Non-Domestic Rating (Multipliers and Private Schools) Bill)

(Limited Text - Ministerial Extracts only)

Consideration of Commons amendments and / or reasons
Wednesday 26th March 2025 Lords Chamber

Moved by

[Lord Khan of Burnley]

That this House do not insist on its Amendment 1, to which the Commons have disagreed for their Reason 1A.

1A: Because the Lords Amendment interferes with the public revenue and affects the levy and application of local revenues, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Lord Khan of Burnley) (Lab)]

My Lords, in moving Motion A, I will also speak to Motion A1, Motions B and B1, Motions C to F, Motions G and G1, Motions H and H1, Motions J to M, Motions N and N1, Motions P and P1, and Motion R. These Motions concern the measures in the Bill to enable the introduction of new multipliers from April 2026 in line with the Chancellor’s intention set out at the Autumn Budget.

As a reminder, it is the Government’s intention to introduce two lower multipliers for qualifying retail, hospitality and leisure properties, and for that permanent tax cut for those RHL properties to be sustainably funded to also introduce one higher multiplier for all properties with a rateable value at or above £500,000. Given the challenging fiscal context, this prudent approach is essential to ensure that the new lower RHL multipliers can be adequately funded from within the business rates system.

Motions A to M ask noble Lords not to insist on their Amendments 1 to 12. The other place disagreed to these amendments on the basis that they interfere with public revenue and affect the levy and application of local revenues. The other place did not offer any further reason, trusting that this reason is sufficient.

The noble Baroness, Lady Pinnock, has tabled Amendments 1B and 7B in lieu of Amendments 1 and 7. These amendments seek to allow the Treasury to exclude healthcare hereditaments from the higher multiplier. The noble Baroness, Lady Scott, has tabled Amendments 2B and 8B in lieu of Amendments 2 and 8. These amendments seek to allow the Treasury to exclude anchor stores from the higher multiplier.

We have discussed during the passage of the Bill the importance of having a higher multiplier that applies to all properties at £500,000 rateable value and above, and why this is the only fair way of raising the revenue needed to fund the lower multiplier. We have ensured that the Valuation Office Agency has published data on those hereditaments in the healthcare and retail sectors with a rateable value of £500,000 or above. The impact is very limited and, for retail, mostly limited to supermarkets and retail warehouses. I have previously provided the House with the statistics that show that, and they have been published by the VOA.

Nevertheless, I assure the House that the powers already contained in Clause 3 would allow the Treasury to exclude from the higher multiplier classes of hereditament based upon their use. The amendments put forward to Clause 1 are therefore unnecessary. Therefore, I respectfully ask the noble Baronesses, Lady Pinnock and Lady Scott, not to press these amendments.

Motions N, P and R ask noble Lords not to insist on their Amendments 13, 14 and 16. The other place disagreed with Amendments 14 and 16 on the basis that they interfere with public revenue and affect the levy and application of local revenues. The other place did not offer any further reason, trusting that this reason is sufficient. The other place disagreed to Amendment 13 on the basis that the Government have already agreed to publish information about the new multipliers and further provision is not necessary.

The noble Lord, Lord Thurlow, has tabled Amendment 13B in lieu of Amendment 13 and Amendment 14B in lieu of Amendment 14. Amendment 13B seeks to require the Government to undertake a review of how provisions within the Act may affect businesses whose rateable value is close to £500,000. The amendment requires that this part of the review be laid before Parliament within six months of the day on which the Act is passed. Amendment 13B also sets out that that review must consider the merits of a separate use class and associated multiplier for retail services provided by fulfilment warehouses that do not have a material presence on local high streets. Amendment 14B is similar to the amendment previously tabled by the noble Lord but removes the requirement for the recommendations of that review to be implemented.

As set out previously in this House and the other place, Amendment 13, and now Amendment 13B in lieu, probe the way that the multipliers in business rates currently operate and whether this may serve as a disincentive to invest. This is something the Government have already committed to looking at through their work in Transforming Business Rates. The Government have published a forward look that shows that an announcement on reforms to be taken forward will be coming later this year. Reforms will be phased in over the course of this Parliament.

Furthermore, the objective set out now in both Amendments 13B and 14B, to identify fulfilment warehouses used by online retailers that do not have a material presence on our high streets, is something the Government believe they are already exploring through the existing digitalising business rates project. As set out previously in this House, that project will allow the Government to match property-level data with HMRC business-level data. This will help us to improve the way that we target business rates and identify property and businesses within the business rates system.

For these reasons, the amendments are not necessary as they are already being pursued through other government work. Therefore, I respectfully ask noble Lords not to press these amendments. I beg to move.

Motion A1 (as an amendment to Motion A)

Moved by

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[Baroness Pinnock (LD)]

My Lords, as the Minister said, the higher rate or multiplier being introduced in this Bill is to apply to all properties with a rateable value of more than £500,000. This is a worthy attempt by the Government to have a fairer approach to business rates.

However, 290 hospitals are captured by this new banding. It means a considerable increase in their business rates—potentially, a 20% increase—for which government funding has not made provision, so hospitals will have less funding to drive down waiting lists, which is an aim that has all our support. I give just one example: University College Hospital here in London has a rateable value of nearly £12 million. With the new higher multiplier, its business rates will increase by over £1.2 million.

Amendment 1B, in lieu of Amendment 1, would provide the Government with the option, by regulations, to exclude hospitals from this higher banding. At this late stage, I urge the Minister to agree. None of us wants to see waiting lists not going down as fast as they could because of the Government’s reluctance to exclude hospitals—not from business rates, just from the higher multiplier.

I will speak very briefly to the other Motions. Motion B1 in the name of the noble Baroness, Lady Scott of Bybrook, is very important to the viability and vitality of our town and city centres. We on these Benches are minded to support the noble Baroness on this issue if she wishes to take it to a vote.

Motion N1 in the name of the noble Lord, Lord Thurlow, would provide the Government with a way forward to address cliff-edge issues when there are hard divides between different multiplier levels. This is of concern to businesses and, again, we will support the noble Lord if he intends to divide the House on this issue. I beg to move Motion A1.

[Baroness Scott of Bybrook (Con)]

My Lords, first, I declare my interest as a vice-president of the Local Government Association. This group of amendments addresses the ongoing issues with Clauses 1 to 4 that have been debated throughout the progress of the Bill. These clauses present two major problems. They do not reflect the Government’s previously stated ambition to reform the business rates system in order to protect the high street and ensure that online businesses pay their fair share. The higher multiplier will damage businesses on the high street and drive them out of town centres.

The Bill is an attempt by the Government to deliver on their manifesto commitment to reform the business rates system, but they have instead used a blunt instrument as a cut-off. That means that a number of businesses will be paying this higher multiplier, which they should not be doing. The Government will be hitting stores up and down the high street. Despite promises that reform will follow, the Bill leaves a number of important high street businesses paying higher rates, with no certainty at all as to when the situation will improve.

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[Lord Thurlow (CB)]

My Lords, I realise that I omitted to refer to Motion P1, which is in the same group. It is consequential on Motion N1 and will depend on the outcome of that Division.

[Lord Khan of Burnley (Lab)]

My Lords, I thank all noble Lords who took part in this short debate. We heard concerns that the measures in the Bill for new multipliers do not deliver on the stated intention of the policy as announced at the Budget. I do not agree with that. At the Budget, the Government announced their intention to introduce two lower multipliers for qualifying retail, hospitality and leisure properties and, in particular, to end the uncertainty of annual RHL relief. RHL is a temporary stopgap measure that has been extended year on year since the pandemic, and it does not provide the certainty that businesses require. The Government, through this Bill, are taking steps to address that. It was also announced at the Budget that the permanent tax cut for RHL businesses needs to be sustainably funded. This is an appropriate and prudent approach. The challenging fiscal environment that the Government face requires this, but it goes without saying that any tax cut must be funded as part of sound financial management. To do this, the Government intend to introduce a higher multiplier for the most valuable properties, those with a rateable value of £500,000 and above. The higher multiplier will affect less than 1% of properties in England. This delivers on the policy set out at the Budget by the Chancellor. Furthermore, it represents the Government’s first step to delivering on their manifesto commitment to transform the business rates system to one that is fairer, protects the high street and is fit for the 21st century.

I have explained to noble Lords here today while the amendments tabled in lieu are not necessary. For these reasons and the other reasons I have already set out, I respectfully ask noble Lords not to press their Motions containing Amendments 1B, 2B, 7B, 8B, 13B and 14B.

[Baroness Pinnock (LD)]

I thank the Minister for his response, which gave me no hope that the Government are considering relieving hospitals of the higher multiplier. We agree with him that retail, hospitality and leisure businesses should benefit from the lower multiplier in the Bill, but it should not be at the expense of the NHS. There are other ways of doing it, and I am appalled that the Minister has not sought to find alternative sources of income. So because we on these Benches wish to make sure that our hospitals do not lose a penny more in business rates to the Government, I beg leave to test the opinion of the House.

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16:40

Division 1

Ayes: 278

Noes: 165

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Moved by

[Lord Khan of Burnley]

That this House do not insist on its Amendment 2, to which the Commons have disagreed for their Reason 2A.

2A: Because the Lords Amendment interferes with the public revenue and affects the levy and application of local revenues, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

[Lord Khan of Burnley (Lab)]

My Lords, I have already spoken to Motion B. I beg to move.

Motion B1 (as an amendment to Motion B)

Moved by

[Baroness Scott of Bybrook]

At end insert “, and do propose Amendment 2B in lieu—

2B: Clause 1, page 2, line 6, at end insert—
“(1A) Regulations under sub-paragraph (1)(a) may specify that occupied anchor stores are not subject to the higher multiplier (and may define “anchor stores” for this purpose).””

[Baroness Scott of Bybrook (Con)]

My Lords, in support of businesses on high streets up and down this country, I intend to test the opinion of the House.

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16:53

Division 2

Ayes: 277

Noes: 172

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Moved by

[Lord Khan of Burnley]

That this House do not insist on its Amendment 3, to which the Commons have disagreed for their Reason 3A.

3A: Because the Lords Amendment interferes with the public revenue and affects the levy and application of local revenues, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

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Moved by

[Lord Khan of Burnley]

That this House do not insist on its Amendment 4, to which the Commons have disagreed for their Reason 4A.

4A: Because the Lords Amendment interferes with the public revenue and affects the levy and application of local revenues, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

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Moved by

[Lord Khan of Burnley]

That this House do not insist on its Amendment 5, to which the Commons have disagreed for their Reason 5A.

5A: Because the Lords Amendment interferes with the public revenue and affects the levy and application of local revenues, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

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Moved by

[Lord Khan of Burnley]

That this House do not insist on its Amendment 6, to which the Commons have disagreed for their Reason 6A.

6A: Because the Lords Amendment interferes with the public revenue and affects the levy and application of local revenues, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Motion G

[Lord Khan of Burnley]

Moved by

That this House do not insist on its Amendment 7, to which the Commons have disagreed for their Reason 7A.

7A: Because the Lords Amendment interferes with the public revenue and affects the levy and application of local revenues, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

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Moved by

[Lord Khan of Burnley]

That this House do not insist on its Amendment 8, to which the Commons have disagreed for their Reason 8A.

8A: Because the Lords Amendment interferes with the public revenue and affects the levy and application of local revenues, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Moved by

[Baroness Scott of Bybrook]

At end insert “, and do propose Amendment 8B in lieu—

8B: Clause 1, page 2, line 6, at end insert—
“(1A) Regulations under sub-paragraph (1)(a) may specify that unoccupied anchor stores are not subject to the higher multiplier (and may define “anchor stores” for this purpose).””

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Moved by

[Lord Khan of Burnley]

That this House do not insist on its Amendment 9, to which the Commons have disagreed for their Reason 9A.

9A: Because the Lords Amendment interferes with the public revenue and affects the levy and application of local revenues, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

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Moved by

[Lord Khan of Burnley]

That this House do not insist on its Amendment 10, to which the Commons have disagreed for their Reason 10A.

10A: Because the Lords Amendment interferes with the public revenue and affects the levy and application of local revenues, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

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Moved by

[Lord Khan of Burnley]

That this House do not insist on its Amendment 11, to which the Commons have disagreed for their Reason 11A.

11A: Because the Lords Amendment interferes with the public revenue and affects the levy and application of local revenues, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

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Moved by

[Lord Khan of Burnley]

That this House do not insist on its Amendment 12, to which the Commons have disagreed for their Reason 12A.

12A: Because the Lords Amendment interferes with the public revenue and affects the levy and application of local revenues, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

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Moved by

[Lord Khan of Burnley]

That this House do not insist on its Amendment 13, to which the Commons have disagreed for their Reason 13A.

13A: Because the government has already agreed to publish information about the new multipliers and further provision is not necessary.

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17:08

Division 3

Ayes: 277

Noes: 162

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Moved by

[Lord Khan of Burnley]

That this House do not insist on its Amendment 14, to which the Commons have disagreed for their Reason 14A.

14A: Because the Lords Amendment interferes with the public revenue and affects the levy and application of local revenues, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

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Moved by

[Lord Khan of Burnley]

That this House do not insist on its Amendment 15, to which the Commons have disagreed for their Reason 15A.

15A: Because the Lords Amendment interferes with the public revenue and affects the levy and application of local revenues, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

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[Lord Khan of Burnley (Lab)]

My Lords, in moving Motion Q, I shall also speak to Motions S, T and U. These Motions relate to the measure in the Bill to remove charitable rate relief from private schools that are charities.

This Government are committed to breaking down barriers to opportunity and raising standards for every child and young person, no matter where they come from or their financial background. To do this, the Government need to concentrate on the broader picture towards the state sector, where most children are educated. That is why the Government committed in their manifesto to remove the eligibility for charitable rate relief from private schools that are charities in England to raise revenue to help deliver these important commitments.

This is a tough but necessary decision. This Government must act to restore public services and improve opportunities for all. Removing the eligibility of private schools for charitable relief will raise approximately £140 million per year. Taken together with the removal of the VAT exemption from private school fees, these policies are expected to raise £1.8 billion a year by 2029-30, which will help to deliver the Government’s commitments in relation to education and young people. The approach to this policy has been carefully considered. The Government have sought to ensure that the impact of this change on those children with the most acute needs is minimised.

Motions Q and S to U ask noble Lords not to insist on their Amendments 15, 17, 18 and 19. The other place disagreed to Amendments 15 and 17 on the basis that they interfere with the public revenue and affect the levy and application of local revenues. The other place did not offer any further reason, trusting that this reason was sufficient. Similarly, the other place disagreed to Amendments 18 and 19 on the basis that these amendments are consequential on Amendment 15, with which the other place disagrees for the reason stated.

The noble Baroness, Lady Barran, has tabled Amendments 15B, 15C, 15D and 15E in lieu of her original Amendment 15. These amendments move the decision to remove the charitable rate relief from one made by this Parliament to one which would be made by the Secretary of State by regulations subject to the affirmative resolution procedure for that statutory instrument.

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[Lord Khan of Burnley (Lab)]

My Lords, the noble Baroness, Lady Barran, has tabled Amendments 15B, 15C, 15D and 15E in lieu of her original Amendment 15. These amendments would move the decision to remove the charitable rate relief from one being made by this Parliament to one which would be made by the Secretary of State by regulations subject to the affirmative resolution procedure for that statutory instrument.

As I have said, this Government are clear that the relief should be removed from private schools. We believe that this is a matter that Parliament should decide, and we have invited Parliament to do so through this Bill. The amendment therefore seeks unnecessarily to move this decision from Parliament to the Secretary of State. I respectfully ask the noble Baroness not to press her amendments. I beg to move.

Motion Q1 (as an amendment to Motion Q)

Moved by

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[Baroness Pinnock (LD)]

My Lords, we on these Benches believe that there is a principle at stake of not regarding independent schools as charities. Education is not a profit-making business, although independent schools have to cover their costs—which, as I have sadly heard, Fulneck School has failed to do. We will support the noble Baroness, Lady Barran, if she wishes to test the opinion of the House.

[Lord Khan of Burnley (Lab)]

My Lords, I thank all noble Lords for their important contributions in this debate. The noble Baroness, Lady Barran, has stated her firm belief that no education should be taxed. She has also reminded this House of her view, shared by the noble Lord, Lord Mackinlay, that the Government are creating a two-tier charity system. The measure delivered through this Bill is a tough but necessary choice to ensure that the Government can deliver on their commitments and break down barriers to opportunity for all. Tough choices are difficult—the Government know this—but they are also necessary. This Government will take these tough decisions because of the financial climate out there.

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[Lord Lexden (Con)]

Will the Minister confirm clearly that, through this measure, the country will obtain, for the first time ever, a two-tier charitable system? That is what he appeared to accept. This must be thoroughly undesirable. To remove a set of arrangements that independent schools, the vast majority of them very small schools, have enjoyed over centuries and to create two tiers must be a thoroughly retrograde step. To describe the exemptions that independent schools, like all other charities, have hitherto enjoyed as “tax breaks” is deeply unfair. Independent schools have been properly treated, along with other charities, for centuries—a position that ought to endure—and it is really shameful, given that independent schools are overwhelmingly small and cannot bear these burdens, for this state of affairs now to come into existence as a consequence of this legislation.

[Lord Khan of Burnley (Lab)]

Noble Lords will not be surprised to hear that I disagree with the noble Lord. We are putting the Bill through because we, as the Government, want to deliver on our commitments and break down barriers to opportunity for all. Ninety-three per cent of students are in the state sector. The measures are necessary, tough decisions. We know they are tough choices, but they are necessary to make sure that we can support the state sector, where 93% of students attend.

[Baroness Barran (Con)]

My Lords, I listened carefully to the Minister and I think he did not satisfactorily address the points made by my noble friends Lord Caine and Lord Moynihan, and the noble Baroness, Lady Grey-Thompson, which addressed, in different ways, how independent schools form part of the fabric of our society. Nor did he really address the points of principle raised by my noble friends Lord Mackinlay and Lord Lexden, the noble Baroness, Lady Pinnock, and the noble Lord, Lord Thurlow. He understandably repeats the point about tough decisions and tough choices, but these amendments do not force the Government to do anything: all they do is allow the Government to change their mind gracefully if they find that their policy actions do not raise the funding that they had hoped. With that, I would like to test the opinion of the House.

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17:52

Division 4

Ayes: 267

Noes: 151

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Moved by

[Lord Khan of Burnley]

That this House do not insist on its Amendment 16, to which the Commons have disagreed for their Reason 16A.

16A: Because the Lords Amendment interferes with the public revenue and affects the levy and application of local revenues, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

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Moved by

[Lord Khan of Burnley]

That this House do not insist on its Amendment 17, to which the Commons have disagreed for their Reason 17A.

17A: Because the Lords Amendment interferes with the public revenue and affects the levy and application of local revenues, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

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Moved by

[Lord Khan of Burnley]

That this House do not insist on its Amendment 18, to which the Commons have disagreed for their Reason 18A.

18A: Because the Lords Amendment is consequential on Lords Amendment 15 with which the Commons disagree.

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Moved by

[Lord Khan of Burnley]

That this House do not insist on its Amendment 19, to which the Commons have disagreed for their Reason 19A.

19A: Because the Lords Amendment is consequential on Lords Amendment 15 with which the Commons disagree.