§ 8 pm
§ Mr. Nigel Jones (Cheltenham)
I beg to move amendment No. 1, in page 1, line 21, leave out 'X is 100', and insert 'X is 95'.
The First Deputy Chairman of Ways and Means
With this it will be convenient to consider amendment No. 2, in page 1, line 27, leave out '100', and insert '95'.
§ Mr. Jones
I move this amendment because the recession is continuing for most businesses and I want to push the Government a little further in helping businesses to survive the recession. I welcome the main thrust of the Bill. The amendment would increase help for people on transitional relief. The Government's calculations will lead to a real-terms increase of zero this year. I want to bring about a small cut in businesses' rates this year because increases in uniform business rate bills have recently been very large for many businesses, and have tipped many small businesses over the edge into bankruptcy. A small decrease in their bills this year could help some companies to survive.
Administration of the UBBR has been chaotic in terms of the valuation process, appeals and administration of the transitional relief scheme, which has led to great anxiety and frustration among many businesses, particularly small businesses, at a very stressful time. With this amendment, I ask the Government to help those businesses to survive the recession.
If the Government are ever to provide extra help in the business rate arena, now is the time to do it, when many people think that we are still in recession. Although the Government have said before, during and after the election that they believe that we are coming out of recession, there is much evidence to show that the recession is continuing for most businesses and that a cut in the business rate would help. That evidence is that unemployment is still rising at an underlying trend of more than 30,000 a month, and that bankruptcies, mostly of unincorporated businesses, continue to rise. In the first three months of this year, there were 8,604 bankruptcies —an increase of 67 per cent. on the first quarter of last year.
Smaller businesses are going bust as fast as ever, and the Government's talk of recovery must mean absolutely nothing to such firms. The Government can send a message to small firms considering going into liquidation to keep going because help is on its way. Liquidations of larger companies are also increasing, although not quite so fast. In the first three months of this year, there were 5,835 such liquidations—an increase of 17 per cent. on the first quarter of last year.
There is evidence that the recession is still with us. I press the Minister to ask the Treasury for more money to help small businesses through this difficult period.
§ The Minister for Local Government and Inner Cities (Mr. John Redwood)
The Government are producing a generous package through the proposals that were announced in the Budget and are confirmed in the legislation. Our proposals will cost £400 million this year, £520 million the following year, and £325 million in the third year—a bumper package of £1,250 million or thereabouts for England as a result of the rate reductions. [Interruption.] Hon. Members may scoff, but that is extremely good news for businesses—very welcome news indeed. I should have thought that hon. Members would welcome it rather than cavil and laugh about those large sums of money which will give direct reductions in bills.
§ Mr. Redwood
I shall give way when I am ready to do so, but I have not finished dealing with the points that have been raised from a sedentary position and in a rather churlish manner.
The Liberal proposals for site value rating would be extremely bad news for business, assigning hypothetical values to sites on the basis that they could be redeveloped. What kind of recipe for small shopkeepers would that be? What would that do to the businesses for Cheltenham? The hon. Member for Cheltenham (Mr. Jones) should do his homework before he pooh-poohs the excellent ideas in our legislation and before he recommends to the House the half-baked scheme that the Liberal Democrats have been talking about outside the House and have mentioned on Second Reading. [Interruption.] I am dealing with the amendment.
I cannot understand why the hon. Gentleman thinks that those who are losing from the revaluations should be given more favourable treatment than all those who are already paying at the full amount required by the valuations that are in practice. But that, of course, is what the Liberal Democrat amendment would do. It would positively discriminate in favour of those who, through transition, are having to increase their bills because of the revaluation, against those who are already paying the full amount required by the revaluation.
Of course, some of the revaluation increases were large because there was a very long gap between one valuation and another. Those anomalies are being corrected and, as I pointed out on Second Reading, some businesses in transition, being protected by the legislation, if passed, as well as by the transitional relief, may never have to pay the full amounts required by the 1990 valuation, because we shall have regular valuations from now on, and any decreases in value will be reflected in the subsequent valuation if that is true at that date.
I hope that the House will send the strong message to business today that it wants fast passage of the legislation to give the large amount of rebate to businesses which need relief from their rates. The costing of the hon. Gentleman's proposal, skewing things in favour of those under transitional arrangements, would be an additional £120 million in the current year. That, with the costing of the next item, would have to be added to the big Liberal Democrat plans to raise public borrowing, which would be likely to raise interest rates and other business costs.
§ Mr. Malcolm Bruce
The Minister talks about a bumper package. Has he forgotten that the Government increased VAT by 2.5 per cent. as part of the incompetence of the 779 poll tax? That is yielding a substantial amount which could be redirected to businesses, many of which are suffering from a loss of markets because of the inflationary effect of the VAT increase. Have not the Government added to the recession by their own measures, in raising revenue which they should plough back in a simple and direct way which would reduce business costs?
§ Mr. Redwood
I have never heard the hon. Member for Gordon (Mr. Bruce) or his party argue for lower local authority expenditure. Had I done so, I should have been more sympathetic to his interventions, but it is always spend, spend and more spend. As we know, that requires taxation revenue to pay for it. We decided to reduce community charge bills across the country because people thought that they were high. We did that by cross-financing, out of an increase in VAT, which was a perfectly reasonable way of doing it.
§ Mr. John Bowis (Battersea)
Will my hon. Friend the Minister press the hon. Member for Gordon (Mr. Bruce) further to see where the money currently coming from VAT would otherwise come from to support businesses that the hon. Gentleman's party seeks to support? The only way to do that would be to reimpose that amount on every community charge payer in the country. If that is the case, we should be told.
§ Mr. Redwood
My hon. Friend has made an extremely powerful point. Unless they make spending cuts, the Liberals would have to raise the tax from somewhere, or raise public borrowing.
§ Mr. Redwood
I see Liberal Members nodding in assent that they would raise public borrowing. Do they know what that would do to market sentiment, interest rates and businesses? The Government have systematically reduced interest rates in recent months. We should not want to see that upset by unreasonable increases in public borrowing wished upon us by the Liberal party.
§ The Chairman
Order. Before we go any further, I remind hon. Members that the Bill deals with non-domestic rates. I hope that hon. Members will bear that in mind.
§ Mr. Don Foster (Bath)
I do not know whether the Minister did it deliberately, but he certainly misrepresented the comments made by my hon. Friend the Member for Cheltenham (Mr. Jones) when he moved the amendment. My hon. Friend made it clear that we welcome the moves that the Government are making to give support to businesses and in particular to small businesses. My hon. Friend's amendment seeks to increase further the level of support that we believe needs to be given to small businesses across the country especially with the continuation of the recession brought about largely by measures taken by the Government.
In particular, we are keen to see additional support given to several areas of Britain which are heavily reliant on the small business sector. For example, as a result of the revaluation, my constituency had the second highest 780 increase in business rates of all the English districts—13.3 per cent. compared with the English average of about 8.1 per cent. Such increases have had a significant effect on the level of the uniform business rate, which in turn affects the number of job losses. According to the figures produced by the House of Commons Library, unemployment in my constituency, where the UBR has increased significantly, rose by 113 per cent. between 1990 and 1992.
The Minister asked where the money will come from. Perhaps he will bear in mind the significant cost of unemployment. I hope that he will welcome the proposal in my hon. Friend's amendment to give additional support to small businesses. After all, his party originally claimed to be the party which supported small businesses. On that basis, I hope that the Minister will accept the amendment.
§ Mr. William O'Brien (Normanton)
As you rightly pointed out, Mr. Lofthouse, we are discussing amendments to the Local Government Finance Act 1988. The Opposition, as well as agencies and pressure groups outside the House, warned in 1988 that the Act would not benefit people generally in Britain, and in particular would not benefit small businesses.
The parts of the Act which referred to domestic ratepayers, subsequently poll tax payers, have been proved to be full of faults. After one year of operation in England and Wales, those parts of the Act were withdrawn. We are now dealing with non-domestic rating. The foolishness of the Government in introducing a national tax for businesses has been demonstrated beyond any shadow of doubt.
The amendments seek to make available additional money to help small businesses. I suggest that, if additional money is to be provided, it would be better distributed by allowing people who have difficulty in paying not to pay at all. Some form of rebate scheme should he available to help people over difficult periods, as the hon. Member for Cheltenham (Mr. Jones) said. But any additional finance should be channelled to the people in greatest need. If money is available, we should consider a scheme to allow those who are having difficulty paying not to pay. Instead of a blanket cover, we should consider the principle that if people cannot pay they should not have to.
I support the Government's moves to help small businesses, but I ask Liberal Members to consider carefully that we ought to press the Government to make resources available to allow people having difficulty in paying the business rate not to do so. That would sustain small businesses much more than the proposal in the amendment. I cannot support the amendment. If the Government are considering making further money available, they should use it to help people who cannot pay. If people are having difficulty meeting the high charges, they should not pay.
Revaluations were carried out mainly when property costs were high. That is the real problem facing many small businesses. I suggest that the Liberals consider carefully that any additional money should be placed where the need is greatest. People should not pay rates if they cannot pay rates.
§ Mr. Bowis
I am drawn to intervene by the preposterous proposal from the Liberal Benches that the level of value added tax should be restored, thereby placing a burden on 781 the community charge payer or, if any other way of raising the money was used, on the taxpayer. [Interruption.] That was the gist of the intervention of the hon. Member for Gordon (Mr. Bruce). My hon. Friend the Minister replied, but we had no specific response from the Liberal party.
I speak for many community charge payers. I know that the Bill deals with non-domestic rates, but in passing I would mention that the £140 was of great value.
Order. I should not bother in passing. I have already ruled on that. Stick to non-domestic rates.
§ Mr. Bowis
Then I shall pass on to the benefits that the Bill will produce. I want both the community charge payer and the non-domestic ratepayer to enjoy benefits. I represent an area of London which had to contribute considerably to the less well-off regions of Britain through the UBR system. Like the Opposition Front-Bench spokesman, the hon. Member for Normanton (Mr. O'Brien), I welcome the Government's proposal to bring relief to business ratepayers. This is the way to do it. I am surprised that Liberal Members seek to delay the measure and do not go along with it wholeheartedly.
§ Mr. Rhodri Morgan (Cardiff, West)
I hope that the hon. Gentleman understands the problem that Opposition Members have with his speech and that of the Minister. We do not disagree with the principle that the Government got rating and its replacement hopelessly wrong in the Local Government Finance Act 1988. We have no problem with that. We said that it was wrong at the time. We said that events and time would prove the Government wrong. That was obviously true on the domestic side and on the non-domestic side.
We also have no problem with the principle of occasionally making public money available by way of largesse. The principles according to which the money goes to a certain body of people should be clearly laid out. The problem is for the Government to say why and when they give public money to other people. The hon. Gentleman cannot simply get away with it by saying, "Oh, well, it was necessary to win the election."
§ Mr. Bowis
There is a slight difference of opinion between the second Labour Bench and the Labour Front Bench. I shall not go into that. I was merely agreeing with the Labour Front-Bench spokesman when he agreed with my hon. Friend the Minister that the Government's proposal was the way forward.
I ask the hon. Member for Cheltenham (Mr. Jones), who fairly expressed anxiety for small businesses, to tell the House what benefit would come to small businesses in London and the south-east from his party's policies to raise fuel taxes and introduce a land value tax which would decimate businesses and especially small businesses in my part of London.
§ Mr. Nigel Jones
In response to the hon. Member for Battersea (Mr. Bowis), the benefit would be 5 per cent. off the rate bills for small businesses. That is what is so clean, simple and immediate about the amendment. I understand that the hon. Gentleman will vote against that if we press for a Division.
The Minister said that we were talking about extra borrowing, and I nodded. That is what we are talking about and I see nothing wrong with extra temporary borrowing to keep companies in business. Such tax cuts would not undermine Government finances in the long 782 term. They could improve them if, by cutting taxes now, more businesses and enterprises survived and more people remained in useful, tax-paying employment.
These measures can be afforded in the short term and could strengthen the Government's finances in time. The Bill adopts the principle of funding temporary business tax cuts by temporary borrowing. As the Government have already accepted that principle, they can have no problem with the principles of our amendment. They may have a problem in finding the money to do it. It could be argued that the Government's finances cannot afford the amendment, but we must take up that debate with the Chancellor of the Exchequer, whose present estimate of public sector borrowing for this year is £28 billion. Is it in fact worse than that?
I found the Minister's response disappointing and unsatisfactory, and I wish to press the amendment to a Division.
§ Question put, That the amendment be made:—
§ The Committee divided: Ayes 22, Noes 168.783
|Division No. 21]||[8.21 pm|
|Alton, David||Mackinlay, Andrew|
|Beith, A. J.||Maclennan, Robert|
|Bruce, Malcolm (Gordon)||Madden, Max|
|Campbell, Menzies (Fife NE)||Mahon, Alice|
|Cryer, Bob||Michie, Mrs Ray (Argyll Bute)|
|Cummings, John||Skinner, Dennis|
|Foster, Donald (Bath)||Steel, Rt Hon Sir David|
|Jones, leuan (Ynys Môn)||Tyler, Paul|
|Jones, Nigel (Cheltenham)||Wicks, Malcolm|
|Kennedy, Charles (Ross, C & S)|
|Llwyd, Elfyn||Tellers for the Ayes:|
|Loyden, Eddie||Mr. Archy Kirkwood and|
|Lynne, Ms Liz||Mr. Simon Hughes.|
|Aitken, Jonathan||Cope, Rt Hon Sir John|
|Alexander, Richard||Couchman, James|
|Alison, Rt Hon Michael (Selby)||Currie, Mrs Edwina (S D'by'ire)|
|Amess, David||Davis, David (Boothferry)|
|Ancram, Michael||Day, Stephen|
|Arbuthnot, James||Deva, Niranjan|
|Arnold, Jacques (Gravesham)||Devlin, Tim|
|Ashby, David||Douglas-Hamilton, Lord James|
|Atkinson, Peter (Hexham)||Duncan, Alan|
|Baker, Nicholas (Dorset North)||Duncan-Smith, Iain|
|Baldry, Tony||Durant, Sir Anthony|
|Bates, Michael||Dykes, Hugh|
|Beresford, Sir Paul||Elletson, Harold|
|Blackburn, Dr John G.||Emery, Sir Peter|
|Body, Sir Richard||Evans, David (Welwyn Hatfield)|
|Booth, Hartley||Evans, Jonathan (Brecon)|
|Boswell, Tim||Evans, Nigel (Ribble Valley)|
|Bottomley, Peter (Eltham)||Evans, Roger (Monmouth)|
|Bowis, John||Faber, David|
|Brandreth, Gyles||Fabricant, Michael|
|Brazier, Julian||Fairbairn, Sir Nicholas|
|Bright, Graham||Field, Barry (Isle of Wight)|
|Brooke, Rt Hon Peter||Fishburn, John Dudley|
|Browning, Mrs. Angela||Forsyth, Michael (Stirling)|
|Burt, Alistair||Forth, Eric|
|Butler, Peter||Fox, Dr Liam (Woodspring)|
|Butterfill, John||Fox, Sir Marcus (Shipley)|
|Carlisle, John (Luton North)||Freeman, Roger|
|Carrington, Matthew||French, Douglas|
|Carttiss, Michael||Gallie, Philip|
|Chaplin, Mrs Judith||Gardiner, Sir George|
|Chapman, Sydney||Gillan, Ms Cheryl|
|Clappison, James||Goodson-Wickes, Dr Charles|
|Clifton-Brown, Geoffrey||Gorman, Mrs Teresa|
|Coe, Sebastian||Gorst, John|
|Colvin, Michael||Greenway, John (Ryedale)|
|Congdon, David||Griffiths, Peter (Portsmouth, N)|
|Coombs, Simon (Swindon)||Hague, William|
|Hargreaves, Andrew||Paice, James|
|Harris, David||Patnick, Irvine|
|Hawkins, Nicholas||Pattie, Rt Hon Sir Geoffrey|
|Hawksley, Warren||Peacock, Mrs Elizabeth|
|Heald, Oliver||Pickles, Eric|
|Heathcoat-Amory, David||Porter, David (Waveney)|
|Hendry, Charles||Powell, William (Corby)|
|Hill, James (Southampton Test)||Redwood, John|
|Horam, John||Richards, Rod|
|Hordern, Sir Peter||Riddick, Graham|
|Howell, Ralph (North Norfolk)||Roberts, Rt Hon Sir Wyn|
|Hunter, Andrew||Robertson, Raymond (Ab'd'n S)|
|Jenkin, Bernard||Robinson, Mark (Somerton)|
|Jessel, Toby||Rowe, Andrew (Mid Kent)|
|Jones, Gwilym (Cardiff N)||Ryder, Rt Hon Richard|
|Jones, Robert B. (W H'f'rdshire)||Sackville, Tom|
|Jopling, Rt Hon Michael||Shaw, David (Dover)|
|Kellett-Bowman, Dame Elaine||Shepherd, Colin (Hereford)|
|Kilfedder, James||Smith, Tim (Beaconsfield)|
|Kirkhope, Timothy||Speed, Keith|
|Knight, Mrs Angela (Erewash)||Spencer, Sir Derek|
|Knight, Greg (Derby N)||Spink, Dr Robert|
|Kynoch, George (Kincardine)||Sproat, Iain|
|Lait, Ms Jacqui||Steen, Anthony|
|Legg, Barry||Stephen, Michael|
|Lidington, David||Stern, Michael|
|Lightbown, David||Streeter, Gary|
|Lilley, Rt Hon Peter||Sweeney, Walter|
|Luff, Peter||Sykes, John|
|MacKay, Andrew||Taylor, Ian (Esher)|
|Maitland, Lady Olga||Thomason, Roy|
|Malone, Gerald||Thurnham, Peter|
|Mans, Keith||Tredinnick, David|
|Marlow, Tony||Trend, Michael|
|Marshall, Sir Michael (Arundel)||Twinn, Dr Ian|
|Martin, David (Portsmouth S)||Waller, Gary|
|Mawhinney, Dr Brian||Wardle, Charles (Bexhill)|
|Merchant, Piers||Wells, Bowen|
|Milligan, Stephen||Whittingdale, John|
|Mitchell, Andrew (Gedling)||Widdecombe, Ann|
|Moate, Roger||Willetts, David|
|Monro, Sir Hector||Winterton, Mrs Ann (Congleton)|
|Moss, Malcolm||Winterton, Nicholas (Macc'f'ld)|
|Neubert, Sir Michael||Yeo, Tim|
|Newton, Rt Hon Tony|
|Oppenheim, Phillip||Tellers for the Noes:|
|Ottaway, Richard||Mr. Tim Wood and|
|Page, Richard||Mr. Robert G. Hughes.|
§ Amendment accordingly negatived.
§ Clause 2 ordered to stand part of the Bill.