Non-Domestic Rating (Multipliers and Private Schools) Bill

Baroness Scott of Bybrook Excerpts

Committee stage
Monday 24th February 2025 Grand Committee

[Lord Thurlow (CB)]

My apologies.

[Baroness Scott of Bybrook (Con)]

My Lords, I will speak to Amendment 1 and to my notice opposing the Question that Clause 1 stand part of the Bill. I was pleased and interested to see that the Liberal Democrats had tabled a purpose clause, given that they have criticised purpose clauses tabled by my Conservative colleagues on other Bills. On the purpose clause tabled by my noble friend Lord Davies of Gower—

[Lord Fox (LD)]

As a point of information, I have proposed purpose clauses for at least six Bills in the last three years.

[Baroness Scott of Bybrook (Con)]

I will continue. When my noble friend Lord Davies of Gower tabled a purpose clause on the Terrorism (Protection of Premises) Bill, the noble Baroness, Lady Suttie, argued that it was unnecessary because it restated some of the language in the Long Title of the Bill. In contrast to the amendment that we are debating today, my noble friend Lord Davies’s amendment included a legal duty on the Secretary of State, as well as establishing a purpose clause giving it legal effect. This is all water under the bridges, though, and we hope that our friends on the Benches to my left will not criticise our use of purpose clauses when scrutinising future Bills. As I say, we on these Benches are very comfortable with purpose clauses which seek to probe the intentions of the Bills that this Government are bringing forward, so I welcome the noble Lord’s amendment.

As the noble Lord, Lord Fox, says in his explanatory statement, there is a real question mark over the Bill’s impact on the Government’s plan to deliver on their stated aims of protecting our high streets and encouraging investment. Later in this Committee, I will seek to probe the impact of the Bill on larger anchor stores, which are often the key drivers of the footfall on our high streets and keep smaller businesses alive. I will also seek to understand more fully the impact that the Bill will have on the retail and major food shops, including supermarkets, which people across the UK rely on.

We know that the Government’s original intention was to hit international businesses that have large, warehouse-style business premises, such as Amazon and other international tech giants, but it is not clear that the Bill achieves that goal effectively. There is a risk that the increased costs of multipliers will be passed on to consumers in very unexpected ways. The higher multipliers that the Bill will introduce are a tax on business. We need to understand better what impacts this business tax will have on jobs, growth and prices. The impact assessment that the Government have published to date is utterly inadequate. Although I am really very grateful to the Minister for his engagement on the Bill so far, I feel that we will need to hear much more detail from the Dispatch Box on the real-world impact of the Bill if we are to proceed with it.

I turn to my stand-part notice, which seeks to question whether Clause 1 should stand part of the Bill. Clause 1 sets out the Government’s intention to create a system whereby hereditaments over the value of £500,000 pay at a higher multiplier. What they have failed to include in any part of the Bill, or indeed in the Explanatory Notes, is an explanation of why £500,000 was chosen as the threshold for the higher multiplier. Indeed, £500,000 seems entirely arbitrary, and the Government have not explained why that is the number.

As was mentioned by several noble Lords from across the House at Second Reading, the Bill raises more questions than it has answers, and there is a complete lack of clarity. Not only do we not know why the threshold is set at £500,000, but we also do not know what the actual multipliers will be. The Government’s choice of setting the threshold in this way means that many businesses on our high streets will be forced to pay this higher multiplier.

I agree that the business rates system needs reform, but I do not for a second think that this Bill achieves the reforms that our high streets need. There is an understanding across the board that businesses that operate online and occupy out-of-town warehouses should pay a larger amount of business rates, and such reforms have been nicknamed an “Amazon tax”. But the Bill does not achieve that on its own terms. We know that thousands of large shops will be caught by this threshold, and we cannot support a Bill that risks a decimation of our already struggling high streets across the country simply because the Government have failed to do their homework and have got their numbers wrong.

We will be probing the Government’s proposed threshold as the Bill progresses. It is the job of Ministers to get this right, and we will be listening carefully to the Government’s responses to this challenge. The Labour manifesto committed to reforming the business rates system and to

“level the playing field between the high street and the online giants”,

so why does the Bill not do that? The arbitrary threshold set by the Bill will damage many high-street businesses and, coupled with the reduction of retail, hospitality and leisure relief, will not fulfil the Government’s claims that they intend to reduce how much in business rates these businesses actually pay.

Again, the Explanatory Notes reference the higher multiplier as applying to

“distribution warehouses … used by online giants”,

but simply including a cut-off of £500,000, while it will tax online giants, will not protect other businesses. Although the majority of the businesses with a rateable value over £500,000 may be warehouses, not all of them are. Through a failure to target the policy effectively, the Bill is likely to have unintended consequences that will have a ripple effect on other businesses on our high streets.

It is important to look at this Bill in the context of the wider decisions that this Government have made that force businesses to have higher costs. The Government have increased the minimum wage, which we support, and they have increased the employer national insurance contributions—a hidden tax, a job tax, that will hit the retail sector with a bill of £2.3 billion a year. Although this Bill alone may not cripple businesses, when considered with the other taxes that the Government have imposed on businesses, it very well could be the thing that forces businesses to close on high streets up and down the country.

I thank the noble Lord, Lord Fox, who has provided a good contribution to this debate, and I hope that the Minister will consider the concerns that we have both raised.

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Lord Khan of Burnley) (Lab)]

My Lords, let me start by expressing my gratitude for the kind words from the noble Lord, Lord Fox, in relation to my not being present for the Second Reading because of the tragic loss of my mother, and I extend my gratitude to everyone in the House. I had a good look at the Second Reading, and I appreciate all the tributes that were made during this difficult time of my life.

It has been a lively start to this afternoon’s proceedings, but I thank the noble Lord, Lord Fox, and the noble Baroness, Lady Pinnock, for tabling Amendment 1. It will be appropriate alongside this amendment to consider whether Clause 1 should stand part of the Bill. I understand that there is concern that the Bill before us does not deliver on the Government’s stated intentions. I am grateful for the contributions of the noble Lord, Lord Fox, and the noble Baroness, Lady Scott, but I must disagree with their position.

The Bill delivers on the Government’s commitment, as announced at the Autumn Budget, to introduce from 2026-27 permanently lower tax rates for retail, hospitality and leisure properties and, as also announced at the Autumn Budget, the introduction of a higher tax rate on the most valuable properties—those with a rateable value of £500,000 and above—to fund that permanent tax cut sustainably. Clauses 1 to 4 of the Bill enable this.

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[Lord Fox (LD)]

The noble Earl alluded to a balloon being squeezed; we should remind ourselves that this is an expanding balloon. The costs faced by local authorities, of which a huge proportion—well over 50% and approaching 80% in some areas—is adult social care, are a rapidly expanding balloon that we are seeking to get our hands around and fill. This has enormous ramifications for not just high streets but the other services that local authorities are required and able to deliver on the budgets they get from rates and central government.

[Baroness Scott of Bybrook (Con)]

My Lords, I will speak to all the amendments in the name of the noble Lord, Lord Thurlow. I understand that he may be concerned by the lack of transparency surrounding the higher multipliers. We share this concern. We need to hear more detail from the Government. They are wrong to seek legislative powers to implement the higher multipliers without giving Parliament—and, more importantly, businesses—any clarity on what they are likely to be. We do not have an estimate of the revenue from the new multipliers. This is clearly not a satisfactory situation.

In principle, we are open to and understand the big concerns surrounding online giants, but more details are needed on this Bill, which we do not believe meets the policy aims. The principle of higher multipliers for certain ratepayers is a sensible idea when done well, so I cannot support the noble Lord’s Amendments 2 and 4. This Bill does not do it well with its arbitrary £500,000 threshold, but the principle of a higher multiplier for businesses that tend to pay less of other taxes can benefit small independent shops.

I cannot support the noble Lord’s Amendment 45—although I understand the sentiment—because, in the way the Bill is structured, high street businesses will be supporting other high street businesses through the higher multiplier. This is not sufficient reform. If we are to engage with the Bill on its own terms and seek to make it effective, the threshold will need changing the most. If the online giants were to pay a larger proportion of tax to enable a tax reduction for high street businesses, I would be inclined to support the Bill.

Before I finish, I thank both the noble Lord, Lord Thurlow, and the noble Earl, Lord Lytton, because, when you hear them talking, you will understand this sector of our economy. They understand what businesses know and think. The noble Lord, Lord Thurlow, is right to say that there should have been a much more in-depth consultation with all types of businesses, but it is difficult to do that when you do not know the effects on those businesses then or cannot give any indication whatever of that.

I also thank the noble Baroness, Lady Pinnock, because I have heard her stories of online giants in Yorkshire. I was pleased when I saw this coming, as perhaps the Government were going to deal with that issue for her. Sadly, I think they are dealing with part of it while, at the same time, putting our high streets in danger.

I am sorry that I disagree with the noble Lord that the Treasury should fund this reduction, but these are important points that the Government should consider carefully and answer fully. I hope the Minister will respond with much more clarity than so far.

[Lord Khan of Burnley (Lab)]

My Lords, I will address Amendments 2, 4 and 45 from the noble Lord, Lord Thurlow, which concern provisions relating to the new higher multiplier and the funding of the new lower multipliers.

At the Autumn Budget 2024, the Chancellor set out a Budget to fix the foundations—a Budget that took the difficult but necessary decisions on tax, spending and welfare to repair public finances, to increase investment in public services and the economy, to rebuild Britain and to unlock long-term growth. Part of that agenda included transformation of the non-domestic rating or business rates system, including delivering on the Government’s manifesto pledge to support the high street.

Support for the high street is an area on which I know that the noble Lord, Lord Thurlow, and others in this House have spoken passionately in prior debates on business rates legislation. I appreciate the depth of knowledge and experience that both he and the noble Earl, Lord Lytton, bring to these debates.

The Government have made clear that supporting the high streets is a priority. They are a focal point of economic activity and a point of local pride, and they can often reflect the unique character of a community. Yet, as they are property-intensive sectors, the Government are aware that they shoulder a significant business rates burden. Since the Covid-19 pandemic, a one-year relief has been repeatedly rolled over for retail, hospitality and leisure properties as a temporary stopgap. However, this has meant uncertainty for businesses about their business rates bills from one year to the next, and it has created a significant fiscal pressure for the Government.

The Bill will enable the Government to provide a permanent tax cut for qualifying retail, hospitality and leisure properties and, in doing so, better ensure the ongoing vibrancy of high streets up and down the country. However, against the challenging fiscal position that the Government inherited, we have been clear that we must take difficult choices to ensure that this support is delivered in a sustainable way. I repeat: the system should work in a sustainable way.

Specifically, this is why, at the Autumn Budget 2024, the Government announced our intention to introduce a higher tax rate on the most valuable properties. The amendments proposed by the noble Lord, Lord Thurlow, go to the heart of this element of the Bill. They serve to prevent the Government funding the support that the noble Lord would agree is critical for the high street from within the business rates system.

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[The Deputy Chairman of Committees (Lord Geddes) (Con)]

Amendment 3 leads a substantive group. I suggest that the Opposition might want to move it.

[Baroness Scott of Bybrook (Con)]

It is not me.

[Lord Jamieson (Con)]

May I deputise? Before I do, I declare my interest as a councillor in Central Bedfordshire. In moving Amendment 3, I shall speak to Amendments 18, 37 and 43 in the name of my noble friend Lady Scott, and in favour of Amendment 32 in the name of the noble Lord, Lord Thurlow.

Amendment 3 seeks to introduce discretion for billing authorities in the application of the higher multiplier. The other amendments in the name of my noble friend Lady Scott—Amendments 18, 37 and 43—question whether the Treasury is the right authority to define these hereditaments. The purpose of these amendments is to seek the Government’s reaction to the proposal that local authorities should have a role in deciding which businesses pay the newer, higher multiplier. Local authorities are in a unique position to comprehensively understand the challenges and circumstances faced by their local businesses, which a centralised body certainly is not.

For all its strengths, we know that His Majesty’s Treasury does not have the local knowledge and in-depth understanding of the needs of individual high streets to make informed decisions on business rates that work in the best interests of the local areas. Local authorities are on the ground and are intimately familiar with the economic, social and cultural landscape of their high streets and areas. From my own experience in Central Bedfordshire, I know the positive impact that a well-run local authority can deliver for its high streets. We are interested to hear how the Government seek to empower councils in these areas. We have heard a great deal from the party opposite about the value of devolution; this is a good example of where the Government should put these sentiments into action. The amendments in the name of my noble friend Lady Scott look to empower local authorities to tailor policy to best suit their local area’s specific needs.

Fundamentally, policy is about not only implementing rules but creating a framework that works in practice. Therefore, it is essential, even if the Government are unable to accept the amendments in this group, that local authorities are consulted properly before the Bill is passed. Can the Minister set out the consultation process undertaken to date and confirm for the Committee the further steps that his department will take to consult local authority leaders on these changes? Can he also update the Committee on how this change to our business rates system will interact with the Government’s wider plans to reorganise local authorities? We know that the environments in which businesses operate vary dramatically throughout the UK. However, this issue is neglected in the drafting of this legislation.

It is concerning that the broad applications of the definitions of hereditaments, which will be determined by the Treasury, will not address these regional disparities and enable a focus on what works locally. When created by the Treasury, definitions are designed with an overarching and national perspective and may risk creating unintended consequences for local businesses. They do not account for the nuances of local businesses, which are well understood by local authorities, so we must be cautious about adopting a one-size-fits-all approach when introducing legislation that will undoubtedly have significant implications for local businesses. The Government risk implementing blanket definitions that are disconnected from the realities faced locally.

Finally, I turn to Amendment 32 in the name of the noble Lord, Lord Thurlow, which seeks to remove the power of the Treasury to define a retail, hospitality and leisure property; this addresses the fact that it is local authorities who decide what constitutes a retail, hospitality and leisure relief property, in line with the government guidance. In tabling this amendment, the noble Lord appears to have many of the same concerns as those expressed in my noble friend Lady Scott’s amendments. I look forward to hearing his speech. We did not discuss this matter before Committee so I was pleased to see on the Marshalled List that I have a friend on this issue on the Cross Benches; I thank and offer my support to the noble Lord, Lord Thurlow, and hope that we can work together constructively after Committee.

To conclude, I hope that all noble Lords will listen carefully to the concerns raised in this group of amendments. I look to the Minister to engage proactively with the issues addressed in this amendment. I beg to move.

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[Baroness Pinnock (LD)]

My Lords, I have tabled Amendments 7 and 24 in this group and have added my name to Amendments 14, 31 and 41 in the name of my noble friend Lord Fox. I have also added my name in support of Amendments 5 and 22 in the name of the noble Earl, Lord Lytton, to which he has just spoken. This is an important group of amendments because it seeks to expose the problem that the Government have in applying a higher multiplier to some businesses without targeting them, as we heard on an earlier group this afternoon.

Searching through the Valuation Office Agency’s information reveals, for instance, that about 60 civic centres or town halls, and 80 police headquarters or very large city centre police stations, are included in this higher rate. If the top end of the higher multiplier is applied to these properties, that will add 20% to the business rates bills of those local authorities or police authorities, at a time when both have severe problems with their finances and are struggling to make ends meet.

It is not just police headquarters, police stations and town halls: 80 courts, from the Supreme Court at one end to large magistrates’ courts at the other, are included in the rateable values assessed as being above £500,000—this is in the information that the Minister shared with us at the weekend—as, indeed, are 80 prisons. I am not quite sure why the Government are including town halls, civic centres, police HQs, courts, prisons and 630 schools in the higher multiplier. Why would any Government want to impose 20% higher costs, potentially, for business rates on those publicly funded essential institutions? I am sure the Minister will have a reply; whether it is one I will accept is a different matter. It gets worse: 300 further education colleges are included in this.

We just had a skills Bill passed through this House, which purported to increase the advantages of a skills agenda for young people. Most of us know that FE colleges have been consistently undervalued and underfinanced over the last 10 to 14 years—or even more. Adding this to the list of their problems will not help the skills agenda, nor will 360 state schools. Why on earth would you include state schools in this catch-all of the higher multiplier? Within the budgets and funding for state schools there is an element to cover their non-domestic rates costs. Whether that will be increased for those who are caught up in this higher valuation remains to be seen. I am just quoting from the information that the noble Lord shared.

On top of that, 310 universities are caught up. As I declared earlier, I am a vice-chair of the University of Huddersfield. I know how hard the changes that the previous Government made have hit university funding. Across the country, universities are having to close departments—often those that are vital for the future growth agenda that the Government are following. I need to hear from the Minister how the Government will address this non-targeted way of having the higher multiplier. Will all those state-funded institutions that I listed—local government, police, prisons, courts, schools and FE colleges—be compensated for the potential higher rate multiplier and therefore the 20% increase in their business rates? Universities function as businesses now and have very little income that comes directly from government, but they are facing very challenging financial futures, which is absolutely contrary to what the Government want to achieve from their emphasis on R&D. That cannot happen if universities struggle to make ends meet.

The challenge the Government have is to ensure that the changes result in the same income from NDR as previously. Between 30% and 40% of local government funding now comes from business rate income. As well as my earlier questions, can the Minister assure this Committee that local government will have the same total funding pot from business rates as it does now and—because of the way the system works—that no local authority will suffer a loss in income from business rates as a result of these changes? I will not go into the way it works for local government. The Minister will understand that assuring the total funding pot of business rates does not necessarily mean that each local authority will continue to have the same level of funding.

The question is whether the Minister can assure us that schools, colleges and so on—all those publicly funded institutions that may have to pay considerably higher costs in business rates—will have compensatory funding from the Treasury to meet those additional costs. Otherwise, they are giving with one hand and taking away with the other.

I am going to leave my noble friend to talk about the importance of music venues. The noble Earl, Lord Lytton, knows that I support both the amendments he has tabled, to which I have added my name, and I do not wish to add anything further to what he said. I am looking forward to the Minister’s answers to my questions .

[Baroness Scott of Bybrook (Con)]

My Lords, I rise to speak to my Amendments 12, 15, 29 and 33 and, in doing so, I apologise to the Committee that I omitted to declare my interest as a vice-president of the LGA. I keep forgetting it. My amendments seek to exempt manufacturing businesses from the higher multiplier.

The manufacturing industry is exceptionally important to the British economy, and to place an additional financial burden on this sector is unsatisfactory. In 2023, the total value of UK manufacturers’ product sales was £456 billion, which demonstrates the value of the sector to the UK economy. The sector accounts for 8.1% of UK employment and, in July to September 2024, accounted for 8.8% of the total UK economic output. Ministers never tire of telling us that growth is this Government’s number one mission, so can the Minister give the Committee a cast-iron guarantee that the Bill will not have a negative impact on the growth of our UK manufacturing sector?

Recently, the global political situation demonstrated the importance of being self-reliant with the rise in energy prices we have seen in the wake of Putin’s illegal war in Ukraine. My amendments seek to protect this vital sector, which has an important role to play in growing the UK economy, by allowing manufacturing hereditaments to qualify for the lower multiplier. This Bill, despite promising business rates reform, will put an arbitrary threshold in place and many businesses will be adversely affected. We will listen carefully to the Minister’s response to this group. Given that the manufacturing sector is likely to be included in this bracket, I would be grateful if the Minister would take this opportunity to outline exactly what impact his department expects the changes to business rates will have on the UK manufacturing sector.

This sector is already facing higher costs due to the increase in the cost of labour, and the Government are hitting it with a triple whammy of increasing costs with the increase in the minimum wage, which of course we support, and the increase in employer national insurance contributions, which is a damaging jobs tax. The House will have the opportunity to debate the national insurance measures tomorrow, and we will be speaking up for the number of sectors that will be devastated by this government policy. But why would these businesses invest to increase the value of their business and risk it going over £500,000? Labour-intensive sectors are already paying the cost of a Labour Government, and if businesses are forced to pay the higher multiplier suggested in this Bill that will only worsen their predicament.

Amendments 5 and 22, in the name of the noble Earl, Lord Lytton, seek to exempt retail, hospitality and leisure businesses from the higher multiplier. They are sensible amendments, and several of my amendments touch on very similar issues. I have referred in my amendments to specific types of stores on our high street, which are yet to be debated, but the sentiment of the noble Earl’s amendments is certainly one that I support.

Amendments 14, 31 and 41 are in the name of the noble Baroness, Lady Fox, who I do not see in her seat.

[Lord Fox (LD)]

They are not from the noble Baroness, Lady Fox. They are in my name.

[Baroness Scott of Bybrook (Con)]

Once again today, I apologise to the noble Lord.

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[Lord Fox (LD)]

For the Committee’s information, there is a misprint. It should have read “grassroots music venues and larger venues”. If I had spoken before the noble Baroness, I would have explained. The Royal Albert Hall is clearly not a grass-roots venue.

[Baroness Scott of Bybrook (Con)]

That confused me, but I thank the noble Lord.

Amendments 7, 13, 19, 24, 30 and 38 all seek a similar thing: to allow the Treasury the power to exempt other hereditaments from the higher multiplier as it sees fit. While I understand the desire to introduce flexibility into a Bill that does not seem to have been fully thought through, it is important that we empower local authorities rather than afford the Treasury further powers. I look forward to the Minister’s response.

[Lord Fox (LD)]

I will speak for myself rather than the noble Baroness. What we have seen in the various themes in this group is the malign effect of a blunt instrument. My noble friend Lady Pinnock raised the important issue of public sector buildings that fall into the trap of high value and therefore the higher multiplier. Clearly, we need to understand the overall financial effects on those organisations. The noble Baroness, Lady Scott, spoke well about manufacturing. We tabled the same amendments in the Commons, where one of the implications of what the Government said was that manufacturing does not have to be in a town centre, on the basis that there is somehow an ability to up sticks and go without huge capital implications and lots of other things.

If we are talking about a mixed economy in town centres, things such as light engineering and printers, as well as other businesses such as accountants, design agencies and all sorts of things, add to their plurality and success. When you remove from a town centre the people who work or live there, you remove a huge proportion of the trade that the sector that the Government are seeking to boost relies on. Not everybody has to come in a car to buy a sandwich from a shop. They might work or live there. That is an important part of trade that this Bill seems to ignore.

I turn to my Amendments 14, 31 and 41. I was going to clarify at the beginning that the explanatory statement should have read that they are to probe the impact of the higher multiplier on large venues and, for other elements of the Bill, on grass-roots venues. There were two issues, and I somehow managed to conflate them into a mess.

I spoke earlier about unintended consequences. This Bill has lots of potential unintended consequences. The Music Venue Trust calculates that just the move from 75% to 40% business tax relief from April 2025 will create a demand for £70 million more in additional premises tax from the GMV sector, as I am going to call grass-roots music venues, that in 2024 returned an entire gross profit across all 810 venues of just £25 million. In other words, the sector will be asked for well over twice—nearly three times, in fact—what it made in profit last year. Some 43% of grass-roots music venues in the UK made a loss in 2024 and, in 2025, they continue to operate an overall profit margin of just 0.5%. This is a very marginal activity. I believe that, given the tone of the Budget and the commitment to consider the culture area of our economy in the spending review, this must have been an unintended consequence or an omission of protection, rather than an intended tax rise. I look to the Minister to confirm this.

As an aside, GMVs have specific space issues in their business characteristics that are not recognised properly in the general rateable value process. That is a separate issue with which a review would, I hope, deal.

I return to the consequences of this Bill. There are two areas. The first is an option for the Government to create multipliers that are designed specifically to encourage activity we wish to see. This goes back to the flexibility point that other noble Lords mentioned. For example, specific multipliers for cultural spaces would go a long way to support creative growth and the regeneration of our high streets, both of which are key elements in the Government’s wider agency, but there is an immediate, separate issue facing cultural spaces that operate in properties over the rateable value threshold of £500,000.

Just like schools and universities, there are big venues around the country, such as the Royal Albert Hall, the Underworld, the Roundhouse and the Royal Festival Hall—there are others, I am sure, but not a huge number—that fall above the £500,000 threshold. For those businesses, there needs to be some differentiation according to their activity. I come back to what my noble friend said about universities. Why are we including them in this measure? Why are we including police stations? Also, why are we including large-scale cultural icons? The idea of flexibility will help with other issues, about which the noble Baroness, Lady Scott, and my noble friend will talk in our debate on a future group of amendments. Without that flexibility, what we have is a blunt instrument, as I have said before.

I come back to music venues: we believe that these venues will be penalised unless something is done. Can the Minister respond to either this debate or some consultation with experts so that we can make sure that that does not happen? Grass-roots music venues are the R&D of our music industry. They are where almost every band starts. Bands start in their bedrooms, they then move to the streets, and then get to a grass-roots music venue. They may end up in the Royal Albert Hall, on television or whatever, but GMVs are where our music industry comes from. That ecosystem also supports wider nightlife and hospitality businesses in the UK, including pubs, food businesses, takeaways, taxis and nightclubs, all of which have physical premises in the community.

There are two issues here. One is the removal or reduction of relief for grass-roots music venues across the country, which will, on average, put them out of profit and into loss. The second is the application of the higher multiple on particularly large venues around this country. I do not think that the Government intended to deliver either of these outcomes for our music industry, but they must intend to improve and change the system in order for these catastrophic issues not to happen. So I hope that the Minister, either now or with consultation, can come back with two different solutions for these two sides of a very important industry.

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[Lord Fox (LD)]

I apologise.

[Baroness Scott of Bybrook (Con)]

Will the extra burdens on local authority budgets that might come be funded by the new burdens policy?

[Lord Khan of Burnley (Lab)]

Yes, that is right.

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Moved by

[Baroness Scott of Bybrook]

8: Clause 3, page 3, line 27, after “more,” insert “and is not a retail premises which is open to customers for more than 18 hours a day,”
Member's explanatory statement
This amendment, along with another in the name of Baroness Scott of Bybrook, seeks to exempt businesses that open for longer than 18 hours a day because they are often the only retailer in the local area.

[Baroness Scott of Bybrook (Con)]

My Lords, in moving Amendment 8 I will also speak to the rest of the amendments in this group. They focus on protecting the essential services that are provided up and down the high street.

Amendments 8 and 25 in my name seek to exempt community shops that are open for more than 18 hours a day. Within local communities, there is often a shop that is open for longer hours than general retail premises. Often, this can be a garage forecourt which is open 24 hours and has essential things for people working in the night-time economy, who may be on a different clock to us. These shops provide essential services for those living in that surrounding community. Without them, there may be fewer customers on that high street, which we believe would begin to damage the surrounding shops and businesses. People often rely on these stores with longer opening hours, so exempting them from the higher multiplier would ensure that they can continue to provide a vital service to local people.

My Amendments 9 and 26 seek to exempt hereditaments that have a post office on the premises from qualifying for the higher multiplier. A post office does not make the same level of profit as the shop, but it provides essential services that many people rely on. Does the Minister agree that it would be unacceptable for shops providing these services to close because they are inappropriately hit by the higher multiplier?

Amendments 10, 17, 27 and 35 seek to exempt premises shared with banking hubs. Less than two weeks ago, many in this House discussed the importance of banking hubs in a debate on bank closures and the particular impact on rural communities. The shift to online banking inevitably brings to light issues of accessibility. While digital banking services are convenient for many, they are inaccessible to others, particularly those living in rural areas. The elderly and the disabled are often significantly impacted by the lack of physical banking services. Age UK has found that over 4 million over-65s in the United Kingdom with a bank account did not manage their money online, placing them at a high risk of financial exclusion. Bank closures have also been found to negatively affect those with disabilities, with a Which? survey concluding that 50% of respondents would be negatively impacted by not having access to a physical service.

The previous Conservative Government recognised the detrimental impact of bank closures on groups in our society and collaborated with the banking industry to establish shared banking hubs. Operated by both the Post Office and banks, these hubs offer essential banking services, including cash withdrawals, deposits and in-person consultations. We must continue to look to mitigate cases of financial exclusion, and I draw noble Lords’ attention to my Amendment 26.

This group of amendments deals with a matter of utmost importance for millions of people across the UK who rely on these essential services. I therefore encourage the Minister to listen carefully to the concerns raised in the debate.

[Lord Fox (LD)]

My Lords, this is another example of the blunt instrument in operation. We have talked about increasing tax on public services, some of which have the ability to recover the money via new burdens, while some do not. But these services are offered by private sector organisations, and we know for a fact that they will not get recompense from the Government for this, which will increase their costs, reduce their profit and may eliminate their viability altogether. When post offices and Crown offices are retreating from the high street, this is not a good time for those businesses.

In a moment we will talk about flagship operations. I put it to noble Lords that banks and post offices are flagship operations. People travel to towns to visit a post office and banks, and then they spend their money on other things, so by denuding or putting in peril those sorts of operations, we are removing the attraction of town centres. We are making sure that they do worse rather than better. That is the first point.

Secondly, I have a relative who owns a shop in a country town—I do not have an interest in that shop—and one of their biggest difficulties is banking their money. They have to drive 20 miles twice a week to take bags of money to bank it because there is no longer a bank. The removal of a banking hub would make that even harder. It also drives shops to go fully digital, which means that people who do not want to use digital and want to keep using cash are no longer facilitated by those businesses. I have seen businesses that can no longer handle cash simply because they no longer have the necessary banking facilities.

Once again, we are looking at the RHL sector, but these businesses serve the RHL sector and make their lives operational. I am happy to support the various amendments in this group in the name of the noble Baroness, Lady Scott, and I look forward to the Minister explaining how taxing post offices and banking hubs will help the RHL sector in our town centres and high streets.

[Lord Khan of Burnley (Lab)]

My Lords, in her contribution, the noble Baroness, Lady Scott, said that she hoped the Minister listens very carefully. Just to reassure her, I always listen very carefully and with great interest to everything that the noble Baroness says, as is the case for all noble Lords in this debate.

Six of these eight amendments seek to change the Bill to remove certain high street services from the higher multiplier. In the previous debates on the amendments in groups 4 and 5, I explained why the Government have taken a sector-agnostic approach to the higher multiplier and have not excluded any sector or type of property. The same considerations apply here and I will not repeat them.

As regard detail, it is worth being clear what type of retail properties on the current rating list would be caught in the higher multiplier. The Valuation Office Agency’s published data shows that, of the subsector of shops that are at or above the £500,000 threshold, 72% are supermarkets, large food stores or retail warehouses. That leaves only 900 other shops at or above £500,000 across England, and of these 630 are in London and the south-east. For most regions, the number of shops affected, excluding supermarkets, large food stores and retail warehouses is fewer than 50. These numbers are rounded to the nearest 10.

In particular, the noble Baroness, Lady Scott, mentioned petrol stations, and amendments would support petrol stations but, in reality, from the Valuation Office Agency’s data, the number of petrol stations above the higher multiplier threshold of £500,000 is fewer than five.

The danger with these carve-outs from the higher multiplier is that the benefit could, in part, flow to large businesses in thriving and valuable locations, reducing the ability for us to support smaller businesses and less valuable locations through the lower multiplier. We understand the importance of facilities such as post offices or banking hubs for local communities. The average post office has a rateable value of only £16,000, so we do not anticipate that the higher multiplier will apply to very many premises used by post offices, and post offices are eligible for the existing retail, hospitality and leisure relief.

We understand that Amendments 17 and 35 seek to add to the lower multiplier hereditaments that host banking hubs. In the debate we have just had on group 4, I explained why we feel it necessary to target the lower multiplier on RHL. These amendments could easily widen the lower multiplier to other settings and introduce a loophole to the Bill. I assure the Committee that the Government will continue to work closely with high street banks to ensure that communities and local businesses have access to the banking services they need. I hope the Committee is assured that the Government remain committed to banking hubs. With these facts and assurances, I hope that the noble Baroness, Lady Scott of Bybrook, will withdraw her amendment.

[Baroness Scott of Bybrook (Con)]

My Lords, I thank all noble Lords who have supported these amendments. This group has dealt with high street services, in particular, post offices and banking hubs. While it goes unnoticed, a post office remains an essential street service, as we heard from the noble Lord, Lord Thurlow. Its use extends well beyond a mail service, and for many, particularly those without internet access, it plays a critical role in ensuring that individuals can pay their bills, collect their pension or access other financial services that a bank would traditionally offer. Indeed, they are the backbone of many of our British high streets, notably those in rural areas. As we enter a digital age, physical banking services offered by bank branches are incredibly hard to come by. When branches close, the impact extends far beyond just customers. It impacts on the whole local economy, as we heard from the noble Lord, Lord Fox, and the noble Baroness, Lady Pinnock.

Many small retailers—farmers and other independent traders—continue to rely on cash transactions. When a bank closes, cash withdrawals become harder, credit becomes less accessible and many face greater financial insecurity. In fact, bank closures may be yet another a blow to small businesses, with the Federation of Small Businesses warning that they could result in reduced

“ability to manage cash flow and productivity”.

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Moved by

[Baroness Scott of Bybrook]

11: Clause 3, page 3, line 27, after “more,” insert “and is not an “anchor store”,”
Member's explanatory statement
This amendment, along with others in the name of Baroness Scott of Bybrook, seeks to exempt anchor stores because they drive business on the high street.

[Baroness Scott of Bybrook (Con)]

My Lords, I rise to speak to Amendments 11, 28 and 36 in my name, which seek to exempt anchor stores from the scope of the proposed changes in the Bill. These amendments are crucial for safeguarding the health and vitality of our high streets particularly in the context of the ongoing challenges facing retailers and small businesses. I thank all noble Lords who, throughout this debate, have acknowledged the importance of these businesses.

As we are aware, anchor stores play a vital role in the commercial ecosystem of any high street. They act as a significant draw for foot traffic, attracting customers not only to their own establishments but to the surrounding smaller retailers and businesses. It is no exaggeration to say that, without anchor stores, many high streets would be devastated. They are the backbone that supports the smaller independent shops that contribute to the unique character of our local economies.

However, while the higher threshold for non-domestic rates is a well-intentioned measure to ensure that out-of-town warehouses and large-scale online retailers contribute their fair share, we must pause and consider the unintended consequences of this approach. The so-called Amazon tax may be designed with online giants in mind, but the current proposals would also capture larger businesses operating on our high streets—businesses that, in many cases, are anchor stores.

It is a very real concern that these stores become subject to increased rates. They may choose to relocate to out-of-town retail parks where rates are more favourable. This would exacerbate the very problem we are seeking to address—the decline of our high streets and the hollowing out of our town centres. We must ask ourselves what the impact would be on our communities if these anchor stores, which currently act as magnets for footfall, were to disappear from our high streets. Would we see a chain reaction where smaller businesses, already struggling under the pressure of rising costs and changing consumer habits, are left without customers and forced to close? How many small businesses would be driven to the brink if the larger retailers that currently support them were to move away, taking their foot traffic with them? These questions are not just theoretical; they are deeply practical and must be considered carefully if we are to protect the future of our high streets.

Amendments 11, 28 and 36 seek to exempt anchor stores from the broader measures in the Bill and offer a way forward that ensures that we do not punish those businesses that are essential for the economic vibrancies of our town centres. They are about striking the right balance. We must ensure that we support businesses that are critical to the future of our high streets and town centres. Exempting anchor stores from this measure would help to achieve this balance. I ask the Minister to consider whether the current proposals risk harming the very high streets that we all seek to protect. We cannot afford unintentionally to undermine the businesses that are central to our local economies. Exempting anchor stores is a sensible, practical step to ensure the long-term health of our high streets, and I urge the Government truly to reflect on this before moving forward. I beg to move.

[Baroness Pinnock (LD)]

My Lords, I thank the noble Baroness, Lady Scott of Bybrook, for this group of amendments which seeks to exempt so-called anchor stores from high streets.

We could do with a definition of an anchor store and, indeed, of a high street, but we will come to that in a later group. High streets vary enormously from small town high streets and market town high streets to larger town centres and city centres. When there is a new retail development in a town or city centre, the phrase “anchor store” often comes into play. It is very clear in the business sector that retail works better if there is one major store, which is a sun around which the satellites of smaller shops and businesses operate. This is the description that the noble Baroness, Lady Scott, provided. However, that is just for a group of retail businesses, often in a new situation—such as an out-of-town retail park, a new retail development within a larger town centre or an existing large business in a town centre, for example a Marks & Spencer or a John Lewis store that has a multitude of operations within it. That enables other businesses to exist and thrive from the footfall that the big name store attracts.

I agree with the noble Baroness, Lady Scott, about the importance of these so-called anchor stores, although I would like to see whether the Government have a definition that can be applied. I agree with her argument that smaller businesses develop and thrive as a result of the draw of a so-called anchor store and, equally, the argument that she makes that, because anchor stores are critical to the business environment for the totality of large, medium and small businesses—retail, leisure, hospitality or otherwise, within the sector—it is important to think about whether those often large retail businesses are exempt from the higher multiplier.

I am thinking of a local town high street where the Marks & Spencer closed and moved out some years ago. It was absolutely clear that that was the focus of shoppers going to that town. Once it went, it caused the closure of a whole section of shops in that town and very difficult situation for the businesses that were left. The town will require government money for regeneration to get back on its feet. That is what happens.

So it is important that the Government, in thinking about the Bill and the impact it will have on businesses, think about the consequences of what they are doing. In a previous group, I raised the consequences for public sector-funded businesses, but this is as important for the future health of our town centres. If you take out the key store around which others, like satellites, are drawn because its business sums no longer add up, the whole area will be on a downward spiral.

I will give the Committee an example from some figures that I remember, so they may be wrong. Take John Lewis, which is a big store. It knows that much of its business will move online. I think its business plan expects 60% of its business to move online. If we put an additional cost, as would happen under the large multiplier, on the remaining 40% of its business, I expect that one of the consequences would be that a greater proportion would move out of the high street to online to reduce those costs. That is not what this Government want to happen. They have argued for the importance of the health of our town centres for all sorts of reasons, not just to support small businesses but to support the community which goes there to meet and so on.

It is important that the Government think about the unintended consequences of this rough and ready Bill because it will potentially have very rough consequences on our high streets, particularly those which depend on a big store as the holder of the rest of the businesses around it. I look forward to what the Minister says, but I hope that he does not use “tough choices” and “fair and sustainable”.

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[Lord Khan of Burnley (Lab)]

My Lords, these amendments seek to change the Bill to remove anchor stores from the higher multiplier. I apologise for being repetitive, but as I explained in the debates on the previous three groups of amendments, we have taken a sector-agnostic approach to the higher multiplier and not excluded any sector or type of property. This is the fairest option.

We have also ensured that the Valuation Office Agency has published data on those properties currently falling within the threshold for the higher multiplier. This shows that the impact on high street shops is very limited. I will not repeat those numbers at this time but encourage noble Lords to look at that information.

Alongside noble Lords, we of course appreciate the role anchor stores can play in the high street, but it should be acknowledged that anchor stores are often part of large retail chains that will also have a number of properties with a rateable value of below £500,000. Where retail properties’ rateable value is below £500,000, they will benefit from the lower tax rates for qualifying retail, hospitality and leisure from April 2026.

The amendment would also be difficult to operationalise and would require the Government to define the meaning of an anchor store. It would be very difficult to define these stores in the way that the noble Baroness is thinking. There are anchor stores in almost every out-of-town shopping centre and retail park, and what is an anchor store beyond a large shop?

While I understand the concerns of the noble Baroness, I do not think it follows that we should exempt anchor stores from the higher multiplier, nor do I think that this can easily be done without, in effect, removing all shops. Some very difficult decisions have been made, and we need to ensure that the system is long-standing and continues in a fair manner. I hope, therefore, that the noble Baroness, Lady Scott of Bybrook, will withdraw the amendment.

[Baroness Scott of Bybrook (Con)]

My Lords, I thank the noble Baroness, Lady Pinnock, the noble Lord, Lord Thurlow, and all others who have mentioned this issue throughout the afternoon. There is an important role for anchor stores. To the definition, with the greatest respect to the noble Lord, I suggest that they should ask communities and their residents what would be an anchor store in their local town centre and ask the sector to discuss that as well. As a former leader of a council for many years, and knowing many council leaders, as I do, I know that they know exactly what an anchor store at any one time would be for the size and type of the high street they are trying not only to protect but to keep being a high street for any length of time. Many leaders of councils across this country have spent many hours working with the sector to get exactly that in order to make sure that they have a good thriving and surviving high street for their local communities.

As we have said, we all agree that these stores play a crucial role in the vitality of high streets and town centres. We know that they drive footfall, support local businesses and contribute significantly to the economic and social fabric of our communities. That is why it is important that we find a definition and a way through this. Without them, many of our high streets will struggle to survive, let alone thrive. I have spoken to the sector, and these businesses will leave the high street and go out of town where it is cheaper. Not only that, but they may even go out of business and, as we are seeing, go permanently online. That will not help our high streets.

As I have said, the changes in the Bill could inadvertently harm these vital businesses and place an undue burden on them, pushing them out of our high streets. The Bill follows several other damaging decisions that businesses are having to fund. This one at the end of it could be the straw that breaks the camel’s back. Not only will it likely leave anchor stores paying higher business rates; they will also be paying increased staff costs, as we talked about earlier.

These decisions will have a cost, and if the Government continue to make them, we are worried that there will be no businesses left in the high street to tax. I urge the Minister to carefully consider the concerns raised by many noble Lords today. We just want a fair and equitable business rates system—

[Baroness Pinnock (LD)]

“Fair and sustainable”.

[Baroness Scott of Bybrook (Con)]

And equitable. We must not overlook the specific need, as we have all said—across parties—to protect our high streets for our communities for the future. We believe that exempting anchor stores from these changes is a measured and practical way of safeguarding the future of our town centres. I hope to have further discussions with the Minister on this before Report but, at this point, I beg leave to withdraw my amendment.

Amendment 11 withdrawn.

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Moved by

[Baroness Scott of Bybrook]

21: Clause 3, page 3, line 37, at end insert—
“(9D) In sub-paragraph (9B) the £500,000 threshold must be increased on 1 April each year by at least the CPI.(9E) The CPI is the Consumer Price Index percentage recorded by the Office for National Statistics for September of the financial year preceding the relevant year concerned.”Member’s explanatory statement
This amendment, along with others in the name of Baroness Scott of Bybrook, seeks to increase the £500,000 threshold with inflation to ensure businesses don’t get drawn into the higher rate.

[Baroness Scott of Bybrook (Con)]

My Lords, Amendments 21, 40 and 44 in this group seek to introduce a statutory index-linked uplift in the threshold for the higher multiplier in line with inflation. These specific amendments relate to the level of the threshold in future years, so I am grateful for this opportunity to have a brief and specific debate on the threshold.

We have already probed the Government over their arbitrary threshold of £500,000, but I hope that, in response to this group, the Minister will be able to explain the Government’s current plans for uprating the threshold in future. There are no measures in the Bill to prevent more businesses being caught by this threshold over time. We are told that it is not the Government’s intention for smaller high street businesses to be hit by the higher multiplier, but inflation and a fixed threshold mean that that will be an inevitable result of this policy. I remind the Committee at this point that, thanks to the Government’s Budget measures, inflation rose by 3% in the 12 months to January 2025, up from 2.5% in the 12 months to December 2024. As the hereditament valuations rise over time, more and more businesses will be paying higher business rates.

If the Minister feels that the CPI is not the correct index to tie this threshold to, we are open to discussions about that. Our goal here is to probe the Government’s willingness to explore increases in the thresholds going forward to protect small businesses that should never have been caught by the higher multiplier threshold from facing higher taxes by the back door. Can the Minister confirm that it is not the Government’s intention for smaller businesses to be hit by these higher taxes? If the Government do not intend to hit smaller businesses with higher taxes, can the Minister give us an undertaking to look at the threshold and consider including in this Bill a measure that would deliver either an index-linked uprating of the threshold or, as a minimum, a power for Ministers to uprate the threshold without having to bring primary legislation before the House again? We are generally cautious of new regulatory powers but, provided that a power was limited to uprating and excluded the possibility of lowering the threshold, that might be a way forward. I beg to move.

[Lord Fox (LD)]

My Lords, I think this might be the last group today; I would say that we have done very well to get this far. I shall speak to these four amendments. The first three make an assumption that the £500,000 threshold was right in the first place. Of course, that is really addressed by the fourth amendment, so I am going to speak to it. It is right that there should be some form of uprating, but I am more intrigued about how the figure of £500,000 was alighted on in the first place.

If we were looking at something that was broadly financially neutral, I do not know how we would know, because we do not know how the flexible upper rate will be applied, so we do not know how much money that will raise. We therefore do not know whether £500,000 was the right number to make it financially neutral. Was it chosen for a business reason? Are businesses of that size particular sorts of business that we need to factor in, in a different way, or was there some other sociological plan involved in choosing £500,000? My big question for the Minister is who chose the number. Was it DHCLG or the Treasury?

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[Lord Khan of Burnley (Lab)]

My Lords, Amendments 21, 40 and 44 concern the rateable value threshold above which the higher multiplier may apply. This is set in the Bill at no less than £500,000, as we have heard repeatedly in contributions by noble Lords. The Bill allows the Government to set a higher threshold through regulations if they wish, but the amendments would require this threshold to be increased annually in line with CPI.

Alongside the amendments, the noble Baroness, Lady Scott of Bybrook, has given notice of her intention to oppose Clause 3 standing part of the Bill. It would therefore be appropriate at this point if I set out why Clause 3 should stand part.

The noble Baroness, Lady Scott of Bybrook, raises a reasonable question as to whether, and if so how, the £500,000 threshold should change over time and other noble Lords have also raised this point. Of course, we would expect that, over time, the value of properties and therefore their rateable values will increase as the economy grows. As these rateable values grow, the current threshold in the Bill of £500,000 will, relatively speaking, be smaller and more properties may be drawn into that category. That is the issue that the noble Baroness is probing with these amendments.

However, I do not think these amendments are the answer to that issue. First, and perhaps most importantly, rateable values will not increase annually in line with inflation or with any other measure of property value or the economy. Rateable values are set every three years at revaluations, and between those revaluations will not change other than for matters such as physical changes to the property.

The Government have set out that our intention for the 2026 rating lists is for the threshold for the higher multiplier to be set at a £500,000 rateable value. The Government consider that this will best ensure that sufficient revenue is raised to provide for a meaningful level of support for retail, hospitality and leisure properties, and will do so in an objectively equitable way.

The 2026 rating list will last for three years, and those rateable values will not increase over that period, other than if, as I have said before, the property is expanded or improved, for example. By extension, the 2029 revaluation will be the next logical moment to consider whether the £500,000 threshold remains the appropriate minimum for the new higher multiplier.

In approaching these considerations, the Government will need to examine how rateable values have changed at the revaluation but also what support is to be provided to retail, hospitality and leisure properties and, consequently, how much revenue is needed to be raised from the higher multiplier.

I hope the noble Baroness will appreciate that there are several factors the Government will need to consider and balance, beyond just the changes in rateable value. More broadly, as the noble Baroness will be aware, the Government keep all taxes under review, including rates and thresholds. As such, I can assure the Committee that in relation to the proposed amendment, the Government will, as a matter of course, actively consider whether the £500,000 threshold in the relevant regulations should be amended at the 2029 revaluation, as they approach that revaluation.

The noble Lord, Lord Fox, asked whether MHCLG or the Treasury decided. It was the Government who decided. As much as I love darts, it definitely was not a dart-throwing exercise.

I will now expand further on Clause 3 so that, I hope, noble Lords can agree that it should stand part of the Bill. We have discussed several amendments in relation to Clause 3 today, so I shall try to keep my remarks to the point and not go over previously covered ground too much.

Clause 3 is concerned with how we will determine to which hereditaments those multipliers should apply. It is split into three main parts, concerning occupied hereditaments in Clause 3(2), unoccupied hereditaments in Clause 3(3), and hereditaments on the central rating list in Clause 3(4). Properties on the central list are typically utility networks spanning many local authority areas, such as the gas, electricity and water networks. Each of these parts of Clause 3 are essentially identical, so to save the Committee from repetition, I will explain the provisions on occupied hereditaments in Clause 3(2) only.

The most important part of Clause 3(2) is the small amendment made by Clause 3(2)(a) to existing powers in the Local Government Finance Act 1988. Under those existing powers, the Treasury already has the ability to determine in regulations which multiplier applies to which property. Those powers, in respect of occupied properties, are in paragraph 10(9) and 10(10) of Schedule 4ZA to the 1988 Act. Clause 3(2)(a) amends that part of the 1988 Act to extend those powers to cover also the new additional multipliers. This means that the Treasury will be able to determine by regulations which properties pay on which multiplier.

As with Clause 1, we have included in Clause 3 safeguards as to how the Treasury may use these powers. These limit the higher multipliers to hereditaments with a rateable value of £500,000 or more and limit the lower multipliers to only qualifying retail, hospitality and leisure hereditaments.

Finally on Clause 3, the existing powers for determining the application of the multiplier allow the Treasury to do that by reference to a list of factors found in paragraph 10(10) of Schedule 4ZA to the 1988 Act. This is a non-exhaustive list that includes factors such as its rateable value, location or use. Clause 3(2)(c) expressly gives the Treasury the scope also to determine the application of the multipliers by reference to the description which the Valuation Office Agency puts in the rating list.

I hope that this further information provides the reassurance and clarity needed for the noble Baroness to withdraw her amendment and agree that Clause 3 should stand part of the Bill.

[Baroness Scott of Bybrook (Con)]

My Lords, I thank the noble Lord for speaking in this debate. He actually brought today’s debate right back to the beginning: where did the £500,000 figure come from? If we could get that from the Minister, it would be very useful for our debates as we enter Report.

The answer to whether there will be any further uplifts, is, I understand, the revaluation, which is in three years, but three years could go on. I go back to the difficulty that this makes for businesses to plan when they know they are going to hit that cliff edge of £500,000 and that their business rates are going to go up considerably. I go back to the example of my noble friend Lord Jamieson, who gave the example of the health centre that wants to build an extension, which could possibly move it across; the health centre would need to think very seriously about doing that extension, and this will happen across all investment in different types of businesses, which I think is worrying.

This is something that we could resolve together by a relatively straightforward amendment to the Bill, and I hope that the Government will do the right thing in protecting these smaller businesses from being hit with higher business rates inappropriately in the future. But, at this point, I beg leave to withdraw my amendment.

Amendment 21 withdrawn.

Holocaust Memorial Day

Baroness Scott of Bybrook Excerpts

Thursday 13th February 2025 Lords Chamber

[Baroness Scott of Bybrook (Con)]

My Lords, I thank the Minister for bringing this important debate to your Lordships’ House today. It has been my solemn duty to bring this debate to the House in previous years, and I congratulate him on his speech. I too am looking forward to hearing the maiden speeches of the noble Lords, Lord Evans of Sealand and Lord Katz, and the noble Baroness, Lady Levitt. I know the whole House will join me in welcoming them.

On Holocaust Memorial Day every year, we remember the unspeakable crimes of the Nazi regime against the Jewish people. We remember also the many political prisoners, Soviet prisoners of war, Polish, Roma, Sinti, lesbian and gay victims of the Holocaust.

It is on Holocaust Memorial Day that we remember the unique evil of the Holocaust: the killing of Jews because they were Jews, as part of the Nazis’ plan to wipe out the entire Jewish people. The history of the Holocaust is a bitter truth, and we must never shy away from repeating that truth. Auschwitz, Dachau, Bergen-Belsen, Majdanek and Treblinka are just some of the haunting names of the places where Jews were imprisoned, beaten, worked to death, tortured and exterminated—murdered because they were Jews.

Not all the names of the Nazi camps are so familiar to us. Auschwitz and Bergen-Belsen were just two of over 1,000 concentration camps operated by the Nazi regime for the mass persecution and murder of Jews and its other victims. Eighty years ago today, on 13 February 1945, Soviet forces liberated Gross-Rosen concentration camp. By 1945, there were no Jews left at Gross-Rosen because, on 2 December 1941, the head of the camp, Anton Thumann, gave the order that

“no Jew is to remain alive by Christmas”.

On 12 October 1942, the last 37 living Jewish prisoners were sent to Auschwitz.

Isaak Egon Ochshorn, a Jew who was in Gross-Rosen from June 1941 to October 1942, before being transferred to Auschwitz, gave evidence after the liberation of the camps that showed the appalling treatment of Jews at Gross-Rosen. He said:

“The sport of Commandant [Thumann], favoured in winter, was to have many Jews daily thrown alive into a pit and to have them covered with snow until they were suffocated”.


We must never forget.

In this the 80th year following so many liberations, we must also remember that liberation was not the end of the story for the victims and survivors of the Holocaust. Many Jews died early because of the harm the Nazis did to them during the Holocaust. The wounds of families that were broken by the Holocaust were felt for many years and are still felt today.

Holocaust Memorial Day was intended to be a reminder of the suffering of the Jewish people in the past, but we sadly know that Jewish people are still not free from persecution. As we heard from the Minister, since 2023 we have seen a shocking rise in anti-Jewish racism on our streets, online, and in our schools. In 2024, the Community Security Trust recorded 3,528 anti-Semitic incidents in the United Kingdom, the second-highest total ever reported to the CST in a single year, second only to the 4,296 recorded in 2023.

Anti-Semitism in this country is growing, and it is shaming that the spike in anti-Semitism we have seen over the past year has directly followed the worst massacre of Jews since the fall of the Nazi regime. When I moved this debate last year, just months after the pogrom of 7 October, I recounted the story of 91 year-old Moshe Ridler, a Holocaust survivor murdered in Kibbutz Holit, just over 1 mile from the border with Gaza. His home was hit by a rocket-propelled grenade and then by a hand grenade. To his 18 children and great-grandchildren, may his memory be a blessing.

The deaths of the 1,200 people who were murdered in the 7 October pogrom, as well as the ongoing suffering of the hostages and their loved ones, remind us that the work of organisations such as the Holocaust Memorial Day Trust and the Holocaust Educational Trust has never been more important. I put on record my thanks to the CEO of the Holocaust Educational Trust, Karen Pollock CBE, who does so much important work to ensure that our children and grandchildren are taught about the horrors of the Holocaust. I also thank the Holocaust Memorial Day Trust, its CEO, Olivia Marks-Woldman OBE, and her team, which delivers the annual Holocaust Memorial Day ceremony and thousands of local activities across the country.

Eighty years on and still the Jews across the world experience persecution, discrimination and, at worst, fear for their lives. That is the imperative of our commemoration: we must not merely ensure that the Holocaust is never forgotten; we must remember, actively reflect on and learn about the unique suffering of the Jewish people in the Holocaust. We must teach it to our children and remind our neighbours of the insidious threat of anti-Semitism. We must never forget—and we must hold to the promise, “Never again”. Only by keeping our covenant to remember may we hope to end anti-Semitism for good.

I look forward to hearing the reflections of noble Lords across the House. My thoughts and prayers are, as always, with the victims and survivors of the Holocaust and their families.

English Devolution and Local Government

Baroness Scott of Bybrook Excerpts

Wednesday 12th February 2025 Lords Chamber

[Baroness Scott of Bybrook (Con)]

My Lords, the Government’s announcement on local government restructuring is a hugely significant upheaval for local democracy. We support the principles of devolution, but we do not support the Government’s method of achieving it. No council should be bullied or blackmailed into top-down restructuring. This was not in the Labour Party manifesto, and the Labour Government have massively rushed this whole exercise.

The Conservative Party has a proud record of supporting devolution. While we were in government, we empowered residents and their councils. We gave councils more control over local planning, improved accountability through elected mayors and police and crime commissioners, and decentralised power to the people by letting parents create free schools and giving residents power over neighbourhood planning.

In December 2024 we set out five tests for the Government that we believed any form of devolution should satisfy. Is this a genuine choice for local councils? In two-tier areas, do both district and county councils agree with restructuring? Will local government be more accountable to local residents? Will the overall changes help keep council tax down? Finally, will restructuring avoid disruption of social care?

We already know that the Government have failed each of these tests. Restructuring is compulsory. There has been no attempt to gather consensus within two-tier areas. Residents have not been consulted, and there has been no time for proper communication with local people about the plans that local councils are putting in place. The Government are incentivising council tax rises across the board—no, worse: punishing councils that keep council tax down. I have not been reassured by the Government that they understand the needs of adult and children’s social care, and the impact that this could have on it, compounded by Labour’s national insurance hikes. Nevertheless, I would be grateful if the Minister could address these five points in turn, and explain what consideration the Government have given each of them.

The shadow Secretary of State in the other place, Kevin Hollinrake, asked a number of questions of the Secretary of State, Angela Rayner, that went unanswered. Now the Government have had more time to consider these serious and reasonable questions, I ask the Minister to answer some of them, but this time with substance and not politics.

First, how exactly will this restructuring put more money into people’s pockets? How is it compatible with Labour’s changes to the local government funding formula that punish councils that keep their council tax low? Do the Government accept that these changes, which will mean that every single council employee in two-tier areas has to reapply for their job, will have an impact on local services, including planning delays? How will this impact on the Government’s plans to deliver 1.5 million homes in this Parliament? Finally, what support will the Government give to authorities—such as Woking and Thurrock—facing significant levels of debt? Will this debt be written off or passed on to the new unitary authorities?

We support stronger local accountability, but there are different ways to do this, and there should have been proper, full and open consultation. Local government must remain local and accountable to its residents. The whole process should be considered more slowly, to ensure that the people understand their future representation and have their say on it.

[Baroness Pinnock (LD)]

I remind the House that I have relevant interests as a councillor and as a vice- president of the Local Government Association. This is a wide-ranging Statement about the future of local government. There are three different elements within the Statement, and I want to address each separately.

First, I want to think about the creation of the so-called strategic authorities. The Government, in the headline to their Statement, described it as “devolution”. It is not devolution; it is delegation of powers from the centre in Westminster. True devolution will occur only when funding is raised locally and decisions are made locally, without the iron grip of Whitehall being exerted. This is a bit of a challenge for the Minister: if they are to have devolution, can she describe the route to the place where there is freedom for local government to make and fund its decisions, without the diktat from above?

The next challenge I have for the Minister—I am sorry, there are one or two here—is that of the democratic deficit that is being deliberately created. We are, apparently, going to have mayors for these so-called strategic authorities. If the evidence from the past in the election of mayors is to continue, mayors are elected—when they are stand-alone elections—by less than 20% of the electorate, which is hardly a resounding vote of confidence in that system. Those of us who care about local democracy are rightly concerned about increasing powers. For example, the mayors of the strategic authorities will have the power to create policy on housing and on strategic planning, which really affect the lives of residents. How will those decisions be respected when the mayors have been elected by such a low number of electors?

One small step that the Government could take to help reverse this democratic deficit is to return to the voting system that prevailed in the election of mayors until the previous Government, in their last throes, decided to remove the additional vote system and return to first past the post. I guess they thought it would help their cause; it did not. At least having an additional vote—albeit that is not what would I want—means that more people help to support the person who is elected.

The next element of the Statement is the abolition of district councils. I serve on a metropolitan council, so district councils are not anything I have experienced, but we know that they are very efficient in running very local services and are very close to the residents they serve. Systems always need reform, so if there is going to be reform of this two-tier system, why do we not think of change rather than abolition? Is it because the county councils are running out of money, and they need the district council reserves to prop them up?

In the new era of unitary authorities, the Government are talking about the average size of these unitary authorities being a population of 500,000. That is very much like the metropolitan area that I serve in. I can tell the House that this means that the wards that councillors will be elected to serve in will be large, and in rural areas they will be geographically large. I suspect that the Government are considering a ratio of councillor to electors of about 1:5,000. That is a very large number of people, and it would take local democracy away from people.

The last item I want to raise is the cancelling of elections. I do not think that, in a democracy, we should ever cancel elections. I know that the previous Government cancelled elections, so there is a bit of a precedent, but I do not think that it is one that should be repeated. People have a right to have their say in electing people to represent them. The difficulty that cancelling these elections creates is that the existing councillors who were elected four years ago will be the ones who determine the set-up for the new unitary councils in their area. If you do that you need the electoral mandate to do it, which they will not have.

I am very disappointed that the Government have decided that democracy is not worthy of the name, and that we are moving local government further and further away from local people. I hope that the Minister will be able to answer my questions and put some life back in local democracy.

Local Government: Electoral Quotas

Baroness Scott of Bybrook Excerpts

Tuesday 11th February 2025 Lords Chamber

[Baroness Taylor of Stevenage (Lab)]

I have heard this view from the Liberal Democrats for many years in local government. The first past the post system means that the electorate decide who is in charge of our local councils. That is up to them. It is a straightforward system which is widely appreciated by the people who engage with it. That is not to say that we cannot do more to encourage involvement in local elections. We will continue to do so.

[Baroness Scott of Bybrook (Con)]

My Lords, if His Majesty’s Government do not have any plans to restructure London councils or any other metropolitan areas such as Manchester or Birmingham, can the Minister explain why the Government believe that those living in more rural parts of our country deserve less representation than those living in our cities?

[Baroness Taylor of Stevenage (Lab)]

We believe that everybody should have proper representation. While we are undergoing the devolution programme in the rest of England, we will not be looking at those metropolitan areas, but that is not to say that it will never happen.

Renters’ Rights Bill

Baroness Scott of Bybrook Excerpts

Tuesday 4th February 2025 Lords Chamber

[Baroness Scott of Bybrook (Con)]

My Lords, I declare my interest as set out in the register as vice-president of the Local Government Association. I very much look forward to the maiden speeches of the noble Baroness, Lady Brown of Silvertown, and the noble Lord, Lord Wilson of Sedgefield, and welcome them to the House.

The Renters’ Rights Bill is counterproductive. While the Government may have good intentions, they will drive landlords from the market—reducing choice and putting up rent for the tenants they seek to protect. While we discuss this Bill, it is important to remind ourselves who landlords are: around 45% own one rental property, with another 40% owning two to four. In many, if not most, cases these are not professional landlords; they may have gained an extra property when a family member has died or through marriage later in life, or perhaps they invested in a property or two to use as a pension. To expect them to be able to cope with all the costs and burdens placed on them by this Bill is at best naive. Many decent landlords and safe, quality homes will leave the rental market as a result.

We must absolutely deal with bad landlords, but in most circumstances there is no reason a good landlord would want to lose a good tenant. It is in their interest to keep a steady income from a reliable tenant who respects their property. Having an empty property is expensive, and there are significant fees and paperwork involved with finding a new tenant. While trying to protect and improve living conditions for renters, the Government should be very careful not to do the opposite and make it worse for them.

The last Conservative Government introduced our own version of this Bill, the Renters (Reform) Bill. It was first introduced to the House of Commons in May 2023 and eventually had its Second Reading in your Lordships’ House in May 2024, but was not taken any further before the general election. The Bill did not make quick progress because we wanted to take our time to get this right. We listened to representations from the sector and carefully considered the impact of our policies. We made changes during the Bill’s passage through the House of Commons, most notably on the readiness of the courts, and further changes were planned for the House of Lords, most notably to carve out student lets.

We recognise that some reform to our rental market was necessary to protect tenants from the abuse at the hands of rogue landlords, but it was always important to us that we balance the rights of tenants to live safely and peacefully in the homes they were renting with the rights of landlords, particularly with respect to their property rights.

The Government were trying to balance the see-saw, and I know we did not get everything right. Many felt that the measures introduced by the Bill went too far in favour of tenants and too far against the landlords in a way that would work to the detriment of the rental market, and I have sympathy with that. However, we listened to the concerns that were raised and we were making changes to the Bill as it progressed.

If the Renters (Reform) Bill did not quite balance the see-saw, the Renters Rights’ Bill tips it over. This is not the same Bill that the last Conservative Government introduced, and the Government are rushing it through without any care for the repercussions that will reverberate throughout the sector. Labour has abandoned our commitment to improvements in His Majesty’s Courts & Tribunals Service before abolishing Section 21 for existing tenancies, as well as our six-month implementation period before abolishing Section 21 for new tenancies. This means that our courts will not be resourced as they need to be. Labour has also abandoned our requirement for the Lord Chancellor to assess the courts’ possession processes before abolishing Section 21 for existing tenancies, which would have ensured that they were ready for the changes first.

Labour has abandoned our plans that would have stopped tenants being able to give notice during the first six months, to give landlords some predictability and protect them against tenants seeking to exploit these new arrangements for rolling tenancies such as holiday lets. Labour has abandoned our plans to make it easier to remove anti-social tenants, which we were changing from “likely” to cause a nuisance or annoyance to “capable” of doing so, making it much harder to evict those who deserve to be evicted. Labour has also abandoned our commitment to sufficiently carve out student accommodation, where it is essential that both landlords and tenants have the certainty of fixed-term contracts to plan for subsequent years.

Not only have the Government removed many of the safeguards and improvements for landlords that we put in the Bill but they have added many concerning measures of their own. They are increasing the mandatory eviction threshold for rent arrears from two months to three months, significantly increasing the loss incurred by landlords when a tenant is not paying for the property they are occupying. They are shortening the time limit for landlords to consider a pet, which we know to be a significant issue. They are rushing, in our opinion, the implementation for the private sector of Awaab’s law—a law that was designed for the social housing sector and that could have significant implications for smaller landlords if not implemented very carefully.

If that was not enough, Labour took the Bill even further, through the amendments it made in the House of Commons. It introduced amendments to include restricting the payment of rent in advance, which will hit most severely self-employed renters and those with bad credit ratings, where a landlord is now even less likely to want to take the risk on them. It introduced amendments requiring landlords to pay compensation to tenants when they possess their properties, burdening landlords with even more unfair costs, even if they have no choice but to take their property back and may have already spent a lot of money to do so.

Much has changed since the original Bill was introduced, and we must acknowledge the broader context that the Bill and the sector find themselves in. Landlords are leaving the rental sector at a higher rate than ever, with many citing rental reforms as their reason for leaving. Rightmove has estimated that 18% of homes up for sale were previously rented, compared with 8% in 2010. In London, where we know the problem in the rental market can be most acute, the situation is even worse: 29% of homes for sale in our capital city were previously rented out.

On top of this inflated package of rental reforms, landlords now have the minimum energy-efficiency standards to contend with. Ed Miliband, the Secretary of State for Energy Security and Net Zero, is requiring all private and social rented homes to meet EPC C by 2030. The industry estimates that this could cost the sector £25 billion—an average of £5,400 per home. This is a cost that many landlords, particularly those with only one or two properties, just cannot take.

Of course, this is set against a backdrop of ever-increasing taxation from a Government who do not understand how our economy works. All these issues compound to make our country an unattractive, burdensome and expensive place to be a landlord, however fair and decent one might be to their tenants.

There is always a balance to be found with legislation, and in this case respect for property rights is essential for investment and stability. I would expect the risk of legal challenge on this Bill to be very high. There will certainly be a few interested parties queuing up to challenge the Government over the rights to their own property. If the Government are not careful, and continue with such an aggressive pursuit of landlords, there is a good chance that their Bill will get stuck in the courts and not be able to benefit anyone.

In Scotland, similar legislation has resulted in the highest rent increases in the United Kingdom because of demand far outstripping supply. The Nationwide Foundation found that 70% of landlords and letting agents lack confidence in the future of the sector. This has led to a significant reduction in rental stock, which has made it much more difficult and expensive for tenants, especially those on low incomes, to find a home. We must learn from Scotland’s mistakes.

There will always be people who want, or need, to rent rather than buy their home. We must ensure that there is a stable rental market for them, and we will do all we can to convince the Government to think carefully about how they proceed. We intend to table amendments to address some of the most pressing concerns, including: the capacity and operation of the courts; student landlords, who need certainty of length of tenure and other mutually agreeable fixed-term contracts; some exemptions for smaller landlords, who are less able to weather these changes; the availability of insurance for damage caused by pets; consideration of the property rights of landlords; and the impact on the housing market. We will pursue these amendments for the benefit of landlords and tenants alike, because we know what will happen if we do not.

The Government’s own impact assessment acknowledges that tenants will see increased costs as a result of their policies, saying

“it is likely that landlords will pass through some costs of new policies to tenants in the form of higher rents—to offset those costs and maintain a degree of profit”.

Surely the Government cannot want this, and I hope that they will listen to the concerns being raised by the sector and by many noble Lords across this House before it is too late.

Council Tax

Baroness Scott of Bybrook Excerpts

Monday 3rd February 2025 Lords Chamber

[Baroness Taylor of Stevenage (Lab)]

My noble friend makes a good point about the link between universal credit and council tax, but there is significant support. All local authorities are required to run local council tax support schemes, which provide council tax reductions for those on low incomes. Some 3.7 million households currently receive this support. There is also a range of discounts and exemptions that reflect personal circumstances. I urge anyone struggling to pay their council tax to contact their local council, because they might be missing out on some of the benefits that are available.

[Baroness Scott of Bybrook (Con)]

My Lords, last year, Labour-run Birmingham City Council imposed a 21% council tax hike on residents over a two-year period after it mismanaged its finances. This year, Labour-run Bradford Council is proposing a 15% hike. Can the Minister explain why it is Labour-run councils that are imposing some of the worst council tax increases on local people this year?

[Baroness Taylor of Stevenage (Lab)]

It is not only Labour-run councils that apply for exceptional financial support. My honourable friend the Minister will be making a Statement later today about which councils have been successful in gaining that exceptional financial support. There are any number of reasons why councils need to apply for that. It is not necessarily poor financial management: it can be the circumstances they find themselves in, particularly those areas that have low funding because the fair funding was not looked after.

Future Homes Standard

Baroness Scott of Bybrook Excerpts

Wednesday 29th January 2025 Lords Chamber

[Baroness Taylor of Stevenage (Lab)]

The noble Lord makes some very important points. I have a lot of sympathy with what he says about how we take this forward. I think I was very clear in what I said: the intention of our Government is to make sure that there will be no further retrofitting needed when new homes are built. They will be built to the standard we set as soon as that standard comes into being. The discussions I have had with the construction industry lead me to believe that it is waiting for that standard and will be ready for it as soon as we are able to set it. I hope that will be the case. I will take the other ideas the noble Lord put forward back to my department.

[Baroness Scott of Bybrook (Con)]

My Lords, it was my understanding that this Government had said that rented properties must achieve at least an EPC rating of C by 2030, but I thank the Minister for correcting me on this. However, many listed properties cannot achieve this without substantial investment, which many private landlords simply cannot afford. This will only push more landlords to sell up, further restricting an already strained rental market. What assessment have His Majesty’s Government made on the impact of these new requirements and the impact they will have on the number of rental properties available?

[Baroness Taylor of Stevenage (Lab)]

Just to clarify, we are in consultation at the moment on the new EPC framework, which will require all properties to have an EPC registration of C. I will report to the House later on that issue. In relation to historic buildings, I have met the Historic Houses association and visited at least one historic property to try to discover for myself what the real issues are. There is further work to be done on that, but I am aware of all the issues related to the retrofitting of historic properties.

Non-Domestic Rating (Multipliers and Private Schools) Bill

Baroness Scott of Bybrook Excerpts

2nd reading
Wednesday 29th January 2025 Lords Chamber

[Baroness Scott of Bybrook (Con)]

My Lords, first, I send our condolences to the noble Lord, Lord Khan of Burnley, and to his family in Burnley. He is always in our thoughts and prayers. This will be a difficult time for him, as I know. I declare my interest as vice-president of the Local Government Association.

This Bill represents another stealth tax for businesses. Not only are the Government increasing business rates; at the same time they are also reducing business rate relief for retail, hospitality and leisure businesses up and down this country. This is the wrong approach and we will scrutinise this Bill very closely in Committee.

Throughout the election campaign, the now Chancellor promised that the Labour Government would be the

“most pro-business government this country has ever seen”.

Yet the choices they have made indicate the exact opposite. This Budget has been decidedly anti-business and the decision to increase business rates demonstrates this Government’s failure to understand how to achieve growth.

On Monday, the CBI reported that firms expect another significant fall in activity over the coming three months, with the CBI’s growth indicator suggesting a 23% fall in the three months to January. The only official estimate of the revenue from this Bill is just £70 million for the Exchequer in 2025-26, but the impact on businesses will be disproportionate to that figure. When paired with all the other damaging tax increases in the autumn Budget, it provides a clearer picture of the campaign of crippling tax rises that this Government are imposing on our businesses.

As we scrutinise this Bill, we will be focusing in particular on the impact of these changes on our high streets, including hospitality and leisure businesses. Businesses are being asked to pay more through their employer national insurance contributions and the inflation-busting increase in the national living wage. With this Bill, the Government are hitting businesses with a triple whammy. It is our duty to hold the Government to account and to scrutinise the unacceptable negative impacts this Bill will have.

While the Bill will ensure that these online giants pay higher business rates, the Government have singularly failed to protect businesses on the high street, some of which will also be subject to these higher rates. Although the Government set out to separate online businesses from traditional retail, the Bill uses the rateable value of £500,000 as the distinction. This will allow a higher rate for

“the majority of large distribution warehouses, including those used by online giants”.

I do not dispute that this distinction will capture many online retailers, but it will also capture additional businesses such as supermarkets, hotels and department stores. The Bill fails to distinguish between these different business types, and it will have unintended consequences. The CEO of John Lewis & Partners has confirmed this, explaining that the prime location of its stores means they have a higher rateable value than out-of-town warehouses. He has called the combination of higher business rates and the national insurance tax raid as a “two-handed grab”.

We are also concerned that the new business rate multipliers have not yet been set. We are being asked to trust the Government and give them these powers without knowing how they intend to use them. I cannot understand why the Government would not set these rates before publishing the Bill; we need clarity if we are to proceed. Would the Minister be willing to give the House an explanation of the Government’s plans in this area before we go into Committee?

We are deeply concerned about the impact these changes will have on businesses, which will be hard hit by these measures. We know the Bill will mean that retail, hospitality and leisure businesses on high streets up and down this country are going to be closed. This will be yet another setback for our high streets, which we already know are struggling. The Minister claims these higher rates will affect only 1% of businesses, but I am certain that the impact will be wider spread and it is vital that we protect our high streets. In the world of public finances, the Bill does not raise an extraordinary amount. The £70 million referred to in the impact assessment will not go very far, but the impact on businesses that are forced to close as a result of this, alongside other measures included in the Budget, will have a wide-reaching impact on our economy, as well as on our communities across the country.

The Government claim the Bill will leave retail, leisure and hospitality businesses with a lower bill to pay, but this will not be the case for many businesses that our high streets rely on. The anchor stores of our high streets will be hit. I agree with the Government that independent stores are important on our high street, but that does not mean that the larger stores are not. I am worried that the Bill will have the effect of forcing retailers out of their high street locations and instead moving them to out-of-town locations where the value of property is lower. I cannot see how that is going to benefit anyone.

The second part of the Bill removes charitable relief for private schools. My noble friend Lady Barran will speak about this part of the Bill in more detail in her closing speech. This is a mean-spirited attack on private schools, and Clause 5 raises many issues. I am concerned about the exemption only for pupils with EHC plans. We have been clear that taxing education is wrong, but taxing education for children with special educational needs is unconscionable.

The Government may have made an attempt to retain charitable relief for schools that wholly or mainly educate pupils with SEND, but the way that the Bill has been drafted fails to account for special educational needs pupils who do not have an EHC plan. We know it is exceptionally difficult to get one of those plans and it takes a very long time, so many parents choose to send their children to private schools instead. The Bill will place an additional cost on the many parents in that position. Surely that cannot be right. We will bring forward an amendment in Committee to address this clear failure in drafting.

Alongside the issue of SEND education in private schools, I do not think the Government have considered the effect of the Bill on private schools’ engagement with their local communities, which often involves sharing facilities with state schools, summer schools and other community organisations. Many private schools go above and beyond in providing facilities for the other schools in their areas but, with the number of extra costs the Government are piling on them, they will be unable to provide the same level of help. The Bill may have the perverse effect of forcing private schools to reduce that support as they seek to cover the tax bill imposed on them by the Government through lettings at a higher commercial rate. I ask the Minister to confirm whether that has been considered.

In conclusion, the damage that the Bill will wreak on our high streets cannot be ignored, nor can we allow the principle that education should not be taxed to be abandoned without any challenge. We will take a robust approach to the Bill in Committee and hold the Government to account for the negative impacts that these measures will have on our towns, our high street and our educational system.

--- Later in debate ---

[Baroness Taylor of Stevenage (Lab)]

My Lords, with the leave of the House, I rise to close the debate. I thank all noble Lords who have taken part in the debate. The great strength of your Lordships’ House is the hugely knowledgeable and informed debates we have, and this has been a great example, with experience from across sectors such as business, education and many other areas—even veterinary practices—so I am very grateful to noble Lords for their contributions. They have demonstrated their enthusiasm and interest for our high streets, the important role they play in our local communities and the small businesses that are their lifeblood, and for ensuring that all children are able to receive a high-quality education. There is certainly consensus on that, if perhaps not on the means of achieving it, but there is a consensus that every child deserves to have all the opportunities that should be available to them.

I will make a few general comments on remarks made by noble Lords, and then I will attempt to answer most of the questions, but I expect I will run out of time long before I get there. I assure noble Lords that anything I do not get to, I will reply to in writing.

Both the noble Baronesses, Lady Scott and Lady Barran, referred to the overall policy, in relation to some of the really tough decisions we have had to take. I understand that these are tough decisions and why people think they are. However, yet again in this House we have had a bit of a swerve around the reason why those decisions were necessary; it is the inheritance we picked up when we came into government. We have to balance the books and get the fiscal picture straight so that we can deliver the reform to public services that we want to see, and tackle some of the cost of living issues that everybody faces.

I have another general comment on a point raised by a number of noble Lords. The Bill is not intended to achieve the comprehensive reform of business rates that we have set out as our intention. We are working on it and there is a consultation paper out at the moment, and I hope all noble Lords who have contributed this afternoon—and anyone else who has an interest in the business rates system—will make a contribution to the ongoing work on business rates. Having been a councillor for many years and listened to many complaints from both the public and private sectors about how business rates operate, I am in no doubt that we need comprehensive reform.

I hope that has picked up some of the general points and I will turn now to the specific points that noble Lords made.

There were, rightly, a number of questions regarding the impact of the proposed new multipliers. The noble Baronesses, Lady Scott, Lady Pinnock and Lady Barran, and the noble Lords, Lord Fox and Lord de Clifford, all mentioned this issue. As I explained in my opening speech, the actual tax rates to the new multipliers will be set at the 2025 Budget, taking into account the effects of the 2026 business rates revaluation, which we have to do, as well as the broader economic and fiscal context at that time. It is for my right honourable friend the Chancellor to make those decisions at the right time. Tax policy and legislation are not subject to the same requirement for an impact assessment that accompany other non-fiscal policy decisions. Nevertheless, the Treasury is committed to publishing an analysis of the effects of the new multipliers at Budget 2025, taking into account the broader factors that I just mentioned. I hope I set out clearly in my opening speech why we need to take these steps.

On the VOA and its property rateable values, which were mentioned by the noble Baroness, Lady Scott, the noble Lord, Lord Fox, and the noble Earl, Lord Lytton, on 5 February the VOA will publish an ad hoc release relating to properties with a rateable value of over £500,000. That will provide a breakdown by category of property type by local authority for all those properties with a rateable value above and below £500,000, so we will be able to see clearly which properties are impacted by which parts of this reform.

On the issues around the multipliers policy approach, I have heard the message that noble Lords may think this is a blunt tool for dealing with this matter—the noble Baronesses, Lady Scott and Lady Pinnock, the noble Earl, Lord Lytton, and the noble Lord, Lord Jamieson, mentioned this. The permanent tax cut for retail, hospitality and leisure properties, including those on the high street, from 2026-27, will ensure that much-needed certainty and support. That tax cut has to be funded, so we intend to introduce that higher rate on the most valuable properties. The Government’s view is that it is the fairest approach to ask all properties with a rateable value of £500,000 and above to pay a higher tax rate to support the viability of our high streets. It is the fairest way and, as I said in my opening speech, the higher rate will apply to less than 1% of all properties, and we will know which those properties are once the VOA has published its assessment.

The noble Baronesses, Lady Scott and Lady Pinnock, raised the approach being detrimental to anchor stores. I understand the concern around this. Unfortunately, we lost our Marks & Spencer store in Stevenage town centre; luckily, we managed to attract it back, and it is operating there very successfully, and it is much appreciated by our residents.

The Government intend to introduce two permanently lower tax rates for retail, hospitality and leisure properties, which will give certainty. I understand concerns that the higher multiplier may catch some of the largest and most valuable retail businesses. However, we think that the fairest approach is to ask all properties above £500,000 to pay that. This is a property tax, so whether large stores are based on the high street or in retail parks, it will still have the same impact. I remind noble Lords that the upper rate will impact on only 1% of businesses.

Retail, hospitality and leisure relief was extended year by year by previous Governments, but it has been a stopgap measure. The noble Baroness, Lady Scott, and the noble Lords, Lord Fox and Lord Jamieson, raised the issue of our process being a temporary measure. This is a permanent measure which will give certainty to those businesses. Before the intervention we are taking now, retail, hospitality and leisure relief would have ended entirely in April 2025, creating a cliff edge for those businesses. We have decided to offer that 40% discount to retail, hospitality and leisure properties up to a cash cap of £110,000 per business in 2025-26. By extending that retail, hospitality and leisure relief instead of ending it entirely, the Government have, for example, saved the average pub with a rateable value of £16,800 more than £3,300. We are doing our best to support the sector, in spite of the difficult fiscal picture that we see.

On wider business rates reform, raised by the noble Lord, Lord Fox, the noble Baroness, Lady Pinnock, and many other noble Lords, the discussion paper has been published. It builds on our plans announced at the Autumn Budget to support high streets by further highlighting areas for reform, incentivising investment and modernising the system so that it is fit for the 21st century. A number of noble Lords mentioned business rates avoidance. We will shortly publish a consultation on adopting a general anti-avoidance rule for business rates in England.

The noble Lord, Lord Fox, raised the issue of the small business rates relief which is in place to support all of our small businesses. I want to highlight that that provides 100% relief to small businesses which occupy only one property with a rateable value of £12,000. A taper of relief down from 100% is available to such ratepayers with rateable values up to £15,000. That scheme ensures that over a third of all properties, or about 700,000 ratepayers, are not paying any business rates at all. The Government have no plan to remove small business rates relief, which is permanent and set down in legislation.

The noble Earl, Lord Lytton, raised the issue of business rates being too high overall and I understand those concerns. We all know only too well that economic and fiscal stability is critical to business confidence. At the Budget, the small business multiplier for properties with a rateable value under £51,000 was frozen at 49.9p, meaning that, together with the small business rates relief, over 1 million properties will be protected from a 1.6% inflationary increase.

The Budget honours the manifesto commitment not to raise corporation tax. The UK has the lowest corporation tax in the G7, the joint most generous plant and machinery capital allowances in the OECD, and the joint highest uncapped headline rate of R&D tax relief in the G7 for large companies. I will come on to the noble Earl’s other points later, but I thank him, as usual, for his expertise, which we experienced during the levelling-up Bill and have once again had the benefit of this afternoon.

Supporting the high street and the broader government approach was mentioned by a number of noble Lords, including the noble Baroness, Lady Scott, and the noble Lord, Lord Fox. We are committed to rejuvenating our high streets and town centres. The measures in this Bill to introduce permanently lower tax rates for RHL properties will help, but they are only part of our work. In December, we introduced the high street rental auctions, a new power which allows local authorities to auction off the lease of persistently vacant commercial units. The new regulations will make town centre tenancies more accessible and affordable for businesses and community groups, while helping to tackle the vacancy rates on our high streets.

In addition, through the English devolution Bill we will introduce a new strong right to buy for valued community assets, such as shops, pubs and community spaces. That community right to buy will give local people the power to purchase community assets that go up for sale, helping to keep assets in the hands of the community. I have seen the great benefit of this in the Station Pub, in Knebworth, which the community has taken over and made a great success of. Like the pub mentioned by the noble Lord, Lord Waldegrave, it is a great place, and if noble Lords are ever in that area, they should visit. The Government continue to invest in a number of initiatives to boost town and city centres, including our high street accelerators. As part of our plan for change, we are working hard to support our high streets, and the measures in the Bill are part of that.

I thank all noble Lords for their comments on private schools, and in particular on special educational needs. The noble Baroness, Lady Scott, and other noble Lords mentioned pupils who do not have an ECHP. I used to be the education spokesperson at Hertfordshire, so I am very familiar with the sometimes lengthy delays in obtaining EHCPs. The approach adopted in the Bill has sought to ensure that the impact on pupils with the most acute special educational needs is minimised.

The Government are aware that some parents may make a choice for their child to attend private school, but this is a choice, like that made by any parent using the private sector. For most pupils with a special educational need, support is provided within a mainstream state school, and all children of compulsory school age are entitled to a state-funded school place if they need one. We support local authorities to ensure that every local area has sufficient school places for children who need them, and that appropriate SEND support is available, if needed. I recognise the issues around obtaining an EHCP. I am concerned by what the noble Baroness, Lady Scott, said about stigma around obtaining an EHCP, and I will discuss that with my noble friend the Education Minister.

The noble Lord, Lord de Clifford, spoke about what will happen to pupils with an ECHP when a school loses its charitable relief. Business rates are a tax on property; it is not possible to differentiate at the individual pupil level. Where a private school has only a few pupils with EHCPs, it will lose its eligibility for charitable rates relief. However, where a private school has been named on a pupil’s EHCP, the local authority funds the pupil’s place. Therefore, in the event that a private school loses eligibility and chooses to pass through some of that additional cost to fees, these pupils and their families will remain unaffected. In private schools, including private special schools, just 5.7% of pupils have an EHCP, predominantly in private special schools, and 97% of such pupils have their place at a private school funded by their local authority. I hope that helps clarify that point.

The Government are committed to reforming our SEND provision overall to improve outcomes and return the system to financial sustainability. We have provided a £1 billion uplift in high-needs funding for the next financial year. We know that that will not solve all the problems, but it will make a start. As part of our plan for change, we want to make sure that we are doing our very best to provide those opportunities that SEND children need, as with all children. This Bill is part of the process of driving that forward.

The noble Lord, Lord Jamieson, spoke about SEND and the state sector, and said that this approach will increase costs. We are absolutely committed to improving inclusivity and expertise in mainstream state schools, restoring parents’ trust so that their children will get the support they need to flourish. If an EHCP assessment concludes that a child can be supported only in a private school, the local authority will fund that place.

The noble Lord, Lord Lexden, whose great knowledge on this subject I respect, spoke about the Government not caring about pupils in private schools. The Government believe in parental choice, but we are determined to fulfil the aspiration of every parent to get the best education for their child. To eliminate barriers to opportunity, we need to concentrate on the broader picture and the state sector, where most of our children—93%—are educated.

Ending the tax breaks on business rates—and VAT—for private schools is a tough but necessary decision. We need to secure vital additional funding to help deliver those commitments to education and young people. As I said, there is a consensus on what we need to do, but perhaps not on the means of getting there.

The noble Lord, Lord Lexden, also mentioned the impact on faith schools. Again, the Government value parental choice but all children of compulsory school age are entitled to a state-funded school place if they need one, and schools are required to follow the Equality Act and requirements relating to British values. We expect them to foster and promote an environment that encourages respect and tolerance of children and families of all faiths. The Government have listened carefully to arguments on this matter and have decided that a carve-out for faith schools cannot be justified. However, children can attend faith schools and have their faith respected in the state sector.

The noble Lord, Lord Lexden, referred to private school closures. We expect those numbers to remain relatively low and they will be influenced by various factors, not just the removal of VAT and business rate tax breaks. Parents can seek places in other private schools or find a state school place through their local authority. There has been a traditional number of around 50 private schools closing each year, including independent special schools, but we must also note that private schools have continued to open, even after the Government announced that they would end tax breaks for private schools. The register of independent schools shows that 77 independent schools have opened between January and October 2024.

The noble Lord, Lord Lexden, felt that the timing of this was poor. Ending tax breaks on VAT and business rates for private schools is—I will say again—a tough but necessary decision, and we have had to take some measures to fill the gap in the budgets. Delaying implementation of the business rates policy would forgo around £140 million a year that is intended to fund the Government’s investment in state education and young people.

[Baroness Scott of Bybrook (Con)]

But if I remember rightly, the decision about the taxation of independent schools was made well before the Chancellor got into place and saw anything in the books.

[Baroness Taylor of Stevenage (Lab)]

Knowing the Chancellor as I do, I am sure she was extremely well prepared for taking on the commitment and had some idea of what was going on well before she came into office. I am sure that that was her being well prepared.

The noble Baroness, Lady Scott, and the noble Lords, Lord Waldegrave and Lord Maude, raised the impact on charitable activity if schools stopped or reduced their activity. They will continue to operate as charities and there will be no other tax changes specific to their charitable status.

I see I am running out of time, so I will close. I have a number of other points, including on several points of detail made by the noble Earl, Lord Lytton.

Political Parties: Donations from Abroad

Baroness Scott of Bybrook Excerpts

Wednesday 22nd January 2025 Lords Chamber

[Lord Khan of Burnley (Lab)]

My noble friend makes an excellent point. She is correct that overseas voters have the right to participate in UK parliamentary elections, and this includes the right to donate to parties or candidates they support. However, foreign money is not permitted, and it is a criminal offence to facilitate an impermissible donation. Those rules apply to voters abroad as well.

[Baroness Scott of Bybrook (Con)]

My Lords, a Question was asked on this matter on the 15 January 2025, answered by the noble Baroness, Lady Taylor of Stevenage. Can the Minister provide the House with more detail on His Majesty’s Government’s review of all matters relating to electoral donations? In particular, can he confirm that it will address the matter of public bodies disclosing information to political parties, and tell the House when we can expect the review to conclude?

[Lord Khan of Burnley (Lab)]

The noble Baroness mentioned a similar Question that was previously asked. When it comes to foreign influence, additional controls are being implemented through the foreign influence registration scheme, which will require those being directed by a foreign power to carry out, or arrange for others to carry out, political influence activities to register with the scheme. I will take her concern forward and ensure that, when we have our wider consultation and bring forward proposals, which are not yet finalised, we will look at this in legislation and policy.

Local Government Reorganisation

Baroness Scott of Bybrook Excerpts

Thursday 16th January 2025 Lords Chamber

[Baroness Scott of Bybrook (Con)]

My Lords, what local residents want from their local council are good quality services at a reasonable cost, however it is organised. When the Conservatives took control of Harlow Council in 2021, they cut council tax, and have kept it frozen ever since. Under this Government’s new local government funding formula, Harlow will lose approximately 30% of its grant funding next year. Why is the Government’s new formula punishing councils that are keeping taxes down and providing better value for money for taxpayers in their area?

[The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Baroness Taylor of Stevenage) (Lab)]

I find it astonishing to hear the party opposite challenging us on funding issues in local government, when it has punished the whole of local government for 14 years in this respect. I agree with the noble Baroness about what the public want from their local government services. They are not worried about the overheads of additional councils; they want to see good public services at local level and good value for money. That is what the devolution and local government reorganisation programme is all about.

The review of the funding formula will happen as we go into the spending review in the spring, and is there to make sure that funding is directed where the need is greatest. That will be what we set out to do. It is what we said we would do in our manifesto, and we will continue to do so. Let us not take any lessons in that from the party that has starved local government and brought it to its knees over 14 years.