Non-Domestic Rating (Nursery Grounds) Bill

(Limited Text - Ministerial Extracts only)

2nd reading (Hansard): House of Lords
Tuesday 24th July 2018 Lords Chamber

Moved by

[Lord Bourne of Aberystwyth]

That the Bill be now read a second time.

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government and Wales Office (Lord Bourne of Aberystwyth) (Con)]

My Lords, I am grateful to noble Lords who have given up their time to discuss this Bill. I am looking forward to hearing the considered and expert views of the House. These views are always welcome as we work together to ensure that our laws are both fair and robust.

This Government are committed to supporting sustainable growth in the rural economy. Through the 2014-20 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 and the Government are also set to continue to commit £3 billion in funds for farm support until the end of this Parliament.

Earlier this year, the Government also launched a wide-ranging consultation on the future of farming. This Bill is an important part of our continued support for the horticultural sector in England and Wales. The agricultural exemption from business rates plays an important role in supporting agricultural productivity. This measure will support our ambitions for a more dynamic and self-reliant agricultural industry.

This Bill received cross-party support in the Commons, where it passed quickly without amendment. We want swiftly to amend the law to ensure that those ratepayers affected will not have to pay business rates. The Bill will deliver on our commitment to support the rural economy and promote this country’s rural life.

Noble Lords may be aware that, for almost 100 years, plant nursery grounds have been treated as exempt from business rates as part of the general exemption for agriculture. This practice was widely understood and accepted by the Valuation Office Agency and rating surveyors. However, in 2015 the Court of Appeal decided in Tunnel Tech v Reeves that the exemption did not apply to plant nurseries in buildings which were not occupied together with agricultural land and used solely in connection with agricultural operations on that or other agricultural land. Only at the end of 2015 was it clear that there was to be no appeal on that decision to the Supreme Court.

This did not reflect the Government’s policy nor the widespread belief among the sector. The consequence of the 2015 judgment has brought unwelcome change and uncertainty for business rate payers in the horticultural industry. It was therefore understandable that following the judgment the industry expressed concerns about the consequences that the potential imposition of business rates might have on nursery growers, and the Government have listened. We understand that to date only a small handful of nurseries have been affected by the court ruling, but there is the potential that many more would be affected if the Government did not act.

The Government made clear that they would take action. In March 2017, we set out in a Written Ministerial Statement our intention to legislate and, subject to the passage of this Bill, enable the Valuation Office Agency to return to its former practice of exempting all plant nurseries from business rates. A further Written Ministerial Statement was made in 2018 restating the Government’s commitment to legislate and for the first time confirming that the measure would have retrospective effect from 1 April 2015 in England and from 1 April 2017 in Wales.

This Bill will preserve a long-standing policy and ensure that plant nurseries solely consisting of buildings will once again benefit from the exemption of business rates for agricultural land and buildings. It will enable the Valuation Office Agency to return to its former practice of exempting plant nurseries and removing those few plant nurseries which have been assessed from the business rates list. Those plant nurseries that have been paying business rates since the 2015 decision on the basis of the Tunnel Tech decision will be eligible for a backdated refund of their business rates.

While the Bill will restore the former practice of exempting plant nurseries in buildings, I make it clear that it will not otherwise disturb the existing boundary of the agricultural exemption. Uses beyond agricultural operations, such as garden centres, will rightly continue to be subject to business rates. The Bill will also provide support and certainty to plant growers in England and Wales who would have otherwise been brought into the rating system on the basis of the Tunnel Tech decision. It ensures that these viable businesses do not become subject to a tax which could have an impact on the cost of farming and produce.

We have been able to bring forward this measure quickly and without amendment because of the support and advice—which I acknowledge—we received from the National Farmers’ Union in England and the Farmers’ Union of Wales. Their expertise has been invaluable and we are grateful for their assistance.

This Bill is about fairness for business rate payers in the agricultural sector and I commend it to the House. I beg to move.

--- Later in debate ---

[Lord Bourne of Aberystwyth]

My Lords, first let me say that I have lost a bet: I said that there was nothing more certain than that the noble Lord, Lord Kennedy, would put down an amendment. I owe my team and I probably owe the noble Lord a beer as well. I thank him very much for his support.

I shall deal with the points raised by noble Lords, whom I thank very much for their participation in this debate. I turn first to the noble Earl, Lord Lytton, and his point about the provenance of the decision that led to the Court of Appeal judgment in Tunnel Tech Ltd v Reeves.

We have the separation of powers in this country, and HMRC is not a government department, so the decision in this case cannot be laid at the feet of the Government. It would have been entirely wrong for us to interfere—and it would have been interference—in a wholly unconstitutional way with the valuation office procedures, the valuation tribunal decision and the Court of Appeal decision.

That said, once the decision was made, we faced having to decide whether we should seek to overturn the judgment or let it stand. I think it took everybody by surprise—everybody in the agricultural sector, surveyors. The great mass of people were caught on the hop by this decision, and that certainly included the Government; we were not expecting the decision. However, faced with letting it go through or doing something, I think we have taken the right decision, as borne out by noble Lords’ contributions, in deciding to reverse it. The alternative would have been unthinkable for our agricultural industry, and I share what other noble Lords have said about the importance of the agricultural industry and returning some certainty to it. In a way, as other noble Lords will have realised, there is a parallel with the recent legislation on the staircase tax that we have been looking at. In that case, once again, we were confronted with a decision that we did not expect. That is important.

Let me correct a particular point that I made when I said that HMRC is not a government department. It is a government department, but it is a non-ministerial department. I should have stressed that, and it is important that I correct myself on that point.

My noble friend Lady Byford speaks with great knowledge and authority in this area, particularly in relation to her home county of Leicestershire and her experience there. She asked a very valid question: how is it that some have been affected by this judgment and not others? All are affected by this judgment, but so far the valuation has been done only for some. We are therefore moving fairly quickly, because valuations here apply to just a handful of cases involving the reimbursement of backdated money—the retrospective effect. If we did not act, more and more agricultural businesses would gradually be involved.

I join my noble friend and the noble Lord, Lord Kennedy, in thanking the NFU and the FUW very much for their help, their briefing and their great interest and assistance in this case.

I thank the noble Baroness, Lady Pinnock, very much for her support, and indeed for her questions. She asked about the definition of a plant nursery, which it is quite true is not in the legislation. A plant nursery ground, as I understand it, is where small plants or trees are grown in the initial stages of their life with a view to selling them later to somebody else to complete the growing process. A market garden, which would not be subject to rating, is where fruit, vegetables and flowers are produced to final crop and then sold directly or indirectly to members of the public for consumption. Sometimes businesses are both, in which case there is a split assessment. I hope that is helpful.

I very much agree with the noble Lord about the importance of support for the agricultural exemption and the sector generally, which I think, given the contributions made, is shared across the House.

I come back to the noble Earl’s point and understand how the confusion could arise, but HMRC is a non-ministerial department and it is clearly not open to us to interfere in valuation tribunal decisions, and still less, on the same basis, in the Court of Appeal.

I thank noble Lords very much for their support on this.

The Bill was read a second time.