the local authorities working in partnership with their business communities. We need to keep stressing this. I do not believe that now, in this day and age, any local authority will simply impose this rate, even if the provisions of the Act enable them to. No local authority in its right mind at this time will simply impose a supplementary business rate without doing a considerable amount of preparation work in partnership with the businesses, whether or not it is required at that time to have a vote, which is a debate we are yet to have.

I do not support the amendment; it is important that the provisions in the Bill should apply throughout the country.

I am extremely grateful to the noble Lord, Lord Tope. I could not improve on what he said. It was an extremely powerful and entirely persuasive case—I shall certainly vote for this Bill. The noble Lord, Lord Bates, and I seem to have a fundamental disagreement about the Bill, and I am sorry about that, because I think we would agree on quite a lot.

The Bill is not simply about raising the necessary revenue for Crossrail, although that is important. It is certainly not an excuse for a national rollout, as the noble Lord suggested. The point is that this—as a device to enable local authorities and business to find another way of working together under exceptional circumstances, and as part of the pattern of those evolving relationships identified by Michael Lyons, the sub-national review and then the White Paper—is all part of this progression towards better partnership, greater economic prosperity, greater local autonomy and proper delivery by local authorities on the basis of what they know their local communities need.

I was about to quote the noble Lord, Lord Smith, in exactly the same context, because he absolutely summed it up. There is no doubt that local authorities across the country can take advantage of the BRS as and when they are able to. I am not a bit surprised that the LGA has said that no one is lining up to do this immediately. Of course we are in exceptionally difficult circumstances and there are other tasks in hand. However, to deny other local authorities the ability to create this sort of partnership would be profoundly undemocratic. Michael Lyons in his final report said that,

“communities need more power to choose to raise new local revenue to invest in themselves … greater flexibility over raising revenues to invest at the local level should allow communities to strengthen their own economies … over time”.

He certainly did not suggest that that should be limited to London. In fact, in evidence to the Public Bill Committee in another place, it was significant that Julie Grail, the chief executive of British BIDs, stated that,

“we can see outside of London all sort of scenarios where a BRS could work very well”.

The basis of the Bill is to take the long-term view and create opportunities that are not there at the moment. If the amendments were to be accepted, the rest of the country would wonder why they were being debarred from a benign opportunity—a voluntary opportunity, which is a matter of choice to them—to take advantage of this new type of partnership. There is a huge amount to gain from giving local authorities a greater ability to raise revenue for investment, in partnership with business.

I hope that the noble Lord, Lord Bates, has been persuaded, if not by me, then at least by the noble Lord, Lord Tope, to withdraw the amendment.

Obviously, all sides of the House support Crossrail, but I have heard arguments that the project and our desire to have it have been used as a Trojan horse—a form of seduction—to roll out the BRS scheme across the country. It has been likened to a form of mission creep as a means of gathering more public money. Whichever side of the argument you are on, I have a question for the Minister. Can she guarantee that other government spending or government grants will be in no way reduced because of local authorities’ ability to levy a business rate supplement?

I am going on, I am afraid. There is a temptation, which people have foreseen, that the Government may say to local authorities, “We are not going to pay for that project. You pay for it out of the business rate supplement”. I shall give you an example. When the congestion charge was introduced under the Greater London Authority Act 1999, an estimate was made of the likely income that the charge would gather. Then—surprise, surprise—the very next year, the central government grant to Transport for London was reduced by almost exactly that amount. This is one of the worries. I ask the question again: will the Minister guarantee that government spending or government grants will be in no way reduced because of the ability of local authorities to raise business supplement relief?

We are straying into the principle of additionality, in some ways. I hope it will satisfy the noble Earl if I quote the White Paper, which is succinct and clear. Paragraph 2.17 says:

“In principle, additionality can be simply and clearly defined. It means that supplements should only be used for investment that would not otherwise have taken place. Local authorities should not use revenues from supplements to substitute for their own resources and to support projects which they would have undertaken anyway”.

There is no question of this funding being used to compensate for cuts in government funding.

The criteria that will have to be applied will have to meet certain very tough tests of additionality, which is exactly why the principle of these projects is so different and so specific.

I think it is slightly the other way around. It is because local authorities have been able to raise money through this scheme that the Government have said, “You’ve raised a lot of money this year. We are going to cut the grant that we are going to give you”.

Yes, but the principle applies. It is not a question of substituting funding from one source to another. These are exceptional additional projects, which will be funded through this additional mechanism. It will have no relationship with other resources and funding.

Before the noble Lord, Lord Bates, withdraws his amendment, it is hardly for me to leap to the defence of the Government on transport funding for London, but I must say to the noble Earl—I am sure he has encountered this in his years as a councillor—that disentangling the real rationale behind central government funding to a local authority, which is comparable to the example that he used, is always extremely difficult. What one suspects is rarely ever confirmed, however strongly one might suspect it. Central government funding for London’s transport infrastructure was enormous. Those of us who were working in London government might have had many criticisms of what was going on, but we could not have said that London was being deprived of funding for transport infrastructure. We could have said that we did not like the way in which the Underground was dealt with, and all that, but the cash amounts over the past few years have been enormous.

I thank all noble Lords who have taken part in this short debate on these amendments. I think I get the flavour of response to them, and I very much understand where it is coming from, but I will say a little more so that noble Lords understand where we are coming from and just in case people misunderstand our position or argue about it. This is particularly relevant to the observation made by the noble Lord, Lord Tope, that if London should have it, why not the rest of the country? It depends on what you think this is. We think that this is a tax. It looks like a tax, it walks like a tax and it acts like a tax, so it is a tax. It raises additional funds and places an additional burden on businesses, so the notion that somehow out there in the provinces businesses are queuing up to ask why they cannot have additional taxation is an interesting interpretation. That difference in perception between how we see this legislation and how the Government see it is at the heart of what we propose in the amendment.

Again, there are some key issues as regards Crossrail. It was unique legislation which required additional funding from businesses. Transport investment in London runs at a dramatically higher rate per head of population than elsewhere in the country. Many schemes are desperately trying to get off the ground: for example, the Leeds Metro system; the Tyne and Wear Metro, which is trying to get additional funding; new routes to Durham Tees Valley Airport, which need to be subsidised in order to keep them going; or Manchester, which is in a very difficult situation after quite decisively rejecting the proposed road charging in the referendum. Therefore, there is a disparity and argument outside London about what London receives, but it is very much about the share of the cake and, particularly, about the share of transport infrastructure spending in the capital relative to other parts of England in particular.

These amendments try to make the case. I and the Minister have referred to the Local Government Association briefing, which, in a sense, we are both praying in aid. It seems to be saying, “We are not sitting on the edge of our seat. We do not feel that we need it”. Effectively, if the survey of chief economic development officers around the country is correct, not one authority will use the capability. Therefore, why do we have to open it up to this extent? Clearly, there is a real need for Crossrail and a real problem in plugging the gap in its funding, which is why this innovative scheme was brought up. In our mind, that is where it ought to stay. That said, I very much sense the mood of the Committee and I am grateful for the comments that have been made. I will therefore withdraw the amendment, but reserve the right to return to it on Report.

Amendment 4 withdrawn.

Clause 2 agreed.

Clause 3 : Use of money raised by a BRS

Amendment 5

Moved by

5: Clause 3, page 2, line 7, leave out subsection (1)

Amendment 5, which is in my name and that of my noble friend Lord Cathcart, very much is an argument that has already been made by my noble friend in the context of the debate on Amendment 4. I have to be very careful about how I say that. It surrounds the whole issue of what is considered to be additional funding. We had a discussion about this because there are many ways in which the types of issues, about which the Minister told us and gave examples, could qualify for a business rate supplements scheme or the types of project that might come forward.

The list included, for example, a training initiative or a centre of excellence in a particular area, which again would be very worthy. I do not doubt that centres of excellence would improve innovation, which is one of the five key drivers of productivity. That equals growth, with which we have no problem at all. Growth is a wealth-creating investment. There was also the suggestion that people might use marketing to promote a local area and its businesses. These principal examples were offered as schemes which might qualify under the terms of this report and the Lyons report, to which we have referred.

The only difficulty is that a lot of that work has already been undertaken. The noble Baroness, Lady Hamwee, has referred to the role of the regional development agencies. In the north-east of England, we have three centres of excellence; that is, one for the process industry, one for new and renewable energies, and another for life sciences. They are all—certainly the first two—doing excellent work and have been funded by the regional development agency. Not wanting to build a conspiracy theory, the regional development agency in the north-east has had its funding cut from £270 million to £207 million. That is a significant cut. The viability and future funding of those centres of excellence is being drawn into question. Clearly, a cut of that magnitude is making the regional development agency look at the funding of all its major projects.

We should be grateful for some further statements on the record from the Minister about how the term of additionality is to be applied. If it is suggested that that funding is taken from hard-pressed local business rate taxpayers, simply taking over from the regional development agency because it has had its central government funding cut, that is unacceptable—similarly when it comes to promoting an area. Forgive me for mentioning the north-east of England twice, but there seems to be a rich seam of examples there. We have the major theme of promoting the north-east of England, which is “Passionate People, Passionate Places”, as will be demonstrated at St James’s Park this very evening. That is the slogan: “Passionate People, Passionate Places”. Regeneration under that slogan is being developed by the regional development agency. Are we to say that it will not be involved in promoting the area any longer? The Newcastle-Gateshead initiative, which has a special board chaired by the noble Lord, Lord Faulkner, is doing some work in that area.

My point is that there are myriad different vehicles, whether business improvement districts, local authority business growth initiative schemes, regional development agencies or local authorities’ economic development functions, Business Links, or other quangos, that are doing that work up and down the country. Our suspicion, and the reason for moving the amendment, is that the Department for Communities and Local Government is not the focus, but that this is being driven by the Treasury, which sees this as a way to plug the gap in the cuts in public funding by transferring part of the burden to already hard-pressed businesses. That is the basis of our objection, and that is why we are moving the amendment: to seek absolute clarity about what is meant by additionality and the tests that the Government plan to introduce to ensure that money is truly additional. I beg to move.

I remind the Committee that if the amendment were to be agreed to, I would be unable to call Amendment 6 for reasons of pre-emption.

The amendment puzzled me because it seemed to be inconsistent with the noble Lord’s other concerns but, having heard him speak, I think that he is probing what is meant, rather than seeking to take the provision out of the Bill. It gives me an opportunity to ask the Minister to say a little more about a term used in the consultation on the draft guidance on additionality, which is “existing available funding”—that local authorities should be able to demonstrate that the BRS would add to existing available funding and how it would fit with other available funding packages.

It seemed to me, when reading and rereading that paragraph, that to assess what is available is not quite as easy as it might initially appear. Funding may become available when the last bit of the jigsaw, which might be the BRS, is slotted into place; the funding exists somewhere but the BRS makes it available for the project because of the local authority’s own commitment. I hope the Minister can reassure me that if that is the situation, the additionality test would be passed and not failed. To turn it around, it is the BRS that ensures that all the funding comes together. One must expect that there would be situations where the private sector would say, “We will invest in this project if we have a commitment from the local authority for it”. It would be against the spirit of what the Government have been saying if in that situation the whole thing failed because the additionality test was failed.

This is an important amendment, which gives me an opportunity to explore the issues raised by additionality. They are complex, because to an extent we are dealing with hypothetical situations, as the noble Lord, Lord Bates, said. It is about the place of BRS when it is levied for a project with more than one funding stream. The noble Lord has raised a probing amendment that would remove the restrictions on the use of BRS only for expenditure on the project to which the BRS relates, and for expenditure that the local authority would not have incurred had it not imposed the BRS, which is fundamental to the BRS. Noble Lords said that there were myriad funding streams. That is the point: there are many funding streams but this is quite different.

I shall set out again why we are so clear that this will not be used to plug gaps or as a substitute for other funding. It would have been verging on the dishonest if we had been less than clear in what we said in paragraph 2.17 of the White Paper, which I shall cite again:

“supplements should only be used for investment that would not otherwise have taken place. Local authorities should not use revenues from supplements to substitute for their own resources … This is … a new tool to stimulate economic growth—not … a different way of financing existing policies”.

That is the answer to concerns about the Treasury. This has been crafted with specific challenges in mind—the sort of exceptional project that may be like the projects that the noble Lord mentioned which are funded in other ways but which, without the BRS and the commitment of this partnership between business and local authorities, simply would not have happened.

I understand the concern that the noble Lord has raised about RDA funding. It is important to say again that the RDAs’ terms of reference are based in law. They are publicly funded and they have to deliver on their aims and objectives and spend their budgets. It may be that an RDA would find a role in a partnership, but crucially, as the noble Baroness, Lady Hamwee, was getting at, the BRS is the crucial and unique link that makes it possible to do something with available funding that would not otherwise have happened.

I will try to say this again in another way, because I think that I am repeating myself. The fundamental point is straightforward. It is not the Government’s intention that BRS will replace funding streams from central government or anywhere else in the public sector, any more than we intend that BRS should replace funding streams from within the levying authority. BRS is about promoting economic development locally in partnership between the levying authority and business in ways that would not be possible without a contribution from the business sector. This will be a case-by-case opportunity for development which will be unique to each local authority. It is very difficult to hypothesise, because local authorities are innovative and imaginative. All sorts of things may lend themselves to this sort of partnership, which will be extremely successful. Yes, BRS can complement other funding streams, but it is about delivering more.

When we consider additionality and why the focus on economic development is fundamental, I should again refer to the White Paper. We went on to say that BRS is,

“not intended as a new means to fund existing expenditure, or as a resource to support general service expenditure. The Government intends their use to be clearly focused on economic development, with local flexibility over what specific projects will best promote long-term economic growth in that area”.

It is fundamental, therefore, that BRSs are used on the project to which they relate, because the White Paper essentially was clear that BRS is,

“intended to support specific investments in economic development in a transparent and targeted way”.

That is the credibility of the project. That is why business has to be confident that its contribution to a project cannot be used for any other purpose. The Bill provides for that.

I turn to the question of determining additionality. In the White Paper, we did not disguise the fact that assessing additionality may well be complex. In fact, paragraph 2.19 makes that clear. It states:

“It requires comparison with a hypothetical ‘no supplement’ scenario which can never be fully tested in reality. There will need to be clear accounting of the revenues”;

and identifies four ways in which that might be done to test the claim that it is additional expenditure. There could be benchmarking in the areas affected by spending, so it can be assessed by how far it is additional. The White Paper states that,

“local authorities could be required to set out the funding routes that have been explored, and the reasons that they are not sufficient”.

A local authority with a three-year budget has a baseline and can easily build in benchmarks across the range of those revenues in transparent ways. It also states:

“where an authority intends to use a supplement to support borrowing they could be required to set out their full borrowing plans”.

Therefore, there are ways in which this can be tested, and the sort of examples that have been given in the provisional guidance and the White Paper ranged over a number of different types of projects. For example, the White Paper mentioned projects such as a new bus transit, a light rail scheme or a convention centre that could pull in experience and opportunities; or there could be a retail development. There are all sorts of different ways in which this claim of additionality could settle on a partnership or project and could be tested under the criteria that we have set out.

That is not at all woolly. It will be a tough test, but we have sufficient detail in the White Paper and there will be further information in the policy paper that we will issue later this week. I was wrong to call it guidance; it is actually a policy paper that will provide the context to the regulations. That is why it has been a more complex document to write.

Although I am conscious that I have been repetitive—which is partly to do with the helicopter circling overhead—I hope that I have answered some of the questions that have been raised by the noble Lord and that he will feel able to withdraw his amendment.

The Minister’s response was very helpful, as usual, and I am very grateful for other contributions to this short debate. The Minister drew attention to the White Paper. As well as outlining why this is a very difficult issue, paragraph 2.19 refers to four alternative routes that could be used for testing additionality. Paragraph 2.20 says:

“The Government intends to consult on how best to deliver the additionality requirement”.

The Minister invites us to accept that we need a tax-raising power and to trust that the Government will use it only for projects that are additional to those already in the pipeline. It does not even offer any settled way in which that will be done.

The Minister refers to the fact that councils are innovative and imaginative. Councils may be, but Her Majesty’s Treasury trumps everyone in its innovation and imagination in coming up with new schemes. In saying that, I declare an interest as a former Treasury Minister in a previous Administration who has spotted its fingerprints on these issues. Noble Lords can see the vagueness when it comes to computing the figures, and I am sure that we will return to the issue on Report. I beg leave to withdraw the amendment.

Amendment 5 withdrawn.

A Division has been called in the Chamber. Normally we would wait for 10 minutes for the Division to end, but by request we will break for 15 minutes. The Committee will resume at 6.02 pm.

Sitting suspended for a Division in the House.

Amendment 6

Moved by

6: Clause 3, page 2, line 10, at end insert—

“( ) Such sums may be used for capital and revenue expenditure or either.”

I shall also speak to Amendments 24 and 26 to 31. Before I do so and to ensure that no one spends time following up the point I made on the powers of regional development agencies, let me “fess up”. The provision I was thinking of says that:

“A regional development agency may only provide housing by acquiring existing housing accommodation and making it available on a temporary basis for purposes incidental to its purposes”.

That is probably a draw, because it makes my point that housing is relative to economic development, but I withdraw the suggestion that this might be different because an RDA has only very limited powers to provide housing and cannot actually build.

Amendment 6 would provide that the sums raised by BRS,

“may be used for capital and revenue expenditure or either”.

I have tabled this amendment for clarification and, I hope, to hear from the Minister her confirmation that my understanding of the position as expressed in this amendment is correct.

Amendment 24, to Schedule 1, would include in the prospectus:

“The authority’s estimate of the costs of maintaining and operating the project and how they are to be funded”.

It is not clear that paragraph 4 covering an,

“authority’s estimate of the total cost”,

extends to these matters. I think it probably should, but again I seek to understand the position more fully. Maintenance is often overlooked when a capital project is being constructed or not thought through in sufficient detail. Ratepayers are entitled to know about maintenance and operation in order to judge the project and to assess how realistic is the estimate given by the levying authority.

The other amendments are probing in nature and all express future categories of expenditure. For example, Amendment 31 probes in paragraph 11 the words,

“expenditure incurred and work undertaken”,

which includes what will be undertaken in the future on the project. Perhaps more specifically, Amendment 29 is to paragraph 8(c), which refers to the “principal terms” on which money is loaned—

“in particular, the rates of interest”.

We all know that rates of interest can go up as well as down. I am putting quite a heavy burden on a local authority to see into the future, but you cannot budget for the sort of projects which might fall within these categories without thinking through the “what ifs”. So I have referred to,

“the anticipated terms or budgeted interest”.

Again, the intention is to assist ratepayers in assessing the reality test applied to the prospectus. I believe that the prospectus is an immensely important document, which it will be quite hard to construct. I want to be reassured about its scope. I beg to move.

From our perspective, we find much in the later amendments in this group with which we would agree and find very helpful. However, as we are discovering as we go through this afternoon, we are perhaps on the wrong foot—or the right foot, depending on one’s perspective. Under Amendment 6, the business rate supplements can be used for capital and/or revenue expenditure. We would have a problem with that because we do not want the scope of the business rate supplements to be wide and to include revenue spending. It opens up the possibility of local authorities being called to use the business rate supplements for things that should really be paid for from the centre. That is all tied up with the fear that the Government will try to use the business rate supplements to shift the burden of debt on to local authorities.

If the rate is to be used, it should pay for specific and clearly identified projects, which are one-off in nature or have a clear plan as to how they will generate the revenue from their activity to fund their ongoing existence. Taking the conference centre example used by the Minister, in the prospectus there should be a clear statement as to how that will be commercially viable on an ongoing basis.

However, other elements of this group are very helpful. Amendment 24 sets out the requirement in the prospectus to make clear how the projects will be funded on an ongoing basis. It also means that there is something for businesses and interested parties to hold an authority to account for if more expenses are incurred and more funding is needed. It also increases the business involvement in a project by increasing the amount of information open to assessment in the prospectus, which is available before a decision is made. This is very important, because we would like businesses to be involved throughout the whole process and not just when a decision is imposed and the business rate supplement has been levied.

Amendments 26 to 31 relate to borrowing money. The noble Baroness has done us a great service in raising the issue of borrowed funds, which is outlined in Schedule 1 in the prospectus. If money is going to be borrowed for cash flow, one presumes that there is going to be a lag, albeit a fairly short one, between the funds coming in and their being expended. Some funding is going to be needed in that gap. That is important, because this clause in the schedule raises whole new questions. In this age of difficult dealings with banks, for example, which the noble Baroness, Lady Hamwee, referred to, what rate of interest is going to be levied? Who undertakes the liability for the loan on its ongoing basis? If a project does not work out, who stands liable? Could it be that the businesses that signed up to the business rate supplement are therefore somehow inculcated as part-funders, and therefore partly responsible for the loan that is taken out on a project that they have supported? There are a number of questions here, and we will listen with care to the Minister’s response.

This is a useful amendment that will allow us to dig under the surface of the Bill. I shall take Amendment 6 first. It is obviously right that there should be safeguards to ensure that money is spent appropriately, and the Bill provides safeguards on that point. The Bill makes clear, as I have said several times today, that revenue from BRS can be used only on projects that the local authorities are satisfied will promote economic development. Conversely, the Bill sets out a number of areas for which the supplement cannot be used, and we have discussed those today as well.

It is also true that the BRS cannot be used to fund services and projects that the authority is already committed to. We have discussed that too. Clause 3 makes clear that the supplement can be spent only on the project for which the BRS was introduced. Levying authorities will not be able to raise a supplement for one project only to use it to fund another.

That is more or less a summary of what we have debated on previous clauses. With regard to this amendment, I am happy to make it clear that the funding can be used either for capital or for revenue, whichever the local partners determine will be most useful. The crucial point is additionality. We all recognise that there are immensely worthwhile projects where the real added value would come from support for staff, skills or whatever it is. The original guidance gave the example that a levying authority may identify a business support or vocational skills programme in a local area, which clearly brings with it a revenue implication in terms of training. Whether revenue is used to pay the salaries of staff or training—in fact, whatever it chooses to use the revenue for, whether it is about repaying loans or directing it to revenue projects—we have decided that this should properly be left to the authority. We have provided for flexibility there.

I mentioned loans. I may not be able to answer all the questions asked by the noble Lord—I may have to read Hansard carefully tomorrow to make sure that I have picked up all of them—but I will do my best. Clause 3 already makes provision for levying authorities to use BRS revenue to repay loans on sums borrowed. That flexibility is another very important feature of the BRS. It means that authorities are not subject to what would in effect be a limitation on their ability to spend their BRS revenue on capital projects. This will give them the flexibility that they need to identify the project or projects that will best suit their local circumstances and aspirations.

I reiterate that I am happy to put on record the fact that the Bill already gives levying authorities the freedom to use revenue income on capital expenditure, revenue expenditure or a mix of the two. It is unnecessary to put that degree of detail into the Bill. I hope it will help that I have put this on the record.

The Minister’s phrasing seems to suggest that she is open to the possibility of a local authority choosing to raise its capital finance by means of a bond at a local level as a debt instrument. Is there any stipulation on that? She seemed to suggest that a local authority bond or another bond could be a way of raising capital finance directly on the markets rather than from a commercial lender.

I do not have that degree of detail in my briefing, but I will say more about loans in due course. I suspect that I will have to write to the noble Lord. As I said, I might have to read his questions in Hansard in some detail.

Amendment 24 would require levying authorities to include in their prospectus an estimate of the costs of running a project funded by a BRS. This would include the expected cost of maintaining and operating the project, as well as details about where the funding would come from. That is clearly more relevant to capital projects than revenue projects because it specifically highlights maintenance and operating costs.

As I have said, the BRS can fund revenue projects. The current draft of the Bill is deliberately broad in asking the levying authority to set out the potential cost of the project. We must recognise that some of these projects might be quite long term and will be very diverse. That is why we have built in as much flexibility, accountability and transparency as possible.

I reassure the noble Baroness that what she wants to achieve is already allowed for in the Bill. Paragraph 7 of Schedule 1 makes it clear that levying authorities should include a description of how the money that is raised though the supplement will be used. Therefore, if the levying authority plans to use the supplement to cover the maintenance and operating costs of the project, that will need to be set out in the prospectus under the current provisions of the Bill.

As I have said, the current draft of the Bill is purposely flexible because we wanted to ensure that all the costs associated with a BRS project are captured in the prospectus, irrespective of how the money raised will be used. If the BRS is to be used to fund operational or maintenance costs, the Bill already makes provision for that to be made clear in the prospectus.

Amendments 26 to 29 seek to clarify the information that a levying authority must include in a prospectus when BRS revenue is to be used to borrow money to provide funding for a project. The intention is that levying authorities should be required to give details in their prospectus of money that they intend to borrow to fund their project. It might help if I explain what the Bill currently requires levying authorities to set out in their prospectus when they propose to borrow money for a BRS-related project.

Schedule 1 sets out the information to be included in a prospectus for a BRS. The prospectus is a central plank of BRS and will form the basis of the statutory consultation that must take place with those potentially liable to pay the levy. It is a key document that will set out the arrangements for such matters as billing, exemptions, thresholds, and how the authority proposes to deal with variations, overspends and underspends. As such, it forms a vital part of the necessary reassurances for business and stakeholders. One of the areas that must be covered in the prospectus is the details of any borrowing that the BRS will fund. This must include the amount of money loaned, the period for which the money is loaned and the principal terms on which the money is loaned—in particular, the interest rates.

These amendments, however, propose that levying authorities should be required to set out in the prospectus information about loans that the authority proposes to take out in the future. I reassure the noble Baroness that I agree that this is important. Where money from business is used to borrow money for a project, it is absolutely right that ratepayers should be able to see the details of those loan arrangements and have the chance to comment as part of the consultation process. That should apply whether the levying authority has already borrowed the money or intends to do so. There is no need for the Bill to be amended to accommodate this point. The Bill, as drafted, already requires information to be included in a prospectus on whether the levying authority has already borrowed the money, or intends to do so in the future. I hope that reassures the noble Baroness. I hope that I have also reassured the noble Lord as I think that some of the questions he raised concerned some of those connected issues. However, I may not have gone into sufficient detail to satisfy him on some of the other points he raised, which I shall have to look at.

Amendments 30 and 31 seek to expand the information that a levying authority must include in a prospectus when setting out its plans for levying a BRS. These amendments would require levying authorities to set out in their prospectus how they intend to provide ratepayers with information about their future plans for the BRS. This would give further reassurance to those paying the BRS about how their money is being used. I have talked about the importance of the prospectus. I perfectly understand and agree with the argument that those who contribute to the BRS should be able to see how their money is to be spent. However, the Bill does not need to be amended to address this point. The prospectus already requires levying authorities to set out key information about future spending plans and how they intend to spend the BRS money. That requirement goes hand in hand with the requirement for authorities to set out in the prospectus how they intend to inform ratepayers about expenditure incurred and work undertaken on the project. Therefore, we have built in as much transparency and future proofing as possible into these arrangements so that people can see how the money will be raised in the future and how it will be spent. I hope that satisfies the noble Baroness.

I had better take advantage of the respite from the noise of the helicopters but I hear that it is not continuing. This reminds me of my early days in your Lordships' House when I took a guest, who was the chief executive of a record company, into the Chamber and instead of saying, “Ooh, ah, look at the Throne. Where do you sit?”, he said, “It must be very difficult mixing the sound in here”. The recording of today’s proceedings will be difficult with the helicopter apparently intent on ensuring that we are all behaving ourselves.

I was not at all surprised that the noble Lord, Lord Bates, disagreed with the first of my amendments in this group but I am very glad to have the Minister’s reassurance on Amendment 6 and the other amendments. I may return to Amendment 24 at the next stage as I may not have made myself clear.

I am not concerned about the flexibility or what is permitted; I was looking to require the prospectus to go wider than we have been discussing, beyond the use of the BRS, but to give information that will help ratepayers to take a view on whether the project is one that they want to support. The issue is not just the use of their own money but—I hate the word “viability”; it is often misused, and I do not think that using it at this point would be absolutely correct—whether the project is realistic and what its future prospects for success are. Maintenance and operation must be a part of that, even if the BRS is being used only to start the project off. If I were a business ratepayer, I would not be enthusiastic about paying for the establishment of a project if I did not have reasonable confidence that it was going to be successful over a fairly long term.

I may well want to come back to that issue, and possibly we can discuss it outside the formal proceedings. I beg leave to withdraw the amendment.

Amendment 6 withdrawn.

Amendment 7 not moved.

Amendment 8

Moved by

8: Clause 3, page 2, line 26, leave out “The Greater London Authority” and insert “A levying authority”

I shall speak also to Amendments 9, 10 and 32. I appreciate that Clause 3(5), which would be amended by the first three amendments in this group, is designed for the particular structure of the Greater London Authority; it refers to the GLA and to “functional bodies”, the term that is used for the four so-called functional bodies, and it picks up on the mayor’s relationship with London Transport and with London’s regional development agency, the London Development Agency, in particular.

My amendment probes whether it would be appropriate to allow other levying authorities not just to contract with third parties, including their RDAs and private sector commercial organisations, but to make arrangements for, say, the RDA to carry out the work that is in prospect. I have assumed that Clause 3(5) means something more than a fairly normal contract with a third party, because of course third parties are going to be contracted to undertake the work. Does it mean here that the functional body is to be given some discretion by the GLA? If it does not mean that, why is it necessary? To widen the argument to the other authorities, is it not important that they contract with bodies to achieve an outcome, perhaps with discretion as to how to achieve it? I do not see why they cannot be allowed to do that. The implication of Clause 3(5) is that there is some restriction on the other authorities, and, in these days of partnership working, that restriction does not seem appropriate—if my reading of it is right.

I prepared this amendment before I realised that a similar amendment had been moved in the Commons by my honourable friend the Member for North Cornwall, but my reasons are not the ones that he was using; they go rather further.

Amendment 32 would require an explanation in the prospectus of whether there is to be a special purpose vehicle, its governance arrangements and its proposed project management. Again, businesses that think other than fairly superficially about a proposal are going to want to know about governance—a very important point on which the noble Lord, Lord Bates, has tabled an amendment in a later group—because energetic organisations understand the importance of good project management, and this is all about assisting them to assess the project that is put before them. I beg to move.

I can be fairly brief as we have established our position on this. We would have great difficulty in supporting an extension beyond the Greater London Authority of levying powers and, therefore, we would not be able to support the first group of amendments. However, if this Bill is to go ahead, Amendment 32 would provide an important safeguard. There ought to be a statement on the governance and management of a project. The noble Baroness, Lady Hamwee, referred to her colleague in another place who moved a similar amendment. He stated that it would be a case of constructing a board comprising people drawn from the local authority, businesses and the community, and particularly those who would be paying the business rate supplement. It seems sensible and appropriate to have them on the board.

I have some experience of this type of arrangement. In the 1990s, my noble friend Lord Heseltine introduced the concept of City Challenge, which was the same idea except that it brought together the public and private sectors willingly to contribute funds towards the development or regeneration of a given area. As a part of that, City Challenge boards were set up comprising all the various stakeholders. Some of them worked very closely together, which resulted in a load of spin-offs that went way beyond the specific project before them. However, the idea of getting businesses and local authorities around the table talking in the same language and working together is something we would regard as very good practice indeed. We would strongly support any measure that seeks to put that in the Bill.

Amendments 8 to 10 would allow all levying authorities to pass their BRS revenues on to any other body to spend on the BRS project. Amendment 32 would require a new levying authority to set out in the prospectus the governance structure. Both sets of amendments deal with accountability and openness, as well as with good project management. I know that the noble Baroness understands very well the arrangements that apply in London and underpin Amendments 8 to 10, so I can save at least three pages of speaking notes because I do not need to explain to her how London works. Suffice it to say, in moving swiftly to paragraph 7, that the same arrangements do not apply outside London. The levying authorities are obviously more constrained in how they deliver BRS-funded projects.

The key thing—the noble Lord, Lord Bates, made this point—is that the provisions of the Bill are very much about reflecting local structures. They are not about stifling possibilities for joint working and collaboration. This is, after all, a partnership, and accountability is key. It is obviously essential to have a clear account of how money that is collected from ratepayers for a BRS project is spent, and we have had to make special arrangements in the Bill for the GLA because of the unique way in which the different functions operate in London. Obviously we do not need to make the same provision for local authorities outside the capital.

Joint working in any local authority will depend on what body the levying authority wishes to work with, what the relationship is, whether that body has the capacity to hold funds in its own right and how its existing capabilities can be turned to the advantage of the BRS. We are not inventing anything new; we are simply maximising the possibilities presented by what is already there. Local authorities already have variable powers to enter into partnerships and to spend money on them. That includes providing financial assistance. Nothing is ruled out that I can see, as long as it is set out in the prospectus with a clear account of how the powers, functions and money will be used to secure the objects that everyone has signed up to. That really is a very flexible and pretty robust set of possibilities.

Obviously the key to all this and to credibility will be accountability and people, particularly the business partners, being satisfied that the arrangements are robust. They are going to need to know that, and that will have to be demonstrated to them in a way that is both transparent and credible.

As part of the accounting arrangements, the Bill requires all levying authorities that impose a BRS to keep a specific BRS revenue account for each BRS that they operate. That will ensure there is a clear means of identifying income and expenditure, and we will certainly make that clear in regulations. We will consult shortly on those regulations, which will set out what we propose for the whole set of accounting arrangements: what must be credited, what must be debited, and so on. Credits will include BRS revenues for the year, and debits will include expenditure on the project.

I hope that that indicates the flexibility we are looking for and that will ensure that the project is constructed with the greatest possible chance of success and will fit in with the local arrangements and partnerships.

Amendment 32 seeks to ensure that levying authorities include in the prospectus information on project management and governance. I entirely agree with what the noble Baroness said about the importance of good project management, because businesses need to have confidence in the way in which the project is managed. They need to be kept informed about the progress that is being made and the costs that are being incurred.

I know that the amendment is probing, but it is overly restrictive and does not reflect the fact that each BRS will be different. Indeed, each BRS might be only a minor part of a much wider funding package. The same aim could be achieved through other more flexible means that would allow levying authorities to tailor the approach to the specific needs of the project and the local community.

Importantly, the BRS prospectus will have to make it clear how those who are paying the supplement can expect to be kept informed about how much revenue has been raised through the BRS and how this money has been spent. Paragraph 11 of the current Schedule 1 requires levying authorities to make it clear in the prospectus how those liable for the supplement will be informed about the expenditure incurred on a BRS project, and about how they will provide updates on the work that has been completed. That will be a very clear indication of progress. Businesses will not be kept in the dark.

The guidance that will accompany the Bill makes clear that it is right—it is fundamental; it is written into the basic assumptions of the White Paper—that businesses must be involved. They will not commit unless they clearly understand the nature and expectations of the project. That must mean that they understand the wider governance of any project.

Local situations are very different, with different funding streams. We must leave it to local discretion how BRS will fit in to and be part of any governance structure. Surely noble Lords will agree that it is better for the accountability and management arrangements to be decided case by case. The levy authorities, in partnership with the key stakeholders, are best placed to decide what approach to governance is appropriate for each project, because they will truly understand their nature and scope. The noble Lord referred to the City Challenge project, which was hugely successful, but there are many different projects with different forms of governance. The New Deal for Communities is a more recent example of such local organisation. We cannot determine such things centrally; we should not try. I know that noble Lords would not want to be prescriptive.

Transparency is crucial. That is why the Bill requires that the prospectus states how and when money will be spent. Any successful project involving local business will want to consider the skills and talents available, and we would expect all aspects of that to be developed, with local business being the key driver. I am happy to signal that appropriate involvement is vital and that any locally important project must demonstrate the involvement of local stakeholders. I would be very surprised if that was not part of a BRS prospectus. We do not need to lay down a model to be imposed on diverse local circumstances.

I hope that the noble Baroness will feel that that answers most of her questions.

I am grateful to the noble Baroness. I thought that I understood London, but I am puzzled why Clause 3(5) is necessary. Is it because the GLA’s powers—as distinct from those of the functional bodies—are not sufficiently extensive?

I did not address that point—I addressed it indirectly in my general statement—but I will write to the noble Baroness about that because there may be some other implications of that subsection.

The noble Baroness's comments on Amendments 9 and 10 were helpful. I had not intended Amendment 32 to be restrictive. It was designed to assist ratepayers in assessing what they are being asked to sign up to. I was not proposing a particular model; I used the phrase,

“whether a special purpose vehicle was to be formed”,

not that it should be. I should like to think about that, but, for now, I beg leave to withdraw Amendment 8.

Amendment 8 withdrawn.

Amendments 9 to 11 not moved.

Clause 3 agreed.

Amendment 12 not moved.

Clause 4 : Conditions for imposing a BRS

Amendment 13

Moved by

13: Clause 4, page 3, line 21, leave out “where there is to be”

I shall speak also to Amendments 15, 16, 17, 34, 36, 42, 44, 46 and 47, and I am quite alarmed that I seem to have so few notes for so many amendments. The noble Lord, Lord Bates, and the noble Earl, Lord Cathcart, have other amendments in this group.

This takes us to the issue of ballots and our proposals that there should always be a ballot, not only if the levying authority decides that there should be or if the threshold is reached. I am well aware that the Local Government Association is not seeking an extension of the ballot provisions; indeed, it would prefer there not to be any ballots, as I understood the evidence. It takes the view that whether or not there is a ballot should be up to the local authority. I understand that line of thinking; I thought that the evidence session in the Commons went less into why that was the case than it might have done, which was a pity, but one can understand—and I very much share—the view that local authorities should be autonomous.

The Liberal Democrats have a reputation for defending the local authority position; that is an instinctive reaction, but I hope that it is not a knee-jerk response. It is because we see local authorities as very close to their communities and carrying out an important representative role, but the concern that underlies all that is concern for the people whom they represent. I want to explain why I am taking what may appear to be an anti-local-authority line. It is not—that is not where I am coming from.

I do not suggest that a ballot should replace good, thorough and effective consultation, which is fundamental to the business rate supplement proposal working well. However, because there is no business vote, although I am not arguing for that, we need to be careful to give business the fullest opportunity to make its views known.

I realised, but only this morning, that I had made a bad error in the drafting of these amendments, which I found myself dealing with at some speed just before they were put down, and I hope that both the Minister and the Official Opposition’s officers received a message that no one should spend hours honing their arguments about why there should not be a ballot on Crossrail. I should have accepted Crossrail. The term “unique” really does apply to it—an overworked term, but in this case used correctly. I do not seek to argue for a ballot in this case. Crossrail is different; it has been debated for many years and in great detail.

The Minister, John Healey, has said more than once in the Commons that it would not be right for business to have a veto when the funding for any given project is also coming from other sources. I seek not a veto over a project but a veto over the BRS element of the project’s funding. It is important to have a ballot for any project. The Bill provides a threshold, and if it is considered necessary for business to have—I will use the same terminology—a veto when its contribution is over the one-third threshold, why is it not necessary to have a ballot for any contribution? I do not see that the proportions make for a separate argument.

Most of these amendments were drafted by the Federation of Small Businesses and arrived at a very timely point when I realised that I was in danger of not managing to draft amendments on ballots by the deadline. It says that there is a danger of an authority deliberately or carelessly underestimating the BRS proportion in order to avoid a ballot. I acknowledge its concern but I do not share it. Local authorities may do their best to ensure good relations with businesses in their area but the national non-domestic rate—I stress “national”—is a national rate. It is harder to consult effectively and there is inevitably a degree of cynicism about consultation when the body collecting is not the body setting. We need good consultation and the ballot.

I return to my point about whether it is necessary to have a ballot if the threshold is reached. The draft guidance, which I looked at this morning, seems to ignore the discretion of local authorities to hold a ballot whatever the proportion. That again makes me wonder about the Government’s mindset in arriving at their decision on this. This is an immensely important point, as I said. It is not anti-local-authority but pro-ratepayers. I beg to move.

I wish to speak to Amendments 14, 35 and 37 standing in my name and that of my noble friend Lord Cathcart. I do not think that the noble Baroness, Lady Hamwee, is the only person who has struggled to capture the essence of this matter vis-à-vis all the amendments in this group. She generously acknowledged that there might not be coherence with regard to all the amendments in the group. I am instructed that we should make a similar apology. I am deeply conscious that often our speeches would not make sense without the aid of the wonderful people who burn the midnight oil, undertake research and draft amendments for us. Having failed to acknowledge their existence when the amendments that they have drafted go swimmingly well, I do not want to draw attention to them only when things go wrong. I thank them for all their work and support.

As the noble Baroness, Lady Hamwee, said, this matter goes very much to the heart of the issue. A mandatory ballot is one of the two or three central issues that we need to debate. The Minister said earlier that it was important to consult the business community and that she had met the British Retail Consortium, the Federation of Small Businesses, the CBI and the British Chambers of Commerce. I cannot remember exactly what subject was being discussed but she mentioned that there did not appear to be an appetite for the proposed measure.

This is entirely different. One might dare to say that every one of those organisations is militantly in favour of having a vote on this key issue, which is particularly the case at the present time of financial hardship, economic downturn and recession. After all, it would be strange—would it not?—to have a situation where a business rate or a project was proposed with the explicit objective of economic development, regeneration and growth, and not to consult or for it to be done against the wishes of the people who were generating that economic development and growth. It would be an own goal of spectacular proportions, perhaps equalled only by the ports tax, about which we have talked on other occasions. This is a non sequitur.

Clearly, if there is a powerful, strong, persuasive case for how this project will result in economic regeneration in a given area and increased economic output, the businesses whose livelihoods, profits and salaries are dependent on such economic development should be at the front of the queue in endorsing it. If they are not, that raises serious questions about whether this really is additional and about economic regeneration. Those points need to be on the record.

At the moment, the ballot, as it is configured, is directed to those who may be liable to pay the rates and would have a rateable value in excess of £50,000. Sometimes we let these things trip off the tongue, but a £50,000 rateable value is a decent-sized business. I certainly would be happy to run a business with a £50,000 rateable value. It suggests that you probably have 3,500 to 4,500 square feet of office space, which is probably enough for 35 to 40 members of staff, unless it is the House of Lords, where it would be enough room for 300 to 400 Members. But it is a pretty substantial place.

When it is measured against rateable value, those principally affected are not necessarily offices. They will be retail premises because they obviously need to have the store facilities. I believe that relatively small numbers of businesses fall into that category. In the briefing from the Mayor of London’s office, the Greater London Authority produced a helpful map—although I do not want to raise the issue of the map again. There is one here, but I am sure that the GLA had longer to produce it than the worthy people in the Minister’s department. However, it points out how many authorities have 20 or more businesses with a rateable value of more than £50,000. Hansard is still based in the written age, and we cannot show pictures—although it is worth Hansard considering having pictures every now and again. Dare we say that? Is that utterly radical? That really will get me into trouble. If a map were available, it could be useful in this regard because it would show vast elements of wide spaces all over London which do not have between 0 and 50 businesses with rateable values of more than £50,000. That certainly applies further out of London, where rateable values obviously fall. Because the cost of property falls, as does rent, there will be far less incidence of businesses with rateable values at that level.

My point with regard to the whole section on rateable values and the size of business that is involved is that it should not be too difficult for the local authority, if it wants to regenerate an area, to talk to businesses of this size on a routine basis. It ought to be engaging with them; clearly it is going to be a major employer. Ninety-six per cent of businesses, or whatever the number is, so the Federation of Small Businesses tells us, have fewer than 10 employees. Clearly, then, a business with 20, 30 or 50 employees is a significant business in the area and should be involved in decision-making.

We talked before about the White Paper having the problem of additionality. If you want the ultimate test of additionality, put it to a ballot. The ballot is the ultimate test. If an initiative ticks all the boxes, is truly additional and is genuinely for economic development, you will have no problem in persuading people to sign up to it. If it is not, however, and if it is just a shuffling of the deckchairs, or just a pet project of one of the local government officers, you will not get people to do that.

We now have this farcical situation where the Bill says that the levying authority might decide, even if the contribution is not over one-third, to offer a ballot. It is only ever going to offer a ballot on the projects where it thinks it will get strong approval. This amendment would ensure that all projects under the business rate supplement had that approval. With a stroke of a pen, that would assuage a great deal of concern from many business organisations. It would be good practice and would force local authorities into good discussion and dialogue with businesses. It would follow and mirror a type of arrangement that has worked well in business improvement districts and so on, and it ought to be supported.

The whole ethos of the Bill is to try to take the business community with the schemes and to try to build on the relationships between business and local authorities. It is all about building on what are hopefully the existing good relationships between those two. I am afraid that, like other noble Lords who have spoken to these amendments, I cannot divorce the consultancy process from the voting process; they are tied together.

The Minister in the other place, John Healey, said at Second Reading that,

“there will be compulsory consultation”.—[Official Report, Commons, 12/1/09; col. 44.]

That sounds very punchy but compulsory consultation, although welcome, can be ignored. I can give two examples where that has happened. The first was when Ken Livingstone tried to extend the congestion charge. He jumped through all the right hoops, including consultation, but business and residents did not want the extension imposed on them. That opposition was ignored. The other was another thorny issue: the consultation on the third runway at Heathrow. There was a lot of opposition to that, but it was ignored.

I am not making any particular points about those issues. My point is that consultation alone is a very thorny issue and does not necessarily lead to satisfaction. If, as my noble friend has said, a scheme really is so good for business, they will vote for it. Why would they not if it is going to be so good?

The noble Baroness, Lady Hamwee, put the position of the Local Government Association, and I am afraid that I do not agree with it. It would say that, wouldn’t it? That was bound to be its position. It does not want any opposition to its schemes, so it does not want anyone to vote on them. We have the bid scheme. Bid scheme approval requires a majority of liable taxpayers so that the aggregate of rateable values voting in favour must exceed those voting against. That scheme seems to work extremely well, so why cannot we have a similar system of mandatory voting for this all the way through? I cannot understand why the Government are so reluctant about this.

Another point is that you get voting only when the contribution from business is 33 per cent of the scheme. There is the possibility that local government will massage the figures. If a local authority wants to raise £300,000 from business through a BRS, provided that its estimates for the total cost are more than £900,000, it will not have to have a vote. It can then force its project through without one; it can make the estimates greater so that it does not have to reach the threshold of a third. I have talked before about what happens when the actual cost is lower than the local authority’s original estimate and about the ability to massage the figures. The noble Baroness gave me an answer, and I hope that it would not massage the figures, but there is a danger that it might.

I am afraid that I have to go back to the question of consultation, because consultation is vital if these schemes are to be effective. Consultation can work in two ways. The local authority can come up with a scheme and consult on it. I gave the example of Norfolk and the dualling of the A11, which many areas in Norfolk do not think will benefit them at all. I mentioned King’s Lynn. There are lots of them, Downham Market, King’s Lynns, Swaffham, Dereham, Fakenham, Wells-next-the-Sea and Cromer. Lots of places might feel that they just do not benefit from a scheme. It will help the economy in south Norfolk, but not the other areas. Despite opposition from the areas that it does not help, Norfolk might say, “We are going ahead with the scheme anyway”. That is one form of consultation.

The other form of consultation is asking the businesses in Norfolk what scheme they would like and what would help them, rather than imposing a scheme on them. I hope that there would be something in guidance along those lines. They might want an incinerator because all the waste that they produce is put into landfill and the cost is becoming prohibitive, and an incinerator might get rid of a lot of cost and they are willing to help to pay for it. Consultation could work both ways. Why not have a vote because this is a scheme that businesses really want? I cannot understand why the Government are so reluctant to give a vote.

Noble Lords opposite should not apologise for the incoherence of their amendments because the argument just made is very coherent and the debate has been clearly set out. The noble Lord, Lord Bates, was doing very well until he got to the end and said that if we had a ballot to assuage local concerns, it would force local authorities to take note of the views of business. However, it would not assuage concerns for the very reasons described by the noble Baroness, Lady Hamwee. She said that traditionally the Liberals always support local government because there are two partners to the contract, and they need not be as opposite to one another as the noble Earl, Lord Cathcart, suggests. We are trying to get the balance right between local authorities which, reasonably enough, do not want any form of ballot, and businesses that want to have their say. Those are both perfectly respectable points of view. We have ended up in a position which not only creates trust between the parties—I shall come on to explain why I think that is true—but is also an effective way of tying people into a project in an honourable and sustainable way.

Amendments 13 to 17 would require that a ballot is held before any BRS is levied, and the remaining amendments are essentially consequential. I agree absolutely with the conclusion of the noble Earl, Lord Cathcart, that it would be a good idea if local authorities were to ask businesses what is in their interest and what would really help. That is exactly where we hope local authorities will start. This is about economic development, prosperity and greater productivity—all the things we talked about when considering the first amendment. Local authorities will be bound to ask local businesses what is in it for them if they are to come on board as partners, agree to the initial financial commitment and make contributions. Of course the question that must be asked before any other is this: what is going to be the most effective project from your point of view? The notion of consultation is absolutely fundamental to the purpose and the principle of the Bill.

We have made it absolutely clear that there is no way that a BRS can be foisted on businesses because that simply will not work. There has to be early, proper and thorough consultation, and certainly the statutory guidance will make it clear that levying authorities should consider how they can involve businesses over and above anything described as a formal consultation. However, the issue of a ballot raises significant concerns, and I understand why noble Lords opposite have been lobbied by businesses about it.

Perhaps I may go over the narrative a little. At Second Reading we discussed the fact that it is likely that the BRS would often form part of a wider funding package, marking a crucial link to bring business partnership with it. For example, it could help to pay for a large infrastructure project such as a new or improved transport link. Such a project would bring with it funding streams from bodies such as the Department for Transport, the Highways Agency, and Section 103 agreements as well as BRS funding. Under those circumstances, I would ask noble Lords to think about whether it would be right, democratic or fair that an entire project of some significance that was being marshalled by a balance of partners should be put in jeopardy due to uncertainty over a relatively small but critical element of a funding package. I would argue that it unbalances the partnership and introduces an avoidable degree of uncertainty. It is not worth taking that risk if the BRS is contributing only to a relatively small proportion of the overall funding package, which is one that would genuinely help business because it will be the test to be applied.

I do not agree that proportion does not count. The noble Baroness, Lady Hamwee, asked me why the proportion is so important and why we should not do this as a matter of principle and not require a ballot. However, we believe that we have arrived at a fair point. The Bill requires authorities to hold a ballot only if the supplement will fund more than one-third of the total cost of the project. I repeat, one-third—not a half or two-thirds—which is a proper and defensible threshold. The threshold for determining when a ballot must be held represents a judgment between those cases where a BRS can be seen as contributing a relatively large proportion towards the cost of the project and, therefore, have a right to ensure that all members have a say. I will come to the means of voting in a moment. That is as opposed to a situation where the BRS is a smaller player in terms of the overall funding of a project.

The policy on ballots was set out in the White Paper, which followed extensive discussions with business and others on how any supplement would best work. Since noble Lords have taken up the case, it is worth putting on the record—the noble Baroness was quite right to say that it is not in the guidance—that the Bill does not prevent levying authorities from holding a ballot if they consider it to be appropriate. The noble Lord, Lord Bates, was uncharacteristically cynical about this in saying that a ballot would be held only if it was going to be approved. I would argue that, if a supplement was opposed by a particularly vocal minority, it might be a very good idea for a local authority to hold a ballot. It would be a mechanism for ensuring that all those who are liable for the supplement are able to have their say. It would tie people into the project. But we would not disagree among ourselves that the key point is that this must be left to local discretion, so that the levying authority can consider if it is appropriate on a case-by-case basis.

The noble Earl, Lord Cathcart, and the noble Lord, Lord Bates, raised the white spaces problem in London and the arrangements within BIDs for voting. We have tried to address that in exactly the same way as the BIDs arrangement works. It is the same formula because it is fair. Much of the process in this Bill to do with BRS is modelled on how BIDs work successfully. It is worth restating therefore how we intend the ballot to work fairly so that certain businesses in certain parts of the capital or wherever will not be burdened unduly. It is described as a “double lock” ballot, which means that its success is not determined only by winning a majority in terms of the number of votes cast, as there also needs to be a majority in terms of rateable value. For example, let us take a ballot where 100 businesses with a combined rateable value of £10 million are balloted and 80 of the 100 businesses vote in favour, but where those that voted in favour tended to occupy premises with lower rateable values. Therefore, the combined rateable value of those which voted in favour was £4.5 million, which would be less than 50 per cent of the total rateable value of all those which voted. In such cases, the BRS would not go ahead because the 50 per cent had not been achieved on both criteria. That is exactly how BIDs operate.

Perhaps the noble Baroness could educate me. Does the BIDs scheme involve voting on all BIDs or just on those over a certain threshold?

I will have to take advice on that. The answer is yes, it will be all businesses. I hope that the noble Earl is helped by that answer.

Amendment 46 would require that the ballot is held if any variation is made to a BRS. My case about uncertainty applies to this as well. Projects already under way could be put in jeopardy simply because of a relatively minor change. I understand the noble Lord’s concern that the BRS should not be subject to undue changes without adequate consultation of those liable for the supplement. Clause 10 already makes provision that if the variation in the project would increase the BRS contribution towards a project to more than one-third a ballot would be required, as is the case with new projects. Again, we have covered that point in the interests of fairness.

There is another possibility. The levying authority might want to vary the supplement, but the change would not result in the BRS contributing more than one-third towards the cost of the project. If that change was not highlighted in the prospectus as a possibility, the authority would be required to consult, which would involve publishing a document that set out the proposed variation, mirroring the prospectus required before a supplement could be levied. If the variation would increase the number of persons liable to the BRS, there must be consultation, whatever the original prospectus says. We have underpinned that arrangement for consultation.

In the Bill, we have tried to set a minimum standard for the consultation and balloting needed before a supplement can be changed. Any decision to carry out a ballot over and above that requirement should be left to the discretion of the levying authority. Amendment 15 potentially goes further than requiring a ballot in all cases. It would also extend who was eligible to vote in a ballot to those whom the authority was required to consult. This would mean that in addition to those who were liable for the supplement, lower/upper authorities and other persons the authority thought appropriate would be eligible to vote.

I agree that the views of the wider community need to be considered, and I think we would see local authorities consulting their communities as a matter of course, in the way that they do already. Given the duty to involve, that is even more likely now. However, giving the same weight to the views of those who would not be liable for the supplement as those who would have to pay could undermine both the fairness principle and the fundamental principle that BRS is a new tool.

I conclude by citing the LGA during the Public Bill Committee. It picked up on the fundamental point that every noble Lord who has spoken has made. It stated in evidence:

“The guarantee to local businesses that this power will not be abused is the guarantee that we are accountable to local communities. We have a direct interest in ensuring that local economies are maintained and sustained … No authority will make a decision that has a detrimental effect on its local business community”.—[Official Report, Business Rate Supplements Bill Committee, 20/1/09; cols 65-75.]

That is a straightforward and positive statement from the LGA, and I hope noble Lords will accept that.

There is one thing. I asked about the idea of manipulating the cost estimate so that a vote would have to be held. I do not want to press the Minister now, but on an earlier amendment she was looking at the whole business of costs being wrong, and I wondered whether at the same time she might want to deal with that.

I do not share the noble Earl’s view that that is likely. Frankly, it is not in anyone’s interests to come forward with a fraudulent prospectus, which is what it would be. The prospectus will have to be tested against outcomes, criteria and hard questions of project management. The funding elements of that will have to be specific and evidenced. With the best will in the world, projects change—there might be cost overruns, for example—and the reason why we say that the prospectus has to spell out how underspends or overspends will be dealt with is precisely that that discipline must be there for the partners to be able to deal with such an situation.

I like the idea of Hansard having illustrations, but let us not go as far as cartoons.

On the Minister’s last point, where she quoted the LGA, I still have difficulty in applying the points that it makes to the question of under and over one-third. The arguments are yes or no, rather than centring on that one-third contribution. The proposal to have a ballot is not a matter of not having confidence in a local authority’s judgment about what is good for its area; it is about the businesses that are being asked to pay. The other partners can veto by refusing to contribute because they are not multiple in the same way as businesses are. A local authority can come to a perfectly honest view about what is best, and ratepayers may disagree. That is where we differ.

The consultation allows for nuanced responses. The prospectus should reflect the consultation. The consultation is not an end in itself; it almost certainly ought to lead to variations in the draft prospectus. It is unlikely that the latter will be perfect initially. The consultation has a role to play in developing the prospectus. The consultation is not a referendum. I probably depart from the noble Earl on this because I do not see it as an alternative to a ballot but as complementary to it. One should not consult on something that one is not prepared to do. Consultation has a much wider role. Local authorities should hold a debate with local businesses, but that is not the same as giving them a menu of things to choose from. I do not see that working.

I hope that I am not being unfair, but I believe that the Minister’s argument can be summarised as the Government’s proposals striking a balance between the two arguments. I fear that the proposals actually satisfy neither of those engaged in this argument. I am certain that we will return to this on Report. I beg leave to withdraw the amendment.

Amendment 13 withdrawn.

Amendments 14 to 17 not moved.

Clause 4 agreed.

Committee adjourned at 7.27 pm.