Non-Domestic Rating (Nursery Grounds) Bill

(Limited Text - Ministerial Extracts only)

2nd reading: House of Commons
Tuesday 5th June 2018 Commons Chamber

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

I beg to move, That the Bill be now read a Second time.

Agriculture is at the heart of our country’s rural life, and, moreover, at the core of our rural economy. It employs over half a million people and supplies almost half of everything we eat and drink in this country. In England alone, the rural economy is worth over £250 billion. We want our country to offer unparalleled business opportunities for an agricultural community that produces some of the finest food and drink in the world. At every stage of the food chain, the UK is creating exceptional food and drink enjoyed around the world, with lucrative opportunities for British exporters, international buyers, and investors. In just 10 years, global demand has grown by nearly a third, with total food and drink exports now exceeding £20 billion.

I am proud to represent a deeply rural and agricultural constituency, home to businesses like Wensleydale Creamery, HECK sausages, Stamfrey Farm yoghurt, and Thornborough Cider—all fantastic rural businesses producing food and drink that competes with the best around the world.

This Government are absolutely committed to supporting sustainable growth in the rural economy. Through the 2014-2020 rural development programme, we are investing almost half a billion pounds in England’s rural businesses. Our support for rural enterprises includes developing farm and horticultural companies. In February, the Government launched a wide-ranging consultation on the future of farming—one that supports farmers once the United Kingdom is outside the European Union. The Government are now analysing views and responses from all stakeholders who contributed. Our ambition is for a more dynamic and self-reliant agricultural industry. Supporting our rural economy and protecting farmers is an essential part of our exit from the European Union. Leaving the EU provides the Government with a unique opportunity to establish new frameworks that support our farmers to grow more, sell more and export more great British food and drink. As we develop this new approach to food, farming and fisheries outside the EU, we will not compromise on our high standards of animal welfare and environmental protection.

The Government are set to continue to commit the same cash total—£3 billion—in funds for farm support until the end of this Parliament. Then the Government will devise a new agri-environment system to be introduced in the following Parliament.

[Mr Jim Cunningham (Coventry South) (Lab)]

One of the big problems with regard to protecting farmers, as I am sure the Minister knows, is getting labour in from the EU and other parts of the world. That is where the big problem might lie after we have come out of the EU.

[Rishi Sunak]

It is not quite my place to comment on future immigration policy, but the hon. Gentleman will know that the new Home Secretary is devising a new immigration system for the UK after Brexit. Of course, ensuring that all businesses, not just in agriculture, have access to the talent and the labour they need will be at the forefront of that new system.

The Government have also said that they will use the structural fund money that comes back to the UK following the EU exit to create a UK shared prosperity fund. The needs and interests of rural businesses have to be addressed as part of any future plans.

We firmly believe that the business rates system plays an important role in supporting agricultural productivity. The agricultural exemption from business rates is a key part of this support. It is a broad-ranging and generous tax measure that ensures that no business rates are paid on agricultural land and properties.

[Sir Greg Knight (East Yorkshire) (Con)]

The Bill itself does not define what a “nursery ground” is, but the explanatory notes, which are not considered by Parliament and are not part of the legislation, do contain a definition of what a “nursery ground” is. Why is this? Would it not be better to put the definition in the Bill, or does it exist in other legislation?

[Rishi Sunak]

My right hon. Friend is right. My understanding is that other legislation has outlined the difference between the two, and I will come on to the Court decision that distinguished the treatment of the two.

It might be helpful, for Members who are not aware, if I explain the distinction. A nursery ground is where small plants or trees are propagated or sown with a view to their being sold on to someone else for growing on to their mature state, for sale to or use by the end consumer, whereas a market garden is where fruit, vegetables, flowers or plants are produced to be sold directly or indirectly to members of the public for consumption.

[Rebecca Pow (Taunton Deane) (Con)]

I have been much involved with the horticultural industry, so I am quite aware of the nursery industry, but I believe that many people are not aware of how significant it is for growing produce for our home market. We could grow it even more after Brexit—indeed, we need to—and the Bill will help a great deal by making these businesses more viable.

[Rishi Sunak]

My hon. Friend is, as ever, an incredible champion for agriculture and the rural community. She is right to highlight not only the current contribution of the fantastic horticultural sector to the UK economy in providing such fantastic food and drink for us to enjoy but the opportunities that will come after Brexit, as we make good on the promise of a global Britain where our food and drink exporters can look out to the world around, where demand is growing exponentially, and take advantage of all those opportunities. Consumers around the world will have the opportunity to benefit from high-quality produce developed in this country and always to high welfare standards, of which I know she is also a champion.

It is worth noting that the exemption from business rates for agricultural land has been in place since 1929. Before that, in the early part of the 20th century and before, agriculture benefited from a partial exemption from rates. For almost 100 years, the Government and Parliament have considered that agriculture should not pay rates. This Government and I trust that this Parliament has no intention for any change of direction in this matter.

It has been assumed until now that all plant nurseries where plants or trees are grown in the initial stages of their life, as I outlined, benefited from that exemption. That had always been the understanding of both rating valuers and practitioners, but in 2015, a Court of Appeal decision showed that the exemption did not apply to plant nurseries in buildings where the buildings were not used in connection directly with agricultural land. That does not reflect Government policy, and neither does it reflect our commitment to supporting sustainable growth in the rural economy.

This legislation will ensure that plant nurseries in buildings will once again benefit from the exemption from business rates for agricultural land and buildings. It will restore fairness for hard-working businesses hit by an unexpected tax burden, and it will enable the Valuation Office Agency to return to its former practice of exempting plant nurseries in buildings and removing plant nurseries that have been assessed from the business rates list. Plant nurseries paying business rates since 2015 will be eligible to apply for a backdated refund of their business rates, which will ensure that these businesses do not continue to suffer as a result of a property tax with an impact on the cost of farming and produce.

[Bob Blackman (Harrow East) (Con)]

My hon. Friend is clearly laying out the Government’s position, but can he clarify one issue that has been raised with me? Garden centres are commercial centres for direct provision to the public, but what will be the position under the new legislation of hybrids—in other words, plant nurseries with a garden centre alongside them that sells their produce directly to the public?

[Rishi Sunak]

I thank my hon. Friend for bringing up a helpful and important point that is worth clarifying. Under current legislation, garden centres are not exempt from paying business rates because they are not treated as agricultural businesses, which I am sure hon. Members will understand. It would be for the Valuation Office Agency to determine the individual facts of the case that he mentioned, but in general, it is perfectly possible for different parts of an entity to be treated in different ways. In the example he gave of a hybrid, where an agricultural business also had a retail operation, the Valuation Office Agency would be able to treat different parts of the business in different ways, and some may benefit from the agricultural exemption. Another example might be a working farm that also happens to have a retail element—for example, a farm shop—that might not benefit from the agricultural exemption, whereas the rest of the farm would. I hope that that clarifies my hon. Friend’s query.

In developing this legislation, we have worked very closely with the National Farmers Union to make sure that the measure meets our shared aim of ensuring that plant nurseries benefit from the agricultural exemption. I want to put on the record my thanks to the NFU for its invaluable insights and expertise, which has helped us to bring this effective legislation to the House. I very much welcome its support for the Bill.

I also want to put on the record my thanks to my hon. Friend the Member for St Austell and Newquay (Steve Double). He deserves enormous credit for highlighting this issue to both my predecessor and others last year, and he has continued to press the case with Ministers and other parts of the Government. I am glad that he will be able to see the fruits of his labour brought to bear today.

To return to the comment made by my hon. Friend the Member for Harrow East (Bob Blackman), the Bill will not otherwise disturb the existing boundary of the agricultural exemption, so uses beyond agricultural operations, such as garden centres, will continue to be subject to the normal business rates process.

[Sir Greg Knight]

Is the Minister in effect saying that all the Bill does is return the law to the same state we all thought it was in before the case of Tunnel Tech v. Reeves?

[Rishi Sunak]

My right hon. Friend is absolutely right: that is what the Bill seeks to do. It is a limited, targeted Bill that restores the practice previously widely accepted and understood by all participants in the rating system and ensures we will return to the state that existed before the Court of Appeal decision.

While I am responding to my right hon. Friend, let me clarify my earlier point. He asked where exactly the definition of nursery grounds can be found. I am reminded that it is precisely defined in case law, rather than in statute. That is where the definitions used over the years have been developed.

To turn to the business rates system in general, the Government are very clearly using the business rates system to create opportunities and to drive growth across the country. The Government have introduced a range of business rates reforms—worth over £10 billion by 2023—that will benefit the wider economy, including many businesses in rural areas. In April 2017, we permanently doubled small business rate relief to 100%, and raised the threshold from £6,000 to £12,000. As a result of these measures, over 600,000 small businesses—occupiers of a third of all properties—now pay no business rates at all. This demonstrates the Government’s clear commitment to supporting small businesses. We understand the impact of business rates in the rural economy in particular, so at the same time the Government also doubled rural rate relief from 50% to 100% for eligible businesses.

[Rebecca Pow]

I have an urban area in Taunton Deane, but I speak as someone whose constituency is particularly rural. There is a view that there is an increasing divide between urban and rural, particularly in the south-west, where we are largely rural. These business rates exemptions are absolutely crucial. Does the Minister agree that this Government are very much indicating that they understand their importance?

[Rishi Sunak]

My hon. Friend is absolutely right. She will know that I also represent a deeply rural constituency. I have seen at first hand the incredible difference that the business rates exemptions make to small rural enterprises, whether they are small business rate relief, rural rate relief or, indeed, some of the measures to support pubs that the Chancellor has announced in the last Budget or two. All of these measures add up to tangible savings for thriving enterprises, which are indeed the lifeblood of rural areas.

My hon. Friend will know, as I do, that rural areas typically do not benefit from large multinational employers. The backbone of rural economies are small and medium-sized enterprises, for which business rates are often a significant cost to bear. Any relief that the Government can give is always warmly welcomed, and it makes an enormous difference to their profitability and future success.

I am pleased to tell my hon. Friend that the Government continue to listen to business. At the spring Budget last year, the Chancellor announced a £435 million package to support rate payers facing the steepest rises in bills following the revaluation. Further answering calls from businesses, the Government brought forward to April this year the switch in the annual indexation of business rates from the retail prices index to the consumer prices index. That represents a cut in business rates every year. Although bringing forward that measure two years earlier than previously planned might sound technical, it is worth £2.3 billion over the next five years.

Furthermore, at last year’s autumn Budget the Chancellor also announced an increase in the frequency of property revaluations from every five years to every three years following the next revaluation. That will ensure that bills more accurately reflect properties’ current rental value and relative changes in rents. The 2018 spring statement announced that the next revaluation would be brought forward to 2021 from 2022, so that businesses can benefit from the change as soon as possible. After that, three-year revaluations will take effect in 2024.

To deliver on that commitment, the Government have already introduced secondary legislation to set the valuation date for the next revaluation on 1 April 2019, allowing the Valuation Office Agency to start preparing for a 2021 revaluation. The Government will introduce primary legislation to change the date of the next revaluation to 2021 in due course. The British Retail Consortium recognised that that was a positive move to improve the fairness of the system, and I look forward to meeting its representatives shortly.

In spite of all that, the Government are not resting on our laurels. We are also reviewing the wider taxation of the digital economy, and the Chancellor has been clear that we need to look more broadly at the overall taxation of the digital economy. The Government are working internationally to ensure that corporate tax rules deliver fairer results for certain digital businesses. We will use the output of those discussions to help inform consideration of the wider business tax system, to ensure that all businesses make a fair contribution to the public finances and that business rates continue to support the stability of local government funding.

[Sir Greg Knight]

I am grateful to the Minister for his generosity in giving way. What would be the position of a business adversely affected by the Court of Appeal decision? Would it be able to claim compensation for any losses suffered?

[Rishi Sunak]

I am happy to tell my right hon. Friend that businesses will absolutely be able to claim back any business rates they have paid from 1 April 2015. In Wales, businesses will be able to claim back to 1 April 2017. It might help Members if I explain the difference between the two dates.

The business rates system in England has relative lists of valuation dates—there is a 2010 list and a 2017 list. When we reach a certain point, it is then impossible to go back and change the list from the beginning. In this case, for any decisions that the Valuation Office Agency made after the spring of 2016, it was only possible to go back and change people’s bills to April 2015. Our understanding is that only a handful of businesses have been caught, and they will be able to use this legislation and subsequent regulations to appeal to the Valuation Office Agency and receive a refund backdated to when they first started paying bills.

[Sir Greg Knight]

Will the Minister clarify something—and if he cannot answer today, will he write to me? In addition to claiming back what has already been paid, will the businesses affected be able to claim costs and any other expenses arising out of the money that they erroneously had to pay?

[Rishi Sunak]

The businesses will not be able to claim costs; the new “check, challenge, appeal” system allows them to make a no-cost filing with the Valuation Office Agency, so there will be no cost to them as they claim back the bills they paid. However, it is important to note that, when they paid, the bills were not paid in error; they reflected the circumstances on the ground at the time.

I said that I would clarify why the date in Wales is different from the date in England. It is purely on the advice of Welsh Government officials. They do not believe that any businesses have been caught up by this in a way that would impact their previous list. In Wales, therefore, any active businesses caught up in this will only have their bills backdated to 2017 at the start of the new and current ratings list. Further retrospective dating is therefore not required.

[Bob Blackman]

My hon. Friend is clearly setting out to answer many of the questions from across the House. Will he clarify the number of businesses caught up in this and the total amount of money involved? I quite understand if he is unable to answer those questions today, but it would be helpful to many colleagues if this could be clarified subsequently in writing.

[Rishi Sunak]

I can answer my hon. Friend’s question now. The Government do not actually know, and are not in a position to know, the tax or business rates circumstances of individual businesses across the country. The VOA is under no obligation to share confidential taxpayer information with the Department. What I can say, based on informal conversations with the sector and the VOA, is that we believe just a handful of businesses impacted by the court ruling have subsequently had their bills changed. That is the working number we are aware of and I hope that provides the clarity he requires.

To return to digital taxation, the paper published at the 2017 autumn Budget sets clear expectations on what the Government hope to achieve on digital taxation: international momentum behind long-term corporate tax reforms and, pending that, the development of interim multilateral digital tax measures.

In conclusion, the Bill delivers on our commitment to support the rural economy and promote this country’s rural life. Moreover, it promotes fairness for hardworking businesses in the agricultural sector. I believe that it has widespread support from the agricultural community and valuers around the country. I very much commend it to the House.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Nigel Adams)]

I have 15 minutes in which I have the pleasure of winding up this incredibly interesting and broad-ranging debate on an important subject. I am grateful for all the valuable contributions that have been made; it has been helpful for me to hear Members’ views ahead of further scrutiny of the Bill. There have been contributions from all parts of the House—well, almost all parts—and they have all been very well informed.

I wish to respond to some of the points that were raised, but first I wish to refer to the opening remarks by the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak), and to flesh out his comments on what we have done to improve the revaluation process. As my hon. Friend noted—[Interruption.] Mr Deputy Speaker, I never knew how much interest there was in plant nursery grounds.

[Mr Deputy Speaker (Sir Lindsay Hoyle)]

The Whips are being sent like London buses!

[Nigel Adams]

There are Whips at the Bar of the House who when they noticed a nursery grounds Bill thought it referred to Lords nursery ground, rather than to plant nurseries.

Let me build on some of what my hon. Friend the Minister said earlier. We heard from stakeholders that the normal five-year revaluation cycle was too long. They told us that the property market can sometimes move very quickly and a five-year period can therefore leave rateable values out of date for some time. We recognised that that was unfair. [Interruption.] They are still coming, Mr Deputy Speaker. We listened to stakeholders’ concerns, which is why we announced in the autumn Budget 2017 that we will move to a three-year revaluation period.

To help businesses further, we have moved the next revaluation forward from 2022 to 2021. [Interruption.] My right hon. Friend the Minister for the Armed Forces is here; there is clearly a Ministry of Defence interest in the Bill. The steps we have taken have been welcomed and supported by ratepayers across all sectors. The VOA has started to prepare for the 2021 revaluation and we have ensured that the agency is sufficiently funded to carry out high-quality valuations.

Let me turn to the points raised by the Opposition. The hon. Member for Oldham West and Royton (Jim McMahon) asked whether ratepayers would be paid interest on any repayments made as a result of the Bill. In principle, ratepayers are entitled to receive interest for overpayments, including as a result of the Bill, but it is only fair that the interest is tied into the actual cost of money and that ratepayers do not gain overall from receiving repayments if they are found to have been paying too much. To ensure that that is the case, the rate of interest is set at 1% below the average base rate of the largest banks. The reality is that not much interest will be paid back—in fact, there will be nil.

The hon. Gentleman also rightly asked why the Government are acting only now and what other cases are in the pipeline. The court decision was indeed taken in July 2015, but it was right that the Government and the VOA looked into the impact of the decision and how it would be applied in practice before deciding whether to change the law. A written ministerial statement was made in March 2017, and a further written ministerial statement in 2018 restated the Government’s intention to legislate and make the changes in the Bill.

My hon. Friend the Member for Chichester (Gillian Keegan) is the most fantastic champion of rural issues in Chichester. She asked whether ancillary buildings are exempt. They may very well be—it will of course depend on the facts on the ground—but it is for the VOA to decide whether rates are payable.

My right hon. Friend the Member for East Yorkshire (Sir Greg Knight) displayed his disgust at the fact that there were no Liberal Democrats present in the Chamber for this debate. It may very well be the case that one can get an entire parliamentary Liberal Democrat party into two London cabs. I am very pleased to see that the hon. Member for Stroud (Dr Drew) did make his way in for this debate.

In conclusion, this Bill will deliver on the Government’s commitment to ensure that plant nurseries can continue to benefit from this important agricultural exemption. Members have raised a number of interesting points in today’s debate, and we will return to them at a later date. I hope that we can all agree that the overall aims of the Bill and the positive impact that it will have on the rural economy mean that it should be welcomed, and I commend it—

[Steve Double (St Austell and Newquay) (Con)]

rose—

[Nigel Adams]

Before I commend it, I will give way to my hon. Friend.

[Steve Double]

I am very, very grateful to the Minister for giving way. I congratulate him and say that it is great to see him in his place. May I place on the record my deep gratitude to the ministerial team, and indeed to the former Minister, my hon. Friend the Member for Nuneaton (Mr Jones), for bringing forward this measure? Will the Minister join me in acknowledging the very important role that the National Farmers Union played? It first brought the matter to my attention, which led to me raising it in the House. It has played a very important role in speaking up for its members, and it is only right that we acknowledge the role that it has played in this.

[Nigel Adams]

I absolutely agree with my hon. Friend. In fact, without his amendment on the Local Government Finance Bill, I am not entirely sure that we would have got to this measure so quickly, so he should be congratulated, along with the NFU and everybody else who has contributed to the Bill.

Mr Deputy Speaker, I am wearing a new set of glasses. I thought that the clock said 6.59, but it actually said 6.49, so, if you do not mind, as there are so many Members in the Chamber, they may very well want to hear some more about what this Government are doing for the rural economy.

[Sir Greg Knight]

I am most grateful to the Minister for giving way. Perhaps he should have gone to Specsavers. Will he say a little bit more about compensation? Some of the people who have to pay rates, which they will now get back, may have deferred business investment decisions, based on a business expense that they were not expecting. There is an arguable case in future for our looking at the issue of compensation again.

--- Later in debate ---

[Nigel Adams]

What I can tell my right hon. Friend—it is not the answer that he will want to hear—is that there will be no compensation paid to these businesses. We are talking about a very small number of organisations and businesses that are affected and a relatively small sum of money.

In the absence of any more interest in this debate, I hope that we can all agree across this House that this Bill will have a positive impact on the rural economy and that it should be welcomed. I am sure that we all look forward to being able to flesh it out further during its later stages, and I commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Non-Domestic Rating (Nursery Grounds) Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Non-Domestic Rating (Nursery Grounds) Bill:

Committal

(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.

Other proceedings

(5) Any other proceedings on the Bill may be programmed.—(Rebecca Harris.)

Question agreed to.