Draft Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2026
Draft Local Government Finance Act 1988 (Calculation of Non-Domestic Rating High-Value Multiplier) (England) Regulations 2026
(1 day, 6 hours ago)
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The Exchequer Secretary to the Treasury (Dan Tomlinson)
I beg to move,
That the Committee has considered the draft Local Government Finance Act 1988 (Calculation of Non-Domestic Rating High-Value Multiplier) (England) Regulations 2026.
The Chair
With this it will be convenient to consider the draft Local Government Finance Act 1988 (Calculation of Non-Domestic Rating High-Value Multiplier) (England) Regulations 2026.
Dan Tomlinson
The regulations prescribe the circumstances in which the new retail, hospitality and leisure and high value business rates multipliers will apply.
It is a pleasure to see you in the Chair, Dr Murrison—[Hon. Members: “No!”] No? Oh, that is totally wrong; who have we got in the Chair? [Hon. Members: “Mr Mundell.”] Mr Mundell—that’s right. Forgive me for my sins; I know not what I do. Members will be glad to know that I do not plan on speaking for 15 minutes today, as I did in the Chamber the other day.
The regulations give effect to the new business rates multipliers for qualifying retail, hospitality and leisure and high-value properties. This is the first step to creating a fairer business rates system that protects the high street, supports investment and is fit for the 21st century. At the Budget we announced a comprehensive set of reforms to business rates. We have created a new, fairer system with permanently lower multipliers for RHL properties with rateable values below £500,000. The scope of these new multipliers is broadly the same as that of the current RHL relief. These new multipliers will be 5p below their national equivalents, but when combined with the outcomes of the revaluation, the tax rate that RHL properties on the small business multiplier pay next year will fall by nearly 12p and the rate for RHL properties on the standards multiplier by 12.5p.
It is important that we make support for the high street sustainable, so we are funding these new multipliers through higher rates on the top 1% of properties—those with rateable values of £500,000 and above. The higher multiplier will be only 2.8% above the national standard multiplier, meaning that properties in its scope will pay a reasonable tax rate too. These new rates will be worth almost £1 billion a year and will benefit more than 750,000 RHL properties. They will mean that from April, the most valuable properties, such as large distribution warehouses occupied by online giants, will pay a tax rate 33% higher than that for small high street properties.
The new business rates multipliers being brought into force by these statutory instruments are the first step to creating a fairer business rates system that protects the high street, supports investment and is fit for the 21st century. I commend them to the Committee—and forgive me, Mr Mundell.
James Wild (North West Norfolk) (Con)
It is a pleasure to see you in the Chair, Mr Mundell.
The two sets of regulations together set out the new tiered business rates system for the 2026 financial year. In plain English, the first set of regulations defines who gets which business rates multiplier under the new system, and the second sets out how much large premises will pay.
Of course, ahead of the election the now Prime Minister said that there would be a new regime of “permanently lower business rates”. Indeed, the Chancellor said at the Budget, referring to these measures, that these business rates were at their lowest level since 1991. The reality is proving somewhat different. Businesses are facing major increases, and claims to the contrary are false. Their bills are going up. That is why I, along with the shadow Housing Secretary and shadow Business Secretary, have written to the Office for Statistics Regulation, as it is statistically misleading to make the claim of record low taxes on the basis of the multipliers, as those are not the tax rates. I was pleased to have confirmation on Friday that the Office for Statistics Regulation is looking into this matter as we speak.
I will now turn to the regulations. In their first Budget, the Labour Government chose to cut back retail, hospitality and leisure rate relief introduced by the last Conservative Government from 75% to 40%. That was a tax raise of £1.1 billion a year. Through these measures, they have axed that relief in its entirety, which means higher bills. The Government have also locked in automatic inflation-linked rises every single year. What will the result of that be? The Office for Budget Responsibility expects business rate receipts to increase by £3.5 billion next year, a 10% increase in a single year. For small and medium-sized businesses, that is incredibly challenging. The bill of the average independent pub will rocket from £4,000 in 2024-25 to nearly £10,000 by 2028-29, a rise of 144%. The position of shops, hotels and restaurants is even worse than that.
At this point, it is usual for Ministers—indeed, for this Minister—to claim that the last Conservative Government would simply have abolished the relief overnight. Of course, that is utter nonsense, and I welcome the opportunity to get that on the record. It is simply a desperate attempt to deflect from what we can see are the bad political choices that the Chancellor and her Ministers have made. As the Conservative Party manifesto said, we would:
“Continue to ease the burden of business rates for high street, leisure and hospitality businesses”,
and our record is one of supporting the sector and the people creating jobs across the country.
Under the new system set out in these regulations, combined with the revaluation, businesses across retail, leisure and hospitality face much higher bills, and fewer will benefit compared with the 40% relief, because under that scheme, as is set out in the explanatory notes, local authorities had more discretion over which premises benefited from the relief. Will the Minister tell us what the Government’s estimate—the Valuation Office Agency will undoubtedly have provided one to the Treasury— of the number of businesses that will not get the relief under the discretionary powers that were there in the first place?
The rates of the small and standard multipliers are set in separate regulations, so I will not dwell on those, but two months on from the Budget, we have already seen a partial reversal of the plans the Chancellor set out, despite the promises of lower multipliers and lower bills. Ministers may point to their pubs and live music relief as if it solves the problem, but it does not: it is a sticking plaster when there is a major wound that the Chancellor has caused. It covers just 38,000 out of 750,000 hospitality and leisure businesses—barely one in 20—and it excludes restaurants, cafes, shops, hotels, theatres and all the venues that will have been in touch with members of the Committee. One in four pubs will still pay more overall, even after that relief, and guess what? That relief is only temporary—indeed, a sticking plaster. The Minister previously said there would be no further support for the wider sector. We all hope that he has to come back to the House with that package soon enough, or perhaps the Chancellor will actually do it herself when she delivers her spring update.
The draft Local Government Finance Act 1988 (Calculation of Non-Domestic Rating High-Value Multiplier) (England) Regulations 2026 set the rate for the new high value multiplier. The standard multiplier will be 48p, and the high value multiplier will be 50.8p—an extra 2.8p in the pound.
Big online warehouses, with a rateable value of at least £500,000, are supposedly the target, but twice as many retail sites, often acting as anchors for our high streets, will now face this higher rate. That is not what Labour promised before the election. It said it would replace the business rates system, raising the same revenue in a fairer way and levelling the playing field between high streets and online giants. Will the Minister explain why the Government are targeting anchor retail stores that are so important to our wider high streets? Of course, these higher rates come on top of higher employment costs, increased alcohol duties and the new tourist tax on hotels and bed and breakfasts, which UKHospitality warns could cost consumers £518 million, if the mayors take up the powers given to them by the Government.
We would take a very different approach. We would deliver permanent 100% business rates relief for retail, hospitality and leisure businesses of up to £110,000, helping around 250,000 small businesses, and we would pay for it by controlling the welfare budget. We believe in backing those taking a risk, employing people and investing.
Dan Tomlinson
In response to the points raised by the shadow Minister, it is worth emphasising that the decision to introduce new tax rates to the system means that, for the first time, a typical high street business now has a lower multiplier—a lower tax rate—than the online giants and the larger properties. The tax rate on larger properties is 33% higher than the rate paid by a smaller property on the high street. That significant difference is the first step in the reforms that we have implemented to business rates.
I will not make the point that the previous Government would have removed the reliefs overnight, but I will say that if they were planning on keeping them, I do not understand why that information was not in the documents that the OBR published in advance of the general election. If the shadow Minister will not concede that his Government would have got rid of the reliefs overnight, he seems to be suggesting that there was a multibillion-pound unfunded tax cut that they did not tell us about before the election. I am not sure which he would prefer.
In advance of the Budget, we considered the inclusion of large retail stores within the high-value multiplier. It is really encouraging that Sainsbury’s, the Co-op, Iceland and other large retailers have welcomed our getting the balance right in the business rates system and setting the multiplier at a rate that has allowed some shops to reduce prices, or at least hold down price increases for consumers, because of the changes that we made and the proportionate way in which we went about making them.
We are committed to going further to reform the business rates system. At the Budget, we published a call for evidence on how to remove further barriers to investment. Transforming business rates is a multi-year process. The Government remain firmly committed to collaborating with stakeholders and with businesses small and large to achieve further meaningful change in the business rates system.
Question put and agreed to.
Draft Local Government Finance Act 1988 (Calculation of Non-Domestic Rating High-Value Multiplier) (England) Regulations 2026
Resolved,
That the Committee has considered the draft Local Government Finance Act 1988 (Calculation of Non-Domestic Rating High-Value Multiplier) (England) Regulations 2026.—(Dan Tomlinson.)