Non-Domestic Rating (Lists) Bill
Monday 17th June 2019
(5 years, 5 months ago)
Commons ChamberRead Full debate Non-Domestic Rating (Lists) Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts
Mr Speaker
I inform the House that I have considered the Bill, and I have concluded that it does not meet the criteria for EVEL—that is to say, English votes for England laws—certification.
To move the Second Reading, I call not any Minister, but a particular Minister, a perspicacious Minister, a dedicated Minister and, I know, a Minister in a hurry—Rishi Sunak.
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
I beg to move, That the Bill be now read a Second time.
This Bill makes a major improvement to the rating system that delivers on Government commitments and addresses ratepayers’ concerns. It will ensure that business rates bills will be updated at more frequent revaluations to reflect changes to the rental property market. In doing so, it will ensure that business rates become more responsive to economic changes.
Business representatives such as the CBI, the British Property Federation and the British Chambers of Commerce have all asked for more frequent revaluations. They were promised that by the Chancellor at autumn Budget 2017 and again at the 2018 spring statement. This Bill delivers on those promises.
Business rates bills are based on the rateable value of the property, which, broadly speaking, represents its annual rental value. The rateable value is therefore the tax base for business rates and it is assessed by the Valuation Office Agency, independently of Ministers.
Since the current system of business rates was introduced in 1990, the Government have had regular revaluations of rateable values, to ensure that they remain up to date. These revaluations ensure that the amount paid in business rates—money used to fund important local services—is distributed fairly among all ratepayers, having regard to their rental value.
Regular revaluations are an important part of maintaining fairness in the system, but the Government must strike a balance between the uncertainty created by regular revaluations—because it is inevitable that rate bills will change at that time—and the stability of businesses being able to plan for the future.
Mr Clive Betts (Sheffield South East) (Lab)
The Minister just made an important point about the fact that revaluations are there to ensure fairness in the system. On that basis, does not council tax completely fail the test? If the Minister really wanted to go down in history, would it not be more appropriate to have a non-domestic rating and council tax valuation Bill?
Rishi Sunak
I am not sure I would like to go down in history as the man who revalued people’s homes to tax them more. The Chair of the Select Committee on Housing, Communities and Local Government makes a fair point, but the difference is that the statutory basis for business rates requires that the overall revenue raised remains neutral in real terms, taking account of appeals and increases, so it is necessary to ensure that that happens in practice. As a result of doing that every five years since 1990, the Government have enacted a revaluation.
Following the 2010 revaluation, and in the face of the economic downturn, the planned 2015 revaluation was postponed to 2017. That reflected the need at that difficult time to give businesses more certainty. Quite rightly, however, it also led to renewed interest in business as to how often we should in the future revalue for business rates.
Bob Blackman (Harrow East) (Con)
I will not be as mischievous as the Chairman of the Select Committee, but there is an issue that needs to be dealt with. Various Treasury and Ministry of Housing, Communities and Local Government reforms have resulted in many reliefs and opportunities for people to run small businesses without having to pay any business rates at all. Is it not time for a fundamental review of business taxation, to make it fair and reasonable and to ensure that those people who operate online also pay their fair share of business taxation, rather than relying on those businesses that happen to be in situ?
Rishi Sunak
I feel like I am being pincered by the illustrious senior members of the Select Committee. Of course, the issue of business rates vexes many people, but my hon. Friend is right to point out that, because of the various reliefs enacted by this Government, it is the case that fully one third of all businesses pay no business rates at all, and that is to be welcomed.
Notwithstanding the fact that I would be straying far from my brief and treading on the Chancellor’s toes if I addressed the broader structure of business rates taxation, it is worth saying that when the Treasury last looked at the issue a few years ago, there was no consensus among the business community about what might replace it. On digital taxes in general, although it is not quite the same, the digital services tax mooted by the Chancellor goes in part towards addressing the issue raised by my hon. Friend.
To return to the Bill, the response of businesses to the consultations and engagements was very clear: they thought that the revaluation cycle should be shortened, and the most popular option emerged as three years. Therefore, this Bill makes three changes to the rating system in England.
First, the Bill will bring forward the date from which the next revaluation takes effect, from 1 April 2022 to 1 April 2021. Secondly, the Bill will ensure that, thereafter, revaluations will take effect every three years, so the next revaluation after that will be in 2024, and so on. Thirdly, the Bill will change the last date by which draft rateable values must be published in the lead-up to the revaluation, from the preceding 30 September to 31 December. That period, during which new rateable values are published before the list comes into force, is known as the draft rating list.
Business rates is a devolved policy area, but the Bill also applies in part to Wales. As in England, the next revaluation in Wales will be brought forward to 1 April 2021. I understand that the Welsh Government are considering options for the frequency and nature of revaluations thereafter, so the requirement for three-yearly revaluations does not yet apply in Wales. Entirely different legislation applies in Scotland and Northern Ireland, but I understand that both countries are committed to having more frequent revaluations.
Hon. Members who have been following the proceedings of the Select Committee on the Treasury inquiry into the impact of business rates will have seen a range of business groups support the move to more frequent revaluations. I will end with a quote from the evidence provided by the Association of Convenience Stores:
“More frequent revaluations will allow rateable values to link more closely with the non-domestic property market and three-yearly revaluations strike the balance between VOA resource and accuracy for business.”
In conclusion, I am very glad to be able to make this improvement to the rating system, and I commend the Bill to the House.
Jim McMahon (Oldham West and Royton) (Lab/Co-op)
First, may I refer Members to my entry in the Register of Members’ Financial Interests? I am a vice-president of the Local Government Association. We are very supportive of more frequent revaluations. There are growing calls to make sure that that happens, not only to ensure their relevance but to remove any potential sharp cliff edges—the longer a revaluation is left, the more the valuations between regions drift.
The LGA, though, would like the Government to go further, and asks them specifically to reduce the significant backlog of appeals: there are a staggering 65,000 unresolved appeals from 2010 in the system. That is important because local councils have to have £2.5 billion in reserves, in case those appeals are successful and the risk is carried by council services. The LGA also asks for the appeal period to be capped at six months. Again, that would reduce the financial exposure for which local authorities would have to make provision through their reserves. The LGA believes that that would be more appropriate.
We must consider the impact of revaluations with regard not only to the changing nature of demand—including for retail, office and other types of uses—but to the geographical shift away from our regions to London and the south-east, as shown by the most recent revaluation. The net take for the Treasury has to be broadly the same, and the revaluation reflects the increase in value in London and the reduction in the regions.
In the 2017 revaluation, it was only London that experienced an increase in all values across all sectors: retail was up by 26.2%, industry by 15.1%, office by 21.2%, and other uses by 25.7%. Every other region, bar the south-east, experienced a reduction in retail values, including by 1.2% in the west midlands and by 6.8% in the north-east. Although office values were more mixed, Yorkshire and the Humber experienced a decrease in value of 13.25%, followed by the north-east, which was down by 12.5%. A real shift is taking place away from our regions, primarily in the north, towards London and the south-east.
Let me paint what that picture means in pounds and pence, because that is what the Treasury cares about when it comes to business rates. The square mile of the City of London alone is now valued higher than the whole of Wales. Westminster City Council and Camden Council together are worth more than the whole of the north-west of England. Greater Manchester alone is valued higher than the whole of the north-east of England. We are seeing major shifts in values across the country, focusing not just on the capital but on the city bases away from our towns.
Why is that important? As more local authorities move towards business rate retention schemes, all with varying degrees of retention and because of that different degrees of exposure, there will be an impact on those with 100% retention in particular. Councils will be asking—following the next revaluation in 2021, should the Bill go through—what safety net will be in place to ensure that councils with perhaps weaker economic bases are not disadvantaged because they have opted into a business rate scheme. That is not because they have not been working hard to drive their local base—many have been doing that, which is why they went into the scheme in the first place—but because the nature of demand in those places has changed so much.
In Committee, when we have a bit of time to secure evidence to test some of these ideas out, I hope there will be a spirit of wanting to work together to try to make the system work. We have heard some pushing demands from Members who, quite rightly, recognise that council tax and business rates are both very important property taxes which also have limitations. It is important that both are sustainable and fair on the payers.
Bob Blackman
The hon. Gentleman provides an analysis, which I recognise, of the changes that took place during the previous revaluation. He also says that there is an opportunity for local authorities to grow their economic base. Has he done any economic analysis of how successful those areas of the country that have seen a greater fall in their valuations have been in attracting businesses, in particular where public services and Government Departments have been devolved to those areas, which can increase the economic basis of those local authorities?
Jim McMahon
We have done that analysis. We have spoken to local authorities that are part of the retention scheme and where they have managed to capture the uplift in growth of values. I should say, however, that in combined authority areas and city regions, where we take the locality in the round we are seeing a shift away from towns to cities. The cities are performing very well and we are seeing stability in the retail and office markets, but we are not seeing the same repeated in the neighbouring towns that can be only a mile or two up the road. In terms of net gain, a lot of them will have to bring forward their strategic plans to ensure they are developing enough big employment sites, because it will eventually come down to square footage as we see the nature of it shift.
Let us be honest: we are talking about an online sales tax. The Government have really resisted that. There are some legitimate reasons to be cautious, particularly in terms of EU legislation and what that might mean for a potential challenge, but the fact is that we have not addressed, even within the business rate regime, how completely unfair it is for the high street anchor store —John Lewis, Debenhams and so on—which brings in footfall into town centres and supports the other retailers. The Amazon big shed on the edge of the motorway pays a fraction of the business rates to occupy that space, when it is actually a more productive space direct to the consumer. There is a lot of room to go here, not just to rely on an internet sales tax, but to get around a table, work through the detail cross-party and really test what areas are not controversial. Most people who understand this recognise that the system has to catch up with the changing times. That offer has been on the table for a while and perhaps one day it will be taken up.
Mr Clive Betts (Sheffield South East) (Lab)
I draw the House’s attention to my entry in the Register of Members’ Financial Interests. I am the vice-president of the Local Government Association.
I do not want to keep the Minister too long from his exciting bedtime reading, which he was telling us about in questions earlier. In principle, I accept what the Bill tries to do and I think it is a sensible move. The Housing, Communities and Local Government Committee has conducted an inquiry into business rate retention and, more recently, the high street. The view generally has been that business rates should be revalued more often and that three years is a reasonable compromise. Five years is too long, because we get major changes in rating values that we then have to catch up with, and we then have dampening mechanisms, appeals and so on. Any more frequently would be too much change too quickly, so three years is a reasonable compromise on which I think there is general agreement.
I hope the Government really mean it and that we will have three years. In 2015, when we had five years, the valuation was postponed for two years. Why? It was because we were going to have a general election in 2015. That was the reason and everyone knows it. That meant seven years between revaluations, which created an even bigger problem with even bigger changes and a lot more difficulties, from which we are still suffering.
Are there any implications for the business rate retention scheme? Presumably, the Government are still going ahead with the 75% figure. Is it going ahead from next year? We are still not quite sure, in these changed circumstances. Will it have any impact particularly on the issue of resets within the system? Presumably not, particularly if a rolling reset is done. I presume that would be covered and would not be affected, but it would be helpful to have reassurance on that.
I echo the point made by my friend the hon. Member for Harrow East (Bob Blackman). All the evidence we have heard, in our high street inquiry and the business rate retention inquiry—I am currently a guest on the Treasury Committee inquiry into business rates—shows that we just cannot carry on not recognising the change of circumstances, particularly with regard to the high street and 20% of sales now being done online, which is the highest percentage anywhere in the world. At some point, the system will have to change. Amyas Morse, the then Comptroller and Auditor General, made the point to the Committee that simply having a system based on another age and on floor space was taking no account of the changes happening now in modern society. That was not sustainable in the long term and there had to be change.
There could be a complete comprehensive review, moving to a completely different system of raising money from businesses. That is one way. I still think it is hard to avoid taxation on physical buildings and that they are probably a good basis for a system, but there has be some reform and some addition. The Select Committee’s inquiry into the high street recommended that we look at a number of alternatives, including the potential for an online sales tax. That would take the pressure off those elements of business, particularly high street shops, which are most under pressure. That still needs to be looked at.
Finally, appeals are still a problem. We hear that local authorities are holding reserves for very obvious reasons. We have changed the system and we now have a check and challenge. We have been told that it is discouraging businesses from appealing, so there is that disadvantage, compared with having lots of appeals that were bogging down the system. Fundamentally, the evidence showed that the valuation office is understaffed and under-resourced to deal with appeals. That came up in the Treasury Committee inquiry. I hope Ministers will look at that.
Whatever system we have, there has to be a proper appeals system that works expeditiously for the benefit of the appellant and local authorities. A number of issues still need to be considered, but the principle behind this small Bill is a good one that should be supported.
Dr Roberta Blackman-Woods (City of Durham) (Lab)
I am extremely grateful for the very incisive comments and questions to the Minister by my hon. Friend the Member for Sheffield South East (Mr Betts) and the hon. Member for Harrow East (Bob Blackman).
Labour supports this reform, not least because it is a part of our five-point plan for our high streets. Labour pledged in February 2017 to introduce more regular revaluations, coupled with simplifications in the business rate system. It is to be welcomed that the Government are at last finally getting on board with this essential reform, but the entire business rate system is in desperate need of comprehensive review. The Government’s consultation on the introduction of more frequent revaluations noted some challenges that are yet to be addressed, including: the increased workload resulting from this reform and the need for significantly skilled staff to undertake this work; and the possibility that the move will result in more appeals by ratepayers, placing additional pressure on the Valuation Office Agency.
According to the latest valuation tribunal statistics, there are still 65,000 unsolved 2010 appeals and councils have had to divert over £2.5 billion from services to deal with the appeals risk. How do the Government intend to deal with that? The explanatory notes state that the Bill’s provisions “may lead” to the Treasury providing additional funding to the VOA, but it does not guarantee to do so, even though additional valuations and perhaps more appeals arising from them will be required.
While we welcome the changes in the Bill, we cannot settle for this tinkering around the edges while the nation’s high street retailers are struggling so much. Nationwide, every type of retail premises—high streets, retail parks and shopping centres—saw the number of occupied units decline at a faster rate in 2018 than in 2017. The high street vacancy rate rose from 11.2% to 11.5% in 2018 and almost 5% of that vacant space has been empty for over two years, which demonstrates the scale of the challenge.
The Confederation of British Industry has warned that the current business rates system is entrenching regional inequalities:
“The lag between the area’s boom in property prices and its latest business rates revaluation has seen firms suddenly having to cope with an almost 50% increase in their bill.”
On the other hand, areas that have suffered from economic downturn, where major industries have left in recent years, have continued to require firms to pay higher business rates. It can also mean that local authorities are underfunded where businesses are on the rise.
These regional inequalities are entrenched by the business rates system in areas that have already had their finances worsened by the Government’s continuing austerity policies. Between 2010 and 2019, Knowsley, the second most deprived area in the country, saw a spending power cut of £1,406 per household. This is simply a disgrace.
Last month, the UK2070 Commission published research showing that the inequalities that blight economic performance and life chances in parts of the UK are likely significantly to worsen, with London “decoupling” from the rest of the UK unless drastic action is taken. The chair of the commission said that what the Government are doing is just a sticking plaster and that it is
“too small, short-lived or disjointed to have a lasting impact.”
When will the Government listen to business and deliver a wholesale review of the system? When, too, will they address the threats to retailers posed by their online competitors and ensure that businesses with physical shops are not at a disadvantage under the business rates system?
We look forward to the Government pressing on further with reform of the business rates system and to hearing what the Minister has to say.
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Mrs Heather Wheeler)
It is an absolute pleasure to give the closing speech to this part of today’s business. The Bill may be narrow and technical in scope, but in practice it will improve the rating system for all ratepayers. It is the culmination of discussion with businesses about how we can improve the rating system. They wanted more frequent revaluations and that is what we are delivering.
I do not need to tell the House how quickly the commercial property market can change. Trends in sectors, locations and types of property can drive changes in the rents paid by businesses. Currently, the rating system picks up on those changes only every five years. Businesses have told us that five years is too much of a lag in the rating system before rateable values can catch up with rents. It results in ratepayers paying rates based on a rateable value that may no longer reflect their rent. That is why businesses want more frequent revaluations and why we are delivering precisely that with this technical Bill.
Jeremy Lefroy (Stafford) (Con)
I very much welcome the Bill. Will the Minister comment on one aspect that is not covered by the detail of it, but which is very important to people in my constituency who own riding stables and particularly those who provide riding services for the disabled as well as commercial riding stables? We often find that the Valuation Office Agency simply does not have the expertise to deliver an accurate valuation for that kind of very specialist activity, where there is not really a rental market.
Mrs Wheeler
I thank my hon. Friend for that question. The last time this matter was raised, the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak) facilitated meetings between the professional groups and the people involved. There were ongoing discussions that became very fruitful.
The Bill will ensure that rateable values and therefore business rate bills are more responsive to changes in the rental market. It requires revaluations after 2021 to take place every three years and I am delighted that Opposition Front Benchers have accepted that. Some businesses have asked us to go further and move to annual revaluations, but we are delighted to have peace reigning in the Chamber today.
Let me try to answer the question about business rate retention from the hon. Member for Sheffield South East (Mr Betts), the Chair of the Housing, Communities and Local Government Committee. The revaluation does not affect councils’ local income, as there are adjustments to make sure that that is dealt with. As regards resourcing the VOA, that will form part of the spending review later this year.
Mrs Wheeler
Very sadly, apparently I am not running to be leader of the Conservative party—[Hon. Members: “Shame!”] How kind! It is subject to that.
The Bill brings forward the next revaluation to 2021 but ratepayers do not have to wait two years to benefit from our reforms to the rating system. Ratepayers are now benefiting from a multiplier linked to CPI rather than RPI and from a small business rate relief scheme that has removed 655,000 small businesses from rating. They are benefiting from a retail discount of one third off small and medium retail properties. I commend the Bill to the House.
Question put and agreed to.
Bill accordingly read a second time.
Non-Domestic Rating (Lists) Bill (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Non-Domestic Rating (Lists) Bill:
Committal
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 2 July 2019.
(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Proceedings on Consideration and up to and including Third Reading
(4) Proceedings on Consideration and any proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion two hours after the commencement of proceedings on Consideration.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion three hours after the commencement of proceedings on Consideration.
(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on consideration and up to and including Third Reading.
Other proceedings
(7) Any other proceedings on the Bill may be programmed.—(Amanda Milling.)
Question agreed to.
Non-Domestic Rating (Lists) Bill (Money)
Queen’s recommendation signified.
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Non-Domestic Rating (Lists) Bill, it is expedient to authorise the payment out of money provided by Parliament of any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Amanda Milling.)
Question agreed to.
Non-Domestic Rating (Lists) Bill (Ways and Means)
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Non-Domestic Rating (Lists) Bill, it is expedient to authorise provision for, or in connection with, changing the dates on which non-domestic rating lists must be compiled.—(Amanda Milling.)
Question agreed to.
Non-Domestic Rating (Lists) Bill (First sitting)
Tuesday 25th June 2019
(5 years, 4 months ago)
Public Bill CommitteesRead Full debate Non-Domestic Rating (Lists) Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 25 June 2019 - (25 Jun 2019)
The Chair
Before we begin, I have a few preliminary announcements. Please switch electronic devices to silent. Tea and coffee are not allowed during sittings. Date Time Witness Tuesday 25 June Until no later than 10.25 am Association of Convenience Stores; Federation of Small Businesses; British Retail Consortium Tuesday 25 June Until no later than 11.25 am Local Government Association; Confederation of British Industry; Chartered Institute of Public Finance and Accountancy
We will first consider the programme motion on the amendment paper. We will then consider a motion to enable the reporting of written evidence for publication and a motion to allow us to deliberate in private about our questions before the oral evidence session. In view of the time available—I apologise for my slight lateness—I hope we can take those matters formally, without debate.
Ordered,
That—
(1) the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 25 June) meet—
(a) at 2.00 pm on Tuesday 25 June;
(b) at 11.30 am and 2.00 pm on Thursday 27 June;
(c) at 9.25 am on Tuesday 2 July;
(2) the Committee shall hear oral evidence in accordance with the following Table:
TABLE
(3) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 11.25 am on Tuesday 2 July.—(Rishi Sunak.)
Resolved,
That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Rishi Sunak.)
The Chair
Copies of written evidence the Committee receives will be made available in the Committee Room.
Resolved,
That, at this and any subsequent meeting at which oral evidence is to be heard, the Committee shall sit in private until the witnesses are admitted.—(Rishi Sunak.)
The Chair
We will now resume our public sitting and hear evidence from the Association of Convenience Stores, the Federation of Small Businesses and the British Retail Consortium. Before calling the first Member to ask a question, I remind all Members that questions should be limited to matters within the scope of the Bill and that we must stick to the timings in the programme order the Committee has agreed. We have until 10.25 am for this panel. Panel members, would you be so kind as to introduce yourselves for the record?
Dominic Curran: Hello. I am Dominic Curran. I am the property policy adviser for the British Retail Consortium.
Martin McTague: Hello. I am Martin McTague. I am the chair of policy and advocacy at the Federation of Small Businesses.
Edward Woodall: Good morning. My name is Ed Woodall. I am head of policy and public affairs at the Association of Convenience Stores.
The Chair
Thank you. Does anyone want to ask a question? No. Would the Minister like to kick us off?
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
I am happy to come in at the end. Perhaps the Opposition spokesperson would like to start.
Jim McMahon (Oldham West and Royton) (Lab/Co-op)
Q
Dominic Curran: An extremely adverse impact. The business rates level has risen 50% since its inception in 1990. It has risen by 10p in the pound, from 40p to just over 50p, in the last decade alone, at a time when there is, as you well know, an enormous retail transformation happening on the high street. That prohibitive level of business rates is hindering our members’ ability to invest in their stores and in the retail experience for the future that we hear so much about and that our members want to be a part of.
Jim McMahon
Q
Dominic Curran: Yes. We have put in a submission to the Treasury Committee, which, as you will know, is holding an inquiry on the impact of business rates at the moment. Fundamentally, we think the system is broken. It needs reform. Our overarching call is for a wide-ranging, fundamental reform of the entire suite of business taxation. The problem is that, in the past, there have been reviews just of the business rate system in isolation. Given its links to local government finance, and the wider impact of how different taxes affect the ways in which businesses operate—online and offline—we need a much more wide-ranging review.
That said, we recognise that that is quite a big, long-term ask, so we have called for some immediate reforms—most importantly and immediately, a freeze in the multiplier, and then a way of using the forecast increased revenue from corporation tax to offset business rates revenue, so that we can begin to, essentially, treat all business taxes with one coherent tax system, and use one element to help another element. An online tax, which is often prayed in aid, is not the best idea. If it is an online tax on goods, it would effectively be levied 100% on the retail sector. Retail pays 25% of business rates, so if you were to use the online tax to recycle the revenue from that to help retailers, they would essentially be paying 100% of the tax and getting 25% of the benefit.
The Chair
May I just interrupt for a moment? Questions and answers need to be within the scope of the Bill, which is specifically about the timing of bills and business rates, and we should try to constrain ourselves to that very narrow basis and avoid talking about wider issues. Was there a supplementary within scope, Mr McMahon?
Jim McMahon
Q
Dominic Curran: I think—
The Chair
Again, I do not mean to be difficult, but I am advised that consumer warehousing is not strictly within the scope of the Bill, which is on the timing. Do you want to make a comment within the scope of the Bill?
Dominic Curran: I would only say that I think that all business properties should be valued every three years, as the Bill suggests.
The Chair
Do any other Members want to ask a question within the scope of the Bill? No. I call the Minister.
Rishi Sunak
Q
Martin McTague: In principle, yes, we support the move to the three-year revaluation period. We see it as a compromise, because we know it will put a lot of pressure on the VOA. We are concerned that, if pressure is put on the VOA, it might start to transfer to billing authorities. The person who usually ends up getting the bill to pay is the small business at the foot of that process. We are very disappointed in the way that check, challenge, appeal is working and that it is, effectively, creating a system that lacks transparency. The ratepayer cannot see the basis on which they are rated, which means that when they try to challenge any of these things, the delay can be enormous. We think that the fundamentals of the process are still wrong, but the move to three years is a good one.
Dominic Curran: At the risk of having an outbreak of agreement, we also fully support a move to three-year valuations. Five years was too long; I know many call for annual revaluations. There is a spectrum of views among our membership, but we have settled on three years as the right balance, taking into account two factors. First is the balance of stability: for every three years, you know exactly what your rates bill is. Even if that is not perfect, at least you can work on that basis. Second is the capacity of the Valuation Office Agency; as Martin said, we are not convinced that it would necessarily have the resource or capacity to undertake yearly or two-yearly valuations. That is an important area of resource that should be looked at carefully by the Treasury in the upcoming spending review.
Jim McMahon
Q
Martin McTague: I can certainly answer that. There is widespread concern about the lack of capacity in the VOA. It is bizarre that the solution seems to be that you impose a six-month cap on appeals. That is effectively saying, “It’s so difficult to get these appeals through the process that we are going to cap the time required to do it.” Yet the information is not available to the business rate payer to be able to challenge things easily. The point that you made at the beginning—that the VOA is fundamentally under-resourced to deal with this change—needs to be addressed quickly.
Edward Woodall: I agree with Martin. The feedback I get from my members is that there is a lack of capacity at the VOA to allow them to engage meaningfully in the process and talk to individuals. There is also a challenge, which we will probably come to, about the structure of the process it has developed—check, challenge, appeal—and people’s ability to interact with that, which is causing difficulties.
Dominic Curran: Absolutely. Our members are enormously frustrated with the VOA on a day-to-day basis. The appeal system is clogged up at best. It needs better resourcing. There certainly should not be a cap on appeals, in terms of the time length. But more frequent revaluations would, to an extent, reduce the need for appeals, because valuations would be less out of date, although they would probably still be somewhat out of date.
Rishi Sunak
Q
Dominic Curran: The argument is strongest if we were to move to a system of annual revaluations. With an annual revaluation, it almost would not be worth appealing a valuation that you thought was wrong, because it would change in a year’s time anyway. The other effect would be that the valuation probably would not be so wrong, because your annual changes would be on a much smoother line—looking at it on a graph—whereas if we revalue every seven years, as we have, you get quite a steep change. Obviously, somewhere between seven years and one year, the line gets smoother and smoother. It is a question of judgment which number we pick. Using that logic, three years should have fewer appeals than five or seven, but one year should have fewer than three. We will see how good the VOA is at dealing with three-yearly revaluations.
The Chair
As there are no further questions from Members, I thank the panel for their evidence. Thank you so much for coming along.
We are running ahead of time, and the other panel has not arrived, so I propose that we suspend.
The Chair
Welcome. We will now hear oral evidence from the Local Government Association, the Confederation of British Industry and the Chartered Institute of Public Finance and Accountancy. We have until 11.25 am for this panel. I invite the panellists to introduce themselves for the record.
Annie Gascoyne: Hi, I am Annie Gascoyne. I am director of economic policy at the Confederation of British Industry.
Councillor Watts: I am Councillor Richard Watts. I chair the resources board at the LGA, and in my spare time I run Islington Council.
Adrian Blaylock: Good morning. My name is Adrian Blaylock. I am the lead revenues adviser for the Chartered Institute of Public Finance and Accountancy. I provide specialist technical advice to local government on council tax and non-domestic rates.
The Chair
Thank you. Who will be the first Member to ask a question? I call Jim McMahon.
Jim McMahon
Q
Annie Gascoyne: I am happy to go first. It is an issue that the VOA has struggled with the number of appeals in the past. There would be a challenge with VOA capacity if we moved to annual revaluations, which is what businesses would like to see in the longer term, because it would mean that the revaluations were more in sync with the economic cycle and what businesses are able to pay. However, we think that the three-year revaluations are a good stopgap, and are something that the VOA should have the capacity to deal with. That said, there have been issues with the check, challenge, appeal system and the VOA’s IT systems, which were implemented too quickly without due thought to some of the more complex business relationships when it comes to property.
The VOA has some work to do to look at modernising its IT infrastructure, perhaps taking lessons learned from how making tax digital for VAT was implemented. We should see whether there are ways that the VOA can streamline the process so that, in the longer term, instead of three-yearly revaluations, which is what we are talking about today, we can move towards annual valuations, and potentially in the future self-assessment, which would simplify the process for everyone in the long term.
Councillor Watts: Thanks for the question, Jim. We have significant worries about the VOA’s capacity. Clearly, if we are going to give it more work, which this Bill does, it will need to be properly resourced. It is worth adding, even at this early stage, that this is not just about the VOA’s capacity to do extra work in the future. There is a very significant backlog of work stored up at the VOA and the appeals tribunal. It is a sad fact that there is more than £2.5 billion tied up in council reserves that could be spent on public services. That is currently being kept back to guard against the risk of appeals from the 2010 revaluation. Clearly, if that money is to be freed up to be used on public services, as we all want, we need to crack through the backlog of appeals rapidly, and we must recognise that more regular revaluations will lead to more work in the future. We think that more resource is needed at the VOA so it can get through what is already a pretty big mountain of work, and there will be more work if the Bill passes.
Adrian Blaylock: I agree with my colleague from the LGA. He is right that the VOA is struggling with its capacity, in terms of the backlog of appeals from the 2010 list. I do not think we have yet seen the impact of the 2017 list and the switch to the check, challenge, appeal system. Moving to three-yearly revaluations will certainly have an impact on the VOA’s resources, which has an impact on local government because of the provisions it has to set aside for loss on appeals. It is really important that the VOA is resourced sufficiently under the new CCA system to deal with the revaluations and the appeals, or whatever we want to call them, coming out of the more frequent revaluation.
Jim McMahon
Q
Adrian Blaylock: It depends where we go in terms of rates retention. The consultation that happened in December and the switch to the alternative model for rates retention give local authorities certainty, in terms of a guaranteed baseline funding level, regardless of what a revaluation does. If we go down that route, I do not think it will be an issue, but you are right that, if you look at the impact of any revaluation, there are winners and losers in the different regions across the country. It is important that there is a rebalance of funding across local government so that no single authority is overly adversely affected. The safety net built into the current rates retention system seems to be working adequately for 50% retention. It probably needs to be reviewed as part of the move to 75%, and ultimately—hopefully—100%. I guess that will have to be part of the consultations about how we move to that sort of system.
Councillor Watts: I agree with that. There is a wider point, which I will stray into only briefly because it is not precisely the topic of the Bill. The risk we face on business rates is that we represent a council area that has seen a very rapid rise in valuations, which has put enormous pressure on many of our small and medium-sized businesses, and we are seeing holes in our high street for the first time in a while as a result of rapid increases in rates and rents. There is a disparity between the amount being paid locally and the amount being received locally, which at some point stops adding up for people. There is a challenge relating to the wider business rates system. Some areas are seeing very rapid rises in the value of property. Most businesses do not own the property they operate from, and therefore do not feel the benefit of the rise in its capital value; they just get a high rent bill as well as a high rates bill.
Jim McMahon
I recognise from the outset that this is slightly expanding the scope, but I will try to be disciplined about it. Do your members have a view about the treatment of plant and machinery in the revaluation?
The Chair
I think we cannot go there, given the timeframe. You were right to give a warning. Do you have another question that is in scope? Stephen Morgan, you have one.
Stephen Morgan (Portsmouth South) (Lab)
Q
Annie Gascoyne: I will go first. I do not think we have any technical issues with the drafting of the Bill. One aspect of the Bill is that it effectively rolls over the current transitional arrangements from the last revaluation to the next.
One challenge with that is the point about fiscal neutrality; where to get upward transition, you must also have the downward transition. The challenge with that, of course, is that businesses that have seen their property value drop have had the asset base of their business affected and, effectively, their company value, and then they do not benefit from that. So, they are already in a difficult situation, where their asset base is reduced, and then you are saying that we need to keep the rates at the same level.
One challenge with the current Bill is that it requires those transitional arrangements to continue into the next revaluation cycle and those beyond that. That should be looked at to see whether it should continue. Those transitional arrangements were introduced because of the length of the last revaluation cycle and the fact that it spanned the recession. They were introduced for that reason and so we do need to ask whether they remain fit for purpose.
There is one point to make on the rates retention question. Although it is not directly about the impact on local authorities, there is one important point to note. Rates retention does mean that local authorities are less inclined because they have the option to give partially occupied relief. They are less inclined to do so because it obviously affects their income to pay for vital public services. A lot of businesses tell us that that does not really incentivise them, if they have got an empty building, to occupy or lease out part of it. There is an opportunity cost there in terms of economic potential.
Councillor Watts: The LGA is not opposed to the principle of the Bill. There are, though, a couple of points of detail on which we would welcome some further reflection. The first point is about resourcing the VOA. If you are going to do that, there has to be recognition that we need to resource the VOA effectively to do it.
Although we welcome proposals for businesses to inform the VOA more regularly about valuation changes to their properties that might inform more frequent valuations, we worry about the effectiveness of that without effectively having a duty on businesses to inform the VOA or without more powers for the VOA to ask for information about businesses, which is something we have called for previously.
We have a big concern that, if we are going to move the last date of the draft rating to 31 December from 30 September, once every three years, there are profound implications for the way in which local authorities set budgets for one year out of three. Local government was not consulted on that before it was announced, which is regrettable. Settlement timing has previously been based on the new rateable list and, if that is now not available until 31 December, that either pushes the state of the settlement into January, which would be incredibly problematic for local government, or the settlement is based on information not yet published, which is also less than ideal. That is something that needs to be resolved, though I am sure it is perfectly soluble.
We also think there are measures about business rates avoidance, looking at some of the successes of the new Welsh system, which has cut down on some sharp practice around empty property reliefs and a whole range of other stuff. There is an opportunity to look at that through this piece of legislation.
Adrian Blaylock: I agree completely with everything said there. The VOA needs to be resourced; we have already talked about that in the initial question. I have other concerns about moving the dates from the end of September to the end of December for the draft rating list. Local government have a return that must be submitted to central Government by 31 January. There are certain steps they have to take from receiving the draft rating list to be able to do that return. If we are not going to get it until, at best, early January, we are going to struggle for time to be able to do all the necessary work to get that return done.
I notice that it says in the regulations that it will be “by the end of”, so that is the latest date and it would be nice if it could be moved to earlier than the end of December.
Stephen Morgan
Q
Councillor Watts: The specific concern we have is about the shift in the date. It would have been helpful, I think, for the Local Government Association, on behalf of its member authorities, to have been consulted on it before the principle was announced. There are those arguing for that and we understand why the Government are proposing it—you can see that it makes some sense for businesses and others—but it has significant implications for how councils set budget, which, as we all know, is way in advance of the end of the financial year. My authority has finished budget setting by the end of November, because you have to run your statutory consultations from 1 January onwards. Therefore, this is a very late date indeed, and we would welcome any further dialogue with the Ministry of Housing, Communities and Local Government about ensuring that the date works for local government budget- setting cycles.
Melanie Onn (Great Grimsby) (Lab)
Q
Councillor Watts: To the 2010 revaluation, so from 2013 onwards.
Melanie Onn
Q
On the financial position of local authorities and the level of reserves, are local authorities across the country fully prepared to deal with the potentially increased rate of appeals? The Minister has mentioned that he expects there to be fewer because the rates will be altered more regularly and there will not be such great changes.
Councillor Watts: We do not have a view on whether shifting the revaluations from five to three years will increase or reduce appeals—we will have to wait to see. What we need is some resourcing of the Valuation Office Agency and the valuation tribunal just to get through the very significant backlog from the 2010 revaluation. There is no structural fix to that; the Valuation Office Agency and the appeals tribunal just need to get through that backlog, quite a lot of which, it has to be said, is stuck in the courts at the moment. Therefore, it is not an easily soluble problem.
What we have not yet got, partially because it is early days in the check, challenge, appeal system, is any real sense of the number of appeals from the 2017 revaluation, and they could come through relatively late. That is one of the reasons we support a six-month deadline for businesses to lodge appeals, after the new valuations have been published, to give us some sense of the level of risk. But it could be that one of the impacts of the CCA system is that people are sitting on potential appeals, which will come through in due course, creating another layer of risk for businesses, and we will have to see about that.
As I understand it, the deadline for appeals on the 2017 revaluation has not yet been announced. We would hope that it was in line with the precedent, which would mean it would be the end of 2021, but we would welcome an early announcement on that to give us some sense of the scale of risk. It could well lead to more money having to be kept in reserves to manage a second or third round of risk around those appeals as well.
We would welcome the extra resources going in to clear the backlog. Whether more regular cycles lead to fewer appeals—I hope so, but we have no evidence to be able to comment on that either way.
Melanie Onn
Q
Councillor Watts: Yes, it is £2.5 billion.
Adrian Blaylock: It was £2.5 billion at the end of March 2017. If you look at the returns that local government is submitting to central Government in terms of their estimates, roughly £1 billion a year is being added to the appeals provision for loss for that particular year. Obviously, as appeals are heard and settled, some of that provision is released, but roughly £1 billion a year is set aside to settle appeals.
In answer to your question, do councils have enough reserves to pay for it? The way it works is that they will reduce their income from non-domestic rates; when they submit that return to central Government, they assume a level of loss and therefore that they will get less income. In effect, it creates its own provision—if that makes sense. That is where the reserve comes from.
Graham P. Jones (Hyndburn) (Lab)
Q
Adrian Blaylock: Nothing obvious occurs. There are a lot of unknowns about rates retention—we are talking about whether we carry on with a similar model to what we use now, just with the 75%, or whether we go for the alternative model, which was favoured in the December consultation—and what local government needs is certainty of funding, and understanding of when and how the money will come. So I do not think that the Bill particularly causes any issues, but it would be nice to get some early indication of where we are going with rates retention and how that will change.
Councillor Watts: I do not think there are any in-principle reasons why the Bill creates problems for business rates retention.
Annie Gascoyne: I agree.
Jim McMahon
Q
Annie Gascoyne: You mean beyond business rates? We would see a fundamental reform of business rates as being high on our priority list—
The Chair
May I just intervene? Sorry to interrupt. To be in scope, a question has to be about timing, so do you want to rephrase that question to be about the timing of change? Otherwise it is not in scope.
The Chair
Okay. We have time for more questions. I will ask the Minister if he has any questions, but if people suddenly, spontaneously, have questions, I will allow some more within the timeframe, if necessary.
Rishi Sunak
I am fine, thanks. Thank you for all coming, and thanks for your evidence and comments. Everything has been perfectly well answered.
Jim McMahon
Q
Councillor Watts: We are, yes. In effect, our request is that we would welcome further conversations with the Government about getting a date. We understand the arguments for shifting it, because it is quite a long time and 30 September is quite early in the process. However, for one year out of three when that impacts on the potential local government announcement, we would like to understand more about how the Government would like to co-ordinate between this announcement in December and the local government spending announcement having to be earlier than it, because that is a change in precedent. We cannot push the local government spending announcement each year beyond 31 December—it is already too late where it is, given that local budget setting for any authority of size is effectively always concluded before the spending settlement on the basis of guesswork, then tweaked when the settlement is announced in the House.
The Chair
As there are no further questions, I thank all members of the panel for their evidence. I invite the Government Whip to move the adjournment.
Ordered, That further consideration be now adjourned. —(Jeremy Quin.)
Non-Domestic Rating (Lists) Bill (Second sitting)
Tuesday 25th June 2019
(5 years, 4 months ago)
Public Bill CommitteesRead Full debate Non-Domestic Rating (Lists) Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 25 June 2019 - (25 Jun 2019)
The Chair
Welcome to line-by-line consideration of the Bill, on which we held an evidence session this morning. As in the main Chamber, the usual rules of debate and behaviour apply, as I am sure you all know very well. No amendments have been tabled, so we will consider merely whether each of the four clauses should stand part of the Bill. However, I intend to take all four clauses together for debate, so we will have only one debate.
Clause 1
Compilation of rating lists
Question proposed, That the clause stand part of the Bill.
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
It is a pleasure to serve under your chairmanship, Mr Gray. I hope not to detain the Committee for more than a few minutes.
I hope that by now the Committee is familiar with the three specific improvements the Bill will make to the business rates system: first, it will move the next revaluation in England and Wales to 1 April 2021; secondly, it will move the cycle for revaluations in England thereafter from every five years to every three years; and, thirdly, it will move the latest date by which draft rateable values must be prepared in England and Wales to the 31 December preceding the revaluation. I am glad to say that those substantive changes can all be found in clause 1.
To understand clause 1, we need first to consider the main primary legislation for business rates: the Local Government Finance Act 1988. Part III of the Act concerns business rates; it currently requires revaluations in England and Wales to take place every five years from 1 April 2017. Clause 1 is concerned entirely with amendments to that Act, and specifically to section 41(2A), which provides for revaluations of local rating lists in England
“on 1 April 2017 and on 1 April in every fifth year afterwards”;
to section 52(2A), which does the same for central rating lists in England; and to sections 54A(4)(b) and 54A(5)(b), which provide for revaluations of local and central rating lists in Wales on a date specified by the Welsh Government by order—1 April 2017—and
“on 1 April in every fifth year afterwards.”
That shows in black and white the delivery of our commitment to make the rating system more responsive to changes in the property market and fairer for ratepayers, and to ensure that businesses see those benefits as soon as possible.
Sections 41(5) and 52(5) of the 1988 Act set out the deadline by which draft rateable values must be provided before the revaluation. That is currently set at no later than 30 September. Clauses 1(3) and 1(6) of the Bill move the deadline to no later than 31 December. It is important to remember that that is only a deadline—it is the latest date by which draft rateable values must be prepared. The Welsh Government agree that the deadline for the draft list should be changed to 31 December. Sections 41(5) and 52(5) of the 1988 Act apply to both England and Wales, so the amendments made by clauses 1(3) and 1(6) will automatically change that date in both countries.
Clause 2 will make purely consequential amendments to primary and secondary legislation. The sections of the 1988 Act that concern the transitional arrangements made at the time of each revaluation, and the regulations made under those powers in England, reflect the existing five-year cycle of rating lists. Clause 2 will therefore amend those references to bring them in line with the new cycle of rating lists in England and Wales. It will make no other changes to the powers in those sections.
Clauses 3 and 4 are, I hope, self-explanatory. As is normal practice, the Bill will come into force two months after it is passed. It will give the valuation office the legal basis it needs to complete the valuation exercise for a revaluation in 2021. Since it has already started work on those valuations under the existing legislation and will continue that work over the coming months, there is no need to shorten the normal two-month commencement period.
Jim McMahon (Oldham West and Royton) (Lab/Co-op)
This morning, though brief and focused, we heard from representatives of the Association of Convenience Stores, the Federation of Small Businesses, the British Retail Consortium, the Confederation of British Industry, the Local Government Association, and the Chartered Institute of Public Finance and Accountancy. We place on record our thanks for the time they took to give evidence to the Committee.
The scope of the Bill is narrow, and that was reflected in the discussion we had. However, some themes came out during that session that are worth repeating. Clause 1 brings forward the new ratings list by a year, to 2021—a move that we welcome and that was welcomed by all those who gave evidence earlier today. There were calls for annual reviews, but given the concerns about capacity in the Valuation Office Agency, evolution might be more advisable, which is why we support bringing the new list forward by one year.
One element that was queried by the Local Government Association was the change from six to three months’ notice to billing authorities of the new list, pushing the deadline from “not later than September” to December. That change will hit many local authorities, as they will be presenting—or, in many cases, would intend to have already presented—their budget proposals to council. That is important because, as employers, councils have to meet their statutory obligations to their employees for any changes that might follow, whether for redundancies or any structural changes within the organisation. It is important that councils can meet the January deadline for that, so the notice period is important. I therefore ask that the Minister meets representatives of the LGA as a matter of urgency to address their concerns and decide whether something can be done to minimise the impact of that change.
Clause 2 addresses transitional relief and brings it in line with the new list proposals. There was a broader discussion, which I do not intend to pad out here, about business rates and their impact on the retail sector, the viability of businesses and the future of high streets and town centres. We share the concerns about those issues and would welcome further discussions to create a business rates system that is not only fairer but helps British businesses and industry to thrive in future, rather than—as business rates do at the moment—simply acting as a tax to occupy or exist. There are growing calls for change, and I hope they are heard and acted on by the Government beyond the scope of this Bill.
Rishi Sunak
I thank the hon. Gentleman for his typically thoughtful comments and join him in thanking all the witnesses we were lucky to hear from this morning.
During this morning’s session, I was pleased that there was widespread support for the principle of the Bill, namely shortening the revaluation cycle to make business rates more responsive to economic conditions. It felt like all participants agreed that three years was the right place to end up, striking an appropriate balance between responsiveness on the one hand and providing some certainty and stability for ratepayers on the other.
I am pleased to tell the hon. Gentleman that my team is already in discussions with the LGA and will continue to be so. It is also in discussions with CIPFA, which participates in a technical working group on business rates and business rate reform to ensure that the process for local authorities submitting their NNDR1 forms by the end of January is not unduly impacted by the change. As in the past, we have been able to work constructively with local government and CIPFA to ensure all the processes that need to happen for revaluation work for the sector, ratepayers and everyone else involved.
To the hon. Gentleman’s last point, and without wanting to stretch the scope of the Bill, I understand what he says. I am glad he recognises the contribution of business to our economy and society—not least providing employment and the funds we need for our public services. We will always be keen to do what we can to support business. With regard to business rates, £13 billion of various reforms have already been enacted by the Government—most recently the retail relief scheme, which provides a third discount to retail high street stores on their business rates bill and has been warmly welcomed. The Government will continue to watch that issue closely.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clauses 2 to 4 ordered to stand part of the Bill.
Bill to be reported, without amendment.
Non-Domestic Rating (Lists) Bill
Monday 22nd July 2019
(5 years, 4 months ago)
Commons ChamberRead Full debate Non-Domestic Rating (Lists) Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 25 June 2019 - (25 Jun 2019)
Mr Speaker
I call the hon. Member for Richmond (Yorks) (Rishi Sunak), the Minister in a hurry, to move the Third Reading of the Bill. He may be a Minister in a hurry in more ways than one—I know not—but, as always, he is a happy and positive-looking Minister.
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
I beg to move, That the Bill be now read the Third time.
I always try to be pithy, Mr Speaker, as you instruct us to be, but this is an important matter, so we shall proceed without too much haste.
Ratepayers have told us that the current system, with revaluations of business rates every five years, has not been responsive enough to changes in the rental market. They have asked us for more frequent revaluations so that the system is fairer and more closely reflects the rents that they actually pay. This small but significant Bill delivers what business has asked for: it moves business rates revaluations in England on to a three-yearly cycle, and brings forward the next revaluation to 2021 so that ratepayers benefit from the change as soon as possible.
I am grateful for the contributions of all Members, both on Second Reading and in Committee, and thank them for their support for the Bill. In the public evidence sessions, we heard from various business groups that expressed their support. I thank them, including the Confederation of British Industry, the British Retail Consortium and the Association of Convenience Stores. I give particular thanks to the Local Government Association and the Chartered Institute of Public Finance and Accountancy for not only their comments in the evidence sessions but their work with my officials to ensure that we can implement the Bill in a manner that meets with their approval.
Lastly, I give thanks to the shadow Minister, the hon. Member for Oldham West and Royton (Jim McMahon), who has been, as ever with these relatively short and uncontroversial Bills, thoughtful and constructive in his approach. I am of course grateful to the Clerks of the House and, indeed, to my team, who have managed to get this important legislation through its various stages with efficiency and effectiveness.
This is a small but important Bill that continues our support for business in this country, and I commend it to the House.
Jim McMahon (Oldham West and Royton) (Lab/Co-op)
The Bill came around very quickly from Second Reading to Committee and then to Third Reading, which just shows that, when Parliament decides to do something, it can do it. Perhaps that is because we are light on business and there is time to debate and discuss these issues. I know that this is a geek interest—I take pride in being a geek and in liking data, numbers and finance, and this is an important matter. We cannot achieve the Government’s ambitions if we do not have a solid financial foundation. Business rates, although boring for many people, are actually a very important part of that. I also wish to echo the thanks to the Clerks for supporting the passage of the Bill. As always, they acted with absolute professionalism and ensured its smooth passage.
The purpose of the Bill has already been outlined, which is that it creates a three-year cycle and brings forward the revaluation period by one year. None the less, issues were raised on Second Reading and in Committee. I am slightly fearful that the Minister will be whisked away to another Department very shortly, and that we will lose his consistency and thoughtfulness. It matters not only that we pass the legislation in this place, but that we manage the transitional arrangements and the impact that naturally follows. We need to see what transitional arrangements will be in place. We need to ensure not only that the valuation office has capacity and is encouraged to deal with the backlog of 60,000 appeals going back to 2010, but that it has the people to deal with a new revaluation in the appeals process that will come. We need to make sure that the transitional arrangements are there, so that those who are adversely affected are able to manage that transition.
As part of the wider review, we need to ensure that we are clocking the geographical shift in valuations that takes place with every revaluation, because if we are going to move to 50%, 75% or 100% retention, that will naturally have an impact on the financial stability of local authorities that are part of those schemes. If, after every revaluation, we see a transition to the values of London and the south-east, that will not help build the northern powerhouse, which is a shared ambition for everyone who cares about the whole of the UK benefiting from the country moving forward.
We also need a more fundamental review of local government finance. I really feel sorry for local government Ministers. It is not right that the Treasury often has a closed mind to their funding issues, that they are told to deal with the envelope of money that they have, and that they are always last in the queue, behind the NHS, the police service and other more pressing Departments. The truth is that, if we do not get this right, older people will not get the care they need, younger people will be put at risk, and, critically for democracy, people will question why they are paying more and more council tax for less and less of the neighbourhood services that everybody enjoys universally. We on the Labour Benches will be holding our own review.
I thank the Minister for his approach this Bill, and I look forward to scrutinising it through the transitional arrangements as we approach the revaluation.
Question put and agreed to.
Bill accordingly read the Third time and passed.
Non-Domestic Rating (Lists) Bill
Tuesday 23rd July 2019
(5 years, 4 months ago)
Lords ChamberRead Full debate Non-Domestic Rating (Lists) Bill 2017-19 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 25 June 2019 - (25 Jun 2019)
Non-Domestic Rating (Lists) Bill
Monday 30th September 2019
(5 years, 1 month ago)
Lords ChamberRead Full debate Non-Domestic Rating (Lists) Bill 2017-19 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 25 June 2019 - (25 Jun 2019)
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Viscount Younger of Leckie) (Con)
My Lords, the Bill gives this House the opportunity to support a measure widely requested by businesses. It will improve the business rates system by ensuring that rating assessments are more up to date and fairer. It is a Bill which will increase the frequency of business rates revaluations. A move to more frequent revaluations has been one of the most repeated requests from the business community, including from representative bodies such as the Federation of Small Businesses, the Confederation of British Industry and the British Retail Consortium.
Business rates are a tax on non-domestic property. They are paid not just on business premises but on local and central government buildings, hospitals, utility networks and even the very building we are in today—the Palace of Westminster—so although this Bill may seem small and technical it is in fact important to very many ratepayers and local authorities across the country. The tax base for business rates is the property’s rateable value which, in broad terms, is based on its annual rental value. Like all rateable values, the assessment of the Palace of Westminster can be seen on the current non-domestic rating list, which dates from 2017 and is available to view on the website of the Valuation Office Agency. Before noble Lords reach for their iPhones to look up that website, I can save them some time and effort: the rateable value of Parliament is currently £16.09 million.
Rateable values are currently based on the rental market values as at 1 April 2015, and the purpose of regular revaluations is to ensure that those values keep pace with the changes in the rental property market. The next revaluation was due to take place in 2022 but this Bill will bring it forward to 2021. As I have said, this has been requested by a wide range of business groups. Preparation for the revaluation is already under way and it will be based on the rental property market as at 1 April 2019.
It may be helpful to noble Lords if I explain how the revaluations work and why they are so important to businesses. Revaluation is a significant undertaking. The Valuation Office Agency has collected details of hundreds of thousands of rents to ensure that it has a good evidence base for the revaluation. It is now analysing that rental information and preparing valuations on more than 2 million properties. This is clearly a substantial exercise and one of the most important undertaken by the agency. This Bill will ensure that the results of its work will come into force one year early on 1 April 2021.
I shall give noble Lords an example. Take a shop on the high street. A shopkeeper will currently pay business rates based on the market value of rents in that high street as at 1 April 2015 and will have been paying that since 2017. Clearly, much has changed since 2015 and businesses rightly expect to see the information underpinning their bills updated accordingly. Over recent months, the Valuation Office Agency will have been collecting all the new rental evidence it can on that high street. This evidence will come from new leases and tenants moving into empty shops and from lease renewals and rent reviews on existing shops. The agency will have collected these rents on official returns and will now be analysing the results. Having regard to all this rental evidence, the valuation officer will then take a view—in line with certain statutory assumptions—of the market rental value of that high street as at 1 April 2019, which, as I have said, will be the valuation date for the 2021 revaluation.
This new assessment of market rental values will then be used to update all the shops on that high street, so the 2021 revaluation will therefore reflect the change in rents on that high street between 2015 and 2019. This exercise is repeated across all high streets, shopping centres, industrial estates, business parks and offices in order to give a full picture of the change in the relative value of non-domestic property across England and Wales. It is on this updated picture of rateable values that the new bills are based. I hope noble Lords will be able to see how important the revaluation and this Bill are to those businesses. More frequent revaluations will ensure that business rates bills are more up to date and more closely reflect the current rental value of the property and relative changes in rents.
However, in deciding whether to have more frequent revaluations, we need to strike a balance between the more up-to-date assessments that would flow from such a reform and the uncertainty that more regular changes to bills will create; and of course there is a cost to more frequent revaluations. The 2021 revaluation is expected to cost about £50 million over its duration. We believe that revaluations every three years strike the right balance, so this Bill will ensure that that happens after 2021.
Finally, the Bill will change the latest date by when draft rateable values can be published before the revaluation from the end of September to the end of the preceding December. Ratepayers have told us that they accept the trade-off that comes from increasing the frequency of revaluations and favour fairer, more up-to-date assessments. Shortening the period of the draft rating list is part of this trade-off and ensures that the time the list remains in draft continues to be proportionate to the shorter revaluation cycle. This change in the publication of the draft rating list will help pave the way for three-yearly revaluations. However, the Bill will still allow the valuation office to publish rateable values earlier than the end of December, so we will give ratepayers as much notice as possible of their draft rateable values and new rate bills within the new three-yearly cycle.
This Bill makes a step-change improvement to business rates. It is supported by the business community and is necessary to allow the Valuation Office Agency to complete the 2021 revaluation. Last, but no means least, I greatly look forward to the maiden speech from my noble friend Lord Randall of Uxbridge this afternoon. I beg to move.
Lord Randall of Uxbridge (Con) (Maiden Speech)
My Lords, I thank my noble friend Lord Younger for his kind words and for introducing the Bill.
When I made my first contribution in the other place back in 1997 to a similarly packed Chamber, little did I suspect, or even dream, that I would have to go through a similar experience in this Chamber. I never cease to be in awe of this country and its democracy that has allowed a son of a retail furnisher and a school meals organiser to become a Member of this most historic and illustrious House. It is a privilege and an honour that is difficult to put into words.
Like so many newly appointed to this House, I have been struck by the kindness and friendship of noble Lords—including those adversaries from another place and another time—and not least the kindness and wisdom shown by my supporters, my noble friends Lady Fall and Lord Young of Cookham. I cannot think of a better mentor and guide than my noble friend.
For 12 of my 18 years in the other place I served as a Whip, both in opposition and as Government Deputy Chief Whip. One thing that I learned there was that trust and compromise can serve better than confrontation and artifice. I think, and hope, that I will be at home in this Chamber.
I had no hesitation in choosing my territorial title, as Uxbridge has been my lifetime home and somewhere that I am immensely proud of. If noble Lords will indulge me, I will relate two moments in history when Uxbridge was at the centre of this nation’s destiny.
The first is little known, perhaps because it was ultimately doomed to failure. In early 1645 there was a significant but abortive negotiation to try to end the first English Civil War. Parliament drew up 27 articles in November 1644 and presented them to Charles I at Oxford. Much input into these Propositions of Uxbridge—often referred to as the treaty of Uxbridge—was from a gentleman by the name of Archibald Johnston. The royalists stayed on one side of the high street, the parliamentarians on the other. Sadly, the negotiations failed and, to coin a phrase, the rest is history.
The other, perhaps more well known, connection that I would like to mention is the Battle of Britain. The No. 11 (Fighter) Group Operations Room, housed in what is now known as the Battle of Britain Bunker on the former site of RAF Uxbridge, was responsible for planning and co-ordinating the air defence of London and south-east England during the Second World War. As well as bearing the brunt of the Luftwaffe onslaught during the Battle of Britain, the operations room was responsible for controlling fighter operations in the south-east and over occupied Europe throughout the Second World War, including the Dunkirk evacuations and the Normandy landings. It is of course also a tribute to the airmen of many nations who played their part in the struggle for freedom, most notably the Poles and the Czechs.
If noble Lords find themselves in Uxbridge, I can commend a visit to the wonderful museum that has recently opened where the operations room is shown exactly as it was on 15 September 1940—the day on which Winston Churchill visited and witnessed the conduct of the most significant day of the Battle of Britain. It is also where the then Prime Minister said the immortal words:
“Never in the field of human conflict was so much owed by so many to so few”,
before repeating it here in Parliament some days later.
Noble Lords have been extremely indulgent with this first contribution of mine. I blame my loquaciousness on the fact that for more than a year my role as the environment adviser to Theresa May in No. 10 rendered me silent in this place, but the floodgates are now open. I will have a lot to say on the subject of the environment, as wildlife and conservation in particular have been passions of mine since my very earliest days. Some of what I say will be controversial. I also want to pay tribute to the former Prime Minister. I cannot think of anyone who is more of an embodiment of a life devoted to public service than Theresa May.
My spell in No. 10 also once again reinforced my opinion that the Civil Service has some of the most dedicated, hard-working and best brains in the UK. My co-conspirator in the environment office, Anouka Dhadda, fits all those descriptions.
The fact that we are debating anything today is a result of extraordinary circumstances, but it has allowed me to take part in your Lordships’ proceedings earlier than I thought would be the case. This Bill is a very apt one for me to speak on as it appears to be pretty uncontroversial if its passage through the other place is anything to go by. And so it should be, as allowing for more frequent rating valuations for business premises is something for which businesses and business organisations have been asking for a considerable time, and this will finally deliver previous commitments made by the Government. As a former businessman—in fact a hereditary retailer—I know exactly how difficult that sector is, and I hope that this will assist. There is no silver bullet for remedying our ailing high streets, but I hope that this is one step.
Noble Lords have been more than patient with me today. I conclude by saying that I still find it strange to have a title that makes me sound more like a pub in Uxbridge. However, I am also delighted that the family firm, Randalls of Uxbridge, which started in 1888 and ceased trading in 2015, lives on in this place in a different guise in my title. I think my forebears would be somewhat surprised.
The Earl of Lytton (CB)
My Lords, it is an absolute honour to follow the noble Lord, Lord Randall of Uxbridge, and to congratulate him on an outstanding maiden speech. He speaks with very great authority on the retailing and modern worlds from his experience with the family firm. I regret having received the speakers’ list only when I came into the Chamber, so I have not had the opportunity to discover anything embarrassing about him that I can share with the House. However, like many of us, he has a wiki page, which tells me that he studied Serbo-Croatian. Of course, we know of his distinguished career as a Whip in the other place. He will therefore be not only familiar with the usual channels, but unsurprised at some of the stranger bits of double Dutch and jargon that inhabit the business rates world. I look forward to many more of his contributions.
Many years ago, I made my own maiden speech on what is colloquially known as the poll tax Bill. Noble Lords with long memories will remember its fate. I hope that this Bill fares a little better, although, unlike the noble Lord, Lord Randall, I am not at all convinced of its greater worth. I take this opportunity to congratulate the Minister on his appointment and his arrival into the hypothetical world of rating assumptions, in which only really the property and the bills are tangible and most of the rest is some sort of statutory assumption. That is worth bearing in mind. However, the economic outcomes are real enough. The noble Viscount should therefore be especially wary of the complexities and risks. I certainly look forward to working with him on this sector. At my stage of life I have no particular axe to grind, though. As a Local Government Association vice-president, I see all sides. Having a professional involvement of 44 years with this area of local government finance, here is my contribution to what I hope will be a bit of semi-honest brokerage from a ratepayer’s perspective.
A few years ago this Bill, which mainly increases the frequency of rating revaluations, would have been welcome. At this stage, though, my fear is that it is too little and almost certainly too late. We have a five-year revaluation cycle—or did, until it suited the Government of the day to defer the 2015 revaluation date. They argued that that gave certainty to ratepayers. Perversely, it did so, but at the expense of pegging their business rates to the historically high levels of the antecedent 2008 valuation date, which in turn informed the 2010 valuation list. More realistically, it guaranteed certainty of tax yield to the Treasury. Let us not kid ourselves, then, that this was anything particularly to do with benefiting businesses.
The resultant seven-year gap up to the 2017 valuation list meant significant adjustments, which in many cases would have created welcome reductions in rates burdens were it not for something called transitional relief. That operates to shield ratepayers from sharp increases in rates, but is financed by negating the benefits of reduced assessments for the others. It also protects the taxman from falling tax yields and is, I understand, reputed by some experts to have given him a large windfall. It is the extended revaluation gap in a time of rapid change, though, which amounts to the Government taking their eye off the ball.
There is also something called fiscal neutrality. I apologise for inflicting this jargon on noble Lords; it is a Treasury mantra that means that any changes to concessions, such as transitional and small business reliefs, have to be off-set—effectively funded—by higher charges to the remaining ratepayers. At the same time, it provides a safety net, if not a windfall, for the taxman, so it appears at the very least to be somewhat asymmetric as to effect.
Unlike rents, which ultimately have to follow market reality, the national rate yield is a fully protected upward-only construct. This has resulted in extraordinary increases in overall rates burdens on businesses over recent years—extraordinary by comparison with other applicable indices. As a result, there has been mounting pressure for reform of a property tax that is now the highest of any comparable impost anywhere in the EU or the OECD area.
The Minister will tell us, no doubt, that the industry has asked for these valuations. The noble Lord, Lord Randall, also referred to that. I believe that the British Retail Consortium has, indeed, asked for that, but I understand that everybody else has been asking for still more frequent revaluations plus a host of other reforms. I therefore do not feel that the justification for the Bill is entirely there. In any event, it only scratches at a fundamentally much deeper problem.
In effect, the system has been gamed to breaking point, not only by some unscrupulous consultants, but by HMRC and the Valuation Office Agency. Nobody in the business community now has much confidence in it, perceiving it as unjust, unfairly administered with an overly complex system of redress called “check, challenge, appeal”, or CCA, to use its acronym, which is consciously designed, it would appear, to impede fair rights of challenge and appeal.
I commend to the House consideration of a closely argued submission made in March this year to the Treasury Select Committee in another place by Mr Jerry Schurder of Gerald Eve. He is an acknowledged expert in the business rates field. He outlines failings in all the main areas on which a tax properly and reliably rests. However, even if the Minister does not believe Mr Schurder, he cannot deny the evidence that businesses across the land are voting with their feet in responding to business rates burdens as a major consideration in their retailing, office and industrial space occupancy and decision-making, while investors hesitate to commit in the face of empty rates charges. When a taxation system causes behavioural changes on this scale, it is wise to consider carefully the underlying policy, which has certainly contributed to high street atrophy and business reticence. When anyone involved in upgrading their premises finds that they are in receipt of a higher rateable value, removing at a stroke much of the benefit of the improvement, it is also a retrograde system.
Business tax payers need confidence that they are being fairly treated. Here, I fear, they know that they are not. No Government can claim to be business friendly while presiding over unfair local business taxation. The results for retail streets, for visitor attraction to towns, for investment, pension scheme portfolios and so on are negative. However, I am afraid HMRC still does not get it and will shortly have to find radical and costly solutions that will not be fundable on the fiscal neutrality principle, as more and more people trade online or migrate to other methods of trading not involving high-value, high-priced premises. Business rates are not solely to blame, but they and their administration are now widely seen as a very significant factor.
To finish, and given the parameters I have outlined, along with the failure to keep to five-yearly revaluations previously and the subsequent attrition in Valuation Office Agency resources, can the Minister say how the proposal in the Bill will be implemented and funded? Will the additional costs of more frequent valuations ultimately have to be met by the ratepayers themselves? If so, how much more mismanagement should they be expected to fund? When it comes to billing authorities having 100% business rate retention, as we believe is the ultimate intention, what factor of reliability does he think will be a realistic measure of future rates yield? This clearly matters to local government finance officers. However, if the current system collapses through failure to rectify, modernise or resolve the deep mistrust now prevalent—I believe we are close to that situation—the consequential expense of replacing the system will be incalculable, along with a needless destruction of valuable taxation and valuation stock in trade. I refer, of course, to the information base on all properties that go into making up the valuation list.
I really cannot express much enthusiasm for this particular policy tick-box of a Bill, nor do I see it as tackling the real issues. However, given that there is an intention to do something—anything—it is at least welcome to that extent.
Baroness Pinnock (LD)
My Lords, it is always good to follow the noble Earl, Lord Lytton, on the subject of business rates because he has such considerable knowledge about how they work and what the consequences of any changes might be. Before I begin my comments, I draw the attention of the House to my interests as a vice-president of the Local Government Association and as an elected councillor on Kirklees Council. I welcome the Minister to his new role and look forward to our exchanges. I am sure they will be very positive and constructive.
The principle of the Bill, which is obviously to reduce the gap between revaluations of properties liable for non-domestic rates from five years to three, is one which we support. It is generally supported by the business community and, in essence, it should provide more certainty for businesses, as there should be less chance of wild fluctuations in valuations which are, after all, dependent on rental value, which is itself a reflection of the national and local economy at any one moment. However, such a change raises questions about implementation and wider concerns about the sustainability of the business rates regime.
The first question is one of practicality. Can the Minister confirm that additional funding will be made available to the Valuation Office Agency to ensure that revaluations can be fulfilled in the much reduced timescale? Obviously, he has also already referred to the current cost of £50 million, but clearly that has been over a longer timescale than the three years being proposed in this legislation.
Secondly, local government is now reliant on business rates income for basic service provision. Will the Minister confirm that any fall in the total national take from business rates will not lead to a reduction in funding from this revenue stream for local government? A briefing from the Local Government Association has drawn attention to the fact that more regular and accurate information is required from businesses so that the valuation office can provide more accurate revaluations. A consultation was apparently due last year but has not taken place. Can the Minister explain how more accurate information is to be supplied to the valuation office so that it can make judgments about revaluations in a timely manner?
Thirdly, we are concerned about the number of appeals that flow from any revaluation. Currently—as I am told in the Local Government Association briefing—there is a very large backlog of appeals, even from the 2010 revaluation, for which councils had to set aside more than £2.5 billion in case appeals were granted. That money is obviously set aside to cover those risks. That is a considerable amount of council funding to be set aside when councils are under such pressure for the provision of services.
Then there are more fundamental questions about the sustainability of the existing business rating regime. There have been many questions and comments in your Lordships’ House over the last few years on the failure of the current system to demonstrate that it is, in principle, fair to businesses. I suggest that a fundamental and radical reform of business rates is needed. The noble Earl, Lord Lytton, also drew attention to that. The Government are allocating funding in a desperate attempt to revive declining town centres. However, at the same time they fail to appreciate that one of the biggest costs for small businesses, including independent retailers, is the business rates bill. Meanwhile, town centre businesses are competing with online businesses, which are able to operate from out-of-town warehouses and pay significantly less, pro rata, in business rates. The model is broken and must be reformed.
The Liberal Democrats have agreed a policy for such reform, which would scrap business rates altogether and replace them with what we have called a commercial landowner levy. The basic principle of this tax system is to tax the land, rather than the property and the investment in improvements that sometimes goes with it, as the current system does. It is estimated that businesses would receive a significant boost to profitability in this way, particularly in those areas of the country that are in desperate need of a funding boost to kickstart a revival in their fortunes.
The Government have occasionally hinted at the need for a more substantial reform of business rates. Can the Minister provide any indication of whether businesses may anticipate some policy statement to that effect from the Government? Will he also reflect on the challenge to the climate change emergency of favouring out-of-town warehouses, highly dependent on road transport, over more local shopping habits, and whether the latter should be encouraged rather than the former? With that array of questions, I look forward to the Minister’s responses.
Lord Kennedy of Southwark (Lab Co-op)
My Lords, I welcome the noble Viscount to his new role and look forward to our future debates on a variety of matters.
I congratulate the noble Lord, Lord Randall of Uxbridge, on his excellent maiden speech. The noble Lord had a distinguished career in the House of Commons, and his contribution here will be very welcome on all sides of the House. He was the Government Deputy Chief Whip in the other place, and I am sure that his skills will be in much demand on the Government Benches. I agree with him that trust and compromise are welcome and much-needed qualities; they are often on display in this House, which is why this House works so well. I look forward to hearing him very many times in the future.
I refer the House to my relevant declaration of interest as a vice-president of the Local Government Association.
The Opposition support the Bill as far as it goes. We welcome the proposal to bring forward the revaluation by one year to 2021 and to hold revaluations every three years thereafter. The noble Earl, Lord Lytton, is an expert on these matters, and I look forward to the response of the noble Viscount to the very many points the noble Earl made. The Bill was of course promised back in 2017, and I am pleased that it is finally here.
There is, though, a serious problem: these proposals will not address the damage being done to our high streets. The noble Baroness, Lady Pinnock, made reference to the broken model of high streets and online businesses, and I very much agree with her comments. I am very supportive of the Save Our Shops campaign run by the trade union USDAW, which has real expertise in understanding how important our high streets are. Our high streets are in real trouble in many parts of England. We need proper, co-ordinated action: a proper industrial strategy for retail that deals with taxation in general, commercial rents and business rates. This is desperately needed so that we can ensure a level playing field for different types of retailers and deliver the framework to support local communities and the wider and local economy. When shops close and businesses move out, it destroys communities.
CAMRA, which I have been a member of for many years, has a campaign focused on saving the great British pub, and I fully support its campaign. Pubs currently pay 2.8% of the entire business rates bill but account for only 0.5% of the total business turnover, which is an overpayment by the sector of around £500 million. CAMRA is calling on the Government to conduct a full review of how the system works, and it has my full support in that. This review needs to look at how to address the current system, in which pubs are unfairly burdened. In addition to being local businesses, pubs provide a community service and often a community hub that needs to be both supported and protected. As I said at the start of my remarks, we support the Bill as far as it goes, but much more needs to be done.
Another issue I want to raise in this short debate is that of unresolved valuation appeals, of which 65,000 were lodged in 2010 and are still not resolved. This has led to local authorities diverting £2.5 billion to allow for the possibility of a successful appeal. This cannot be allowed to continue, and the Government must address this. Perhaps the noble Viscount can respond to that point when he responds to the debate shortly.
In conclusion, I wish the Bill a speedy passage. Maybe the noble Viscount can tell us what is going to happen with this Bill in the next few days—obviously I want to see it on the statute book—but we have a really serious problem here and this Bill does not yet attempt to address that. At some point, we need to do that quickly.
Viscount Younger of Leckie
I thank noble Lords for their contribution to this short debate. I shall deal with all the points they have raised in just a moment, but I start by paying tribute to the excellent maiden speech from my noble friend Lord Randall of Uxbridge. I am pleased to know that his voice can now, at last, be heard in this Chamber. I found the speech rather reflective, not just of the historical context of Uxbridge—it was interesting to hear of the role of air defences in the Battle of Britain—and more; my noble friend was also quite right that in this House there is more of a focus on compromise. Perhaps it is fair to say that there is a lot more courtesy in this House. He did not say “compared to the other place” but, given the climate at the moment, his point was well made.
I also thank all noble Lords for their kind words about my new appointment. It is not lost on me that I have big shoes to fill. My predecessor, my noble friend Lord Bourne, held the role for some time, so I have much to learn.
A good number of points were raised by the noble Baroness, Lady Pinnock, and the noble Earl, Lord Lytton. If they will forgive me, I will address their points towards the end of my remarks.
As I said in my opening speech, business rates are an important tax, providing a vital source of revenue to help local government pay for local services. We believe that in this country we offer a highly competitive basket of taxes, which ensures that public services are funded in a balanced and fair way. Of course, we also recognise that some businesses need help. Since the 2016 Budget we have announced reductions in business rates worth more than £13 billion coming up over the next five years.
For example, we have made 100% small business rate relief permanent and doubled the threshold for 100% relief from 2017. This means that 675,000 of the smallest businesses now pay no rates at all. For the high street, at Budget 2018 we announced the business rates retail discount, providing eligible retailers with a rateable value of less than £51,000 with a third off their bills for two years from April 2019. That is delivering help now worth an estimated £1 billion and is in addition to the Prime Minister’s plan to unite and level up cities, towns and coastal and rural areas across our country. In July, we announced a £3.6 billion towns fund to re-energise local economies so that everyone can share in a new era of prosperity.
I listened carefully to the remarks made by the noble Baroness, Lady Pinnock, and the noble Lord, Lord Kennedy, about high streets, and they are absolutely right to raise the issue. The point should be made that we want to encourage people into high streets as well as out-of-town retail centres. The high streets are a focus at the moment and have a crucial role to play as we work to grow the economies of all parts of the country, so the fund I just mentioned includes an accelerated £1 billion future high streets fund. This will support local areas in England to renew and reshape town centres and high streets in a way that improves experience, drives growth and ensures future sustainability. I add one more thing, which is that it provides an excellent experience for those who want to come into the high street, and we have much more to say about that as we take the policy forward.
More than 300 local authorities bid for a share of the funding in round one. More than 100 places have now been successful in progressing to the next phase of developing, detailed business cases; 51 places were announced on 5 July and a further 50 on 26 August. Successful local authorities will each receive up to £150,000 revenue funding and support from officials.
In response to the noble Baroness, Lady Pinnock, who asked about the impact on local authorities of the rates retention scheme, I assure her that local authorities will be compensated for the revaluation. As was the case at the 2017 revaluation, we intend to make any adjustments as are necessary to the rates retention scheme to ensure that locally retained income is, as far as practicable, unaffected by the 2021 revaluation. However, to reassure her further, we will consult local government on how to make those revaluation adjustments to the rates retention scheme nearer the time. This is something we successfully achieved for the 2017 revaluation, and I am confident that that can be repeated for 2021.
We are aware of concern from local authorities that changing the date of the draft rating list from the end of the previous September will impact on their billing and budgeting process. The Bill provides only that the end of December preceding the revaluation is the latest date by which the draft list must be published. It may be that a sensible time to make the draft list available is at the time of the autumn Budget, alongside the confirmation of the multipliers and transitional relief. That is something that we will discuss with local government, and the Bill will allow us to do just that.
For local authorities, we intend to make any adjustments as are necessary to the rates retention scheme to ensure that locally retained income is, as far as practicable, unaffected by the 2021 revaluation. As I said, we will consult local government on that.
I recognise that this matter was raised in Committee on the Bill in the other place, and we are working with the Local Government Association and other local government representatives to ensure that the publication of the draft list fits with the local government budgeting process. My officials met the LGA in August to discuss this matter, and we continue to work with the sector. As was noted by Councillor Watts of the LGA when giving evidence to the Bill Committee in the other place, we are confident that this matter is perfectly soluble.
I turn to another question raised by the noble Baroness, Lady Pinnock. She asked about scrapping business rates and explained the Liberal Democrat policy. I just say that the Government concluded a fundamental review of the business rates at Budget 2016 and decided to retain business rates as a property tax. Respondents to the review agreed that property-based taxes were easy to collect, difficult to avoid, relatively stable and clearly linked with local authority spending. Some respondents suggested alternative tax bases. However, there was no consensus, as respondents were clear that other taxes, such as a land value tax, have their own issues, including agreement on how land should be valued, and would not address the perceived unfairness between high street and online retail. I should not expect the noble Baroness to agree with that, but that is based on real evidence that we produced.
The noble Baroness also asked about resources for the Valuation Office Agency. I reassure her and the noble Lord, Lord Kennedy, that we believe that good progress has been made, particularly in clearing outstanding appeals, which were mentioned, going back to the 2010 list. At 30 June, there were around 62,000 outstanding appeals from the 2010 list. The majority of these—more than 50,000—are waiting for the resolution of litigation. We understand that the VOA is on track to clear the 2010 appeals within its control by the end of September 2019. I believe that good progress has been made. While I do not have completely up-to-date figures to hand, I understand that the VOA is expecting to have cleared the remaining appeals today—the end of the month. If for any reason situations arise where this does not occur, I have been assured that a timetable will be agreed with the ratepayer or their agent for the resolution of their case. I recognise the seriousness of this matter, but I hope that noble Lords are reassured that we are on the case and have the evidence to support that.
The noble Earl, Lord Lytton, raised a number of questions. He started by saying that this is too little, too late. He might not be surprised to hear that I do not agree with him. However, I shall address his question. The first was about whether the 2021 revaluation will be revenue neutral and how the multiplier will be adjusted. We will adjust the multiplier from 2021 to 2022 to offset the estimated change in total rateable value due to the valuation after allowing for inflation and forecast future appeals. He will know that we are required by law to do that. He further asked whether we plan to move to more frequent revaluations. To be fair to him, I understand how annual revaluations would further improve the rating system. It is something we will certainly consider in future, but in deciding whether to have revaluations more frequently than three years, rather than five years, we will need to strike a balance between the more up-to-date assessments which would flow from such a reform and the uncertainty that it would create by more regular changes to bills, and we will need to take the cost into consideration.
The noble Earl also asked about the revaluation process and the unacceptable burden on businesses. As I said earlier, and as he will know, revaluation is an important part of the business rates system that ensures that bills are more closely aligned with relative market values. The majority of businesses saw no change or a fall in their business rates liability following the 2017 revaluation. A £3.6 billion transitional relief scheme is providing support for the minority of businesses facing an increase in their bills. An additional £435 million of support to businesses was announced at the 2017 Spring Budget. I hope that reassures him that it is not the problem he thinks it might be.
The noble Earl also said that the CCA system was criticised at the Commons Treasury Select Committee. The numbers show that the system is operational and customers are using the service to make checks and challenges. The VOA published its road map in 2018, which set out the IT improvements that it will make to the system as it continues to deliver against that plan. The VOA has delivered some key improvements to the system, addressing specific concerns from stakeholders, including adding frequently requested features, such as an application programming interface—a so-called API—on check and streamlining the registration process to make the system easier to use. As of 31 March 2019, the VOA has registered more than 100,000 checks and more than 17,000 challenges under the new “check, challenge, appeal” system.
Towards the end of his remarks, the noble Earl asked how the revaluation will be delivered. I fully understand concerns regarding funding for the Valuation Office Agency, some of which I addressed earlier. Rating valuation is a specialised field, but we are confident that it can secure the staff it needs to discharge its statutory duty now and in the future. We are keeping a very close eye on it. I confirm that the agency is currently on track with preparations and resourcing for delivering the 2021 revaluation. The agency is also actively working to train and recruit staff to ensure that it can continue to fulfil its statutory duties. To this end the agency is continuing to develop and train its workforce for the future, including a targeted rolling recruitment campaign for chartered surveyors and those studying for accredited surveying qualifications.
I am ever grateful to all noble Lords this afternoon, for their many helpful points and questions raised. Your Lordships have that expertise and knowledge in the field of local government, and it is my first experience of that. Noble Lords’ expertise in the field of business rates valuation is less well known but equally appreciated. I am delighted that we have the noble Earl, Lord Lytton, here to keep us up to the mark—put it that way.
The Bill looks small and technical but, in fact, has widespread application in improving the business rate system for over 2 million ratepayers. It underpins the £50 million revaluation project currently being delivered by the Valuation Office Agency.