Non-Domestic Rating (Preparation for Digital Services) Bill
Monday 13th May 2019
(5 years, 7 months ago)
Commons ChamberRead Full debate Non-Domestic Rating (Preparation for Digital Services) Act 2019 Read Hansard Text Read Debate Ministerial Extracts
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 Government are committed to ensuring that the tax system is fit for the 21st century, that it is designed around the needs of the taxpayer and that we minimise as far as possible the administrative burden for businesses paying their taxes. The Government are also clear that this system should reflect and take full advantage of modern technology, and use that to make the process as simple and efficient as possible for taxpayers.
This very narrow Bill will support those aims in the context of the administration of business rates. This extremely short and simple measure will simply allow us to start exploring future digital reform of the business rates system. The same clauses appeared in the 2017 Local Government Finance Bill and passed through Committee without Division. The hon. Member for Oldham West and Royton (Jim McMahon) was present during those debates, and I hope the clauses will receive the House’s support again today.
John Redwood (Wokingham) (Con)
Can the Minister give an idea of the cost involved and what sort of efficient and better system might emerge?
Rishi Sunak
The measure is even narrower than that; it is simply a paving measure, which I will come on to, that enables that exploratory work to start so that future Ministers will be able to come to this House with firmer proposals, with costs attached, depending on the eventual design of the system that is ultimately decided to be appropriate after extensive consultation with the sector. If my right hon. Friend bears with me, I hope his question will be answered later. If not, I will be happy to have him intervene again.
In the lead-up to the 2016 Budget, the Government undertook a wide-ranging review of the business rates system, in response to public calls to reform. As well as seeking views on the business rates tax itself, the review invited specific feedback on the administration of the rates system, including how business rates are collected.
Responding to the review, business groups called for a number of changes to the way the system is run, including switching the annual indexation of the business rates multiplier to the consumer prices index, rather than the retail prices index; implementing more frequent valuations; and modernising the billing and collection of business rates. I am pleased to say that the Government have already begun reforming the system to implement those changes.
Ratepayers are already benefiting from the change to the annual indexation of business rates from RPI to CPI, which was brought forward by two years, to April 2018. That measure alone is worth almost £6 billion to businesses over the next five years. The Government have also committed to increase the frequency of business rate revaluations from every five years to every three. To ensure that businesses benefit from that change at the earliest point, the Government have further announced that the next revaluation will be brought forward from 2022 to 2021. That will ensure that, as requested, business rates bills more accurately reflect properties’ up-to-date rental value and any relative changes in rents.
The Bill will enable us to begin exploring how to modernise the billing and collection of rates. Businesses in this country are of course already banking, paying bills and making sales online. Our tax system needs to keep pace.
Mr Jim Cunningham (Coventry South) (Lab)
Has the Minister seen press reports today that some major companies are calling for a 20% reduction in business rates? Does he have any comments to make about that?
Rishi Sunak
It is important to remember that the Bill is much narrower in scope than the design of the business rates system and how individual businesses pay the bills they are given. My hon. Friend the Member for Rossendale and Darwen (Jake Berry), the high streets Minister, is looking forward to winding up the debate, and he will be able to give the House chapter and verse on every single initiative the Government have undertaken to support businesses on the high street. In sum, there has been £13 billion of relief since the 2016 Budget, and a third of all businesses no longer pay any rates at all.
Tim Farron (Westmorland and Lonsdale) (LD)
I thank the Minister for giving way—he is being very generous. On that point, however valuable and commendable many of the proposals he mentions may be, does he not feel that this is somewhat like fiddling while Rome burns, or indeed many of our town centres burn? There have been calls for a reduction of around 25% in high street business rates, and that could be funded by making sure that the tech giants pay their fair share of corporation tax.
Rishi Sunak
Madam Deputy Speaker, I am loth to get drawn on to topics that are much broader than the very narrow scope of this Bill. However, I am happy to reiterate that I do not think the £675 million high street fund my right hon. Friend the Secretary of State and my hon. Friend the high streets Minister introduced earlier this year is a case of fiddling while Rome burns. The Government are committed to the vibrancy of our high streets through various initiatives that will be outlined in my hon. Friend’s winding-up speech.
Indeed, the Bill is also an important measure; it is a measure that businesses have called for. Given the statutory nature of HMRC, it is impossible to move forward without this short piece of legislation. The reason for that is that businesses today receive separate business rates bills for each non-domestic property they occupy. Large businesses with property in different areas may receive bills from a number of local authorities responsible for issuing bills and collecting payment. It is worth bearing in mind that there are over 300 different billing authorities today, each with its own system of billing for business rates. While I pay tribute to the good work carried out by local authorities in administering business rates locally, the Government’s clear view is that reforming the system to more closely link with the wider management of business taxes led by HMRC could unlock long-term improvements to the current system.
Members will appreciate that implementing any reform of this scale takes significant time and that it is critical that the Government engage with businesses and local government in developing and designing any new digital system; indeed, the hon. Member for Oldham West and Royton brought that up in Committee during consideration of the previous Bill. I am pleased to tell him that the measure before us today will take many years to come to full fruition. The current intention announced by the Treasury is that any new design of the system will not come into force until after the next revaluation, in 2024. What we are doing today is therefore just a very small first step on a journey that requires an enormous amount of engagement and consultation.
The main measure in the Bill allows HMRC to expend resources on beginning to explore designs for a new digital service for business rates. That is necessary because HMRC’s current statutory functions do not include activity in connection with the administration of business rates. To be clear, the legislation we are considering simply permits HMRC to begin the necessary design and engagement work for a potential new digital service. It does not implement any reforms to the current system of business rates administration.
That is important because, as I have noted, the Government are clear on the need to engage with businesses and local government to seek views on any specific options for reform. For example, the local government sector will want to ensure that any changes are fully compatible with the local retention of business rates and with plans to increase rates retention in the future. Equally, business organisations such as the Federation of Small Businesses, the British Independent Retailers Association and the CBI will be keen to engage in future design work to ensure any reforms deliver benefits to businesses and minimise any burdens. Members should also be aware that any practical reforms to the system are likely to require further changes to legislation and, as such, there will be opportunity for full scrutiny of any proposals once the design work has concluded.
The Government’s efforts to improve digital tax services are already helping businesses seize the opportunities that digital technology offers. They are giving businesses more control over their finances, allowing them to spend their time focusing on innovation, growth and the creation of jobs. The Bill will support this by enabling HMRC simply to begin exploring potential options to link business rates with the administration of the wider tax system. It will also enable HMRC to undertake the necessary engagement with stakeholders to ensure any reforms work for business and for local government. While the Bill is just a small paving measure, it supports some potentially significant long-term improvements to the current system. I commend it to the House.
Madam Deputy Speaker (Dame Eleanor Laing)
Before I call the Opposition spokesman, with the leave of the House, and most unusually, I am sure the House would like to join me in wishing the Associate Serjeant at Arms, who occupies the Serjeant at Arms’ Chair, a very happy birthday.
Jim McMahon (Oldham West and Royton) (Lab/Co-op)
I will not put the House through a rendition of “Happy birthday”—[Hon. Members: “Shame!”] But many happy returns.
Perhaps this is a missed opportunity. It is a shame, really, that the Bill is so narrow, because we have a good five hours where we could have talked about the real threats our businesses face, the dangers to our high streets and the many representations made on this issue. Nevertheless, this Bill is progress. Following the falling of the Local Government Finance Bill when the general election was called, we encouraged the Government to come forward with non-controversial elements of that Bill. Clause 14 was not controversial, so I am glad to see it in this Bill.
Local councils are on the frontline of government, delivering services that people rely on and which both support and enrich our communities on a day-to-day basis. Labour welcomes the modernisation of tax collection and the move to online payment and account facilities. However, the proposal to develop an online payment system led by HMRC, as set out in the Bill, does raise some questions.
Madam Deputy Speaker, I refer you to my entry in the Register of Members’ Financial Interests as a vice-president of the Local Government Association, the body that represents councils, which are the billing authorities responsible for the collection of business rates. It, like me, wants confirmation that the move to develop an online payment collection facility will not change the fundamental and historical role of local councils as billing authorities with the legal responsibility for the collection of business rates. In the design of this new bridging system, to what extent have the Government sought input and representation from local government? Local government has significant experience in designing systems and processes, and it is important to draw on that to make the best of this proposal.
As the Government are investing in digital services, do they intend to streamline this online facility with the check, challenge and appeal process already in place? That would make it easier for businesses to have an end-to-end business rate system in place, marrying in one system the payment mechanism with the ability to check and appeal business rates. What payment mechanism will be in place to transfer funds to local authorities, especially in rate retention pilots? Who will be responsible for the collection of rates, and who will underwrite funds lost through non-collection?
The most critical issue is the wider sustainability of business rates and their role in funding local public services and encouraging local economies to thrive. Local government has already seen severe cuts after nine years of brutal and devastating Tory austerity.
Mr Jim Cunningham
One of the reasons that there is a reaction from businesses regarding the level of business rates is that while central Government should have been responsible for funding certain services, they have shoved that on to local authorities, which have had to put that through business rates, just like the police and fire authorities’ precepts.
Jim McMahon
It is a matter of fact that the Government are moving towards the self-financing of local government. That is fine if a local authority can generate money through business rates and council tax in its local economy, but if, for whatever reason—usually for historical reasons—it is not able to do that, the Government do not care if councils sink or swim. That is no way to fund adult social care or children’s safeguarding services, or to make sure the homeless get the support they need either. Quite frankly, it shows a callous disregard for the role of central Government in making sure that every area gets its fair share of funding. That is a critical point.
Mr Cunningham
Anybody who has any experience of local government—my hon. Friend does, as do I and many others in here—knows that three or four years down the road, though they hint at looking again at business rates, Ministers will come along and tell everybody in local government, “You’re profligate, you’re spending too much, so we’ll cap you.” As I am sure he will remember, we have had all this before.
Jim McMahon
The hallmark of local government across parties—this is not a party point—is that people roll up their sleeves and get on with it. They do not complain; instead, they find solutions to the difficult challenges facing the community, but that is made much harder when central Government are disconnected.
Successive Secretaries of State have failed to champion local government, which is why I welcome our shadow Secretary of State having that local government background and experience and really believing in it. I hope he will be Secretary of State in the future, leading on this from the Government Benches. It is critical that the Secretary of State should not batter local government all the time. It needs a champion to celebrate what goes on in every community and, regardless of party affiliation, to fly the flag for what has been proven to be the most efficient arm of government—they are our champions, and we should thank them for all the work they do.
By 2025, there will be a funding gap in local government of £8 billion, and by 2020 local authorities will have faced core funding cuts at the hands of central Government of nearly £16 billion since 2010. That means that councils will have lost 60p for every £1 the Government previously provided to cover local public services. Next year, 168 councils will receive no funding whatever from central Government to meet the cost of rising demand for local public services.
What impact will that have? We can talk about the big numbers, and £16 billion is a huge number and has had a huge impact, but this is really about people and communities—the streets where people live, the communities that bind people together and make places decent places to live. The cuts have had a dramatic impact on government services. Youth centres have closed; libraries have reduced their hours, and hundreds have closed altogether; and meanwhile, social care is on the verge of collapse. Warning after warning has been issued, but the Government, particularly the Treasury, have not come to the table. As a result, our councils are having to make difficult and unwelcome decisions about where to make efficiency savings, and that is hampering their ability to prioritise social good above all else.
Moving to an online payment system administered by HMRC, but with links through to local billing authorities, raises a more fundamental point about taxation on business overall. Currently, many believe it operates in a silo and that the approach to business taxation is very disjointed. While our town centres and high streets are going to the wall, the online giants are making record profits and ensuring that as much as possible is sent offshore. The Government should use this opportunity not just to introduce a digital payment system, but to undertake a more fundamental review of business taxation overall to ensure that tax is generated where the wealth is created and that our town centres and communities are properly supported. We look forward to scrutinising the Bill properly and to hearing answers to the questions posed.
John Redwood (Wokingham) (Con)
I have declared my business interests in the Register of Members’ Financial Interests, but I am not speaking for them of course; I wish to speak on behalf of the retail businesses in my constituency, as others have already done.
While I am sure it is well intended and necessary to develop a digital payment system for this tax, can the Minister reassure us that it will not be used as a device by the Treasury and others to accelerate payments and to damage further the cash flow of the shops and other businesses that have to pay it? There is the temptation to use the power of digital technology to have real-time information and then to knock the money off for the tax rather more quickly, when the timing of tax payments may be an important part of cash-flow planning, particularly of retail businesses.
I hope that Ministers are sensitive to the current position in many high streets up and down the country. Large chains and other sizeable independent shops are struggling because their cost base is very high, and they are competing with online retailers who have nothing like the same cost base in terms of property and staff numbers. They are finding it difficult to manage, and another hit on their cash flow from the Government would not be welcome.
Rents are now falling in shops generally in England and Wales, the area covered by the Bill. Some retailers are talking about reductions of 25% or 30% as and when the rents on various shop properties become due for review. That relief is welcome to some extent, but it takes time, because many of the leases are for several years and have to mature before renegotiation is possible. Some retailers must go through the agony of a voluntary administration to secure a change in their rents. Another problem is the fact that rents can go down through market processes, but rates never go down, except in the case of very small shops that benefit from one of the exemptions. So the total property cost does not fall at anything like the percentage that the market is suggesting that it should, because the Government element is very fixed. I hope that Ministers will be sensitive to that.
I realise that this is not the occasion—much as many of us would like it to be—for a proper debate on the balance of business rate taxation and its impact on the retail sector. However, in Wokingham, a lot of money has just been spent on refurbishment and the provision of new and more attractive space in the town centre. Securing the first lettings is an important part of promoting a more active town, but over-avaricious taxation, speedier payments and other changes in how the business rate is handled could offset what will otherwise, we hope, be a good-news story.
That is my prime concern, to which I hope the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for Rossendale and Darwen (Jake Berry), will respond. I am delighted that he will be winding up the debate, because I know that he is very conscious of and sensitive to the need to do more to help retailers, and I am sure that he will mention that.
I should like to follow up my earlier intervention on the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak). It would be good, at some point—it may not be possible today—to have a better idea of the scope of the survey and of the costs that might be involved. Will it be conducted by our own Government officials, or will there be consultancy contracts? If there are consultancy contracts, will we get value, and will we be consulting people who actually know what they are talking about, so that we can end up with something that we are proud of?
The Government have a duty to taxpayers to ensure that money is well spent. It would be useful to have any more information that the Minister can give about the kind of sums that the Bill might authorise, and what the purpose is. What more can they learn that Her Majesty’s Revenue and Customs does not already know from running perfectly good systems for a range of taxes on people and businesses? A fair amount of them are now handled electronically, so presumably there is quite a lot of in-house experience and expertise that could be drawn on. We always want to make the best possible use of the talent that the Government already have and the information that they have already gleaned both through their own researches and by buying it in through consultancies. I hope that Ministers will have some ability to discipline that work and to ensure that it is timely and provides value for money.
Dr Roberta Blackman-Woods (City of Durham) (Lab)
This is probably the easiest summing-up that I have experienced so far in the Chamber. I thank the right hon. Member for Wokingham (John Redwood), my hon. Friend the Member for Coventry South (Mr Cunningham) and the hon. Member for Westmorland and Lonsdale (Tim Farron)—first, for turning up and, secondly, for making incisive comments about this short Bill.
As we know, this is paving legislation to enable the Government to deliver on their commitment to link the local authority business rate system to HMRC digital tax accounts so that businesses can manage their rates bill in one place alongside other taxes. As I think should be clear from what was said by my hon. Friend the Member for Oldham West and Royton (Jim McMahon), we fully understand the Government’s wish to modernise the administration of business rates for the 21st century, and we fully understand that linking the local authority business rates system to HMRC digital accounts will make it easier, simpler and less burdensome for businesses to understand and pay their business rates. Nevertheless, as I am sure the Minister would acknowledge, there is some way to go before that aspiration can be achieved, and little of the detail of the new system is yet known.
The Bill provides HMRC with the ability to undertake the planning, consultation and testing that is needed to truly inform the design of the new service, and in their factsheet the Government say they will engage locally with local government and the business sector in developing detailed proposals and seeking views. It would therefore have been really useful today for the Government to have provided more detail on how they intend to go about this; we have simply no idea about the detail of how they will take this forward. There is a money resolution but absolutely no idea of the costs of digitising, and it would be helpful to hear something from the Minister about the costs that will be incurred.
The Minister made it clear that the measures in this Bill are to be compatible with the 100% business rate retention system the Government are aiming for, but we need to stop for a moment and explore this further, because there is a real risk under the 100% business rate system of dividing the country further between the haves and have-nots, the wealthiest areas and deprived areas, the south and the north. So can the Minister confirm that councils, particularly those affected by austerity, will not lose out under this system?
As my hon. Friend the Member for Oldham West and Royton said, since 2010 there has been a massive £16 billion-worth of cuts—a reduction of 60p in every pound for some councils—and the Centre for Cities found in January that the poorest areas have borne the brunt of council spending cuts. As a result of these cuts, councils have had to make £7 billion pounds of savings to adult social care, with less being spent on early intervention, libraries, youth services and so forth. In fact, these services have almost disappeared in some local authorities. So it might have been helpful for the Government to set out at the same time as this Bill how they see the whole of the local government finance system progressing in the future—for example, by having more information about the fair funding review and whether the Government will agree to independent scrutiny of the system and its implementation to test whether it actually is fair.
We know, too, that the current business rate system is broken, and we need firm proposals from the Government to ensure business rates are not an impediment to tackling regional inequalities in the way they are at the moment.
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Jake Berry)
The hon. Lady says we should talk about that to enable us to have a full discussion here today. This might be slightly beyond the scope of today’s debate, but perhaps she will set out from the Dispatch Box Labour’s position for business rate reform in some detail because we have time to do that, and then I will comment on that in the context of today’s debate.
Dr Blackman-Woods
I thank the Minister for that intervention, because perhaps I was not clear: I was not suggesting that those measures necessarily needed to be in this Bill, but they do need to be set out so that we can place the Bill within the context of the Government’s wider proposals, because the Government—
Madam Deputy Speaker (Dame Eleanor Laing)
Order. The hon. Lady has explained that very well and I understand why the Minister made his point, but of course matters that are not in this Bill are not subject to discussion this afternoon. As I said, the hon. Lady has explained the context very well and I am sure the debate will not be widened—and actually it is not difficult for me to keep this as a narrow debate.
Dr Blackman-Woods
Thank you, Madam Deputy Speaker. I will do my best to keep to what is in the Bill. However, the Government cannot continue to rely on a system of ever-increasing council tax bills and supplements to make up for the lack of Government funding for our essential public services such as policing, youth services, housing and social care. That is why we are interested in the wider picture, as well as the matters we are discussing today, but I will keep my points as narrow as possible.
The Local Government Information Unit has been pressing for a clear vision for the future shape of the council funding system, and it is worried that councils could continue to fail if no such vision is put forward in the near future. We also need to know something about the redistribution mechanisms that could be attached to 100% business rate retention, and it would be extremely helpful if the Minister said something about that.
My hon. Friend the Member for Oldham West and Royton set out a series of questions for the Minister to address this afternoon. We need to know how the lessons from the retention pilots will become known and when they will be rolled out and whether there will be any additional costs for ratepayers. We need to know who will be responsible for collection rates and who will underwrite funds lost through non-collection. We also need to know how the system will be appealed and challenged, and who will administer the non-payment collection and the applications for discounts and exemptions. How will local government be involved, not only in the design of the new system but in bringing in the arrangements? I hope that the Minister will address all those detailed questions this afternoon. We understand the need for the Bill, and we will not seek to divide the House on it; instead, we look forward to improving it in Committee.
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Jake Berry)
What a privilege it is to have this opportunity to close the debate today. I wish that it had been better attended, but it is great to have had a contribution from my right hon. Friend the Member for Wokingham (John Redwood) and some contributions from Labour Members. There was no one here from Change UK or TIG or whatever it is called; it obviously does not care about business rates.
In our debate today, it is important for us to stick rigidly to the scope of the Bill, which sets out how we will empower HMRC to look at digitisation and at how it can modernise and simplify the business rates system. Before the 2016 Budget, the Government held an extensive consultation and set out a commitment to enter on this process. It is a commitment that, following the passage of this Bill, HMRC will then, and only then, be able to progress the necessary design work.
Today’s Bill is an important step towards those reforms, and it will allow HMRC to start to explore some of the digital infrastructure that will link local authority business rates to digital tax accounts. This has been called for by businesses, and it is also being welcomed by them. Today’s Bill is simply the first important step, and it rightly paves the way for further discussions on how the process will proceed. All those discussions will require legislation, which will pass through the House and be subject to the usual scrutiny of the Opposition parties.
Turning to the impact of business rates on businesses, we have heard clarion calls in the press this morning and from the Opposition during this debate for looking into a more wholesale reform of business rates rather than simply digitising them, and it is impossible to have a debate about digitisation without giving cognisance to that point. Let us not forget, however, that we have committed to £13 billion-worth of savings to business over the next five years through the reforms that we have already made to business rates. We have switched the annual indexation from RPI to CPI, which will, over the lifetime of that commitment, save ratepayers and businesses up and down the country some £6 billion. That is £6 billion that will remain in all our local communities and economies for the constituents that we represent. We have also reformed small business rate relief, doubling it to £12,000 and making it automatic, meaning that 650,000 businesses now pay no business rates at all. We have responded to calls from businesses for more frequent revaluations, which will now happen every three years from 2020-21.
Turning to the points raised by my right hon. Friend the Member for Wokingham about business rates and revaluation, it is of course the case, thinking about cash flow and the impact that business rates may have on a business, that it is possible for business rates to go down if rent has gone down and other factors have reduced during the period since the previous revaluation. The last revaluation actually led to a majority of businesses seeing no change or a reduction in their business rates. Over time, that should happen more often with more frequent revaluations from 2021.
Bill Wiggin (North Herefordshire) (Con)
I am curious, based on the Minister’s research, about how often businesses ask for a revaluation.
Jake Berry
I thank my hon. Friend for that helpful intervention. From speaking to business groups—I regularly consult with the Government’s Future High Streets Forum, and the Department for Business, Energy and Industrial Strategy has the Retail Sector Council—it is clear that they seek more frequent revaluations because that stops bill shocks. I am sure that my hon. Friend knows about bill shocks from people who have visited his advice surgery, and he also runs his own business—[Interruption.] Although I do not think that farms have a big business rates bill, because they do not pay any business rates.
Bill Wiggin
However, I get continual complaints about business rates from the landlord at the Moody Cow pub, which is very near my home.
Jake Berry
I am sure that those at the Moody Cow will be delighted not just with more frequent revaluations, but with when they can move on to the digitalisation of business rates, which we are discussing today.
People who make the clarion calls for the abolition of, reduction in or some other change to business rates will accept that they are already a key source of funding for local authorities, funding essential services, such as adult social care and children’s services. I note that the hon. Member for City of Durham (Dr Blackman-Woods) did not take the opportunity in the wider context of this debate on business rates to elucidate the Labour party’s policies, but those who seek to reform business rates have an obligation to say how the revenue would be made up.
Many people who talk about business rates reform have at heart concerns about the health of our high streets, which was mentioned by the Opposition Front-Bench spokespeople and which should worry us all. The Government need to find a way of ensuring that high streets continue to thrive as shopping patterns and behaviours change. I cannot remember a period of more rapid change in how we choose to shop. High streets must clearly transition from bricks-led retail to a bricks-and-clicks online and offline model, with experiential leisure at its heart. High street retailers will be delighted that business rates were slashed by a third in the most recent Budget for retailers with a rateable value of under £51,000, and that formed part of our wider high street package.
Madam Deputy Speaker, I do not know whether you are a fan of “Sex and the City”, but Sarah Jessica Parker recently bemused her Instagram followers on a recent visit to London, when she praised Timpson not just for its key-cutting service, but for its extensive selection of umbrellas, labelling the branch in High Street Kensington tube station as her new favourite shop. Timpson is of course a fine retailer, which is why I was delighted that Sir John Timpson worked so closely with the Government on his report on the future of the high street, business rates and retail. Leading directly from his report, the Government created the £675 million future high streets fund to support high streets and enable them to pay their business rates. Although all those reforms have been welcomed, people will continue to call for a more fundamental review of business rates, and the Government will, of course, continue to keep that under review.
The hon. Member for Oldham West and Royton (Jim McMahon) raised a lot of specific questions about how the digitisation of business rates will work. I am sorry to disappoint him, but I am unable to answer any of those questions today because the purpose of the Bill is to give HMRC the statutory power, which it currently does not have, to go away and work up that system. How the system will work cannot become clear until we have empowered HMRC, both on Second Reading and in Committee, to start work on it. That is why it is so important that we agree Second Reading this evening, and it is why it is so welcome that the Opposition Front-Bench team support the Bill.
This important Bill is just the start of our cross-party work to ensure that we create a business rates system fit for the future. Many people who run businesses will now be used to making the majority of their transactions online, whether it be paying their VAT bill, paying their utility bills or making sales and buying stock. If we truly want to create a modern tax system that is supportive and friendly to business, we must all work to create an online taxation system, including for business rates, that small businesses and large businesses alike will find workable and useful in driving productivity and efficiency in their business. That is why I have the pleasure of commending the Bill to the House.
Question put and agreed to.
Bill accordingly read a Second time.
Non-domestic Rating (Preparation for Digital Services) Bill (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7),
That the following provisions shall apply to the Non-Domestic Rating (Preparation for Digital Services) Bill:
Committal
(1) The Bill shall be committed to a Committee of the whole House.
Proceedings in Committee of the whole House, on Consideration and up to and including Third Reading
(2) Proceedings in Committee of the whole House, any 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 in Committee of the whole House.
(3) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion three hours after the commencement of proceedings in Committee of the whole House.
(4) Standing Order No. 83B (Programming committees) shall not apply to proceedings in Committee of the whole House, to any proceedings on Consideration or to other proceedings up to and including Third Reading.
Other proceedings
(5) Any other proceedings on the Bill may be programmed.—(Rebecca Harris.)
Question agreed to.
Non-domestic Rating (Preparation for Digital Services) 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 (Preparation for Digital Services) 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.—(Rebecca Harris.)
Question agreed to.
Non-Domestic Rating (Preparation for Digital Services) Bill
Monday 20th May 2019
(5 years, 7 months ago)
Commons ChamberRead Full debate Non-Domestic Rating (Preparation for Digital Services) Act 2019 Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)
It is a pleasure to serve under your chairmanship, Dame Eleanor.
The Government have made significant reforms to the business rates system since our wide-ranging review in 2016. Responding to the needs of ratepayers, we are building a system fit for the 21st century. The tax system must keep pace with the way business operates today, and that means a modern, online system that makes it easier for businesses to manage their bills in one place.
Today’s measure is a small step towards that modern system for business rates. It will give Her Majesty’s Revenue and Customs the ability to carry out the early design work so that it can explore how a new system can be delivered. It does not implement or commit us to a particular approach, and the Government will work closely with local government and businesses when we come to develop detailed proposals. We need the Bill because HMRC’s statutory functions do not currently extend to the administration of business rates. As I have said, further primary legislation will be needed for HMRC to implement the outcomes of this work, so this House will have a further opportunity to look again at the project.
On the detail of the Bill’s clauses, HMRC’s functions are set out in primary legislation in the Commissioners for Revenue and Customs Act 2005. These functions relate to the collection and management of revenue, as set out in section 5 of the Act, and do not extend to the administration or payment of non-domestic rates. Clause 1 therefore provides HMRC with the ability to incur expenditure in connection with digital services to be provided by it for the purpose of facilitating the administration or payment of non-domestic rates in England. Subsections (2) and (3) define digital services and non-domestic rates respectively. Clause 2 sets out that the amendment will extend to England and Wales but apply only to England.
Jim McMahon (Oldham West and Royton) (Lab/Co-op)
It is a pleasure to serve under your chairmanship, Dame Eleanor.
When we debated the Bill’s Second Reading last week, we were careful not to stray too far from what is a very narrow Bill. The benefit to the Minister was that he was able fill a speech by reading out the Bill. I shall not speak just for the sake of it; I shall cut straight to the chase.
I accept completely that this is enabling legislation to allow Her Majesty’s Revenue and Customs to develop the framework and the product offer, but there are still many outstanding questions that the Government need to answer at this stage, because they are fundamental to the approach that is being taken. For instance, will local councils retain their primary role as billing authorities? Who will underwrite the non-collection losses for businesses that opt to use the new digital system? How frequent will HMRC’s payments to local authorities be?
To what extent will local government be involved in the co-design of the system? As was pointed out on Second Reading, there is a great deal of expertise in our councils when it comes to designing systems and processes and bridging systems across different software products, and I think we can tap into that expertise to ensure that the system is fit for purpose. I am sure that the Minister does not want his CV to bear the legacy of an inadequate IT system, a fate that has befallen many Ministers who have gone before him in various Departments.
We want those fundamental questions to be answered, ideally before work starts and money is spent—and that brings me to my next point: we still do not know how much money will be spent. Oddly, a money motion was tabled but did not proceed to a Division, and there was no explanation even of the ballpark figure: not even a rough estimate of how much the new system might cost. The cost must be weighed against the benefits to HMRC and businesses, and it must be established whether we are getting value for money for the investment.
I must be careful not to stray too far from the subject of the debate, but the Bill does not address the underlying chronic underfunding of local public services. The Minister really must deal with the issue of the £8 billion funding gap, to which we have referred very often in the House.
We do not intend to divide the Committee, but if the Minister is not able to answer those questions today, it would be useful if, at the very least, Ministers could respond in writing.
Rishi Sunak
Let me deal briefly with the hon. Gentleman’s points. He asked some specific questions about the design of the system. As we established on Second Reading, I cannot give him the answers, not because I am trying to hide something but simply because I do not know them at this stage, and nor does anyone else. The Bill will enable HMRC to start its scoping work, and the questions that the hon. Gentleman rightly posed about the design, who will do what, and how intensive the work will be—or, indeed, how light-touch it might be—will be answered during subsequent analyses. Further primary legislation is likely to be required, so the House will have an opportunity to debate those changes.
On Second Reading, the hon. Gentleman raised an interesting point about the potential integration of the new challenge and appeal system with whatever new platform is designed. That point is worthy of consideration. Again, however, at this stage no one knows how much that would cost, how long it would take, or whether it would be a worthwhile addition to the plan of work. I hope the hon. Gentleman will forgive me: I am not being evasive, but we are beginning a process that will answer all those questions and others.
Similarly, I cannot give the hon. Gentleman a specific figure in relation to the budget, because we do not know what the overall system will look like. What I can say is that HMRC’s initial scoping work will be done within its existing resources and budgets, will not, in general, involve the use of consultants, and will hopefully lead to a proposal which, during the spending review, HMRC can decide whether to adopt, depending on the outcome of the review.
Of course local government and, indeed, business should be extensively engaged in the process. I know that HMRC is committed to that, and the hon. Gentleman would no doubt hold me and Treasury Ministers to account if it were not the case. Typically, Select Committees would take evidence from HMRC in hearings as the system was being designed and rolled out over subsequent years, and I have no reason to doubt that that would happen in this instance.
The last question the hon. Gentleman posed was specifically about the frequency of payments. I am pleased to be able to tell him that this was also brought up on Second Reading. Currently, businesses tend to have at least the opportunity to spread their business rates payment over 10 different instalments over the year. That right is prescribed in regulation—the Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 1989—so that flexibility is already in place and is taken up by many businesses. If there was to be any change to that, it would require this place to pass new regulations, so I think the hon. Gentleman can rest assured on that point.
I hope that answers all the hon. Gentleman’s questions, and I ask Members to agree that, if we can take clauses 1 and 2 together, they stand part of the Bill.
The First Deputy Chairman of Ways and Means (Dame Eleanor Laing)
In answer to the Minister’s implied question, I have not put clause 2 to the Committee yet, and therefore before I put the questions on clauses 1 and 2 I will immediately, for the sake of clarity, rule that we are debating clause 1 and clause 2 together; I had not said that before, but as both the Minister and the Opposition Front-Bench spokesman appear to have done so I will retrospectively allow it. Also, I will just ensure that no one else wishes to speak on either clause 1 or clause 2 before I put either of the Questions, and I see that that is indeed the case, so let us proceed.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clause 2 ordered to stand part of the Bill.
The Deputy Speaker resumed the Chair.
Bill reported, without amendment.
Third Reading
Rishi Sunak
I beg to move, That the Bill be now read the Third time.
This simple, narrow measure will take the first steps towards improving the tax system for businesses by developing a new digital system to administrate business rates. It is part of the Government’s commitment to make Britain the best place in the world to do business.
I would like briefly to thank right hon. and hon. Members in all parts of the House for their contributions during the extensive Second Reading and Committee stages of the Bill. Specifically, I am grateful to those who supported it on Second Reading, highlighting the importance of our efforts to support business and our high streets and of our consulting widely on the development of this new digital system. I am grateful to the Clerks of the House and to officials in both my Department and Her Majesty’s Revenue and Customs for their work on the Bill.
This simple Bill will allow HMRC to develop a new system for the administration of business rates; it has wide support, and I commend it to the House.
Jim McMahon
I do not intend to talk at length, but I do wish to say that when people look at Parliament and the division that Brexit causes, they believe that our politics is in crisis. Although I know that the topic the Bill addresses is not interesting for many people and I doubt that many people will be watching, it has demonstrated that we can work across parties, and indeed that is how Parliament generally works, although it is not often seen. I accept that this is a technical matter and is not as controversial as Brexit, which I will leave for others. I thank the Minister for reaching out very early in this process, and I wish the Bill success in the other place.
Question put and agreed to.
Bill accordingly read the Third time and passed.
Non-Domestic Rating (Preparation for Digital Services) Bill
Tuesday 21st May 2019
(5 years, 7 months ago)
Lords ChamberRead Full debate Non-Domestic Rating (Preparation for Digital Services) Act 2019 Read Hansard Text
Royal Assent
Thursday 4th July 2019
(5 years, 5 months ago)
Lords ChamberRead Full debate Read Hansard Text