Non-Domestic Rating (Designated Area) Regulations 2021

The designation of this special economic area is part of that financing plan—part of a masterplan that will see new investment on the site and the creation of an additional 20,000 new good-quality jobs on one of the largest development sites in Europe. It builds on central and local government investment to initially deal with the legacy of steel-making and ensure that the site was kept safe and secure, before working with local, national and international investors on what market opportunities are most relevant to the site. The development corporation secured ownership of the developable land through agreement and a compulsory purchase order, bringing order to a piecemeal and incoherent situation, and allowing developments at scale.

There is a healthy pipeline of investment interest in place, and the provisions of this statutory instrument will ensure that, as the land is developed and new industries emerge, part of the business rates income will be reinvested in site development. It is a virtuous circle, where success in investment will bring resource to accelerate the development of the site. The regulations provide that the designated area will come into force only after the Government are satisfied that Redcar and Cleveland Borough Council and the Tees Valley Combined Authority have put in place arrangements that ensure that the money they keep as a result of these regulations will be used solely for the benefit of the South Tees Development Corporation.

To that end, the Government have negotiated a memorandum of understanding with Redcar and Cleveland Borough Council and the Tees Valley Combined Authority which will ensure that there are clear revenue-sharing arrangements in place, protecting the finances of the local authority and enabling funding to be released for the development of the site. This will be signed as soon as Parliament agrees to the regulations, and will enable the designated area to come into existence on 1 April 2021. From that point, all growth in business rates will be shared 50:50 between the council and the combined authority.

Growth will be measured exactly as in other designated areas. Schedule 2 provides details of that measurement. When in any year the business rates income in the designated area is greater than a baseline amount, set out in Schedule 1, the council and combined authority will keep 100% of the difference. The baseline amount—a little over £7 million—has been set by Redcar and Cleveland Borough Council. It represents the annual amount of business rates that it would expect to collect in the designated area at this point in time. As the regeneration of the development corporation increases, the council and combined authority will keep every pound of the collectible business rates above that £7 million baseline. This will be reinvested in the area, generating still further growth.

These are important regulations. They will provide additional funds over an extended period, allowing the council and the combined authority to invest in the regeneration of South Tees. I commend them to the House.

That means ending our society’s obsession with low personal tax. If we want a decent quality of life in town centres, which everyone says they do, we have to be prepared to pay for it. It is not going to happen on its own: market forces and commercial pressures will not resolve this problem. Treasury funding, provided through local councils, is necessary to regenerate and revive our town centres, and I hope that the Minister will seriously take up this option and encourage the Government to act before our town centres die. In that context, I support this order, but I think that a wider, more fundamental strategy is needed.

Business rates have become an unacceptable drag on our economy. This system is a tax on productive investment at a time of chronically weak productivity growth and a burden on a high street struggling to adapt to the rise of online retail and the impact of the pandemic. Because of the highly unequal way in which land values currently exist, a land tax of this sort would significantly reduce business taxes in the poorest parts of the country, helping bring about the regional rebalancing that is so badly needed. By taxing only land, and not the productive capital above it, it would remove a major disincentive to investment, boosting productivity and accelerating the UK’s recovery.

The business rates retention policy in these regulations, of sharing between central and local government—and solely within local government in this case—and providing local councils with extra cash to promote growth, could work equally well under a land value taxation scheme. Any growth in revenue could still accrue to the local authority alone. Therefore, although I agree that these regulations can serve us well as a policy in a period when growth is possible and likely, I encourage the Government to consider a new system altogether which would stimulate growth and encourage endeavour rather than just taxing it.

This benefits Tees Valley Combined Authority and Redcar and Cleveland Borough Council. As my noble friend the Minister has indicated, it allows the retained monies to be used in the designated area where the need is greatest and where local economic growth is most required. That is a good thing. The establishment in certain parts of the country of mayoral combined authorities with specific spending powers and, in particular, the emphasis on local economic growth has clearly required new funding arrangements. Although these regulations are dealing only with any income arising from the growth of rate returns, in this one designated area, those sums will be totally at the disposal of local government. As this money will be shared 50/50 between the local authority and the mayoral combined authority in the area, I hope that the required memorandum of understanding between the two, which has been referred to, will be a really co-operative and positive statement and an encouragement for greater economic activity, and will allow the designated area to be confirmed in April, as suggested.

Memoranda of understanding are being ever more utilised as precursors for more solid agreements, as has been demonstrated in our recent UK trade initiatives. While always well intentioned, they do not always result in long-term satisfaction. Moving more of the monies received into the hands of local democracy is very important and it is, of course, not a substitute for thorough reform. We await that reform with great interest.

I am assuming that regulations similar to these will be put before us for other areas where a mayoral combined authority and local authorities are working together, and that this will include West Yorkshire, which moves to a new status soon. Can my noble friend the Minister confirm that this will indeed be the formula for all such combinations in the future as devolution proceeds? When the proposed revaluation is completed, will further changes be made to support business even more with the hope of economic enhancement, job creation and a lessening of the burdens on business as we emerge from the present crisis?

It is clearly beneficial to an area to have thriving businesses that will generate the income that they will then be able to use, as the Minister said, to improve infrastructure and the area generally. Would it be possible, if it is not done already, for central government to investigate what initiatives work? Does a town centre management scheme, for instance, bring new life into an area? Can educational initiatives be introduced locally that will, before very long, bring new business rates into an area? I would like to see government be proactive on this and would be grateful if the Minister would say whether he thinks that that sort of initiative is possible.

Finally, I echo the words of others in this debate. It is absolutely imperative that the business rates holiday, which was very speedily granted in the wake of Covid and the devastating effect that it had on our high streets, is extended in the Budget. Can the Minister give us any assurance on that?

I am also mindful that the charitable relief from non-domestic rating has been a vital lifeline for faith-based organisations and for the community and voluntary sector. Any strategy for spearheading the recovery from the ravages of Covid-19 must not neglect these groups, as their operation has already been severely disrupted.

In conclusion, I agree with those who have emphasised the necessity of a specific plan to revive our town centres and high streets. I trust that the Government will give us a positive lead on that.