Non-Domestic Rating (Chargeable Amounts) (England) Regulations 2026
(1 day, 5 hours ago)
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Baroness Taylor of Stevenage
That the draft Regulations laid before the House on 15 December 2025 be approved.
Relevant document: 47th Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Baroness Taylor of Stevenage) (Lab)
My Lords, I appreciate that noble Lords’ enthusiasm for transitional relief on business rates at 12.07 am might not be as keen as mine, so I will be as brief as possible, but it is necessary to set out the detail of the regulations.
Before I discuss the regulations before us in detail, I wish to briefly touch on the measures announced yesterday by the Government—which is actually now the day before yesterday, but let us not split hairs—as this is relevant to the Motion tabled by the noble Lord, Lord Jamieson, which I will address in full in my opening statement. Yesterday, the Government announced a further 15% relief for pubs and live music venues in 2026-27, on top of the support package announced at the Budget. This will be followed in 2027-28 and 2028-29 by a real-terms freeze in the bills of these properties.
As a result of the intervention next year, around three-quarters of pubs will see their bills fall or stay the same. I add that the Government published a definition of “pub” and “live music venue” which local authorities will use in determining which properties in their area are eligible, and formal guidance for local authorities will be issued shortly.
These regulations provide for the business rates transitional relief that was announced by the Chancellor at the Budget. This scheme, provided over three years, gradually phases in large bill increases created by the 2026 revaluation. It also puts in place a 1p transitional relief supplement for one year only, in 2026-27, to help fund the relief provided.
These regulations are necessary because of the 2026 business rates revaluation. As of 1 April 2026, the revaluation will update the rateable value of the 2 million non-domestic properties in England. Revaluations are an important and necessary part of the business rates system, where rateable values are updated to reflect market conditions. At the same time, the multipliers or tax rates are adjusted in response to the overall movement in the tax base.
If the overall rateable value increases at the revaluation, it has a downward pressure on the tax rates, and vice versa. That is why the multipliers for next year will be at a lower rate than they are currently. This does not necessarily mean that bills go down; at revaluation, some ratepayers’ bills go down, some stay the same and some go up. The Government fully understand that, for some ratepayers seeing increases, support is required to help them move gradually to their new liability over time. That is why the Government have introduced a support package to help ratepayers with their new liability, and these regulations are part of that support package.
To return to the points raised by the noble Lord, Lord Jamieson, in his amendment, it is important to clarify a factual point. These regulations do not alter or reduce the current 2025-26 retail, hospitality and leisure relief, or other small business reliefs within the business rates system, such as small business rate relief. Voting against these regulations would, in fact, prevent us giving transitional relief support to ratepayers. To address the broader point made by the noble Lord, the retail, hospitality and leisure relief was introduced to support eligible ratepayers during Covid. It was an atypical measure for an atypical period of time.
This Government have been clear, first at Budget 2024 and then through our passage of primary legislation, the Non-Domestic Rating Act 2025 to create the new multipliers, that, as part of our broader work to transform the business rate system, we would end the temporary, financially unsustainable Covid-era relief and replace it with a permanent lower tax rate for eligible retail, hospitality and leisure properties. The Government have done that through the introduction of the new permanent retail, hospitality and leisure multipliers for qualifying properties with rateable values below £500,000. However, the Government are well aware that a lower tax rate does not necessarily equate to a lower rate liability. Some ratepayers, particularly those in sectors which were closed due to Covid on 1 April 2021—the antecedent valuation date for the 2023 revaluation—have seen substantial rateable value growth. This was expected as normal economic activity has been restored since Covid.
It is right and important that the previous Covid-era relief is unwound, but the pace at which we do that is just as important. That is why, at the Budget, the Government also announced the expanded supporting small business relief scheme. The scheme provides relief to ratepayers losing some or all of certain reliefs as a result of the revaluation, including the 2025-26 retail, hospitality and leisure relief. That scheme caps bill increases for eligible properties at whichever is the higher of £800 or the relevant transitional relief percentage cap. Importantly, the capped increase is calculated from a base liability, including the effect of the eligible reliefs, providing enhanced support to enable these ratepayers to transition to their new liability over time.
As I have set out, the Government, following engagement with stakeholders, went further yesterday for pubs and live music venues, announcing additional support on top of this Budget package. The regulations before us today do not deliver the supporting small business relief scheme, or measures announced yesterday. These are provided by guidance that is published by my department, which enables local authorities to apply these additional reliefs. None the less, they are important contexts to remember, and are pertinent to the points raised by the noble Lord as we consider the draft instrument before us.
This instrument delivers the transitional relief scheme element of the government support package, and will protect properties from large overnight increases in their business rate bills as a result of the revaluation. It will cap bill increases by a set percentage each year. For example, in 2026-27, the caps within the transitional relief scheme are 5% for small properties, 15% for medium properties and 30% for large properties. These are the same year one caps as set at the 2023 revaluation. These caps are applied before changes in other reliefs and local supplements. Therefore, changes in actual bills may differ from those caps.
At this revaluation, the transitional relief scheme will provide more generous caps for large properties in years 2 and 3 compared to previous revaluations. The caps in years 2 and 3 will also rise with inflation, as has been the case previously.
The noble Lord has raised the fact that no public consultation was undertaken prior to the laying of these regulations. As was set out in the Explanatory Memorandum accompanying the draft instrument, transitional relief was last consulted on in 2022. In their consultation response in 2022, the then Government stated:
“Given that upwards caps have been consistently retained for consecutive schemes and, in general, it is only the level of support provided that will vary, the government will no longer consult on the scope of future TR schemes as a matter of course”.
That response also stated:
“Future TR schemes will be developed taking into account revaluation outcomes to ensure that the support provided continues to be effectively targeted at ratepayers facing the largest bill increases”.
The steps that this Government have taken to redesign the scheme include providing more generous support in years 2 and 3 for the largest ratepayers and calculating support from the relevant multiplier that each ratepayer pays.
Lord Jamieson
At end to insert “but this House regrets the significant reductions in business rate discounts arising from the draft Regulations because they fundamentally threaten the future of the hospitality and small business sector in England; and further regrets that no public consultation has been undertaken prior to the laying of these Regulations.”
Lord Jamieson (Con)
My Lords, in speaking to this regret amendment in my name, I declare my interest as a councillor in Central Bedfordshire.
At first glance, the statutory instrument may appear technical and relatively uncontroversial with transitional relief, but in reality for many businesses, particularly in hospitality and leisure, the substantial underlying increase in business rates is very damaging. In fact, in many ways, it can be considered to be the straw that, so to speak, breaks the camel’s back. Our high streets, pubs, hotels and restaurants—indeed, the whole of the hospitality and leisure sector—are already under severe strain. Yet the Government, which claim that their number one priority is economic growth, have instead pursued a series of policies that systematically undermine one of the country’s most important employment-intensive and community-focused sectors. The Government have abandoned small business, and nowhere is that abandonment clearer than in their announcement on business rates in the Budget.
Increases in business rates cannot be considered in isolation. They come on top of a jobs tax through higher national insurance contributions, which have substantially increased the cost of employment and disproportionately hit labour-intensive businesses, particularly those that rely on part-time workers, where national insurance was extended further down the run. For hospitality, this is not an abstract accounting change; it is a direct tax on jobs. It comes alongside a sharp increase in the minimum wage. While we all want people to earn more money—rightly so—wage increases must be affordable if businesses are to survive.
This is a particular challenge for the hospitality and leisure sector, which employs a high proportion of younger workers, many of them working part-time. The minimum wage for an 18 year-old has risen by around 45% over the past two years. Now, on top of all this, we have rising business rates.
Analysis from UKHospitality shows that the average pub will face an increase of around 15% in business rates next year, admittedly prior to the recent announcements. With those increases compounding over time, by 2028-29 the typical pub will be paying around £7,000 more per year, with the cumulative impact approaching £13,000 over the next three years.
Hotels face an even more dramatic increase. Average bills are expected to rise by nearly £29,000 next year, reaching well over £110,000 a year by 2028-29, with the cumulative additional burden exceeding £200,000. For many operators, particularly outside London, these figures are simply unsustainable.
Let me illustrate this with a concrete example. My local pub faces a cumulative increase in costs of around £50,000 as a result of recent changes, of which around £10,000 comes from business rates alone. That is on a turnover of £800,000. This would be bad enough in isolation, but alongside this there is food price inflation of over 4%, including an alarming 30% increase in beef prices, and higher utility bills. Consumers themselves are tightening their belts, meaning higher prices leading to lower volumes, and many pubs are struggling just to stand still.
Traditionally, Christmas is when you make the money that helps you survive the winter, but my local pubs are finding that their profitability in December has dropped dramatically, and they will no longer be able to cope through the winter. The inevitable result is closures, reduced operating hours, fewer staff and pubs shutting one or two days a week. This matters because pubs are not just businesses. They are community anchors. They provide social value, local employment and vitality to our towns and villages.
Like many people, my first job was a part-time Saturday job in the retail and leisure sector. These crucial jobs give youngsters their first experience of work and the first step on the jobs ladder. This Government seem determined to remove that opportunity.
The consequences of this approach are entirely predictable. Without urgent action, and not just a temporary measure, it is estimated that more than 500 pubs will close this year alone, with the loss of jobs, investment and vital community assets that will inevitably follow. Yet instead of clarity, businesses are offered speculation. The Chancellor chose to signal another reversal—the 14th U-turn by this Government. Rather than offer clarity to Parliament, the Chancellor chose to signal it at Davos and in subsequent announcements by unveiling a targeted support package for pubs and live music venues worth over £80 million a year. This relief is time-limited and confined to pubs, while hotels, restaurants and the wider hospitality sector remain excluded from this concession.
That is in the context of a £3.5 billion increase in business rates. The Minister talked about it going up in some cases and down in other cases. Predominantly, it is going up. As Michael Kill, the chief executive of the Night Time Industries Association, said, this is
“little more than a drop in the ocean”.
It is striking that the Chancellor appears not to have absorbed the lessons of the 2025 Budget. On that occasion, as on this one, the Government allowed rumour and conjecture to run ahead of policy, creating weeks of damaging uncertainty before detail was finally provided. That uncertainty has been a major factor in suppressing economic growth.
What makes this situation all the more remarkable is the Government’s selective enthusiasm for certainty. When it comes to public sector unions, Ministers have shown themselves perfectly willing to offer generous multiyear settlements, providing stability and predictability and doing so without meaningful conditions attached. The Government will claim that the measures announced by the previous Government on business rates were temporary, as the Minister did, and linked solely to the pandemic. That is not correct. These reliefs stem from a 2019 manifesto commitment and reflected a continuing policy of choice, not a short-term emergency response.
The Government can try to point to the timing of valuations, as the Minister did, during the pandemic to explain volatility, but if this were a genuine reform, the revaluation would be broadly revenue neutral. As I said, it is going to raise £3.5 billion extra—a 10% increase in the first year alone, with further increases built in thereafter. It is nothing more than a stealth tax.
Finally, the House should note the uncomfortable contrast between the treatment of small businesses and the treatment of the Treasury itself. While local pubs are facing rising bills, the business rates at 1 Horse Guards Road, the home of the Exchequer, are set to fall by nearly £300,000. At 2 Marsham Street, which houses many major government departments including the Minister’s department, business rates will fall by over £1 million. The Treasury is happy to cushion itself while small businesses are left to absorb the shock. This House should regret the passage of this statutory instrument and urge the Government to rethink an approach that damages confidence, undermines growth and places an ever-greater burden on the very businesses on which our country depends.
Lord Stoneham of Droxford (LD)
My Lords, this is the last speech that I shall be making after midnight as Chief Whip for the Liberal Democrats, because I am stepping down at the weekend. I hope that the first thing that the next Session of Parliament does is bring in some legislation, or whatever we require, to modernise the hours of this House. It is ludicrous that we are sitting here at this time.
I will not speak for very long, because this SI is aimed at providing transitional relief to support business rate payers as they transfer to the new bills following the 2026 business rates revaluation. It is based on schemes that we have had for some time and has been improved by the Government. We will deal with extra support for public music venues when we look at the SIs on 10 February, so I am not going to go on about the impact of NI with the minimum wage and the rate valuation now. We will look more closely at those issues at that time.
We support the new structure of rates designed to shift the burden from the high street to large warehouses. The only problem that I want to raise is that the Government would do well to publish data on the impact of the revaluation on specific sectors to help analyse the need for targeted support.
Baroness Taylor of Stevenage (Lab)
My Lords, before I respond to the regret amendment, I thank the noble Lord, Lord Stoneham, for all his work as Chief Whip of the Liberal Democrat group. I am very grateful to him for everything he has done. I know that he will continue to contribute in the House, but we are very grateful for what he has done in that role.
Quite honestly, it was the party opposite that sat on their hands as our high streets crumbled around them for 14 years. Therefore, I find this simply astonishing, and the selective memory on Covid measures, again, is quite baffling. The measures were put in as a response to the situation during Covid. I will respond to some of the points that the noble Lord, Lord Jamieson, made, but I do so in the hope that, at some point, those who were part of the previous Government will have a bit of humility about the fact that we have had to come in and sort all this out, because it was left in such a mess when we took over in 2024.
In relation to the noble Lord’s comments on stealth tax, the retail, hospitality and leisure relief introduced by the previous Government in 2020 is unsustainable and was always temporary in nature. We have ended the uncertainty of that relief and replaced it with permanently lower tax rates for eligible retail, hospitality and leisure properties. We have done this in a way that is financially responsible and sustainable by funding this support from within the business rate system via the high-value multiplier for ratepayers with a rateable value of £500,000 and above.
In relation to further support for high streets, as I set out in my opening speech, the Government have introduced permanently lower multipliers, and we have also provided an expanded supporting small business rate relief scheme to help those ratepayers gradually move from the 2025-26 relief to the new tax rates by moderating their bill increases over the next three years. We went further in the announcements yesterday with the additional 15% relief for pubs and live music venues on top of the Budget package.
Lord Jamieson (Con)
I thank the Minister for her response. Before I comment on it, I also thank the noble Lord, Lord Stoneham, for his work as the Liberal Democrat Chief Whip. I am slightly envious that he will not be here after midnight. I fear that several of us will be here after midnight many more times in the future, but for tonight, let us avoid having a little argument about whether this is dinner break business and try to focus on what we are here to do. The noble Lord, Lord Stoneham, commented on focusing on warehouses. Twice as many retail premises will be hit by that change in tax.
Anyway, I will get on to this. My first comment is that it is regrettable that we are debating this so late at night. This is an important issue: the impact of business rates and other factors on our retail, hospitality and leisure sector. It is disappointing that it has not had the debate that it deserves.
The Minister again threw out a large number of numbers and obfuscation and claimed selective memory. Well, I can share barbs across the Benches, but I do not feel that that is the point of tonight. The point of tonight is to raise the plight of our hospitality and leisure venues. I use pubs as an example here. They really are in deep trouble. They are in worse trouble now than they were two years ago, by a very substantial margin. I worry that this Government are continuing to undermine them.
However, I recognise the late hour. What I will do, rather than press this to a vote, is invite the Minister to my local pub, which is only a 40-minute drive from Stevenage, so that she can hear at first hand of the difficulties that are faced by pub owners, in central Bedfordshire at least. I am glad that the pubs in Stevenage are doing well.
With that, recognising the late hour, I beg leave to withdraw my amendment.