Non-Domestic Rating (Lists) (No. 2) Bill

(Limited Text - Ministerial Extracts only)

Committee stage & 3rd reading & 3rd reading: House of Commons & Committee: 1st sitting & Committee: 1st sitting: House of Commons
Tuesday 20th October 2020 Commons Chamber

[Steve Reed]

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.

[The Minister for Regional Growth and Local Government (Luke Hall)]

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.

[David Simmonds]

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?

[Luke Hall]

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.

[David Simmonds]

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?

--- Later in debate ---

[Luke Hall]

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.

[David Simmonds]

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.

[Luke Hall]

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.

Third Reading

[Luke Hall]

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.