Non-Domestic Rating Bill Considered in Committee [Dame Rosie
Winterton in the Chair] Clause 1 Local rating: liability and
mandatory reliefs for occupied hereditaments 5.24pm The First
Deputy Chairman of Ways and Means (Dame Rosie Winterton) Before I
call the mover of amendment 4, I remind the Committee that, while I
am in the Chair, I can be addressed as Madam Chair or Dame Rosie,
but not as Madam Deputy Speaker. We always have to remind
colleagues of...Request free trial
Non-Domestic Rating
Bill
Considered in Committee
[Dame in the Chair]
Clause 1
Local rating: liability and mandatory reliefs for occupied
hereditaments
5.24pm
The First Deputy Chairman of Ways and Means ( )
Before I call the mover of amendment 4, I remind the Committee
that, while I am in the Chair, I can be addressed as Madam Chair
or Dame Rosie, but not as Madam Deputy Speaker. We always have to
remind colleagues of this as we move into Committee.
(Waveney) (Con)
I beg to move amendment 4, page 1, line 10, at end insert—
“(2A) In section 64 (Hereditaments) of the Act—
(a) omit subsection (2), and
(b) in subsection 4(3), after “subsection” omit “(2)”.
(2B) In section 65 (Owners and occupiers) of the Act—
(a) omit subsection (8), and
(b) omit subsection (8A).”
The intention of this amendment is to abolish liability to
non-domestic rates of advertising when a right is granted
permitting the use of land for advertising (section 64) or when
land is used for advertising or the erection of an advertising
structure (section 65).
The First Deputy Chairman of Ways and Means
With this it will be convenient to consider the following:
Amendment 5, page 3, line 3, leave out “one year” and insert
“five years”.
The intention of this amendment is to extend the delay in uplifts
to business rate bills.
Clauses 1 to 4 stand part.
Amendment 1, in clause 5, page 16, line 3, leave out from “(b),”
to end of line 4 and insert “omit “fifth””.
This amendment would require local non-domestic rating lists to
be compiled every year.
Amendment 6, in clause 5, page 16, leave out line 4 and insert
“in every fifth” substitute
“no less frequently than in every third”.
The intention of this amendment is to move towards revaluations
on local non-domestic rating lists at no more than three-yearly
intervals.
Amendment 7, in clause 5, page 16, leave out line 4 and
insert
“”on 1 April in every fifth year afterwards”
substitute
“on 1 April 2026 and on 1 April in every year afterwards””.
The intention of this amendment is to move towards annual
revaluations on local non-domestic rating lists from April 2026
onwards.
Amendment 2, in clause 5, page 16, leave out line 6 and insert
“omit “fifth””.
This amendment would require central non-domestic rating lists to
be compiled every year.
Amendment 8, in clause 5, page 16, leave out line 6 and insert
““in every fifth” substitute
“no less frequently than in every third””.
The intention of this amendment is to move towards revaluations
on central non-domestic rating lists at no more than three-yearly
intervals.
Amendment 9, in clause 5, page 16, leave out line 6 and
insert
““on 1 April in every fifth year afterwards”
substitute
“on 1 April 2026 and on 1 April in every year afterwards””.
The intention of this amendment is to move towards annual
revaluations on central non-domestic rating lists from April 2026
onwards.
Amendment 3, in clause 5, page 16, leave out lines 12 and 13 and
insert—
“(ii) the year beginning on 1 April 2023 and each year beginning
1 April after that date”.
This amendment would make every year from now on a relevant
period for transitional provision under the 1988 Act.
Amendment 10, in clause 5, page 16, leave out lines 12 and 13 and
insert—
“(ii) the period of three years beginning on 1 April 2023 and
each year beginning on 1 April from 1 April 2026 onwards.”
The intention of this amendment is to move towards each single
year being the relevant period for transitional provision under
the 1988 Act.
Clause 5 stand part.
Amendment 11, in clause 6, page 16, line 15, at end insert—
“(za) in subsection (4), for “different from what it would be”
substitute “less than it would be””.
The intention of this amendment is to effectively abolish
downwards transition.
Amendment 12, in clause 6, page 16, line 17, at end insert—
“(c) in making these regulations the Secretary of State shall
ensure that no ratepayer pays a higher amount in business rates
than the amount derived from multiplying the uniform business
rate by the property’s rateable value.”
The intention of this amendment is to remove downward
transitional phasing.
Clauses 6 to 12 stand part.
Amendment 13, in clause 13, page 21, line 31, leave out
“paragraph 4G” and insert “paragraphs 4FA and 4G”.
This is a paving amendment for Amendment 14.
Amendment 14, in clause 13, page 22, line 26, at end insert—
“4FA The definition of a person (“P”) for the purpose of
paragraphs 4C to 4E does not include a person who is in receipt
of relief of 100 per cent with a chargeable amount of nil.”
The intention of this amendment is exclude businesses who have
nothing to pay from the duty to notify HMRC and the VOA.
Amendment 20, in clause 13, page 23, line 35, at end insert—
“4LA Paragraphs 4K and 4L do not apply if P is eligible for small
business rate relief (for example, because the rateable value of
the hereditament for which P is or would be a ratepayer is less
than £15,000).”
This amendment would exempt businesses in receipt of Small
Business Rate Relief Exemption from annual reporting if there is
no change to report.
Amendment 15, in clause 13, page 27, line 44, at end insert—
“(5A) After paragraph 5ZF (inserted by subsection (5))
insert—
“Rebate in case of failure by valuation officer to provide
confirmation
5ZG Where the valuation officer has not provided confirmation to
P of a change following a notification by P that will affect the
valuation of a hereditament within 60 days of the valuation
officer receiving that notification, the total amount of
non-domestic rates payable on that hereditament is reduced
by—
(a) £100, and
(b) (b) a further £60 for each day until the confirmation is
received by P, up to a maximum of £1,800.””
The intention of this amendment is to impose reciprocal penalties
on the VOA for failure to notify ratepayers on changes in their
rate assessments.
Clause 13 stand part.
Amendment 17, in clause 14, page 32, line 37, at end insert—
“(e) after paragraph 2C insert—
“2D(1) This paragraph applies where—
(a) a hereditament consists wholly or in part of land on which an
advertising right is exercisable; and
(b) the right is not severed from the occupation of the land.
(2) For the purposes of determining the rateable values of the
hereditament under paragraph 2 above, the rent at which the
hereditament might reasonably be expected to be let shall be
estimated as if the adverting right did not exist.
(3) In this paragraph “advertising right” means a right to use
any land for the purpose of exhibiting advertisements.””
The intention of this amendment is to provide that the rateable
value of hereditaments which consist wholly or in part of land on
which an advertising right is exercisable to be calculated as
though the advertising right does not exist.
Clauses 14 to 18 stand part.
Amendment 18, in clause 19, page 39, line 11, at beginning insert
“Subject to subsection (4A)”.
This is a paving amendment for Amendment 19.
Amendment 19, in clause 19, page 39, line 17, at end insert—
“(4A) Section 13 may not be brought into force until at least 6
months after guidance has been published by the Valuation Office
Agency on the requirement this Act will place on business
ratepayers.”
This amendment is to ensure that guidance is made available to
business ratepayers before the duty to notify comes into
effect.
Clauses 19 and 20 stand part.
New clause 1—Valuation Office Agency performance targets—
“(1) The Secretary of State must within three months of the date
on which this Act is passed prescribe by regulations performance
targets for the Valuation Office Agency to respond to requests
for updates to the central and local non-domestic rating lists
and to challenges to the valuations on those lists.
(2) The Secretary of State may by regulations require the
Valuation Office Agency to report at least annually on its
performance in such detail as the Secretary of State may require
in or by virtue of those regulations.
(3) The Secretary of State must lay before Parliament any reports
made under subsection (2).
(4) Any regulations made under this section must be made by
statutory instrument and are subject to negative procedure
(annulment by either House of Parliament).
(5) Regulations under subsection (1) may not come into force
until an impact assessment has been laid before Parliament.”
This new clause would require annual reports from the VOA on its
performance against targets to be set by the Secretary of
State.
New clause 2— Non-domestic rating: retail sector review—
“(1) The Secretary of State must conduct a review of the effect
of non-domestic rateable values on the retail sector.
(2) The review must be commissioned no later than 6 weeks after
the date on which this Act is passed.
(3) The review must assess the impact of non-domestic rateable
values on competition between different parts of the retail
sector, for example—
(a) stand-alone businesses operating from a single shop premises
in a village, town or suburban high street setting,
(b) chain stores with multiple premises in city centres and
out-of-centre shopping malls, or
(c) mainly online operations based on making deliveries from very
large warehouses or fulfilment centres.
(4) The report of the review must be laid before Parliament no
later than 1 May 2024.”
This new clause would require a review of the differential impact
of business rates on different parts of the retail sector.
New clause 3—Non-domestic rating: hospitality sector review—
“(1) The Secretary of State must conduct a review of the effect
of non-domestic rateable values on the hospitality sector.
(2) The review must be commissioned no later than 6 weeks after
the date on which this Act is passed.
(3) The review must assess the consistency of approach to setting
of non-domestic rateable values between hospitality businesses
occupying premises of similar size and trading style,
including—
(a) public houses,
(b) restaurants
(c) live performance theatres, and
(d) exhibition spaces.
(4) The report of the review must be laid before Parliament no
later than 1 May 2024.”
This new clause would require a review of the differential impact
of business rates on different parts of the hospitality
sector.
Amendment 25, in schedule, page 47, line 2, at end, insert —
“18A In the Non-Domestic Rating (Alteration of List and Appeals)
(England) Regulations 2009 (S.I. 2009/2268), omit regulation 15
(Advertising rights).
18B In the Non-Domestic Rating (Alteration of List and Appeals)
(Wales) Regulations 2009 (S.I. 2005/758), omit regulation 15
(Advertising rights).
18C In the Non-Domestic Rating (Miscellaneous Provisions) (No. 2)
Regulations 1989 (S.I. 1989/2303), omit regulation 4 (Advertising
rights).”
These consequential amendments would be required to remove
references to advertising rights following the abolition of
liability to non-domestic rating in respect of advertising rights
effected by Amendment 4 to Clause 1 of this Bill.
Government amendments 21 to 24.
That the schedule be the schedule to the Bill.
I shall start off where I left off in the Bill’s Second Reading
debate. By way of background, the Bill is to be welcomed,
although it is important that it is viewed as the start of the
process of fundamentally reforming business rates and not the
endgame. It probably would have been preferable to have heeded
the advice of the Chartered Institute of Taxation and for the
Government to have brought forward a new consolidated business
rates Bill, rather than to amend the Local Government Finance Act
1988. That would have sent the message to businesses both large
and small that real change was on the way. However, we are where
we are and we must ensure that, ultimately, this Bill paves the
way to reducing business rates to an affordable level, putting
the business rates system on a long-term, more easily understood
footing and removing those barriers to regional growth.
We must have in mind the ultimate end goal, which should be to
get the uniform business rate multiplier back down from in excess
of 50p in the pound to the more affordable 30p in the pound,
which is where we started when the system came in in the early
’90s. To get to that, we need annual valuations, the abolition of
the multitude of complicated reliefs and to digitalise the
Valuation Office Agency. The Bill moves us in that
direction—although perhaps a little too tentatively. Moreover,
the duty to notify, which takes up much of the Bill, adds a
bureaucratic burden on businesses and there are some unintended
consequences that we should avoid. We must have in mind the need
at all times for increased transparency. The amendments that I
tabled have those considerations in mind.
Any adjustments to the business rates system should be guided by
two principles: reducing the regulatory burden on businesses and,
as I said, reducing the uniform business rate multiplier. We
should look at the Bill with those considerations in mind and aim
to move towards a sustainable system that provides a long-term
revenue stream that businesses can find bearable, which has not
been the case so often in recent years.
A properly functioning property tax system is critical to
achieving a vibrant and sustainable economy. For most of this
century, an outdated and unresponsive business rates system has
placed enormous strain on many businesses, particularly those in
the retail and hospitality sectors. Moreover, that strain has not
been shared equally across the country. That illustrates how the
current system is a hindrance—a logjam—to levelling up. We need
non-domestic rates to be more responsive to changes in the
economy so as to ensure that the system does not place an undue
and unfair strain on businesses. If we can achieve that, we shall
be more able to attract long-term investment into our towns and
cities, and we shall be better placed to meet other vital policy
objectives such as revitalising our high streets and achieving
our net zero aims and goals.
Clause 5 relates to the frequency at which revaluations take
place.
As I have mentioned, we need to move to the end goal of annual
valuations, so that business rates are more in line with the
economic outlook. I have tabled amendments 6, 7, 8, 9 and 10 with
that objective in mind. To achieve a responsive business rates
system, valuations should be carried out as regularly as
possible. The Bill is a good first step, and increases valuations
from every five to every three years, but it should provide the
flexibility for a future Government to require more frequent
valuations —ultimately, every year. Annual revaluation could
bring bills more in line with commercial property values, rather
than lagging many years behind. Even with a three-year list and a
two-year antecedent valuation date, occupiers will be paying
business rates bills in early 2026 that are based on valuations
from nearly five years beforehand.
Annual revaluations are essential if the Government are serious
about modernising the business rates system. They take place in
countries as diverse as Hong Kong and the Netherlands, and thus
there is no reason why they should not take place in England and
Wales. To conclude on this issue, the enormous administrative
burden placed on ratepayers by the new duty to notify would
certainly not be worth the distress and inconvenience it will
cause if it does not ultimately result in the introduction of
annual revaluations. In that context, I urge the Government to
give full consideration to these amendments.
Clause 13 sets out the requirement for ratepayers to provide
information—this is the new duty to notify, which, as drafted,
places an unnecessary burden on businesses. Amendments 13, 14 and
15 have the objective of reducing that burden and imposing
penalties on the Valuation Office Agency.
Amendments 18 and 19 relate to clause 19, and would ensure that
guidance is made available to business ratepayers before the duty
to notify comes into effect. The new duty to notify will place an
onus on all ratepayers to provide the Valuation Office Agency
with any information that they reasonably believe could impact on
the business rates valuation. This is an enormous additional ask,
not least for the 700,000 businesses which, up to now, have not
been subject to business rates and might be completely unaware of
what is proposed. The duty requires ratepayers to notify the VOA
of changes to their properties within a 60-day window, and
carries the risk of financial sanctions and even imprisonment if
they fail to comply.
As a former chartered surveyor, I cannot see how such a
burdensome duty on all commercial property occupiers—including,
as I have said, current non-ratepayers—can be justified as
necessary to administer a move to three-yearly revaluations. This
duty might be bearable for businesses if it assisted the VOA in
administering the move to annual revaluations. For small
businesses, it will cause more pain than the gain that will be
derived from moving to three-yearly valuations.
The new duty will leave many ratepayers wondering what might
qualify as a notifiable change. The VOA is yet to publish any
guidance; thus many businesses will take no chances and will
notify the VOA of any changes to their properties. The VOA will
hence be hoist with its own petard, as it will be flooded with
paperwork.
As I mentioned on Second Reading, many businesses, particularly
small and medium-sized enterprises without any rating expertise,
will turn to rogue rating advisers for help. Business rates
advisers do not require a licence to practise, and many
unscrupulous operators will see the new duty to notify as an
opportunity to take advantage of small businesses.
While the ratepayer has a short period in which to notify the VOA
of any changes to the property, as the Bill stands, the VOA has
no such obligation. It can, in effect, respond to notifications
at its leisure. I therefore propose a reciprocal provision that
places on the VOA a 60-day timeframe in which to respond to
notifications, with rebates to the ratepayer equivalent to the
fines set out in clause 13 that accompany a failure to
comply.
Clause 6 is a short and simple but nevertheless extremely
important clause, which gives effect to the removal of downwards
transitional phasing, as announced by my right hon. Friend the
Chancellor on 17 November last year in his autumn statement. That
was a positive step, but clause 6 as drafted does not permanently
remove the threat of downwards phasing, which is a punitive tax
that unfairly penalises occupiers whose rateable values have
fallen. It is wrong to force those whose property values have
fallen to subsidise those whose property values have risen.
The clause as it stands simply removes the requirement for
transitional phasing mechanisms to be revenue-neutral. That means
that the Government no longer need to fund any upwards
transitional mechanism with a corresponding downwards
transitional mechanism. However, that means that a downwards
mechanism can be easily introduced by a future Government without
any parliamentary scrutiny. Amendments 11 and 12 would plug that
loophole and permanently abolish downwards transitional phasing.
If any future Government want to reintroduce it, they should come
to Parliament and make the case for it, rather than bringing it
in through the back door.
Amendment 16 would delete clause 14, which, from my perspective,
is inequitable and unfair to businesses. As it stands, clause 14
exempts Government legislation from qualifying for the pursuit of
a material change of circumstances. That would remove a vital
check on Government and would allow future Governments to
legislate with impunity at the expense of businesses right across
the country, leaving them no recourse to challenge legislation
that interferes with their ability to do business.
A material change in circumstances gives ratepayers recourse to
pursue relief on their business rates when circumstances outside
their control hinder their ability to do business. Clause 14
exempts Government legislation from being a qualifying reason for
a material change in circumstances. I anticipate that the
Government have included this clause because they want business
rates to be a predictable source of revenue, even if their own
legislation or action undermines the very rateable value of the
properties occupied by businesses.
During the covid lockdown, to prevent the spread of the virus,
the Government forced a number of businesses to cease trading.
However, instead of accepting that there had been a material
change of circumstances for those occupiers and allowing appeals
to be launched, the Government introduced a locally administered
compensation scheme. With clause 14, the Government are seeking
the freedom to introduce any legislation at any time that might
alter the rateable value of a property. That is both
unprecedented and wrong.
Clause 14 can be viewed as a power grab that sets a dangerous
precedent and tells occupiers that they will have to accept the
detrimental impact of legislation on their ability to do
business, with no legal recourse. Amendment 16 would delete
clause 14, restoring the ability of ratepayers to claim a
material change of circumstances, regardless of how the change in
circumstances arose.
Amendments 4, 5, 17 and 25 would amend and add to clauses 1 and
14 and part 1 of the schedule. They address a niche issue, albeit
an extremely important one. The out-of-home advertising industry
includes adverts on billboards, walls, digital posters, street
furniture, bus shelters, buses and railway stations, which we see
every day as we go about our lives and probably take for granted.
The industry provides an important form of income for local
authorities, and it is estimated that almost half the revenue
generated goes back into local communities. These amendments
would abolish the liability to non-domestic rating in respect of
advertising rights.
The removal of business rates on advertising rights from the
rating lists would have three advantages. First, it would
increase the value and level of services provided by local
authorities. Secondly, it would remove a competitive disadvantage
to growth that impacts the out-of-home advertising industry, but
that does not apply to its rivals—broadcast, print and online
media. Thirdly, it would reduce the high level of inefficiencies
relating to advertising rights applied through the Valuation
Office Agency, local authorities and the out-of-home advertising
industry.
As drafted, the Bill will directly and adversely impact the
industry’s ability to invest in local communities. That runs
contrary to the Bill’s objective of reducing barriers to business
investment. In 2023, business rates charged on advertising rights
are an antiquated, out-of-date and ineffective tax. Advertising
rights are the only remaining right attracting liability for
non-domestic rating. The liability to non-domestic rating in
respect of sporting rights was abolished by the Local Government
and Rating Act 1997. Amendments 4, 5, 17 and 25 would remove that
anomaly.
In conclusion, I have enormous respect for the Minister and for
his co-sponsor of the Bill, my hon. Friend the Financial
Secretary to the Treasury. Although Treasury Ministers are not
currently present on the Front Bench, I am mindful that the Bill
has been drafted from a Treasury perspective, gathering in all
that money. That is incredibly important—don’t get me wrong—but I
suggest we also need to look at the issue through the prism of
business.
Whether large, medium-sized or small, businesses need confidence,
certainty and a fully reformed business rates system that takes
on board some of the amendments I have put forward. A fully
reformed system will mean that businesses will know where they
stand, and business rates will not be the elephant in the room.
People will be able to invest in, build on and expand their
businesses with a degree of confidence, leading to increased
profits. What that will do—joy to the Treasury—is increase
taxation. The Bill makes a start and provides an opportunity for
us to turn the vicious circle of business rates into a virtuous
circle.
The First Deputy Chairman of Ways and Means ( )
I call the shadow Minister.
(Luton North) (Lab)
As I stated on Second Reading, the Opposition support the
measures in the Bill overall because it is crucial that local
authorities and businesses have clarity as soon as possible so
that they can prepare for what is to come. We have worked
constructively to improve the legislation before it gets to them,
but the Bill is still lacking in areas that small businesses are
crying out for help with.
On Second Reading, I raised the matter of the pressures that
small businesses, particularly small chains such as convenience
stores, will be under as a result of the intensified reporting
requirements. Although it is certainly important to increase
accountability for businesses submitting their finances,
stakeholder groups such as the Association of Convenience Stores
and the Shopkeepers’ Campaign have drawn attention to the
stifling impact that the new requirements could have on their
businesses. Some small and medium-sized enterprises may resort to
outsourcing their account reporting, risking another financial
hit in return. We have yet to see the Government addressing those
concerns or considering any alternatives.
5.45pm
The Bill still does not have enough detail on how new reliefs
will be implemented by local authorities, or on how they will be
compensated for income forgone. Crucially, the Bill is also
missing a crucial assessment of any new administrative burdens
that might arise for councils and of how they will be supported
in handling them. Need I remind the Committee that local
government is already operating on skeletal budgets, trying to do
the utmost for residents with declining resources? Since 2010,
core funding for councils has reduced by £16 billion. Needs have
only risen as we have endured austerity followed by a
catastrophic mini-Budget. The funds announced by the Chancellor
in the spring Budget do not touch the surface of the challenge
that councils currently face.
It is, of course, welcome that the Government have committed to
consult local authorities and other stakeholders on how to
address business rates avoidance and evasion. When we are asking
local authorities to put enhanced resources into new reliefs, we
must also ensure that they are getting their fair due back from
businesses. The Government could go further in that regard by
tightening up the rules around empty properties and charitable
reliefs. The Welsh Labour Government may be a good example for
the Minister to look into; further thought should also be given
to allowing councils to set their own business rates multiplier,
tailored to their local economy and to the needs of their
businesses.
We cannot ignore the fact that we desperately need reforms to how
we tax online businesses in this country. That has been woefully
missing from the strategy from this Government so far. When will
we see a serious review of taxing digital giants? The Government
are failing—they are failing in their responsibility to tax
fairly. While business booms for major online corporations, our
bricks and mortar businesses continue to struggle through.
Another failure from the Conservatives is their complete refusal
to raise the small business rate relief threshold. Labour’s
proposal to raise the threshold to £25,000 would have saved our
high streets more than £1 billion. If Ministers will not listen
to me, will they please listen to the Federation of Small
Businesses? It backs our measure and says that it would lift over
200,000 small businesses out of business rates altogether. Why
did the Minister and his colleagues decide that that money was
not worth saving? Perhaps it was because they are not the ones
footing the bill.
I turn to the amendments. Colleagues have tabled some reasonable
amendments to the Bill that would result in some burdens being
lifted, particularly for small and medium-sized enterprises, as
well as enhancing transparency in local authority processes.
However, further thought is needed on the unintended consequences
of those alterations.
The hon. Member for Waveney () has tabled a range of
amendments. With regard to his amendment 4, the Local Government
Association rightly points out that a consequence of abolishing
liability to non-domestic rates of advertising would be a
reduction in income for local authorities.
At a time when councils are more stretched than ever, we cannot
seriously consider adding more financial constraints to this
already flawed Bill. New clause 1, in the name of the hon. Member
for North Shropshire (), is one such amendment,
which is attempting to be constructive but could create
difficulties for local authorities further down the line. The
Opposition have always been in favour of stronger transparency,
so in principle we support the idea of more frequent updating and
local non-domestic rating lists. However, the amendment prompts a
question about resourcing.
If the Government opt to require annual reporting from the VOA
according to targets that they set, they will need to outline how
they will support local authorities. Again, this is an added
burden on staff time that has not been accounted for. I do not
need to remind the Minister that the decline in funds over the
past 13 years has led to staff being overstretched, with
vacancies high and workloads even higher. Colleagues must agree
that adding more pressure on to a diminishing workforce without
extra resources is only going to reduce the quality of
services.
Amendment 20, also tabled in the name of the hon. Member for
North Shropshire, is a more straightforward suggestion. It would
ease burdens for small businesses, relinquishing them from the
need to report to the VOA in years when there is no change in
their business. It would free up valuable resources in those
hard-pressed companies and free up time for VOA staff to focus
their attention on assessing businesses that have actually had
circumstantial changes. We are supportive of this common-sense
measure. It would be a welcome change to the Bill, and it would
be a welcome change if Ministers were willing to take on this
constructive suggestion.
Ultimately, however, what we are attempting to do with this Bill
is to make minor improvements to a problematic and outdated
business rates policy that, if we are fortunate enough to be in
government, Labour would abolish anyway. These discussions might
all prove futile if the British people entrust the Labour party
to bring in the change that we so desperately need. Labour in
power would scrap the dysfunctional system of business rates
entirely. No longer would high street businesses be forced to
close their shutters due to soaring rents and rates. Online
giants would finally pay their dues, paying British taxes on the
trading that they do in our country. Small and medium-sized
enterprises would be supported from being start-ups to successful
national businesses.
All this would take place alongside our promise to abolish the
shameful non-domiciled tax status that too many of the
super-wealthy in this country exploit. By raising the digital
services tax paid by the likes of Amazon, we will be able to
raise the threshold of small business rates relief, helping more
home-grown SMEs to thrive in our retail sector. Labour is the
party of business. We have a plan to make it fairer, easier and
safer to trade in our country, after 13 years of crushing
economic failure. We will create new green jobs, boosting
Britain’s income and therefore our ability to support local
businesses. A huge part of that will involve finally addressing
the problem that this Bill only skirts around. The current
business rates system hinders entrepreneurs and is starving our
once-thriving high streets of viable businesses. Over the last 13
years, we have seen managed decline, from village to town to
city, and it will take clear thinking and bold action to stop
that. Sadly, both are missing from this timid Bill.
(North Shropshire) (LD)
I rise to speak to amendments 1, 2, 3 and 20, as well as new
clauses 1 and 2, tabled in my name. I note the excellent speech
by the hon. Member for Waveney (), who tabled amendments with
very similar objectives to my own. This Bill is a disappointment
to all businesses who are struggling through tough financial
conditions. Not only are prices going up for every single
purchase that they make, but many small businesses were forced to
lock into gas and electricity contracts at astronomical rates
last year and are no longer receiving any meaningful support with
those energy costs. They may also be struggling with interest
rate rises on their borrowings following the period of economic
chaos caused by the Government last autumn.
This Government committed to reviewing the system of business
rates fundamentally in their 2019 manifesto, but this Bill offers
only peripheral changes to an outdated system that does not work
for a modern economy. The Bill offers to change the timescale of
revaluations from every five years to every three years. This is
a welcome reduction, but Liberal Democrats believe that it does
not go far enough. The reality for businesses is that a
three-year gap between revaluations means that they will continue
to pay rates that are far from reflective of the real economic
conditions they are operating in. Amendments 1, 2 and 3 would
require non-domestic rating lists to be compiled every year and
make every year from now on a relevant period for transitional
provision under the Local Government Finance Act 1988. Annual
revaluations are possible. We only need to look to the
Netherlands, where they have been taking place since 1995. There,
rateable values are allowed to move with the local economy. This
means the tax that businesses are required to pay better reflects
the conditions that they face.
I also want to spend a little time on amendment 20, tabled in my
name. It is estimated that as a result of the Bill as it stands,
700,000 small businesses who currently pay no business rates at
all will need to submit annual reports to the Valuation Office
Agency, even when there has been no change to the premises they
occupy. These small businesses, like many in North Shropshire,
are already plagued by seemingly endless monthly and quarterly
Office for National Statistics returns, along with their ongoing
tax and financial reporting requirements.
The Bill adds yet another administrative hoop for these
businesses to jump through and threatens hefty penalties if forms
are completed incorrectly. This piles unnecessary pressure on to
small businesses and it will not raise any more tax for public
services. These businesses already receive a notification to
inform the VOA if there is a material change in their premises,
so there is nothing to be gained from this element of the Bill.
Amendment 20 attempts to deal with this problem by removing the
requirement for annual reporting of no change for those
businesses in receipt of small business rate relief. I urge the
Minister to support amendment 20, which I intend to push to a
vote, and to cut unnecessary red tape for the small businesses we
desperately need to help, in order to drive economic growth and
breathe new life into the high streets of our historic market
towns.
I also wish to speak to new clause 1, tabled in my name. It seems
very one-sided to impose punitive fines on businesses for failing
to report updates to the VOA on time, without any reciprocal
expectations of that agency. As I outlined on Second Reading,
dealing with the VOA over changes to a premises can be a
protracted affair, and all the time that that is going on,
businesses face uncertainty about their rates liability and,
critically, cannot plan their cash flow. New clause 1 would
require the VOA to report to the Secretary of State on its
performance in detail at least once a year. This report should
correspond to targets to be set by the Secretary of State. The
new clause also calls for the findings of these reports to be
laid before Parliament. I have suggested targets, rather than
legally binding levels of service, to reflect the fact that no
two premises are the same and that updates can be complex and can
be challenged, but those targets would at least set an
expectation of performance and ensure some accountability for the
VOA.
Lastly, I wish to draw attention to new clause 2. I think there
is general agreement on both sides of the Committee that we want
to see our high streets and market towns thrive. This is
especially true in places such as the five historic towns in my
North Shropshire constituency, where the local high street is not
just a practical place to go to but a social lifeline for many
residents. Those high street shops are in competition with online
retailers whose warehouse premises have a much lower rateable
value per metre squared, putting the high street at a
disadvantage. This was confirmed in the Treasury Committee’s
“Impact of business rates on business” report in 2019.
Disappointingly, however, the Bill does not take this discrepancy
into consideration. Instead, the Government will continue to
drain physical retailers through rates that do not reflect the
challenges they are already facing, leaving many at a tipping
point and struggling to compete on an unfair playing field. New
clause 2 would require a review of the impact of non-domestic
rateable values on competition in different parts of the retail
sector, so that Members could understand the true scale of the
issue and inform policy accordingly. This review should be
commissioned within six weeks after the date this Act is passed.
Overall, I urge Ministers to support these amendments and new
clauses in order to improve the Bill, which is just not ambitious
enough in fundamentally reforming an out-of-date tax system.
The Parliamentary Under-Secretary of State for Levelling Up,
Housing and Communities ()
I am grateful to all colleagues across the Committee for their
contributions today. I think all of us spoke on the Bill’s Second
Reading, and we have rehearsed the arguments on a number of these
points already. It is important to reiterate from the Government
Front Bench that this Bill delivers significant reforms for the
business rate system. It increases the frequency of revaluations,
which I think has been generally welcomed across the Committee
today. It also modernises the administration of the tax and it
provides new reliefs to support things such as property
improvements. Taken along with the nearly £14 billion-worth of
taxpayer subsidy for businesses this year, it helps to manage the
tax burden amid the ongoing pressures that the hon. Member for
North Shropshire () mentioned.
I will now turn to the contributions that hon. Members and hon.
Friends have made today. My hon. Friend the Member for Waveney
() made an incredibly
constructive set of comments, and I completely understand the
sentiments behind many of the amendments he has tabled. He set a
challenge at the outset of his speech, saying that he is looking
to move towards annual valuations, the removal of complications
and the adoption of digitalisation. We are making progress in two
of those three areas, which I hope is not bad, and he has
indicated that, overall, this is a step in the right direction.
We are moving from five-yearly valuations—in reality, they have
happened every seven or eight years in some instances in recent
years, for good reason—to three-yearly valuations. We are moving
towards the collection of further digital data, and we are
continuing to support businesses, where we can, through the
reliefs we have put in place.
6.00pm
My hon. Friend spoke about greater frequency of valuation, and I
acknowledge the desire of Members on both sides of the Committee
to move towards more frequent valuation. I hope the Government’s
move from five years to three years is a step in the right
direction. We have said we will look at this again in the coming
years, where we are able to do so. That change, which has been
mentioned in every speech today, comes alongside the necessity to
change how we approach business rates in general.
Fundamental changes to the system would require an extremely
significant amount of upheaval, which we do not support, so the
country has to look at how we change the collection of data and
how we change the processes to make them more effective. We
currently have a process of check, challenge and appeal. Our
changes, including through the collection of additional data,
will help to reduce and remove at least the check process. We
have to acknowledge that if we were to move to annual valuations,
more data would have to be provided in one way or another,
because the 2 million checks in the current process would not
work if we moved to a greater frequency.
Amendments 13 and 14, and other amendments, talk about 100%
relief and how ratepayers must still comply with duties. Although
I understand the concerns my hon. Friend outlined, the
information collected on specific properties is often used in the
valuation of other comparable properties, many of which may not
receive 100% relief. A small business that occupies a single shop
might pay no rates, whereas the same property would be liable for
rates if it were used by another business, such as the Co-op. We
have to have in mind the broad gamut of business rates when we
consider the collection and use of data.
My hon. Friend spoke on Second Reading and in Committee about his
concerns on material changes in circumstances. Although I
understand his concerns, I reiterate the Government’s position
that, subject to the will of the Committee, these changes are
being introduced to reflect and respond to the kinds of
extraordinary events we saw with covid. Although we hope those
extreme circumstances never happen again in our lifetime, we seek
to ensure that we have the powers that may be necessary in such
circumstances.
The hon. Member for Luton North () is my friend everywhere other
than in this Chamber. I am grateful for the Opposition’s overall
support for the Bill. We have differences on its implementation,
which she cogently outlined, but I am grateful for her
constructive approach to the Bill. On reforming online sales, I
gently remind her that revaluations in recent months have seen
around a 20% reduction in average costs for retail and a 27%
increase in the average costs for online distribution warehouses.
She asked when there will be reform, and that reform is already
under way.
I hope I have covered the points raised by the hon. Member for
North Shropshire, who spoke of the need for greater frequency of
revaluation for business rates and any business taxation. As she
indicated, the Liberal Democrats do not believe the Bill goes far
enough and believe that annual revaluation is possible. She
specifically highlighted the Netherlands. Although comparisons
are difficult—the UK and the Netherlands are fundamentally
different countries with different populations and different
approaches—the Netherlands moved to annual revaluation in stages,
and we are moving from five years to three years. We will look to
see where we can improve in future, where possible.
Although I accept that the hon. Lady will probably press
amendment 20 to a vote, I will gently try to dissuade her from
doing so. She rightly outlined the huge importance of small
businesses to our economy, and all parties in this House share
her concern about ensuring that the viability and vitality of the
small business sector can be maintained, grown and improved, but
I remind her that, as a result of decisions made by this
Conservative Government over the past 13 years, 720,000 business
already have 100% small business rate relief and a further 76,000
businesses are within the taper, so they receive partial relief.
A 75% discount is being introduced as a result of this year’s
revaluation for the hospitality, retail and leisure sectors.
Small businesses want certainty, which they will not get from the
Liberal Democrat policy of fundamentally changing the business
rates landscape, and they want to know that the Government of the
day, who are responsible for such changes, have an understanding
of the macroeconomic picture and of the importance of being able
to fulfil their promises. The proposals from the Liberal
Democrats and Liberal Democrat-supporting reports in recent years
would reduce our income from business taxation, which would need
to be covered. That means taxes would need to go up
elsewhere.
The leader of the Liberal Democrats continues to speak to the
media and in this place about tens of billions or hundreds of
billions of pounds of additional spending. If we were to remove
the income from business rates, the Liberal Democrats would have
to ask themselves where they would get that money from and how
they would pay for the black holes created in our tax system.
rose—
The hon. Lady is going to tell me exactly where she would find
several hundred billion pounds to fill her black hole.
Amendment 20 is about cutting red tape for small businesses. Does
the Minister agree that he is talking about policy objectives
that are not relevant to the Bill?
That tells us everything we need to know about the Liberal
Democrats. They want to talk about only this Bill, ignoring every
other policy. They look one way when talking to one part of the
country, and the other way when talking to the other part of the
country. That shows the Liberal Democrats’ lack of seriousness in
understanding how taxation actually works, in understanding how
to run a modern, dynamic market economy and in understanding how
we need to pay our way to make sure our economy is successful in
the long term. It is for those reasons that we oppose amendment
20.
The points I made were genuine. I think this Bill needs to be
changed, and I hope the Government will have an open mind in
considering whether to do so in the other place. We may well
review this situation again.
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 1 ordered to stand part of the Bill.
Clauses 2 to 12 ordered to stand part of the Bill.
Clause 13
Requirements for ratepayers etc to provide information
Amendment proposed: 20, on page 23, line 35, at end insert—
“4LA Paragraphs 4K and 4L do not apply if P is eligible for small
business rate relief (for example, because the rateable value of
the hereditament for which P is or would be a ratepayer is less
than £15,000).”—(.)
This amendment would exempt businesses in receipt of Small
Business Rate Relief Exemption from annual reporting if there is
no change to report.
Question put, That the amendment be made.
[Division 234
The Committee divided:
Ayes
168
Noes
282
Question accordingly negatived.
Held on 22 May 2023 at
6.09pm](/Commons/2023-05-22/division/62635670-7122-4713-96E3-3FD28C9F77FC/CommonsChamber?outputType=Names)
Clauses 13 ordered to stand part of the Bill.
Clauses 14 to 20 ordered to stand part of the Bill.
Schedule
Consequential Provision
Amendments made: 21, page 50, line 33, leave out “an order” and
insert “regulations”.
This amendment and amendments 22 to 24 correct drafting mistakes
which refer to “regulations” as “orders”.
Amendment 22, page 50, line 34, leave out “such an order may not”
and insert “no such regulations may”.
See the explanatory statement to Amendment 21.
Amendment 23, page 50, line 36, leave out “it” and insert “the
regulations”.
See the explanatory statement to Amendment 21.
Amendment 24, page 50, line 38, leave out paragraph (b) and
insert—
“(b) in subsection (9AA)—
(i) for “an order under paragraph 5G” substitute “regulations
under paragraph 5FB”;
(ii) for “order” in the second place it occurs substitute
“regulations”;
(iii) for “it” substitute “the regulations”.”—(.)
See the explanatory statement to Amendment 21.
Schedule, as amended, agreed to.
The Deputy Speaker resumed the Chair.
Bill, as amended, reported.
Bill, as amended in the Committee, considered.
Third Reading
6.24pm
I beg to move, That the Bill be now read the Third time.
It has been a pleasure to support the progress of this Bill
through the House. I do not seek to detain the House for long,
but let me say briefly that the Bill offers some of the most
substantial reform to the business rates system since its
inception in 1990 and meets our commitment to reform and reduce
the burden of the tax on business. By moving to more frequent
revaluations from 2026, we are delivering on a key ask of
business. We have been up-front with the House and with
businesses that meeting this commitment is a major ask, which is
why we have made some changes to the way ratepayers interact with
the Valuation Office Agency. That principle was accepted by
respondents to the review that predated this legislation.
Our approach has been to listen and to take appropriate action. I
have already mentioned the evidence-based approach that we
adopted in that review and the close dialogue that we foster with
our partners in business and local government. We are also taking
action to reform transitional relief, which was the No. 1 one ask
from stakeholders on business rates ahead of the 2023
revaluation. That is a major commitment, a major step to
supporting fairness and a major improvement in the credibility of
our business rates system.
Finally, we are happy to have agreed to the Welsh Government’s
request for various measures to be extended to Wales, and also to
be supporting Northern Ireland with a data sharing measure.
I conclude by expressing my thanks to all Members for their
contributions on Second Reading and in today’s debates. Although
we have not agreed on everything, this has been a useful and
constructive session. I am grateful to the Clerks of the House
for supporting the smooth running of the Bill and to all of the
teams across the Department and those in the Treasury, His
Majesty’s Revenue and Customs and the Valuation Office Agency for
their help in preparing the Bill. I look forward to watching the
Bill’s progress in the other place, and I commend it to the
House.
Madam Deputy Speaker ( )
I call the shadow Minister.
6.26pm
Throughout the condensed debate on this Bill, it has become clear
that, although well meant, this was a missed opportunity to do
better—to do more for businesses across the country. Yet again,
the Government have managed to miss the point, despite multiple
people, even from their own Benches, trying to guide this
legislation into a better place.
A step in the right direction could and should have been a leap.
This was a chance to provide businesses with more than short-term
sticking plaster fixes. Instead, we see small businesses worrying
over the administrative burden of meeting the new duty to notify
requirements and questioning what hefty punishments will be
handed down for any genuine errors. The hon. Member for Waveney
() quite rightly pointed out
that they include even imprisonment.
The Federation of Small Businesses, the shopkeepers, the corner
shops, the Association of Convenience Stores—the backbone of many
of our urban and rural communities —have all voiced their
concerns. Those concerns have been echoed by Members from all
parts of the House, but have sadly fallen on the deaf ears of
this Government.
However, there has been some agreement in these debates—that the
current outdated, dysfunctional business rates system is not fit
for purpose. The only difference is that the Government continue
to tinker around the edges while Labour would scrap it root and
branch. That is what small and medium-sized enterprises have
spent years lobbying for.
Labour has a plan for British business. We will support
entrepreneurs to turn their ideas into reality. We will ensure
that bricks and mortar businesses stay on our high street by
making their tax contributions proportionate. Labour will make
online tech giants finally pay their fair share of tax—something
that Conservative Ministers have had neither the will nor the
ability to do. By raising the digital services tax paid by the
likes of Amazon, we will be able to raise the threshold for small
business rates relief, helping more home-grown small and
medium-sized businesses to thrive in our retail sector.
Among the common-sense reforms that we put forward was to provide
short-term support by raising the threshold for small business
rates relief this financial year. As I have said previously,
raising the threshold to £25,000 would save our high streets more
than £1 billion. This support is not only what small local
businesses need, but what our high streets and towns are crying
out for.
I know that Small Business Saturday takes place just once a year
nationally, but it is something I do in Luton North nearly every
Saturday. I meet entrepreneurs, small businesses, innovators and
creators in my town who are doing amazing things in our
community, with our community and for the good of our community.
Every Small Business Saturday shout-out that I do is to celebrate
them and their contribution to our local economy. I know the very
real difference it would make to them and to every small business
across the country if we raised the threshold of business rates
relief to £25,000 now, and ultimately if we did away with the
outdated and unfair current business rates system altogether.
I genuinely hope that that the small steps in the right direction
made today can be built on and improved in the future by a
Government of whatever political stripe—hopefully a red one. We
must stem the decline of our high streets and tip the tax balance
between digital and physical businesses. We cannot continue to
see high street shops boarding up their windows while online
giants get away without paying their fair share.
Lastly, I thank every hon. Member who has spoken, including the
Minister, I thank the Clerks and I thank the stakeholders, who
have briefed well and lobbied fairly on behalf of their members’
interests.
Question put and agreed to.
Bill accordingly read the Third time and passed.
|
