Draft Non-Domestic Rating (Rates Retention: Miscellaneous Amendments) Regulations 2023
(Limited Text - Ministerial Extracts only)
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The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Lee Rowley)
I beg to move,
That the Committee has considered the draft Non-Domestic Rating (Rates Retention: Miscellaneous Amendments) Regulations 2023.
It is a pleasure to serve under your chairmanship, Mr Hosie. I realise that this is the big issue before Parliament today, so I shall focus on it.
Business rates are governed by a raft of secondary legislation that needs to be updated more or less annually to ensure that it reflects changes made to the rates retention scheme and to the structure of local government. The miscellaneous amendments in the draft regulations will ensure that for the forthcoming financial year, the retention scheme operates as intended and everyone receives the funding they expect.
The draft regulations make changes to four of the seven principal sets of regulations that govern the operation of the rates retention scheme. First, the Non-Domestic Rating (Transitional Protection Payments) Regulations 2013 provide for authorities to receive compensation where their business rates income is lower than it otherwise would be as a result of transitional measures put in place by Government. The draft regulations make a small change for 2023 and future years to ensure that the calculation ignores the newly introduced public lavatories relief, so that compensation is calculated and paid on the true cost of the transitional arrangements put in place following the revaluation.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
I have a tiny point to make. Do the draft regulations cover the whole of the UK, just England, or England with Wales?
Lee Rowley
I had to check, but it is England.
Secondly, the Non-Domestic Rating (Rates Retention) Regulations 2013 provide for the day-to-day administration of the rates retention scheme. As part of those arrangements, the City of London is allowed to retain a small amount of business rates income outside the scheme in recognition of its low resident population and its limited ability to raise council tax income. The amount that the City is allowed to retain normally changes each year in line with the change to the business rates multiplier. In 2023, that multiplier is not changing, so the change before the Committee isolates the inflationary uplift and ensures that it is applied to the City offset. Without the change, the City would see no increase in the coming financial year.
Thirdly, the draft regulations make changes to the Non-Domestic Rating (Levy and Safety Net) Regulations 2013. Under the rates retention scheme, authorities may receive financial help if their business rates income declines. The cost of making the safety net payments is met in part by a levy on those authorities whose income is growing. The levy and safety net regulations set out in detail how such payments are to be calculated and make adjustments accordingly.
Mr Sheerman
The Minister is being very good at giving way, and being fast and getting through the business as we all want to, but as a newly appointed freeman of the City of London, may I press him? I hope the measure does not mean that the City of London gets special privileges, does it?
Lee Rowley
It is an accommodation within the existing regulations, as I understand it, given that the City of London is incredibly atypical in having large service requirements but a very low residential population. There has to be an accommodation somewhere in the processes for the realities in the City of London to ensure that it can still support the services it needs to provide for those visiting, living and working within the City.
Nick Smith (Blaenau Gwent) (Lab)
Does the Minister have an estimate of the benefit to the City of London of the particular opt-out that it enjoys?
Lee Rowley
I do not have an estimate, but I am happy to write to the hon. Gentleman with it. The principle behind the change has been in place for a number of years. As a result of freezing the multiplier, we are simply seeking to ensure the continuation of the situation that would otherwise occur had we changed the multiplier.
The regulations make changes to the non-domestic rating regulations on the basis of distribution of the levy account. I said a moment ago that safety net payments made to authorities whose business rates income has declined are paid for in part by a levy on those who have experienced growth. All levy and safety net payments are made to or from a levy account. Any surplus on that account can at year end be repaid to local government or carried forward against future deficits. If it is repaid, it is distributed to authorities as set out in the basis of distribution regulations. The changes we are making to those regulations pick up the changes to the structure of local government. They also ensure that those authorities will receive a share of the £100 million surplus held in the levy account that the Government announced in the local government finance settlement that it would be redistributing back to local authorities this year.
Although the changes are relatively technical in intent, they make a number of critical changes to the administration of the business rates retention scheme. Without them, authorities would find themselves without the income from the rates retention scheme that they anticipate and according to which they have budgeted. I commend the regulations to the Committee.
Lee Rowley
I thank the hon. Lady for her questions, which I will try to answer in a number of buckets.
I accept that the Government and the Opposition have a different views about how to approach business rates, and I recognise that we will not resolve that this evening, but we are trying to ensure that there are regular revaluations. We committed to that, and the Prime Minister—the former Chancellor and Minister for Local Government—has highlighted in his various guises the importance of regular revaluation. I think that is genuinely welcome, and it is important that we do that.
As a result of the changes that have been made, a multi-billion pound support package is coming that will provide significant support to businesses across the country—in particular for businesses such as pubs. It is important to highlight that we need to continue the business rate system. Labour Members talk extensively about how it does not work, but less about what they would replace it with, beyond the high level. We must ensure that the system is updated, that it has a significant amount of support within it, and that it works for the long run.
The hon. Lady talked about online businesses. That is obviously a challenging issue to get right, but I gently note that as part of the revaluation, there will be a significant uplift in business rate costs for some manifestations of online businesses—warehouses and the like—so I hope that the Opposition will welcome that.
On resources, it is important to note that part of one of the four changes in the thing we are actually voting on—we obviously talk about broader issues relating to business rates regularly—a significant amount of money is being redistributed to local authorities. I am grateful to the hon. Lady for confirming that she will not press these regulations to a vote. Where money is in the system—in the levy account—and is not needed because we think we can accommodate the coming year and beyond without having to retain it, we are giving it back to local authorities, which understand better what to do with it.
On new burdens funding and the City of London, I am happy to write to the hon. Lady and the hon. Member for Blaenau Gwent with more information after the Committee. I am grateful for the Opposition’s confirmation that they will not oppose the regulations and I commend them to the Committee.
Question put and agreed to.