Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2026

Tuesday 10th February 2026 Grand Committee

Considered in Grand Committee

15:45

Moved by

[Lord Livermore]

That the Grand Committee do consider the Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2026.

Relevant document: 48th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, this debate will also consider the take-note Motion tabled by the noble Lord, Lord Clement- Jones, on the Non-Domestic Rating (Definition of Qualifying Retail, Hospitality or Leisure Hereditament) Regulations 2025.

These statutory instruments form part of a wider package of legislation that gives effect to the new business rates multipliers for qualifying retail, hospitality, leisure and high-value properties. I thank the Secondary Legislation Scrutiny Committee for the detailed and thoughtful consideration of these statutory instruments in its 40th and 48th reports. Business rates are based on a property’s rateable value and a multiplier for each tax year. In the Autumn Budget 2024, the Government announced a comprehensive set of reforms to the business rates system in England, including the introduction of three additional multipliers from April 2026.

The three new multipliers are: a small business retail, hospitality and leisure multiplier for qualifying retail, hospitality and leisure properties with rateable values below £51,000; a standard retail, hospitality and leisure multiplier for qualifying retail, hospitality and leisure properties with rateable values of £51,000 to £499,999; and a high-value multiplier for properties with rateable values of £500,000 and above. In the Budget last November, the Government announced the rates for these new multipliers. These new rates will deliver permanently low multipliers for eligible retail, hospitality and leisure properties with rateable values below £500,000.

The Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2026 prescribe the circumstances in which the new multipliers will apply. The new multipliers will replace the pandemic-era retail, leisure and hospitality reliefs that currently apply. These reliefs were introduced on a temporary basis in 2020, recognising the exceptional circumstances of the time. Continuing these reliefs would cost around £1.7 billion per year. The new multipliers will benefit over 750,000 retail, hospitality and leisure properties. However, unlike the existing relief, they are permanent, thereby providing businesses with greater certainty and support. They are also not subject to a cash cap, meaning that all qualifying properties in a retail, hospitality and leisure chain can benefit. Taking into account the upcoming business rates revaluation, the tax rate that retail, hospitality and leisure properties on the small business multiplier will pay next year will fall by nearly 12p overall. Similarly, the rate for retail, hospitality and leisure properties on the standard multiplier will fall by 12.5p compared with what they are paying now.

To ensure that support for the high street is sustainable, the Government will fund these new multipliers through higher rates on the top 1% of properties, those with rateable values of £500,000 and above. From April, the most valuable properties, such as large distribution warehouses occupied by online giants, will pay a tax rate that is 33% higher than that paid by small high street properties.

I turn to the Motion laid by the noble Lord, Lord Clement-Jones, which relates to the Non-Domestic Rating (Definition of Qualifying Retail, Hospitality or Leisure Hereditament) Regulations 2025. These regulations set out the eligibility for the new multipliers and passed into law last year. The Government’s objective in setting these regulations was to reflect the same definition for eligibility as the existing retail, hospitality and leisure relief. We want sectors that benefited under the previous relief to continue benefiting under this new relief. For example, under the existing relief, businesses benefit if they are wholly or mainly used for retail, hospitality or leisure purposes. That includes the sale of most goods, services, food and drink or entertainment as well as accommodation to the public. These requirements are the same under the new relief.

Similarly, under the existing relief, businesses benefited only where they were used for in-person activity. The same principles apply under the statutory instrument that we passed last year. The Government have retained the same approach to ensure continuity in our support for the sector while making this support permanent and uncapped.

The new multipliers are being introduced alongside a revaluation of non-domestic properties, which the Valuation Office Agency carries out independently every three years. Currently, property values are based on values from 2021, during the pandemic. Values were generally lower at this time due to the unusual economic situation that the pandemic created. Many properties are therefore seeing their rateable values increase at this revaluation, reflecting post-pandemic recovery.

To support affected businesses, the Government announced in the Budget a significant support package worth £4.3 billion over the next three years. First, we are implementing transitional relief, which will cap increases next year by 5% for the smallest properties and up to 30% for the largest properties. Secondly, we are expanding the supporting small business scheme. Currently, the scheme caps the bill increases of those losing some or all their small business rates relief or rural rates relief. We are expanding it to those which are currently eligible for the 40% retail, hospitality and leisure relief. The supporting small business scheme will cap bill increases at the relevant transitional relief cap or £800 per year, whichever is higher.

Together, these schemes will mean that the majority of properties facing increases will see them capped at 15% or less next year, or £800 for the smallest. Even after the revaluation, around a third of properties will pay no business rates at all as they receive 100% small business rate relief. A further 85,000 properties will benefit from reduced business rates as this relief tapers. We have also extended the small business rate relief second property grace period from one year to three years, to support small businesses as they grow.

Following the Budget, concerns were raised about how the valuation methodology for pubs was applied. We have listened and responded to those concerns by launching a review into how pubs are valued for business rates. This review will also cover how hotels are valued and will include extensive engagement from valuation experts, businesses and their representatives. It will report in time for any decisions that follow to be implemented for the 2029 revaluation.

In the meantime, we are taking steps to support pubs for not only next year but the next three years. From April, pubs and live music venues will receive 15% off their new business rates bill on top of the support announced in the Budget. Bills will then be frozen in real terms for a further two years. This support is worth around £1,650 to the average pub and will mean around three-quarters of pubs seeing their bills either falling or remaining the same next year. This decision will mean that the amount of business rates paid by the pub sector as a whole will be 8% lower in 2028-29 than it is today.

The Government are also committed to going further to reform the business rates system to incentivise more investment. That is why we published a call for evidence on the next phase of business rates reform in November last year; that consultation will close later this month, and the Government will respond in due course. We recognise that transforming the business rates system is a multi-year process, and we are committed to working with stakeholders throughout this process to achieve meaningful change.

The reforms being delivered through these statutory instruments will benefit over 750,000 properties across England while ensuring that the top 1% most expensive properties, including those used by online giants, pay their fair share. They will support investment and create a fairer business rates system. I beg to move.

[Lord Clement-Jones (LD)]

My Lords, I wish to speak to the Motion standing in my name on the Order Paper.

I have not secured this debate to oppose the Government’s ambition to support the high street. Permanent lower multipliers for retail, hospitality and leisure are, in principle, a welcome step towards stability. Instead, I have tabled this Motion to highlight a critical flaw in the definition of who qualifies for this support. By drawing the lines of eligibility too narrowly, these regulations inadvertently exclude the engine room of our £8 billion music industry and the R&D hubs of our visual arts sector, threatening the very existence of the UK’s grass-roots creative infrastructure.

Our recording studios face a perfect storm and I know that the noble friends of the Minister, the noble Lord, Lord Brennan, and the noble Baroness, Lady Keeley, are both very supportive of what we are trying to highlight today and regret that they unavoidably cannot be here to say so. I know that the noble Lord, Lord Berkeley of Knighton, would also want to say something if he were able and did not have other engagements. Under the 2026 revaluation, which coincides with these new multipliers, these businesses face an average increase in rateable value of 45%, with some seeing hikes of nearly 100%. Simultaneously, because Regulation 3 excludes them from the retail, hospitality and leisure RHL category, they are denied the lower tax multiplier that their neighbours on the high street will receive.

The Music Producers Guild has provided alarming evidence that 50% of studios surveyed are considering closure within the next year. These businesses operate on ultra-thin margins, often requiring 85% occupancy just to break even. They compete in a global market. If it becomes too expensive to record here, artists will simply move to eastern Europe or the United States. We are already seeing top UK artists recording major projects abroad. The urgency cannot be overstated. I have seen correspondence from the Music Venue Trust highlighting a terrifying reality: directors of these businesses are running their figures for April and realising they will be insolvent. Under HMRC rules, to continue trading would constitute what is called fiscal recklessness, risking personal liability. This means we risk a wave of closures before the first bills even land, simply because the Government have failed to provide certainty.

Let me draw the Committee’s attention to the 40th report of the Secondary Legislation Scrutiny Committee. The committee explicitly noted the submissions from UK Music and the Music Producers Guild regarding this exclusion. The committee highlighted a glaring inconsistency in government policy. Film and TV studios currently benefit from a specific 40% business rates relief, which the Treasury confirmed will continue. The SLSC invited this House to question the Minister on this matter, so on what basis does the Treasury protect the infrastructure of our film industry while the infrastructure of our music industry, facing identical economic pressures, is left to face what the sector describes as an existential threat?

The Government’s justification for excluding these studios is that they are not reasonably accessible to visiting members of the public. I must challenge this, using the Government’s own guidance. Paragraph 22 lists funeral directors, shoe repairers and key cutters as eligible because they constitute the provision of a service. Recording studios are functionally identical: they provide a specialist service accessible to any member of the public willing to pay for it, be that a professional band, a local choir or a community group. Do the public browse a funeral parlour? No, they book a specific service. A recording studio is no different. If a key cutter qualifies, surely a recording studio does too.

We know that the Government can act when the system creates anomalies. Just weeks ago, following concerns regarding pubs, the Chancellor announced a 15% reduction in bills and a freeze for two years. The Minister in the other place, referring to music venues, said:

“It would not be right to seek to draw the line in a way that includes some and not others”.—[Official Report, Commons, 27/1/26; col. 771.]


Yet that is exactly what these regulations do: they support the venue where music is performed but tax the studio where music is created out of existence. The music ecosystem is a pipeline: if you destroy the creation phase, you eventually starve the venues. The Chancellor justified the pub relief by calling pubs “community assets”. If that is the test, studios that host community choirs, youth education projects and amateur bands must surely pass it.

Reports suggest that the Chancellor is resisting wider relief for hotels and restaurants because she cannot afford to support every business. I understand that constraint, but we are not talking about thousands of hotels; we are speaking of roughly 500 recording studios. The cost must be negligible compared with the £300 million package announced for pubs, yet the value to the £8 billion music industry is existential.

16:00

This crisis extends beyond music. I know that the noble Lord, Lord Freyberg, will want to expand on this. The Contemporary Visual Arts Network warns that artists’ studios face an almost identical situation. Like recording studios, these spaces are the R&D of the creative sector, themselves operating on razor-thin margins to keep workspace affordable, yet because of inconsistent interpretation by local authorities regarding public access, many are excluded from relief. Without clear case studies or guidance, which the CVAN has specifically requested, we face a postcode lottery in which vital cultural assets will be lost.

Furthermore, there is a structural failure in how the Valuation Office Agency assesses these unique spaces. Recording studios do not have their own category and are frequently misclassified as offices. This is nonsensical. Under office rules, a tenant is taxed on the square footage of internal walls. In a high-end studio, soundproofing can be three feet thick, occupying 30% of the floor plan. We are, in effect, taxing these businesses for the dead space that is essential to their craft.

In the Treasury’s steps for legislation that the VOA follows, the Government have created bespoke valuation categories for bingo halls and betting offices. Why does the betting industry get a tailored approach while our music industry is misclassified as office space? We must also ask why rateable values are rising so aggressively. The Music Venue Trust has shared alarming data showing venues facing hikes of 100% to 200%. This is because the VOA is applying a one-size-fits-all retail model to specialised cultural infrastructure.

The current methodology contains two fatal errors. First, it treats essential cultural space—the stage, the backstage, the sound booth—as if it were commercial trading floorspace. Secondly, it assumes that these venues trade all day, like a high street shop. In reality, a grass-roots venue might trade for only 20 hours a week during performances. By ignoring these realities, the system generates fictional turnover figures that no venue can achieve.

Turning briefly to the prescription of multipliers regulations, I note the SLSC’s 48th report, which criticises the lack of a full impact assessment for the new high-value multiplier. The committee warns of “cliff edges”, where a single £1 difference in rateable values triggers a massive tax hike. This high-value multiplier will hit our larger cultural institutions, major concert halls and larger creative workspaces that anchor our cultural economy.

In closing, I have three questions for the Minister. First, will the Government review the eligibility criteria to accept that recording studios are “service providers” akin to the shoe repairers and funeral directors listed in the guidance, and instruct local authorities to treat them as eligible for the RHL multiplier? Secondly, will the Government publish clear case studies for the visual arts sector to ensure that artists’ studios with public access are not erroneously denied relief due to local inconsistencies? Thirdly, if RHL inclusion is rejected, will the Treasury introduce targeted reliefs? Will the Minister commit to exploring a specific relief for music studios, ensuring parity with the 40% relief currently enjoyed by film studios, or instruct the VOA to create a specific valuation category for studios to stop them being taxed on their soundproofing?

We are risking the loss of world-class cultural infrastructure. As UK Music warns, without our studios we miss out on finding the next Adele and we lose our soft power to the US or Europe. We cannot let a rigid definition of retail silence the British music industry.

[The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)]

It might be helpful to the Committee if I explain that we are considering only the first Motion on the agenda at this time. I shall call the noble Lord, Lord Clement-Jones, to move his Motion when we have concluded this debate. We are debating them both, but we can take only one at a time. The one that we are taking now is the first Motion from the noble Lord, Lord Livermore, but the noble Lord, Lord Clement-Jones, has been in order by speaking to his Motion, because it has been grouped with the government Motion.

[The Earl of Clancarty (CB)]

My Lords, I am very pleased that the noble Lord, Lord Clement-Jones, has called this debate, which is so important for the arts. He has summarised the arguments extremely well. I am grateful, too, to the noble Lord, Lord Livermore, for his introduction.

I am grateful for the briefings from both the Music Producers Guild and UK Music. I am particularly grateful for the conversation I had last week with Gaby Grafftey-Smith, who runs the prestigious Angelic Studios in Northamptonshire. Angelic was founded by musician Toby Smith of Jamiroquai—

“by a musician for musicians”,

as its website eloquently puts it. Since 2017, when Toby Smith sadly died, the studio has been run by Gaby. One of the first things that she told me was that no one runs a studio to make money; they do so out of a passion for music. It is less a business and much more a vocation. The artists and technicians themselves build up the heritage. A studio develops organically in a creative manner. In terms of business, the margins are tight, as the noble Lord, Lord Clement-Jones, said, and there is a ceiling on income, because only so many artists can be booked. The space itself often has to be for the desired sound, which may be created by choirs or a grand piano—a big space.

It is also precious. Gaby talks about the precise mix of cultural and technical specification that make up her recording studio and others. Trust is built up over time between the studio recording engineer and artist. Each recording studio will have a different character and a different sound; they are all individual. She told me about a drummer for a well-known band, who, having tried different studios across the country, has said that her studio is the only one that provides the right environment for the particular sound that the drummer is trying to achieve.

Angelic is also one of a few key residential studios, which further cements the crucial relationship between artist and studio. In particular, for major stars such as Harry Styles or Black Sabbath, it means, as Gaby puts it,

“a unique, rural, isolated space to work”.

If such artists cannot find such spaces in the UK, we will lose these stars to America. By their very nature, they are not spaces where public access is appropriate, but, as the noble Lord, Lord Clement-Jones, said, they can nevertheless be used by anyone.

Like other studios, Angelic also has an apprenticeship scheme, but Gaby points out that, if recording studios cannot afford to take on those who are learning what is a key craft in the music recording industry, those who come into the industry in the future are much more likely to be from a moneyed background. That is an effect that the Government ought to think hard about. The major effect would of course be on the artists themselves, with artists turning to studios in other countries, such as in New York or Paris, in the event of studios closing or booking charges increasing. Just as worrying is the possibility that new British artists would not get a rung on the ladder or be able to record in a professional environment alongside established musicians.

Like all recording studios, Angelic is extremely worried about the increase in business rates. The Music Producers Guild reports that, for Angelic, that increase would be 48%—slightly higher than the average predicted increase of 45%, itself a massive increase. On business rates, Gaby believes that, for the reasons that I have laid out, studios should have their own category and be linked to yearly turnover, rather than a square-footage rateable value. I have described the character of one recording studio to show how much creative effort goes into the provision of one important specialist facility that cannot be expected to grow and diversify like an ordinary office-based business—it grows in a different way.

It ought to be pointed out here that Abbey Road, with its mixed portfolio, is, for obvious reasons, an outlier. Abbey Road is far and away the most famous recording studios in the world and a tourist attraction, so identified is it globally with the Beatles—although, of course, those studios also have a remarkable classical legacy that stretches back to Elgar, as the noble Lord, Lord Berkeley of Knighton, will well know.

I hope that this debate will make it very clear how much our recording studios are as much critical creative infrastructure for the music industry as film studios are for the film industry. Yet film studios receive 40% relief on business rates without, of course, needing any public access. The loss of a single recording studio would be tragic, but the loss of possibly up to half of our recording studios would be catastrophic—a tragedy that would be writ large on the music industry.

[Lord Freyberg (CB)]

My Lords, I, too, add my thanks to the noble Lord, Lord Clement-Jones, for setting out the issues surrounding these regulations with such clarity. Like the noble Earl and the noble Lord, I wish to express my gratitude to the Music Venue Trust, UK Music and the Music Producers Guild for their helpful briefings and for joining several Members of this House —the noble Lords, Lord Clement-Jones, Lord Parkinson of Whitley Bay and Lord Bassam, and my noble friend Lord Clancarty—before Christmas to brief the Arts Minister, the noble Baroness, Lady Twycross, on the consequences of these measures for grass-roots music venues, recording studios and artists’ studios. Let me briefly set out how I see the key issues facing each of the sectors affected by these regulations.

For grass-roots music venues, the picture is stark. Despite contributing over £500 million to the UK economy in 2025, the sector remains structurally fragile, with an average profit margin of just 2.5% and over half of venues showing no profit at all. These venues face a collective £7.2 million increase in their tax base from the 2026 revaluation. Hundreds will see rateable values rise by over 50%, with some experiencing increases of 100% or more. The Music Venue Trust projects that between 200 and 300 venues could close over the next four to five years. For venues already operating on razor-thin margins, these are not merely bills; they are closure notices.

For recording studios, the situation is equally perilous. Around 250 studios—roughly half the UK’s commercial studio base—are at risk of closure without mitigation by April 2026. Studios are facing an average business rates increase of 45%, with some experiencing rises of up to 100%.

These are not marginal businesses. Dean Street Studios, created by Tony Visconti and used by artists from David Bowie to Adele, has already closed three of its commercial studios, sold equipment and cut staff by 80%. The Motor Museum in Liverpool, which has supported artists from Oasis to Arctic Monkeys, is fully booked seven days a week, yet it tells us that a mere £50 increase in daily rates would drive away the emerging artists it exists to support. The studio is on track to becoming unviable.

More than 75% of recording studios are outside London, in Manchester, Liverpool, Birmingham and beyond. This is not a London-centric problem; it is a crisis affecting local economies, regional talent development and cultural infrastructure across the entire country.

As the noble Lord, Lord Clement-Jones, highlighted, the visual arts sector faces the same structural vulnerability. Artists’ studios operate on extremely low margins, keeping rents deliberately below market rates to remain affordable. Like grass-roots music venues, they function as public-benefit cultural infrastructure, not commercial property. The removal of retail, hospitality and leisure relief, combined with the new multiplier, will force rent increases that artists already at breaking point cannot absorb—or it will trigger studio closures. We have already seen this pattern in major cities across the country.

As the noble Lord, Lord Clement-Jones, has also highlighted, the 40th report of the Secondary Legislation Scrutiny Committee drew attention to a notable contrast in the Government’s approach. It observed that film studios benefit from a specific business rates relief: a 40% reduction on gross bills until 2034, worth some £470 million over 10 years. Yet recording studios, which are equally critical creative infrastructure for the music industry, receive no equivalent support. Indeed, the regulations before us specifically exclude premises used for the production or recording of music. This makes little sense.

16:15

Film studios receive their relief without any requirement for public access. Recording studios, by contrast, provide a service accessible to any member of the public who wishes to pay for it, serving both amateur and professional markets. The committee recommended that this House question the Minister on whether a similar scheme to support recording studios has been considered. I echo that question today: have the Government given consideration to introducing targeted relief for recording studios, equivalent to that provided to film studios?

It is also worth noting that the UK’s approach to premises taxation compares poorly with our European neighbours’. The average premises taxes for grass-roots music venues across the 27 EU nations amount to 0.9% of turnover, ranging between 0% and 1.4%. In the UK, following the latest revaluations, the figure currently stands at 2.93%, almost three times the European average. When combined with VAT differences on tickets, UK venues pay approximately three times what their European counterparts pay in pre-profit taxation. This is not a level playing field. Modest, targeted relief for those sectors would be proportionate and justified for several reasons.

First, the creative industries are a stated pillar of the Government’s growth strategy. The creative industries sector plan seeks to drive economic growth through culture, yet the business rates system is actively dismantling the very infrastructure on which that strategy depends. Secondly, venues and studios are low-margin but high-spillover assets. They anchor local creative supply chains, provide employment and skills development, and function as long-term cultural infrastructure for communities across the country. They are the research and development engine of our world-leading music industry, as we have heard: the places where unknown artists become national successes. Thirdly, intervention now represents excellent value for money for the Exchequer. Preventing irreversible closures through targeted relief would cost significantly less than later regeneration programmes, skills initiatives or business support initiatives required to rebuild what has been lost.

However, the fundamental flaw remains: the current system is designed to value property, not cultural purpose. The Valuation Office Agency applies generic valuation models designed for retail and hospitality to a specialised cultural sector with a unique operational and economic model. Recording studios are often misvalued as offices because no dedicated category exists; studio owners are taxed on three-foot-thick soundproofing walls, as we have heard, and acoustic voids essential to their craft as if they were rentable floor space. As long as venues and studios are treated as speculative commercial assets rather than cultural utilities, relief measures, however welcome, amount only to temporary stays of execution. What we require is a structural reform of the valuation methodology itself.

The Government have shown they can act decisively for the film industry. I urge the Minister to extend the same recognition to grass-roots music venues, recording studios, and artists’ studios before we lose irreplaceable cultural infrastructure that has taken generations to build and, once lost, will not return.

[Lord Watson of Wyre Forest (Lab)]

My Lords, I declare my interest, as in the register, as the proud outgoing chair of UK Music, the umbrella body for the British music industry. I am sure I do not have to tell my noble friend that the United Kingdom is one of only three countries in the world that remain net exporters of commercial music. That is not an accident; it is the result of a delicate and highly successful ecosystem. After two terms and six years chairing UK Music, I have spent a great deal of time reflecting on what makes this country so distinctive in the breadth and quality of its music, and its renowned commercial success. There is no single explanation, but there are four essential pieces to that jigsaw.

The first is our songwriters. They are unique, special and precious. They are often contrarian, usually very clever, and sometimes fragile and tender, much like the songs they write. The second is our performers—the artists who wear their heart on their sleeve night after night, festival after festival. Last week, it was a pleasure to see British artists Lola Young and Olivia Dean win acclaim on the world stage at the Grammys. The third is our musicians. They are technically gifted, are often poorly paid and frequently struggle to make ends meet. Yet, for them, music is often not just a job but a vocation.

The fourth piece of that jigsaw, and often one of the most overlooked, is our producers and their recording studios. A few are famous, such as AIR Studios, founded by Sir George Martin, which still has trailblazing engineers such as Olga FitzRoy, who helped to give the London 2012 Olympic Games their music; she has also worked with Coldplay and my personal hero, George Michael. Then there is Mickie Most, the founder of RAK Studios, who worked with artists including Herman’s Hermits, The Animals and Jeff Beck.

However, there is also a generation of producers who are perhaps less well known but still highly regarded around the world. They include: Manon Grandjean, a leading figure from the grime scene, who has worked with Stormzy and Dave; Paul Epworth, a producer for both Adele and Florence and the Machine and the owner of the Eurythmics’ former studio; Catherine Marks, an award-winning producer who has worked with Alanis Morissette and Wolf Alice; and the great Cameron Craig, a mixer and producer for Grace Jones and Annie Lennox, with multiple Grammy awards to his name.

Together, these producers and studios shape the sound of modern Britain and underpin our global success. That is why I am extremely grateful to the noble Lord, Lord Clement-Jones, for bringing this important report from the Secondary Legislation Scrutiny Committee to the attention of the Committee.

One of the reasons given for excluding recording studios from this measure is that, unlike music venues, they are not accessible to the public. With respect, that suggests a misunderstanding at the Treasury of what recording studios are and the role they play in the music ecosystem. Recording studios are not private; they are not private members’ clubs. They are working spaces. They are social and cultural. Anyone can hire them—artists, musicians, producers and engineers do so every day. Some of them even have bars. The sector spans everything from a small studio on an industrial estate to large facilities capable of hosting orchestras, as well as landmark studios that are part of our national cultural heritage.

This matters far beyond London, too. A brief example illustrates the point. Habitat Studio, a short walk from Manchester Piccadilly station, hosts between 120 and 150 bands every month, around 80% of whom are grass-roots artists. Alongside this, it works with established touring acts, charities and universities. Facilities such as this operate seven days a week, with small teams providing professional, affordable and reliable spaces for recording and rehearsals, and food and drink. They are not marginal operations. They are busy, productive and deeply embedded in their local music economies and cultural scenes.

What concerns me most is the logic underpinning their exclusion. First, there is an economic inconsistency. Studios face the same pressures as venues, including high energy costs, specialist premises and skilled staff. Supporting one part of the supply chain while excluding another risks distorting behaviour and, over time, pushing recording activity overseas. Secondly, studios act as regional anchors. They sustain skilled employment, support freelancers and help create creative clusters in towns and cities across the country. Thirdly, studios are not peripheral. They are upstream infrastructure. Without studios, there is no recorded music. Without recorded music, there is no touring product. Without touring, there is no export success.

Britain’s music industry is one of the country’s great success stories. It depends on an ecosystem in which every part matters, from the songwriters to the performer, from the musician to the producer and the studio that brings that work to life. If we value that ecosystem, our tax and rating policies should reflect how it functions. To borrow a lyric from a song recorded by the Korgis at Crescent Studios in early 1980, I say to the Minister:

“Change your heart, look around you”.


Recording studios are not an optional extra. They are essential cultural and economic infrastructure and our policy should recognise them as such.

[Lord Fuller (Con)]

My Lords, having heard from the Deputy Chairman of Committees that we were going to the first Motion first, we have the second Motion first. I want to go back. I do not want to talk about studios. It is not that I do not know anything about recording studios; it is that I have nothing to add to what noble Lords have said.

I want to raise a wider point about what happens when you make changes in the business rates system. It is important that the business rates system has the right incentives and is fair to small businesses, particularly those on the high street that make such a cultural contribution to our nation. We have seen in the newspapers as well as in these regulations what happens when you make alterations to the business rates that pertain to pubs, hotels, restaurants, between retail and industrial, and to large businesses versus small. It is one of those truths that the winners tend to keep quiet, but it can be existential for losers. That is partly because the amount of money that is raised by business rates is fixed and, as you give a relief in one place, it pops up as additional burdens elsewhere. That is just the way the system works.

However, for local government, stability and buoyancy in the system are important. When you change the system, there are downstream consequences, because business rates very largely pay for the delivery of local government services. Yes, there is redistribution within the nation of the money that is raised. For example, we are in Westminster, which raises nearly £1 in every £12 raised in business rates in our nation, and that £2 billion or so is redistributed to Redcar, Redruth, Wroxham and all around the country with a complicated process of ceilings and floors. There are also systems within county areas, as they tend to be, so that all the councils can pool together to grow the economy. That is important, because the system is designed with powerful incentives for councils to grow the economy on the simple truth that the more you grow the economy, the more you keep. Of course, resets happen every now and again and they are a disincentive to grow. All that effort is wasted as the business rates baseline is washed away. That is the context within which I wish to make my subsequent remarks.

In the past few weeks, there have been technical changes in the way that baselines and pooling are done that would have had material effects on district councils. For most councils, about 10% of their net budget would have been swept away, badly impacting on homelessness, recycling, building and all the things that we need to get the economy going. That is especially germane because district councils outside the M25 and the urban metropolitan centres tend to be the planning authorities that get growth going.

I know that the District Councils’ Network and, more widely, the local government family are grateful that the technical changes that could have caused that 10% disaster have been fixed for the coming year, but for one year only. As we look at business rates more generally and at altering the application of business rates, we need to make sure that the Treasury and the local government department are better aligned in future years so that we avoid the perverse outcomes that we might have seen.

It is not fair on councils to have the uncertainty. It is certainly not the right thing for the economy, because confidence and long-term stability provide that central alignment between central and local government to generate wealth in these islands. It is incumbent on the national Government to ensure that they do not accidentally damage that delicate balance that keeps the economy growing, people in work and taxes paid.

[Lord Parkinson of Whitley Bay (Con)]

My Lords, I add my name in support of all the noble Lords who have spoken in favour of the take-note Motion of the noble Lord, Lord Clement-Jones. I am grateful to him and to the members of the Secondary Legislation Scrutiny Committee for drawing our particular attention to the regulations before the Grand Committee.

16:30

As the noble Lord, Lord Clement-Jones, said, this is a critical and urgent issue for many organisations and venues which are part of our vital cultural infrastructure. This is about not just grass-roots music venues but recording studios and, as we heard, artists’ studios as well. Many of these venues, which have just about managed to weather the combined storms of the Covid pandemic, rising global energy costs, inflation, the additional costs of employment through the changes that the Government have made to national insurance contributions and more, are now struggling, as the noble Lord said, to work out how they will balance their books for the forthcoming financial year. Grass-roots music venues are a sector in which more than half the businesses that operate them did not make a profit in the last year. They see themselves, quite rightly, as the loss-leading R&D hubs of our creative industries. If we were to lose the work that they do, the Exchequer, and all of us, will pay a very great price.

We had a very helpful Question two weeks ago in the Chamber, asked by the noble Lord, Lord Bassam of Brighton. The Minister responded to it very generously, offering a meeting with the noble Lord. I do not know if that has taken place yet, but in my intervention in that exchange I said that it might be helpful if he could broaden the discussion to include the Valuation Office Agency. As we heard in a number of contributions today, at the heart of what underlies the concern that many of us have is that the VOA is making assumptions based on flawed methodology. We have heard about some of the concerns that have been raised, such as that a recording studio has to have thick walls to keep the noise in and out, and these are being charged as commercial spaces. Similarly, for grass-roots music venues, storage areas for sound equipment, the back room, the green rooms and so much more are wrongly being counted as commercial space, when they are not.

[The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)]

I apologise for interrupting the noble Lord, but a Division has been called. We look forward to hearing from him again in about 10 minutes.

16:32

Sitting suspended for a Division in the House.

16:41

[Lord Parkinson of Whitley Bay (Con)]

My Lords, we had to hit pause, but I shall resist the temptation to hit rewind and repeat what I said. I was echoing the points that have been made: a lot of the problems here are with the way the Valuation Office Agency tries to understand the particular nature of these important businesses. At the very helpful meeting with the noble Baroness, Lady Twycross—which the noble Lord, Lord Freyberg, alluded to—we heard from a lot of people across the sector. They are frustrated that they have one conversation with the Government but hear something different from the Valuation Office Agency. If there is a way to short-circuit that, I know that they would appreciate it.

There is also the broader question of how the Government value and account for things. Can the Minister say whether, in bringing these measures forward in the discussions that His Majesty’s Treasury had with the Department for Culture, Media and Sport, he was able to talk to the team there that works on the culture and heritage capital programme? That team is working to arrive at a Green Book-compliant way of valuing the wider benefits that we have heard about. That includes the social benefits of our cultural infrastructure in terms of not just our physical and mental health and well-being or tackling isolation and loneliness, particularly in rural areas or areas of deprivation, but trying to put a value on inspiring the future generations of musicians, artists and others.

It seems that the decision here runs counter to the Government’s noble aims in their creative industries sector plan to grow what are already world-leading sectors for the United Kingdom. Nevertheless, they are precarious and challenged by a number of global competitors, which are breathing very heavily down our necks. As the noble Lord, Lord Watson of Wyre Forest, said, we have a very delicate ecology and ecosystem in these sectors, and it is very important that we all do everything we can to maintain that.

[Lord Clement-Jones (LD)]

My Lords, I am not quite sure, as the procedure is rather arcane, but I think I manage to get a very quick wind-up. The positive thing today is that we have heard so much about our music ecosystem, and people have been celebrating that. The noble Lord, Lord Parkinson, was absolutely right when he talked about the impact of Covid—the perfect storm, in a sense, of inflation, national insurance and so on—but that ecosystem is hanging on. It is still there, and it is absolutely fundamental to the music industry. In a sense, that is the good news; the bad news is that some of the issues we have been talking about today on business rates are going to kill what the noble Earl, Lord Clancarty, called the critical creative infrastructure.

16:45

I thank all noble Lords who have spoken in this debate, particularly the noble Earl, Lord Clancarty, and the noble Lords, Lord Freyberg and Lord Fuller. The latter made an interesting point that there should be better alignment between the Treasury and local government. Well, there should be better alignment between the Treasury and just about everybody: I would have thought that DCMS in particular would benefit from having a much closer dialogue over matters such as this.

The noble Lord, Lord Parkinson, mentioned the offer of a meeting made at Question Time not that long ago to broaden the discussion on the VOA assumptions that he, I and that noble Lord, Lord Freyberg, talked about. There is certainly the basis for further discussion there if the Minister wills it. The noble Lord, Lord Freyberg, talked about artists’ studios and the structural fragility there, which is comparable in many ways to the recording studios, but they are caught, in a sense, by a different catch in the system.

I also thank the noble Lord, Lord Watson, who has served as chair of UK Music for two terms, as he reminded us; he also reminded us of the strength of the music industry and that producers and recording studios are an absolutely essential part of the ecosystem, and he gave us some great examples of recording studios that we should value for the extraordinary output they have been responsible for.

I do not think there is much more I can say until we hear from the Minister, but I very much hope that he does not use all the arguments that I have rehearsed and tried to push back on: that studios are not public-facing like shops, that we cannot afford to extend relief or that we have competitive grant funding out there. As the noble Lord, Lord Parkinson, also said, this is, in many ways, contrary to what the Government are trying to do in their creative sector strategy. If the Government were seriously thinking straight, they would be very mindful of the impact of the issues that we are talking about today.

Quite apart from the lack of discount, the VOA issues loom large, and I very much hope that the Minister will roll discussion of that into the other aspects of hospitality, retail and leisure discounts in his reply.

[Baroness Neville-Rolfe (Con)]

My Lords, I rise to speak to these two closely related sets of regulations, which together established the new tiered system of business rates for the 2026 financial year. One determines which hereditaments fall into each multiplier band, and the other fixes the resulting liabilities for larger premises. I thank the Minister for his clear and careful introduction to the new rules.

Although I plan to focus elsewhere today, I am very grateful to the noble Lord, Lord Clement-Jones, and others for drawing our special attention, so eloquently, to the second instrument, to the anomalous position of the recording studios and to the hikes in rates that they face. This could lead to unwelcome closures and to the expected moves of some studios abroad. I have visited Abbey Road Studios as a private citizen. Those studios are an important part of our rich art and cultural heritage, which has been referenced so many times today—indeed, I have walked across the famous zebra crossing, made of worldwide importance by the Beatles.

I am also grateful to the Secondary Legislation Scrutiny Committee for its, I have to say, critical report. It was disappointed that the Government had not seen fit to publish any of the wide range of evidence and analysis it considered on the effects of the new multipliers, other than high-level data. It also sought a proper explanation of why the Government consider it fair that, apparently without advancing evidence, a low multiplier should apply to smaller RHL premises compared to non-RHL properties. I look forward to a full response from the Minister on that report.

Prior to the election, the now Prime Minister promised a regime of permanently lower business rates multipliers. Since then, the Chancellor has claimed that, on this basis, business rates are at their lowest level since 1991, yet many businesses now face substantial increases in their bills. That is why it is so profoundly misleading to characterise these changes as record low taxation by reference to multipliers. Multipliers are not the tax rate. Bills are, and it is bills that businesses have to pay and real people have to bear.

Turning to the substance of the regulations, in their first Budget, this Government chose to cut back retail, hospitality and leisure relief, a tax rise worth £1.1 billion a year. At the same time, they have locked in automatic, inflation-linked increases every year. Can the Minister explain, in specific terms, what the Government believe the cumulative effect of these decisions will be by the end of this Parliament? What modelling has the Treasury done on business closures, employment losses and investment being deferred? For SMEs, the challenge is acute. Shops, hotels and restaurants face even steeper rises. Does the Minister seriously believe that this trajectory is sustainable?

Under the new system set out in these regulations, combined with the revaluation, businesses across retail, leisure and hospitality will face higher bills and fewer businesses will benefit from relief than under the previous 40% scheme. As the Explanatory Memorandum makes clear, local authorities previously had greater discretion over which premises benefited. Can the Minister tell the Committee what estimate the Government have made—the Valuation Office Agency will undoubtedly have provided one—of how many businesses will lose out because that discretion has now been removed?

I turn now to the Non-Domestic Rating (Definition of Qualifying Retail, Hospitality or Leisure Hereditament) Regulations, which I have looked at in combination with the draft Local Government Finance Act 1988 (Calculation of Non-Domestic Rating High-Value Multiplier) (England) Regulations. As confirmed in the letter sent by MHCLG to the chief finance officers of English billing authorities this very day, these set the new high-value multiplier at 50.8p, compared to a standard multiplier of 48p—an extra 2.8p in the pound.

The Government’s intention is for these measures to be directed at large online warehouses with rateable values of around £500,000 or above. However, as the provision currently stands, a greater number of retail premises will in fact be captured by the higher rate, including many of the anchor stores that play a central role in sustaining footfall and economic activity in our high streets. I remember these so well from my time at Tesco, since they were at the heart of a regeneration strategy in poorer areas that provided jobs for the unemployed and fresh fruit and vegetables, which Southampton University found materially improved health locally. The study was actually paid for by Sainsbury’s, but the outcomes were very positive.

It appears to be difficult to reconcile hitting such stores hard with the commitments made prior to the election, when it was said that business rates would be replaced with a fairer system intended to address disparities between large online operators and physical retailers. Will the Minister say why the Government are choosing to target anchor retail stores? What assessment has been made of the knock-on effects on surrounding businesses in the same development or high street when these anchors are weakened or lost?

The higher rates are being introduced alongside rising employment costs, NICs, national minimum wages, especially for the young, increased alcohol duties, high energy costs and the proposed tourist levy on hotels and bed-and-breakfast accommodation. UK Hospitality has warned that should mayoral authorities choose to exercise these new powers, the additional cost to consumers could amount to £518 million. Layering new fiscal burdens, even where individually justified, can in aggregate undermine the very sector that the Government wish to support.

At what point do the Government consider the cumulative impact of these measures, taken together, and reflect on whether the overall burden risks becoming counterproductive? Of course, I understand the challenges the Government face, but it is this cumulative effect that is such an acute problem. What consideration has been given to the impact on consumer prices and demand, especially at a time when households remain under significant financial pressure?

We would take a different approach. We would provide permanent 100% business rates relief for retail, hospitality and leisure businesses with rateable values of up to £110,000, supporting around 250,000 small businesses across the country. That support would be funded through a more disciplined and focused approach to welfare spending, as set out clearly at our party conference last year.

In these circumstances, I was pleased to hear from the Minister during his Statement on 29 January that the Government were looking at the adverse effect of the changes on hotels and that the wider review of business rates was ongoing. We heard that any changes to business rates would be considered at the Budget in the usual way. Can the Minister confirm that we are talking about the 2026 Budget and comment on the budgetary position? Is there new money for pubs and music venues—and, if need be, for hotels—or does everything have to come out of the £4.3 billion announced in the previous Budget?

Can the Minister please confirm that the wider review of business rates, which currently has an ongoing call for evidence due to close in a few days’ time, as he mentioned, will address not only large infrastructure businesses and premises such as airports, but small and medium-sized businesses in the context of the current economic and tax environment? Will he take a good look at incentives and anomalies in the VOA rules and at the need to align Treasury and local government thinking, as mentioned by my noble friend Lord Fuller? Will he look in particular at the problem facing recording and artist studios, raised so eloquently by my noble friend Lord Parkinson of Whitley Bay, the noble Lord, Lord Clement-Jones, who has led with his Motion, the noble Earl, Lord Clancarty, the noble Lords, Lord Freyberg and Lord Watson of Wyre Forest—and UK Music? Discussions with DCMS could, it seems, also be helpful to the VOA.

Noble Lords will know that we believe in backing those who take risks, create employment and invest in the productive economy. In our view, these regulations move in the opposite direction. For that reason, I urge the Government to reflect carefully on their approach and on the conclusions that they reach from the review that they are undertaking.

[Lord Livermore (Lab)]

My Lords, I am grateful for all the comments and questions raised throughout the debate. Let me start with the Motion tabled by the noble Lord, Lord Clement-Jones, and the comments made on that. The Motion he has laid relates to the Non-Domestic Rating (Definition of Qualifying Retail, Hospitality or Leisure Hereditament) Regulations 2025. These regulations set out the eligibility for the new multipliers, and they passed into law last year. As I said at the outset, the Government’s objective in this statutory instrument was to reflect the same definition for eligibility as the existing retail, hospitality and leisure relief. We want sectors that benefited under the previous relief to continue benefiting under the new relief. We have therefore retained the same approach to ensure continuity and fairness in our support for the sector while making this support permanent and uncapped.

I have heard clearly in the course of this debate the strong views expressed and the passion for the sector. There were comments from the noble Lords, Lord Clement- Jones, Lord Freyberg and Lord Parkinson of Whitley Bay, the noble Earl, Lord Clancarty, and my noble friend Lord Watson of Wyre Forest, who I was sorry to see is not sitting on this side of the Committee. I hope there is nothing for the Whips to worry about in that.

Noble Lords asked in the course of the debate many questions around recording studios. As I have said already, our objective in setting these regulations was to reflect the same definition for eligibility as the existing retail, hospitality and leisure relief. I suspect noble Lords will not like my answer here, but that existing relief is centred around retail, hospitality and leisure properties which are

“reasonably accessible to visiting members of the public”.

If a recording studio forms part of a single property with a qualifying hospitality or retail business, and the hospitality or retail aspect is the main purpose of the property, it will qualify for the lower multipliers. It is only if a property is wholly or mainly used as a recording studio that it will not qualify for the lower multipliers, as these are generally not open to the public.

17:00

I should stress that recording studios will benefit from transitional relief if they are seeing large bill increases, which caps bill increases next year by between 5% and 30%. I am afraid I cannot commit here to introducing targeted relief, although noble Lords will know that the Government keep all taxes and reliefs under review. The noble Lord, Lord Clement-Jones, and other noble Lords asked why there is no bespoke valuation approach for recording studios in the methodology. I am very happy to take that back and discuss it further with colleagues. I am also very happy, as the noble Lord, Lord Parkinson of Whitley Bay, asked, to include the VOA in the meeting that I agreed to have with the noble Lord, Lord Bassam. I am happy to invite it to that; I cannot guarantee its attendance, but I will do my very best.

The noble Lord, Lord Parkinson, also spoke about quantifying the wider benefits of culture and how we value that. That is obviously an important debate to be had. I do not have an update for him today, but I absolutely understand the points that he was raising.

The noble Baroness, Lady Neville-Rolfe, asked several questions around the wider system and the other SI that we are debating. As she knows, the new multipliers will replace the temporary pandemic era retail, hospitality and leisure reliefs. They are worth nearly £1 billion per year. They will benefit over 750,000 properties and will be funded by higher rates on the top 1% most expensive properties. When combined with the outcomes of the business rates revaluation, the tax rate that retail, hospitality and leisure properties on the small business multiplier will pay next year will fall by nearly 12 pence. Similarly, the rate for retail, hospitality and leisure properties on the standard multiplier will fall by 12.5 pence, compared to what they are paying now.

The Covid era retail, hospitality and leisure relief was introduced on a temporary basis in 2020, recognising the exceptional circumstances of the time. As the noble Baroness will know, continuing it would cost around £1.7 billion per year. Without this Government having intervened, the relief would have ended entirely in April last year, creating a cliff edge for businesses. Instead, the Government decided to provide a 40% relief to retail, hospitality and leisure properties up to a cash cap of £110,000 per business in 2025-26, ahead of permanently lower tax rates for retail, hospitality and leisure properties for this year. The noble Baroness also knows that increases for large businesses with rateable values over £500,000 are necessary to reduce permanently those for smaller businesses. I note that she supported the smaller business rates but opposed the money to fund that through the higher rates. That is a fairly standard response from her and her party when it comes to taxation measures.

The noble Baroness asked for some data. I do not have specific data with me now on the data analysis that she asked for, but I am more than happy to write to her if it is available. The Government do not have data that links individual properties and businesses, as business rates is a property level tax. The Government have, though, engaged extensively with businesses to understand the impact of the changes on them.

The noble Baroness, Lady Neville-Rolfe, also asked about hotels and the review of hotel methodology. Hotel valuations are undertaken in a different way to some other sectors. The methodology used is well established but, as with pubs, specific concerns have been raised by stakeholders, and it is right to review this to ensure it accurately reflects the market for these sectors. I am not going to prejudge the outcome of that review now. She asked which Budget it is. Yes, it is the 2026 Budget, but as I say, I am not going to prejudge that review or the next fiscal event. As I said, I will write to her with the specific data, if it is available, but for now, I commend these regulations to the Committee.

[The Earl of Clancarty (CB)]

I do not know whether the noble Lord, Lord Clement-Jones, is going to leap up to ask some questions as well, but the Minister did not mention film studios. A number of us talked about the possibility that recording studios could be treated in the same way as film studios and have that exemption. Is that something the Government are prepared to look at, please?

[Lord Livermore (Lab)]

As I said, I cannot commit to introducing any specific targeted relief, but we keep all taxes under review.

[Lord Fuller (Con)]

I raised the issue that this year there was a misalignment between the Treasury and MHCLG regarding some of the changes that were made to the business rates. Will the Minister commit to at least having advanced discussions between MHCLG and the Treasury in future years? There has been a temporary sticking plaster—I might characterise it as that—and the sector is very grateful for that, but it is for one year only. Having got out of the fire this year, can we be clear that we will not accidentally stumble back in on a future occasion, otherwise we will be standing here in 12 months’ time having the same debate?

[Lord Livermore (Lab)]

I listened carefully to the noble Lord’s remarks and do not think he asked a specific question, which is why I did not give him a specific answer. Of course, the Treasury and MHCLG talk regularly on all matters and will continue to do so.

[Lord Watson of Wyre Forest (Lab)]

I sincerely apologise to the Minister for my location here today. In studio terms, I have accidentally ended up on the B-side, not the A-side.

[Lord Livermore (Lab)]

As my noble friend knows, some of the best songs are often on the B-side.

[Lord Freyberg (CB)]

Artists’ studios find dealing with the Valuation Office Agency very frustrating because when they approach it, it will not give them a model answer about how the square footage of their studios is calculated. It would be very helpful if the Valuation Office Agency could give a model or examples that other councils could follow, so that there is guidance on a national basis.

[Lord Livermore (Lab)]

I will put that to it. I have also committed to ask it to attend the meeting. If the noble Lord would like to attend that meeting as well, I am more than happy for that to happen.

Motion agreed.