Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill

Debate between Baroness Blake of Leeds and Earl of Lytton

Wednesday 10th November 2021 Grand Committee

[The Earl of Lytton (CB)]

My Lords, it might be of assistance to the Committee if I offer a few words of clarification, because the noble Baroness, Lady Pinnock, has given us some extremely perceptive insights into the whole issue.

With regard to Amendment 1, the issue here is that the Government have chosen to replace what would have been the objectively and judicially managed process of appeals against the assessment of the value of the real estate with what is, in fact, a wholly discretionary sum, with all that that entails, which will, as we heard from the noble Lord, Lord Cormack, be spread thinly across a huge number of non-domestic ratepayers, who will presumably plead some sort of hardship. That seems to transfer a load of administrative activity on to local government and away from what one would normally expect to be the longer-term process.

The Minister made a comment about the pandemic never having been in focus in terms of dealing with material change of circumstances. I am not sure he is entirely right in that interpretation. The acid test is fundamentally one of the perceptions of the longevity of the problem. It is quite clear that this will be a multi- year factor.

The noble Baroness’s second amendment points to the lumpily uneven nature of what has now become the business rates system. She referred to the online retailers, many of which operate out of enormous distribution sheds. Their shop window is a website with a virtual walkaround operation, their stockroom is somewhere between a number of vans on the road and their fulfilment centres, as I believe they are called, and the till is PayPal or the equivalent.

The situation regarding the principle of business rates is that it was always supposed to be the benefit derived from the occupation of those premises. Over the years this has morphed into being, “You’re the owner so you pay up.” That is the principle behind the invidious situation we have now to do with empty rates. I add those who have high street premises that they cannot let; they cannot find an exempt or partially exempt occupier such as a charity to come and occupy it for them. They are stuck with this situation. There is no relief for them. Not surprisingly, they get boarded up and, in street frontage speak, they become a missing tooth in the jaws of a pretty girl, as it was once put to me. That needs to be sorted out.

The fundamental review I referred to earlier is, I think, trying to do the least it possibly can. When I said that I thought we were getting—or had got to—the point of no return, I meant it, because if this is not taken seriously and is not taken in hand, the only show in town will be what I understand is a bit of Labour Party policy, which is to abolish business rates and have some sort of sales tax instead. We know what has happened in the past—I cannot remember if it was the first or the subsequent Government under Mrs Thatcher that was elected partly on the premise that they were going to abolish the unfair ratings system.

If we are not careful, this simply becomes another mantra where, historically, a perfectly good, cheap to run system gets trashed. The Government will rue the day that they allowed this process to continue and allowed the forces within the revenue department to erode the system of fairness and confidence—this will be the net result. It affects everybody—businesses and local authorities—and prospects all round, because doubt, uncertainty and risk are corrosive of the entire process.

I very much take the point that the noble Baroness made in moving this amendment, and I hope that the Minister is taking this on board, because we are pretty much at a tipping point and many people have said to me that it cannot go on like this. I just felt compelled to make that intervention at this stage.

[Baroness Blake of Leeds (Lab)]

Thank you for those contributions. There is no doubt among any of us about the real sense of urgency and the importance of the amendments that we are discussing in this group. Again, it is inevitable that the question of the £1.5 billion comes up, but we also need to keep a very close eye on the economic prospects as we go forward. I have to say, the confidence around that is not as great as perhaps we are being led to believe.

Again, I thank the noble Baroness, Lady Pinnock, for putting her name to Amendments 1 and 2, and for the comments of the noble Earl, Lord Lytton; he really got across that sense of urgency. I can confirm that Labour has called for the longer-term abolition of the current system of business rates, to be replaced by a new system that is better balanced between high-street businesses and the out-of-town online giants, as we have been hearing.

On Amendment 2, does the Minister agree with the assessment that we are in a very lumpy situation, and will he be looking at how the playing field can be levelled out? That is a really important question that we need some certainty on. Again, Labour has called for an increase in small business rate relief next year from the current threshold of £15,000 to £25,000. Does the Minister accept that we need an increase in relief to help small businesses cope?

I turn to the amendment in my name. It is important, at every opportunity that we have in this House, to really spell out the dire situation facing local authorities, particularly regarding the financial position that they are in. This is one reason local authorities are asking for clarity and a sense of urgency. They are also asking that, once the criteria are established, the way that this unfolds is kept under review, and for local authority guidance to be published as soon as possible. We made a very strong case for that at Second Reading.

We know that Covid-19 has had a devastating impact on local authority finances, with a combination of income falling and costs rising. The income element for local authorities, I am afraid, is one which the former Secretary of State would not take into account in terms of the losses that local authorities have been facing. This is on top of the fact that Conservative Governments since 2010 have cut £15 billion from central government funding to local authorities.

We are looking at a situation, according to the LGA, where councils in England will face a funding gap of more than £5 billion by 2024 just to maintain services at current levels. It estimates that the Government will need to find an extra £10.1 billion per year in core funding to local authorities by 2023-24 just to plug the existing funding gap. New research by the BBC, I understand, has shown that UK councils have found a £3 billion black hole in their budgets as they emerge from the pandemic. Put in that context, I think we can all understand why there is so much concern from local authorities about how much is going to be available to them to distribute, to enable businesses in their areas to survive and to continue to pay the rates due to them. Again, I ask whether the guidance can be issued to local authorities as a matter of haste and whether it is possible for us to have an understanding of when that will be.

I was actually in the room when the former Secretary of State told local authority leaders that the Government would provide

“whatever funding is needed for councils to get through this and come out the other side”.

Again, I ask: does the Minister believe that this promise has been kept? I do not think we need a list of all the different resources that have been given to local authorities, welcome though they have been. Unfortunately, they do not match the need and we know from the impact of the pandemic that need in our communities, through a whole raft of measures, is really going through the roof.

In that context, I hope that everyone will recognise the urgency required to resolve these matters but also the enormous challenges facing local authorities in the years ahead.