My Lords, the Hybrid Sitting of the House will now resume. I ask all Members to respect social distancing.
Members will be called to speak in the order listed. Short questions of elucidation after the Minister’s response are discouraged. Any Member wishing to ask such a question must email the clerk. The groupings are binding. A participant who might wish to press an amendment, other than the lead amendment in a group, to a Division must give notice in debate or by emailing the clerk. Leave should be given to withdraw amendments. When putting the question, I will collect voices in the Chamber only. If a Member taking part remotely wants their voice accounted for if the question is put, they must make it clear when speaking on the group.
1: After Clause 1, insert the following new Clause—
“Annual Rates Revaluation Reporting
(1) Within three months of the passing of this Act, and every twelve months thereafter, the Secretary of State must publish a report on the timing of business rates revaluations and lay it before both Houses of Parliament.(2) Each report must contain an assessment of the impact of the timing of business rates revaluations on—(a) the prosperity of towns and high streets,(b) the prosperity of small businesses,(c) the ability of high street businesses to compete with online businesses,(d) local authority finances, and(e) business rates appeal waiting lists.(3) Each report must contain a statement detailing how the Valuation Office Agency and local authorities have been consulted in relation to the timing of business rates revaluations.(4) Each report must make a recommendation as to whether action from the Government needs to be taken to prevent adverse impacts arising from the timing of the rates revaluation.”
My Lords, I draw the attention of the House to my relevant registered interests as a vice-president of the Local Government Association, chair of the Heart of Medway Housing Association and as non-executive director of MHS Homes Ltd.
Amendment 1 seeks to place a new clause in the Bill whose purpose is to require the Secretary of State to publish a report on the timing of business rate revaluations and to lay that report before the House. The report must address the issues I have laid out in proposed new paragraphs (a) to (e) of my amendment. Each point needs careful attention.
Our high streets were in crisis before the pandemic, and the position has been made even worse over the last year. Hardly a week goes by when we do not hear of struggling high streets and well-known businesses leaving the high street for good, or questions being raised as to their future viability. Sir John Timpson, chairman of the wonderful Timpson Group, addressed this very point this morning on Radio 4, reflecting on the work he did looking at our high streets for the Government before the pandemic. The Bill does not address that fact, but merely moves the date of the revaluation so that it better reflects the effects of the pandemic. While that is welcome, it falls a long way short, and the Government have missed an opportunity here to do more to save our high streets.
I do not think one can disagree with the points set out in my amendment. If the noble Lord is going to resist the amendment, can he set out what he and his department are doing to support the prosperity of our towns and high streets? That must go much further than the towns fund, or other small schemes with limited funding. What must happen is fundamental help for all our towns and high streets. Small shops and small businesses on our high streets deserve support as they will be a crucial to our economic revival, including the much loved British pub, which is at the heart of local communities. I also draw the attention of the House to my being vice-chair of the All-Party Parliamentary Beer Group. I very much support its work, and the part that pubs play in our community lives.
We must also address the completely unfair situation that exists between high street businesses and online businesses, which we have discussed many times in your Lordships’ House. There is a much wider debate to be had about business rates as a method of raising finance, but if business rates are levied there must be fairness in the system. There are too many examples today that highlight an unfairness between the high street and online businesses which must be addressed, and this amendment seeks to give the Government the tools to do just that. Business rates raise money for local government and are a key part of its finances. We recently debated a pilot scheme that the Government have under way to increase the funds raised for local authorities through business rates, and again this needs to be looked at, as does the question of appeal.
If the Government do not take the opportunity that the amendment gives them today, I hope they will go back and reflect on these issues. If not, there is no doubt that we will be here year after year, trying to address the serious problem facing our high streets, which the pandemic has accelerated. I hope the Government will take this matter seriously. I beg to move.
My Lords, I speak in support of Amendment 1, just moved by the noble Lord, Lord Kennedy. It is a real pleasure to follow him and his very measured and careful support for the need to tackle the issues on which I too will comment.
I am disappointed that the Government and the Minister have not thought fit to take on board the range of sensible improvements put to your Lordships’ House in Committee. A wide range of noble Lords spelled out the difficulties that an unamended Bill will impose, particularly on the hard-hit retail sector, where the devastation of Covid-19 lockdowns on top of a decade-long decline in high street sales has wiped out a long string of household names, as the noble Lord, Lord Kennedy, rightly rehearsed
The Chancellor’s emergency business rates relief has certainly been a life saver. The Association of Convenience Stores says that four out of 10 of its members would have gone out of business without that support in the past year. It is no wonder that many Conservative MPs are calling on the Chancellor to extend that scheme, and to provide some continuing support to the high street, at least until Covid restrictions are fully lifted. I hope he will do that but, as we discussed in Committee, that could all be in vain if those retailers are then left waiting for years for the revaluation, which this Bill will trigger, to come into effect. The big risk is that the cavalry will arrive too late—in time to count the dead, but too late to bring success to the high street.
Today’s amendment is in default of any response so far by the Government to these issues. It requires an annual audit of the heavy burdens borne by some, especially high street retailers, alongside the unearned tax holidays given to others, particularly distribution centres and the gigantic out-of-town warehouses of the online retailers. Those businesses are booming and occupy property that is virtually untaxed under the present regime, compared to the high street trader.
The amendment refers to the impact of the timing of rates revaluation, and that is what I want to focus on. I want the Minister to respond to this specific point when he winds up: does he acknowledge that unless the Chancellor’s rate relief scheme is extended, or the effective date of implementation of the revaluation in this Bill is brought forward, there will be a hiatus, when many small shops will face ruin? They will be forced to pay wholly disproportionate property taxes, which are now completely out of kilter with current rental and property values. If he does acknowledge the reality of the hiatus, will he undertake to work with the Treasury to bridge it? That could be by extending the existing scheme set out by the Chancellor, or by bringing forward the effective implementation date of this Bill, or both.
Further to that, it is noteworthy that the Non-Domestic Rating (Public Lavatories) Bill has a retrospective implementation date of 2020. I presume that that means that the Government accept the principle that the benefit of a reduction in rateable value can be backdated. If it can be done for public lavatories, surely it should be done for high street shops as well. If the antecedent valuation date is taken as 1 April this year, as set out in this Bill, surely it makes sense in the current circumstances to make that the date from which the payment amount is calculated. That would not be immediate cash in hand, of course, but it could be a vital, bankable credit for a struggling business and give retailers the incentive and the means to keep going through this crisis until the valuation is actually published. Will the Minister undertake to explore this with the Chancellor as one of the ways of closing the chasm between the end of the Treasury scheme and the coming into force of this Bill?
If the Government are serious in saying that we have to build back better, surely this is exactly the time for some joined-up thinking across government departments. Is this not exactly the simple bridging measure that would help stop the disruption of our high streets? We all know that thriving local communities everywhere need ready access to diverse public and commercial services that serve everyone, and that a healthy and diverse local retail sector is an essential part of that. This is not at all about keeping alive an outdated business model that is able to limp along only with tax cuts and subsidies; it is about putting right a taxation injustice that is now beyond dispute, so that high streets can do what they do best: provide local communities with a focal point for the things they need. I support Amendment 1 and I look forward very much to hearing that the Minister does too.
I thank the noble Lord, Lord Kennedy, for tabling Amendment 1, which I wish to speak to, and it is a pleasure to follow the noble Lord, Lord Stunell. I declare my interests as set out in the register. I am a non-domestic ratepayer in Scotland, although I know this Bill does not include affairs in Scotland.
The Bill is all about timing; it is not about fairness, fitness for purpose, the impact on business, sorting out the appeals system or any other aspect of what has become, I fear, a broken system. The Bill ignores the most critical timing issue, which is simply that of dealing with the appeals backlog—ratepayers paying the requested sum until an appeal is settled. In the current circumstances, that is critical. We cannot expect the Covid-related rates holiday to last for ever. We have seen a collapse in retail rental values over the past 12 months, and as both the noble Lords, Lord Kennedy and Lord Stunell, have pointed out, it was a crisis long before this. Some tenants are to pay double the appropriate rates bills. This amendment brings the plight of the high street retailer into high relief. The annual report it proposes would focus specifically on small businesses, as set out in subsection (2)(b). I am pleased that it also addresses the elephant on the table of all non-domestic rates discussions in the retail sector: the killer impact of the online assault on the high street, as we have heard from both the previous speakers.
Online retail is not a bad thing and it is clearly the future for a huge percentage of domestic spending. The bad thing is the Government’s inability—after years of notice, for online is not a new phenomenon—to recognise the twin neglects of taxing the profits of online and of fairness in the spread of rates between the high street and that sector. Subsection (2)(d) of the amendment requires that the report address the impact of the revaluation timing on local authority finances. Rates are a critical ingredient in local authority finance, but unfortunately the funding gap that the next revaluation will create will lead to a difficult political challenge: how to replace the fall in rates funding—another reason to delay the reform so desperately needed.
Subsection (2)(e) addresses the subject of waiting lists for appeals, which I mentioned earlier. This has become critical. Waiting list delays are themselves enough to put many out of business—a good example of shooting ourselves in the foot of local authority funding. The end result will be worse.
I must refer also to the fundamental review—a story of delay. It is most disappointing, in that the most vulnerable ratepayers can hardly speak for themselves. This delay will be the death of many small, innovative and hardworking businesses, the very ones the Government claim to champion. Should the noble Lord, Lord Kennedy of Southwark, press for a Division on this amendment, I will certainly support it. But my greatest concern is that the valuation date for the revised NDR lists has been chosen at a point in the market cycle that provides no evidence. In my 40-odd years in this profession, I have seen highs and lows in the rental value market cycle, but I have never seen paralysis. Paralysis is what we now have in the rental market from which the rate levels are derived. It will probably lead, as I explained in Committee, to a huge mass of rating appeals. I ask the Minister to take these comments back to the Government, but I fear that it is too late.
My Lords, it is a pleasure to follow the noble Lord, Lord Thurlow, and I declare my interest as a vice-president of the LGA. I congratulate the noble Lord, Lord Kennedy of Southwark, on his composite amendment which neatly brings all the issues that have been debated previously into one. During those debates, all the relevant arguments were made, and I speak today in favour of Amendment 1.
It is important that there be annual rate revaluation reporting. Business rates reviews cannot be left to drift from year to year, especially as so many businesses are struggling. Keeping a careful watch on how revaluations are affecting businesses is vital to ensuring a healthy economic recovery. Towns and high streets are being decimated by the lockdown, as the noble Lord, Lord Kennedy, said. Some three-quarters of retail outlets are closed and many have been boarded up. Only essential outlets are open: supermarkets, pharmacies, opticians and some DIY stores. As lockdown is gradually released, many shops will, hopefully, reopen, but the effect of business rates may be the last straw. This must be monitored to prevent the total decimation of the high street shopping experience.
The Association of Convenience Stores has welcomed the Bill and the revaluation date being moved to 1 April 2023. It sees this as a positive step forward but it has several recommendations that would further assist its operation, including a reduction in the burden of business rates by resetting the business rate multipliers to more sustainable levels.
The whole issue of NDR is a balancing act between the need of funding local authorities and the economic viability of businesses. Local authority finances are stretched to the limit. Government grants have been radically reduced over the years and many councils now only deliver statutory services and these to the minimum standards permitted. It is not that councils do not wish to provide those vital services which communities rely on, such as grants, improved play areas, adequate and dignified social care, after-school clubs et cetera; it is the sad, realistic fact that they no longer have the finance to do this.
The understandable increased cost of social care for the elderly, children looked after, and those with learning and physically disabilities has taken every spare pound councils might have had to provide extra provision for speciality services. Without access to business rates, many local authorities will not even be able to provide the statutory minimum level of service in many areas.
Potholes—a constant running problem on the many rural C roads—are becoming deeper and wider. How are local authorities meant to balance the needs for decent roads against the needs of children looked after and adults with learning disabilities? I do not expect the Minister to provide the answer today, but the question will need to be addressed by central and local government working together.
In Committee, I spoke about business rate appeal waiting lists and times and will not repeat my arguments today, but the length of waiting lists should be kept under constant review. The noble Lord, Lord Thurlow, referred to the impact of delayed appeals. An appeal left waiting for years, is a properly elected council waiting years for its legitimate funding. This makes budgeting all but impossible. The ACS suggests reforming the appeals system by shortening the statutory timeframes for the VOA to respond to checks and challenges and improving the transparency of data used to inform valuations. Has the Minister considered this?
Lastly, I want to speak about the ability of the high street to compete with online businesses. Currently, that is an inability. The online business fraternity, previously in most cases, offered free delivery, but the purchaser had to pay the cost of returning unsuitable goods. Nowadays, if you purchase online you are more likely to be offered free returns but be charged for the initial delivery. This encourages purchasers to buy, as they can clearly see the delivery charge, whereas returning a bulky item could be expensive, if free returns were not offered. This has altered the playing field.
With high street retail outlets closed in lockdown and many businesses going under altogether, online is the only way in which to access the goods and services we have been used to. It is extremely frustrating, to put it mildly, for those paying business rates, to see vast profits accumulated online without the need to pay business rates. This has led to a total distortion of the marketplace.
The Minister will have heard these arguments many times, so he and his colleagues in Government have had plenty of time to come up with an answer. What are the Government going to do to ensure that online businesses are treated in the same way as those on the high street, in shopping centres and in business parks around the country? The ACS recommends introducing an online sales levy or an alternative rating methodology for online distribution warehouses and using the revenue raised to reduce bills for retail stores to support the viability of high streets and local services. Have the Government considered this? It is essential this element is addressed for the sake of all businesses concerned and for the funding of local authorities. I fully support the amendment in the name of the noble Lord, Lord Kennedy, and look forward to what I hope will be a positive response from the Minister.
My Lords, I draw the House’s attention to my relevant interests as vice-president of the Local Government Association and a member of Kirklees Council. The noble Lord, Lord Kennedy, has tabled a comprehensive amendment, which addresses issues of concern that were raised and debated in Committee. The Minister was unable to provide sufficient reassurances at that stage, hence today’s amendment, which has the support of the Liberal Democrats, as already clearly stated by my noble friends Lord Stunell and Lady Bakewell.
The Bill as it stands simply changes the date of the assessment of the revaluation to 1 April of this year and to delay the publication of the rateable values until 31 December in the year prior to its implementation. As was debated in Committee, these simple changes may have a profound effect on businesses, the prosperity of our high streets, local government finances and on the appeals waiting lists.
First, I will take the effect on local government finance. During Committee, the Minister sought to provide assurances about the financial impact on council income, and I thank him for that. However, there is a wider point of the double whammy on town centre businesses of the impact of Covid lockdowns and the competitive advantages enjoyed by online business. This is likely to mean that town centres will have several empty shops, which will undoubtedly have a knock-on effect on the remaining businesses.
The Government have some support for town centres, but much is limited and scattered around the country. It does not provide sustained help. Part of the answer lies with the radical reform of the whole business rate system. Will the Minister provide the House with a draft timetable for the introduction of a reformed approach, which, as several noble Lords have stated, has been promised for several years.
My noble friend Lady Bakewell has spoken from her experience of the impact of long appeal waiting lists on businesses and council services. As the Minister will know, councils have to set aside considerable sums for the refund of any possible successful appeal. Will he tell the House the total amount set aside by local authorities for this purpose? If he is not able to do so today, will he agree to set out the information in a letter to those taking part in today’s debate? Is the Minister able to consider an alternative to setting aside large sums for potential refunds that clearly make an impact on the day to day services—as described by my noble friend Lady Bakewell—that a council is able to provide?
The current system of business rating is failing, in that it considerably disadvantages those who have a physical presence as opposed to those purely providing an online retail offer. I am not opposed to online shopping but urge the Government to appreciate the value to communities of physical shopping. As the various lockdowns have shown us, there is an intrinsic value to individuals of physical shopping. One simple benefit is that of meeting another person, in the shop or serving at the till. For too many people living on their own, this may be the one chance in the day that they have to speak to someone.
There is also the benefit to communities as a whole. Local high streets provide a sense of belonging to a place. The importance of place-based services has shone through during the pandemic. Local shops and services are part of that sense of place and play a significant role in supporting well-being. We lose it at our peril.
That leads me to repeat the example I gave in Committee of a small shop in the town centre of Cleckheaton, which pays at the rate of £250 per square metre on its 30 square metres of shopping space. In contrast, a large online-only retailer, with an out-of-town warehouse occupying 40,000 square metres, also in Yorkshire, pays just £45 per square metre. If that online retailer were to pay at the same rate as the small town-centre shop, it would be paying a rates bill of £5 million. That would solve a lot of local government finance issues. The retail playing field is hugely skewed to the benefit of online retailers. The Government must act with urgency to address this imbalance and demonstrate that they really do support prosperous local high streets.
The further problem for the Government and Valuation Office Agency is the timing of the valuation assessment. My noble friend Lord Stunell said today that the changes that the Bill will bring may be too late to save more retailers from closing their high street shops. He suggested bringing forward the implementation date to put it in line with the proposals of Non-Domestic Rating (Public Lavatories) Bill, which was discussed last week.
The noble Lord, Lord Thurlow, drew attention in Committee and today to the timing of valuations, when so much of the high street has been closed for several months. Equally, it is not of benefit to town-centre retailers that the current valuation will be that on which their rates bills will be based for the next two challenging years. The Government should address this issue with urgency, but there is no evidence that they are doing so. I look forward to the Minister’s responses on a number of these issues and hope that they are more positive than those we received in Committee.
My Lords, I am grateful to the noble Lord, Lord Kennedy, for tabling this amendment, which allows us to return to the important matter of how the revaluation will impact on various parts of our economy. I entirely understand that the House wants to consider the impact of the next revaluation on sectors such as the high street and small business. I point out to the noble Lord that the £1 billion future high streets fund is not insubstantial and forms part of the £3.6 billion towns fund. It is an important part of helping our high streets to bounce back. Also, as has been mentioned by noble Lords, there has been the business rates relief scheme throughout the Covid pandemic, which has cost in the region of £10 billion. It is for the Chancellor to signal how that will continue in his Budget later this week.
A number of noble Lords, including the noble Baroness, Lady Pinnock, referenced the shift over many years, even before the pandemic, towards online and away from place-based shopping on our high streets. It is a matter for the Chancellor, who is carrying out a fundamental review of business rates, to consider how to address that. The interim report is due on 23 March and the review will conclude in the autumn.
Businesses have been calling for frequent revaluations and we had planned for the next one to take effect this year. It would have been based on rental values as at 1 April 2019. In the difficult circumstances in which we now find ourselves, this was clearly unsatisfactory, as those new rateable values would not have shown the impact of the pandemic. Instead, the Bill will move the date on which the next revaluation takes effect back to 2023. This will allow us to use rental values as of 1 April 2021, which will better reflect the impact of the pandemic.
As we heard in Committee, some noble Lords are concerned that rental values and the market at 1 April 2021 will be too unstable to undertake the extensive and sometimes complex valuations needed to complete the revaluation. We heard calls to move the date by which rateable values are set to later this year, but I assure the House that the Valuation Office Agency is already working at full pace to contact thousands of businesses to collect evidence of the market, and then to understand and analyse this evidence. This exercise is going to plan.
Moving back the valuation date would take several months out of an already tight timetable and require the VOA to, once again, go back to the businesses and ask them for market evidence as of a new date. I am confident in the valuation exercise that is already under way, and the Government have no plans to change the valuation date.
The amendment brought forward by the noble Lord, Lord Kennedy, asks for a report on the impact of the revaluation to be published three months after the passing of the Act and every 12 months thereafter. In fact, the new valuations will not be completed until the autumn of 2022, and we will not know the multiplier and transitional relief scheme—the other vital parts of business rate bills—until the fiscal event of that autumn. So we will not know the impact of the revaluation on towns, high streets or small business within three months of the passing of this Act or, indeed, within 15 months. This Government—any Government—could not prepare such a report on that timetable.
However, when the revaluation is completed, and the multiplier and transitional relief set, businesses and stakeholders will not need a government report to tell them how the revaluation will impact upon them. Every individual rateable value will be published with the multiplier and transitional relief scheme, and those businesses will be able to see precisely how they will be impacted. These rateable values will remain public and, as is the case with the current 2017 rating list, the VOA will publish regular statistical analyses of the new rating list.
I understand that the House and businesses would like to know what is going to happen at the revaluation, but we must wait until the results of the VOA’s work—work done independently of Ministers, by experts, and based on evidence. The Bill will ensure that the revaluation will better reflect the impact of the pandemic. The revaluation will also reflect trends in the rental market over the last six years, resulting from economic shifts including the growth of online businesses. We may well see these trends reflected in the rental values of, for example, modern distribution warehouses and traditional high streets but, rather than speculate on these rental market shifts, we should wait for the VOA to complete its exercise and look at the actual results.
As with every revaluation, there will be winners and losers. Some ratepayers will see their rates bills fall and others will see theirs rise. I assure the House that, as with previous revaluations, we will introduce a transitional relief scheme to protect those facing large increases at the revaluation. As I have said, we intend to publish details of that scheme and how it will be funded at the time of the autumn 2022 fiscal event, so that ratepayers have plenty of time to plan for changes to their rates bills.
I should again like to reassure the House on how the revaluation will impact on the funding of local government, as raised by noble Lords. In Committee, I had the opportunity to explain in a little more detail how the revaluation could change the amount of business rates paid in individual local authority areas. As I set out then, we will make adjustments to the business rates retention scheme to ensure, as far as is practicable, that the business rates income retained by individual local authorities is unaffected by the revaluation. I am happy to give the House that assurance again today, and to confirm that we will continue to work closely with the VOA and local government on this and all matters related to business rates.
Finally, let me respond to the noble Lord, Lord Thurlow, and the noble Baroness, Lady Bakewell of Hardington Mandeville, on the appeals backlog. The Treasury continues to provide the VOA with the resources required to successfully deliver the valuations and property advice needed to support taxation and benefits. The Treasury works closely with the VOA and its sponsor department, HMRC, to understand the VOA’s resource requirements. The funding requirements to deliver the appeals case load and the next revaluation will be considered as part of those ongoing discussions. I hope that gives some confidence that there will be no issue around resources for the VOA to work through the backlog. On this basis, I hope that the noble Lord, Lord Kennedy, will withdraw his amendment.
My Lords, I thank all noble Lords who have spoken in this debate. The noble Lord, Lord Stunell, rightly highlighted the support the Government have given, which is very welcome. I am very happy to acknowledge that. It has been vital to ensure that businesses have survived through this.
The fundamental question is the unfairness of the present system of business rates. If that is not sorted out, we are going to see the demise of the high street accelerate, and we have to address that at some point. I thank the noble Lord, Lord Thurlow, for his support. As he said, we must address the elephant in the room. As the noble Lord highlighted, it is the twin problem of taxing fairly online retailers—and I wish all online retailers success—to raise revenue from them and the amount of revenue raised from businesses on the high street so that they are taxed fairly as well. Getting that balance right is the issue and that can no longer be ignored.
I thank the noble Lord, Lord Thurlow, for indicating that he would support me if I divided the House. I am often very happy to divide the House, but I have decided that, this time, it is probably not the best thing to do, so I shall not do so—I know the Minister will be very disappointed by that.
The Government must reflect on this. Although it is disappointing that these proposals will not be taken forward, I think that the Government are going to have to do every single thing in my amendment. If they do not do that, they cannot arm themselves with the information they need to take decisions in future Bills and policy, and the crisis will become a complete nightmare on our high streets.
The noble Baroness, Lady Bakewell of Hardington Mandeville, also highlighted the unfairness between online and the high street, and she is right. The risk is that when we return to anything like a normal situation it will not be normal because it will have gone too far and people will not return in numbers to our high streets. I have always supported local shops where I live. I am looking forward to 12 April. I am desperate for a haircut, so I am looking forward to the 12th very much. I am going to my barber straightaway to get it done. It is vital that we support our high streets.
I am very happy to acknowledge the support the Government have given; I mentioned that earlier. It was very welcome and has kept many businesses afloat. It is just a shame that we are not going to address these issues here. I have said before that all the points I have raised will have to be addressed by government because we are going to have to look at the bigger, wider points about what we want from our high streets and how we raise revenue from our high streets and from online so that we can pay for the services we all want. At this stage, I beg leave to withdraw my amendment.
Amendment 1 withdrawn.
2: After Clause 1, insert the following new Clause—
“Assessment of effects of timing of business rates revaluations on amateur sports clubs and clubs providing other facilities
Within six months of the passing of this Act, and biennially thereafter, the Secretary of State must publish the report of a review analysing the effects of the timing of business rates revaluations on amateur sports clubs and those providing facilities for physical recreation and cultural activities.”
My Lords, I return to the subject of support for amateur sports clubs which I raised in Committee. I, too—I might as well clarify it now—do not expect to divide the House at the end of this debate. Of course, the Minister might just manage to inspire me by his answer, but that is not normally his style. Let us see if we can be consistent about that.
The reason why I am raising this again is that, although the Minister gave me some answers, I want a bit more detail and thought about how the Government are planning for the future of sports clubs and sport itself. The Government have accepted their importance by giving them some support throughout the lockdown period, but the problems sports clubs have will, as in all sectors, not stop the minute they get back. Actually, the minute we start activity again, problems will be exposed and identified. All of them can be accentuated by finance. Business rates are part of that. That is where it comes from, so let us see if we can get some idea of whether the Government are prepared to go across department and across thinking to make sure that they accept that this group is worth keeping on.
Why are sports clubs worth keeping on? It is quite simple: in this country we have a tradition of sports clubs running themselves and being set up without government support, often with the help of employers—indeed, employers have set up sports clubs which have survived when the employer has gone. We have a tradition of self-help which has provided the infrastructure for sport to take place. At amateur level, sport is dependent on that structure. These clubs and centres depend, for example, on their bars and on renting out rooms for other functions to keep themselves going. They are small businesses and act in the business environment even with charitable status. They have a consistent relationship of raising their own funds. How the Government are thinking slightly longer term to make sure they can carry on doing that is vital.
Let us not kid ourselves: there is a major problem coming through here. I do not know how enforced inactivity has at the moment encouraged people to retire early from a club; for instance, retiring at 32 as opposed to 35. There has been a break in activity. To take a classic example, you will not get fit as easily as you did and you have started doing something else, so you ask yourself whether you want to go through the pain and discomfort of getting back into shape. It is one of the first considerations. Also, perhaps people think they should spend more time with something else. It is when that interaction stops that people stop going. We all know that; anybody who has been involved in this knows it. I do not know how rugby union is going to handle it, having had probably the biggest break. It is probably the biggest example of this model. It will have to restructure. I do not know how, but it will be something to come back to. The Government have said they value these clubs and all the activity outside, education and structure. Clubs are going to have a problem structuring how they take on their activity and how that relates to funding.
Rates is part of that, so I will be looking to get from the Government today an idea of how they think this bit of government fits in. The idea of getting an initial review and then a continuing one is very important. Let us face it: I am not an expert on rates. Having attended a couple of meetings with my colleagues, I decided that I probably do not want to become one. This is a complicated, difficult thing. Something that has no intellectual friends is probably business rates. There is probably someone hiding in a cupboard in Whitehall who quite likes them, but that is about where they are. Can we have a look at how this local taxation affects sports clubs? How are the Government taking this on? Sports clubs are important. We are hearing about social interaction and mental health problems. Sport is a great medium for that. It is the social connection that goes through. It is physical connection and support, and something that is tied into so many other bits of government that it is not true. I hope that when the Minister answers this amendment he will give us an idea of how his department is taking a lead or feeding in on this, because it is one of the links in the chain. If this link is strong and healthy, the rest of that chain may just survive. I beg to move.
My Lords, I refer to my interests in sport as set out in the register. It is a pleasure and a privilege to follow my noble friend in sport, the noble Lord, Lord Addington, and support Amendment 2 in his name. During the passage of this Bill, the noble Lord and I have simply sought to point out that, at a critical time as we seek to emerge from Covid-19 in 2021, it is hoped that the Government will finally take the vital opportunity to initiate new policies. This includes the adoption of this new clause to give a new national impetus to sport, recreation and an active lifestyle, which was missed at the last opportunity created by the London 2012 Olympic and Paralympic Games.
If we are to emerge stronger from Covid, we need to provide opportunities for everyone to be more active and healthy so we can reduce the burden on the National Health Service and have a country that prioritises preventive healthcare and an active lifestyle—frankly, for the first time in our history.
My noble friend the Minister can take one small step with us today. He is a reasonable man; he appreciates and totally understands that moving from the mandatory 80% compulsory relief from business rates applying to community amateur sports clubs, where local authorities also have in their discretion such relief to increase it to 100%, should be accepted and broadened in two ways. First, it should apply to all sport, recreation and physical activity venues and clubs which promote an active lifestyle. Secondly, the policy should be applicable at the level of full rate relief, central to a government programme to ensure that we build back better.
However, we are not asking the Minister to go that far. We are simply asking him to adopt this new clause, just to provide your Lordships’ House and Parliament with an
“Assessment of effects of timing of business rates revaluations on amateur sports clubs and clubs providing other facilities”
and to do so within a very reasonable period of time—within six months of the passing of this Act. We could have asked for a further report to be presented to Parliament every six months, but we wanted to be helpful to my noble friend. We did not even propose an annual review. We asked for a review to be biennial so as to reduce any serious workload on the Minister and his officials. We ask for them to simply
“publish the report of a review analysing the effects of the timing of business rates revaluations on amateur sports clubs and those providing facilities for physical recreation and cultural activities.”
This is such a small request for such a substantial and impressive Minister. It is hardly a great deal to ask. This is the time for the Minister to tear up his speaking notes and communicate with this House from his heart, because he knows this is correct. He knows that the motive behind it is accurate and with his great intellect he can simply stand up and say, “I accept this new clause”.
[Inaudible.]—follow that clarion call to the Minister, but I will try. My noble friend Lord Addington and the noble Lord, Lord Moynihan, have again made a very powerful case again for specific action in respect of amateur and community sports facilities. As my noble friend Lord Addington has reminded us, the Government already provide some support to community sports clubs but it is unlikely to be sufficient to help them balance their books after such a long period of closure due to the various lockdown measures.
I recall that in Committee, the noble Lord, Lord Moynihan, shared the result of an academic investigation by Sheffield Hallam University which valued the impact of community sport at £85.5 billion per annum to the country. The noble Lords have today made a further strong argument for change.
It is not just the impact on the finances of the country that we need to think about in the amendment, but the strong argument made in the discussion on Amendment 1 about the impact on the nation’s health and well-being. That is invaluable in itself. Covid has demonstrated the real importance of daily activity for health and community well-being to us all.
In Committee the Minister agreed with the case made by both noble Lords and said
“I will be a strong advocate” —[Official Report, 4/2/21; col. GC 382.]
of it to the Treasury. We are aware of the benefit of community sports provision. It needs to be valued by the Government for the wider community effect of providing a focus for activity and friendship. Given that the Minister has said how strongly he supports the case, I look forward to his positive response today.
My Lords, I am very happy to support the noble Lord, Lord Addington, in his amendment. Both he and the noble Lord, Lord Moynihan, made a very powerful case when we were in Committee and they have made an equally powerful case today. I am very happy to support them.
As we heard from the noble Lord, Lord Moynihan, we want to be healthier; we have to get people doing more physical activity, because it will have great effects on their health. That is a good thing as people will live longer and have fewer problems with disease, and that will have a knock-on effect on our health service. That is the most important thing behind all this—getting people to be more active and healthier. The Government are currently running a major campaign, quite rightly, which you see on television, at bus stops and everywhere. I fully support that.
It is also important to ensure that local amateur clubs doing a variety of activities in their communities actually get people doing things. Where I live in south London, there is the Francis Drake Bowls Club—I often go past and see lots of people playing on the bowls green. There is also Lewisham Borough Football Club, an amateur club, and the athletics club that takes part on the track in Ladywell Fields. Those are the things that local people can do to become more active and physical, and if we can support them through the rating system, we should.
As the noble Lord, Lord Moynihan, said, all the amendment is asking for is a biennial report. The amendment is much more generous than I would have been as I wanted one every 12 months. If the Government accept this amendment, they will have to do everything that is in it anyway because they need to have good policy, and good policy needs facts and proper information.
I hope that the noble Lord will tear up his speaking notes to resist this and say, “I agree”. I look forward to hearing his response.
My Lords, in my rush to respond to the noble Lord, Lord Kennedy, on the first amendment, I forgot to declare my relevant commercial and residential property interests as set out in the register, so I do so now.
I thank the noble Lord, Lord Addington, and my noble friend Lord Moynihan for their suggestion that I tear up my speaking notes and do what the amendment says. I will seek to reassure them that we have a real commitment to community and grass-roots sports. In that spirit I will refer to a number of things that the Government are doing. My family, friends and I all benefit from community sports and it is right that we do all we can to support community and grass-roots sport, as Members have highlighted.
As I explained in my response to the previous amendment, we will not know the effect of the revaluation on ratepayers for some time and certainly not within six months of the passing of this Bill. The same points apply to this amendment. However, I appreciate that the noble Lord and others want to understand how the revaluation will affect amateur sports clubs. It may therefore assist the noble Lord if I explain how these clubs are valued for business rates—I will try to make the incomprehensible comprehensible.
First, the Valuation Office Agency must, by law, value a property having regard to its current use. This means, for example, that when valuing the site of an amateur cricket club the valuation officer must have regard to its value to the cricket club and not its value to a developer. As you would expect, this important principle means that the rateable value of sports grounds is generally quite low.
The VOA publishes statistics on the rateable value of different categories of properties. The average rateable value in England of sports grounds is £12,000 but the value of many is much less than this and the median rateable value of sports grounds is only £6,000. That equates to a full annual rates bill of about £3,000, which for many will be reduced by the 80% mandatory rate relief. Under those circumstances, many sports clubs will find themselves with a rates bill of as little as £600 per year or £50 per month.
Of course, I appreciate that some clubs will find themselves paying more than this. Business rates reflect the specific circumstances of the property so some clubs, for example with more facilities than others, may find themselves paying more. We also heard in Committee that some clubs may be not eligible for the 80% mandatory relief for community amateur sports clubs. That is a matter specific to the individual clubs but I can understand that some will still have a particular interest in understanding whether their rates bill may change at the 2023 revaluation.
As I have said, we will not know the answer to that until much later in 2022, at the point when all clubs will be able to see their new rateable values. These valuations will be prepared over the next 18 months and, as with all properties, the VOA will first search for evidence of rents paid on sports grounds as a guide to value. As I have explained, to be good evidence these rents will have to reflect the value to the sports club. These rents should not reflect matters such as the development value where, for example, the club happens to be in a prosperous area. To the extent that the rental evidence, where available, shows that values have risen or fallen over the last six years, this will be reflected in rateable values at the 2023 revaluation.
The VOA expects to use rental evidence for most clubs but, whatever the valuation approach adopted for the property, the VOA is clear in its guidance that for non-commercial clubs valuers can also have regard to ability to pay before setting rateable values. The valuer should ask themselves if the rateable value represents the rent that clubs or organisations of the kind which occupy the type of sports ground concerned could reasonably be expected to pay. The VOA’s guidance specifically recognises that where income is generated from the occupation of these grounds, the costs of occupation will be barely covered despite voluntary assistance. Although I am unable to tell the noble Lord how amateur sports clubs will be impacted by the 2023 revaluation, I hope that this background to how they are valued is helpful.
The noble Lord, Lord Addington, has established to the House the vital importance of our community sports clubs. While the value of the 80% mandatory business rates relief to eligible community amateur sports clubs cannot be understated, I recognise the need for the Government to provide support beyond this, particularly throughout the duration of this pandemic. This Government’s commitment to sport is evidenced by the £220 million provided by Sport England to support community sports clubs and exercise centres since March 2020. In addition, the Government have put in place a £300 million sports winter survival package, which has been used to protect the immediate future of major spectator sports over the winter period, and a £100 million support fund for local authority leisure centres. In total, the Treasury estimates that around £1.5 billion of public money has gone into sports in the last year. I hope the House will agree that this constitutes a significant package of support that this Government have made available to sports clubs and exercise facilities of all sizes.
I hope that I have given the House some assurances about both the financial support that the Government are providing to our grass-roots sports sector, and the process and approach which will be taken over the coming months as amateur sports clubs are revalued by the VOA. We will continue to keep in mind the points on how we can support community sports at the grass-roots level. I appreciate the passion from both the noble Lord, Lord Addington, and my noble friend Lord Moynihan, but, reluctantly, I cannot tear up my speaking notes. Therefore, I hope that with these reassurances the noble Lord, Lord Addington, will agree to withdraw his amendment.
My Lords, I thank noble Lords who have spoken in support of us, particularly my friend in sport, although I prefer “collaborator”. I thank the Minister for his reply about the current system and for saying that if you have done the right thing, you will get some benefit out of it. That is fair enough, as such things are fairly hard won in the first place. The noble Lord, Lord Rooker, had a chat about the creation of community amateur sports clubs—a conversation which, I believe, the noble Lord, Lord Moynihan, and I were both in on, in the Moses Room. Civil servants were more or less told to go back and think again, so a precedent has been set that should perhaps be looked at at some point. These groups do good things and do the Government’s job for them.
My amendment also mentioned physical, recreational and cultural activities. We did not really get round to them in the debate but they are also important. Maybe we should think about dance classes, local am dram and music group facilities as well. The Minister has acknowledged that the Government as a whole have a responsibility here. It is not something that can be pushed off to health, DCMS, education or meetings at junior functionary level, and then be ignored; it is a priority. The most important point here is that the Government as a whole should support this as it does their work for them in many fields. I do not think there is much dispute about that.
However, if rates is not the way forward, I look forward to dragging out of whoever happens to be sitting where the Minister is now how they are going to do it and combine the various areas, because that is the important thing to come out of this. Having said that, I beg leave to withdraw my amendment.
Amendment 2 withdrawn.
Clause 1 agreed.
We now come to the group beginning with Amendment 1. I remind noble Lords that anybody wishing to speak after the Minister should email the clerk during the debate.
1: After Clause 1, insert the following new Clause—
“Statement on consultation with the Valuation Office Agency and local authorities
Within one month of the passing of this Act, the Secretary of State must publish a statement detailing how the Valuation Office Agency and local authorities were consulted in relation to the provisions of this Act prior to its passage.”Member’s explanatory statement
This new Clause would highlight the need for the Government to work closely with the Valuation Office Agency and local authorities by ensuring that the Government details how they worked with them in relation to the provisions of this Bill.
My Lords, as this is my first contribution, I draw the attention of the Committee to my relevant registered interests: as a vice-president of the Local Government Association, chair of the Heart of Medway Housing Association and a non-executive director of MHS Homes Ltd.
Amendment 1 would put on the face of the Bill a new clause requiring the Secretary of State to publish a Statement setting out
“how the Valuation Office Agency and local authorities were consulted in relation to the provisions of this Act prior to its passage.”
A property’s rateable value, which business rates are based on, has been assessed independently of Ministers by the Valuation Office Agency since 1990. The Bill will, among other things, make a change to when the Valuation Office Agency must publish draft rateable values. The noble Lord, Lord Greenhalgh, has told us previously that this is to support the smooth transition of the revaluation. The publication of these draft rateable values will be aligned with the timing of decisions relating to the multipliers and transitional arrangements.
This is only a probing amendment and I am hopeful that the noble Lord will be able to set out for the Grand Committee exactly how what is asked for in the amendment has been done. If the agency and local authorities have not been consulted, can he tell us why not, and why the Government think that that is an acceptable course of action?
Amendment 6, in the names of the noble Baronesses, Lady Pinnock and Lady Thornhill, would insert a new clause into the Bill. I am very much in support of this new clause, as it would provide for an impact assessment of the timing of a rates revaluation. I am sure that we will get a full explanation of the amendment from the noble Baronesses.
There is of course a wider debate to be had about the whole question of business rates and their appropriateness as an element of local government funding. It is important to note that the Government have cut £15 billion from central government funding for local government in the last decade. The Covid-19 pandemic has had a catastrophic impact on local authority finances, with income falling and costs rising. The current lockdown, which is the right thing to do, will also have a serious impact. Here, the Government need to keep their promise to fully fund local authorities for the costs of the pandemic.
According to the Local Government Association, local councils in England will face a funding gap of more than £5 billion just to maintain services at current levels. But to respond to demand pressures and plug the existing funding gap, an additional £10 billion per year in funding will be needed by 2023-24. For those reasons and many others, which I am sure we will hear from the noble Baronesses, Lady Pinnock and Lady Thornhill, I support their amendment. I beg to move.
My Lords, I, too, am a vice-president of the Local Government Association.
I wish to speak in favour of Amendment 6, which stands in my name and that of my noble friend Lady Pinnock, and to support Amendment 1 in the name of the noble Lord, Lord Kennedy of Southwark.
I am very aware that this is a narrowly focused Bill and that it has had broad support and been welcomed. However, it is significant that, despite that, several Members of your Lordships’ House have taken the opportunity to table amendments. I believe that that shows the depth of concern around the whole issue of business rates. The amount of interest shown in both this tightly drawn Bill and the Government’s consultation for their ongoing business rates review shows how important it is for the review to be both bold and radical.
It is also significant that all the amendments seek to hold the Government’s feet to the fire with regard to the various ongoing impacts of the Bill, be they on sports clubs, the high street or local government finance—hence, Amendment 6 stipulates a timeframe of six months. This is due to the fact that the instability and uncertainty provoked by the impact of Covid-19 are exacerbating issues that were already of significant concern—and we are not out of the woods yet.
Indeed, the amendment seeks to continue to draw your Lordships’ attention to the challenging situation regarding local council finances. The latest figures from the Local Government Association show that the financial impact of Covid-19 on local authorities is an estimated £9.7 billion for 2020-21, with a further £2.8 billion of lost income from council tax and business rates. However, it must be noted that these figures were reported before the lockdown and the spread of the new strain was known. This is a significantly different set of circumstances from when the 2020-21 funding package was last evaluated, and is part of the reason for continuing concern around council finances. I am sure it is appreciated by all noble Lords just how important business rates are to the individual finances of a local authority.
One reason for the amendment is to highlight the volatility of the tax base, which is so unpredictable at present. For example, the loss of office space to residential—a topic much discussed with the Minister in this House—is a trend that is likely to continue with inevitable loss of revenue. The Valuation Office Agency is currently negotiating appeals and challenges for offices, airports and factories under a material change of circumstances appeal, due to Covid-19. A rebate of up to 25% was mooted. The reduction in income could be substantial. If a rebate were forthcoming, would subsequent losses be repaid to local government in line with the recently announced tax income guarantee? Some 75% of losses will be guaranteed for 2020-21, but nothing has been said yet about 2021-22. Of course, local government must make up the other 25%.
The amount of money that councils have had to put aside for appeals is also significant, hence local government concerns around cutting down the window of time to appeal and getting the number of appeals reduced. The more certainty that we can add to the processes the better. To date, councils have had to divert £3 billion from services to appeals. A significant amount of money is also tied up in irrecoverable losses for both business rates and council tax. With debt recovery and enforcement activities understandably limited due to the pandemic, and with limits on activities and pressures on court time, councils’ ability to recover debts and secure income as they usually would, will be restricted. These are not usual times, and more businesses are likely to fail.
I use these points to illustrate one purpose of the amendment and the volatility of this important tax base. There is much instability in the system at present, which is being masked by the current, much-needed and much-valued reliefs offered to businesses from the Government. This could change significantly when the reliefs end; it could impact on local authority incomes, but we do not know when this will be. If the amendment is not accepted, could the Government at least agree to look closely at the impact once all reliefs have been suspended? This could provide vital evidence on which sectors are most impacted as well as on local councils’ finances.
Regarding Amendment 1, it was noted by several noble Lords at Second Reading that the VOA has been formally criticised as being cumbersome and difficult to deal with, and its valuations opaque and inconsistent. This is why I endorse what has been said by the noble Lord, Lord Kennedy of Southwark, and support his amendment and additional amendments tabled by my noble friends. In short, the amendment asks the Government how the pandemic that happening now will affect the revaluation in 2023, based on values at April 2021, which will not be looked at again until 2028.
My Lords, it is a pleasure to follow the noble Baroness, Lady Thornhill, who certainly speaks with authority in this area, not least from her time as Mayor of Watford. I speak to the first group of amendments and, as I indicated at Second Reading, I strongly support this Bill. It is welcome, it is needed, it is positive, and I hope that it passes unadorned. I thank the Association of Convenience Stores for its briefing on this subject. It too strongly welcomes this legislation.
The effect of moving the business rate revaluation to 1 April 2023 will mean, as has been noted, that valuations will be fixed as at 1 April 2021. This will prevent the base being on a very high value, or on a relatively high value, as at 2019. This Bill will, in short, ensure that the base that is used reflects the impact of the pandemic. That is welcome. It will also provide certainty to non-domestic rate payers. This is very welcome to a hard-pressed sector. However, I have some questions for my noble friend the Minister. While I am very much in favour of passing this Bill, I would welcome some further reassurance from my noble friend regarding what discussions there have been with the Valuation Office Agency and local authorities about timescales and resources.
In relation to local authorities, speaking about the impact of the revaluation on the business rates retention scheme at Second Reading, the Minister said:
“On this point, I assure the House that we intend to make any necessary adjustments within the business rates retention system to ensure that locally retained income is, as far as is practicable, unaffected by the revaluation.”—[Official Report, 18/1/21; col 1068.]
Can I press my noble friend a little more on that? I take that to mean that, except de minimis, retained income will be no less than prior to the revaluation. It is an important point and I hope that he will be able to provide the necessary reassurance that my interpretation is correct.
On the wider point about the reform of business rates and what we are doing today, this Bill is, I think, essentially non-controversial in what it is seeking to achieve. What will be more contentious, I suspect, is looking at the way we levy business rates or commercial taxes on business in future. This issue has been thrown into high relief by the pandemic, making more obvious the imbalance between physical high street retail, out-of-town retail and, of course, online businesses. This is an important issue, and it is clearly essential to our nation that we get the balance right; all three parts of that servicing of retail are important. I would be grateful if the Minister could provide some thoughts on that. I appreciate that he cannot be precise on the approach or the timescale, but some indication of when we will address this important issue would be welcome.
My Lords, I remind the Committee of my interests, as recorded in the register, as a member of Kirklees Council and a vice-chair of the Local Government Association.
The debate on these amendments has been a relatively short but, I trust, helpful for the Government. As we have heard from my noble friend Lady Thornhill, and the noble Lords, Lord Kennedy and Lord Bourne, to cover the cross-party contributions to this debate, there are significant concerns about the timing of the assessment—or the antecedent valuation date, to give it its official title—of new rateable values. Some have experienced enormous challenges over the last year, none of which are of their making. The challenges of the pandemic have brought large parts of the hospitality and retail sectors to their knees. Now is not the time to undertake an assessment of rental values, which is in large part the basis of the valuation.
Will the Minister agree to discuss with the department the possibility of a delay to the AVD? This concern is at the heart of the amendment in my name and that of my noble friend Lady Thornhill. A six-month review would establish whether it is practicable to assess new rental values that feed into the final valuation. A delay is preferable but, failing that, a review is essential as it would highlight the difficulties of doing this while a pandemic is rife. The concerns from those of us who have had extensive local government experience is that local authority finances will be adversely impacted. Of course, the Government have given assurances that any loss of income from business rates will be fully compensated—at the moment. However, they have not, as yet, given such a commitment for when the revaluation comes live in 2023. Will the Minister provide copper-bottomed assurance that no local authority will lose income from the revaluation, and that any necessary top-ups will be provided? I look forward to the Minister’s response to these questions, which will inform any amendments to be tabled at Report.
As we discussed at Second Reading, the Government have chosen a particularly inopportune time for the revaluation of business rates. The valuation day is set for April of this year, and I urge the Minister to consider delaying the date and accepting the proposal in both these amendments. I look forward to his reply.
My Lords, I first point out my residential and commercial property interests as set out in the register.
I am grateful to the noble Lord, Lord Kennedy, for raising the points highlighted by his proposed new clause. The business rates system is unusual among taxes because its implementation is split between the Valuation Office Agency, which is an agency of HMRC, and local authorities. Many noble Lords have, like myself, experience of working in local government and know and understand how important the relationship is between the VOA, local authorities and my department in running the business rates system.
As the Committee would expect, one of the issues raised in our discussions with local government has been how revaluations impact on local government funding, so I am grateful to the noble Baronesses, Lady Pinnock and Lady Thornhill, for tabling their amendment on that subject.
In relation to the provisions of this Bill, we have worked closely with the VOA to ensure that a revaluation in 2023 can be delivered on time. The antecedent valuation date of 1 April 2021 was set by a statutory instrument laid on 6 August last year, since when the VOA has been preparing for the revaluation. It has already started to collect the information it needs to value 2 million properties and is on target to complete the exercise to plan.
As I discussed at Second Reading, Clause 1 also moves back the latest date by when the draft rating list must be published before the revaluation to no later than the preceding 31 December. In practice, we expect this to be around the time of the autumn fiscal event, when the multiplier and the transitional relief scheme are also announced. That will mean that rating lists will come to local government a little later than previous revaluations, but we do not expect this to mean any delays in the process of billing or estimating business rates income.
Local government of course needs the multipliers and details of relief schemes before it can calculate liabilities, and it is only once that full package is confirmed that bills can be issued. That is the case whether we are in the year of a revaluation or not. Nevertheless, I can assure my noble friend Lord Bourne and the Committee that my officials meet representatives of local government regularly and will continue to discuss these matters with them to ensure the smooth delivery of business rates bills.
More generally, my department and the VOA are continuously looking at how we can improve consultation and closer working with local government. In recent years the VOA has introduced a data gateway under which it is able to share information about ratepayers with local authorities in order to support the billing process, and last year we made regulations empowering local authorities to provide the VOA with information on a quarterly basis about the properties that ratepayers occupy. This was introduced with the support of local government and will ensure that the VOA has up-to-date information ahead of 1 April 2021, which is the intended valuation date for the 2023 revaluation.
One specific matter we have discussed with local government is how to reflect in the local government finance system the changes in business rates income at revaluation—and I recognise that this is the matter on which the noble Baronesses, Lady Pinnock and Lady Thornhill, seek reassurance through their amendment. The purpose of the revaluation is to ensure that business rates bills reflect the up-to-date rental value of properties.
This of course means that some ratepayers will see increases and some will see reductions as a result of the revaluation, and it follows that the business rates income for individual local authorities will fluctuate in the same way. Some local authorities will see their business rates income rise at the revaluation and others will see it fall. Between revaluations, local authorities can increase their business rates income by supporting growth and investing in their area. Their share of this type of growth is retained by them through the rates retention scheme.
In contrast, the changes we see in local authority income levels at the revaluation come mainly from the trends and variations in the wider national economy and the commercial property market. These factors are largely outside the control of individual local authorities and the Government’s view is that such changes in business rates income levels at the revaluation should not feed through into local government budgets.
Therefore, our intention—as it was at the previous revaluation in 2017—is that we will, as far as is practicable, ensure that retained rates income for individual local authorities under the business rates retention scheme is unaffected by the 2023 revaluation. For the 2017 revaluation we achieved this by adjusting the tariffs and top-ups in the scheme to reflect the change in income at the revaluation. We consulted local government on the mechanics of these adjustments from as early as the preceding summer. This was a collaborative process and one which we intend to repeat for the 2023 revaluation. This process will give local authorities the budget assurances they need regarding revaluation. As such, the timing of the revaluation and how it affects the distribution of business rates income should not impact directly on local government finances.
I hope, therefore, that I have reassured the Committee on the degree to which my department and the VOA work closely together and in partnership with local government on business rates matters, and on the steps we will take to protect local government finances at the time of the revaluation. These working relationships are important, and we are indebted to those in local government who offer their time and expertise to support us in running and improving the rating system.
I hope that, with these assurances, the noble Lord, Lord Kennedy, and the noble Baronesses, Lady Pinnock and Lady Thornhill, will agree not to press their amendments.
I have received no requests to speak after the Minister, so I call the noble Lord, Lord Kennedy of Southwark.
My Lords, I thank all noble Lords for their contributions to this short debate. In particular, I thank the noble Lord, Lord Greenhalgh, for his full response on the issues raised by the two amendments. I will read the noble Lord’s response carefully before considering whether this is an amendment to which I will wish to return on Report.
The noble Baroness, Lady Thornhill, made a compelling case for her amendment and set out the difficult situation in which local authorities find themselves. We will come to amendments later on regarding appeals, but the noble Baroness highlighted the real problems that are faced today. The noble Lord, Lord Bourne of Aberystwyth, raised further important points and questions that, again, we may need to come back to on Report. However, at this point, I am happy to withdraw my amendment.
Amendment 1 withdrawn.
We now come to the group beginning with Amendment 2. I remind noble Lords that anyone wishing to speak after the Minister should email the clerk during the debate.
2: After Clause 1, insert the following new Clause—
“Assessment of impact of timing of business rates revaluations on prosperity of towns and high streets
Within six months of the passing of this Act, the Secretary of State must publish an assessment of the impact of the timing of business rates revaluations on the prosperity of towns and high streets.”Member’s explanatory statement
This new Clause would create an assessment of the impact of timing of business rates revaluations on the prosperity of towns.
My Lords, Amendment 2 in my name seeks to place in the Bill a new clause that would require the Secretary of State to publish an assessment of the impact of the timing of business rates revaluations on the prosperity of towns and high streets. We need a root-and-branch reform of the business rates system to make it fairer and to help bricks-and-mortar retailers compete fairly with the online, out-of-town warehouse operations that are putting our much-loved high streets at risk.
Even before the Covid-19 pandemic, we saw a serious decline in footfall on our high streets, and we now have the tragic situation where, on average, one in 10 shops is standing empty. Something must be done to reverse this decline. My amendment seeks to focus minds on this pressing problem. I hope that the Government will take the opportunity to consider it carefully and to accept it.
Amendment 5, in the names of the noble Baroness, Lady Pinnock, and the noble Lord, Lord Stunell, is another that I am happy to support. It gives us an opportunity to examine whether the revaluation based on property values as on 1 April 2021 is right. There are some suggestions that property values will fall even further, and, if that is the case, we could be creating further problems for our hard-pressed high streets.
Amendment 7, in the names of the noble Lords, Lord Addington and Lord Moynihan, brings us back to an issue that both noble Lords spoke about at Second Reading. It proposes a new clause that would require the Secretary of State to publish an assessment of the impact of the changes in the timing of business rate revaluations on amateur sports. I fully support this amendment and cannot see any reason why the Government would want to resist it.
Some amateur sports clubs have charitable status and some have community amateur club status, which provide a level of tax advantage. Charitable status provides for 80% rates relief, with the ability of the local authority to offer a top-up. But many sports clubs are not charities and will not be able to secure this benefit, and I think that it is important to understand the effect of these changes on these organisations. I am sure that we will receive detailed explanations of the amendments later in the debate but, at this stage, I beg to move.
My Lords, I wish to speak to Amendment 5, in my name and that of my noble friend Lady Pinnock, but I also make clear that I support the intentions of both the other amendments in this group. My noble friend Lord Addington will speak to his Amendment 7 shortly. Amendment 2, just moved by the noble Lord, Lord Kennedy, sits four-square alongside our Amendment 5 and I am happy to add my support to the case that he has put forward.
I remind the Minister that the Government’s previous intention was to have the revaluation come into force this year. They had moved that forward from the original 2022 date because of the deteriorating situation of the high street retail sector and the very clear disconnect between outdated valuations and current purchase prices and letting rates. The most obviously outrageous example of that is, of course, the underpricing of out-of-town distribution centres and warehouses.
Covid-19 has changed the situation in two significant ways, the first of which the Government have responded to, but the other is the one I want to draw particular attention to and which Amendment 5 seeks to address. As it was unrealistic to carry out the necessary work on the ground to carry out valuations because of lockdown and infection control restrictions, the date of 1 April this year was set in place of 1 April last year.
That is one of the responses, but it does not take account of the other impact of Covid. There has been a huge acceleration in the existing trend of retail transferring from the high street to online. It is interesting, indeed compelling, that the Association of Convenience Stores, which has 35,000 local shops and forecourt sites in its membership, has reported that 42% of independent shops polled would have gone out of business already if it had not been for the Government’s business rate moratorium—that is the drastic impact on income for the physical retail sector. We can see from the business pages of any national newspaper that many high street names have closed down or downsized, or are being asset-stripped by hungry online operators buying up their brand. This is an acute crisis, but also a chronic one. Everyone understands that the online shoppers newly recruited by the pandemic have found that it is an easy way to buy and is perhaps better than trudging round in the rain. Nobody expects the retail business of the high street to return to its former levels.
On these Benches, we very much welcome the 100% business rate discount that the Chancellor has introduced. We believe that, in any case, it will need to be extended until there can be a return to what I might call peacetime trading. But those peacetime retailers cannot expect to return to the same volume of sales. Every one of them knows that their turnover will be down and their already dwindling profits will be even less in the post-Covid, peacetime marketplace. When the Chancellor’s scheme ends they will face what were already unreasonably high rating valuations still in full force. Many will be forced into closure. The shutters will come down across the country, leading to a spiralling reduction in footfall and undermining the viability of what remains.
I said at Second Reading that it would be good to see some joined-up thinking by the Government, with a seamless move from the Chancellor’s support scheme for retail running through to the new reduced level of business rates that will come with this measure, as far as the high street retail industry is concerned. I must say to the Minister that it is no good the cavalry coming over the hill two years later simply to count the dead. Either the cavalry must come sooner or the Chancellor must extend his scheme to fill the gap—or a properly planned bit of both. Otherwise there will be precious few retail business left to take advantage of the lower rates bills that we all expect this measure to offer. Hence our amendment: an impact assessment, as the Minister well knows, does not just look at the impact of doing what is proposed, but poses the important question, “What other ways have you looked at to achieve the same outcome?”
Such an impact assessment as we propose would show pretty clearly that delaying implementation of the new valuations to 2023, whatever the actual valuation date, will lead to far more businesses failing and far more damage to the high street than having a 2022 start date for the new system. It would show that extending the Chancellor’s scheme to bridge whatever gap remains would be excellent value for money, bringing a huge financial and community well-being dividend to put the high street back on its feet. It would also certainly show that any gradual phasing-in of the improvement beyond 2023—so that it was in some way cushioned and delayed the benefit to the retail sector—would be terminal. I suggest also, perhaps slightly with my tongue in my cheek, that it would set an interesting precedent, where two government departments look at a policy in the round and agree a sensible way of taking in each other’s washing rather than taking separate decisions—one on the 100% business rate discount and the other on the start date of the new valuations—in two different soundproof silos.
My Lords, I will speak to Amendment 7, in my name and that of the noble Lord, Lord Addington. Before I move to the detail of our amendment, this Committee provides us with the opportunity to set out the critical importance of making the case for further government measures to support sport, recreation and an active lifestyle as we emerge from the Covid epidemic.
The Government are to be congratulated on the steps that they have taken: the £300 million sport winter survival package, which specifically should help the top-end spectator sports in England and provide important support to rugby union, horseracing, women’s football and the lower tiers of the national football league; and £100 million through the national recovery fund to support publicly owned leisure facilities impacted by Covid-19. However, this is nowhere near the £1.75 billion investment package to protect the world-class arts, culture and heritage sector, which was designed to help the showcase institutions as well as the small local arts and culture initiatives across the country.
Consider the scale of this investment to help sport alongside the £2 billion announced to investment in cycling and walking, not by DCMS but the Department for Transport last May, since when—as recently as last weekend—the Sunday Times led on the front page with the impending loss of £110 million to professional sport if gambling logos are banned from sports shirts. Sport on television has provided a beacon of hope and escape for millions of people during the current Covid lockdown—a massive ray of respite amid the boredom and gloom of lockdown. In that context, there has been more coverage of the return to terrestrial television of the England-India test series starting in Chennai tomorrow than there has been of actual coverage of matches in many an overseas test series in the past.
The Government have responded well to the need of our elite sports men and women with safe and necessary exemptions from many of the Covid regulations. These exemptions will need to continue when the new travel quarantine regulations are announced shortly. The Six Nations depends on the exceptionally safe arrangements made for professional sport and the vital good sense of those involved to observe strictly the bubbles in place to protect them. Neither the French team—nor, for that matter, Andy Murray, when he resumes the ATP tour—should be required to spend two weeks in the Gatwick Holiday Inn when they arrive here.
Of course, even those who represent our country would not expect to be, nor should be, vaccinated before the vulnerable groups of all ages in society. I hope, however, that when that cohort is complete, consideration will be given to many of our Olympic and Paralympic athletes ahead of their vital international training, selection and competition schedules later this year.
That is the backdrop to today’s call to extend the business rate holiday granted to the retail, hospitality and leisure sector indefinitely, and the opportunity within six months of the passing of the Bill to publish an assessment of the impact of the timing of business rate revaluations on the viability and health of amateur sports and sporting activity. I hope to abolish them for that sector altogether.
The holiday has been invaluable to sports organisations that own their property, including national governing bodies, professional clubs and community clubs and organisations. However, the rates bill in the past has often been the anchor that dragged many sports clubs towards the rocks of administration and financial difficulties, and at this time we must focus on how we increase opportunities for everyone to follow an active lifestyle. Declining participation rates, a major drop-off in sport after school years, the loss of playing fields and the reduction in local authority spend in England—sport and recreation is a discretionary-line item spend in their accounts, rather than the compulsory priority that it should be—have collectively led to the absence of the much-hoped-for sports legacy from the 2012 Olympic and Paralympic Games. Obesity levels, boredom among the young and lack of opportunities for all pepper the landscape over the UK.
In contrast, I can only praise my noble friend the Minister’s commitment and support for sport in successive policy areas in his department. At Second Reading, he listened carefully to the representations made, as he did previously to my noble friend Lord Botham on this subject. He knows that the business rate holiday can directly benefit community sports clubs, with their sole objective of providing healthy and enjoyable recreational and sporting opportunities, ensuring that all ages re-emerge into the light stronger, fitter and more active in future years than suggested by the pattern of growing obesity and falling participation as a proportion of our growing population, which we saw in the years approaching the pandemic. That alone is one of the major reasons for the increasing call on the NHS in the 2010s. It was in danger of being overburdened before, let alone during, the pandemic.
Like me, the Minister knows that the country faces stubborn inequalities, that the activity gap is widening and that places and spaces, community sports clubs and leisure facilities are critical to providing opportunities for a more active nation to emerge from the epidemic—yet the hardest hit are in deprived communities. Such clubs proliferate in our poorer communities, not least in the East End of London, where life expectancy falls one year for every Underground station passed on the Jubilee line between Westminster and Stratford. Life expectancy is 10 years less there. That is why the Government need to support the Sport and Recreation Alliance, with its campaign to boost activity, from traditional or formal sport to the informal fun and enjoyment that many people can derive from outdoor recreation, movement, dance, and physical activity. Let us make sure that local clubs registered as community amateur sports clubs are exempt from business rates for ever.
My hope is that the case is considered to extend similar support to all sports clubs which provide community sport and recreational opportunities. In comparison to other sectors, business rate liability for the community sport sector remains unfairly high in relation to income. Community sport clubs often have limited financial resources, as they seek to increase membership subscriptions in ways that are affordable, thus enabling community participation without those subscriptions being extortionate.
The cohort of sport and recreational facilities in this country is ageing; too many are falling into disrepair. The costs to operate, repair and maintain are onerous. The result is that sport pays a disproportionate level of business rates, which in themselves are a brake on the key policy objective of making this nation healthier and more active. Sheffield Hallam University recently published a report on the social and economic value of community sport and physical activity in England, valuing it at £85.5 billion. The analysis valued physical and mental well-being at £9.5 billion, mental well-being itself as well as mental health at £42 billion, individual development at £282 million, and social and community development at £20 billion. That evidence makes a compelling case for investment in community sport and physical activity. One keyway in which that can be achieved is a major change in how my noble friend’s department and the Treasury approach a new system of support for exempting those clubs involved in community sport schemes from the business rate system.
I was a major campaigner for changes to be made to the old system in 2002, which resulted in the current and welcome change to the discretionary CASC scheme. But 20 years have passed and we have seen that it does not go far enough if we are to prioritise a healthier lifestyle for all adults and children. The absence of comprehensive rate relief leaves a present system that places a detailed and unreasonable administrative burden on the volunteers who make up the management committees of most community sports clubs. As the Sport and Recreation Alliance has said, the basis of assessment remains unclear and the costs and complexity of the appeals system forces many clubs to accept valuations which are too high. Rate bills are often complicated by transitional arrangements, and there are a plethora of confusing reliefs and exemptions.
The Bill will help, and our amendment will help further. I urge my noble friend the Minister to talk to colleagues in the Treasury and seek the changes that are an essential component to the survival of the sector. Should he accept the amendment, he would unite the Committee and the House, giving my noble friends in sport Lord Botham and Lord Addington—and, dare I say it, even Jeremy Clarkson, who much maligned my noble friend the Minister on another occasion—the opportunity to show their gratitude on behalf of the world of sport.
My Lords, how do you follow that? Jeremy Clarkson being mentioned in a debate in Grand Committee is something new to me. I congratulate my noble friend in sport—my collaborator in sport; that is probably a better way to put it. The essential point is that amateur sport, its clubs and the structure around them are a vital part of our social infrastructure. No one disagrees with that. Will the rating system be a support or a brake on this? How do you generate local money for such a universally accepted good? I congratulate the Government on giving some money to it, although not enough—not as much as it has lost—considering the changes that it will have to go through.
Anybody who has gone through pre-season training will know that it is a bit of a shock to the system. When you have had a year away from it, without playing properly, and you come back to find out that you have problems raising money as well, would you want to sit on the committee? As my noble friend in sport—to use his term again—says, it is a complicated and difficult system and people do not know how to deal with it. I must draw attention to some of the activities I have helped with, including getting the RFU a guide to local government. There were people telling me then, “It is not needed because the information provided is on 53 different websites under 42 different links, and if you understand the law it is fine.” That was the general consensus. These people are amateurs, taking part for fun—and they are giving the Government what they want: activity levels, social interaction and, very often, an informal job market.
Those things are valuable. If the Government will not accept the amendment, please will they heed those words? I hope that the Minister comes away from the debate saying that he will make greater efforts to make the various bits of government talk to each other. If the DCMS proposes something, the department of health may say, “That’s a good idea,” while the Department for Education says, “Yes, but it can’t get in the way of exam results,” and local government says, “What—us?” That seems to be about the way it goes. You can start from any of those departments and stick a couple more in there as well; I will not insult the Minister by trying to mention them all.
If we can get some idea that we are taking the problems of this vital sector seriously, it will reassure many people. Also, Members of the Committee should remember that all the structural problems they see here are the same for virtually any other volunteer sector. I could have mentioned music or any other such sector. Every time that you take on some commitment to a property for a voluntary activity, you have the same problems. When the Minister replies, I hope that he will give us an idea about the thinking here. At the moment, it seems to be a case of, “Oh yes, that’s terribly good, we should support it, but it seems to be somebody else’s problem.” Take a stand here—say it is yours.
My Lords, this group of amendments relates to the impact of the timing of business rate revaluations on the retail sector and, hence, the future of our town and city centres. In the first group of amendments, we discussed the timing in general terms, but my colleagues and I ask the Government to fully consider the implications of a revaluation on business profitability and survival.
For many small businesses, business rates are a significant overhead, along with the rent for the property. As my noble friend Lord Stunell reminded us, the Government’s original intention was to have a revaluation assessment in 2019, but this was moved because of negative forces affecting retailers. That negative impact has not gone away, as he said. We support the relief provided by the Government as part of their Covid response, but these are very uncertain times. This Bill proposes to push back the date on which the multiplier is announced from the September to the December prior to the new valuations coming live—in this instance, it means an announcement in December 2022. This will give businesses just three months to analyse the implications for them of the new rates bill they will be paying from April 2023. The amendment in my name and that of my noble friend Lord Stunell would enable the Government to consider the consequences of the new valuation for particular business sectors and particular regions before the multiplier was determined. An impact assessment would have to consider all the angles of the proposal and would throw light on the effect of the revaluation. It is a positive amendment which would help the Government get to a fair outcome in the revaluation of business rates.
As the Minister will know, in 1990, when the system was created, the multiplier was 34.8%. In 2020, that had risen to 51.2% for large businesses and just under 50% for small businesses. The multiplier is a crucial factor in the final business rate bill. The consumer prices index is the relevant figure used for the multiplier. Does the Minister think it is now time to reconsider the level of the multiplier? I suspect that the answer to my question will be that we should wait for the business rate review that the Government constantly promise. That will give no comfort to businesses, who will know from this Bill that they are expected to pay business rates under this outmoded scheme for at least another five years. There is obviously an effect on the profitability of individual businesses, but there is also the cumulative effect on town and city centres. As the noble Lord, Lord Kennedy, reminded us, one in 10 shops currently lies empty.
The revaluation is just one of the uncertainties that businesses are having to grapple with. The town centre funds and high-street funds that the Government have announced are all well and good, but they just paper over the cracks while the main issues affecting business survival are largely ignored in policy definition and implementation.
My noble friend Lord Addington and the noble Lord, Lord Moynihan, have raised an issue close to their hearts: the effect of business rates on amateur sports clubs. Both were right to do so and made the case with knowledge, experience, and powerful arguments which we fully support. Every community will have an amateur sporting activity at its heart, one that provides enjoyment and an opportunity to develop skills and teamwork through physical activity. They are vital ingredients of a healthy community. I urge the Minister to take note of the arguments made and come to Report with a proposal for action to help amateur sports clubs. I look forward to his response on all the points made.
My Lords, this group of amendments allows us to consider the impact of the 2023 revaluation on rates bills, the multiplier and, specifically, our high streets, town centres and amateur sports clubs. Understandably the Committee, businesses and all ratepayers would like to know how the 2023 revaluation will affect rates bills. However, it will be some time before we know that. The carrying out of a business rate revaluation is a significant exercise which requires the careful application of the considerable expertise within the Valuation Office Agency. The two-year gap between the date on which valuations will be based, 1 April this year, and the date on which the next revaluation will be implemented, 1 April 2023, is necessary to ensure accurate rateable values. For this reason, we will not know the result of the revaluation until much later, in 2022. The Government will not therefore be in a position to make an assessment of the next revaluation in respect of any specific sector or the rating list as a whole within six months of the Bill receiving Royal Assent, as is sought by some of these amendments.
However, I can say that, once enacted, the Bill will ensure that business rate bills from 1 April 2023 will be based on rental values as of 1 April 2021. This means that the business rates due on properties based on our high streets and in our town centres or in the leisure sector will be up to date and better reflect the impact of the pandemic.
Certainly, an important part of rates bills when we reach the 2023 revaluation will be the level of the business rate multiplier. It may help the Committee if I explain more about the process of setting the multipliers for 2023-24. As with all years, we are required to finalise the multipliers as soon as reasonably practicable after the local government finance report has been approved, normally in February. For example, at the last revaluation in 2017, the multipliers were confirmed on 9 March. Therefore, we expect to finalise the multipliers for 2023-24 in late February or early March 2023. In contrast, the new rating lists will not be compiled until 1 April 2023. Therefore, it would not be possible to publish the assessment sought in the amendment proposed by the noble Baroness, Lady Pinnock, and the noble Lord, Lord Stunell, before the multiplier was confirmed but after the list had been compiled.
Nevertheless, I appreciate of course that noble Lords and businesses will want to understand the impact of the revaluation as early as possible and before the multipliers are confirmed. In practice, we will announce provisional multipliers and the transitional relief scheme much earlier in the process, at the time of the autumn fiscal event.
It is our intention at the same time to publish the entire draft rating list. This means that, as well as being able to see the sectoral or regional impact of the revaluation, individual ratepayers, be they on the high street or in the sports sector, will be able to check their own rateable value and calculate their own rates bill. This will give an overall picture of the revaluation and allow ratepayers several months’ warning of their new rates bills.
I point out to the noble Baroness, Lady Pinnock, that the process of setting the multipliers is controlled largely by rules in legislation. We are required to make an adjustment to the multipliers for 2023-24 to offset the estimated change in total rateable value due to the revaluation after allowing for inflation and forecasted future appeals. It is that adjustment which drives the level of the multipliers in 2023-24.
We cannot by law set multipliers higher than that calculated from the adjustment. The Chancellor may by order set a lower multiplier, however. Noble Lords will understand that that is a fiscal matter decided by the Treasury as part of the normal Budget process, balancing the pressures on businesses with the need to fund vital local services, but I assure the Committee that the Government will have full regard to the impact of the revaluation before deciding whether to exercise that power and set a lower multiplier.
Our town and city centres are important hubs of our communities, and I am proud of the steps that the Government have taken to support this crucial part of our economy. While this Bill represents a postponing of the next revaluation, I know from the comments made at Second Reading that noble Lords appreciate that this is a step taken in the exceptional circumstances of the pandemic. However, as I have said, once we reach 2023, the new rateable values will better reflect the impact of the pandemic on rental values in locations such as the high street.
Outside these exceptional times, the Government remain committed to frequent revaluations. The high street continues to be a fast-changing environment, and frequent revaluations will ensure that business rates accurately reflect these trends and changes in the rental market over time.
Nor have we been waiting until 2023 to support the high street. As my colleagues present today will know, the Government responded to the pandemic by ensuring that eligible businesses in the retail, hospitality and leisure sectors are paying no business rates at all in 2020-21. This relief is worth around £10 billion and, when considered alongside small business rate relief, it means that more than half of all ratepayers in England will pay no rates at all this year. Furthermore, this Government have committed not just to buttress our high streets when they are required to be at their most resilient but to support them in returning as strong centres of our local economies and communities.
The amendment tabled by the noble Lord, Lord Kennedy, describes our high streets in terms of prosperity. The Government are committed to supporting the sector in recapturing that prosperity, which is why we have launched the £1 billion future high streets fund to support our town centres in responding with dynamism to the changes in consumer behaviour that have been accelerated by the pandemic. This support forms part of the Government’s £3.6 billion towns fund, which will be used to drive growth and ensure the future sustainability of our town centres and high streets.
There is no greater advocate of amateur sport and community sports facilities than my noble friend Lord Moynihan and his partner in collaboration, the noble Lord, Lord Addington. As the Committee will know, it is not just businesses that are affected by a revaluation; it is also other non-domestic premises such as charities and sports clubs. The Government recognise the value of amateur sports clubs to communities across the country, which is why we have maintained the community amateur sports club scheme. This means that registered clubs are able to benefit from a number of charity-type tax reliefs, including gift aid, corporation tax relief and an 80% business rate discount.
I know that the noble duo asked for more on that, and I will point out that the Government are currently considering options for business rate relief as part of the fundamental review of business rates and in the context of the ongoing pandemic. We will outline plans for the 2021 reliefs in the Budget. I will be a strong advocate of what the noble Lords are asking for in the process of the Chancellor forming his opinion on that. Business rate relief means that eligible sports clubs benefit from the same reductions today as properties being used for charitable purposes.
I hope, therefore, that noble Lords will understand why it is not possible to predict the impact of the revaluation either now or six months after the passing of this Bill, but that the outcome will better reflect the impact of the pandemic. This Government are fully committed to taking the necessary steps to support the renewal of our high streets, provide support to amateur sports clubs and ensure that ratepayers have several months’ warning of their new rates bill.
I hope that, with these assurances, the noble Lord, Lord Kennedy, will be content to withdraw his amendment and the noble Lords, Lord Stunell and Lord Addington, my noble friend Lord Moynihan and the noble Baroness, Lady Pinnock, will agree not to move theirs.
My Lords, I thank all noble Lords who spoke in this short debate.
I was not particularly convinced by the Minister’s response to my amendment. We are asking only for an assessment of the impact of the timing of the business rate revaluation on the prosperity of towns and the high street. I would have thought that the Government would have wanted to do this anyway, to arm themselves with some data, facts and information so that they make good, sound decisions that will have the right long-term effects. So we may come back to this amendment on Report.
I very much support the remarks of the noble Lord, Lord Stunell. I fear, though, looking at the Government and their record, that the soundproofed silos referred to by the noble Lord are firmly in place and contribute significantly to the issues and problems that the Government face. We often hear that departments do not talk to each other. The Government have a lot of issues here, many of which can be traced back to the way in which the Government operate on policy matters.
I also agree with the remarks of the noble Lords, Lord Moynihan and Lord Addington. I very much support the call for further support for community sport, particularly in our poorer communities. The call to exempt for ever community sports clubs is the right thing to do. We want to see everybody get active, fitter and healthier. Almost every night of the week, we see those adverts from the Government asking us all to be healthier, get fitter, walk more and do more sport, so that is absolutely the right thing to do.
If we support providers of community sport and improve our health as a nation, the savings to the NHS and the Exchequer will repay the relief many times over. In that sense, it is a no-brainer. As the noble Lord, Lord Addington, said, these clubs give us the activity levels that we all want to see—so, again, I very much support his amendment. Indeed, I hope that he and the noble Lord, Lord Moynihan, will bring their amendment back on Report. I assure them that, if they do not get the assurances that he wants from the Government then, we will happily support them if they want to divide the House at that stage. Perhaps we need to pass this amendment to give the Minister and the Chancellor of the Exchequer a little more encouragement to do the right thing. But at this stage I beg leave to withdraw the amendment.
Amendment 2 withdrawn.
My Lords, we now come to the group consisting of Amendment 3. I remind noble Lords that anyone wishing to speak after the Minister should email the clerk during the debate.
3: After Clause 1, insert the following new Clause—
“Assessment of the impact on appeal waiting lists
Within six months of the passing of this Act, the Secretary of State must publish an assessment of the impact of the Act on business rates appeal waiting lists.”Member’s explanatory statement
This new Clause would create an assessment of the impact on business rates appeal waiting lists.
My Lords, Amendment 3, to which the noble Baroness, Lady Bakewell of Hardington Mandeville, has added her name, raises the important issue of business rate appeal waiting lists.
As we heard at Second Reading, there are still 40,000 unresolved rating list appeals from 2010—11 years ago. As a result of this backlog, local authorities had to divert more than £3 billion from services to deal with the appeals risk from 2010 and 2017. This is an unacceptable situation; I am sure that the noble Lord, Lord Greenhalgh, would agree with me on that. Local authority finances are under extreme pressure, and this unacceptable situation is being made even worse.
The amendment would place a duty on the Secretary of State to conduct and then publish an assessment of the impact of the Act on business rate appeals. This is an opportunity for the Minister to explain the position of the Government and how they are working to deal with this backlog of appeals. I beg to move.
My Lords, I draw the Committee’s attention to my interest as a vice-president of the LGA.
It is a pleasure to take part in this debate and speak to the amendment in the name of the noble Lord, Lord Kennedy of Southwark, to which I have added my name. I am familiar with rating appeal tribunals from my previous life when I sat on domestic rating appeals. Some had been waiting in the pipeline to be heard for a very long time. The noble Lord referred to these timelines.
However, this is about business rates. Some years ago, before the Government transferred the retention of business rates to local authorities, unitary and district councils were responsible for collecting business rates but had no say in setting them; nor were they able to retain the rates collected. If the local authority had no major facilities in its area that would attract business rates, this was straightforward. However, if there were major infrastructure projects—I use this term loosely—this caused huge problems as, for reasons best known to the Government, these facilities were expected to pay business rates despite not trading as businesses.
I can speak only from my experience of Somerset but feel certain that this situation will have been replicated across the whole country. Taunton Deane Borough Council and South Somerset District Council were lucky enough to have major infrastructure in their areas. In Taunton Deane, it was the MoD camp at Norton Fitzwarren and a large hospital at Musgrove Park, in addition to several superstores. In the case of South Somerset, it was the MoD Royal Naval Air Station at Yeovilton and Yeovil District Hospital, as well as superstores. The MoD bases and NHS facilities are of course funded from central government budgets in the first place. All these assets attracted business rates covering millions of pounds. The MoD, NHS hospitals and superstores appealed against their business rates—the latter were in a slightly different category as they were trading businesses and, hopefully, making a profit, but millions of pounds were at stake.
The Government informed local authorities that they could, if they wished, agree a lower figure with the appellant. However, any difference from the figure originally set and the lower figure agreed by the local authority would have to be made up to the Government from local householders’ council tax. Many of these pending appeals waited four, five, six or even seven years to be heard. As the noble Lord, Lord Kennedy of Southwark, has just said, we have now been waiting more than 10 years for the 2010 appeals. All this time, local authorities were wondering whether they would be faced with massive bills in unpaid business rates that the Government would be expecting to receive. When appeals were heard and were successful, this money was passported back to central government. However, there was also an expectation that any shortfall would be made up by local authorities, so it was a win/lose situation for local councils and their taxpayers.
We now have a situation where local authorities operate under a business rate retention scheme. However, with high street retail outlets and other town centre businesses under extreme pressure because of the Covid pandemic, huge numbers of appeals against business rate assessments are likely.
Household rates and housing benefit levels are set on a sub-regional basis by the valuation office. Our valuation office was based in Bournemouth; the price of a property in Bournemouth was vastly different from the value of one in South Somerset. Can the Minister say whether business rates are similarly set on a sub-regional level and whether the buoyancy of the local economy is considered?
Previously, our town centres have been made up of well-known retail high street clothing stores, yet these have all but disappeared. The brands are being snapped up by online businesses that buy the brand and stock but not the premises, as we have seen this week. My noble friend Lord Stunell has already referred to this. How are local authorities that now depend on business rates to balance their budgets to proceed with an increasing number of empty properties?
Many businesses will survive: insurance agents, estate agents, solicitors, food outlets and supermarkets. However, many supermarkets have long since withdrawn to retail business parks, where there is a significant turnover of retailers as each goes into administration. Mothercare, Staples and Homebase are examples; their premises are often left empty for a considerable time. It seems that now is the time for a radical rethink of just what the Government expect business rates to deliver and what type of business they propose to be classified as liable for business rates. This will now include large warehouse facilities servicing online purchases.
The exponential rise in online shopping has been the saviour of householders who have either been subject to lockdown or, prior to lockdown, isolating to protect themselves due to their underlying health conditions. From my office window, I have an excellent view of the C-grade road that serves the 12 houses in our area. The number of delivery vans going up and down has dramatically increased since Christmas. Whether it is with home deliveries from supermarkets or deliveries by DPD, Yodel or another, they are extremely busy and often call long after it has gone dark. Apart from the supermarkets, the vans are delivering goods that householders have ordered from online businesses. Surely now is the time for these businesses to play their part in the local economy and pay business rates; the noble Lord, Lord Bourne of Aberystwyth, referred to this.
The noble Lord, Lord Kennedy of Southwark, has set out his rationale clearly. The situation that businesses, both local and national, now face is unsupportable. Local authorities are providing vital services not only in terms of housing, welfare benefits, parking, social care and children’s services but, currently, in supporting vaccination centres with admin personnel. The latter is causing some of their routine work to be temporarily put on the back burner. If our councils are also to see a dramatic cut in their income because of non-payment of business rates, we may see some of them having to declare themselves insolvent. There are already examples of this having happened recently.
The number of NDR appeals will rise dramatically. Can the Minister say whether sufficient trained personnel are ready to hear these appeals, or will there be a return to the scenario I started my speech with, where appeals wait years to be heard? It is vital that businesses and local authorities are able to see just what the likely wait for an appeal will be. The regular publication of the numbers waiting for an appeal is vital. Local authorities and businesses could be waiting for huge appeals to be heard with millions at risk, as noble Lords have indicated. This is not good for the recovery of the economy. A rapid system of hearing business appeals is essential and publication of the waiting list within six months of the passing of this Act would be a reasonable timeframe to assist local authorities to assess the seriousness or otherwise of the situation. I fully support this amendment and look forward to the Minister’s response.
My Lords, I thank the noble Lord, Lord Kennedy of Southwark, and the noble Baroness, Lady Bakewell of Hardington Mandeville, for tabling this amendment. I declare my interest as set out in the register. I also take the opportunity to thank the surveyors Gerald Eve for their time and assistance in preparing for this debate.
My concern is the rapid rate of the collapse of high-street businesses—not just the well-known brands that have been referred to but small family businesses, private enterprises and start-ups serving local markets while hoping to succeed, expand and grow. As the noble Lord, Lord Kennedy, commented, the system needs root and branch reform. These retailers’ rating assessments are currently based on pre-crisis levels of rental value, but those values have really collapsed. They were set at a time when there was a healthy economy, with low interest rates and constructive market tension in the leasing marketplace, arriving at competitive rents that were exactly what supply and demand required. That has been lost—which is to say, the values have collapsed as turnover has collapsed—and the rates applied and being paid today are much too high.
We have seen this collapse in values for several reasons; the rates payable by these businesses are the final straw. They can appeal, but there will be long waiting lists. We heard the noble Lord, Lord Kennedy, say that there were 40,000 still hanging over, some from 10 years ago. I am afraid, too, that hundreds, if not thousands, of small businesses will be forced to pay the published rates until appeals are heard, whenever that may be. They will of course have long gone and disappeared as businesses by then.
This is why I am absolutely certain that an impact assessment on appeal waiting lists arising from this Act is so important. I consider six months the absolute minimum period to attempt the impact assessment. It is unfortunate—the sooner the better—but I do not see how they can do it in less. The surveyors may be stretched to their limits to process the appeals.
The process involves a check, challenge, appeal programme, which puts the onus of setting rental value for rateable value purposes on the appellant. The only way to arrive at rental venue is to look at comparable properties and find the latest rental evidence from the marketplace, which is then applied. But there is virtually no evidence. The markets have been sliding, both for offices and retail, and we know that the rating assessments are now significantly in excess of what they should be.
I mentioned retail, but imagine the difficulty of estimating rental value for offices in two months’ time, when the date occurs. Many office buildings are empty or on a skeleton staff rotation. If they are more than a couple of floors tall, social distancing means that you cannot get into a lift. Businesses are, as we speak, considering their future office needs. Working from home, like so many of us are in this debate, means that less square footage is likely to be required. As I said, in the bottom of the trough of this rental crisis, experts will have great difficulty estimating rental values.
Will the Minister please impress on the Government the importance of urgency in addressing this rateable imbalance? Businesses are collapsing in all communities. I support the impact assessment on appeal waiting lists, but it is difficult not to imagine that the appeal process will struggle under the weight of appeals, and I urge the Government to prepare for that probability.
My Lords, it is a privilege to speak after the noble Lord, Lord Thurlow, because he has more or less stolen my thunder, which means I can be really quite brief. He outlined very clearly a common thread in all the debates so far today: the absolute urgency of getting this problem fixed. We all know that it needs a longer-term fix, with a complete overhaul of the system, but, if we are to stay where we are with the current system unamended while we wait for that golden day of amazing reform, I fear that many businesses in the country will collapse and fail, not just in the high streets, but, as the noble Lord, Lord Thurlow, so elegantly and persuasively said, in the office sector and elsewhere. Something has to be done in the meantime—which, of course, was the burden of some of the earlier debates.
The point of the amendment and the impact review is to challenge the Government by saying that what they propose to do—or, perhaps more accurately, what they propose not to do—will leave many businesses in profound despair about how they will manage in the next 18 months or two years. It is obvious that many people will appeal. The number of appeals will be large, not small, and if we start with a backlog from the previous system, that will get worse still.
My noble friend Lady Bakewell asked the Minister some piercing questions that I hope he will respond to about the efforts being made to train panels and find the expert support needed to get the appeals in the system moving through at a proper level. What about the waiting times? Is the Minister, or indeed the VOA, setting a target to deal with this backlog to make sure that it does not pile up behind the new unfolding situation? The noble Lord, Lord Kennedy, has already pointed out the 40,000 appeals. I know that some of those are very specific to one or two topics, but that is not quite the point: one or two specific topics might crop up in this round of appeals and this revaluation that will cause similar problems.
So I strongly support the thrust of the amendment and I believe that we do need an impact assessment. We need some positive action from the Government and I look forward to hearing how the Minister proposes that that should happen.
My Lords, this proposed new clause would require the Secretary of State to publish an assessment of the impact of the Act on the appeals waiting lists. The Government recognise the importance for businesses and local government of having an effective appeals system. The process we have put in place allows ratepayers to understand how their rateable values have been assessed and how to challenge those valuations where they feel that is necessary. Of course, changes to the revaluation cycle can impact on the appeals process, so I welcome the opportunity to consider this through the amendment.
I will first explain the system for appealing rateable values. The Government introduced the check, challenge, appeal system in 2017, known as CCA, because the previous system was failing. Over 1 million cases were received from ratepayers on the 2010 rating list. Many were submitted with little or no evidence and around 70% of Valuation Office Agency appeals resulted in no change. This delayed the VOA’s ability to deal effectively with well-founded cases.
The CCA system introduced a new “check” stage, at which ratepayers must first check and confirm the details of their property. This ensures that factual matters are resolved without any further action. At the next stage, “challenge”, the ratepayer must set out the basis of their case. This provides that only substantive cases progress into the system to be considered by the VOA. The final stage, “appeal”, allows the ratepayer access to the independent Valuation Tribunal, but only where they have exhausted discussions with the VOA. The amendment as drafted is concerned only with the last stage, “appeal”, but I trust that the Committee will want me to discuss more generally the CCA system.
By March 2020, the VOA’s CCA system had been showing modest volumes: around 158,000 checks and only 31,000 challenges. Of course, the pandemic has increased these numbers, and as of 31 December 2020 the VOA had registered over 440,000 checks and over 90,000 challenges. Of these, the VOA has resolved over 400,000 checks and 24,000 challenges.
Nevertheless, I know that some ratepayers and agents have concerns about how CCA operates. The Government acknowledge the issues ratepayers faced when CCA launched, particularly with the software and the use of the system. However, the VOA has improved, and continues to improve, its service for ratepayers. This includes changes to enable CCA users to submit multiple property claims, as well as improvements to the registration process to make it simpler and quicker to register.
In February last year my department published an interim review of the CCA system. Although we recognised that it was still too early to fully judge the system, the review concluded that the reforms were helping to reduce the number of speculative appeals and to improve engagement between ratepayers and the VOA.
I know that noble Lords are also concerned with a number of cases—around 50,000—that have been outstanding for longer from the 2010 rating list. In fact, the majority of the 2010 appeal backlog cases concern ATMs and were stayed pending the outcome of a Supreme Court case. So these cases did not impact on most businesses and the delay was largely outside the VOA’s control. The Supreme Court issued a decision on this matter on 20 May 2020 and I can assure noble Lords that these outstanding 2010 cases are now being settled quickly.
As the amendment we are considering highlights, the CCA process is, of course, affected by the frequency of revaluations. Looking specifically at the Bill’s provisions, to ensure that rateable values better reflect the impact of the pandemic, the Bill will move back the next revaluation to 2023. This of course will give the VOA and the Valuation Tribunal at least an extra year to clear cases on the 2017 rating list ahead of the next revaluation.
More generally, as I set out at Second Reading, the Government are undertaking a fundamental review of business rates. This includes a commitment to look at more frequent revaluations, and we would need an appeals system which supported that. The fundamental review will therefore also examine what reforms might be necessary to the CCA system to support more frequent revaluations.
The call for evidence on the review was published in July and asked respondents to provide proposals for changes to each stage of CCA to improve the system, while recognising ratepayers’ desire for a quicker resolution of cases and greater transparency. The Government are currently considering the responses to the call for evidence, and the review will conclude in spring 2021.
I hope that I have been able to reassure your Lordships about the importance that we place on delivering an effective, functioning appeals system that resolves cases in a timely manner. The proposed new clause raises important questions about appeals and the frequency of revaluations, which the Government are already fully considering as part of the fundamental review. I hope that, with those assurances, the noble Lord, Lord Kennedy, can agree to withdraw the amendment.
My Lords, I thank all noble Lords for their contributions to the debate. I agree with all the remarks of the noble Baroness, Lady Bakewell of Hardington Mandeville. She is right when she calls for all online businesses that deliver goods bought online to pay their fair share of taxes.
The noble Lord, Lord Thurlow, made a compelling case for intervention to stop the rapid collapse and decline of businesses on our high streets. No one wants to see, in effect, an end to our high streets, but that is what we will face if the Government do not take urgent, effective action. I fail to see why they are not acting with more urgency on this. They have given no convincing reason or justification either today or previously when these matters have been discussed.
The point that the noble Lord, Lord Thurlow, made about offices is exactly the conversation that we are having at MHS Homes, where I am a non-executive director. We have a fantastic office in Chatham, where all the staff, except those working on the ground, were based, but we are now wondering what our operation will look like in the future. There is nothing unusual about that—many organisations and businesses are having exactly the same conversation about what to do.
I will look carefully at the response from the noble Lord, Lord Greenhalgh, but I may well decide to bring this issue back on Report. However, at this stage, I am happy to withdraw the amendment.
Amendment 3 withdrawn.
4: After Clause 1, insert the following new Clause—
“Impact of timing of business rates revaluations: high street and online businesses
(1) Within six months of the day on which this Act is passed, the Government must carry out a review of the impact of this Act on local high streets.(2) The review under subsection (1) must make an assessment of the impact of the timing of business rates revaluations on high street businesses and their ability to compete with businesses operating mainly or wholly online.(3) The Government must lay a copy of the review under subsection (1) before both Houses of Parliament.”Member’s explanatory statement
This new Clause would require an impact assessment of the timing of rates revaluations on local high streets, particularly looking at the impact on their ability to compete with businesses that operate online.
My Lords, the purpose of Amendment 4, which stands in my name and that of my noble friend Lord Shipley, is to open up a debate about the revolution taking place in the retail sector. It is a revolution that is being accelerated as a consequence of the pandemic, which has resulted in the non-food retail sector being in shutdown for many months, with a very large transfer of shopping to online retailers. Retail analysts suggest that this significant change in shopping habits is here to stay.
Recent reports on the retail sector make the same points. Bill Grimsey, in his report in 2018, described the effect of business rates on the retail sector as “malevolent” and one that hinders growth. Business rates are, of course, just one inhibiting factor that affects the vibrancy of the physical high street. However, it is like a weather vane, indicating that all is not well with the retail elements of our town centres.
The array of shopping giants that have closed in recent years is a health warning that the Government do not appear to be heeding. Toys “R” Us, Maplin, Poundworld and others closed their doors in 2018. This year, a staple of the high street, Debenhams, is finally closing its physical presence on the high street. The Arcadia Group, which includes a string of well-known brands in many towns, is in administration. There seems little prospect of any of them reopening their shop doors; the businesses will simply go online.
The combination of closures is a large hit on many towns, as those businesses provided both an attractive shopping experience and business rates income for local authorities. The Government really do have to address this with some urgency. The problem is well known: physical retailers have financial overheads that their online equivalents do not.
The comparison of overheads in terms of business rates is stark. In my own town of Cleckheaton in West Yorkshire, an average-sized shop on the main street with 30 square metres of floor space is paying at the rate of £250 per square metre, resulting in a rates bill of around £3,750 per annum. A large Amazon warehouse adjacent to a nearby town in Yorkshire has 40,000 square metres of floor space. The rate per square metre for this giant in the retail sector is £45 per square metre. This results in a business rates bill of £900,000 per annum. If Amazon, as an example—there are others—were required to pay at the same rate as this smallish shop in a small town centre in West Yorkshire, its rates bill on this warehouse alone would be £5 million per annum. That is why attempts to save our high street will fail unless this hugely unfair advantage enjoyed by online retailers is addressed—hence the amendment from the Liberal Democrats.
The very least that the Government should do is to review the impact on local high streets and assess whether the new revaluations harm even further the ability of the retail sector to compete successfully with online businesses. We cannot, like the myth of Canute, hold back the tide of change in shopping habits. However, what the Government can and should do is provide a level playing field for retailers. This is not a problem that can be kicked down the high street in the hope that the sticking plasters of high-street and town funds from the Government will stem the demise of town centres; nor is there an easy solution, but then Governments are elected to deal with difficult problems.
There is an urgency in finding a solution, as I have indicated. Will the Minister provide any certainty for high-street retailers that the Government accept that a revolution in retail habits has to be accompanied by a revolution in business rates? I look forward very much to the Minister’s response.
My Lords, I thank the noble Baroness, Lady Pinnock, for tabling this amendment, together with the noble Lord, Lord Shipley.
There is no doubt that an impact assessment of the new valuations on the high street is worthwhile and important. It is actually vital. We have already seen the change in the high street referred to by the noble Baroness, Lady Pinnock. The former retail parades that once flourished now see nail bars, estate agents, coffee shops and charity shops proliferate. I am delighted, of course, for the charity shops and their sector, but please understand that many of these shops are paying a 20% rates bill and are there because their landlords heave a sigh of relief that they have found someone to relieve them of the burden of the empty premises rates that would be applied after they have lost their traditional tenant.
Our high streets and shopping centres are the focus of local communities. Social health and welfare to some extent depend on them. We cannot afford to lose them because of unrealistic operating costs. I was very pleased when the noble Lord, Lord Greenhalgh, referred just now to the Government’s recognition of the importance of vibrant town centres. The health of those centres lies in the gift of the Government, right now, and in their ability to construct fairness in the apportionment of the NDR burden.
This amendment includes reference to the ability of high streets to compete with online. It is an often-discussed subject, and the urgency of rebalancing the rates burden could not be more pressing. The noble Baroness, Lady Pinnock, mentioned Amazon. I saw in today’s Times an appalling reference—appalling to me, anyway— that £1 in every £20 spent on retail is spent through Amazon. I assume this was a reference to last year, or to the last accounting year.
Amazon, of course, is a giant, but there are hundreds of online retail businesses and we are right in the midst of a massive societal transfer of shopping habits from the traditional shop or store in or out of town, in or out of a covered shopping centre, to online. Covid, of course, has forced that rate of change to accelerate faster than it otherwise would—but it was a concern many years ago.
There are numerous constructive proposals to recoup a fairer contribution from the online sector to the tax base. To equitably rebalance the transfer of sales between online and the high street may require a 40% reduction in the high street burden. That is a huge reduction. I am afraid that the Treasury cannot expect revenue neutrality by simply transferring this across to other commercial sectors. The slack is just not there, particularly if we have to take a reduction from the office sector as well. Logistics, industrial and warehousing will not fill the gap. That is a real worry and a concern. Local authority funding has been referred to already, but I am afraid that it is something that needs addressing.
I support the amendment. The health of the high street cannot wait for the results of the fundamental review that was discussed at Second Reading and has been mentioned by the noble Lord, Lord Greenhalgh. I was very grateful for that, but the issue is too pressing.
My principal concern remains the difficulty of assessing rental value in these most uncertain times. I do not think that it will be possible. Appeals may descend into chaos. Certainly, I predict long delays. Rental values will have to be assessed post Covid, not in eight weeks’ time. A short-term arrangement will be necessary for the non-domestic ratepayers on the high street and in the retail sector to cope with the transfer to online, and I hope that the Minister will be able to make some constructive comments to help give comfort to all of us who are concerned.
My Lords, I first remind the Committee that I am a vice-president of the Local Government Association.
The noble Lord, Lord Thurlow, has made some very salient points, notably that it is vital that urgent action is taken to help high street businesses by reducing their operating costs. I recall the noble Lord, Lord Thurlow, saying at Second Reading—and again today—that it would prove very hard to estimate rentable and hence rateable values for the traditional retail sector even with this deferral, because new lettings will for the time being be rare events.
When I spoke at Second Reading, I pointed out that retailers pay over a quarter of business rates in England and Wales. That is a very large amount of money, but it will now decline significantly as less is generated from high streets. There is, though, an immediate opportunity to even up business rate receipts by switching a greater burden from the high street to online businesses through the revaluation process itself, because we do not have a fair balance at the moment.
At Second Reading, the Minister said the Government would report in the spring on its fundamental review of business rates. He said he was
“sure that the fundamental review will look at alternative taxes to capture the shift in our shopping habits.”—[Official Report, 18/1/21; col. 1069.]
I welcome that and hope it happens, and I draw his attention to the potential for an e-commerce levy on online businesses.
As we have heard, the move online of Arcadia brands and Debenhams in recent days represents what seems to be an irreversible trend—but that cannot be allowed to mean lower rents and rates for online businesses at the cost of the high street. This proposed new clause would require an assessment of the impact of any business rates revaluation on local high streets to be undertaken within six months, looking in particular at the ability of high street retail outlets to compete with the huge retail businesses that operate online.
The timing could fit well—if the Government wanted it to—with the fundamental review of business rates, and I hope that they will take the opportunity provided by the amendment. It would be strongly and warmly welcomed by high street retail businesses because, as the noble Lord, Lord Thurlow, said a moment ago, the matter has become very urgent.
My Lords, Amendment 4, moved by the noble Baroness, Lady Pinnock, seeks to insert a new clause into the Bill which, as we have heard, would require an impact assessment of the timing of rates revaluations on local high streets and, importantly, would look at the impact on their ability to compete with businesses that operate online.
We have a serious problem with our high streets. The problem was in many cases a crisis before the pandemic, as we have discussed today on previous amendments. We can all point to the closed and boarded-up shops in areas that we know. The pandemic has created an even more serious problem for high streets and has put many businesses at risk. We need action from the Government to deal with all the issues that are destroying our high streets and our shopping parades.
We will all have seen the news that Boohoo is purchasing Debenhams and that ASOS is purchasing Topshop, but they are purchasing the names and not continuing with their high street presence. Why they are doing that is the question we need to look at. Clearly, they have taken the view that they do not need, or that it is too expensive to operate, a high street presence. This is why urgent action is needed. The issue with online retailers needs to be addressed. It has been discussed in the other place. My honourable friend the Member for Manchester Central, Lucy Powell MP, has said:
“The pandemic has accelerated changes to the way we shop, yet the government continues to disadvantage bricks and mortar businesses against online companies … The support on offer for struggling business has been a series of sticking plasters. Unless the Government puts in place a long-term plan to help high street businesses survive this crisis and recover on the other side, we will see more well-loved high street names vanishing, and many more jobs lost.”
I could not agree more. I also agree with the noble Lord, Lord Thurlow, that we need vibrant, healthy town centres. As he said, the power to help the high street is in the hands of the Government. I hope the Minister will address that point.
My Lords, I am grateful to the noble Baroness, Lady Pinnock, and the noble Lord, Lord Shipley, for a further opportunity to speak about our high streets. As I outlined when we debated the second group of amendments today, we will not know the impact of the revaluation on rates bills until later in 2022, so it would not be possible to produce now the report outlined in the amendment we are discussing. However, we can be sure that, once we publish draft rateable values alongside the multiplier and the transitional relief scheme later in 2022, ratepayers will be able to see precisely how revaluation will affect their rates bills.
The noble Baroness, Lady Pinnock, raised an important point about online businesses compared to those that operate on the high street. Businesses which sell mainly or wholly online do not avoid business rates. They may also operate shops—many high street retailers also sell online—and they will require significant warehouse and distribution facilities, often in high-value locations. Nevertheless, business rates are a tax on the use of property and the rates bill is based on the value of the property. It follows that business models that occupy less property and perhaps operate from less valuable locations will pay less in business rates.
Property taxes have several key advantages over other forms of business taxation: they are relatively efficient to collect, they provide a relatively stable source of revenue to local government that helps ensure the provision of essential public services, and they provide relative certainty for ratepayers from one year to the next. However, there is undoubtedly a click-and-collect revolution, as outlined by the noble Baroness, Lady Pinnock, and the noble Lord, Lord Kennedy. The Treasury’s fundamental review of business rates is considering alternatives taxes, including a potential online sales tax. The review will need to consider matters such as the economic impacts of such a tax and assess the concerns and risks that have been raised in the call for evidence.
Supporting the high street is a priority for us. In this year alone, no retailer on the high street is paying business rates. With the assurance that the matter of online business is being considered as part of the fundamental review and the updating of rateable values to better reflect the impact of the pandemic which will come from the 2023 revaluation, I hope that the noble Baroness, Lady Pinnock, and the noble Lord, Lord Shipley, can agree to withdraw their amendment.
My Lords, I thank all noble Lords for their contribution to this short but very important debate. The noble Lord, Lord Thurlow, has stressed again the nigh impossibility of assessing rental values in the current climate. I hope the Minister will discuss with his department how rental values are to be assessed while the pandemic is rife.
My noble friend Lord Shipley reminded the Government of the potential of an online tax to create a level playing field for all retailers. I thank the noble Lord, Lord Kennedy, for his support. All noble Lords who have spoken have emphasised the urgency of responding to the situation facing our high street retailers. A revolutionary reform is needed. How much longer are online businesses to escape a fair assessment, compared with physical retailers? I am pleased that the Minister has just said that the Government are considering online taxes in the business rates reform, but I remind him that town centres cannot wait much longer. I beg leave to withdraw the amendment.
Amendment 4 withdrawn.
Amendments 5 to 7 not moved.
Clause 2 agreed.
Bill reported without amendment.
My Lords, that concludes the Committee’s proceedings on the Bill. I remind Members to sanitise their desks and chairs before leaving the Room.
Committee adjourned at 4.26 pm.
My Lords, with the leave of the House, I will speak to both Bills on the Order Paper. I declare my relevant interests in commercial and residential property, as set out in the register.
Both Bills both provide targeted relief for ratepayers and support the reform of the business rates system, delivering on this Government’s commitments. I am pleased that, with the agreement of noble Lords on the Benches opposite, I am able to bring both Bills to this House today in a joint session. I will first set out the purpose of the lists—or revaluation—Bill, before moving on to the Non-Domestic Rating (Public Lavatories) Bill. I look forward to hearing the views of this House on both.
I know that as we tentatively begin to consider what our local economies will look like on the other side of the pandemic, it is important to recognise the concerns about the current business rates system held by the ratepayers who make up our commercial areas and high streets. It is with this in mind that I move the Non-Domestic Rating (Lists) (No.2) Bill. The Bill delivers on the Government’s commitment to set in law the date of the next business rates revaluation at 1 April 2023. This will ensure that future rates bills will better reflect the exceptional impact of the pandemic on the commercial property market.
The basis of a property’s business rates bill is its rateable value, which broadly represents its annual rental value. This is assessed independently of Ministers by the Valuation Office Agency. The agency has carried out regular revaluations of rateable values since the introduction of business rates in their current form in 1990. These ensure that the responsibility of paying the rates, which fund important local services, is fairly distributed among all ratepayers.
At each revaluation, all rateable values are based on the rental property market at a set date. This is known as the valuation date. A revaluation is an extensive exercise requiring many months of collecting and analysing rents, then the preparation of 2 million valuations. To give the Valuation Office Agency time to prepare these valuations, the valuation date is set two years before the revaluation.
Prior to the pandemic, we had wanted the next revaluation to take effect from 1 April 2021 and reflect a valuation date of 1 April 2019, but the impact of the pandemic on the commercial property market since 2019 means it would now not be right to continue with the 2021 revaluation. I hope noble Lords will agree that we could not have a revaluation that resulted in bills which did not reflect the impact of the pandemic. The Non-Domestic Rating (Lists) (No.2) Bill therefore sets the date for the implementation of the next revaluation in England at Wales at 1 April 2023. This revaluation will be based on rents at 1 April 2021, a date which has already been set in secondary legislation.
The Bill will also make a change to when the Valuation Office Agency must publish draft rateable values to support the smooth transition of the revaluation. This date will change from no later than 30 September to no later than 31 December in the preceding year. Doing this will allow us to align the publication of these draft rateable values with the timing of decisions relating to the multipliers and transitional arrangements—decisions which are normally made at the autumn fiscal event. Ratepayers will still be given several months’ notice of their bills for the following April onwards.
While policy on business rates is a devolved area, the Welsh Government have agreed that the application of the Bill should include Wales. This means that, as in England, the next revaluation in Wales will be implemented on 1 April 2023 and the latest date for publication of Welsh draft rateable values will also be changed to 31 December. Entirely different legislation applied in Scotland, where the Scottish Government have also committed to implementing their next revaluation on 1 April 2023, and Northern Ireland, which has only recently implemented a revaluation on 1 April 2020. There is therefore recognition across this country that moving the date of the next business rates revaluation to better reflect the impact of the pandemic is the right thing to do. I hope that this agreement is also shared in this House.
As I have said, this is an exceptional step, taken in exceptional circumstances, and the Government remain committed to implementing more frequent business rates revaluations. The fundamental review of business rates will look at the frequency of revaluations alongside how they are carried out. It will report on these aspects of the business rates system in the spring. However, this is a step we can now take to provide greater fairness and certainty to ratepayers.
Turning to the Non-Domestic Rating (Public Lavatories) Bill, this Government recognise the importance of public lavatories. That is why at Budget 2020 the Government recommitted to introducing a business rates relief for public lavatories. This small but important Bill delivers on that commitment and responds to calls from local councils. It would ensure that eligible public lavatories receive a 100% reduction on their business rates. It will cut the operating costs of public lavatories, particularly in cases where rates bills are a significant proportion of their running costs, and help to keep these important facilities open. The relief will apply to eligible public lavatories run by the private and public sectors, including those operated by parish councils.
Even now, when we are minimising the use of our public spaces and of public transport, the availability of appropriate toilet facilities to those essential workers who continue to keep our country running, such as taxi and delivery drivers, is of particular importance. Given how vital these facilities are, it is understandable that there has been public concern around the potential reduction in the number of available lavatories. I know that the sentiments of these concerns have previously been reflected in the contributions of many noble Lords in this House. Removing the business rates on public lavatories will make it easier for them to remain open. Furthermore, to ensure this measure is implemented quickly and support provided as soon as it can be, I am pleased to say that, subject to Royal Assent, this Bill will apply retrospectively from April 2020. This means that, for eligible properties, the relief will be backdated to the start of the financial year.
I hope your Lordships will allow me the opportunity to pay tribute to councils, and to the National Association of Local Councils, for their support for this Bill. Let me also thank the private organisations and businesses which, through their launching of innovative local initiatives, have formed the vanguard in the campaign to extend the provision of public lavatories. In particular, I would highlight the community toilets scheme, which has now been adopted by local authorities across the country. This scheme allows the public, in less restricted times, to make use of toilets provided by local businesses and councils without making a purchase. I would also highlight the support that the British Toilet Association has given to this scheme through its “Use Our Loos” campaign and the launch of the Great British Public Toilet Map.
Of course, for people who cannot use standard accessible toilets, it is about not just the number of facilities available but ensuring that the right facilities are available. This is why the Government have delivered in providing more “Changing Places” lavatories to ensure that everyone in this country, including those with special lavatory requirements, can be confident in using our public spaces. At the Budget last year, the Chancellor announced £30 million to fund “Changing Places” toilets in existing buildings and accelerate the provision of these vital facilities. We will announce the details of this funding in due course. The ability of people to enjoy our public spaces, and to support our economy, should not be determined by their disability or personal circumstances. I am proud of the commitments that the Government have already made on this important issue. I hope that the measures included in the public lavatories Bill will help to give people the confidence to get out in our public spaces and support our high streets, once it is safe to do so.
The provisions of both Bills before this House today act only to supplement the extensive support that the Government have already provided to ratepayers since the start of the coronavirus pandemic. In response to it, we have ensured that eligible businesses in the retail, hospitality and leisure sectors will pay no business rates at all in 2020-21. This is a relief worth £10 billion which, when considered alongside small business rate relief, means that more than half of ratepayers in England are paying no rates at all this year. Both Bills before the House form part of the critical package of support for ratepayers and reform to the system that this Government have committed to delivering. I commend both Bills to the House.
My Lords, I want to focus my remarks on the Non-Domestic Rating (Public Lavatories) Bill. I was unable to speak on this Bill when it was first introduced—what seems like a lifetime ago—and I welcome it now with a particular interest.
In 2008, when I was standing where the Minister is now, I was pleased to introduce the then first-ever guidance on public lavatories, designed to prevent further closures, improve access and quality and, in general, to make the point that public lavatories should not be a national joke—let alone a national disgrace—but a local asset, which local people can rely on and take as much pride in as any other local provision. The case made then is the same as made now eloquently by the Minister: that everyone of all ages and conditions should be able to count as of right and dignity on there being a decent public loo accessible. We wanted to expand access and encouraged private partners in retail to consider how they could make their loos more accessible. As the Minister has reflected, a great deal of good practice has been inspired at local level: for example, by encouraging the use of S106 to build more loos and in notable innovations and changes.
However, that was not a national strategy, which was at that time beyond my reach. Sadly, however welcome, neither is this Bill a national strategy. That alone would ensure that there were minimum mandatory standards of access, provision and quality tailored for special needs, particularly those of the elderly and disabled, and the many people who suffer from medical conditions and require frequent access. This is therefore a reactive Bill; it is long overdue and reflects decades of pressure from the British Toilet Association. It has worked with successive Governments to achieve it and we should be very grateful to it, but I think it would agree that a national strategy would be welcome now.
The statistics suggest that in the last decade almost 700 loos have been closed, accelerated, I have no doubt, by the vast cuts in local authority spending. In addition to the loss of public lavatories, we also need to face—as sadly the Bill does not—the degraded and frankly disgusting nature of so many of them. Even in the most beautiful towns such as the one I live in, Lewes in Sussex, our local loos are frankly a disgrace. Other local authorities—Ceredigion in Wales is an exemplar—take huge and award-winning pride in what they offer their local community and tourists. If it can make it an important priority, every local authority can. I should add here how glad I am that Wales is also sharing in this measure.
As with everything else, Covid has exposed the importance of things we took for granted. The awful impacts following closures of public loos revealed that only too graphically. We have also become more aware, as shops and buildings close, that public loos become the only option for people who are still working in the outdoors.
This Bill, which provides business rates relief, is long overdue. It is a modest proposal but it has, in effect, removed what was, frankly, always a historic anomaly. The exam question is: what sort and what scale of difference will it make? In principle, it will certainly incentivise better local provision and free up resources, and it might stop the closure of some local lavatories. However, it is impossible to tell whether it will have a real impact, given that current estimates are that there is a black hole of about £10 billion in local authority finance. It goes without saying that the funding deficit makes it simply impossible for local authorities to provide the services which are so badly needed. As we approach post-Covid better community building, that has to be at the heart of it.
The Bill can be improved in this House. For example, I would like to see more emphasis on how loos in public buildings such as museums, town halls and libraries could be involved. However, I have some real questions for the Minister, primarily regarding how far this small amount of extra funding will go to address the extent of the loss of provisions. My questions are these. What estimates have been made for the public loos that will now be saved? How will this be monitored or reviewed? What guarantees are there that this money will be spent on what it is intended for, rather than lost in the other huge demands of local authorities? What incentives are there that this money will also provide for caring for public loos and providing extra facilities, such as changing places? Finally, does the Minister agree with me that the essential thing now is to build on this Bill, and to recognise that public health—as we know acutely at the moment—needs constant vigilance and constant investment, and local agency and partnership? I ask our Minister to take the lead in pressing for a national strategy.
Public lavatories were a sign of public dignity, of high standards and municipal confidence. They were constructed with care and beauty by our Victorian ancestors. They should also be a fundamental part not only of our public health strategy but of our strategies for equality, ensuring that children can be cared for and comforted when they are out and that parents do not have to search in desperation for a friendly pub, and ensuring that people of all ages, and people with medical conditions, are free to leave their homes without a battle plan for finding a loo and living constantly in fear of embarrassment. This is not a trivial or facetious issue. It is far more profound than we give it credit for because, to take it seriously, if we do not prioritise it, it is discriminatory and dangerous. I really hope that the expectations held for this small but important Bill are fulfilled.
I remind the House that I am a vice-president of the Local Government Association.
First, I want to agree with the concerns expressed by the noble Baroness, Lady Andrews, on the Non-Domestic Rating (Public Lavatories) Bill. I welcome the decision to combine the two Bills for Second Reading, given that there has already been a Second Reading of the Non-Domestic Rating (Public Lavatories) Bill. However, it is also appropriate to consider the two Bills separately as they progress through the House, because they cover different issues.
I shall not say much about the Non-Domestic Rating (Public Lavatories) Bill, as other colleagues on my Benches will cover those issues fully. From my perspective, I welcome the Bill and it is right that the Government have agreed to backdate its implementation to April 2020.
I want to speak on business rates and the need for urgent reform of the system. In his introduction, I think I heard the Minister say on the review of business rates that the Government will be reporting in the spring. I had assumed that the Budget at the beginning of March might be the appropriate time for that to be announced, but it sounds now as though it might actually be early summer. I would be grateful if, when he responds to the Second Reading, the Minister might clarify that.
I accept that a delay in revaluation to 2023 is inevitable, given the coronavirus pandemic. However, revaluation must ensure that local government does not end up being underresourced and that councils are enabled to widen their sources of income. Revaluation, when it comes, will be effective only if there is a root and branch reform of the system, so that it is much fairer to high streets and city and town centres, and raises much more from online retail companies and their warehouses. Valuations in much of retail, hospitality and leisure have become very out of date. We should bear in mind that retailers currently pay over one-quarter of business rates across England and Wales.
I hope the Government will avoid the temptation for further temporary fixes to the system. The system was in great difficulty before the Covid-19 pandemic, but it is now broken. One reason for this is that the current system treats companies in the same way, whether they are making a profit or a loss. This is the consequence of levying taxes on the value of a property as opposed to the value of a business itself. This problem can be made more acute by the need of national and local government to raise broadly the same amount each year from business rates, even if turnover and profits of businesses plummet. Another reason is that the current system does not address the lower business rates paid by companies retailing online and based in out-of-town warehouses. Revaluation must take this into account. I have concluded that we should consider the retail sector as a whole and divide up the tax burden differently, so that online retailers pay their fair share of the total tax bill.
There is a lot pressure to move to an annual system of revaluation. I can understand the arguments for that, but, instinctively, I think that three years would be better. It would reduce administration and allow trends to be more certain.
Finally, there is a very strong case for extending the business rates holiday from April this year. In the current year, the Treasury has written off some £10 billion in business rates, fully exempting around 358,000 properties in retail, leisure and hospitality. The case for continuing the current scheme is strong, probably for another full year, although some selective phasing might be appropriate. That said, the Government should be careful not to give a business rates holiday to companies which do not need it. As an example, large supermarkets—whose profit levels have been rising during the pandemic, as evidenced by their recent results—did not need the help they were given in the current year and so were right to pay it back. The Government should not be borrowing money on behalf of the taxpayer to give it to retailers whose profits are rising. That said, smaller high street retailers, including convenience stores, will certainly justify extra help, well into next year.
My Lords, I welcome the opportunity to debate these two Bills, which I support. I thank the Minister for an online meeting last week. I refer to my professional involvement with non-domestic ratings, my membership of the RICS and other bodies, and my interests as a vice-president of the LGA and the NALC, and as a business property owner.
My own experiences started in the Inland Revenue valuation office in 1975. At that time, residential and commercial properties shared a common valuation approach based on an assumed rent between a hypothetical landlord and a hypothetical tenant. I observed both the Layfield report and the Lyons report, which looked at local government finance and central government grant. My maiden speech here was on the Local Government Finance Act 1988, enacting the ill-fated community charge and setting domestic and non-domestic systems on different trajectories. I was in private practice when the poll tax was replaced with council tax, or CT, based on bands of capital value as at 1991. Business rates remained rent based. Subsequently, there was a capping on limited CT increases, but original value bandings for England remained. Business rates, by contrast, were subject to inflation-plus annual increments to uniform business rates, with periodic revaluations. This divergence has changed the tax burdens.
Things sharpened up when the Labour Government curtailed empty property relief, but nothing matched the later financial shock of the 2010 revaluation, based as it was on 2008 peak-of-market rents, by which time of course values had fallen, with insolvencies and rent voids soaring. I saw demands for a fairer approach, reliefs and more frequent revaluations grow, and the effects of the Treasury principle of fiscal neutrality meaning that changes could not of themselves adversely affect tax yield. Welcome exemptions and reliefs for the very smallest premises were thus funded by larger ratepayers. I benefit from that.
Transitional relief for large changes in the rates burden balanced gainers and losers, but the way in which downward transition now operates means that, in the example of a shop in Canterbury, the 2021-22 rates bill will still be 80% more than it would have been without the relief. That seems intrinsically unjust. More frequent revaluations would reduce or eliminate the need for transitional relief but lack delivery. Ideally, we should have annual revaluations but, like the noble Lord, Lord Shipley, I suspect that that may be impractical, although it is proposed for Scotland. Meanwhile, too many rates bills are still coloured by the never-repeated 2008 rental values.
A surge in rating appeals of course followed the 2010 revaluation—many thousands on that list are still outstanding—in response to which the Government introduced a check, challenge, appeal, or CCA, system. It was designed to weed out frivolous cases and reduce administrative burdens, but it also put significant barriers in the way of genuine cases, perceived by appellants as protecting the Valuation Office Agency, the VOA, from the inevitable results of poorly resourced, researched and compiled valuation lists. Avoidance, needless to say, has become more prevalent.
Criticism continues. Largely because of the inflation-proofed and fiscally protected yield, the uniform business rate has risen to over 50p. Some businesses pay more in business rate than rent; reliefs apart, all pay much more on any measure than their services-hungry residential counterparts or businesses under any comparable European tax. The Minister may well wish to reflect on this legacy. The pandemic measures have been very welcome, but even they do not alter the underlying landscape.
I turn to what I call the “lists Bill”. It puts back the next revaluation to 2023 and cuts to three months the deposit of the rating list before it comes into force. The Minister has said how the antecedent valuation date works, but a 2023 revaluation means a 2021 AVD. Although I am assured that the Valuation Office Agency is confident of the evidence base—despite lockdown, furlough, forced closures, pop-up rent deals and rate holidays—other experts think that market rental evidence this April will be thin and unreliable. For bars, clubs and property valued on fair maintainable trade, current evidence will be largely absent. Delaying the AVD to, say, September or December is possible, but apparently not in contemplation due to VOA operational timeframes. I am not entirely convinced on that but am keeping an open mind.
The reduced three-month list deposit period was originally linked to three-yearly valuations—on which the Bill is silent, so it is a little asymmetric. Checking an assessment and pointing up errors in January is one thing; getting the VOA at a busy time of year to make corrections in time for dispatching rate bills in March is another. Bear in mind that rate demands are payable in full until the rateable value is amended. I note that the LGA says it is altogether too short a lead-in period for its members. So this “lists Bill” has consequences.
On public lavatories, I welcome the overdue and long-promised exemption. I thank the Minister for writing to me last October and for confirming backdating. What the Bill sets out is reasonable and appropriate, but it highlights the need to examine public facility exemptions more generally.
Rental values still afford an excellent market-derived business tax base, but problems with the business rates system remain and, as the noble Lord, Lord Shipley, said, major reform is certainly needed. On this, professionals, local government, businesses, the CBI, Revo and trade organisations are united. I commend the Government for commissioning their fundamental review and thank the Minister for his reassurance, but can he confirm that Parliament will have a chance to debate it?
I hope the review will be bold and will look at the overall business rates system and its fairness within local government finance, alongside the appropriateness of exemptions and reliefs and issues of avoidance. I hope that alternative revenue streams, such as those related to online trading and opportunities for locally managed and levied revenues, will be included. It is not before time; critically threatened physical retailing, as well as many investments, pension schemes and jobs may depend on getting this right.
My Lords, I intend to make only a short intervention today.
Covid-19 has had a massive impact on the sport and recreation sectors. While the arts lobby successfully negotiated a £1.57 billion package of support for the art, culture and heritage sectors as long ago as July 2020, the sports sector has not been so fortunate. Some £300 million in emergency funding was agreed to help sports clubs in England survive the ongoing Covid-19 restrictions during the recent winter. Rugby league, rugby union, horseracing and the lower tiers of national league football were all beneficiaries of the support, but in the world of sport the funding gap exists most prominently—and the pain is most acutely felt—among community sports clubs, local authority sports facilities and the smaller local amateur sports clubs, many of which have been the lifeblood of communities the length and breadth of this country throughout our lifetimes.
During this debate on the Non-Domestic Rating (Lists) (No. 2) Bill, I want to draw one item to my noble friend’s attention, in full anticipation that, having heard him respond to my noble friend Lord Botham when he made his impassioned plea on the subject and received such praise from the Front Bench, today in the wider context of post-Covid non-domestic rating policy, his plea and mine will not fall on deaf ears.
Sports clubs in the community provide opportunities for people from all walks of life to have a healthier and more active lifestyle. Non-domestic rate relief pre-Covid had a significant discretionary element. Charities, other not-for-profit bodies and sports clubs could apply for a percentage reduction in the business rates payable on any non-domestic property which was wholly or mainly used for charitable purposes. There were two elements to this reduction and relief: mandatory by law and discretionary—in other words, at the discretion of the council.
If you were a registered charity you were entitled to mandatory charity relief: an 80% discount on the full or transitional amount due. If you ran a community amateur sports club registered with the Inland Revenue, you were also entitled to an 80% mandatory discount on any non-domestic property that was wholly or mainly used for the purposes of the club. However, the rateable values and the cost to the clubs of going through that process—of being at the mercy of some local councils for part of the rates paid—remained a major cost item at a time when many were barely surviving, and those barely surviving have gone through even tougher times now.
I congratulate the Government on the business rates holiday that is in place and on a range of initiatives they have taken, on which my noble friend the Minister has led from the Front Bench in this House. However, the critical issue for the future—I know this is passionately felt by my noble friend in sport, the noble Lord, Lord Addington—is the continued support for sports clubs. My view is that there should be 100% rate relief into the future from the Government for registered community sports clubs. I believe that the time has now come to raise that mandatory element from 80% to 100% and to remove the discretionary element. This should be a mandatory part of the package of measures to help sports and recreational clubs get back on their feet and play a pivotal part in ensuring that the population is healthier and more active as we emerge from Covid-19 and face future challenges.
In summary, I hope that rate relief for community amateur sports clubs will be made compulsory, and I very much hope we will have the opportunity to return to this in future debates. In the meantime, I appreciate the opportunity of raising this important subject in the context of the draft legislation before us.
My Lords, I very much agree with the noble Lord, Lord Moynihan, about the vital importance of sports clubs, and I ask the Minister to look favourably on his proposal.
Although the focus of the non-domestic rating Bill is relatively narrow—to reset the next revaluation of business rates to take account of the pandemic, which of course I welcome—I urge the Minister to get the Secretary of State, the Chancellor and the Prime Minister to think big about the future of town centres. Covid has accelerated their decline; it is now a really big crisis, on top of the online shopping phenomenon, which has also been accelerating.
The Government need to act because town centres can become the hub of local community and business life. They have been in the past, and, to some extent, they still are—but this role is rapidly shrivelling due to commercial and online pressures and changing lifestyles, which have been accelerated by the pandemic. I believe that business rates and rents have a crucial role to play here. Of course, there is a variety of complex exemptions, suspensions and reliefs, but it is now necessary to have a much more radical and comprehensive solution to this problem, or town centres will die just as we consider future policy to save them.
My own town centre in Neath is a cosy, pedestrianised area, which is very attractive to shop in, although the shops have been disappearing on all levels. There is an old market building with small stalls dating back to 1837 and renovated in 1904, and a great variety of small artisan shops—you can get your watch fixed there. Most people go into a jeweller’s and are invited to exchange their watch when the battery runs out rather than replace it because it is almost cheaper to buy a new one. This issue of the throwaway society, which is ecologically damaging, of course, can be dealt with if there are people who repair them, as they do in the Neath town centre market. A number of other small businesses and artisans offer that facility.
To keep that kind of vibrancy in town centres, they have to be supported, otherwise it is not viable. The town centre and markets are being undermined by high costs, high rents and business rates. This is not the local council’s fault: it does not have the funding or the legal basis to subsidise. We lost our Crown post office, which was put into the back of the local WHSmith, but how long will WHSmith survive across town centres such as Neath’s? We have bank branches closing the whole time; if local post offices assumed a post/bank role, banks could put their facilities in the back.
The Government need a completely new agenda on business rates as they apply to town centres. They should be completely scrapped for micro-businesses in town centres. Of course, there will be issues of defining what a town centre is: would this apply to large village centres, for example? At a central level, the Government have to fund local government because it cannot do this on its own. If rents are not scrapped for town centres, that has to be part of this as well. Of course, local government has had a 30% cut in the last 10 years, so it is no good the Government and Ministers passing the buck to local authorities; the Treasury must step in and take responsibility.
To reduce our carbon footprint and end the throwaway culture, where we never get computer printers repaired or watch batteries replaced because it is cheaper to just throw them away and buy a new one, we have to encourage a regeneration of these local skills and facilities, effectively through a subsidy. To do so, we have to end our society’s obsession with low tax. If we want a decent quality of life in town centres, which everyone says they do, we have to be prepared to pay for it. It is not going to happen on its own—market forces and commercial pressures on their own will not resolve this problem. Treasury funding, provided through local councils, is necessary in order to regenerate and revive our town centres, and I hope that the Minister will seriously consider this option in the future review, which has to be comprehensive.
My Lords, I warmly welcome, for the second time, this Bill to scrap business rates on public lavatories. I hope this will mean that closed loos will reopen and that local authorities will now be encouraged to provide more such facilities, including well-maintained disabled loos with hand-washing facilities. It is imperative that more disabled loos are available for our ageing population because so many people with medical conditions cannot risk leaving home without knowing that there is a suitable loo for them to use.
I commend the excellent facilities provided by Changing Places, which the Minister mentioned in his speech: they have space, hoists and a changing table, and are vital for families with disabled children. I am glad that Changing Places is going from strength to strength, with a clear map of where their facilities are installed.
However, there is a problem with the centrally held database of where there are public loos in the United Kingdom. The Government gave up on collecting this information 20 years ago, and the British Toilet Association would like to help them restart this invaluable database. It also says that local authorities would like clear guidance on cleaning and hygiene measures in these Covid times.
Nowhere in the British Isles should be far from accessible public lavatories, and this situation should be monitored. Is that asking too much?
My Lords, it is a pleasure to follow the noble Baroness, Lady Thomas of Winchester. My interest is in the second of the two Bills before us about the exemption from rates for public lavatories. I too am glad to see it back again, following its having been dropped at the end of the last Parliament. I was one of a very small number of speakers at Second Reading on the previous occasion. It is remarkable and very encouraging that, for whatever reason, so much more interest has been shown in the Bill this time round.
I join with others in welcoming the measure; it addresses a very real problem, which is not much talked about in public but is nevertheless very real. This is not just a matter of convenience, as these places are increasingly difficult to find; it is also a serious health issue, particularly for people with special lavatory requirements or other health problems, who need to be able to easily find such places and have them within easy reach. There are some who dare not go to places where they are not assured of such support; there are others who find taking the risk very worrying and uncomfortable. The cost of providing and maintaining such places is not inconsiderable, so something needs to be done. The help that this Bill offers, however small, is overdue and much to be commended.
The other point that interests me about it and has led me to contribute to this debate relates to my past. I spent some time, during an earlier stage in my career as an advocate, in cases about valuation for rating. I was also the joint editor of the leading textbook on this subject in Scotland. To me, it is of interest to find that public lavatories appear as separate entries in the valuation list. I did not encounter them at any time in my practice, and they are not mentioned in the list of unusual subjects to which the book refers, such as advertising hoardings and radio masts. However, there is no doubt that they should be in the list wherever they exist as separate subjects, with the consequence that, according to the ordinary rules, they will be chargeable to non-domestic rates.
This is the result of two basic rules. The first is that every hereditament or structure that is capable of separate occupation should be the subject of its own entry on the list. The other is that the annual value that must be attached to it for rating purposes is, in theory, the rent at which the hereditament might reasonably be expected to be let from year to year, assuming that the tenant undertakes to pay all the rates and to bear the cost of repairs and other expenses necessary to maintain the structure in a state to command that rent. That may seem rather fanciful in the case of public lavatories, but it is what the rule requires. Nowadays, in practice, that figure is obtained, in cases such as this, by applying a prescribed formula which probably does not bear much relationship to actual rents but is intended to maintain some kind of balance across the entire valuation list.
In this case, we are concerned only with self-standing public lavatories that are in separate occupation, such as one might hope to find in a town centre or a public park or in or near a children’s playground. The Bill is designed to deal with that situation only, as is the method that it applies to ensure that rates do not have to be paid by those who occupy them, by which I mean those who are in rateable occupation as their owners or tenants, not the people who find it convenient to use them. However well disposed their owners or tenants may be to the public need for such facilities in these places, it is unlikely that they would be able to claim relief on the ground that they are charities. The subjects cannot be taken out of the list altogether, as that would be contrary to one of the basic principles. So, the solution is to provide by statute that they are to be entered in the list at zero value, which is what this Bill seeks to do.
Like other noble Lords, I would like to see something done to encourage the more frequent provision of public lavatories in public places such shopping malls, public libraries and bus stations. However, the problem is that facilities of that kind have to be included in the value of the larger hereditament of which they form part. They cannot be extracted from it to form a separate entry, as in the case of the subjects dealt with in the Bill. That is not to say that this is not a very important issue, but the fact is that it is not easy to provide a simple solution for them such as we have in this case. Nevertheless, I hope that the Minister can assure the House that minds are not closed on that issue and that something may be done, perhaps by adjusting the relevant formula, to address it.
I support the Bill and would like it to pass into law as soon as possible.
My Lords, I wish to concentrate solely on the Non-Domestic Rating (Public Lavatories) Bill and, in doing so, express my regret that these two Bills have been harnessed together. They may sound similar, but their impact is very different. I declare an interest as a member of an, as yet, informal campaign group trying to improve the quality of public toilets through the introduction of a toilet hygiene rating scheme.
I will start with a quote:
“The main results from the enquiry are 1) the quite inadequate free provision for women. This is perhaps the most outstanding defect at present existing in London in relation to this important matter.”
The inquiry referred to was undertaken in 1928 by the London County Council. This inequality was made worse by the Public Health Act 1936, which allowed providers of public toilets to charge women but not men for using facilities. That particular injustice stopped in 2008, but the inequalities in provision for women continue. Indeed, official advice from the Health and Safety Executive on workplace toilets still embodies this discrimination, setting in print a recommendation for a ratio of male to female facilities which greatly favours men.
It is a biological fact that it takes a woman approximately twice as long to use a toilet as a man. In addition, an average woman has approximately 480 periods in her lifetime, each lasting three to seven days. Some 14 million people in the UK are estimated to have some kind of bladder dysfunction. Women are more prone to this than men, because of the impact of childbirth. I share with very many women a lifelong sense of injustice that we are continually disadvantaged in this way. When did you ever see a queue outside the gents’ toilets? Modern changes of attitude recognise the argument for gender-neutral facilities, but sadly these are sometimes being provided only with the loss of facilities for women. Women from some faith and cultural backgrounds find it simply impossible to share facilities with men.
Of course, this is not the only shortcoming in our public toilets. There are still far too few changing places toilets, as my noble friend Lady Thomas referred to, with both the space and the high standard of hygiene required for severely disabled people and their carers. There are too few well-appointed toilets for disabled people generally. I also want to make a complaint on behalf of fathers. Far too many sets of public conveniences assume that all childcare is done by women, so baby-changing facilities are in the women’s toilets. Men on their own with children often face an impossible dilemma on where to change their child’s nappy.
I have campaigned on these issues since the 1980s and clearly I have failed, because the number of public toilets has dwindled. When the public complain that their cleanliness and condition are poor, local authorities facing financial problems find that the easy solution—the only solution—is to shut them down.
The Covid crisis has heightened awareness of these issues. First, we all became aware of the need for the highest standards of cleanliness. Combined with pressures on staffing, this posed a dilemma for local authorities, which too often simply shut them up completely. Over the years, as the number of council-run facilities has dwindled, we have increasingly relied on toilets in shops, pubs and cafés, but these have been shut for large parts of the last year. This led to some pretty horrifying situations, which hit the headlines when the Prime Minister suddenly decreed that we could all drive as far as we wanted for our exercise. It was midsummer and the weather was lovely. Hundreds of thousands of people set off for the coast without considering whether there were toilets for them to use during their day out. That incident revealed that good, clean public toilets are an important part of our tourist industry.
This legislation is obviously a good, sensible provision, and I support it, but it is not going to solve any of the problems I have outlined. I note that the estimated cost will be £6 million in England and £450,000 in Wales, which will hardly make up the financial deficit which has reduced the availability of good public toilets over the years. The Minister outlined other initiatives that the Government are taking to improve public toilet provision. We clearly need many more of them. The community toilet scheme that he mentioned started in Wales well over a decade ago, so it is good to see England catching up with this excellent initiative. It is now time for stricter requirements and standards. I note that the provisions of the Bill will not apply to toilets which are part of a larger unit; for example, in a public library. Why not, if they are open for public use? My local public library has the only public toilets for at least a mile and a half in all directions. That restriction seems unnecessary.
My Lords, it is a great pleasure to follow the noble Baroness, Lady Randerson. I should tell her that it is not that she has failed, just that she has not succeeded yet in some of the important aims that she has close to her heart.
I shall say a little bit about the first of the two Bills. I welcome the Non-Domestic Rating (Lists) (No. 2) Bill. I agree that the idea of postponing the date for the next revaluation to 2023, when it was originally to have been brought forward to 2021, makes sense in the context of the pandemic. I think that is the right move. The only points that I would make in relation to that are, first, to stress the importance of continuing the business rates holiday for retail during the pandemic. I welcome the fact that we have had it in this financial year but, clearly, in the next financial year it will be equally important, at least for part of that financial year, as I see it.
As my noble friend the Minister made clear, there remain long-term issues about the fair treatment of town centre retail and the proper taxation of online sales and out-of-town businesses, which we need to deal with. Clearly, that has been heightened in the pandemic. We have all welcomed online sales during the pandemic; they have performed very well. But it highlights the need to have a different tax treatment from the one that we have at present. But I certainly welcome that piece of legislation.
I turn to the second Bill. I should say that I see no problem in dealing with both Bills together at Second Reading. As I understand it, they will be separate for Committee and Report, and I welcome that, too. The second Bill is also welcome; it is virtually identical to one that your Lordships may recall I took through Second Reading in July 2019—the only difference being the retrospective nature of the tax relief that is going to be part of the scenario in this current legislation for the present financial year. That Bill fell with the prorogation and, essentially, this is the same legislation being brought forward again.
I recall from that time—and I highlight an issue that has been mentioned by the noble and learned Lord, Lord Hope of Craighead, as well as the noble Baroness, Lady Randerson, just now—the issue of the separate assessment requirement. The problem with the legislation—and I recall looking to see whether there was a possibility of doing some apportionment—is that, unless the public lavatory is separately assessed as a single unit, the possibility of the business rate relief is not there. If it is part of a shopping centre, a museum or a library or, indeed, if it is with a council car park, the likelihood is that business rate relief will not be forthcoming, as the Bill is structured, because it has to be separate standing. That does not mean that it is not a welcome piece of legislation, but it is a defect, if what we are seeking to do is to improve the scenario demonstrably by ensuring that it is far more likely that we get a good spread of public lavatories throughout the country.
I agree with the noble Baroness, Lady Andrews, that we need to look at this as a more serious issue than is covered by this piecemeal reform, welcome as it is. There is an issue, which we can all identify with as we go around the country and go into our own towns and communities, of the need for proper provision that can be welcomed and held up as an exemplar of what we do as a country. If my noble friend the Minister could say something about the possibility of apportionment or a more widespread reform, so we can have wider relief, that would be welcome.
I agree about the welcome measures that are there—the community toilet scheme referenced by my noble friend, and the Use Our Loos campaign funded I think by Domestos, which is also worthwhile. I also very much welcome the Changing Places toilet scheme. Could my noble friend say something about the MHCLG consultation, which I think ended in 2019, on how we are going to carry that forward and do more? As the noble Baroness, Lady Thomas of Winchester, said, that again is much needed, and something that any civilised society would want to do.
Like others, I welcome the fact that Wales is signing up to both pieces of legislation. That is absolutely right and welcome. The only other issue that I will mention briefly is in relation to Network Rail. As I Minister, I talked with Network Rail about extending free entry for its managed stations, which I think the noble Lord, Lord Kennedy, was also keen on. I think that we discovered that all mainline stations in London had free entry except for Marylebone, for some reason. Does the Minister have any update on that, or could he look at it and let me know by letter and copy it to the Library, about the position there? I very much welcome these two measures and will certainly support the Bills.
My Lords, I welcome the return of the Non-Domestic Rating (Public Lavatories) Bill and hope that it will now rapidly complete its passage into law after the delays that it has suffered since its introduction. I declare a strong local interest, in that Saltaire is a village that is also a world heritage site, attracting hundreds of visitors—most often schoolchildren or retired people, both of which groups naturally ask where the toilets are as they get off the bus.
Bradford Council, faced with continuing cuts in its transfers from central government, closed most of its public toilets three years ago, including those in its three tourist destinations—Haworth, with the Brontë parsonage, Ilkley and Saltaire. I do not blame the council, which has found itself up against extremely painful choices in trying to sustain essential services. It has attempted to transfer the costs of providing these basic facilities on to the local communities, which in turn raises the question of how local councils can raise sufficient funds for services such as this when principal councils have found themselves unable to do so.
The history of local government in England is intimately connected with public health, public and private toilets and the prevention of disease. The history of Bradford and the building of Saltaire were shaped by public health concerns. Typhoid and typhus were rife in Bradford in the early 19th century, as a result of overcrowding and the contamination of water supplies. Titus Salt therefore decided to move his entire works and workers out to the countryside, specifically building clean water and the regular emptying of privies into the design of the village. But Titus Salt did not regard such provision as purely a private affair; he was also a local councillor and twice mayor of Bradford, and he raised local rates to pay for public improvements in water supply and sewage disposal.
It is a sad indication of the peculiar mix of anarchic libertarianism and authoritarianism with which the Conservative Party has now become infected that some have questioned whether the provision of toilets is a public duty. We have heard suggestions that visitors can use local shops instead for toilet breaks—not an easy option in a Victorian village such as Saltaire, where toilets were originally in back yards and are now either in basements or upstairs, meaning no access for the elderly or disabled. At a time when our country is gripped by a pandemic, with the Prime Minister regularly reminding us all to wash our hands as often as we can, the suggestion that people away from home should not have easy access to toilets and washing facilities takes the idea of the privatisation of public services to a dangerous extreme.
There are wider issues here about the future of local government finance—and the future of local government and local democracy as a whole. We have all witnessed the bias against local government that the Conservative Government display, painfully evident in the way that they turned to multinational outsourcing companies to set up the test and trace scheme for Covid-19 last spring, rather than turning to local authorities and their public health officers, who would have known how to do it. Government plans to parcel up bits of Whitehall to dispatch outside London, rather than devolving decision-making power to regional and local government, demonstrate a similar engrained authoritarian centralism.
The Prime Minister’s pledge to level up the neglected communities and regions of this country will not begin to make a difference unless the funding, and the powers, of local authorities in these regions are transformed. The Treasury is now undertaking a fundamental review of business rates, as the Minister noted in his opening speech. But questions of the relationship between local and central government in England, including the fiscal and redistributive aspects of that relationship, go much wider than those of business rates alone, of which the provision and financing of public toilets is itself only a small part. The Government have promised us a devolution White Paper. I look forward to the publication of that, and I hope that Ministers will be open to a wide debate on the future of England’s local and regional government when at last it appears.
My Lords, I thank the Minister for his introductory remarks, and, like many others, I support these Bills. I will confine my remarks to the Non-Domestic Rating (Lists) (No. 2) Bill, not least because the other Bill—and the important subject it raises—has been dealt with comprehensively and succinctly by my noble friend Lady Andrews and a number of others, embellished by the hygiene history of Saltaire given by the noble Lord, Lord Wallace. It is always a pleasure to follow him.
Like other noble Lords, I fully understand the need for the measures contained in the Bill. In effect, in summary they will help ensure that future business rates will better reflect the potential effect of the Covid-19 pandemic on the commercial property market by postponing the date of the next business rates revaluation until April 2023. It seems to make sense—not least to the business community affected—to take into account the effects of changing market conditions, and that is why I will support the Bill. But perhaps the Minister could respond to one or two questions and queries that I have regarding the Bill.
First of all, it seems to me that the delay cuts both ways. Does it not mean, for instance, that some businesses badly affected by the pandemic will have to tolerate their existing burden of rates—assessed and set in perhaps much more benign circumstances some years ago—for potentially an additional two years, while their present commercial reality may be much changed for the worse precisely because of the pandemic? To address this, could not the new valuation and assessment, taking into account the effects of the pandemic, be carried out in a much shorter time than the additional two years outlined in the Bill? Perhaps the Minister could tell us.
Secondly, as we have heard on several occasions, the Government are presently undertaking a fundamental review of business rates and, as part of that exercise, they are considering the frequency of future revaluations. Can the Minister tell us what specific implications, if any, today’s Bill might have on that review? Can he assure us, for instance, that the review will not be unduly delayed because of the measures we are considering today, or are we to assume, as I did from his opening remarks, that there has already been a delay on this, partly—presumably—because of the attention being given to the pandemic, including those aspects which relate to the present Bill?
Thirdly, will the additional time being allowed by this Bill permit a consideration of wider changes in market conditions outside of those directly springing from the pandemic? Is it to be exclusively centred in its consideration on the pandemic itself, or, for instance, are the short-term effects of Brexit, which may well prove as deleterious as the pandemic itself for some businesses, to be taken into account?
Finally, in supporting these measures, I should say that, as others have stressed, while they are a common-sense response to a temporary and, I hope, unique challenge—the Covid-19 pandemic—they do not provide a long-term solution to the recurrent problems and criticisms associated with the present valuation process, with which all of us are very familiar. That will be provided only by the review and reform of the whole process mentioned by the Minister. I hope that the Minister can assure myself and all the other noble Lords who have raised this that it will be a thoroughgoing review, followed by the expeditious implementation of the necessary and appropriate reforms, and that that is the Government’s prime longer-term objective.
My Lords, I thank the Government for introducing the Non-Domestic Rating (Public Lavatories) Bill, which applies business rates relief to all public lavatories in England and Wales. We know that many public toilets have closed during the Covid-19 pandemic, and this Bill helps local authorities and others who provide these facilities to keep them open, cleaned and generally maintained.
As co-chair of the All-Party Parliamentary Group for Bladder and Bowel Continence Care, I cannot overstate the importance of government support to keep public lavatories open at this time. It is important to understand, however, that the decline in access to public toilets predates the current pandemic, and I will briefly highlight what I believe are the most urgent issues which need to be addressed.
First, there is no verifiable data on the total number of public lavatories in England and Wales. The British Toilet Association estimates that there has been a 60% reduction in the number of public toilets in the last decade—60%, my Lords. According to the National Association of Local Councils, business rates on public lavatories cost local councils around £8 million each year. Increasingly, local councils are picking up the management of public lavatories due to financial pressure facing principal councils. One of the reasons this is so urgent is that there are 14 million people in the UK living with bladder control issues, and 6.5 million with bowel issues. A Royal Society for Public Health survey in 2018 found that one in five people do not feel able to go out as often as they would like due to the lack of public toilets provided throughout England and Wales.
One group who have been negatively impacted by the closure of public toilets throughout the coronavirus pandemic are bus drivers, delivery drivers and others who work in the transport sector, who are increasingly helping all of us during this time. One way to support these essential workers is to ensure greater access to toilets.
Not only do we need more public lavatories but we need to ensure that these provide the support that people need; for example, there are often no bins provided for the disposal of stoma and other continence and personal care products, especially in men’s toilets. Also, people with severe disabilities require toilets with hoist systems and height-adjustable changing benches, and there are still too few public lavatories with these facilities across the country.
It is recognised that there are economic benefits of providing clean and accessible public toilets: doing so boosts tourism and supports businesses on the high street. The Bill is an important first step towards achieving this.
When the Bill was debated in the other place, it was suggested that the Government publish an assessment of the impact of this legislation and that as part of this assessment they should start collecting verifiable data on the number of public lavatories in England and Wales.
The Public Health (Wales) Act 2017 requires all local authorities in Wales to publish a local toilets strategy by 2021. The aim of this is to encourage Welsh local authorities to invest in public toilets. Local authorities in England should also be required to publish a local public toilets strategy. By collecting and publishing verifiable data on the provision of public lavatories, the Government would be supporting local authorities in delivering such essential strategies, which is surely the minimum we can demand.
I end by commenting that until public lavatories were introduced in railway stations, only women with personal maids could travel—which we sometimes forget. Public lavatories are essential, and they become more and more so as we hope we can become more and more civilised.
My Lords, it is a pleasure to follow the noble Baroness, Lady Greengross. I declare my interest as a vice-president of the Local Government Association. I fully support the comments of my noble friends Lady Thomas of Winchester and Lady Randerson on the NDR (Public Lavatories) Bill. It is essential, in terms of equality, that the number of disabled lavatories and access to them should be increased, not only in town centres but in visitor attractions and beauty spots around the country. Other Peers have spoken eloquently on that issue.
Turning to the NDR (Lists) (No. 2) Bill, I have a few points to make. While I support moving the date for compiling the lists to 1 April 2023, this is an opportunity to move from a five-yearly review to one every three years. Other noble Lords have spoken to this issue. I would not support moving to a yearly revaluation as this would be too great an administrative burden on local authorities, but a three-yearly revaluation would be a good compromise.
It is important that we fully understand what is happening to our high streets. During lockdowns, most of the retail and market outlets are not able to trade. Some retail outlets have been able to move their business to online trading and delivery, but most have not. We have reached a stage where enormous warehouses have been constructed to service online business, but they do not contribute in the same proportion as high-street businesses. Now is surely the time to readjust the rating system so that the rateable value and rates paid by high-street retail outlets is radically reduced permanently. At the same time, online warehouse operations should be taxed in proportion to their size, turnover and profitability.
While it has been enormously beneficial to people to be able to buy goods online during lockdown, especially in the run-up to Christmas, the effect on the high street has been catastrophic. Many retail outlets rely on the December trade to see them through the rest of the year. I am sure the Minister does not wish to see a return to the moribund state of our high streets during past recessions. I welcome the rate relief which the Minister has set out to alleviate hardship during Covid, but that is only short-term.
I will speak briefly on mixed hereditaments. Many, many years ago I sat on rating appeal tribunals. While a large proportion were about dates, there were a proportion of mixed hereditaments, with those living in premises above retail outlets which they ran having concerns about their rateable value. The Government have been keen to increase the housing supply by allowing developers to give notice to quit to business tenants in blocks of flats in town centres over retail outlets. These premises were then allowed to be converted into domestic dwellings. These conversions have not been subject to building controls, and in many cases have resulted in substandard accommodation with very limited space.
Can the Minister say whether these newly converted domestic dwellings were subject to reassessment of their rateable value? Were they changed from business rates to domestic rates? Did the local authorities in which the dwellings were situated receive less in rates payments than previously or more? As the Minister knows, local authorities are very dependent on the receipt of rates to help balance their budgets and to fund their vital services to the community.
While providing homes for those desperate to escape sofa-surfing with their long-suffering friends and relatives, it is important that the accommodation provided through office conversions is adequate, meets minimum standards and provides a dignified living space for their residents. I look forward to the Minister’s response on this and other matters in this debate.
The noble Baroness, Lady Altmann, has withdrawn from this debate, so I call the next speaker, the noble Lord, Lord Stunell.
My Lords, the non-domestic rating Bill is a simple Bill but it has some important ramifications that I want the Minister to clarify in this debate.
The first point I want to explore is how the Government intend to compensate local authorities for the income lost through the current Covid-19 emergency rates rebates, particularly for retail premises. As the Minister himself said, that has cost around £10 billion in this financial year, and it is at least a possibility that there will be some extension of that rebate system into the next year. My first question to the Minister is therefore: who is carrying the burden of that shortfall? Are the Chancellor and the Treasury making up the missing income so that local authorities do not lose out on the redistribution, or is the payout to the fund being cut and the damage borne by local authorities? The Minister may feel that that is outside the scope of the Bill, but that matter is very relevant to the point I shall explore in just a minute or two.
The Bill is the end product of a yo-yo policy-making process by the Government. Plan A was to reduce the review periods to every three years with a review date in 2022. That was changed to an intention to bring the review forward to 2021, to tackle the increasing evidence that outdated valuations were producing more and more unfair burdens for some—especially high-street retailers—and unearned tax holidays for others, especially distribution centres and out-of-town warehouses.
However, we now have a Bill that is to be effective from 2023, which is one year later than the original plan A and two years later than plan B. The Bill, plan C, avoids carrying out revaluation surveys until the Covid-19 pandemic is over—we sincerely hope. That makes sense in the current circumstances; it is not an issue for me at least. But the crucial point that remains is for how long hard-pressed retailers will be left paying exorbitant rates for rapidly depreciating high-street locations. How soon will they get the relief they so desperately need? One unintended result of the switch from plan B to plan C could be that that relief will be delayed by up to two years—a point the noble Lord, Lord Reid of Cardowan, made eloquently.
One key to this may be the antecedent valuation date, or AVD. That is the baseline date from which assessing the rental values will be made. I am indebted to the Association of Convenience Stores for its briefing on that topic. The first part of the briefing welcomes a proposed AVD of 1 April this year because the ACS believes that would allow full account to be taken of the steep decline in retail values and would give its members smaller rates bills to pay. The second part makes a case for the urgent extension of the rates relief scheme into the coming year because of the continuing impact of Covid-19 on its businesses. Indeed, it says in its evidence that four out of 10 of its members would have gone out of business without that support this year, so it has been absolutely critical.
The Bill is running two years later than the Government originally intended. There must not be a two-year delay in bringing the benefits of an updated valuation to the retail sector, which has been left on its knees, not just by Covid-19 but by underlying trends in retail purchasing that were already in train but have been hugely accelerated as a result of it.
If the revaluation is done this year and comes into force only in 2023—and, even worse, if there is any kind of a transition period that delays any benefits to it—the retail industry, already struggling desperately, will be left high and dry between the end of the Chancellor’s scheme and their incoming reduced rates bills. That brings me back to the working of the current retail rate relief system. If the Chancellor has acknowledged the acute pressures facing retail businesses by granting them business rates relief, and if he pays heed to what the Association of Convenience Stores and many others have had to say about extending that scheme, surely there has to be some joined-up thinking across government departments. It cannot make any sense for there to be a critical gap of two years, possibly more, between the end of the Chancellor’s scheme and the delayed implementation of the rates revaluation, given that that review is to be based on an AVD of 1 April this year.
Can the Minister confirm that the AVD will indeed be on 1 April and that he will strongly resist any idea of phasing in the reliefs granted by the revaluation beyond 2023, which would delay the benefit to the retail sector even further? Will he explore any available options for implementing at least some parts of the revaluation at an earlier date than April 2023 so that their full impact will immediately be available sooner, to the retail sector in particular? The public lavatories Bill has a backdated provision granting retrospective tax relief from 2020, so the concept will not be unfamiliar to him. Will he consider introducing a similar provision for the retail rebates in this Bill as well?
Finally, if an early start is not an option, will he work with the Chancellor to provide appropriate transitional support to that sector between the end of the Chancellor’s scheme—that is, the current support package—and the new valuations taking effect? It would be folly for what is now a two-year delay in the original timetable proposed by the Government, which would lead to a near-fatal blow to our high streets—
I wish to address the Bill concerning non-domestic rates on commercial premises. The other Bill has been well discussed; I certainly support it. I declare my interests as in the register.
I cannot make these comments without some focus on reform of the system. By way of background, I spent some 40 years working in non-domestic property. I also spent a limited time—but some time, nevertheless—in the rates department of my firm, where I learned that this is a highly specialised sector lying within a specialist division of the RICS. It is a complex business.
This Bill is about moving the revaluation date forward, thus adopting values from March this year. I believe that it is flawed. In the retail sector, it will be very difficult, if not impossible, to establish estimated rental value—ERV—based on supply and demand and comparable evidence. There are probably thousands of empty shop units across England and Wales. Some will have had no offers for many months, let alone competition—an unheard-of blight in my 40 years of market practice. Many landlords have given up the premises for temporary charity use precisely to avoid the NDR obligation. There is virtually no retail letting activity from which the ERV must be assessed in only a couple of months’ time.
This blight was predicted. For 10 years at least, the industry has been debating the implications of internet shopping for the traditional retail format of high streets, out-of-town shopping and shopping centres. The threat was clear, and it has arrived. Traditional retail must change dramatically if it is to survive the low-rent, low-rates model of internet shopping.
Of course, the body blow to traditional retail is Covid. For many retailers, it is the death knell of their businesses. Every day, the newspapers remind us of high street retailers folding. A few will be bought out of administration but many will disappear, with jobs lost, debts, personal guarantees and tragedy. However, if you are Amazon or any internet retailer, Covid has played into your hands, with low rent, low rates and collapsing competition.
With the Government turning something of a blind eye to the soft rates regime for these internet businesses, the high street carnage comes as no surprise. Yet this could swiftly be corrected if the rating value rules recognised internet warehouses as the engine room of internet shopping. The burden of rates should follow the money and the profits. We should treat these warehouses as the retail properties they have become. The Government have provided Covid rates relief—huge relief—but to the high street, this is a stay of execution, not a cure. Retail patterns are not changing; they have changed.
Moving the valuation date will require valuers to assess ERV at the trough of a dead market. There will be little evidence. The problem will arrive with an appeals process of huge proportions. There will be a tsunami of claims. Without internet shopping, this would not be a problem.
The fundamental review that we expect in the spring, as mentioned by the Minister, is welcome but I fear that these events are occurring in the wrong order. The definitions of “internet shopping” and “distribution centres” must be rewritten to acknowledge their role. Following that event, the valuation process could unfold. High street retail could settle down. Rates would be at an economically justified level. Post-Covid markets would be able to return to a balance between supply and demand.
I fear for those in the VOA who, I believe, will be overwhelmed by the appeals process. I am afraid that the NDR, as applied to retail, is a broken system. There has been a simple transfer of retail trade away from shops to the internet without the corresponding and necessary transfer of rateable obligation. Can the Minister tell the House how long we must wait, following the review, for legislation to reform fundamentally the non-domestic rating system?
My Lords, I welcome both these pieces of legislation. They seem an odd coupling, though, so I hope that the Minister will manage to separate out all the comments on the two. I declare my interest as a vice-president of the Local Government Association.
First, I want to talk about taxing online businesses. They were already outdoing physical businesses before the pandemic, but now, our rapid transition to a digital life over the past 12 months has concentrated commerce into a very small number of online businesses while small high street businesses are really struggling—much more than they did before. It is obvious that we need some sort of online sales tax so that online businesses do not have unfair tax advantages relative to physical businesses. The revenue should go to the local authority of the delivery address. It is a real pity that the Bill does not include such a measure, because this is an opportunity not to moan but to encourage local businesses, which is what we should be doing.
It is good that the Government are finally delivering on their promise to scrap business rates for public toilets. Public toilets are important for everyone but they are especially important for people who might need to use the bathroom more due to age, illness, disability and a whole host of other reasons. Should we be doing more to support their provision? Rather than just scrapping business rates, we could employ a negative rate so that public toilets could earn a rebate based on their rateable value. Businesses and premises that allow the public to use their toilet for free—that is, without needing to buy anything—would therefore benefit. The Explanatory Notes give the example of a toilet in a library premises not being eligible for the zero rate. This is a missed opportunity to encourage more premises to make their toilets readily available to the public. Of course, if, like the Victorians, we were prepared to build new public toilets—or even open the Victorian ones—we would not need to do this.
Finally, I shall talk more broadly about the old system of land taxation. It is a long-standing and fundamental policy for the Green Party that all land should be subject to a land value tax, which would share the unearned value of land use among the community. A policy of taxing land value would act as an incentive to encourage good stewardship and to reduce corporate land ownership—and, of course, the practice of land banking. It would encourage the best use of all land, compatible with the agreed permitted use, encouraging urban land to be used to its full extent and discouraging land ownership for investment purposes only.
A policy of taxing land value would bring many benefits to a large majority of the population, whether urban or rural, including owner-occupiers in small or medium plots and those who do not own land. Taxing land value thus contributes to the creation of a decentralised and sustainable society. Eliminating speculation in land and stabilising prices should make land more available at cheaper prices, enabling more workers’ co-operatives, small-scale enterprises and other community ventures to flourish.
The key difference of a land value tax compared to business rates and council tax is that the tax is levied on the unimproved value of the land itself, not the rentable value of the buildings placed on that land. The level at which the tax would be levied would be based on the full value of the current permitted use of the land, so permitted use would mean, for example, that the taxable value of land deemed by the community to have special amenity or habitat value would inhibit use for a possible greater financial return. When it is considered desirable to change the use through the land use planning framework, this new permitted use would then form the basis of the assessment, so communities would be able to keep what they see as valuable land, which might be open space or habitat for animals, without incurring huge costs.
I would love to hear the Minister’s views on land value tax and for him to take the issue away to explore further with officials. We should be taking a much deeper, longer-term look at reforming the whole of land taxes in this country. This is perhaps not the moment—but if not now, when?
My Lords, I wish to address the Non-Domestic Rating (Lists) (No. 2) Bill, and much of my comments will reflect the speeches of the noble Lords, Lord Stunell and Lord Thurlow. Although this is a short and, I suppose, on the surface relatively uncontroversial Bill, amending the date of the next revaluation for business rates to 1 April 2023, it presents a key opportunity to raise the Government's awareness of the need for a complete overhaul of the business rates system—and, in particular at this time, to save shops by giving them a lower and simpler cost base from which to operate in future.
The Minister will know that retail is a sector that generates about £20 billion in taxes and contributes about £7.5 billion in business rates each year, largely from the high streets and town centres, with further tax contributions made throughout the supply chain. The burden of business rates has risen extremely high in the past 30 years, up from an average of 35p in the pound of rateable value in 1990 to more than 51p, causing business failures, store closures and job losses. The problem for physical retail is accentuated by the rise of online retail and is most acute in the north and the Midlands, adding to the business pressures on those communities.
Frankly, in my judgment, the system is broken. From my past activities in the Commons—that is why I took 1990 as a reference point—and before that as leader of the London Borough of Islington, I believe that business rates have always been a challenge. Now we have a pressing need for a fair system of taxation for business. We need an urgent plan to keep rates at manageable levels to save jobs and retain the character of our shopping places, town centres and high streets. I have done some consultation with the industry, and there are three points it would have me make, which I now make—and agree with. First, we should reduce and fix the uniform business rate from the current 51p-plus rate back to somewhere near 30p, so that it more closely reflects physical retail’s share of sales in the 2020s. Secondly, we should introduce annual business rates revaluation from 2023, to ensure that business rates are fair and accurately reflect market conditions. Thirdly, we should abolish downwards transitional phasing to further support the recovery of the retail sector.
In the immediate term, the Government need urgently to commit to continuing the Covid-19 business rate holiday for retail. The industry itself has accepted that at the end of the current system, a 50% rate would seem appropriate. However, we now have a somewhat different situation because of a significant rise in Covid-19 cases, which has led to the current lockdown. We now see it as vital for the Government to sustain the current relief at 100% until the end of the pandemic to enable retailers and businesses to make the decisions needed now to ensure their survival and recovery next year.
I understand that the industry supports April 2023 as the next revaluation date, but has real concerns about the antecedent valuation date—the AVD—set for 1 April 2021. This would mean that the new rating assessments and rate bills in 2023 would be based on the state of the economy and property rental value at 1 April this year. Given the current lockdown and the prognosis for it to be lifted not before Easter, retail will not have recovered from the economic losses experienced by successive lockdowns for this now to be the appropriate date for revaluation.
Reliable market retail data, which is the basis of AVD, will not be available until at least April 2021 and maybe not until the following January. I therefore urge my Government to defer the AVD, which is specified in secondary legislation, so that it will not affect the primary legislation. I conclude by saying once again that this debate on this Bill provides a unique opportunity to highlight the need for fundamental business review.
My Lords, I refer to the Non-Domestic Rating (Lists) (No. 2) Bill, and agree with much of what the noble Lord, Lord Naseby, just said. Although I welcome that the Bill postpones the revaluation of business rates until April 2023 to help firms affected by the pandemic, I cannot but think, as a number of noble Lords have expressed, that this is a missed opportunity for root-and-branch overhaul of the rating system, despite the Minister having pledged that there will be a review of the current system.
The economy is facing a double-dip recession and many businesses are under extreme financial pressure, as several noble Lords have said. Spending patterns are changing as more goods are bought online. High business rates are killing off our high street and, in these circumstances, a further hike in rates, even two years down the road, will sound the final death knell for many struggling businesses. The noble Lord, Lord Hain, described his experience with his local high street and the independent traders there that are under threat.
As the CBI pointed out in a recent report, the uniform business rate has risen by 44% over the last 30 years. The UBR would be lower if it had risen only in line with inflation. If the switch in indexation from RPI to CPI had happened earlier, it would have saved businesses £13 billion over a nine-year period. The UBR makes up a significant proportion of fixed costs for businesses—another reason any further increase should be delayed beyond 2023. The Government should look at rebasing the UBR, which would boost business investment and fuel economic growth at a crucial time for the UK’s economic recovery from Covid-19.
The CBI has made a number of recommendations and I hope the Minister will take them on board, particularly when the review gets fully under way. For example, for the remainder of the 2017 revaluation period, the Government should freeze the UBR. As a number of noble Lords have said, relief should continue to be targeted to support the most vulnerable businesses, so badly hit by the pandemic.
The Minister should ask himself, “Do we want to save our high streets and many smaller businesses, or not?” Currently, any business that can operate remotely will continue to do so, with implications for the economic health of our city and town centres. The incentives to cut staff and operate from smaller or with no office space will continue. Remote working can bring many benefits, especially if linked to more flexible working, but it should not lead to the shrinkage of our vibrant business sector and have the effect of turning our urban centres into ghost towns.
My Lords, my taking part in this Bill is totally down to the presence of two other names on the list. The first is that of my noble friend Lady Thomas, because of the points she made when one of these Bills was first presented to the House. When I heard her speech, I said, “I should have been there to back her up.” The second is the noble Lord, Lord Moynihan, because when he puts his name down you can reckon there will probably be something about sport. There was not a big jump from rating to small sports clubs—it was not down, but it was something that was going through.
To deal with them in that order, the provision of public toilets, particularly for giving some support to those who are disabled and need access to them, is something a civilised society should do. If you think about it, what you are trying to avoid is a disabled person being fundamentally humiliated—or risking that—when they go out in public. To be perfectly honest, if someone fouls themself, it is not only unpleasant and unsightly, but that person has been marked down as “other”—as being beneath you in public. That is what it effectively amounts to. You have to bear that in mind. You have to actually put that down and say, “That will restrict that person; that fear will restrict them more than just about anything else.” Anybody with them does not want to go through that either.
In coffee shop culture, if we ever get back to it, where cafés have a loo, there is also that little sign that we used to see only in pubs: “Customers’ use only”. It is not a public facility; you are not sure if it is there. You have to go into the place and find it. Is it upstairs or down? We do not know. Many of the suggestions we have heard today, about making available the knowledge of where toilets are and so on, are things that, as a civilised society, we should take on board fundamentally.
To turn my attention to the points about the rating value and the amateur sports groups or smaller sports clubs, we have agreed the principle; let us get the practice down so that it is easy to administer. Let us help these groups. In our society we have a huge bonus in our small sports clubs because, due to historical accident, they are usually self-funded. Local government is not required to provide the stade municipale, as it would be in France. Small clubs have financed themselves. They have given us an infrastructure that will implement government policy—and has been seen as something to implement public policy—for many years. Give them this little bit of help. The principle has been accepted; just say, “Go and get on with it.”
I do not know how many times I have said this, but we have institutions funded either by people taking part and paying a match fee—or whatever you call it—or by the bar. Neither of those income streams is coming in. The Government will have to look at this and are probably keeping an eye on making sure that these institutions stay there, but the higher echelons of most of these sports are not generating the money that used to trickle down. We have a major problem there to keep something that we need and use—to implement the rest of government policy—functioning, or at least functioning at the rate it should. You will not get more people being more active without the use of these things. Even in later-life activity, if you have never moved till the age of 50, and then someone says, “Why don’t you go for a walk with everybody else?” it will be like climbing the Eiger to go up a small hill, to be perfectly honest. We have to make sure that the facilities are there.
I will leave my remarks there, but unless we address these fundamental problems, by making sure that somebody feels safe and has their personal dignity intact when they go out, they will not go out. Let us make sure that we have public toilets you can get to. When it comes to sports clubs, if you have something for free, provided by the general public, that implements government policy, it is insane not to make sure that they can continue to function in the future, especially after the experience of Covid.
My Lords, I am glad to follow the noble Lord and I very much endorse what he said on those subjects. I begin by declaring my relevant interests as set out in the register.
I wholly endorse the powerful and often moving points made by the noble Baronesses, Lady Andrews, Lady Thomas of Winchester and Lady Randerson, the noble and learned Lord, Lord Hope of Craighead, and the noble Lord, Lord Wallace of Saltaire: we cannot, in a civilised society, allow squalor to prevail when we should have dignified surroundings. If anything underlined the need for decent public facilities in the form of public lavatories, it was the series of repulsive scenes in the summer when people flocked to tourist areas and defiled them—in some cases wantonly, but in others because there was no adequate facility.
I want to concentrate my remarks on the Non-Domestic Rating (Lists) (No. 2) Bill because it is absolutely essential that we concentrate, as many noble Lords have this afternoon, on the dire future facing the retail trade—in particular the entertainment sector, including hotels, restaurants, cafés et cetera. I congratulate the Government and thank them warmly for the rescue action they took last year in giving the business rate holiday. They were right to defer the revaluation.
I want to concentrate my remarks on our town, city and, indeed, village centres, and on our high streets. The noble Lord, Lord Hain, in particular, made some extremely important points: if you want to sustain the throwaway society, all you need to do is depopulate our town and city centres. What has to be addressed in the review—it is vital that it is thorough and that we have it soon—is the disparity of treatment between town centre and high-street shops and the vast warehouses, which we have all drawn on during periods of lockdown. They perform a valuable service but they are getting away, if not scot free, then with very little to pay for it. We have to readjust the balance; we have to means test business rates in a way that means the Amazons of this world pay what they properly should, and the small, specialist shops in a glorious town such as Ludlow in Shropshire, or Louth here in Lincolnshire, are not penalised to the point of extinction.
Let us concentrate on this specific issue, and let us also remember that while we have to nurture the smaller shops so that they survive, we have to recognise that the supermarkets have prospered wonderfully over this last year. After all, they are virtually the only large shops allowed to be open at the moment. I thank them for their service. We all depend upon them. They were right to pay back some of the wad they had been given, but they must be treated differently from the smaller shops.
We have to remember in this context that one of our greatest industries, on which we will depend considerably in the future, is tourism. If we rip the heart out of towns such as Ludlow and Louth by, in effect, closing their restaurants, pubs, et cetera, and their smaller specialist shops, we will certainly decrease the attractiveness of our towns and cities to tourists.
I implore my noble friend to do all he can to bring on the review, but he must make sure that it is thorough and realistic. We all remember the poll tax; I do, as one who never cast a single vote in its favour, even when it was introduced in Scotland. We do not want to have a review that leads to anything like that. We must reform our non-domestic rating system to allow prosperity to return to our towns and cities. If we do not, we will have missed an opportunity. The business rates holiday must continue throughout this next year; otherwise, we will destroy that which we proclaim we wish to preserve.
My Lords, this government Bill will introduce 100% mandatory business rates relief for public lavatories in England and Wales. In recent years, organisations such as the Royal Society for Public Health have expressed concerns about the rate at which public lavatories have closed. According to data obtained by the BBC in 2018, local councils have stopped maintaining at least 673 public lavatories across the UK since 2010. Local councils have also reduced the number of lavatories they maintain over the past few years.
In the March 2020 Budget, the Chancellor recommitted to reintroduce business rates relief measures for public lavatories. He said that it would apply retrospectively from 1 April 2020. In September 2020, the Bill was passed in the House of Commons with cross-party support. The Minister, Simon Clarke, said that the Bill will help reduce running costs and
“keep these vital facilities open.”—[Official Report, Commons, 3/9/20; col. 334.]
The coronavirus pandemic has also led to local authorities temporarily closing some public lavatories to help reduce the spread of the virus. The closure of such facilities has had a massive impact on those who require access to them, including those with medical needs and pregnant women. The closure of such facilities could push people further into the shadows and heighten their isolation.
While the rates reduction is a good measure by the Government, coronavirus has once again created further difficulties. Only the scientists can find a solution, with the full co-operation of local authorities.
I remind the House that I am a vice-president of the Local Government Association. As my noble friend Lord Shipley and others have so ably stated, we have few issues around the specifics of the Bill and the most pertinent points have already had a good airing during this excellent debate. Like many others speaking today, I believe that the time for tinkering with and tweaking the business rates system has long passed. I eagerly await the outcome of the review and urge the Government to be both bold and radical.
During my years as the elected Mayor of Watford, in any discussion with businesses in the town, business rates would crop up. I had a set patter about how we, the local authority, did not set business rates, nor did we get all the money into our coffers; we were merely the collector. Interestingly, that fact was always greeted with incredulity. The first complaint was that the rates were too high, of course, and the next that the system of exemptions and reliefs was too complicated; it is. Then, a matter of which I knew nothing at first was the long gap between valuations and the real problems that led to. They clearly felt that such valuations were out of kilter with local economic realities and should be more frequent. In previous iterations of the Bill, as was mentioned by the noble Lord, Lord Bourne, a period of three years was proposed, but it has now gone back to five years, while many groups press for annual valuations. Perhaps the Minister could explain the thinking behind that.
There is no doubt that the Bill, in kicking back the revaluation by a further year, will give businesses some stability, which has been broadly welcomed. But I fully agree with the noble Lord, Lord Naseby, on the AVD, and I too would like the Minister to explain the rationale for the next valuation to be based on April 2021 costs and rentals. That is surely too early for the full impact of the pandemic to hit, and yet it will not be implemented until April 2023. As my noble friend Lord Stunell said, businesses that get a valuation downwards have to pay more rates for a further two years, at an already difficult time.
If I really wanted to see sparks fly in the conversations I mentioned earlier, I only had to mention transitional relief schemes. This is but one of a number of examples in which the current web of reliefs hinders the system and, more importantly, contributes to further unfairness. It needs serious reform. There was also always “Don’t get me started on appeals,” usually with a look towards the heavens. Appeals have already been mentioned by several noble Lords, as well as the backlog of 50,000 cases for the 2010 and 2017 lists. Minister, is there a closing date for the appeals from the 2017 list yet? Within the forthcoming reforms, is there consideration for a much shorter window of time following a revaluation—say, six months—in which to appeal?
It has long been recognised that the Valuation Office Agency is not agile enough to keep up with and adapt to changes in demand within sectors, such as the shift towards online, which has been much mentioned this afternoon. The case could be made that delayed devaluations have, in fact, acted as a subsidy for online retail. While logistics space has massively increased as a result of this trend, it is not taxed anywhere near as heavily as retail shop space. Are the Government looking to address this particular unfairness in their upcoming reforms? The VOA has been criticised for being difficult to deal with and cumbersome, and its valuations as often opaque and inconsistent. Minister, will any consideration be given to local government being the responsible authority for valuations, working in genuine partnership with local experts who know their patch and can respond to change more quickly? This happens successfully in some other countries, often alongside annual revaluations. It can be done.
The principle behind the local retention of business rates is good but, unfortunately, in reality it has meant that local authorities are now competing with each other, not only to attract inward investment, but even to outbid each other in the now controversial commercial entrepreneurial investments. I feel that, particularly in a two-tier system, economic areas are just too small to be really effective and local enterprise partnerships lack the powers and finance to make a difference.
Combined authorities, however, are showing what can be done to drive improvement across larger economic areas. Minister, to encourage and incentivise councils to work together on economic development, which is surely needed, would the Government consider allowing areas that agree to work in this pooling system to keep 100% of their business rates? Finally, can the Minister at least hint at whether it is the Government’s intention, eventually, to transfer the powers and freedoms around businesses rates that are currently available to elected mayors in combined authorities to all local authorities?
My Lords, it is a pleasure to follow the noble Baroness, Lady Thornhill. I will address the Non-Domestic Rating (Lists) (No. 2) Bill. I happen to agree with the noble Lords, Lord Hain and Lord Cormack, that there is a fundamental direct correlation between business rates and the prosperity of our towns and cities, and there is a clear need for business rate reform. In his opening address, the Minister referred to a report on this being forthcoming in early spring. I have to say that that will be challenging, because this fundamental review will have to reflect what has happened as a result of the pandemic, that existing evaluations or revaluations have taken a considerable time and that there are about 50,000 appeals with the VOA. So what will be the constituent parts of that review, when will it be published and when will it be implemented? Will it mean further legislation?
Initially, I referred to the fact that there is a direct correlation between the prosperity of our towns and cities—as already referred to by the noble Lord, Lord Cormack—and business rates and revaluations. There is a need to protect, boost and regenerate high streets. An opportunity must be given during this pandemic to rebuild businesses and their revenue-creating potential. Many of them have been forced to close because they are considered non-essential. Some were never able to open following the first lockdown, including many in the hospitality and retail sector, and they have lost a lot of important revenue. That must be reflected in the Government’s root-and-branch review of business rates. They have also had to compete with large out-of-town supermarkets and the online trade from companies such as Amazon. Therefore, those retail businesses and general businesses have found themselves undermined in every sector. This must be addressed.
Will the Minister have a conversation with ministerial colleagues in BEIS and in the Treasury about a revamp of our towns and cities, putting the heart back into our towns and cities with a freeze on commercial rents for at least one year, a business rate and business taxation reform—which has already been referred to by myself and other noble Lords—a possible rethink or lifting of Sunday trading restrictions, a rethink on the extension of permitted development rights, extension of the towns fund beyond the 101 locations, the expansion of business improvement districts and the expansion of city deals, working with local government, and for all those to happen and be constituent parts of any plan?
This requires a total regeneration plan for our high streets, coupled with that root-and-branch review of the business rates system that reflects what has happened to our businesses as a result of the pandemic. Measures need to be put in place to protect the independent retailers that are having to compete with the large supermarkets which are busy trading when many of them are closed. So can the Minister indicate what action will be taken to address those areas and ensure that a fairer, more equitable business rating system is implemented that reflects the challenges, difficulties and problems faced by all businesses as a result of the pandemic? I have talked to the Booksellers Association, which has no particular issue with 2021 as a base year for 2023 but would like to see some form of transitional relief.
My Lords, I declare my interest as set out in the register as an owner of a small commercial office building from which I ran my business for many years.
There is an inherent unfairness in a tax based on the nature of the property that it is necessary to occupy to conduct a particular type of business rather than based on profitability. Maybe they once marched in step, when retail margins were high and out-of-town and internet selling were not prevalent. Now retail pays 25% of the tax for 10% of gross added value to the economy, and it constitutes 42% of their taxes. These distinctions are broadening further with the expansion of office work from home and more online shopping. If commercial space dwindles, the remainder will inevitably be on the treadmill of ever higher rates to satisfy the tax need. The truth is that the tax base has to be broadened and based on commercial activity and profit. It should be based on known fact, not supposition. I hope the consultation will have that scope.
Why are we sticking with the general design of the present system? It is broken. It does not properly track rents, which are far from the stable or routinely upward rent reviews that were once the story. Added to that background is the ongoing effect of forced closures and staying at home, whether from legislation or from caution. Is that going to be taken into account? Like others, I welcome the rate holiday that has already been given. Will the Government consider further reliefs for the most affected businesses, both in terms of compensation for what they could not do and as a mechanism to aid recovery?
The Non-Domestic Rating (Lists) (No. 2) Bill postpones a review that had been brought forward, which will disappoint many who had been hoping for an earlier lowering of rateable values. Given that the Government are fixed on a delay, I still wonder about the base date for revaluation being April this year, which is likely still to be a time of uncertainty and flux, with relocations out of cities and working from home escalating, shop closures and growing numbers of empty properties of all kinds. How do those empty properties feed into the analysis? Surely their emptiness shows a lack of takers, so how is the market price found?
Unfortunately, delaying a review further would also cause disappointment, but why is it not possible to sample rents for the purpose of adjustment in the same way that a basket of products is monitored for the cost of living? That is a genuine question, as well as perhaps another consultation point. Will the next review be brought forward in sectors or areas where there have been significant changes since April 2021?
Turning to the Bill concerning the removal of rates for stand-alone public lavatories, again I confess to wondering how market rents for public lavatories are assessed, but the measure is welcome. “Stand-alone” means a building that is “wholly or mainly” a public lavatory, so does the Minister have any more guidance about what constitutes “mainly”? What about a combined public lavatory and bus stop? I have seen such an arrangement in car park and rides. Does “mainly” have to mean more than 50% of the footprint of the building, or is it related to purpose? An example given in the Explanatory Memorandum is that lavatories in a public library would not qualify, presumably because the facilities would be provided anyway, even though they also serve those nipping in in passing. What would be the situation if the lavatories were accessed through an independent entrance from the street?
More generally, should not more buildings serve the public need and the owners be recompensed? I can think of other buildings, such as old town halls, that rent out rooms that stay open for the public to access lavatories, even when there are no events. Should those types of facilities be given encouragement to stay open rather than being locked up, which is the usual trend?
I am glad that this Bill is before us, but I hope for more generosity in how it is applied.
My Lords, I welcome both Bills. I completely support the noble Lord, Lord Thurlow, in what he said. When we are reforming the rating system, we absolutely need to follow the money and move in the wake of Amazon, and make sure that, at least where we can bite it, which is its distribution centres, it is paying a proper rate of tax. It is important that we look at the effect our tax system has on our businesses and that we do not disadvantage native UK businesses and advantage overseas ones, as we have been doing for years in our VAT system.
It is also important that, when it comes to rate relief measures, we look at exactly who needs the relief. As the noble Lord may know, I am saddened that the Government have excluded a category of businesses from the Covid rate relief, specifically those such as suppliers to exhibitions, which have to maintain large premises so that they can have a business when exhibitions resume again—maybe this year, but maybe not—but which are still subject to the full business rates arrangements.
I want to spend my time today on the lavatories Bill and support what the noble and learned Lord, Lord Hope of Craighead, and the noble Baroness, Lady Randerson, said. Indeed, I was cheering through the noble Baroness’s speech. We need public lavatories in town centres. Think of what life would be like if there were none. It ought to be one of the Government’s underlying objectives to encourage their provision.
That the Government are relieving the rates on separate buildings that are just lavatories is good, but the most effective way of providing a public lavatory is in conjunction with a business. The loos in Victoria Station are there because the railway wants to look after its customers, and it is the same for the loos in John Lewis, restaurants, hotels and anywhere else that one might make use of them. These are the provisions that we ought to be encouraging. That the intricacies of the current rating system do not seem to offer any obvious way of saying that the value added to a building by including a public lavatory should not affect the rateable value of the building is no reason why we should not do our best, conversationally in Committee on the Bill, to get real legislation when we get rating reform to make sure that the provision of this public service is not something that we then tax.
Also, if we are giving rate relief to public lavatories, we should do so with some conditions, and there should be something in the Bill that allows the Government to impose those conditions.
Coming back specifically to what the noble Baroness, Lady Randerson, said, a proper quantity of provision of separate women’s toilet facilities is absolutely crucial. She demonstrated in great detail why that is true, and I support everything she said. I shall be introducing an amendment in Committee to enable the Government, should they so wish, to impose conditions to say that a toilet would be zero-rated for rates only if it matched the conditions required by the Government.
My Lords, coming last after so many people speaking, astonishingly, about public lavatories, which has delighted me, there is nothing substantially new that I can say. I will just talk about one or two things that have happened in my part of the world and about how things need remedying. Before doing so, I declare an interest as a member of Pendle Borough Council. I am not a vice-president of the Local Government Association; I used to be but I resigned in order not to have to declare an interest all the time—I am still sent the briefings. Like other speakers, I commend the National Association of Local Councils, which has provided so much good evidence and, in many ways, run this campaign. In a sense, I am not surprised that there have been so many speakers in this debate in the House of Lords. When you think about it, the demographic of the House suggests that more people here might be concerned about public lavatories than perhaps a younger generation might be.
As the noble Baroness, Lady Andrews, said, almost at the beginning, the important thing is that there is a need everywhere. There has to be a sufficient number of lavatories in the right places, and many, unfortunately, are not of a sufficient quality; they are what she described as “a disgrace”. The noble Baroness said that there is a need for a national strategy. What worries me is that, if is too much of a national strategy, when national finances get into trouble and there are big cuts, it will be too easy to cut something such as public lavatories. I remind everybody that it was the nationalised railways that closed down a third of the network. I believe that local care and resilience are vital in very local services such as this.
I want briefly to tell a tale of two towns: one is Colne, my own town, and the other is Barnoldswick, next door. Both are on the Yorkshire border. Back in Mrs Thatcher’s time, there was government pressure for what we thought then were massive cuts—little did we know. The council officers thought that public lavatories were an easy thing to cut. They did not have to provide them and thought they were an anachronism in the modern age: people had cars, it was an old-fashioned service and the lavatories were expensive to maintain. They put a lot of pressure on councillors to close them down. In Colne, where I was chairman of the Colne and District area committee, we resisted this as far as we possibly could. Then I took a council holiday and another party took over in Colne and closed down almost all the public lavatories.
Then came austerity, and the cuts to our budgets that we never dreamed would happen did happen. The council as a whole decided that it could not continue to provide a public lavatory service; it simply had to stop doing some things because its budget over 10 years had been cut by half in real terms—I am not exaggerating. So we offered the remaining public lavatories to town and parish councils. Some were taken over, in particular by the very local parish councils, which have looked after their public lavatories—sometimes with volunteers and sometimes using the local odd-job person—and they have been very successful. They have looked after them much better than Pendle council ever did.
Barnoldswick Town Council, on the other hand—I give the plug that it was under the control of my party, the Liberal Democrats—took over the three public toilets in Barnoldswick and significantly increased the council tax precept, because that was the only way we could get extra money. Since then, the public toilets have been looked after by a local contractor from the town, with local care and maintenance. The service has been well received and successful, despite the fact that people are paying more money locally for it.
In Colne, where we have been denuded of almost all our public lavatories, the town council set up a community toilet scheme, which people have been talking about. It got going quite well and had some success, but unfortunately another party then took over the town council and lost interest in the scheme. As I said, it was quite successful but we learned the problems: if you rely on private premises to provide public facilities, they are not open on half-day closing, and quite a few people, for various reasons, are not happy about going into town-centre pubs to go to the toilet or for any other reason. It is not a perfect solution at all. The perfect solution has to be new provision where there is not any. In order to provide that—I think Colne Town Council would be willing to do that and to run it—money is needed to invest in new facilities.
This comes back to one of my beefs: that there is no conventional, easy way for town and parish councils to get capital funding from the Government. Capital grants for town and parish councils are needed if we are really serious about them taking over and providing new facilities. Indeed, when they take over facilities from the principal councils, improving and upgrading them, they have to have sources of money over and above the council tax, because there is a limit to how far people will pay extra council tax for their town and parish councils.
My Lords, I draw Members’ attention to my relevant interests as set out in the register: as a councillor in Kirklees and as a vice-president of the Local Government Association. I thank the Minister for providing time last week for a discussion about these Bills.
We have had a wide-ranging and well-informed debate on both the Bills being considered. Both have in-principle support from Members on my Benches. As many noble Lords have said, the provision of publicly accessible public toilets is essential for many people, but my noble friend Lady Thomas has made a powerful case for the need for more accessible toilets to serve the specific needs of those with disabilities. I hope that the Minister will be able to provide an answer to her question about a government database of public needs. That would be of immense value, especially to those with particular needs.
That is amplified by a report from the Royal Society for Public Health published in 2019. It made a very strong case for a review of the number of accessible public toilets. The royal society investigated public toilets and discovered the number that have been closed by local authorities as a consequence of the severe cuts to public funding, the potential health impact of a lack of public toilets, as others have referenced, and the fact that many people plan their days out according to the accessibility, or not, of public loos.
My noble friend Lady Randerson spoke strongly and firmly in favour of equality of provision for women and talked about the long queues that we women have all experienced on a regular basis. Perhaps the Minister will be able to provide a positive response to her plea.
The same Royal Society for Public Health report also said that in 2018 there were no public toilets at all funded and maintained by local authorities in 37 council areas. That is of course a consequence of the years of significant cuts to local government funding, and this Bill is a bit like shutting the stable door after the horse has bolted.
My noble friend Lord Wallace has raised the difficulties faced by tour groups visiting the world heritage site of Saltaire in the Bradford City Council area, where there are currently no public toilets for the coachloads that arrive. If only the Government could address the lack of public toilets and enable councils, through specific grants, to build them once more.
If the Government believe that public toilets are so important that they deserve special treatment in the form of this rate relief to help ensure their future, they should consider how the provision of publicly maintained toilets can be incentivised. For example, public toilets in town halls and libraries should be offered the same business rates relief, as the noble Lord, Lord Bourne, argued. I hope the Minister will be able to show how a system of apportionment can be devised that will achieve this end.
All speakers today have accepted the need for the provision of publicly funded, publicly owned toilets. I hope the Minister will be willing to consider extending the Bill to encompass more public toilets and, in particular, more fully accessible public toilets.
The headline of the Non-Domestic Rating (Lists) (No. 2) Bill, which concerns the timing of the revaluation of rates to be paid by businesses, is the introduction of new rates from April 2023. However, that means that the revaluation will be based on rental values as of April 2021. The noble Earl, Lord Lytton, who is an expert in this field, has helpfully exposed considerable failings in the current system. Can the Minister confirm that the assessment date for rateable values is subject to decision by a statutory instrument? If so, can he give the House any idea of the timing of such a statutory instrument?
A delay in assessing and then introducing new rateable values is understandable. However, this is tinkering at the edges, while our town centres are in deep trouble. As my noble friends, Lord Shipley, Lady Thornhill and Lady Bowles have pointed out, there is a desperate and urgent need for wholesale reform of the business rates system. There are two fundamental reasons for radical reform, as many noble Lords have referenced during this debate. First, the current system is based on an out-of-date concept of business being dependent on well-located property. In the retail sector, Amazon and hundreds of other such businesses have blown that idea out of the water. The growth of digital-only businesses adds to that argument. Secondly, income from business rates forms a large part of the spending of local government. Loss of business rates income, due to the move away from the high street, has a consequence for the funding available for local council services. Fewer shops means less income from business rates, and this is at a time when there is a growing demand for services due to the pandemic.
Businesses are naturally deeply concerned about the outcome of the next revaluation. My noble friend Lord Stunell made a strong case for the extension of the Covid rate relief, as there is a huge danger for retailers that there will be a gap between the ending of the Covid rate relief and the introduction of the new rateable values. I hope that the Minister can respond to this threat. I urge him to have particular concern for those towns across the country that were struggling even prior to the pandemic.
We on these Benches support these Bills in principle, but we know that there is scope for improvements, which we will bring as amendments in Committee on both Bills.
My Lords, first, I declare an interest as a vice-president of the Local Government Association. Secondly, I am very happy to support both Bills before us today, but I will want to explore options for improving both Bills in Committee.
On the public lavatories Bill, the noble Lord, Lord Greenhalgh, set out what the Bill will achieve: 100% mandatory business rate relief for public lavatories in England and Wales, whether publicly or privately owned. The closure of public toilets over many years is a matter of concern for the general population, particularly those with specific needs—they could be medical needs but not exclusively so. I agree with my noble friend Lady Andrews that this is a long-overdue Bill—of course, it was lost previously due to the general election of 2019. As my noble friend said, Covid-19 has exposed deficiencies in matters that previously we probably all took for granted. I am sure that we will want to deal with them in this Bill.
An increasing number of people are affected by the state of Britain’s public toilets. These include those with disabilities, carers, the infirm, the elderly or people with babies and young children. As I said earlier, people of all ages who are coping with a range of issues and/or medical conditions are not finding adequate provision when they are out and about.
With the closure of bars, cafés and public buildings during the Covid-19 pandemic, we have also seen a reduction in the number of places where people can ask to use the toilet. Although these closures may be only temporary, they have highlighted a real issue for delivery drivers and others who work long shifts on the road getting food to the shops and delivering other essential supplies. Multi-drop goods delivery has always been very hard work. Let us pay tribute to those drivers, who have been outstanding in delivering in these difficult times and ensuring that food is on the shelves. They are struggling to find places where they can go to the toilet when working long hours.
When we are through the worst of this pandemic, we should keep washing our hands with the same increased frequency as we have all been doing in recent months. It would keep us all safer and help prevent the spread of all sorts of infections in the future. We need to be conscious of the age profile of our population and the needs of its older members.
In the past, Britain has—and will do so again in the future—welcomed many millions of tourists to this wonderful country. It is something that we all want to increase and build on. However, it will place further pressure on our existing facilities. Sometimes, these facilities do not give the best impression; for example, when you visit a tourist area and find that facilities are non-existent or, if you find them, they are not in a particularly good condition and do not have a proper cleaning rota.
I am, however, pleased with the progress that has been made in making toilets free at all the mainline railway stations. London Bridge is a station that I use frequently. I have been impressed with the work that has been going on there to make the toilets safe to use during the pandemic. I have not been through Marylebone station recently—the noble Lord, Lord Bourne of Aberystwyth, mentioned it, as he did in our debate in 2019—but I hope that they have now taken away the charge there.
We should all be concerned about public health, hygiene and environmental standards in toilet facilities. I very much agree with the British Toilet Association, which has been mentioned many times in this debate, in its campaign to improve these essential facilities. Good access to toilets that the public can use is all about health and well-being, quality, social inclusion, privacy and public decency.
I agree with the noble Lord, Lord Wallace of Saltaire, in his comments on Bradford and Saltaire; I know the area fairly well, although not as well as him, and I thought the points he made were very valid.
Public toilets must comply with parts 1 and 4 of British Standard 6465, BS 8300, parts M and R of the building regulations and other requirements. It is all about keeping us safe and well.
The British Toilet Association has done some excellent work with the Changing Places consortium, mentioned by the noble Lord, Lord Greenhalgh, and others. The campaign is about the ability of the quarter of a million people in need of Changing Places toilets to get out and about and enjoy the day, which many of us have taken for granted in the past. It is important that, when we go out—when we move on from the pandemic—we can use toilets safely and in comfort. For many that will require a Changing Places toilet, with the adjustable bench, hoist and so on; we need to ensure people with profound disabilities can go out and use them with dignity.
I congratulate Tesco, which has just opened its 100th Changing Places toilet. The Tower of London also has its first Changing Places toilet, put in by Historic Royal Palaces. Again, many congratulations—it is probably the oldest public building in Britain with a Changing Places toilet.
We are in a lockdown, but that will come to an end. When life returns to something like we knew before, we need to ensure that we have legislation in place—possibly with amendments—to ensure that people can enjoy their time outside without any concerns or worries about adequate toilet facilities.
Why cannot any organisation that installs a Changing Places or other disabled toilet facility in its premises, which is available to the public, make use of some sort of business rate relief? Maybe it could be a double relief or revert to 100% relief? I very much agree with the noble Baroness, Lady Jones of Moulsecoomb, who asked why organisations that let people come in and use their toilets cannot have the benefit of some sort of relief. We will want to explore those issues in Committee and expand this Bill to make things better.
As I have said, this is a public health issue, which we might not have taken as much notice of before the pandemic. We need to take notice of it today. Will the Minister set out how this measure will increase the provision of facilities for women and user groups such as wheelchair users, the elderly and people with young children and families with medical conditions? The way in which this Bill is designed does not do that at this stage, but perhaps we can ensure in Committee that it does.
The noble Baroness, Lady Thomas of Winchester, made a powerful case for highlighting the needs of disabled people. What problem would there be in saying that, by investing in facilities for disabled people, young children and families could not actually attract extra relief?
The noble Baroness, Lady Randerson, made the very valid point about the issues facing women and men with children and the general problem we have seen, particularly during the pandemic, about the availability of toilets. I mentioned additional reliefs; that would be one way of encouraging provision for disabled people, for example. I intend to bring these issues back in Committee.
A number of noble Lords made points about lavatories in town halls, libraries and other public sites. Again, we should look at those in Committee.
The “Can’t Wait” card is a very good initiative. It always annoys me to see places that have signs up telling you that “You’re not welcome—you can’t use the toilet”. We need the situation to be much friendlier and to recognise that some people cannot wait; they do need to use the toilets. I remember trying to find the public toilet in Stratford-upon-Avon in the summer of 2019. There were signs up pointing to it but I could not find the thing—it was literally impossible—so I went into the theatre and they let me use the toilet there. A place such as Stratford-upon-Avon relies on tourism. There were coaches of people and tourists everywhere, but it seemed that the council had got to the point where it relied on people going to use toilets in bars, restaurants and cafés. Many let them in, but I did not think that is right. If people are letting them in, why can they not have a benefit from providing that public service?
I also very much support the calls from the noble Lords, Lord Moynihan and Lord Addington, about support for local sports clubs. Thinking about where I live, a place such as the Francis Drake Bowls Club is that sort of organisation, as is Lewisham Borough Football Club, which plays on Ladywell Arena—I think the noble Lord, Lord Moynihan, will know it from his time as a Member of Parliament for that area. There is also Fisher Athletic football club. I must also mention Millwall Community Trust, which I am delighted to be a trustee of, and the work we are doing down at Surrey Docks stadium and the facilities next to the Den.
I support the Bill but, as I have outlined, I will table some amendments in Committee where we can improve it. The Bill is narrow in scope but very welcome. We will see if we can improve it, particularly to reflect on how life going forward after the lockdown may have things in it that we did not all focus on before.
Moving on to the Non-Domestic Rating (Lists) (No. 2) Bill, I am very supportive of the points made by the Local Government Association. As we have heard, this will move the revaluation date to 1 April 2023, based on property values on 1 April 2021. The legislation keeps the period between future valuations at five years although previous Bills, which were of course lost, sought to reduce it to three years. When the Minister responds to the debate, can he tell us whether that proposal has been dropped for good? The noble Baroness, Lady Thornhill, and others raised this in their contributions.
Closer working with the valuation office and local authorities is very much needed, as is reducing the backlog of appeals. As we have heard, according to the latest Valuation Tribunal for England statistics, there are 40,000 unresolved appeals from 2010—I repeat, 40,000. Councils are having to hold money to one side as these have not yet been determined, and this cannot carry on. I support the calls from the noble Baroness, Lady Thornhill, and others: this matter really must be dealt with sooner rather than later.
I support the call from the LGA to see reforms to ensure that appeals can be received no later than six months after a new rating list has come into force. The noble Lord, Lord Shipley, was right to say that we need root-and-branch reform of the business rate system. Our high streets are in crisis and we need a sustainable, long-term solution to the problem. We should make sure that companies all pay their fair share. I endorse my noble friend Lord Hain’s comments urging the Government to think big. My noble friend Lord Reid of Cardowan also drew the attention of the House to the wider issues that this welcome measure will address but which the Government do need to deal with.
Many noble Lords mentioned the contribution of the noble Lord, Lord Thurlow. He made that very valid point about high streets and ensuring that online businesses pay their fair share, as did the noble Baroness, Lady Jones of Moulsecoomb. The noble Lord, Lord Cormack, made some excellent points about support for the high street, small shops and towns such as Louth in Lincolnshire, which I know well. As I said earlier, tourism will once again be an important part of our economy. We have to have the shops for tourists, as well as local people, to visit. As I said, the big online businesses—the Amazons—have to pay their fair share, and the Government need to ensure that they do so.
Finally, my noble friend Lady Ritchie of Downpatrick made a point about the correlation between business rates and the prosperity of our towns—their revenue-creating potential. As my noble friend said, we need root and branch reform.
This has been an excellent debate. I am delighted that there were many more speakers than when the House looked at the public lavatories Bill in 2019. Noble Lords have made fantastic contributions—we are clearly going to have a very interesting Committee stage for both Bills. I look forward to the Minister’s response.
My Lords, I thank noble Lords for their contributions to today’s debate. I shall do my best to respond to the nearly 30 speeches that preceded this final one, in relation to both Bills, starting with the Non-Domestic Rating (Lists) (No. 2) Bill.
What we have heard today reflects what the Government have already been hearing from ratepayers: that frequent revaluations are of great importance to the fairness of the business rate system. It is therefore only in the face of exceptional circumstances that this Government have taken steps to postpone the implementation of the next revaluation. As I have said, we remain fully committed to frequent revaluations, and considerations of the timings of these form part of the Treasury’s ongoing fundamental review of business rates.
As I set out earlier, the Non-Domestic Rating (Lists) (No. 2) Bill will also change the date by which draft rateable values must be published, ahead of the revaluation, from 30 September to 31 December in the preceding year. I recognise that there are concerns that this change will reduce the notice that ratepayers have of their business rate bills for the following year. However, rateable values are only one of a number of factors needed to estimate a rates bill, alongside the new multiplier and details of any transitional arrangements. Historically, these have been confirmed at the time of the autumn fiscal event and, as such, the measures included in the Bill allow for the publication of draft rateable values to be made alongside these decisions.
Of course, moving the date of the draft rating list also has implications for local government, which has a share in business rates income through the business rates retention scheme. On this point, I assure the House that we intend to make any necessary adjustments within the business rates retention system to ensure that locally retained income is, as far as is practicable, unaffected by the revaluation. My department has held discussions with local government representatives and will continue to do so to ensure that the sector has what it needs in order to issue new bills in a timely manner.
I will now address some specific comments. I credit the noble Earl, Lord Lytton, who gave a tour d’horizon of local government finance reform, starting with the Layfield review, which took place over 40 years ago—I was still at primary school at the time—and moving on to the Lyons review. This helped explain the long history of local government finance and how the reform of business rates has been approached since their inception in 1990.
I assure my noble friend Lord Moynihan and the noble Lord, Lord Addington, that the fundamental review of business rates will look specifically at reliefs. They made strong points about community and grass-roots sports. The provision has not cost the Exchequer anything. We are not talking about a stade municipal, but they need support at this difficult time. The noble Lords made their points very eloquently. I will make sure that I take their case to the Treasury and do my best for them.
I also point out that the fundamental review of business rates has not shifted; it was always due to end in spring of this year. It will also look at alternative ways of taxation. A number of noble Lords raised the move to online sales and mentioned specific retailers that seem to be making a whole lot of money. I am sure that the fundamental review will look at alternative taxes to capture the shift in our shopping habits.
I will do my very best on some of the other points raised. My noble friend Lord Bourne and the noble Lords, Lord Shipley and Lord Reid of Cardowan, mentioned frequency. We need frequent valuations to ensure that business rates bills are up to date, but we recognise that doing a revaluation is quite an undertaking. Balance is important. We remain committed to frequent revaluations, but this is a hiccup in the road because of quite extraordinary events.
The noble Baroness, Lady Thornhill, and the noble Lord, Lord Stunell, mentioned transitional relief and, under the current business rates system, we are required by law to provide transitional arrangements after each revaluation. The next scheme to apply following the 2023 revaluation will be designed once revaluation data is available, so it has not yet been designed.
The noble Lord, Lord Stunell, and my noble friend Lord Naseby raised the specific issue of the antecedent valuation date, or the AVD. I think the noble Lord, Lord Stunell, mentioned it on behalf of the Association of Convenience Stores. We recognise that business groups such as the ACS have asked us to consider reducing the gap between the valuation date for the revaluation, the so-called AVD and the date that revaluation takes effect. This would ensure that rateable values follow the rental property market more closely. The revaluation is an extensive exercise, requiring assessment by the VOA of 2 million valuations and this takes time. We have to balance the need for up-to-date valuations against the need to prepare accurate valuations. This is all about ensuring that balance.
To respond to the noble Baroness, Lady Pinnock, 1 April 2021 has already been set by statutory instrument, which I believe was laid before Parliament on 6 August 2020. The noble Earl, Lord Lytton, mentioned the VOA’s difficulties in dealing with the appeals case load. I think the figure of 40,000 appeals was mentioned by the noble Lord, Lord Kennedy. The Treasury continues to provide the VOA with the resources required to successfully deliver the valuations and property advice needed to support taxation and benefits. The Treasury is working closely with the VOA and its sponsor department, HMRC, to understand the VOA’s resource requirements. Funding requirements to deliver the appeals case load and the next revaluation will be considered as part of those ongoing discussions.
I will make one point of clarification on the £10 billion of business rates relief mentioned. That is over half of business rate payers not paying any business rates at all. Will that fall on local government? Absolutely not. These costs fall on the Treasury and are not borne by local government at all. In fact, the new burdens doctrine means that the administration of reliefs is also captured and borne by the Treasury, so it will not affect local council finances in that regard.
The noble Baroness, Lady Thornhill, and the noble Lord, Lord Kennedy, asked about when the Valuation Office Agency can clear the appeals it has received because of Covid. We are aware that the Valuation Office Agency has received a large number of checks and challenges from rate payers who believe that their rateable value in the current rating list should be reduced to reflect the impact of the pandemic. I understand that the VOA is currently considering these cases, but no decisions have been taken yet.
A number of noble Lords raised fundamental reform. It is fair to say that that is not part of this narrow Bill, but there is no doubt that the fundamental review in spring could be a springboard to the reform mentioned by a number of noble Lords. Only time will tell, however, and I do not want to give a sense of direction until we have had the benefit of that review in the spring.
The second Bill before the House today may be small but it is also crucial to the local authorities and private organisations providing public lavatories up and down the country. I am aware of concerns that the Bill applies only to those public toilets that are separately assessed for business rates.
The Government’s policy aims have been clear: this Bill is focused on providing targeted support specifically in circumstances where there are unlikely to be other publicly available facilities and where removing the cost of business rates could help keep facilities open. That narrowness of scope is entirely designed to ensure that we stop seeing more closures of public facilities. Widening the relief to cover all public toilets would significantly increase the cost of the relief and be less likely to target resources efficiently.
Subject to Royal Assent, the Bill will provide a mandatory 100% relief on all separately assessed toilets, including accessible lavatories, whether publicly or privately run, effectively removing business rates altogether for these properties. In meeting the commitment made in the 2020 Budget, the relief will be applied retrospectively from 1 April 2020, ensuring that benefits apply as soon as possible. Local authorities will be responsible for implementing the relief and will be fully compensated in the usual way.
I will now comment on the specific points raised by noble Lords. I thank the noble Baroness, Lady Randerson, for her extraordinarily detailed history of public toilet provision; the noble Lord, Lord Kennedy, for the virtual tour of public toilets in our stations; and the noble Lord, Lord Wallace, for his hygiene history of Saltaire. Much could be gleaned from those contributions.
I point out to the noble Baroness, Lady Andrews, that I am not sure that the answer to this question is a national strategy authored in Whitehall, and I share some of the scepticism of the noble Lord, Lord Greaves, partly because there is such a difference in public toilet provision throughout the country. The answer lies closer to the town hall than to Whitehall—respectfully, that is my view on the matter, notwithstanding the importance of this as a public policy point.
Turning to the issues raised by the noble Baroness, Lady Thomas of Winchester, nobly backed up by the noble Lord, Lord Addington, it is incredibly important that we have fully accessible public toilets. It is something you expect in an advanced western democracy such as ours; it ensures the full participation of all members of our community, which is particularly important in our town centres, which thrive on footfall. We need to make sure that they are accessible to all. That is the basis on which the Changing Places funding was committed in the Budget. I will be able to provide noble Lords with more detail on how the £30 million has been committed—the details of this funding will be made available in due course. This is incredibly important.
The vibrancy of our town centres and high streets is a personal concern of mine. Anyone who spends any time travelling from Fulham, say—we could have said Southwark, but I will take the example of Fulham—to the central activities zone knows the huge impact that this pandemic has had not just on our town centres throughout the country, but particularly on this great global city. I note the points made by the noble Lords, Lord Hain and Lord Reid of Cardowan, the noble Baroness, Lady Bakewell, and others—and the point about high streets made by my noble friend Lord Naseby and others. It is incredibly important that we think about how our high streets and town centres throughout the country can bounce back once this wretched pandemic allows us to be a little freer to move and enjoy life as we once did.
The answer lies not just in business rates but in supporting our high streets. We have a high streets fund and we need to think about flexibility in planning permissions. There are a number of policy tweaks that, I am sure, will make a difference; it is not just about this Bill. However, the point made by noble Lords is incredibly important.
Finally, I have noted the many helpful points raised by my fellow Peers, and I anticipate a plethora of amendments to keep us busy at the next stage. As always, I appreciate the knowledge and expertise in this House, and I am sure that we can all agree that we welcome and support the aims of these Bills. I commend both Bills to the House.
Bill read a second time and committed to a Grand Committee.
The Bill was brought from the Commons, read a first time and ordered to be printed.
House adjourned at 6.24 pm.
(4 months, 2 weeks ago)Commons Chamber
Considered in Committee
[Mr Nigel Evans in the Chair]
I should explain that in these exceptional circumstances, although the Chair of the Committee would normally sit in the Clerk’s chair during Committee stages, in order to comply with social distancing requirements, I will remain in the Speaker’s Chair although I will be carrying out the role not of Deputy Speaker but of Chairman of the Committee. Therefore, I and whoever else occupies the Chair should be referred as Chairs and not as Deputy Speakers.
Compilation of rating lists
Question proposed, That the clause stand part of the Bill.
One can tell by the enormous crowd in the Chamber that the NDR Bill is going to be the highlight of this parliamentary week. Nevertheless, given that the average local authority delivers over 800 different services which, during this covid crisis, are being brought into sharp focus as to how essential they are as part of the warp and weft of our communities, it is important that we get this right.
This matter has been extensively debated previously, and it is largely of a technical nature. However, I would be pleased to hear the Minister address a point about the timing that has emerged during the Bill’s passage through the House. Among those 800 different services, local authorities provide the billing process to local businesses to ensure that business rates are both accurate and able to be paid on time. It is absolutely critical that they have sufficient time within that process to receive the data from the Valuation Office Agency, to test that with the software supplier who ensures that the bills are physically dispatched to businesses, to resolve any disputes that may subsequently emerge—it is not uncommon for businesses to come back with queries—and then to be in a position to ensure that payment is made in a timely manner.
I entirely understand why, from a Government perspective, it is important to align that process with a fiscal event, which is likely to be an autumn Budget. However, as we have seen, especially in these recent times, there is often a situation whereby the timing of those events needs to move around and change. I hope that the Minister will be able to address the need to ensure that this information is available to local authorities in a timely manner so that businesses have certainty and accuracy regarding these bills. I would like an assurance that if there is a need to change the date of the autumn Budget, there will then be scope within the timetable to provide the information to local authorities, prior to the Budget taking place, to ensure that the bills are available to local businesses in a timely manner, and, indeed, can be paid, so as to be part of the critical funding arrangements for local authorities.
With those observations, I take my seat and look forward to hearing the furious and enthusiastically engaged debate that will doubtless follow.
This is not a controversial measure, as the hon. Member for Ruislip, Northwood and Pinner (David Simmonds) has made clear, but I want to put a few points on the record while confirming that the Opposition continue to support the proposals.
Since Second Reading, there have been at least a couple of developments. The first is that the rate of covid infection is rising again, and that makes the case for supporting businesses and local authorities, including through business rate reform, even stronger. The second is that organisations with an interest in this Bill have made it even clearer in conversations with us that although they support the Bill, they are looking for yet more meaningful change. The Bill must be the beginning of root-and-branch reform of the business rate system. Right now, the jobs of people in the arts, retail, hospitality and many other sectors are under threat from the economic impact of the covid-19 pandemic. Those sectors and others need help to get through the rising wave of infections, and they need that help as urgently as possible.
Business rates, as currently set up, do not fairly reflect the rental value of the premises occupied, and they have created regional imbalances. A further and growing unfairness is that retailers that occupy shops in high streets pay far more in tax than online retailers do—that situation is, disappointingly, incentivising the decline of our high streets. Research by Revo shows just how acute the regional imbalance can be. In the north and the midlands, the rate rise is almost 12.5 times greater than the rise in rental values, compared with just four times greater in the south. If the Government are serious about levelling up, they need to address that anomaly.
Getting the business rate system right is essential, and it should be seen as part of the support that the Government must provide to businesses and local authorities to help the economy to recover fully. The Government have been too slow to support businesses and local authorities during the pandemic. According to the Local Government Association, the Government have left councils facing a £3 billion funding gap, which means that support for local economic recovery may be cut precisely when it is needed most.
The country is facing a long, hard winter ahead as we contend with the effects of covid-19, and we must provide all the support we can to local authorities and local businesses to get our communities through this safely.
I know that the Bill is to do with England and Wales, but given that we face potentially the greatest recession that we have had in our lifetimes, there is a need for flexibility in non-domestic rating. Does the hon. Gentleman believe that with the Bill, the Government have given us the flexibility to respond to whatever the future may give us?
The hon. Gentleman makes an important point about the need for flexibility. The situation ahead is very unpredictable and uncertain, and we need the flexibility to support businesses and local economies, whatever circumstances we find ourselves in in a few weeks’ or months’ time.
On Second Reading, my hon. Friend the Member for Blackburn (Kate Hollern) asked the Minister a question that has not yet been answered, so I politely invite him to respond to it today. Given that the Valuation Office Agency has a backlog of 50,000 appeals, some dating back as far as 2010, will he share with the House what conversations he has had with the Treasury about how that backlog will be tackled? Because of the pending appeals, councils, which are responsible for collecting business rates on behalf of the Government, have had to divert more than £3 billion away from frontline services. That figure is very close to the in-year funding gap that is leading to cuts in frontline services across the country, as the second wave of infection rises and the economy slips into recession. What a difference that funding would make, if the Government would only make it available to local authorities and public services on the frontline.
Fixing the business rates system is essential if our high streets are to survive, but the Government must also recognise the key role that local government will play in driving local economic recovery. The Government’s broken promises on council funding will restrict town halls’ ability to support struggling local businesses. I am sure I do not need to remind the Minister just how important local authorities have been throughout the pandemic, and that is why it is so important that they are supported financially. Councils have lost £953 million from business rates income between March and July this year alone, according to the Local Government Association, and that accounts for more than a quarter of all income losses for councils over that period.
The Opposition welcome the measures in the Bill, but only as a first step in the much wider reform that is needed to create a level playing field for businesses and to support our high streets to recover.
I thank the shadow spokesman, the hon. Member for Croydon North (Steve Reed), and my hon. Friend the Member for Ruislip, Northwood and Pinner (David Simmonds) for their contributions.
We are now familiar with the two improvements that the Bill makes to the business rates system. It moves the date for implementation of the next revaluation in England and Wales to 1 April 2023, and it moves the latest date by which draft rateable values must be prepared in England and Wales to 31 December preceding the revaluation. Both changes can be found in clause 1. Clause 2 simply sets the extent and name of the legislation.
In order to understand clause 1, we first need to consider the main primary legislation for business rates, which is the Local Government Finance Act 1988. All of clause 1 is concerned with amendments to the 1988 Act. Part III of that Act concerns business rates, and it currently requires revaluations in England and Wales to take place every five years from 1 April 2017. Therefore, without amendment to the current law, it would require revaluation to take place in England and Wales on 1 April 2022. The Bill changes that date in a straightforward way by amending the 1988 Act to instead provide for the next revaluation in England and Wales to be on 1 April 2023. It does that both for local rating lists and for central rating lists held by my Department and the Welsh Government. Central lists contain large network properties, such as the electricity supply companies.
We can see the change in the Bill—clause 1(2)(a) adds the words “on 1 April 2023”; clause 1(3)(a) makes the change for England and clause 1(4) does so for Wales. The change to the timing of the draft rating list from no later than the 30 September to 31 December can be seen in equally simple terms in clause 1(2)(b) for local rating lists and clause 1(3)(b) for central rating lists.
That date is the deadline—the latest date by when draft rateable values must be prepared. The Bill will still allow the Valuation Office Agency to publish rateable values earlier than the end of December. We fully intend to give ratepayers as much notice as possible of their draft rateable values, the new multipliers and any transitional arrangements that might be included. Historically, these have been confirmed at the time of the autumn fiscal event, so ratepayers will continue to have several months to pay their bill.
My hon. Friend the Member for Ruislip, Northwood and Pinner raised a point about fiscal events and what might happen in different instances. It is worth putting on the record that it is required within law that the multipliers are produced as part of the local government finance settlement, but we are of course cognisant of the fact that a date in February would be too late. I restate our intention to make sure that they are provided earlier than that—in good time—if events transpire as my hon. Friend described.
Moving the date of the draft rating list also has implications for local government, which has a share in business rates income through the business rates retention scheme. On that point, I assure the Committee that my Department has held discussions with representatives of local government, including the Local Government Association. 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 revaluation. That will give councils the assurances they need over locally retained rates income. In the revaluation, we will also ensure that local government will have what it needs to issue the new bills in a timely way.
The hon. Member for Croydon North raised an important point about VOA appeals and was quite right to do so. It is worth saying that the new business rates appeals system introduced in 2017 is operating smoothly and ratepayers have been able to make appeals throughout this difficult period. The large volume of appeals under the previous list system showed why the system was in need of reform, with large numbers of speculative appeals clogging up the system and over 70% of appeals leading to no change. The VOA recently delivered some key improvements to the system, addressing specific concerns from stakeholders, including new features frequently requested by customers and agents to make the system easier to use.
The hon. Member for Croydon North is right to highlight that there are still some outstanding cases from 2010. The majority of those cases have been held up by litigation pending the outcome of a Supreme Court case concerning the rateability of ATMs. The Supreme Court issued a decision on the matter on 20 May this year, and the outstanding cases are now being settled. The VOA is engaging with stakeholders and has agreed a timetable to deal with these cases, and I will keep it under close review. He is right to raise that.
Does my hon. Friend agree that, when it comes to the Valuation Office Agency, there is a need to recognise that some business rates appeals concern very significant amounts of money—so significant in some cases that they can imperil the financial viability of a local authority? We can cast our minds back to the circumstances of West Somerset District Council, with which I had some involvement in my time at the Local Government Association. The business rates appeal relating to the nuclear power station in that area, which was the main source of business rates for the local authority, was so big that local government reorganisation was the only solution to make the delivery of local government services in that area viable. In my area, Heathrow airport is the biggest single source of business rate payments, and changes in those payments can lead to significant in-year variations in business rates. Can he give me some assurance that his Department is focused on making clear to the VOA the importance of processing these appeals in a timely manner and giving sufficient scope for local authorities to manage the impact?
I thank my hon. Friend for his intervention. He is entirely right to highlight some of the challenges, and I can give him that assurance. The fundamental review of business rates is considering a number of issues, including the frequency of future revaluations. He is right to make that important point.
I am afraid I cannot agree with the hon. Member for Croydon North about local government funding. We have had exchanges on that important point, and we have different views. The Prime Minister announced last week an extra £1 billion of funding for local government. I am aware of the need for certainty, and we plan to explain the distribution of that funding as quickly as we can. The £4.8 billion that has been provided to local government, including £3.7 billion of un-ring-fenced funding, has been a big support to councils, which are doing an incredible job up and down the country and delivering first-class public services in an extremely difficult and challenging environment.
Does the Minister recognise that the complexity of local government finance is a huge part of addressing public concerns? A top-tier authority such as a London borough will have responsibility for a parking revenue account and a housing revenue account, and it will have business rates income and council tax income. Over and above that, it will expect to see regular income from fees and charges for services that it provides to the public on a traded basis. Although some of that is captured by the core spending power measure, which is usually used by his Department as the critical way to explain the financial position of local authorities specifically and the local government sector in general, does he agree that that could be improved, so that Members and our constituents could grasp in a little more detail the impact that these changes have in their town hall or civic centre?
My hon. Friend makes a fair point about the need for clarity of message about the spending power of councils, and I am happy to continue conversations with him about how we can look at that. We believe that core spending power remains the most accurate available method to discuss local government finance. That is why we use it when highlighting, for instance, the 4.4% real-terms increase in local government finance this year as part of the local government finance settlement. I thank him for that intervention. He is absolutely right to put that on the record.
We are trying to give councils the tools they need to ensure that they can implement this revaluation, cognisant of the need to provide clarity as part of a fiscal spending event. I restate the point that if that was not possible, we would follow our obligations.
Will my hon. Friend give some consideration to updating the list, which was originally conceived in the days of Lord Pickles when he was Secretary of State at the Ministry? He sought to gather best practice from across the local government sector. While we recognise that the reduction in the cost of biscuits at meetings was not going to bridge any budget gaps, many in the sector—I pay particular tribute to Sir Ray Puddifoot, the leader of Hillingdon, who has just announced his retirement—are masters of the art of looking at different ways to maximise local authority income within the framework provided by the Ministry, to provide the greatest possible consistency and financial stability to their local authority.
My hon. Friend makes a hugely important point, and it is probably one that could be looked at in the even wider context of sharing good practice by local authorities that are doing such an incredible job. That is why we have tried to ensure, in the support we have tried to give councils during the pandemic, that they have the tools and ability to share best practice. We also facilitate that through my Department and our Government, whether that is the Brexit delivery board, for instance, or any of the other vehicles that we use to share good practice.
I put on record my thanks and appreciation to council representatives, groups and the sector as a whole for their role in sharing and providing good practice. The Local Government Association does an incredible job of bringing that type of guidance and support together and ensuring that there are good forums for councils to meet and discuss a wide range of issues, including the one that my hon. Friend rightly highlights on council funding and finances.
We know that it has been a challenging time for councils throughout this pandemic, but that is why we have distributed the funding in the way that we have, working closely with the Department of Health and Social Care. We are cognisant of the pressures still faced by local authorities, which is why our income scheme, the infection control fund and others have been so important to supporting local authorities throughout this pandemic.
We believe that this is a small but important Bill. We are extremely grateful for the support of Members across the House. We believe it is a common-sense solution to the problem faced by councils. I take on board the wider points about business rates that Members have raised today, and I therefore highlight the wider review of business rates that is being conducted. I am always willing to take further representations about the importance of that review. This is a common-sense Bill, and I am grateful for the support of the House.
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.
I beg to move, That the Bill be now read the Third time.
Although small, this Bill delivers on an important commitment that is vital for ensuring a fair outcome for ratepayers, and I am glad it has been accepted by all Members across the House. I am grateful for the contributions of Members both on Second Reading and in Committee. I would certainly like to put on record my thanks to them for their support of the Bill. I am grateful to the shadow Secretary of State, the hon. Member for Croydon North (Steve Reed), and to the hon. Member for Blackburn (Kate Hollern), who has done a lot of work on the Bill and will know it backwards by the end of its passage. Finally, I put on record my thanks to the Clerks and the excellent civil servants in the Ministry of Housing, Communities and Local Government for helping to steer this piece of legislation through the House. This is an important Bill that represents just one part of the Government support provided to business across this country, and I commend it to the House.
I will not rehearse my points on the wider issues of local government finance where there is disagreement across the Benches; that is all on the record. I will just welcome this Bill and the changes that it proposes to the system. They are needed, but as has been accepted on all sides, they cannot be a substitute for the much wider changes that will be required to support our high streets through some very difficult times in the months and years to come. In particular, we need to focus on how we support bricks-and-mortar retailers to compete on a level playing field with online retailers if we want our towns, high streets and districts not just to survive, but to thrive long into the future.
Question put and agreed to.
Bill accordingly read a Third time and passed.
In order for everybody to leave the Chamber safely and for the main players in the next debate to take their positions, we will suspend the sitting for a relatively brief period. If it is possible to have the Dispatch Boxes sanitised as well, I would be very grateful.
(5 months, 1 week ago)Commons Chamber
I beg to move, That the Bill be now read a Second time.
This Bill delivers on an important Government commitment and addresses ratepayers’ concerns by setting in law the date of the next business rates revaluation at 1 April 2023. By doing so, we can ensure that future business rates bills will better reflect the exceptional impact of the coronavirus outbreak on the commercial property market.
Business rates bills are based on the rateable value of a property, which, broadly speaking, represents its annual rental value. Rateable values, in combination with the business rates multiplier and reliefs, determine rates liabilities and are assessed by the Valuation Office Agency independently of Ministers. Since the current system of business rates was introduced in 1990, the Government have had frequent revaluations of rateable values to ensure that they remain up to date. Those revaluations ensure that the amount paid in business rates is fairly distributed among all ratepayers, having regard to the value of the property they occupy.
At the revaluation, all rateable values are based on the rental property market at a set date called the valuation date. The valuation date is set prior to the revaluation taking effect, so that the Valuation Office Agency has time to prepare the valuations. For example, at the last revaluation in 2017, the valuation date was 1 April 2015, which means that current rateable values are based on the market at 1 April 2015.
The next revaluation was scheduled to take effect from 1 April 2021 and would have been based on rental values at 1 April 2019. That was decided in spring 2018 and was the right thing to do at the time, but given what we now know about the coronavirus outbreak and its potential to affect the rental property market, it would not be right to continue with the 2021 revaluation. Continuing to implement the next revaluation on this schedule would have created additional uncertainty for ratepayers at an already uncertain time. It would also have meant that the underlying basis for bills would not have reflected the impact of the outbreak on the commercial rental market.
The Government therefore took the exceptional step of postponing the implementation of the next revaluation in order to give certainty to ratepayers and ensure that the next revaluation reflects the changes to market conditions as a result of the pandemic. The Bill will therefore set the date for implementation of the next revaluation in England and Wales at 1 April 2023. The revaluation will be based on rents at 1 April 2021, a date that we have already set using existing powers in secondary legislation.
The Bill will also change the latest date by which the Valuation Office Agency must publish draft rateable values in the lead-up to the revaluation. That date will be changed from 30 September to 31 December in the preceding year, which will allow us to align the publication of the draft rateable values with decisions normally made at any autumn fiscal event on the multipliers and transitional arrangements for the revaluation.
I understand the reasons why we have postponed revaluations on a number of occasions since 2010. Does that not illustrate the changing nature of the commercial world and the need to move to a different system that is more responsive to the realities of trading on our high streets?
I thank my hon. Friend for his point. We are currently undertaking a fundamental review of business rates, and as part of that exercise we are considering the frequency of future revaluations. When deciding whether to have more frequent revaluations, we need to strike the right balance between more up-to-date assessments, which would flow from such a reform, and the uncertainty it could create, with more regular changes to bills, while also taking into account the time it currently takes to process changes and the impact that any changes that might be required would have on the current system. I certainly understand, however, the point that he has continually made about annual revaluations and how that could further improve the system. I am sure that will be considered.
I have listened carefully to what the Minister has said about the revaluation moving from April 2021 to April 2023, but I wonder whether there is a danger that those properties that might have a substantial revaluation downwards will be paying over the odds on their rates for two further years, at what we all know is going to be an incredibly tough time. I am thinking in particular of retail businesses and a very challenging trading environment. Will he consider changing the date from April 2023 to later in 2021, particularly given the comments he has just made about the need for more regular revaluation?
I thank the hon. Lady for her point. I know it is a matter in which she takes a personal interest and that she has raised it with Ministers. The point stands that we have to have a system that takes into account the impact of the pandemic and, as is the case with the current system, the time it takes the VOA to go through the process. We think that this is the measure required at this time.
We took the step to postpone the implementation of the next revaluation so as to give certainty to ratepayers and to ensure that the next revaluation reflects the changes in the market conditions as a result of the pandemic. The Bill will therefore set the implementation of the next revaluation date in England and Wales as 1 April 2023. On revaluation based on the rents of 1 April 2021, we have, of course, already set that out in secondary legislation.
Business rates is a devolved policy area, but with agreement from the Welsh Government the Bill does also apply to Wales. As in England, the next revaluation in Wales will be implemented on 1 April 2023, and the date of publication of Welsh draft rateable values will also be changed to 31 December. Entirely different legislation applies in Northern Ireland, which has only recently implemented a revaluation from 1 April 2020, and Scotland, where I understand the Scottish Government have also committed to implementing their next revaluation on 1 April 2023. There is, therefore, a good degree of agreement across the UK that the next business rates revaluation is moved, to better reflect the impact of the coronavirus. Notwithstanding some of the points raised, I hope that is accepted across this House.
As I have said, this is an exceptional step and the Government remain committed to frequent revaluations of business rates. The fundamental review of business rates will look at not just the frequency of revaluations but how they are done, and will report on those aspects of the business rates system in spring. However, this is a step that we can take now to improve business rates bills, and that is why we have brought this Bill forward so quickly.
I thank the Minister for bringing forward the Bill. He has set out why it is essential—I and others in this House believe it is, too—in the current economic situation. We need to do all we can to support our businesses and see them through this so that we can reap the rewards in the years to come. When businesses are better off, they are able to help the local economy and pay their taxes to Her Majesty’s Revenue and Customs, national insurance and council pockets. Rather than seeing this as a bail-out, as some do, I see it as a very sensible investment for the future.
I thank the hon. Gentleman for his point. He is right that the Bill’s provisions form only part of the support that we have provided to ratepayers as a result of the pandemic. We have already ensured that eligible businesses in the retail, hospitality and leisure sectors will pay no business rates at all in 2020-21. This is a relief worth £10 billion, which, when combined with the businesses receiving small business rate relief, means that more than half the ratepayers in England will pay no rates this year. This forms part of the business rates measures introduced in England since 2016, which, when taken together, will be worth more than £23 billion over the next five years. These include the doubling of small business rates relief, changes to the threshold, which mean that 700,000 small businesses—occupiers of a third of all properties—now pay no business rates at all, and switching the indexation of business rates from the retail price index to the consumer prices index. That switch alone will save businesses £6 billion over the next five years.
This Bill forms a critical part of the package of reforms and support that we are introducing to business rates, which will result in a property tax that better reflects coronavirus-related challenges in the commercial rental market and provide support to those who need it most, and which is simple and easy for businesses to administer. I commend it to the House.
I thank the Minister for bringing back to Parliament a Bill that will hopefully give greater certainty to businesses and local authorities during this pandemic. Given the existential crises they face, Labour thinks this Bill is a common-sense response to the virus that does not, fortunately, break any laws in specific or limited ways. For those reasons, we will be supporting the Bill.
This is the Government’s third attempt at such a Bill. Unlike the first and second attempts, this Bill makes no changes to the length of time between business rates revaluations. The previous Bill would have replaced the existing five-year cycle with a three-year cycle, which would have implemented commitments made by the Government in their 2017 and 2018 spring statements. The Chancellor, then the Parliamentary Under-Secretary of State for Housing, Communities and Local Government, saw the Government’s first attempt through the House, and in doing so made it clear that a five-year cycle had not been responsive enough to changes in the rental market. The Bill contains no such provision, and while I recognise that the Government are considering more frequent revaluations as part of the business rate review, which I will come to in a moment, I would like to place it on record that, outside of these extraordinary times, Labour in principle supports regular revaluations.
I would be grateful if the Minister shared the Government’s plans to deal with the Valuation Office Agency’s backlog of appeals. According to the latest valuation tribunal statistics, there are still 50,000 unsolved appeals from 2010, and councils have had to divert more than £3 billion from services to deal with those appeals—money that could have been spent elsewhere, on schools, social care and keeping our streets clean. None the less, these are not normal times, and we recognise that, in circumstances where the rental value of properties has fallen, businesses may actually benefit come 2023, if they survive.
Historically, postponing revaluations has created serious issues for businesses. Some have faced huge, sudden increases in business rates, rather than more regular, smaller increments. It is far easier for businesses to assume the cost of smaller increases as a result of more frequent revaluations. Also, the Valuation Office Agency will base the valuation on rental values at 1 April 2021, which is curious, because the chief medical officer has been crystal clear that the virus will be with us for at least six months, and April 2021 is less than six months away. Organisations such as Revo, which supports the whole of the retail property market—owners, occupiers and local authorities—are seriously concerned. Given that the economy is likely still to be significantly affected next year, will the Minister please share with the House the rationale behind his decision to base the valuation on rental values in April 2021?
Beyond those points, there is a much wider issue at play here, as I have said. The business rate system is not fit for purpose. It is broken, and Labour has long called for a root-and-branch review of business rates to make the system fair, to help bricks-and-mortar retailers to compete with online tech giants, and to help to protect our high streets. Can the Minister assure the House that the fundamental review of the business rate system will be delayed no longer than necessary once it is concluded next spring, with the interim report expected as early as this autumn?
Many people working in shops, restaurants, pubs and beyond feel that their jobs are hanging by a thread. The job of the Government is to support businesses to survive and to help them to thrive. This Government are already bringing in big changes under permitted development rules for retail premises, and I am sure we will hear much more about that later. That will also have a negative impact on high streets. Getting the business rate system right is essential, and more so now than ever. The Government have been intransigent and too slow to support businesses in the recovery efforts. They must not make the same mistake by being too slow to reform business rates. The system for assessing rates is complex, costly and time-consuming, and businesses have made it clear that reform is overdue.
Before I finish, I would like to turn to local government. Local government finance has been hit hard throughout this pandemic, and Blackburn has been hit harder than most with the extended restrictions. Alongside council tax, business rates represent the largest source of income for councils. Retained business rates contribute around a quarter of their core spending power, and it cannot be right that the Treasury considers support for businesses and local authorities a closed book. Local authorities have been heroic in their efforts throughout the pandemic, despite the black hole in funding that the Government have so far failed to fill. Councils have lost £953 million from business rates income between March in July this year alone, which accounts for more than a quarter of income losses for councils over the same period.
At the Government’s daily press conference at the beginning of May, when asked what his message to council leaders was, the Secretary of State for Housing, Communities and Local Government said that
“we will stand behind them and ensure they have the resources that they need”.
So far, the Government have failed to live up to that promise. The comprehensive spending review is an opportunity for them to keep that promise. If they do not get local funding right, older people will not get the care they need, young people will be put at risk and, critically for democracy, people will question why they are paying more tax for fewer services. We will support the Bill, but the Government need to stop tinkering around the edges and fix the broken business rate system. They need to support businesses and the millions of workers that are in desperate need, and they need to resource councils that are on a financial cliff edge.
This is a sensible Bill, given the pandemic, and one that I fully support. Basing revaluations on property values at 1 April 2021 rather than 1 April 2019 reflects far better the impact of covid-19 on property values and those businesses that pay business rates. I am pleased that the Government have listened, in order to end the uncertainty, and that the revaluation date for non-domestic rates will now not be until 1 April 2023. It is also right to say on record that the package of measures to help those businesses that pay business rates has probably been one of the best in the world, with almost £10 billion in rates relief throughout the pandemic. I know that many in my constituency, which has a particularly high number of leisure, hospitality and retail businesses, are extremely appreciative.
However, while the Bill might not attract the same level of interest as what is coming later today, I want to draw attention to what the Royal Institution of Chartered Surveyors has had to say about it. Since the last revaluation to date, RICS has called constantly for measures that offer improved certainty, consistency and stability. As has been echoed today, rather than tinkering around the edges, we should commit to a full reform of business rates.
That cuts to the crux of what I wish to talk about briefly—business rates and retailing in particular. Approximately £8 billion in business rates is collected by the Treasury from the high street, but in just months this pandemic has changed many of those businesses forever. Coupled with declining footfall in city centres especially, and the acceleration of shoppers buying online, we now have to think about the bigger picture—rather than just delaying a rates revaluation, reform is very much needed.
I welcome entirely the Chancellor’s efforts to increase the business rates retail discount to 100%, which we have seen. It has been a lifeline for so many, as I mentioned. What happens next, however, is really critical. Traditional business rates are an enormous burden to many who are already seeing footfall decline and much tougher trading conditions. For those on the high street in particular, the rates and rent burdens are often the largest fixed cost base for them to contend with, so we now need to think about new, innovative ways to help the high street. In my view, a fundamental overhaul of business rates is altogether part and parcel of what we need to see.
Business rates must be not just responsive to economic conditions, but fit for purpose in a retailing landscape that is structurally changing in an extremely fast manner. Simply, if our high streets continue to deteriorate at the current rate, businesses will cease to trade, with far-reaching adverse implications for, literally, millions of employers, employees and suppliers connected to and dependent on this sector.
High streets provide many more benefits than purely economic ones. They provide a community, and I think we all agree that in this pandemic community is one of the most robust things to come together. Many towns and cities are shaped by an identity stemming from the vibrancy of their high streets. That is why, as the high street changes, business rates as a blunt cost for occupying a unit need to adapt as well. If we get that right and we reduce the cost base of paying rates—at the moment, we take it for granted that rates are part and parcel of operating from a traditional bricks-and-mortar store—we will be able to put the high street on a more equal footing and to encourage high streets to adapt and flourish as technological shifts change.
Flexible rent schemes—why not even flexible rate schemes? —encouragement of pop-up shops to help vacant space before signing leases, and support for smaller retailers who perhaps started online but want a physical presence must all be ideas that we nurture, support and back. We must look at business rates reform and the success of the high street in tandem, bearing in mind a couple of facts before I end.
Last July, the proportion of shops that were empty reached over 10%, the highest level since January 2015. All the indications that we read show that high street footfall is declining at an accelerating rate from 2% year after year. More worryingly, post covid, many consumers have got used to shopping online. That is being exacerbated as people desert our high streets and in particular our city centres. Recent news showed that, pre-pandemic, £1 in every £5 was spent online; during the pandemic, that rose to £1 in every £3. I implore that we use this opportunity to look at business rates in conjunction with how we support our high streets into the future. Never before has reform needed to come far sooner than perhaps we all expected.
I value this opportunity to raise the issue of business rates and their impact on the retail sector. The hon. Member for North Norfolk (Duncan Baker) raised many similar points, but I wish to talk in particular about the value of retail during this incredibly difficult time.
Our retail sector has been essential in helping many members of my community through this difficult period, which has shown the value of a strong retail sector in every town centre to the building of communities. Many of us who have been holed up at home for an extended period have valued the opportunity to get out and about and have face-to-face contact again. I think more of us value that than ever before. For that reason, although this is a very difficult time for the retail sector, I believe it has a strong future, because we cannot replace the value of that face-to-face contact with an online purchase; it is a tremendous boost to one’s wellbeing. We have all become much more aware of the issues of isolation, people living alone, and how the town centre helps to build a strong local community.
Another point that I wish to make about the retail sector is that it has always been a strong source of employment for many people—local employment is so important for many people who find it difficult to access city centres. I draw the Minister’s attention to the fact that the retail sector is a major employer of female workers; that is so important. Research shows clearly that having more women in employment has a strong impact on reducing the number of children in poverty. That is why it is so important to support the sectors that support female employment.
The rates holiday has been essential to helping retailers survive during the pandemic. Like all Members, the Liberal Democrats have welcomed those measures from the Treasury, but I urge the Government to take the opportunity presented by the Bill to reform the existing structure of rates to better reflect the underlying trading environment that many in the retail sector are having to face. Yes, we should to push the revaluation back for the relevant businesses, but perhaps to later in 2021 rather than 2023. We might assume that more businesses to be found in, for example, the north and the midlands will face a reduction in the value of their properties. It would be better for them to take advantage of the reduction in rates sooner rather than later, especially given the challenging trading conditions everybody is going to be facing. I echo what the hon. Member for Blackburn (Kate Hollern) said about more regular revaluations and how that would support our retail industries in a fast-moving property market.
As the hon. Member for North Norfolk said, this is a critical point for the retail industry, and it would be great to see whether we could take the opportunity to rebalance the burden of business rates away from high streets, in recognition of the fact that the retail market is changing in favour of digital outlets, which militates against those retailers that are still based on our high streets. I mentioned the value of high-street shops and maintaining our high streets; we need to see the Government reflect and support that in their rates policy.
I welcome the business rates review, to which we plan to contribute, but I hope it can be done speedily so that we see rates reform take place sooner rather than later, to better support all those businesses that are relying on rates reform to help them through. Will the Minister consider a reduction in the uniform business rate from 50p to 30p, to better reflect how much lower is the volume of retail going through our high streets as people move to digital and online?
That is an important point and I very much hope that the business rates review will look at it. There is no doubt that online retailers are not currently paying their fair share. Lots of solutions to that problem have been proposed, although I do not think this is the right forum to debate them. There are pros and cons in respect of proposed digital sales taxes, but nevertheless it is a policy area that seriously demands to be looked at. I am sure the hon. Gentleman would agree that high street retail businesses having to bear the brunt of property taxes when they no longer get the lion’s share of the retail market is a situation that cannot continue.
Finally, I just wanted to make the point that we are all expecting a major economic dislocation as a result of the unwind of the furlough scheme and the other measures that the Government have put in place. We are anticipating high levels of unemployment, but one way to mitigate that is through people starting up their own businesses. There are opportunities in the retail sector for those who are looking to start up their own businesses, particularly in constituencies such as mine. We have seen a rise in home working, which has meant that, for the high streets in Richmond Park, there has been a rise in footfall, as people are now at home during the day, instead of perhaps travelling into the city, which is what they would have done previously.
Certainly, speaking to local retailers, I have been quite surprised to find how many of them have thrived over the past few months. They have diversified and found new ways to get their goods to customers. Certainly, the trading conditions are quite strong on our local high streets and, as I say, I believe that that represents opportunities for those who may find themselves out of work in the near future, but I urge the Government to do what they can to lower the barriers to new entrants to the retail markets, so that we can really make the most of these opportunities for new retail businesses on our high streets. That is why I urge the Government to do what they can to address the current rate structure for new businesses.
What businesses often say they need most is stability and certainty. The current system for revaluation of non-domestic rates has sometimes given rise to sudden changes in business rates payable to reflect how local economic conditions may have changed, so although it can happen that business rates go down, a growing economy will more likely result in an increase in rates. If the time period between valuations is high then this can result in sudden and sometimes destabilising increases in business rates.
The Treasury, as we know, has been heroic in its support of businesses across the United Kingdom. The downturn that we have seen would have been much worse without it. We also know of the Treasury’s call for evidence for the consultation on the fundamental review of business rates as well as the call by the Royal Institute of Chartered Surveyors for the Government to commit to full reform of the system.
There is, therefore, demand for change. However, it is clear that the best thing that we can do at this uncertain time is to provide additional stability. I have no doubt that companies such as Thomas Dudley, all the businesses in the Trident and Churchill shopping centres in Dudley and, of course, businesses across the country would welcome the postponing of the revaluation date to the 1 April 2023, as indeed would—probably—the mayor of the west midlands, Andy Street.
Obviously, this proposal is an understandable one and one that we broadly support, although I share the concerns of my hon. Friend the Member for Richmond Park (Sarah Olney) that its late implementation only exacerbates a problem that is rife. If we are desirous of creating greater equity in this country—the party in power refers to levelling up—we would have dealt with this years ago and the imbalance in terms of property and land values. My party would go further and say that business rates are more than just not fit for purpose; they are ripe for abolition and replacement with a commercial landowners’ levy. We can operate that in a way that would not only be fairer, but would motivate the owners of land to use that land for the best and most appropriate purposes. Therefore, if we are levelling up, we would implement this sooner, though I understand that the assessment is delayed for all the correct and reasonable reasons that the Minister set out.
I have two quick points, which are strongly related to that. Members from all parts of the House have talked about the benefits to struggling businesses of the business rates deferral scheme. That exemption has been renewed by the Chancellor for a further six months, which is hugely welcome and will make a massive difference. Of the businesses surveyed, 42% of them said that it made the difference between them being able to continue or to collapse, so it is a welcome support.
I will not be the only Member present who has been lobbied regularly by people who are not helped by that. I am talking about a range of people who, under the banner of the excluded, have received no help from the Government whatsoever. That list is lengthy, and it includes people who have been self-employed, but for less than 18 months now. It includes people who are managing directors of small, limited companies—taxi drivers, personal trainers, hairdressers and many other small companies—and people who were just unlucky and did not get themselves onto the payroll cut-off just at the right moment in March this year. Many of those people are without any support whatsoever and have had to live off what few savings they might have or have overrun credit cards to pay their rent or mortgage and feed their kids. While the exemption from and extension of the business rate relief is massively welcome, will Ministers please give thought to the, we believe, 3 million people, including 4,500 people in my constituency, who have not been helped?
Finally, this is surely a moment for the Government to consider other amendments to business rates and alterations in their structure. This would be the moment for the Government to do something about an issue that they have sought to engage with for some time now: the loophole that allows people who own a second home—I am not talking about a holiday let, but a second home—to avoid paying any form of taxation. In my constituency, it is estimated that about 3,000 to 4,000 second home owners use the loophole so that the property technically qualifies as a holiday let. However, they are not letting out the property at all. They are not breaking the law; they are taking advantage of a loophole. That means that those people are not paying council tax and, as a small business, they are paying no business rates either. A quick back of the fag packet estimate for my constituency is that it costs the council tax payers of South Lakeland £6 million a year to subsidise very wealthy people who can afford to have a second home.
If we add that to the Government’s unintentional, but nevertheless given bung of £10,000 each through the stamp duty relief extension the other month, we have a picture where, in communities such as mine, where excessive second home ownership robs those communities of life, community and demand for local schools, local shops and bus services so that those services end up being under threat and sometimes closing, the Government are encouraging an excess of second home ownership. That is particularly the case in rural communities such as the lakes and the dales, where they should be doing the opposite. I urge the Government to do what the Welsh Assembly Government have done and close that loophole. The Government had a consultation on this, to give them credit. They closed that consultation in January 2019. Twenty months on, is it time, maybe, for us to find out what they are planning to do? Will they stop playing into the hands of those who have plenty, and therefore disadvantaging communities such as mine in the south lakes who do not have enough?
I draw the House’s attention to my entry in the Register of Members’ Financial Interests. I have quite significant interests in the business rates system, in terms of my own business, so hon. Members should take that into account.
To touch on the comments from the hon. Member for Westmorland and Lonsdale (Tim Farron), I absolutely agree with his point about the business rates loophole for holiday cottages, and I hope that the Treasury is listening to that. It is an obvious loophole to close, and it affects North Yorkshire like it affects the Lake District.
I very much support the Bill. I sat on the joint Treasury Committee and Housing, Communities and Local Government Committee inquiry into business rates. We looked very carefully at the frequency of revaluation. We took evidence from a number of different sources. Some nations do the revaluation annually, not three yearly, and that would be better from a business perspective. It would give a more current perspective on the trading environment, although we should bear in mind that all business rates revaluations are fiscally neutral. Some people would benefit from a reduction in their business rates valuation, but that would have to be made up elsewhere by the multiplier changing to come back to the £30 billion a year that business rates raise.
I do not know whether hon. Members have a solution to that problem— I have heard a couple of speeches from Opposition Members who say that the business rates system is not fit for purpose, yet only one solution, from the hon. Gentleman. He suggested, potentially, a land value tax, but that has other inherent difficulties because it is, again, a value-based tax. Business rates are a valued-based tax. It has a correlation with the rental value of a property, which is, of course, inherently tied to the capital value of the premises. As Ronald Reagan once said, “There are simple solutions, but there are no easy solutions.” We might all want reform, but finding reform that works and is fair is difficult—I will, however, suggest something before I sit down. The other issue with the current system is that reliefs and changes brought in as a transitional phase mean that those who should benefit from the revaluations do not do so for some time, in order to try to help with people who are “going up in value”. It is far from a perfect system at the moment.
My first hustings took place in the village I have lived near all my life. One question from the audience was about a local retailer where many of us had shopped—Craggs electrical, a good local white goods retailer selling TVs and the like. It had just closed down after many years in that community. Mrs Craggs was in the audience and the questioner said, “Mrs Craggs’ business has just had to close down because of the situation. She cannot pay her business rates. It is just unaffordable. What are the Government going to do about it?” The reality is that Mrs Craggs’ business was closing down not because of Government business rates, but because of the different shopping trends of all the people in that room; all those people were applauding and saying we should take some action, but the reality is that fewer and fewer of us are buying that kind of stuff from shops. So it is not about what the Government are or are not doing; it is about shopping trends.
As my hon. Friend the Member for North Norfolk (Duncan Baker) mentioned, before the crisis, 20% of shopping was done online but that figure has risen rapidly to 35%, which is making the whole system difficult. Most businesses look at the rent and the business rates when they first take on a premises, and then plug that into their cash flow and decide what they can afford to pay. That is what a good businessperson should do. It is not that the business rates system is anachronistic; the pace of change is the problem. At some point in future, when all this has settled down, businesses will say, “We can afford to pay this rent and these rates”, but the difficulty is being caused by the pace of change.
I am listening carefully, and I bow to the hon. Gentleman’s expertise on this subject, as I know he has studied it long and hard. We have talked a bit about the divide between digital and high street retail. Does he agree that there is a social good to be achieved in supporting high street retail and that the Government should perhaps express a preference for it over digital through the tax system?
Yes, I absolutely agree with that. Community is very important to me and our shops are part of those communities. It is dangerous when the Government start picking winners—I do not think that should happen. The forces of free markets and a market economy are the best things to ensure that prices are kept low and levels of services are high for consumers. That is what is most effective. So what we have to try to do, of course, is create a fair and level playing field, and let businesses come in to fill that gap and provide services that people want. That is what we should be looking to do.
In its review of business rates, the Treasury talks about different options, including an increase in VAT, changes to corporation tax and an online sales tax. It seems to land on the online sales tax as the solution, so let me talk about a couple of things that it sets out in that consultation. It sets out not that an online sales tax will replace business rates, but that it will exist alongside them—that is a key thing to understand—and that it will potentially lead to a reduction for retail. So there will be two systems coming together.
I have heard a few Members talk about retail in this debate, but the changes in consumer behaviour are not just about retail. Uber Eats and Deliveroo, for example, deliver to people’s houses often not from takeaway premises on the high street but from mini-establishments off the high street. Travel agents, insurance brokers, banking—all those things are changing because of consumer habits; people do not visit shops anything like as much as they used to. Looking at the problem purely from a retail perspective is wrong; doing so does not understand the problem.
Another issue is what is online? One of my fantastic local butchers in Thirsk is Johnson’s, an order-in butcher’s, which has wonderful meats, but does not seem particularly the type of business that would go online. I visited them during the crisis, because they had set up a delivery service and offer click and collect, as well as traditional shopping. They have even set up a little bot from which you can order, which talks to you using artificial intelligence—very clever stuff and really innovative, which was great; but how would you assign an online sales tax to those different categories? It would be hugely complex for a business to work out what was bought purely online, what was bought on click and collect and what was bought by customers walking into the store. It would make the system more complicated. The more we try to simplify the tax system, of course, the more complicated we make it. There are some inherent flaws in an online sales tax; it is so very difficult. The problem of distinguishing between online, click and collect and physical shopping is inherent in lots of different businesses, John Lewis being an obvious example. It is not clear how such a tax would operate without making the system more complex.
Simple and easy are two different things. The simple solution, which will not be universally popular, is to look at sales tax. We already have a sales tax; it is called VAT. The simplest thing to do would be to raise VAT. We could not just put a hole in the business rates system—some 30 billion quid—without replacing it with something, certainly not given where the public finances are today. Putting 2p on VAT, would raise £12 billion a year; 4p on VAT would raise £24 billion a year. We could also look at the threshold system of VAT, which is a real deterrent for businesses to grow. If we want a simple solution that is effective and crosses all the different sectors, it is there. It is fair and would keep the tax system as simple as possible.
I urge my very good friend the Minister on duty, the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for Rochester and Strood (Kelly Tolhurst), and the Treasury to think about the full extent of the problems, as well as the potential quick wins. When compared with an online sales tax, VAT is a much better system to operate.
I too refer the House to my entry in the Register of Members’ Financial Interests.
Business rates have been discussed very many times in this Chamber, and I am sure that many of us have had multiple conversations with many businesses across our constituencies. The debate around business rates—how they should be implemented, whether we should have a complete revamp and overhaul of them, or even whether they should be adopted at all—has been going on for a significant period. Business rates impact many, many businesses, both large and small, across my constituency of Keighley and Ilkley and throughout the country. I mentioned the impact on small businesses because, as we all know, business rates relate to the size of the property that the business occupies rather than its turnover, or any other fiscal measurable that relates to the financial performance of that business.
Under the current system, the valuation office should regularly review rateable values to ensure that they are broadly in line with prices paid in the rental market by the businesses that pay business rates, to provide more certainty over bills, but I must say, having had some knowledge as a chartered surveyor over the past 12 years, that the review process can be slow, bulky and inefficient in its delivery. I very much welcome the fact that, since the last revaluation delay, the Royal Institute of Chartered Surveyors has consistently called for measures that offer improved certainty, consistency and stability to the UK property market. Instead of continuing to tweak the rating system and introducing impromptu delays, we need to start thinking about much more of a full reform and a complete overhaul of the system, to provide consistency through a fairer property taxation system, which works better for businesses and is targeted at offering, and able to facilitate, extended business planning. Of course, it must work for our friends over at the Treasury.
I am pleased that this Conservative Government moved incredibly swiftly and presented the Non-Domestic Rating (Lists) (No. 2) Bill to Parliament earlier this year, and I welcome the immediate support to business owners provided through that relief. Across Bradford district, about 5,000 premises will benefit from that rate relief, and of course many of them are based in Keighley and Ilkley. That is a pure demonstration that our Government are on the side of hard-working businesses right across the country. I thank my hon. Friend the Minister and other colleagues in Government for moving swiftly.
Although I support this Bill and the relief that it provides for many businesses, I would like to see a revolutionary approach to the business rates structure that revamps and overhauls business rates so that we have a nimbler and fairer system. I do not want the business rates structure to be removed altogether, but it must adapt much more to the property and business market, which continues to change drastically.
I welcome this short Bill and the change that it makes to the revaluation date. It means that business rates payable from 2023 to 2026 will be based on post-pandemic property prices, as of April 2021. Clearly, it makes sense. I also welcome the Treasury’s fundamental review of business rates, which I believe is essential. High streets in my constituency are suffering very hard. They were suffering pre-coronavirus as a result of the very high burden of business rates and, as has been mentioned, the move towards online shopping.
Kensington pays a very heavy burden of business rates. Two small boroughs in central London—Kensington and Chelsea, and Westminster—account for a whopping 10% of all national business rates. Greater London accounts for a third of national business rates, but has only one sixth of the total properties. In the last reappraisal, rateable values in England as a whole went up by 9.6%, but in London they went up by 23.7%. My high streets simply cannot tolerate that burden. Clearly, it has got worse as a result of coronavirus. In central London, we feel that particularly acutely because footfall has yet to return. The survey of footfall that was carried out a few weeks ago showed that London was bottom of the list for the uptick in footfall.
Many central London businesses did not benefit from the £25,000 Government grant for retail, leisure and hospitality because it was based on rateable value, not on profitability or cash flow. The rateable values in my constituency are three times the average, so many businesses in Kensington did not get the grant, whereas equivalent businesses elsewhere in the country, even some of a greater size, did. Clearly, my businesses did benefit from the business rate holiday, and for that I am grateful.
As my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) alluded to, we cannot be naive here. Business rates are important to the Exchequer—they provide more than £25 billion to it annually—but I believe that the high street is bearing an unacceptable burden of business rates. While I welcome the Bill, I look forward to the Treasury’s review of business rates, and I believe that we need a fundamental review.
The reform of business rates and revaluation has been in a holding pattern for many years, and those of us who have spent time in local government will be conscious that the expected impact of that reform on local authority finance has been hotly debated. I think that we are still of the view that business rates in their current form are the worst possible solution to financing local government, with the exception of all other available choices. My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) made that point strongly in describing the hard choices we need to make in identifying alternative sources of finance. It seems clear that, in the Treasury, the business rates billions remain a key building block of our national budget. As a consequence, there has been a long-held reluctance to tinker with them, for fear of the wider impact on the bigger fiscal picture.
Business rates have been in existence for a long time. For many of our citizens, they used to walk in lockstep with residential rates, long abolished. Even today, the variation in business rates income at local authority level is reflected in the grant funding—the traditional revenue support grant that was the basis of most local authority funding—and in things such as school funding. When schools were first set up as a local authority responsibility, local authorities funded them according to their incomes from business rates and domestic rates, and that differential has been carried forward into the funding rates of our schools today. That long-standing impact and the fiscal picture across government of linking day-to-day expenditure on these services to the income we can rely upon coming through business rates remain in place. That goes to the heart of the point that a number of colleagues have made about the need for reform, but we need to address it as part of that complex formula.
I would like to add my voice to the request from many colleagues for greater flexibility in the way that business rates are deployed. I am fortunate to represent a constituency that has a great diversity of local businesses and very vibrant high streets. Many of those new businesses have grown up to take the place of more traditional activities, some of which have seen their departure mourned by local residents, and others perhaps less so. For example, a sports club has closed and been replaced by a children’s soft play area, because the baby boom means that there is now a much greater market for that kind of activity. The bank that I used to be responsible for is now a bookshop and coffee shop on Pinner High Street, reflecting the fact that our high streets can remain vibrant.
This is not about saying that the Government or the local authority need to pick the businesses that they think should be winners on the high street. It is about reflecting the fact that the challenge of online versus bricks and mortar retailing, the changing nature of the high street and our ability to keep it vibrant on behalf of our communities means that we need flexibility.
My hon. Friend makes a good point. He alluded to the point I made earlier. If we had a business rates system that purely provided discounts for retail premises, what would we do with premises that were not retail and became retail or were retail and became another business category?
My hon. Friend reinforces the point robustly. I declare an interest, as a father of young children. The development on our high streets of more community-focused business opportunities, due to there now being many more young children in my part of the world looking to access soft play, clothing retail and other things, is a reflection of the fact that our communities change—they are vibrant. That is what their nature should be, and those market forces are a welcome part of responding to the changes in our communities.
When we see challenges that come along, whether they reflect the national economic position or indeed wider issues on a local level, we need to be able to respond effectively. A really good illustration of that is the impact on the local authority that serves most of my residents and Heathrow airport—the London Borough of Hillingdon. Heathrow is the largest single payer of business rates within the Greater London area, but the challenge for the local authority that collects those business rates is that the revenue it collects and the proportion retained locally is far less than the cost to the local authority of dealing with the consequences of having the airport in its local area.
That brings me on to my final plea to Ministers as we begin to look to what the future of business rates may be beyond this revaluation. Too often, there is little or no upside for local authorities in supporting the development and growth of businesses, because so much of the money goes into the central pool and the community sees the disbenefits such as congestion and pollution—sometimes, in the case of airports, in the form of air pollution—and needing to provide services to people such as refugees and those who find themselves stranded at the airport. All those are direct costs to local taxpayers as part of the statutory frameworks; they simply are not met by the share of the income that lands locally.
We need to have a much broader discussion about how we ensure that local authorities that see these opportunities to develop local businesses, jobs and a vibrant local economic strategy can see the benefit of doing that coming directly into their local community. In the United States, for example, it is a very common part of considerations of any infrastructure development that local politicians can say to the local community, “Yes, you will have to put up with a downside, but you will see this enormous benefit as a consequence of this development or this project going ahead.”
We need to see this as part of a much broader and more strategic review of the way in which we fund public services in this country. The hon. Member for Blackburn (Kate Hollern) pointed to the impact on local authorities of a reduction in revenue support grant. That is part of this complex picture, but over the same period, we have seen significant growth in levels of business rate income that have been retained by local authorities. When the Ministry makes its calculation of spending power, the reduction in spending power does not simply reflect a reduction in the revenue support grant: it then needs adding back into it the additional revenue that is coming from other sources.
As my hon. Friend the Member for Thirsk and Malton explained so clearly, this is not simply a matter of being able to offer everyone out there who would like to see a reduction in their business rates such a reduction, because if we do that, we need to decide which other taxes will go up to pay for it. We must make sure that we consider that decision fully in this House before it is made, because we have a responsibility to local authorities and residents to make sure that the services we commit to provide for them are financially sustainable.
It is wonderful to hear so many Members recognise the need for reform of business rates—and of course, in fairness, right across the patch. I want to return to two points very briefly.
There are many ways that the Government can support businesses, and making the next business rates valuation a smoother transition for them, as this Bill does, is one way to do it. However, as the Government know all too well—the shadow Chancellor, my hon. Friend the Member for Oxford East (Anneliese Dodds), has spoken about it at length from this Dispatch Box—they have consigned businesses and jobs to the scrapheap. The Government are failing to give businesses that could be viable, although they have been closed for a few months, the support they need. If we are to rescue businesses, there is an urgent need for the Government to support them through this difficult time. Tens of thousands of jobs are at risk. We are talking about rates and how people pay into the system. If people are unemployed, of course there is a cost to that as well, not only financially but emotionally and socially.
The hon. Member makes a very good point. On the jobs at risk and the Government support she is criticising, if this is such a big issue for her party, why are no Labour Back Benchers willing to speak on this very important issue that affects millions of businesses around the UK?
I am sorry that the hon. Member does not understand that this debate is for today. There have been a number of debates on the lack of support for businesses from this Government, and quite a few Conservative Members have recognised that some businesses have had absolutely no support at all, so perhaps we do need another debate on that subject.
On local government funding, councils face a multimillion- pound funding gap. Of course, local government works hand in hand with local businesses to create a sense of place to create vibrant town centres, as well as to encourage community sites and economic growth. I do recognise that the Government are covering 75% of the income loss incurred by councils, but that still leaves them hugely out of pocket and less able to support businesses.
The Bill is a first step to supporting businesses and local authorities, but everyone who has spoken agrees that business rate reforms need to be an urgent priority for the Government. If we are to protect jobs in high streets, this must be dealt with fairly and quickly. I hope that Ministers and their Department will keep these comments in mind as we look ahead to the comprehensive spending review.
I thank all hon. Members for their contributions to this debate, but also for the ideas and the clear passion that Members across the House have on this issue.
I want to pick up on just a few points, because I know time is short. While I have great respect for the hon. Member for Blackburn (Kate Hollern) from our previous dealings, this country has been facing one of the most significant pandemics, and the response from this Government in support of business has been significant. Over the next five years alone, there will be over £23 billion in support for businesses. We have taken steps quickly and in an agile way, and we have been able to protect those jobs, as our constituents quite rightly look to us to do.
I would like to touch on retail, which has been mentioned a lot today. Quite rightly, when people think of rates and when people think of our communities, they look at our town centres and our high streets. Of course, in my previous role, where retail was very much a focus, this issue was not lost on me. One of the things we need to recognise is that, during the pandemic, we were able to double the amount of retail relief. The Chancellor expanded this to 100%, enabling more retail, hospitality and leisure businesses to make use of those discounts.
We also need to recognise, as hon. Members have highlighted, the changing nature of our high streets. Of course, my Department has launched the £1 billion future high streets fund, particularly to work with local authorities to make sure we can take our high streets to the next phase. We are working with local authorities and communities to develop the thriving high streets that we sorely need.
The Bill may be narrow and technical in scope, but in practice it does deliver on an important Government tax commitment by setting in law the date of the next business rate revaluation on 1 April 2023. Business rates are a local tax, rather than a national tax, which is why this small Bill is necessary. However, for many businesses, this Bill is as important as a national tax measure. We hear from rate payers that the accuracy of rateable values is important to the fairness of the business rate system. Frequent valuations ensure that business rates bills are up to date, and accurately reflect rental values and relative changes in rents. That is why we remain committed to frequent revaluations and why we had previously decided to have the next revaluation in 2021. That revaluation would have been based on the rental market at 1 April 2019, before coronavirus. I trust hon. Members understand the exceptional circumstances in which we decided to no longer proceed with the 2021 revaluation, and I very much welcome the support that has been expressed from across the House.
I would like to pick up on a point made by the hon. Member for Westmorland and Lonsdale (Tim Farron). We recognise the issue he raises relating to holiday lets. We have consulted on possible changes to the criteria which could enable more holiday lets to be registered for business rates. We will set out a Government response once we have considered that in more detail.
I also want to pick up on a point expressed by many hon. Members today about the fundamental review of rates. The Treasury has set out the scope and launched a call for evidence. It has been great to hear from hon. Members in this debate, including my hon. Friends the Members for Thirsk and Malton (Kevin Hollinrake), for Keighley (Robbie Moore) and for Ruislip, Northwood and Pinner (David Simmonds), the hon. Member for Richmond Park (Sarah Olney) and my hon. Friend the Member for Dudley North (Marco Longhi). I very much hope they participate fully in the call for evidence and feed in their ideas, so that the Treasury can evaluate them. The scope of the fundamental review includes reducing the overall burden, improving the current system, and considering more fundamental changes in the medium and long term. Hon. Members have rightly called for that. We do hear in our constituencies that the burden of that single bill is large for so many of our businesses.
These measures are particularly important for local authorities. My Department has held discussions with representatives from local government, including the Local Government Association. For local authorities, we intend to make any adjustments to the rates retention scheme that are necessary to ensure that locally retained income is, as far as practicable, unaffected by the revaluation. That will give local authorities the assurance they need regarding locally retained income and revaluations. We will also ensure that local authorities have what they need to issue the new bills in a timely manner.
The Bill sets the next revaluation in 2023, but ratepayers do not have to wait until then to benefit from the reforms we have made to the rating systems. They are benefiting now from the small business rates scheme, which has removed 700,000 small businesses from the rating, and from a £10 billion package targeted on the businesses most affected by the pandemic, which means that more than half of all ratepayers in England will pay no rates at all this year.
I thank colleagues for their contributions to the debate and look forward to the House supporting the Bill.
Question put and agreed to.
Bill accordingly read a Second time.
Non-Domestic Rating (Lists) (No. 2) 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) (No. 2) Bill:
(1) The Bill shall be committed to a Committee of the whole House.
Proceedings in Committee, on Consideration and up to and including Third Reading
(2) Proceedings in Committee, 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.
(5) Any other proceedings on the Bill may be programmed.—(Eddie Hughes.)
Question agreed to.
Non-Domestic Rating (Lists) (No. 2) 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) (No. 2) Bill, it is expedient to authorise provision for, or in connection with, changing the dates on which non-domestic rating lists must be compiled.—(Eddie Hughes.)
Question agreed to.