Monday 17th June 2019
(5 years, 5 months ago)
Commons ChamberNon-Domestic Rating (Lists) Bill 2017-19 Read Hansard Text
This text is a record of ministerial contributions to a debate held as part of the Non-Domestic Rating (Lists) Bill 2017-19 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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.
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)
(Limited Text - Ministerial Extracts only)
Read Full debateTuesday 25th June 2019
(5 years, 4 months ago)
Public Bill CommitteesNon-Domestic Rating (Lists) Bill 2017-19 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 25 June 2019 - (25 Jun 2019)
This text is a record of ministerial contributions to a debate held as part of the Non-Domestic Rating (Lists) Bill 2017-19 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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.
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
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.
Non-Domestic Rating (Lists) Bill (Second sitting)
(Limited Text - Ministerial Extracts only)
Read Full debateTuesday 25th June 2019
(5 years, 4 months ago)
Public Bill CommitteesNon-Domestic Rating (Lists) Bill 2017-19 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 25 June 2019 - (25 Jun 2019)
This text is a record of ministerial contributions to a debate held as part of the Non-Domestic Rating (Lists) Bill 2017-19 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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.
Monday 22nd July 2019
(5 years, 4 months ago)
Commons ChamberNon-Domestic Rating (Lists) Bill 2017-19 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 25 June 2019 - (25 Jun 2019)
This text is a record of ministerial contributions to a debate held as part of the Non-Domestic Rating (Lists) Bill 2017-19 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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.
Monday 30th September 2019
(5 years, 1 month ago)
Lords ChamberNon-Domestic Rating (Lists) Bill 2017-19 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 25 June 2019 - (25 Jun 2019)
This text is a record of ministerial contributions to a debate held as part of the Non-Domestic Rating (Lists) Bill 2017-19 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
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.
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.