Business Rate Supplements Bill

Public Bill Committee, 20 January 2009.

Peter Atkinson (Conservative, Hexham)

Before we begin, I shall draw the Committee’s attention to the normal procedure. First, would you make sure that your mobile phones are switched to silent? I shall check mine in a minute. There is a money resolution in connection with the Bill—copies are available in the room. Also, the formal warning about starred amendments: in general, my fellow Chairmen and I do not intend to call starred amendments, including any that may be reached during an afternoon sitting.

For those unfamiliar with the slightly new system, I shall outline what will happen today. The Committee will be asked to consider the programme motion, on which debate is limited to half an hour. We then proceed to the motions to report written evidence and to permit the Committee to deliberate in private—I hope that we can deal with them formally—in advance of the oral evidence sessions. Assuming that the motion is agreed, the Committee will move into private session. Once the Committee has deliberated, witnesses and members of the public will be invited back into the room and our oral evidence session will commence. The arrangements are similar to those in a Select Committee—look at the brief provided and we shall work out who wants to ask any questions.

If the programme motion is agreed, the Committee will hear oral evidence this morning, this afternoon and on Thursday morning. On Thursday, the Committee will meet in the Boothroyd room, moving to the more familiar scene of the Committee corridor next week and reverting to the normal clause-by-clause scrutiny of the Bill. Is that reasonably clear to everyone? We shall see if we can find our way through that.

Peter Atkinson (Conservative, Hexham)

We will now hear oral evidence from the British Retail Consortium. I welcome Jane Milne and Tom Ironside to the Committee. Will they introduce themselves for the benefit of the record?

Bob Neill (Conservative, Bromley and Chislehurst)

Before I question the witnesses, I wish to say what a pleasure it is to see you in the Chair, Mr. Atkinson. I hope that that is the proper way in which to start our proceedings. It is a new process for all of us, and you are very welcome in the Chair.

Ms Milne, I wonder whether you can help me. The background to such matters stems very much from the Lyons report and the suggestions of flexibility and an appetite for engagement with local authorities and business. What is your assessment of whether this will assist local authorities in engaging with business? Do you see other potential pitfalls?

Bob Neill (Conservative, Bromley and Chislehurst)

What do you mean by the phrase “short-cut”?

Bob Neill (Conservative, Bromley and Chislehurst)

What would need to be done differently to make the engagement genuine?

Bob Neill (Conservative, Bromley and Chislehurst)

Have you carried out any assessment of the impact that the current proposals might have on your members?

Bob Neill (Conservative, Bromley and Chislehurst)

In the written submissions there is a statement that the proposals would

“increase costs without any correlation to a business’s profits or ability to pay.”

The argument might be: if we do not use rateable value as a measure, what other measure could we use?

Bob Neill (Conservative, Bromley and Chislehurst)

Because, you will argue, you are being taxed on a measure that is a higher percentage of your members’ costs than other sectors of the economy?

Bob Neill (Conservative, Bromley and Chislehurst)

Where does that leave you as to a cost-benefit analysis for your members of what might come from a BRS scheme?

Nick Raynsford (Labour, Greenwich and Woolwich)

May I take up a couple of the points you have made and refer back to one of the points in your written evidence? You talked about retailers paying about a quarter of all business rates and you estimated that about a quarter of any business rate supplement will be met by your members. The retail sector is very diverse—it includes small shops as well as large ones. Under the design of the scheme, it is proposed that those with rateable values of under £50,000 will be excluded. What is your estimate of the proportion of total business rates paid by your members with rateable values over £50,000?

Nick Raynsford (Labour, Greenwich and Woolwich)

I hear that message. However, you made the point that you expected your members to meet 25 per cent. of business rate supplement contributions. That does not seem likely if you cannot quantify the percentage of total business rates accounted for by your members with rateable values over £50,000. I find that figure unconvincing without back-up evidence.

Nick Raynsford (Labour, Greenwich and Woolwich)

You must have some idea, because we know all about the make-up of the retail sector. There are some very large businesses, but there are vast numbers of small corner shops. In other sectors of industry—the pharmaceutical industry, or the construction industry, for example—you will not have quite the same diversity, will you?

Nick Raynsford (Labour, Greenwich and Woolwich)

I hear that, but you are putting forward an argument on a rather flimsy basis if you cannot quantify the proportion of anticipated business rate supplement that your members—the retail sector—will pay. The figure of 25 per cent. is clearly not convincing.

Nick Raynsford (Labour, Greenwich and Woolwich)

But you have cast it into doubt by accepting that a significant proportion of your members have rateable values below £50,000.

Nick Raynsford (Labour, Greenwich and Woolwich)

I understand that entirely, but you are making a strong case on the basis of what I regard as quite flimsy evidence.

Philip Dunne (Conservative, Ludlow)

How many retail businesses have gone into administration or liquidation in the past year?

Philip Dunne (Conservative, Ludlow)

Do you have a feel for how many jobs in retail have been lost in the past year?

Philip Dunne (Conservative, Ludlow)

Have your economists come up with a forecast for 2009? You mentioned 40,000 over the next two months. Do you have a full- year forecast at this stage?

Philip Dunne (Conservative, Ludlow)

How many people are employed in retail in the UK?

Philip Dunne (Conservative, Ludlow)

With forecasts of unemployment on a national level on the rise, do you anticipate that any additional taxation on your members would accelerate the rate of loss of jobs over the coming year or two?

Philip Dunne (Conservative, Ludlow)

Could you break down that £1.6 billion a little? How much of it is associated with revaluation arrangements that are already in train, and how much with the impact of the Bill?

Derek Twigg (Labour, Halton)

What evidence do you have that a local authority would impose this increase on business on the basis of wanting greater economic development, when the fact is that business does not like it, it will cause it a problem and jobs will be lost? What local authority would do that? What evidence do you have that local authorities, in wanting to promote economic development, would cause job losses in doing so?

Derek Twigg (Labour, Halton)

So you are not opposed to the legislation per se. The issue is the safeguards that it includes.

Derek Twigg (Labour, Halton)

But you can see the logic. Economic development for local authorities has, certainly in the past ten to 15 years, been a focus, and it most probably was 20 or 30 years ago. You say that you hope that local authorities would not impose the increase. I ask the question again: what evidence do you have? Do you have any evidence at all that local authorities would impose an increase on business that would be contrary to their economic development? Which local authority would do that, when doing so would cause many jobs to be lost?

Derek Twigg (Labour, Halton)

So, it is more of a fear than a fact.

Dan Rogerson (Liberal Democrat, North Cornwall)

I, too, welcome you to the Committee. I am pleased that we have the benefit of your experience at this stage and as we move towards more detailed scrutiny of the Bill. I would like to explore the interaction between BIDs and the potential for the supplementary business rate for financial change. Why do you think that the BIDs model is so successful? What works about that model, both in terms of putting together the BID and of its operation?

Dan Rogerson (Liberal Democrat, North Cornwall)

Clearly, one of the Bill’s main concerns is Crossrail in London, so we are talking about very big infrastructure projects. Would you agree that BIDs would not be not the right model for funding similar projects, which may be on a smaller scale, but still fairly large for those regions, counties or boroughs?

Dan Rogerson (Liberal Democrat, North Cornwall)

I hesitate to paraphrase, but you said in answer to earlier questions that the principle of some form of supplementary business rate to fund a project that the business community in that area thought would be beneficial to the whole community, including its ability to trade, prosper and play a part in economic development, is not the problem. If it signs up to a project, the problem is how it is arrived at and delivered. Is that fair?

Dan Rogerson (Liberal Democrat, North Cornwall)

There is also the issue of areas where a BID may already be operating, but which sit within a wider area that might be subject to the measure. What do you think that the interaction between those ought to be? What safeguards should be in place for existing BIDs sitting within areas subject to an SBR?

Dan Rogerson (Liberal Democrat, North Cornwall)

Would a ballot for the BRS as well, which many are arguing for, be sufficient? Where a BID is operating, people would have the chance to say whether they thought that two projects were incompatible at that time and that one needed to be completed before moving on to another. Is that enough of a safeguard? Do you think that there should be automatic offsetting in that area, or do you think that businesses should decide whether they could cope with both, given that they are delivering different sorts of scheme and that there may be two sets of benefits?

Dan Rogerson (Liberal Democrat, North Cornwall)

I am just trying to establish whether the offset is sacrosanct or whether—if business is involved in arriving at the BRS decision—there will be enough and one could be flexible about the offset.

Paul Farrelly (Labour, Newcastle-under-Lyme)

I want to explore a little how the British Retail Consortium has come to a view on behalf of its members that can be fairly characterised as strongly opposed to the Bill. How many members do you have?

Paul Farrelly (Labour, Newcastle-under-Lyme)

I wish that we could as a political party.

Paul Farrelly (Labour, Newcastle-under-Lyme)

Just by number, by way of background?

Paul Farrelly (Labour, Newcastle-under-Lyme)

Would about 35,000 be accurate?

Paul Farrelly (Labour, Newcastle-under-Lyme)

Could you describe to the Committee the process by which you have polled or taken soundings among that membership to come to the view that you have taken in your submission?

Paul Farrelly (Labour, Newcastle-under-Lyme)

Which committee has this submission been through?

Paul Farrelly (Labour, Newcastle-under-Lyme)

So by e-mail, via associations and by magazines?

Paul Farrelly (Labour, Newcastle-under-Lyme)

Therefore, roughly how many responses have you had for your committees to consider?

Paul Farrelly (Labour, Newcastle-under-Lyme)

Give us a rough number.

Paul Farrelly (Labour, Newcastle-under-Lyme)

Are your members united in their strong opposition to this?

Paul Farrelly (Labour, Newcastle-under-Lyme)

Are there any significant businesses that do not share such strong concerns, such as Tesco, for example?

Paul Farrelly (Labour, Newcastle-under-Lyme)

So Tesco was fully behind this, for example?

Paul Farrelly (Labour, Newcastle-under-Lyme)

You used the word “overall” at the beginning of your submission. That is a very strange word to use for such a strong submission. What does “overall” mean?

Mark Field (Conservative, Cities of London and Westminster)

Ms Milne, I think that all of us here have some sympathy with many of your members, given the tumultuous economic events of recent months. However, I want to explore one or two of your answers and to ask one or two questions, partly on the BIDs process, but also more generally. You said that you are not averse to the principle of making a contribution to infrastructure projects. You were asked whether that would be through a property-related tax, and I am not sure whether you had any other ideas in mind. How do you think that large-scale infrastructure projects, such as Crossrail in London, which obviously affects my constituency, can possibly be funded?

Mark Field (Conservative, Cities of London and Westminster)

One of my concerns, being slightly devil’s advocate with your approach—I appreciate that you have to speak on behalf of your members—is that, ultimately, people will argue that all these retailers and many tenants in properties have cut a pretty bad deal with their landlords to get the property. The commercial property market was buoyant until the past 18 months or so, but you have cut a bad deal with your landlords and you now want to oppose the Bill. You are acting to the detriment of the public at large, who desperately need some large-scale infrastructure projects. There needs to be a way of funding them. We have looked at the whole issue of value capture. This debate does not just go back a few years; it goes back many decades, and it concerns the whole idea of how to ensure that a proper project is in place for something that is for the common good. What do you say to that criticism? I understand that you have to argue your case, but is it entirely self-interest?

Mark Field (Conservative, Cities of London and Westminster)

That, as you say, is potentially a market failure, but it is ultimately an issue of being able, with the benefit of decades-worth of hindsight, to cut the right deal. You have cut a bad deal, and you are expecting the rest of the general public to have poor infrastructure, just so that you can make your case and not pay your way.

Mark Field (Conservative, Cities of London and Westminster)

I will take you down to Victoria street, in my constituency, where there are enough voids to make one think that it is not quite so much a sellers’ market now. I appreciate that those are the market conditions, but I expect that that applies to my hon. Friends’ constituencies. The market clearly has turned.

I also want to touch on BIDs. There are BIDs in my constituency—the New West End Company and the Paddington Waterside Partnership—and they have worked well. Superficially, I can understand one of the arguments that you made: effectively, it sounds like double counting—you become part of BIDs and then potentially you also have the maximum 2p surcharge through business rates. Do you see that there is a view that what a BID is trying to do is somewhat different from what the Bill is trying to achieve? The BID process is looking at some additional spending—to get a few more police, to smarten up a rather small vicinity—whereas the Bill is proposing to get much larger-scale infrastructure projects?

I accept that Crossrail is an exception in terms of costing a total of £16 billion or £17 billion, with about £3 billion to be covered, ideally, by the BRS under the Bill. However, the same will apply on a smaller scale elsewhere across the country. It is a quite different idea. The BIDs are there for additionality in a very small location, whereas the idea of the Bill is to look at large-scale infrastructure projects that would otherwise not be funded, because, clearly, there would always be other priorities from local and central Government. I understand why you make your case, but do you see that a BID and a business rate supplement scheme are two quite separate things?

Mark Field (Conservative, Cities of London and Westminster)

What proportion of the overall costs would you require for it to be worth while—matched funding—or would you expect to get a multiple of benefits from costs?

Nick Raynsford (Labour, Greenwich and Woolwich)

You say that retail accounts for a high proportion of BIDs. Of course, there is a fairly fundamental difference between BIDs and the BRS, in that the £50,000 rateable value threshold does not apply in the case of BIDs, which are often designed specifically to help a range of retailers, including small ones. There is a pretty obvious difference between the two, is there not?

Nick Raynsford (Labour, Greenwich and Woolwich)

But lower than £50,000?

Nick Raynsford (Labour, Greenwich and Woolwich)

The crucial point that I want to establish, and want you to agree on, is that there is a pretty fundamental difference between major infrastructure development and the kind of objective with which BIDs have been very successful. I strongly support BIDs and introduced them as a Minister, so I am wholly behind them, but they were about regenerating and building confidence on high streets, rather than about supporting major infrastructure development.

Nick Raynsford (Labour, Greenwich and Woolwich)

Let us turn to Crossrail, because that is obviously very important. It is a major infrastructure development. You said that, although you support Crossrail, you do not like the way in which it is funded, and you are on record as saying to the Committee that you would like to do without the Bill altogether. Do you recognise that, without the Bill and without the business rate supplement, Crossrail would not proceed? You need not take my word for that. In his evidence to us, the Mayor of London—not a member of my party—said:

“The successful passage of the BRS Bill is therefore crucial to the construction of Crossrail.”

Nick Raynsford (Labour, Greenwich and Woolwich)

But do you think that your London members would seriously support a case for the Bill not proceeding knowing that that would actually kill Crossrail—which it would?

Nick Raynsford (Labour, Greenwich and Woolwich)

So please square with us why London business representative bodies, such as London First and the London branch of the CBI, have supported the framework, including the supplementary business rate, for funding Crossrail. Are such bodies different industries? Are there no retail members in London First?

Nick Raynsford (Labour, Greenwich and Woolwich)

Why then, when they represent their views in another business forum, do they take a different view? Are you saying that London First, the CBI and the London chamber of commerce, all of which have supported Crossrail and the supplementary business rate, do not have a retail voice?

Nick Raynsford (Labour, Greenwich and Woolwich)

Do you seriously think that it is right that retailers, who have a strong presence in many of the areas where Crossrail stations will be built, particularly in places such as Oxford street, will really not get any benefit from the arrival of the new stations that will deliver huge additional opportunities for retail?

Nick Raynsford (Labour, Greenwich and Woolwich)

So the modelling done by Crossrail, which shows substantial business benefits in all parts of the London—not just along the route—and huge benefits in key points on the route is wrong.

Nick Raynsford (Labour, Greenwich and Woolwich)

So why is the Mayor of London so supportive of the Bill?

Nick Raynsford (Labour, Greenwich and Woolwich)

Possibly—we may have a chance to do so.

Bob Neill (Conservative, Bromley and Chislehurst)

May I just ask about thresholds? I am told that £50,000 is postulated as the threshold. It is not in the Bill. How adequate do you regard that, and what will be the position when revaluation takes place in 2010?

Bob Neill (Conservative, Bromley and Chislehurst)

Can you elaborate on those two points? You said first that the effects may be different from 2008. What has been happening to retail since then?

Bob Neill (Conservative, Bromley and Chislehurst)

It is represented that you are somehow unrepresentative of your membership. That seemed to be the drift of some questioning. What is your answer to that?

Bob Neill (Conservative, Bromley and Chislehurst)

Thirty per cent. increases in costs—how do you quantify that?

Paul Farrelly (Labour, Newcastle-under-Lyme)

May I just ask a hypothetical question? What if the legislation were to be amended to make a ballot—governed by a dual-key mechanism—mandatory? On the basis of your views, would it be fair to say that you could mobilise your many thousands of members in London? Would you expect them to go out and vote against Crossrail in droves, if Crossrail could only be funded with the participation of the business rate supplements scheme?

Paul Farrelly (Labour, Newcastle-under-Lyme)

I am thinking of the numbers really. It would be fair to say that, if those circumstances came to pass and you had those protections, your consortium would seek to mobilise many thousands of shopkeepers to vote down a system for London and therefore imperil Crossrail.

Lee Scott (Conservative, Ilford North)

Do you think that the Government’s proposed requirements for the consultation with local businesses are sufficient? If not, what would you suggest?

Lee Scott (Conservative, Ilford North)

It is proposed that a ballot of local businesses is required only if the supplement is to fund more than one third of the total cost of the project. However, is it appropriate to allow a ballot in other circumstances, when the authority may wish to hold one?

Lee Scott (Conservative, Ilford North)

We have just heard from Paul Farrelly that you could mobilise people against a particular project—Crossrail was mentioned, but let us move away from that. If something was of benefit, would you mobilise in the other direction, to be in favour?

Lee Scott (Conservative, Ilford North)

Could you give me an example of the right sorts of projects to bring forward?

Lee Scott (Conservative, Ilford North)

I have a final question on the modelling that you have done. Obviously we are in a recession and things are difficult, but does the modelling take into account that the recession will end—whenever that may be—and we could be into a boom period, and businesses could benefit considerably from various projects being suggested?

Lee Scott (Conservative, Ilford North)

I apologise for mentioning the R-word. Perhaps I should have said credit crunch, but recession is the word.

Lee Scott (Conservative, Ilford North)

I find that interesting, because I have seen some figures for Crossrail—the project does not affect my constituency directly but it does affect the neighbouring one—which showed that businesses, not in Oxford street but in the suburbs, were going to benefit considerably from the extra people that Crossrail could bring in. That study was done before the current climate, and the figures might be different now, but that does not mean that in the longer term there could not be bonuses for businesses. However, you say that even when business was good the modelling showed that people would not benefit from Crossrail.

Andrew Love (Labour, Edmonton)

We are finding it difficult to understand that your modelling seems totally contrary to all the other modelling that has been done on this matter. That point was raised not just by Mr. Scott but by Nick Raynsford. Are you looking in the short term? What is your time scale for the so-called benefits that you talk about? How narrow are the assumptions that you have made about the boost to business from huge numbers of people flowing from outer to inner London? Just give us a taster of how you have assembled that modelling.

Andrew Love (Labour, Edmonton)

We would obviously want you to share that with us, but we are trying to square the circle here. As Mr. Scott said a few moments ago, we are talking about some 600,000 additional people living in east London, who will be carried through Crossrail either to work or to make purchases at all the stops along the line. Looking superficially, it seems that there would be significant benefits not just for central London but all along the Crossrail route, yet you suggest otherwise. I am trying to cope with how you have come up with a different set of figures from almost everyone else.

One of the questions I critically want to ask is, what is your time scale for the figures that you have produced? In the submission by the Mayor of London, he says:

“The long-term benefits of Crossrail to business will far outweigh the costs to them of the BRS.”

He goes on to say:

“All London’s boroughs will benefit from Crossrail”,

not just those through which Crossrail passes. That is a definitive set of findings. The Mayor would not have come up with that if he had thought there would be any challenge. But you are saying not only that it does not work but the benefit is only half the cost to retailers. We have always assumed that retailers would be among the main beneficiaries of this scheme. How do you come up with these different figures?

Andrew Love (Labour, Edmonton)

Let me put it to you this way. Where the underground has been extended, all the evidence suggests that there is a significant benefit, not just in terms of people flows but in terms of the value of properties close to the underground. It has to be assumed that that will be the case with Crossrail. It will carry huge numbers of people, albeit perhaps not more than the overall underground network carries, yet you are asking us to believe that retailers will not benefit. I find that incredible, especially as almost everyone else suggests that there will not just be significant but overwhelming benefits to business from the building of Crossrail.

Andrew Love (Labour, Edmonton)

Let me put you on the spot. How narrowly did you draw up the research? Did you say, “We want you to tell us the bottom-line effect on retailing business, compared with the cost, without taking any of the wider benefits into consideration?” Did you look at this over a longer time scale, or did you set it in the short term? What assumptions did you give to Capital Economics to draw up the figures that you are now telling us?

Andrew Love (Labour, Edmonton)

Okay. We will need to see the figures.

Let me ask you a final question, again trying to square the circle. As has already been said by Mr. Raynsford, all of the business organisations in London have come out strongly in favour of Crossrail, and there is a significant retail element within them. Yet you are telling us that your members are overwhelmingly opposed to this Bill and what it will achieve in terms of building Crossrail. How representative is London within the overall British Retail Consortium? Does it account for 11 or 12 per cent. of your membership, or a much higher proportion? How representative is London and have its views in retail terms been taken on board regarding your attitude to this Bill?

Andrew Love (Labour, Edmonton)

But presumably that is a relatively small minority of the overall membership across the country. Would that be an adequate reflection? Would it be 10 or 15 per cent. of your overall membership?

Andrew Love (Labour, Edmonton)

But how much influence does Harrods have within the British Retail Consortium?

Neil Turner (Labour, Wigan)

I wonder whether we could explore that a little further. Mr. Ironside, you said earlier that your organisation would support a supplement where there was clear and demonstrable benefit. We have just heard that the models that have been done have produced quite different results. Does not that show that small changes in assumptions will make a model show either a benefit or a disbenefit and that what you are really asking for is impossible to deliver?

Neil Turner (Labour, Wigan)

I am not asking you what it proves. I am trying to get at the fact that we have a number of models that show different results. You are saying that your organisation would support the measure only where there are clear and demonstrable benefits, yet small changes within any of the assumptions that are built into these projections which produce the results will produce a different result. Therefore, there will never be a definitive, clear and demonstrable benefit. You are asking for the impossible.

Neil Turner (Labour, Wigan)

You said earlier that you did not think that Crossrail should be supported by business. If not by business through the supplementary rate, by whom should it be funded?

Neil Turner (Labour, Wigan)

But we do not know what those benefits are, because it is a projection.

Neil Turner (Labour, Wigan)

Exactly. So how can you get clear and demonstrable evidence of whether there is any benefit?

Neil Turner (Labour, Wigan)

Do you think that there should be a differential supplementary rate? For instance, in Crossrail, financial services should have 4p in the pound and retail 1p in the pound because that is the benefit that you assess they will get from it?

Neil Turner (Labour, Wigan)

How would you do that?

Dan Rogerson (Liberal Democrat, North Cornwall)

I want to return to the question of ballots, because that seems to be crucial. We have established that in your dream Queen’s Speech, this measure would not be the first thing out of the bag. However, having accepted that it might be appropriate for business to make a contribution to economic development where business will benefit, and that the property-based levy is the mechanism that is currently on the table, how important would the safeguard of a ballot in all circumstances be to your ability to accept it as a way forward?

Dan Rogerson (Liberal Democrat, North Cornwall)

And that would mean, in your opinion, that any consultation that takes place will be more focused on ensuring that everybody is signed up effectively.

We had a discussion about Crossrail. Most, if not all, of the Committee would no doubt feel that Crossrail is a project worthy of support, which we are eager to see go ahead. However, there has been an Act of Parliament and intensive scrutiny and discussion about Crossrail, its viability and what effects it might have. Most of the measures under the Bill would have nothing like that. Would you say that that makes them different from Crossrail and that there is a clear distinction between the way in which the Bill enables Crossrail to be funded and to take place on the model that has been set out, and the potential for other schemes across the country?

Dan Rogerson (Liberal Democrat, North Cornwall)

Do you want to say anything about the type of ballot that should take place and the dual-key approach that has been proposed? Do you have any views on whether that is the correct approach and whether the balance between large and small businesses is correct?

Dan Rogerson (Liberal Democrat, North Cornwall)

Clause 24 refers to the possibility of the Secretary of State—[Interruption.]

Peter Atkinson (Conservative, Hexham)

I apologise to our two witnesses for that interruption. I am afraid that the fire alarm system in this building is not up to scratch. Unfortunately, because we work to a time frame set by the programme motion, the evidence session with you two ended at 12 noon. On behalf of the Committee, I thank you for coming here today and giving up your time. You are very welcome to add anything in writing to clarify points or add figures. It will be added to the written material attached to the report.

Peter Atkinson (Conservative, Hexham)

Good morning, Mr. Frost, and welcome to the Committee, it is very nice to see a fellow Northumbrian here. For the record, would you introduce yourself?

Bob Neill (Conservative, Bromley and Chislehurst)

Good morning, Mr. Frost. I would be grateful if you outlined the overall view of the British Chambers of Commerce. I read your submission, and as you represent 100,000 businesses across the UK, I do not think that any of us will suggest that you are not representative. The Lyons review set forward the idea of greater flexibility in business rates and discussed the existence of an appetite for greater engagement with local authorities on economic development. Is this proposal the right way to get that?

Bob Neill (Conservative, Bromley and Chislehurst)

Why?

Bob Neill (Conservative, Bromley and Chislehurst)

Have you made any assessment of the potential impact of the Bill on your members?

Bob Neill (Conservative, Bromley and Chislehurst)

What would be your attitude if the Bill were limited purely to funding Crossrail?

Bob Neill (Conservative, Bromley and Chislehurst)

I get a suggestion that your attitude would be different if it were proposed purely to fund Crossrail through a BRS.

Bob Neill (Conservative, Bromley and Chislehurst)

There is only one other thing I want to ask. Accompanying the ability to add a supplement to the business rates, should there be an ability to reduce business rates at local level?

Nick Raynsford (Labour, Greenwich and Woolwich)

In your opening comment you said—and I strongly agree—that chambers of commerce have a strong pride in their place. They often work with local authorities to enhance the area. When we came on to discuss Crossrail, in response to Mr. Neill’s question, you said that it was a unique project. You indicated that you were quite sympathetic to the idea that the measure should apply in London only, but that the wider power should not be available. What do you think would be the view of a chamber of commerce in, say, Leeds, Manchester or another part of the country which felt that there was a real need for a major infrastructure project that would enhance the economy and improve the place, but which was told that it could not do it because the Bill has been limited to London?

Nick Raynsford (Labour, Greenwich and Woolwich)

That was a specific response to a question about a congestion charging scheme, not about the need for necessary infrastructure investment that a local authority and the business community would see as improving the quality of their area. Mine was a theoretical question, not tied to congestion charging.

Nick Raynsford (Labour, Greenwich and Woolwich)

I hear that message, but I simply want to come back to the question. A chamber of commerce in a particular locality might believe that it was extremely important to get a major infrastructure development, which would benefit business and towards which it would be reasonable for business to make a contribution. If it looked at London and saw Crossrail being built on exactly that basis, how would you explain to it that it cannot do that even though it wants to do it because the Bill does not apply outside London?

Nick Raynsford (Labour, Greenwich and Woolwich)

I think you said in your evidence that there has been active involvement by the business community in London in the funding of Crossrail. It is very supportive of Crossrail, and regard it as a successful model. Let us remember that this is for a scheme that has been talked about for 20 years. It has taken a very long time to get to the point where, at last, it appears to be proceeding because there is now a broad-based funding model that looks credible. Why should that option not be available to any other part of the country?

Nick Raynsford (Labour, Greenwich and Woolwich)

With respect, we are in a Committee dealing with the business rate supplement because that is what is on the agenda. You have given us evidence suggesting that you are sympathetic to its application in London for Crossrail, but you do not see its potential value outside London. I am trying to get to the bottom of the question of what you will say to your members if they want to proceed on a similar basis as London, are in agreement with the local authority and see a project as necessary, but you have opposed the power to make it possible.

Nick Raynsford (Labour, Greenwich and Woolwich)

So you are not opposed to the Bill’s powers extending outside London?

Nick Raynsford (Labour, Greenwich and Woolwich)

I am sure that we will come back to that, but can you say for the purposes of clarity that you are not opposed to the powers in the Bill being available outside London, obviously subject to the issue of votes and so forth?

Dan Rogerson (Liberal Democrat, North Cornwall)

I suppose the issue is that they cannot do that at the moment, so the Bill is important in its wider scope beyond London, to allow communities to do so. Perhaps we need to explore that message and return to it later.

We have not dealt with ballots. Is that what you are getting at? You have talked about engagement with the community. The message from our previous witnesses was that the Bill would be far more reassuring to their members if a ballot was a standard part of the imposition of a supplementary rate.

Dan Rogerson (Liberal Democrat, North Cornwall)

So with that proviso, the Bill is slightly less scary to your members.

Dan Rogerson (Liberal Democrat, North Cornwall)

Is there a feeling that local authorities would automatically look at the list of all the potential powers and use all of them to get as much money as possible out of the business community? Do you think that it is more likely that through consultation with the business community—and a ballot is integral—there would be a local decision on which model would be best for that area and that that is a better way to proceed?

Sadiq Khan (Labour, Tooting)

My questions arise from those put by Mr. Raynsford and from your answers towards the end. There is the principle of the business rate supplements and their detail. To be clear, you are in favour of the principle of BRS, but have problems with the detail.

Sadiq Khan (Labour, Tooting)

That is excellent. It is a change from the written submission, so good. My second question concerns your being in favour of the principle of the BRS. I am not clear about your position. Are you in favour of the principle of BRS for London and the rest of the country, or just in favour of the principle of BRS for London and not the rest of the country?

Sadiq Khan (Labour, Tooting)

So you would not be in favour of a London-only Bill.

Sadiq Khan (Labour, Tooting)

That leads me to my final question. You are in favour of the principle of the business rate supplement. Is that the case? You mentioned Crossrail.

Sadiq Khan (Labour, Tooting)

Are you in favour of the business rate supplement being used to make Crossrail a reality?

Sadiq Khan (Labour, Tooting)

So you are. I will not go into verbal gymnastics. I have a simple question. You are in favour of BRS in London for Crossrail. We have established that. Does your concern about the detail act as a veto to London getting the funding via the business rate supplement or do you accept, even with its imperfections in your view, that it is worth having and so that Crossrail can succeed?

Sadiq Khan (Labour, Tooting)

With its imperfections, it is fine. I like the pun. Thank you.

Mark Field (Conservative, Cities of London and Westminster)

I am a former business man. I had a business that was based in the City, so I understand your critique or concern that, as a whole, the Government often regard business as a cash cow. I would have used that critique myself when I was on the other side of the fence, before I joined the public sector. Do you not appreciate that there is disbursement on different initiatives, whether BIDs, the whole BRS thing or the accelerated development service, partly because of the level of hostility, so we need small parcels with identifiable, quite distinct benefits for business, otherwise business just thinks that it is all more and more Government on its back. If business can see that there are distinct benefits—there are quite different benefits, as we saw in our discussion about BIDs, for example—do you not accept that that concern is in the mind of any Government who are trying to raise money for large infrastructure projects.

Mark Field (Conservative, Cities of London and Westminster)

But as I understand it, one of your objectives is the transparency of the initiatives. The idea of value capture goes back a long time. It is quite an historical idea, and an element of it in a London context goes back to the Jubilee line extension, when there were huge benefits to the community at large, but specific large benefits to landowners that almost came as windfall gains. There is an element whereby matters of Crossrail and elsewhere have been trying as far as possible to balance out the issues. I appreciate that this is difficult: if we had had this discussion a couple of years ago, you might have found it easier going than now, with the travails and tumultuous economic events of the past year and the difficulties ahead. However, can you understand that there often have been huge windfall gains for property owners, particularly in large infrastructure projects, where they happen to own property nearby, which seems to be at odds with some of the benefits that need to be spread more widely across communities in such projects?

Mark Field (Conservative, Cities of London and Westminster)

I do not entirely agree with what Ministers are saying specifically about Crossrail. My party has some concerns with elements of the legislation. I possibly have slightly fewer concerns about the principles of the measure than one or two other members of my party. However, regarding the benefits of Crossrail, the Bill will raise only £3.25 billion for a project whose cost of is currently envisaged to be between £16 billion and £17 billion. That is a relatively small figure; it is less than a fifth of the overall cost. Do you not think that within the context of those overall benefits, which will be seen, too, by many generations of businesses, to pay about a fifth of that cost is in the ball park of equitability?

Paul Farrelly (Labour, Newcastle-under-Lyme)

Given the initial approach of your submission, which is really to heap one possible charge on another, on another, on another, with the implication that to your members the business rate supplement is either the thin or the thick end of the wedge, I am not surprised that lots of your members may have come back to chambers of commerce around the country and said, “We do not want it, and if London wants it let it get on with it on its own”. Of course, as Mr. Raynsford skilfully probed, Crossrail is unique by definition, because it is unique to London, but it is not unique as a major transport or infrastructure project that might benefit different parts of the country.

I will not speak for Greater Manchester, Warrington or Wigan or even as far as Runcorn, but in north Staffordshire for example, where there is a very active chamber of commerce, some of our transport links are the worst in the country. If you can get into the centre of Stoke, you will find that it is very difficult to get out. My constituency, Newcastle-under-Lyme, has the distinction of being, post-Beeching, the largest town in Britain without any form of railway. If a scheme in north Staffordshire were to be constructed on the table, with different innovative sources of finance, as was the case with Crossrail, which has the support of many London Members, I suspect that the chamber of commerce, given that it is screaming out for better transport in the area, might take a different view. I suspect that that might be replicated around the country. Have you considered that?

Paul Farrelly (Labour, Newcastle-under-Lyme)

To examine your stance in more detail, I think that you are right to moderate the stance that you have taken in your submission, in response to the question from my right hon. Friend the Member for Greenwich and Woolwich, because it is feasible that around the rest of the country the proposal might be a goer, and the answer “Well you cannot have it because it is only for London” would not be satisfactory.

I want to ask one final counter-factual or hypothetical question. Given that the business rate is nationally determined—there is a nationally determined pricing system—and that, particularly with the current slump, certain areas of economic activity could be spurred by business rate reductions, has your membership given any consideration internally to the question of whether chambers of commerce would support a business rate reduction Bill, which might apply locally in different areas?

Paul Farrelly (Labour, Newcastle-under-Lyme)

In principle?

Bob Neill (Conservative, Bromley and Chislehurst)

I have a couple of further questions, Mr. Frost. You have been asked at some length about your position on Crossrail. On what might happen if businesses outside London wanted a structure for raising money for economic development, does not the BIDs system cover that?

Derek Twigg (Labour, Halton)

It seems to me that your strongest objection—you said that you do not have an objection in principle—is that there are several areas in which councils can introduce charges, such as congestion charges or workplace parking levies, and the BRS will be another one. I think that you said there was no coherence, which surprises me. Those are the sorts of tools and mechanisms that councils will have, but it will be for the local authorities, working with business, to set out the strategies for using them. Surely, the supplement would be a case in point. I could be wrong and may be being too generous, but I cannot imagine a council suddenly, off the top of its head, producing a scheme without talking to business or trying to develop a strategy that has to have the support of business to take it forward.

In some ways, are we repeating the arguments that we had in the ’70s and ’80s, when there were loony left councils and when businesses were seen as part of the capitalist world, so we just stuck rates on them. We have moved on tremendously in the past 20 or 25 years. The Financial Times made an important point that councils have significantly raised their game in the past decade—we are in a new environment, a new culture. Some Opposition thinking seems to be based on the old situation, which existed back in the ’70s and ’80s, and not on what exists today. There are much more forward-thinking councils, which like economic strategies that involve business—that closely involve business. Should we not be trying to work this through, rather than saying, “Well, we don’t believe it’s coherent”? It is for the local authorities, with business locally, to make it coherent.

Derek Twigg (Labour, Halton)

But there is a difference between not getting the agreement of business and saying that there is no coherence. Your strongest argument seems to be that there is no coherence to the measures. There is a difference between that and agreeing or disagreeing. Local authorities set out economic strategy, which you would be involved in.

Derek Twigg (Labour, Halton)

Involvement is not agreement.

Derek Twigg (Labour, Halton)

But it does not mean, because you cannot agree on a particular scheme, that the whole thing should fall. That is what you are trying to say.

Dan Rogerson (Liberal Democrat, North Cornwall)

I would like to return to the question of compatibility and the similarity between this sort of approach and BIDs.

We have already discussed ballots, which are part of the BID process. In the view of your members, were ballots to be part of the BRS process too, that would improve the measure. However, is it not important to distinguish between BIDs and what we are talking about here? BIDs are not designed to set up and fund infrastructure projects on the scale that we are talking about—key projects to unlock economic development across a whole county or area. Do you accept that that purpose is a different one to that of a BID?

Dan Rogerson (Liberal Democrat, North Cornwall)

That is interesting—it is not something I had heard before. I understood—we have heard from Mr. Raynsford, who was carefully stewarding local government matters when BIDs were introduced—that they had a different purpose. Perhaps we shall hear later from British BIDs about how that moves forward.

Dan Rogerson (Liberal Democrat, North Cornwall)

On where a BID is already in operation and a BRS might be imposed across a wider area over the top of it, where the BID is focused on the town centre, what do you think should be the interaction between the two? What do you think about offsetting?

Mark Field (Conservative, Cities of London and Westminster)

May I come in on this issue, Mr. Atkinson?

Peter Atkinson (Conservative, Hexham)

Yes.

Mark Field (Conservative, Cities of London and Westminster)

You are a kind man, Mr. Atkinson. I am intrigued because, what you have described, Mr. Frost—perhaps you can tell us a little about how the scheme operates in Coventry—sounds counter to the way in which BIDs were supposed to operate, which was a much more localised process. You referred to a city-wide BID in Coventry. Does it cover the entirety of Coventry?

Mark Field (Conservative, Cities of London and Westminster)

I think that is contrary to what was intended by BIDs, which was that they should be far more localised. Perhaps it is just an appreciation for my own constituency, where locations are often two or three streets from the new west end, Oxford street and Regent street and on one or two small alleyways just off that. So it operates through the whole city, and all businesses—retail and otherwise—pay their supplement towards a city-wide BID?

Andrew Love (Labour, Edmonton)

I am, in a sense, pursuing the point that has been raised by Mr. Field and Mr. Rogerson. It comes back to the question of coherence. Am I to believe that what you are talking about is that local government bodies have a number of measures to raise money, to which supplements will be an addition, and that what you want to see is some connection with those measures to make supplements a coherent choice for the local business community?

Andrew Love (Labour, Edmonton)

Tell me how you think that this should operate. If we introduced a business rate supplement, how would it operate in connection with the other measures? For example, if there was a small BID in the centre of a much larger area where the local government wanted to have a business rate supplement for a transport infrastructure development, which would help the whole area, are you suggesting that the cost of the BID would somehow be netted off? How would it work from your perspective?

Andrew Love (Labour, Edmonton)

But what the business community has been saying to us across the board is that there has to be some justification for the things that it is being charged for.

Andrew Love (Labour, Edmonton)

If you take a retailer in the BID area, one of your members, whom you have already shown that the cost of the BID to their business is worthwhile because of the benefits they receive, and you can then do that with the BRS, what would be wrong with charging for both, so long as it can be justified in business terms?

Andrew Love (Labour, Edmonton)

But you must recognise that there is an essential difference between a small localised BID area—I am interested in this idea that you can extend it through a whole city, but I think would take it away from the original purposes, as Mr. Field has already indicated—where it may be possible to do all the things that you are suggesting we should do, and a much larger area covered by a BRS, where it would be much more difficult to do that.

Andrew Love (Labour, Edmonton)

You must be able to think of many cases where a BID could be successful in a town centre because all the businesses there could see the great advantages, but expanding it out into a whole metropolitan area would be a much more difficult sell.

Andrew Love (Labour, Edmonton)

Let me put a hypothetical case to you. I am sorry to do this as I do not generally like hypothetical cases, but let us take a small BID area where 10 per cent. of the businesses are sceptical of the benefits. What is to stop them saying, “Let us not have the BID in this small area because we will lose. Let us have it in the metropolitan area, where there might be a much better chance of being successful in persuading the business community”? What would be lost is the essential part of the BID that should be developed in the town centre. That would be lost because of the attempt to spread it too far. Do you not see inherent dangers in that—that you will lose the essence of a BID in a town centre because you are trying to extend it into a part where there is a much more sceptical business community?

Nick Raynsford (Labour, Greenwich and Woolwich)

In your evidence, you are clear that you strongly support the BID process, in particular the active engagement of business because there will always be a ballot. With BRS, where the business contribution is over 30 per cent., there has to be a ballot. Is there any difference in such cases between BRS and the BID mechanism?

Nick Raynsford (Labour, Greenwich and Woolwich)

To pursue the question, do you think 30 per cent. is too high and should it be lower? There is quite a strong case that if business is asked to make a de minimis contribution, it should not be in a position to veto something supported by a large number of other people. We touched on that with Mr. Field’s questioning in relation to Crossrail. Are you unhappy about the 30 per cent. or do you argue for a mandatory ballot in all cases, even recognising that in some cases that might kill a worthwhile project because, even though the business contribution was de minimis, it still had a right to vote it down?

Nick Raynsford (Labour, Greenwich and Woolwich)

So you have accepted the 30 per cent. You think there should be threshold and that 30 per cent. is probably the right one. Thank you.

Peter Atkinson (Conservative, Hexham)

Thank you, Mr. Frost. Is there anything you would like to add?