Non-Domestic Rating (Multipliers and Private Schools) Bill

Consideration of Lords message
Monday 31st March 2025 Commons Chamber

Consideration of Lords message

[Madam Deputy Speaker (Caroline Nokes)]

I must draw the House’s attention to the fact that financial privilege is engaged by Lords amendments 1B, 2B, 7B and 8B, and by Lords amendments 15B, 15C, 15D and 15E to the words restored to the Bill by the Lords non-insistence on their amendment 15. If any of those Lords amendments is agreed to, I will cause the customary entry waiving Commons financial privilege to be entered in the Journal.

Clause 1

Determination of additional multipliers

17:18

[The Minister for Local Government and English Devolution (Jim McMahon)]

I beg to move, That this House disagrees with Lords amendment 1B.

[Madam Deputy Speaker (Caroline Nokes)]

With this it will be convenient to discuss:

Lords amendment 2B, and Government motion to disagree.

Lords amendment 7B, and Government motion to disagree.

Lords amendment 8B, and Government motion to disagree.

Lords amendment 13B, and Government motion to disagree.

Lords amendments 15B to 15E, and Government motion to disagree to the words restored to the Bill by the Lords non-insistence on their amendment 15.

[Jim McMahon]

I am grateful for the opportunity to consider the Lords amendments tabled in lieu of those to which this House disagreed. I reiterate my thanks to Members of both Houses for their continued diligence in the scrutiny of these measures.

The Bill makes provision to enable the introduction of permanent lower tax rates for retail, hospitality and leisure businesses from April 2026, ending the uncertainty of the temporary RHL relief. The RHL relief stopgap measure creates uncertainty for businesses, as well as a significant fiscal pressure on the Government. This Government are committed to addressing that in the Bill.

The Government face the significant challenge that we must balance the books, so we cannot and should not make tax cuts without ensuring that those tax cuts are funded. The Bill therefore makes provision to enable the introduction of a higher multiplier for all properties with a rateable value at or above £500,000, ensuring that the permanent tax cut from RHL properties is sustainably funded from within the business rates system.

The Bill will also help to deliver another of the missions set out in the Government’s manifesto: breaking down barriers to opportunity. It will remove eligibility for charitable rate relief from private schools that are charities in England. As I have said before in this House, the Government believe in parental choice but are also determined to fulfil the aspiration of every parent to get the best education for their child. To eliminate the barriers to opportunity, we need to concentrate on the broader picture towards the state sector, where—let us remember—over 90% of children are educated. The revenue raised through the removal of charitable relief will help to deliver our commitments to education and young people and will help us to meet our overarching mission of breaking down barriers to opportunity for all.

Lords amendments 1B and 7B seek to allow the Treasury to exclude healthcare hereditaments from the higher multiplier through regulations. Lords amendments 2B and 8B seek to allow the Treasury to exclude anchor stores from the higher multiplier through regulations. The amendments are unnecessary, because the powers that they seek already exist in the Bill. Let me be clear: the powers in the Bill will already allow the Government, should they so choose, to exclude certain properties from the higher multiplier. This is not the intention that I have set out; the Government’s intention is that the higher multiplier will apply to all properties at or above the £500,000 threshold to ensure that local multipliers can be adequately funded. I urge the House to reject the amendments, because they are not required and they duplicate powers that already exist in the Bill.

Lords amendment 13B, tabled by Lord Thurlow, would require the Government to

“undertake a review of how the provisions in this Act may affect businesses whose rateable value is close to £500,000.”

The amendment would require the review to be laid before Parliament within six months of the day on which the Bill is passed. It also specifies that the 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, to apply in England.”

We have previously considered two similar Lords amendments, and our position has not changed. The amendment is unnecessary. The “Transforming Business Rates” work that is under way recognises the cliff edge in the business rates system and recognises that it may act as a disincentive to expanding. I reiterate the assurance that I have previously provided to the House: the Government are already looking at this precise issue.

The second part of Lords amendment 13B would require the Government to undertake a review examining the merits of a separate use class in business rates and an associated multiplier for warehouses that cater for retailers without a material presence on the high street. As has been set out, the Government are already exploring that objective through the projects that have been mentioned. The “Digitalising Business Rates” project will allow us to match property-level data with the business-level data held by HM Revenue and Customs. This will improve the way in which we target business rates. The Government therefore remain of the view that the amendment is not required. I urge hon. Members to disagree to it.

The Government are fully committed to transforming the business rates system. This is simply the first step in a wider programme of change in a system that is long overdue for reform. As the Chancellor set out in the spring statement last week, the Government will publish an interim report setting a clear direction of travel for reform, with further policy details to follow at the autumn Budget. Reforms to the business rates system will be phased in over the Parliament.

Finally, amendments 15B to 15E seek to move the measure to remove the charitable rate relief from private schools from one that is being made by Parliament through this Bill to one that the Secretary of State would make through regulations, subject to the affirmative resolution procedure for that statutory instrument. The Government are committed to delivering on our manifesto commitments, and part of that is removing the charitable rate relief from private schools to raise revenue to help deliver on our commitments to young people and education, including the in state sector where, as I said, most children are educated. The Government’s view is that this is a matter for Parliament to decide, which is why we have invited Parliament to do so through this Bill. Therefore, the amendments are unnecessary, the Government cannot accept them, and we ask the House to disagree to them.

[Madam Deputy Speaker (Caroline Nokes)]

I call the shadow Secretary of State.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I thank their noble lordships for their diligent further consideration of the Non-Domestic Rating (Multipliers and Private Schools) Bill and for the new amendments they have passed to address their concerns with the legislation. These changes shine a spotlight on Labour’s muddled priorities, exposing an approach that punishes aspiration, squeezes business, and increases the cost of living for consumers and the cost of doing business.

This very week, we will see the new jobs tax introduced and business rate hikes. The Employment Rights Bill is coming down the line, which is of great concern to many private sector businesses, and consumers will consequently see higher prices and lower wages. Tomorrow, we will also see a hike in council tax, energy prices, water bills, broadband and the BBC licence fee.

I will address the four primary groups of amendments in turn. First, Lords amendments 1B and 7B tackle the proposal to levy a higher multiplier on medical, dental and other healthcare settings. The amendments would prudently protect all healthcare premises—occupied or vacant—from the higher multiplier, addressing a glaring flaw in Labour’s Bill. For too long, we have cautioned against their detachment from practical governance, but now it is undeniable: rather than targeting the untaxed profits of internet giants as pledged, they are heaping costs on to hospitals and GP surgeries. It is baffling that Labour’s so-called reform of the rating system would burden healthcare at all, let alone doing so while they plan to hike national insurance on jobs tomorrow to fund the NHS—only to claw it back today by taxing those same health services.

Just yesterday, the Government pledged to funnel more cash into the NHS by taxing jobs through national insurance hikes, yet today they turn around and tax the NHS itself via business rates. It is a fiscal farce—a two-faced assault on healthcare that undermines their own rhetoric. As Conservative Members have mentioned in recent debates, Labour’s obsession with revenue grabs over sensible relief is choking the sectors we need most.

[Robin Swann (South Antrim) (UUP)]

Does the shadow Secretary of State agree that there seems to be a disjointed approach, where the Health Secretary is asking for more healthcare in the community, whereas we will be asking anybody who moves from a central location into the community to pay these additional taxes and rates?

[Kevin Hollinrake]

The hon. Member is right; there is no logic to the Government’s approach. They are giving with one hand and taking with the other, and they are making the kinds of decisions he talks about ever more difficult.

Lords amendments 2B and 8B address the ratings regime for anchor stores on our beleaguered high streets. We echo the words of the John Lewis chief executive Nish Kankiwala, who warned that Labour’s Budget is a “two-handed grab” at retailers that piles on national insurance increases while refusing to reform business rates as it promised to do. Retailers face a £7 billion hit from these policies, with consumers braced for higher prices as a result.

These amendments exempt anchor stores—the vital engines of our town centres—from the higher multiplier. It is a lifeline that Labour seems determined to withhold. Unoccupied anchor stores would also escape this punishing rate, preventing empty shopfronts from becoming permanent scars on our highstreets. Setting the threshold for the higher multiplier at £500,000 is a blunt instrument, as the Minister concedes. I can assure the Government that this will have consequences for businesses that are not big tech giants. It will hit large supermarkets, supermarket delivery and large department stores, showing that the Labour Government have not thought it through.

Conservative Members have rightly decried Labour’s neglect of retail, and they are right. The Leader of the Opposition has rightly highlighted that Labour’s rates multiplier fiasco is killing off the high street while real reform is dodged. Businesses face a double whammy of higher taxes and no certainty thanks to a Government who are more interested in punishing aspiration than powering growth.

17:30

Labour’s failure to shield those businesses betrays the shopkeepers, the workers and the families who depend on thriving high streets, not ghost towns. Labour are putting both those costs on retailers on the high street. Exempting anchor stores from the higher multiplier would help support our high streets. Were unoccupied anchor stores not subject to the higher multiplier, those businesses would have less of a strain on them when it comes to making decisions on what they are to do with their premises.

Supporting businesses’ ability to plan for the longer term is something that we must consider in all legislation and policy. Our concern about the Bill is shared by KPMG, which described the Government’s plan to change the business rates system, as set out in the Bill, as creating uncertainty for businesses when considering the liability that they will need to factor in to forward planning.

Turning to Lords amendment 13B, we confront yet another symptom of Labour’s ill-conceived assault on business. Picture this: a thriving firm with premises valued at £495,000 dares to invest in its future with, perhaps, a modest expansion, new equipment or a refit to stay competitive, and that ambition tips its rateable value just over the £500,000 threshold. What is the reward under the Bill? A staggering jump in business rates from roughly £175,000 to £325,000—a near doubling of its tax burden overnight. That is not fairness; it is a trap and a punitive cliff edge that snares the aspirational and mocks the very notion of fairness.

There must be greater accountability for these new multipliers and tiers, which threaten to crush businesses under arbitrary thresholds. The Lords are absolutely right to demand a review by the Secretary of State to probe the real-world impact of the changes, especially on firms teetering near that £500,000 mark: businesses that employ our constituents, anchor our communities and drive our economy. By mandating consultation with sector experts, the Lords amendment would ensure that future decisions on business rates were rooted in evidence, not ideology, offering Parliament and Government a chance to course-correct before more livelihoods are sacrificed to Labour’s reckless tax experiment.

The final group, Lords amendments 15B to 15E, relates to perhaps the most objectionable part of the Bill: the levying of business rates on independent schools. Let me reiterate the Opposition’s view that education should never be taxed. Over the weekend, The Times published a number of alarming stories outlining the impact that VAT on school fees has had on families. It tells the story of Leanne, a self-employed accountant who works between 5 am and midnight seven days a week to pay for the increase in costs to her disabled son’s education that have come as a result of levelling VAT on school fees, which is exacerbated by business rates on independent schools.

The same article highlights a study that has shown that one in five families with a child with special educational needs and disabilities who attends a private school have already remortgaged their home; one in eight have sold their home altogether. That is before business rates have been levied. As I have already highlighted, the Bill will also levy business rates on nursery schools and sports facilities on the site of a private school that are used by the general public.

This measure is simply wrong, and I agree with the other place that the statutory instrument required to bring in the regulations should be voted on by both houses before such measures can be introduced.

[Madam Deputy Speaker (Caroline Nokes)]

I call the Liberal Democrat spokesperson.

[Vikki Slade (Mid Dorset and North Poole) (LD)]

Here we go again. This is very similar to what we spoke about last week, so I will again put on record my thanks to the noble Lords for their work in pushing forward the amendments from the other place.

We welcome the business rates reform and look forward to a far more substantial overhaul of the system. However, we are deeply concerned about the proposals for hospitals. Lords amendment 1 sought to exclude hospitals and it is so disappointing that that was not accepted. In my area, in Dorset, both Poole and Royal Bournemouth hospitals would be caught by the £500,000 rateable value rule. Poole hospital has a rateable value of £2.1 million and Bournemouth’s is £3.3 million. World-famous hospitals, including Great Ormond Street, The Royal Marsden and England’s oldest hospital Barts, would all be caught up.

The Government have rightly been proud of the early delivery of extra NHS appointments, but keeping hospitals in the Bill risks real problems for local councils which might find themselves having to take difficult decisions to take the hit and not charge their hospitals the higher amount. To take away the discretion altogether, I ask Ministers please to remove the provisions from the Bill so that hospitals do not pay twice.

I share the concerns of the shadow Minister regarding the businesses that are on the cusp of the £500,000 threshold. The impact of flipping just over from the lower to the higher multiplier could be profound. So many businesses are already on the cusp, given the national insurance increases, the living wage and the impact of the Employment Rights Bill. The additional worry about tipping over into the higher threshold could see many fail to invest in their businesses for the future.

I will keep this brief, because we know where we are. We too do not agree with the taxation of education and we continue to support the Lords amendments to remove private schools from the legislation. The main reason that we feel that way is that we know that many parents of children who have additional needs choose the private sector because it is so difficult to get what they need in overcrowded schools that are falling apart at the seams. We therefore fundamentally disagree with the principle of taxing education.

The Government have made a good start on the Bill. We want to see a much more fundamental review of business rates. There is a long way to go, but we think that the amendments, if accepted, would demonstrate a Government who are listening. At a time when trust in the Government needs to be built, a Government who listen to sensible amendments would be most welcome.

[Jim Shannon (Strangford) (DUP)]

I thank the Government for bringing the Bill forward, but I have to put on record some of my concerns—the Minister will not be surprised. He knows that it is never meant in an aggressive way; I put things forward in this way because it is important that my constituents have a chance to express themselves through me in this Chamber.

First, I echo the concerns of the shadow Minister and the Liberal Democrats spokesperson in relation to hospitals and medical and dental schools. I have some concern over how that will trickle down, as it will inevitably, and put pressure on sectors where it does not need to be. The job of those three areas is to ensure that our hospitals can deliver the care and our medical and dental schools can produce the students with the expertise and knowledge to be the next generation of those who look after us.

My major concern, however, is about private schools. I know the point has been echoed many times, but I cannot let this occasion go without making my remarks, on which I have sought the direction of Madam Deputy Speaker and other parties. Members will be aware of the issue with private schools, and I have spoken about it on numerous times to put forward the argument for the faith schools in my constituency. Parents scrimp and save to ensure that their children can go to those schools and have the standard of education that they wish for them, and they have asked me to put that on record. The reason I persist in raising the issue is that I truly believe that some people of faith will be further disadvantaged when the Bill goes through. I know that that is not the Government’s intention, but it will be the reality, and for that reason I must put it on record.

Although the rating provisions will not apply in Northern Ireland per se, the disadvantage to our sector remains in the removal of the tax considerations, which will affect schools in Northern Ireland. That is where the issue is. For the mainland, the effect is quite clear, but schools in Northern Ireland will be affected as well. I wish to be clear that I oppose these provisions on behalf of faith-based schools on the mainland as well, because parents of children at those schools want the same as those who spoke to me.

I am a very proud member of the all-party parliamentary group for international freedom of religion or belief, and I believe that that extends to parents’ freedom to educate their child with a view to how their faith is worked into that education. Lords amendment 15 has been referred to by the shadow Minister and by the hon. Member for Mid Dorset and North Poole (Vikki Slade). For many parents, confidence that their faith will not be dismantled in the classroom is worth the financial burden of paying into their child’s education, but that is being denied by this legislation. I believe that they all deserve the opportunity to educate their child in a way that they wish, for which they will probably pay handsomely, but these proposals will adversely affect parents’ freedom to educate their child in their religious belief.

The option to home-school is one that parents may not have considered previously, yet may now feel is the only financial option available for them. Those parents may not feel qualified or equipped to deal with the skills that are vital to home-schooling, yet believe there to be no option as they simply cannot afford to pay the uplifted fees. That is the unfair burden that falls on the shoulders of those parents.

I firmly believe that the Government disagree with almost every Lords amendment because the Lords amendments interfere with the public revenue and affect the levy and the application of local revenues. The Commons does not offer any further reason, trusting that this reason may be deemed sufficient. Basically that means, “We need the money.” I have been a Member of this House for almost 15 years and an elected representative for some 40 years as a councillor and a member of the Assembly, and never, ever have I believed that money is the bottom line, and I do not believe that many right hon. and hon. Members believe that. We cannot take faith-based education out of the hands of a certain class of people to punish those high-class schools with swimming pools. Let me assure the House that Bangor Independent Christian school, with its Sunbeams nursery schools, has no pool. Regent House prep in my constituency has no swimming pool either. There are small primary schools that will have difficulty operating when these regulations come into force, and that is simply not right.

I know that the strength of the Labour Government means that this Bill will pass, but I am urging individual MPs across the House to consider who will be punished and to urge the Government to review this tax raid on education, even at this late hour. We believe in the right to live one’s faith, and we cannot tax that right out of reach. That is where this Bill has gone wrong, and has divorced itself from the reality of the people that I represent.

[Jim McMahon]

I think I addressed the majority of the points in my opening speech that have been raised subsequently, but I thank Members for their contributions. We have heard the Opposition’s concern that the multipliers do not deliver on the stated intention of the policy as announced in the Budget. We clearly do not agree with that position. At the Budget, the Government announced their intention to introduce two lower multipliers for qualifying retail, hospitality and leisure properties, to end the uncertainty of the annual retail, hospitality and leisure relief. Also, as I set out in my opening speech, the relief was a temporary stopgap measure. Of course, it has been extended year on year, but it does not provide the certainty that businesses require. It has created a cliff edge.

During our last session—I cannot remember when it was; it feels like it was yesterday—the hon. Member for Thirsk and Malton (Kevin Hollinrake) seemed to acknowledge that the cliff edge that was built in the previous system was providing uncertainty to businesses and their ability to plan ahead. He must surely welcome the fact that this new lower multiplier—this permanent relief—gives all businesses, whether they are retail, hospitality or leisure, the long-term security that they have been asking for and, importantly, in a way that is sustainable and self-financing through the business rates system.

Through the Bill, the Government are taking steps to address all the issues that have been outlined. The chosen approach is both appropriate and prudent, and the challenging fiscal environment that the Government face requires it. Any tax cut must be appropriately funded, under our commitment to sound financial management, so the Government intend to introduce a higher multiplier for all properties with a rateable value of £500,000 and above. It is important to say this to settle some of the arguments: that will affect less than 1% of properties in England. Less than 1% will pay more, but that will fund the lower multiplier, as we all recognise. That will help our town centres and our high streets, and it is what we need to do. This approach delivers on the policy set out in the Budget, and on our manifesto commitment to transform the business rates system to make it fairer and fit for the 21st century, and to protect the high street.

17:45

On the comments about the multipliers for the healthcare sector, of course health providers are subject to the same business rates regime. That has been the case for 25 years, since the Crown Estate ended its exemption; Members will know that. They will also know that the financial support given to the national health service this year was a record £22 billion, so that it could deal with the legacy that this Government were left, which was, importantly, holding the country back. That £22 billion is going where it is needed, and of course any decisions about future financing are a matter for the Treasury at the appropriate point.

On the review of the £500,000 threshold, we have already said that there are provisions in the Bill to address that.

[Kevin Hollinrake]

The Minister says that the solution that he has alighted on meets his manifesto commitment, but his manifesto says,

“This new system will level the playing field between the high street and online giants”.

That is not what the provision does—not exclusively. He knows that it levies extra taxes, extra business rates, on high street stores, large department stores, supermarkets, football stadiums and many others. They are not online giants.

[Jim McMahon]

The rating system adequately reflects the scale of properties. Less than 1% of properties in the business rates system will use the higher multiplier. That will fund the tax break for those on the high street that will use the lower multipliers. In the evidence session —the hon. Gentleman was there—we heard retailers say, “Of course, that will have an impact on our distribution centres, but we have so many stores that are below the threshold.” That allows national retailers with multiple locations to benefit; in the round, they find themselves better off as a result of this policy. As for rebalancing the situation for online retailers and those on our high streets, that is exactly what this measure does. Big distribution centres will pay for that relief.

I once again thank hon. Members for their contributions, but for the reasons set out, I respectfully ask this House to disagree with the amendments before us.

Question put, That this House disagrees with Lords amendment 1B.

The House proceeded to a Division.

[Madam Deputy Speaker (Caroline Nokes)]

Order. As the escalators in Portcullis House are still not working, I shall allow an additional two minutes for the Division.

17:47

Division 157

Ayes: 296

Noes: 170

Lords amendment 1B disagreed to.

Motion made, and Question put, That this House disagrees with Lords amendment 2B.—(Jim McMahon.)

18:04

Division 158

Ayes: 301

Noes: 104

Lords amendment 2B disagreed to.

Lords amendments 7B and 8B disagreed to.

After Clause 4

Review: threshold effect

Motion made, and Question put, That this House disagrees with Lords amendment 13B.—(Jim McMahon.)

18:17

Division 159

Ayes: 301

Noes: 167

Lords amendment 13B disagreed to.

Clause 5

Removal of relief

Motion made, and Question put, That this House disagrees with Lords amendments 15B to 15E to the words restored to the Bill by the Lords non-insistence on their amendment 15.—(Jim McMahon.)

18:29

Division 160

Ayes: 302

Noes: 167

Lords amendments 15B to 15E to the words restored to the Bill by the Lords non-insistence on their amendment 15 disagreed to.

Motion made, and Question put forthwith (Standing Order No. 83H(2)), That a Committee be appointed to draw up Reasons to be assigned to the Lords for disagreeing with their amendments 1B, 2B, 7B, 8B, 13B, and 15B to 15E to the words restored to the Bill by the Lords’ non-insistence on their amendment 15.

That Jim McMahon, Gen Kitchen, Mark Ferguson, Harpreet Uppal, Emily Darlington, Kevin Hollinrake and Tessa Munt be members of the Committee.

That Jim McMahon be the Chair of the Committee.

That three be the quorum of the Committee.

That the Committee do withdraw immediately.—(Gerald Jones.)

Question agreed to.

Committee to withdraw immediately; reasons to be reported and communicated

to the Lords.