Levelling-up and Regeneration Bill

Report stage
Thursday 20th July 2023 Lords Chamber

Report (4th Day)

12:35

Relevant documents: 24th and 39th Reports from the Delegated Powers Committee. Scottish, Welsh and Northern Ireland Legislative Consent sought.

Clause 161: Locally-led urban development corporations

Amendment 146

Moved by

[Baroness Scott of Bybrook]

146: Clause 161, page 195, line 25, after “may” insert “, by order made by statutory instrument,”
Member's explanatory statement
This amendment is consequential on the amendment in the Minister’s name at page 195, line 35.

[The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)]

My Lords, we have reflected on the debate in Committee and the report from the Delegated Powers and Regulatory Reform Committee, and I reiterate my thanks to the committee for its work in relation to this Bill. We want to ensure that the designation of locally led development corporations by local authorities is appropriately scrutinised, and therefore these amendments, in line with the DPRRC’s recommendation, apply the affirmative procedure to the orders establishing locally led urban and new town development corporations. I beg to move.

[Lord Stunell (LD)]

My Lords, I welcome the government amendments which, as the Minister has said, bring decisions made by the Secretary of State on urban development areas back to Parliament in the form of affirmative resolutions rather than negative resolutions. In my view, which I have expressed frequently, far too much in this enormous Bill is set out in the form of decisions left entirely to the Secretary of State to fill in by way of statutory instruments. Far too often, the only restraint is the wholly inadequate procedure of negative resolutions. I am pleased that the Minister has recognised the overreach in the original drafting and has brought forward amendments to correct that.

In Committee, I expressed general support for the proposition of locally led development corporations, and that was helped on by the Minister’s reassuring words to the effect that the wide discretion given to the Secretary of State in Clause 162 to designate a development corporation is, in practice, entirely conditional on there first being a positive initiative from that locality. That is all the more important in view of the strange reluctance to include town and parish councils in the formal consultation process.

In responding to this debate, I would be very grateful if the Minister could make assurance doubly sure on that point of local initiation and leadership of the new generation of development corporations. I look forward to hearing her reassurance on that point.

[Lord Lansley (Con)]

My Lords, my intervention on this subject will be brief. I did not speak on development corporations in Committee, but I have been following the subject very carefully. In response to this very short debate, or perhaps more appropriately in a subsequent letter, might my noble friend explain to us a little more about how the various forms of development corporations are intended to be deployed?

As far as I can see, in addition to the mayoral development corporations—which are not much affected by this Bill—we will continue to have scope for urban development corporations initiated by the Secretary of State, we will continue to have scope for new town development corporations initiated by the Secretary and we will have locally led urban development corporations and locally led new town development corporations that may be established at the initiative of local authorities under this Bill. By my count, we have five different forms of development corporations.

There is a certain amount of speculation about under what circumstances, in what areas and for what purposes these development corporations may be deployed, and about the Government’s intentions. It would be reassuring to many to hear from the Government about that, and in particular about their presumption that they would proceed, particularly for new towns and new development corporations, by reference to those that are locally led and arise from local authority proposals, as distinct from continuing to use the powers for the Secretary of State to designate an area and introduce a development corporation at his or her own initiative. It would be jolly helpful to have more flesh on the bones of what these various development corporations look like and how they will be deployed by government.

[Baroness Taylor of Stevenage (Lab)]

My Lords, those who have heard me speak in this Chamber will know that I am a great fan of development corporations, having grown up in a town that, apart from our historic old town, was created and, for the most part, built by Stevenage Development Corporation. At that time, the innovation of development corporations took a great deal of debate in Parliament to initiate, and we have hopefully moved on a bit towards devolution since the middle of the last century.

If there is to be parliamentary scrutiny of the establishment of development corporations, it is absolutely right that it should be done by the affirmative procedure, so we welcome the movement on that in Amendments 146 and 147, to ensure that the establishment of locally led urban and new town development corporations is drawn to the attention of both Houses, in the same way as those that are not locally led.

We hope that it will be the intention of government to scrutinise only the technical aspects of governance, for example, as it would be entirely against the principles of devolution that the Bill sets out to promote for any Government to effectively have a veto on whether proposals for a development corporation go ahead. During the passage of the Bill, we have talked about a new relationship of mutual trust between local and central government, and we hope that such parliamentary scrutiny will not be used to undermine that.

I absolutely agree with the noble Lord, Lord Lansley, about the importance of determining the nature of parliamentary involvement in different types of development corporation. Of course, we would have concern about Parliament intending to have a veto on the locally led ones. The other amendments in this group are consequential on the Minister’s previous amendment on page 195. We look forward to her comments about the points raised.

[Baroness Scott of Bybrook (Con)]

My Lords, I assure the noble Lord, Lord Stunell, that, yes, locally led development corporations will come from local authorities—they will put them forward.

My noble friend Lord Lansley brought up the different forms of development corporations. Rather than standing here and taking time, I would prefer to write to him and copy everybody in. I suggest that we might have a small group meeting about this when we come back in September so that any questions can be asked. I thank the noble Baroness, Lady Taylor of Stevenage, for her support for these amendments.

Amendment 146 agreed.

Amendments 147 to 149

Moved by

[Baroness Scott of Bybrook]

147: Clause 161, page 195, line 35, leave out subsection (3)
Member’s explanatory statement
This amendment is the first of a number that remove provision applying negative procedure to orders establishing locally-led urban and new town development corporations, and instead bring those orders within the existing procedures for such corporations that are not locally-led. The result is that affirmative procedure will apply (without hybrid procedure).

148: Clause 161, page 197, line 42, leave out “to (10)” and insert “and (7)”
Member’s explanatory statement
This amendment is consequential on the amendment in the Minister’s name at page 198, line 19.

149: Clause 161, page 198, line 19, leave out subsections (8) to (10)
Member’s explanatory statement
See the explanatory statement for the amendment in the Minister’s name at page 195, line 35.

Amendments 147 to 149 agreed.

Clause 162: Development corporations for locally-led new towns

Amendment 150

Moved by

[Baroness Scott of Bybrook]

150: Clause 162, page 202, line 1, leave out paragraphs (a) to (d) and insert “in each of subsections (3), (3B) and (3C), after “1,” insert “1ZB,”.”
Member’s explanatory statement
See the explanatory statement for the amendment in the Minister’s name at page 195, line 35.

Amendment 150 agreed.

Schedule 14: Locally-led development corporations: minor and consequential amendments

Amendment 151

Moved by

[Baroness Scott of Bybrook]

151: Schedule 14, page 442, line 17, at end insert—
“(5A) In subsection (4), after “(1)” insert “or (1B)”.(5B) In subsection (4A), after “(1)” insert “or (1B)”.”Member’s explanatory statement
See the explanatory statement for the amendment in the Minister’s name at page 195, line 35.

Amendment 151 agreed.

Schedule 16: Conditional confirmation and making of compulsory purchase orders: consequential amendments

Amendment 152

Moved by

[Baroness Scott of Bybrook]

152: Schedule 16, page 451, line 15, leave out sub-paragraphs (2) and (3)
Member’s explanatory statement
This amendment removes a power that is no longer needed in the light of the conclusion of proceedings in Senedd Cymru on the Historic Environment (Wales) Bill.

[Baroness Scott of Bybrook (Con)]

My Lords, government Amendment 152 relates to a consequential amendment on compulsory purchase. In light of the successful passage of the Historic Environment (Wales) Act through the Senedd Cymru, there is no longer a requirement to include a regulation-making power and associated provision under paragraphs 7(2) and (3) of Schedule 16. As such, these provisions are not required and should not form part of the Bill.

Government Amendment 153 seeks to add Part 7 of the Housing and Planning Act 2016 and Section 9 of the Tribunals and Inquiries Act 1992 to the definition of “Relevant compulsory purchase legislation” under Clause 177(6). The amendment is required because both Acts, or regulations relating to compulsory purchase made under them, make provision requiring the preparation of compulsory purchase documentation to which approved data standards published under Clause 177(3) should be applicable. I hope that the House will support government Amendments 152 and 153.

12:45

Government Amendments 154 to 160 relate to compulsory purchase land compensation. They seek to ensure that the compulsory purchase compensation hope value direction measure already included in the Bill applies comparably and consistently in Wales. The amendments are being made at the request of the Welsh Government, who asked for the hope value direction measure to apply to the Welsh Ministers’ CPO powers under the Welsh Development Agency Act 1975 for housing provision and to Welsh NHS trusts’ CPO powers. The amendments will allow the Welsh Ministers and Welsh NHS trusts to include in their CPOs a direction for the non-payment of hope value, providing they can demonstrate that there is a compelling justification in the public interest to secure the direction. I therefore beg to move Amendment 152 in my name.

[Baroness Pinnock (LD)]

My Lords, I thank the Minister for this group of amendments, which largely—not entirely—relate to the rights and responsibilities of Senedd Cymru. Throughout the Bill the Government have had to bring back, as amendments, changes to it to reflect the devolution rights and responsibilities of both the Scottish Government and the Senedd Cymru.

It strikes me as unfortunate that, even 10 years or more after devolution has become fully developed, the Government are still unable to understand that different nations of the UK have particular rights and responsibilities. They are unable to appreciate that or to understand the extent of those rights and responsibilities. It would be good to know that the lesson has reached the distant parts of the Government and that we will have no more of these hasty amendments to put right government legislation impinging on the rights of the devolved nations. Would it not be great if the Minister could give us that assurance?

[Baroness Taylor of Stevenage (Lab)]

My Lords, this group brings up to date the provisions in the Bill so that they are appropriately applied to Wales. It also updates the list of types of compulsory purchase that can be made, subject to common data standards—we accept that this is important. We have had much discussion about the issues of hope value during the passage of the Bill, and it is therefore absolutely right that the Minister responded to Senedd Cymru’s request to make that apply in Wales as well.

I associate this side of the House with the comments by the noble Baroness, Lady Pinnock. It would be helpful if these types of provisions could be consulted on with the Welsh, Scottish and Northern Irish Administrations before they come before this House. But I am grateful to the Minister for listening to the Welsh Senedd’s request, and we are pleased to see these amendments coming forward today.

[Baroness Scott of Bybrook (Con)]

I thank the noble Baronesses for their input. I say to the noble Baroness, Lady Pinnock, that we understand the devolved authorities’ rights and responsibilities, but, as always, there is negotiation on any legislation that we put through which may affect them. The Government and the Welsh Government did not reach a settled position on the CPO powers until after the Lords Committee stage had concluded. As these things are complex, our devolved authorities also need time to discuss and make decisions. I can assure the noble Baroness that we are working closely with them all the time.

Amendment 152 agreed.

Clause 177: Common standards for compulsory purchase data

Amendment 153

Moved by

[Baroness Scott of Bybrook]

153: Clause 177, page 219, line 22, leave out “or” and insert—
“(fa) section 9 of the Tribunals and Inquiries Act 1992,(fb) Part 7 of the Housing and Planning Act 2016, or”Member's explanatory statement
This amendment adds further legislation to the list governing the types of compulsory purchase documentation which can be made subject to common data standards.

Amendment 153 agreed.

Clause 180: Power to require prospects of planning permission to be ignored

Amendments 154 to 160

Moved by

[Baroness Scott of Bybrook]

154: Clause 180, page 225, line 19, leave out from “is” to end of line 27 and insert “constructed or adapted for use as a separate dwelling and—
(a) in the case of a building in England, is to be used as—(i) social housing within the meaning of Part 2 of the Housing and Regeneration Act 2008, or(ii) housing of any other description that is prescribed, or(b) in the case of a building in Wales, is to be used as housing of a description that is prescribed.”;”Member's explanatory statement
This amendment and the amendments in the Minister’s name at page 234, line 23 and page 235, line 43 adjust the definition of affordable housing used in Clause 180 so that an existing definition relevant only to England is not made to apply in Wales.

155: Clause 180, page 225, line 32, at end insert—
“A1 Section 21A(1)(c) and (2)(c) of the Welsh Development Agency Act 1975 (acquisition by Welsh Ministers of land in England for Welsh development purposes).”Member's explanatory statement
This amendment extends the power to direct that compensation be assessed without regard to potential planning permission so that it applies to acquisitions of land in England by the Welsh Ministers under the Welsh Development Agency Act 1975.

156: Clause 180, page 226, leave out lines 14 and 15 and insert—
“9 In the National Health Service (Wales) Act 2006—(a) paragraph 20 of Schedule 2 (acquisition by local health board);(b) paragraph 27 of Schedule 3 (acquisition by NHS trust).”Member's explanatory statement
This amendment extends the power to direct that compensation be assessed without regard to potential planning permission so that it applies to acquisitions of land by NHS trusts in Wales.

157: Clause 180, page 232, line 41, at end insert—
“(3A) In the case of a compulsory purchase order made under section 21A(1)(b) or (2)(b) of the Welsh Development Agency Act 1975 (compulsory acquisition by Welsh Ministers of land in Wales for Welsh development purposes)— (a) the reference in paragraph 1(4) to submission under section 15A(3) of the Acquisition of Land Act 1981 is to be read as a reference to preparation under paragraph 3B(2) of Schedule 4 to the Welsh Development Agency Act 1975, and(b) the references in paragraph 1(4) and sub-paragraph (1)(a) to the confirmation of the order are to be read as references to the making of the order.”Member's explanatory statement
This amendment is consequential on the amendment in the Minister’s name at page 236, line 8.

158: Clause 180, page 234, line 23, leave out from “is” to end of line 31 and insert “constructed or adapted for use as a separate dwelling and—
(a) in the case of a building in England, is to be used as—(i) social housing within the meaning of Part 2 of the Housing and Regeneration Act 2008, or(ii) housing of any other description that is set out in regulations made by the Secretary of State, or(b) in the case of a building in Wales, is to be used as housing of a description that is set out in regulations made by the Welsh Ministers.”;”Member's explanatory statement
See the explanatory statement for the amendment in the Minister’s name at page 225, line 19.

159: Clause 180, page 235, line 43, leave out from “is” to end of line 8 on page 236 and insert “constructed or adapted for use as a separate dwelling and—
(a) in the case of a building in England, is to be used as—(i) social housing within the meaning of Part 2 of the Housing and Regeneration Act 2008, or(ii) housing of any other description that is set out in regulations made by the Secretary of State, or(b) in the case of a building in Wales, is to be used as housing of a description that is set out in regulations made by the Welsh Ministers.””Member's explanatory statement
See the explanatory statement for the amendment in the Minister’s name at page 225, line 19.

160: Clause 180, page 236, line 8, at end insert—
“(3A) In Part 1 of Schedule 4 to the Welsh Development Agency Act 1975 (procedure for compulsory acquisition under that Act), after paragraph 3A insert—“(1) Where the Welsh Ministers prepare a compulsory purchase order in draft under section 21A(1)(b) or (2)(b), they may include in the draft order a direction that compensation is to be assessed in accordance with section 14A of the Land Compensation Act 1961 (cases where prospect of planning permission to be ignored); and if they do so the following provisions of this paragraph apply.(2) The Welsh Ministers must prepare a statement of commitments together with the draft order.(3) A “statement of commitments” is a statement of the Welsh Ministers’ intentions as to what will be done with the project land should the acquisition proceed, so far as they rely on those intentions in contending that the direction is justified in the public interest.(4) Those intentions must include the provision of a certain number of units of affordable housing. (5) The statement under paragraph 3(1)(a) of Schedule 1 to the 1981 Act must include a statement of the effect of the direction; and paragraphs (ba) and (bb) of the same sub-paragraph apply in respect of the statement of commitments as they apply in respect of the draft order.(6) The Welsh Ministers may amend the statement of commitments before the compulsory purchase order is made.(7) But they may do so—(a) only if satisfied that the amendment would not be unfair to any person who made or could have made a relevant objection for the purposes of paragraph 4 of Schedule 1 to the 1981 Act, and(b) only if the statement of commitments as amended will still comply with sub-paragraph (4).(8) If the Welsh Ministers decide to make the compulsory purchase order in accordance with the applicable provisions of Schedule 1 to the 1981 Act—(a) they may make the order with the direction included if satisfied that the direction is justified in the public interest;(b) otherwise, they must modify the draft of the order so as to remove the direction.(9) If the order is made with the direction included, a making notice under paragraph 6 of Schedule 1 to the 1981 Act must (in addition to the matters set out in sub-paragraph (4) of that paragraph)—(a) state the effect of the direction,(b) explain how the statement of commitments may be viewed, and(c) explain that additional compensation may become payable if the statement of commitments is not fulfilled.(10) In this paragraph—“the project land” means—(a) the land proposed to be acquired further to the compulsory purchase order, and(b) any other land that the Welsh Ministers intend to be used in connection with that land;“unit of affordable housing” means a building or part of a building that is constructed or adapted for use as a separate dwelling and—(a) in the case of a building in Wales, is to be used as housing of a description that is set out in regulations made by the Welsh Ministers, or(b) in the case of a building in England, is to be used as—(i) social housing within the meaning of Part 2 of the Housing and Regeneration Act 2008, or(ii) housing of any other description that is set out in regulations made by the Secretary of State.(11) A statutory instrument containing regulations under sub-paragraph (10) is subject to annulment in pursuance of a resolution of—(a) Senedd Cymru, in the case of regulations made by the Welsh Ministers, or(b) either House of Parliament, in the case of regulations made by the Secretary of State.””Member's explanatory statement
This amendment duplicates the new power to direct that compensation be assessed without regard to potential planning permission for acquisitions of land in Wales by the Welsh Ministers under the Welsh Development Agency Act 1975.

Amendments 154 to 160 agreed.

Clause 183: Vacancy condition

Amendment 161

Moved by

[Baroness Scott of Bybrook]

161: Clause 183, page 238, line 15, leave out paragraph (a)
Member's explanatory statement
This amendment removes the provision requiring premises to be considered as vacant for the purposes of Part 10 when occupied by a trespasser (other than in cases caught by paragraph (b) of the same subsection, i.e. squatting in commercial premises).

[Baroness Scott of Bybrook (Con)]

My Lords, I shall speak also to Amendment 161A. Together, the amendments bring us back to an issue raised in Committee relating to premises that are counted as vacant. I thank the noble and learned Lord, Lord Etherton, and others for bringing this issue to our attention and for meeting me and my noble friend Lord Howe to discuss it. We have proposed amended wording to clarify what is meant by the clause in question.

Amendment 161 will clarify that occupation by true “squatters”—for example, persons who have broken into commercial high street premises and are using them as their residence—will not count as occupation for the purpose of assessing the vacancy condition for a high street rental auction, but occupation by other types of trespassers, such as commercial tenants who have remained in occupation following the expiry of their lease, may do so. This will be achieved by removing the reference to trespassers in Clause 183(4), while retaining reference to people living at premises not designed or adapted for residential use.

Amendment 161A adds words to the clause to clarify that “count” in this context means counting as occupation. I beg to move.

Amendment 161 agreed.

Amendment 161A

Moved by

[Baroness Scott of Bybrook]

161A: Clause 183, page 238, line 18, after “count” insert “as occupation”
Member's explanatory statement
This amendment makes a drafting clarification.

Amendment 161A agreed.

Amendment 162 had been withdrawn from the Marshalled List.

Amendment 163

Moved by

[Baroness Taylor of Stevenage]

163: After Clause 202, insert the following new Clause—
“Support for pubsWithin 120 days of the day on which this Act is passed, a Minister of the Crown must publish a strategy to support the pub industry and reduce the number of pubs closing.”Member's explanatory statement
This amendment is intended to help support the pub industry.

[Baroness Taylor of Stevenage (Lab)]

My Lords, I might take a little longer over this set of amendments. Our Amendment 163 addresses the severe impact that the cost of living crisis has had on the pub industry in the UK and asks that Ministers address it with a strategy to support this trade, which has such a unique and special place in the culture of our country.

The number of pubs in England and Wales continues to fall, hitting its lowest level on record. According to new research by the Altus Group, there were 39,970 pubs in June, down by more than 7,000 since 2012. After struggling through Covid, when it received welcome support from the Government, the industry is now facing soaring prices and higher energy costs. Over the past decade, thousands of pubs have closed as younger people tend to drink less—they do not all drink less; they tend to—supermarkets sell cheaper alcohol and the industry complains of being too heavily taxed. According to Altus, 400 pubs in England and Wales closed in 2021 and some 200 shut in the first half of 2022 as inflation started to eat into their profits. That brought the total number of pubs down to its lowest since its records began in 2005.

My noble friend Lady Hayman, who, sadly, cannot be in her place today, drew to the attention of the Minister during debates on the Non-Domestic Rating Bill concerns from the British Beer & Pub Association about the proposals for improvement relief. That is because pubs that are not directly owned and managed by the ratepayer—namely, those in tied or leased arrangements, which are apparently around 30% of UK pubs—become a much less attractive proposition for investment, as improvement relief can be guaranteed only on directly managed pubs. We urge Ministers to take this seriously and consider working with the pub industry to develop a strategy to support it in the medium and long term.

All the amendments in this group draw attention to some of the serious issues facing our high streets and, importantly, to the negative contribution that the current business rates system makes to those problems. I am very aware of proposals in the Non-Domestic Rating Bill currently making its way through the Lordships’ House, but while we welcome many of them, they do not go far enough. We see that Bill as merely tinkering at the edges of an outmoded and outdated system. During my many years on the Local Government Association’s resources board, successive attempts have been made to encourage government to get to grips with both a fair funding review and a comprehensive review of the non-domestic rating system. Unfortunately, the Non-Domestic Rating Bill does not do that, and even the measures it does contain bring concerns about the capacity of the VOA to enact them. It is a huge missed opportunity.

I was very grateful to the Minister for providing me and the noble and learned Lord, Lord Etherton, with an extensive briefing on the Non-Domestic Rating Bill. During it, she pointed out that consultation had not resulted in a call for major reform of the business rates system. I looked at the detail of the consultation and it was, as government consultations often are, a technical consultation framed around government’s questions relating to the existing system, on matters such as transparency of the VOA, penalties for non-compliance, transition to online services, changes of circumstance, improvement reliefs, valuations, the multiplier, local discretionary relief, et cetera. What it absolutely did not do was encourage wider comment on whether the business rates system was fit for purpose in the first place.

The Local Government Association published its response to government proposals. It welcomed some of them, but it said:

“The LGA will continue to argue for a sustainable local government finance system which conforms to the principles we submitted in our submission to the Business Rates Review; sufficiency, buoyancy, fairness, efficiency of collection, predictability, transparency and incentive. We published commissioned work examining alternatives for reform in January 2022. Only with adequate long-term resources, certainty and freedoms, can councils deliver world-class local services for our communities, tackle the climate emergency, and level up all parts of the country”.


We firmly believe that there is a case for further reform of the business rates system. Our Amendment 273A and that in the name of the noble Baroness, Lady Pinnock, Amendment 282D, ask that the Secretary of State consider again the issue of non-domestic rates and the contribution they can make to levelling up and regeneration.

The major example I would give is that the Non-Domestic Rating Bill does nothing to address the very unfair advantage currently enjoyed by online businesses as compared to our high street businesses. The Centre for Retail Research found that 17,000 shops closed last year—that is 47 shops a day, the highest annual total in five years. More than 5% of retail staff lost their jobs last year and hospitality suffered a similar fate. Not all those failures are because of business rates, of course, but I am sure they are a contributing factor.

High streets have been hit hard and are increasingly run down, with hard-working business owners having to accept defeat in the face of impossible financial difficulties. While crisis relief was made available during the pandemic, there does not seem to be a long-term strategy to address the issues that businesses are facing, which will be critical to ensuring that every town or neighbourhood centre in the UK has the opportunities it needs to regenerate and level up.

Labour has a clear plan to scrap business rates and bring in wide-reaching reforms to even out the playing field, but we are still not clear about what the Government’s long-term plan for business taxation will be. The threshold for rates relief for small businesses is still too low, and online giants are still not paying their fair share of taxes, with a digital service tax not high on the agenda—as far as we can see, it still sits in the “too difficult” box. How can we say to our communities that high street shops such as Marks & Spencer—known, valued local businesses—are paying more in tax than online giants such as Amazon? That is not levelling the playing field. Each loss of a much-loved store, pub, bank, post office or leisure facility is felt by our communities like a kick in the teeth, and worse than that is the feeling of helplessness that the Government are standing by and watching this happen.

13:00

Many local authorities are engaged in the Herculean endeavour of trying to regenerate and bring to life their town centres and high streets. Some have benefitted from the bidding pots dished out by the Government. However, even these are not necessarily going to where they are most needed but simply to areas which have the resources to put together good bids. A comprehensive reform of the business rates system would ensure that those who benefit the most would pay more, and that would fund the support needed by those who struggle. That would be a real step towards levelling up.

On these Benches, we strongly support the amendment submitted in the name of the noble Lords, Lord Holmes and Lord Scriven, and my noble friend Baroness Hayman, on the development of regional mutual banks in the UK. I have seen at first hand how effectively these operate in Germany to support the SME sector, and in his excellent article for City A.M., the noble Lord, Lord Holmes, sets out that in 2021 SME funding was £600 billion in Germany, whereas in the UK it was only £57 billion. I am not going to steal any of the noble Lord’s lines, but he is right in his aim to increase financial inclusion for SMEs. I hope our amendments will be accepted by the Minister. I beg to move.

[Baroness Pinnock (LD)]

My Lords, Amendment 282D in my name would require the Chancellor of the Exchequer to undertake a review of the business rates system. The Government know that the current system is flawed and fails to reflect modern business practices. There have been several Bills in the last few years that have tweaked the non-domestic rating system—as the Minister knows, we have one currently before the House—but these are just tweaks to a complex set of business taxation that is in desperate need of fundamental reform.

The system is basically flawed, as illustrated by the fact that the Treasury pays out billions of pounds in support of small businesses every year, via the small business rates relief. This demonstrates that there has to be a more effective way to levy businesses to support the local services on which they depend.

It is not only me saying that business rates need fundamental reform. Many business commentators have urged for a fundamental review. The Centre for Cities published a report in 2020 which proposed 11 changes to the business rates system. The IFS has published a report pointing to spatial inequalities that are “profound and persistent”.

A fundamental review is long overdue, and the amendment in my name simply asks that a review considers the effects of business rates on high streets and rural areas, and compares that information with an alternative business taxation system—for instance, land value taxation, which was referred to in the IFS report. The spatial inequalities explored in the report are at the heart of the levelling-up agenda. Any detailed review of business rates should gather relevant data on the impact of business rates on different parts of the country.

The Government have recognised what they have called “bricks vs clicks”, and in the Financial Statement earlier this year raised rates for warehousing. However, that steers clear of the major issue facing our high streets, which is the competitive advantage that online retailers have over high street retailers when it comes to the rates applied for business rates.

I have mentioned several times in this Chamber the glaring difference between warehousing for a very large online retailer, which may be at the rate of £45 per square metre, compared with the rate for a small shop in a small town of £250 per square metre. The change to raise the rates for warehousing does nothing to address that vast gap. For instance, it was reported that the change introduced this year by the Government cost Amazon £29 million. That might sound a considerable sum to some people, but it is pennies in the pot for a big online retailer such as Amazon. It really needs to start paying its fair share towards local services. Its little vans whizz round our streets, and Amazon needs to pay for the upkeep of them. The rate of its contribution is small in comparison to the services it uses. That is the argument for a huge, fundamental review of the system as is stands.

We also have to take into account the impact of any changes on local government. A large portion of a council’s income now derives from business rates, and any changes to the system by the Government to reduce the burden on businesses—which they did in the Statement by freezing the multiplier—results in compensation to local government for those changes. This again demonstrates that the system is not fit for purpose.

We currently have a system that says that these are the rates, but oh dear, they are too big for charities, small businesses and so on, and then provides relief which costs the Treasury billions of pounds a year. When any further changes are made, that has an impact on desperately needed income for local councils. Therefore, there will have to be compensation in that regard also. This demonstrates that the business rates system, as currently set up, is really not doing the job it needs to do. I repeat that a fundamental review is essential.

It is important to add that the way in which business rates income is demonstrated, via the tariffs and top-ups arrangements, creates further unfairness This becomes more noticeable as councils struggle to balance their budgets.

A business rates system that encourages business development and growth must be at the heart of any strategy to bring more prosperity and jobs to those areas defined in the White Paper as being the focus for levelling up. I do not need to spell out what that might mean, but it could perhaps be reduced rates for some areas, to encourage development and the movement of businesses to those areas.

The noble Baroness, Lady Taylor of Stevenage, raised similar issues in moving her amendment to support the pub industry, which we support. My noble friend Lord Scriven has signed the amendment in the name of the noble Lord, Lord Holmes of Richmond, who I do not think is in his place, regarding the establishment of regional mutual banks. We support this approach as another way of empowering regional businesses and entrepreneurs to take financial decisions which meet local ambitions, rather than the more risk-averse national banks. The noble Baroness, Lady Taylor of Stevenage, used the comparator of Germany. She is right that the mutual banks in Germany have done much to support their regionally-based industries, which does not happen in this country because of the way our banking system is set up.

I really hope the Minister will be able to say in her reply that the Government accept that the business rates system as currently devised is not fit for purpose and that they are looking to have fundamental review to reform it to the benefit of those places—because this is the levelling-up Bill, and I shall keep saying it: anything we do in the Bill should be in support of the levelling-up agenda. This does not do it, and that is why we need a reform of the business rates system.

[Baroness Scott of Bybrook (Con)]

My Lords, Amendment 163 in the name of the noble Baroness, Lady Taylor of Stevenage, concerns the support for our pubs. We are all aware of the importance of our local pubs; they provide space for people to come together, they provide jobs and they support local economies. But we also know that the past few years have been a challenging time for our pubs, with the Covid-19 pandemic and the current high prices, caused by Russia’s invasion of Ukraine, conspiring to put pressure on already tight operating margins.

Through the pandemic, we recognised that the hospitality sector needed to be more resilient against economic shocks. That is why, in July 2021, we published our first hospitality strategy, Reopening, Recovery and Resilience, which covers cafés, restaurants, bars, nightclubs and pubs.

In 2021—this is important for the issue raised by the noble Baroness, Lady Taylor, of listening to the sector—we also established a Hospitality Sector Council to help deliver the commitments set out in the strategy. The council includes representatives from across the sector, including UKHospitality, the British Beer & Pub Association and the British Institute of Innkeeping, as well as some of our best-known pub businesses. While we fully agree with the aim behind the noble Baroness’s amendment, the strategy she asks for already exists.

Moving on to Amendment 279, I notice that my noble friend Lord Holmes of Richmond is not in his place, but the noble Baroness, Lady Taylor of Stevenage, brought it up on behalf of the noble Baroness, Lady Hayman of Ullock, as did the noble Baroness, Lady Pinnock, on behalf of the noble Lord, Lord Scriven, so I will respond. The amendment would require the Secretary of State to report to Parliament within three months of Royal Assent on the existing barriers to establishing regional mutual banks in the United Kingdom and instruct the Competition and Markets Authority to consult on barriers within competition law for this establishment and identify possible solutions.

I make it clear that the Government are supportive of the choice provided by mutual institutions in financial services. We recognise the contribution that these member-owned, democratically controlled institutions make to the local communities they serve and to the wider economy. However, regional mutual banks are still in the process of establishing themselves here in the United Kingdom, with some now in the process of obtaining their banking licences. It is therefore too early to report on the current regime and any possible limitations of it for regional mutual banks.

I know that my noble friend Lord Holmes was interested in how regional mutual banks have performed in other jurisdictions and how we could use these examples to consider the UK’s own capital adequacy requirements. In this instance, international comparisons may not be the most helpful to make. The UK is inherently a different jurisdiction, with different legislation and regulatory frameworks from those in the US, Europe and elsewhere. Abroad, some regional mutual banks have been in existence for centuries and have been able to build up their capital base through retained earnings. In the UK, regional mutual banks are not yet established and are continuing to progress within the UK’s legislative framework.

Additionally, the Competition and Markets Authority plays a key role in making sure that UK markets remain competitive, driving growth and innovation while also protecting consumers from higher prices or less choice. It is very important to note that the CMA is independently responsible for enforcing UK competition and consumer law. The Government cannot instruct the CMA to undertake a consultation. The Treasury is continuing to engage with the mutuals sector and other industry members to assess how the Government can best support the growth of mutuals going forward. I hope that this provides sufficient reassurance to my noble friend on this issue.

13:15

Finally, I thank the noble Baronesses, Lady Hayman of Ullock, Lady Taylor of Stevenage and Lady Pinnock for tabling their Amendments 273A and 282D, which I will take together. Both amendments would require the Chancellor to undertake a review of the business rates system. I understand the noble Baronesses’ concerns here, but, as noble Lords are no doubt aware, the Government have only recently concluded a comprehensive review of the business rates system, supported by an extensive public consultation exercise, with the final report on that review having been published in the Autumn Budget 2021.

The Government of course recognise that the conditions for business are a concern for many noble Lords and have taken action to help ratepayers up and down the country through a significant package of rates support. The review recognised the importance of the rates system in raising funds for critical local services in England, worth around £22.5 billion in 2022-23 and concluded that there was no consensus on an alternative model of taxation that would be able to replace business rates revenue.

The review did, however, identify several significant improvements to be made to the business rates system, and noble Lords will of course also be aware that the Non-Domestic Rating Bill, which was considered in this place only earlier this month, delivers on the major rates reforms called for by stakeholders. That Bill will bring into law the conclusions of the business rates review, most notably a move to more frequent revaluations. This will ensure that the system is fairer and more responsive to changes in the market and will mean that bills are more accurate and reflect current economic circumstances and trends.

In addition to modernising the tax by moving to more frequent revaluations, the Non-Domestic Rating Bill also brings forward changes to make the valuation process more transparent, to deliver new reliefs to support investment in property improvements and to give local authorities greater flexibility to provide relief to local businesses. I trust that noble Lords will continue to support the safe passage of that legislation through this House.

This, of course, is on top of other changes emanating from the Government’s rates review that have already been delivered, including the exemption of renewable plant and machinery from rates. Together, these changes have reduced the burden on businesses in England through support for businesses worth £7 billion. But the Government are not resting on their laurels. In the Autumn Statement 2022, the Government went further and announced additional business rates measures, effective from 1 April 2023, worth an estimated £13.6 billion over the next five years. As part of that package, the Government announced that the tax rate would be frozen for 2023-24. This real-terms cut to the tax rate is worth around £9.3 billion over five years.

In addition, the retail, hospitality and leisure relief will be extended for a further year and made more generous. The retail, hospitality and leisure relief is, in 2023-24, providing eligible businesses with 75% off their bills, up to a maximum of £110,000 per business. This is worth an estimated £2.4 billion to ratepayers, many of whom are on our high streets.

In response to the concerns of businesses in England, the Government have delivered a transitional relief scheme for the 2023 revaluation, which, subject to the passage of the Non-Domestic Rating Bill, will be funded by the Government, not by the ratepayer. This is expected to save businesses £1.6 billion. This has meant that 300,000 ratepayers have seen reductions in their rateable value at the rate of revaluation and an immediate fall in their bills effective from 1 April 2023, rather than seeing reductions phased in over the life of the list. This makes the rates system fairer and more responsive, and it ensures that ratepayers can benefit from the revaluation as soon as possible.

The Government have also delivered a supporting small business relief scheme, which ensures that ratepayers losing some or all of their small business or rural rate relief as a result of the revaluation will see their increases capped at a maximum of £600 in 2023-24. This is worth over £0.5 billion over the next three years and will protect an estimated 80,000 small businesses. That is on top of the generous existing package of statutory support provided to small businesses through the small business rates relief, which ensures that over 700,000 of our small businesses can continue to pay no rates at all, with an additional 76,000 benefitting from reduced rates.

I reassure noble Lords that the amendment is entirely unnecessary. A review has only recently concluded, and the Government remain committed to delivering on the conclusions of that review. We have already taken the first steps towards that and are delivering on our further commitments through the Non-Domestic Rating Bill. I understand why noble Lords have raised their amendments, but I hope that I have provided assurance that the concerns underpinning the two amendments are already being addressed through the changes the Government are delivering to the business rates system, through both legislation and the generous and wide-ranging support that we have made available to ratepayers. I therefore ask the noble Baronesses not to press their amendments.

[Baroness Taylor of Stevenage (Lab)]

My Lords, I am grateful for the very detailed and thorough response from the Minister, as ever. I thank her for her comments on the Hospitality Sector Council. I have a question for her, to which I am happy to receive a response in writing: were the views of the Hospitality Sector Council on the non-domestic rates taken into account in the drafting of both this Bill and the Non-Domestic Rating Bill before your Lordships’ House?

I turn to the issue of regional mutual banks. I am sorry that the noble Lord, Lord Holmes, is not in his place, because he has been a very good champion of this sector. It would be a big step forward for levelling up and regeneration to have those banks, which would work with local government and local communities on the economy of local areas.

I point out that, through the work I have been doing with both the Co-operative Party and the Co-operative Councils’ Innovation Network, I know that regional mutual banks are already being delivered in Wales with the support of the Welsh Government, but in England there are still considerable barriers and hurdles to overcome. My colleagues in Preston have been engaging with this process, but it is highly complex.

We appreciate that financial security is paramount in the development of a regional banking sector, and we are very pleased to hear that that sector has the Government’s support, but we need to work as quickly as we can to overcome the barriers to that. We genuinely believe that, without a switch from the centralised banking system that we have in this country to a much more regional sector, we will not be able to reach the full potential of local areas.

On the issues with the business rates review, I have pointed out the technical nature of that consultation process and the concerns we still have about the resources needed to enact the provisions of the Non-Domestic Rating Bill, particularly in relation to the Valuation Office Agency. There are still concerns around the appeals process, which takes far too long and can leave both businesses and local councils hanging on for years, in some cases, while appeals are settled.

The noble Baroness, Lady Pinnock, was right to raise the issues of tariffs and top-ups, which are not very efficient at making sure that the funding from non-domestic rates gets to where it needs to go. They are not structured enough to ensure that, where you have poorer parts of better-off areas, the funding gets to where it needs to go.

We note that many concessions on business rates are coming forward in the Non-Domestic Rating Bill, which we welcome, but changes to the multiplier are giving cause for concern; it is no good giving businesses concessions with one hand and then taking them away with the other. Our fear is that if there is not a radical and different approach to both fair funding and the business rates system, it will be more difficult to achieve levelling up or regeneration. That said, I am happy to withdraw my amendment at this stage.

[Baroness Scott of Bybrook (Con)]

I will quickly respond to the noble Baroness. I will look at what was discussed with the Hospitality Sector Council and will write to the noble Baroness. I am sure that all the other issues will be discussed further in the NDR Bill.

Amendment 163 withdrawn.

Consideration on Report adjourned.