Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2026
Lord Clement-Jones Excerpts(4 days, 15 hours ago)
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The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, this debate will also consider the take-note Motion tabled by the noble Lord, Lord Clement- Jones, on the Non-Domestic Rating (Definition of Qualifying Retail, Hospitality or Leisure Hereditament) Regulations 2025.
These statutory instruments form part of a wider package of legislation that gives effect to the new business rates multipliers for qualifying retail, hospitality, leisure and high-value properties. I thank the Secondary Legislation Scrutiny Committee for the detailed and thoughtful consideration of these statutory instruments in its 40th and 48th reports. Business rates are based on a property’s rateable value and a multiplier for each tax year. In the Autumn Budget 2024, the Government announced a comprehensive set of reforms to the business rates system in England, including the introduction of three additional multipliers from April 2026.
The three new multipliers are: a small business retail, hospitality and leisure multiplier for qualifying retail, hospitality and leisure properties with rateable values below £51,000; a standard retail, hospitality and leisure multiplier for qualifying retail, hospitality and leisure properties with rateable values of £51,000 to £499,999; and a high-value multiplier for properties with rateable values of £500,000 and above. In the Budget last November, the Government announced the rates for these new multipliers. These new rates will deliver permanently low multipliers for eligible retail, hospitality and leisure properties with rateable values below £500,000.
The Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2026 prescribe the circumstances in which the new multipliers will apply. The new multipliers will replace the pandemic-era retail, leisure and hospitality reliefs that currently apply. These reliefs were introduced on a temporary basis in 2020, recognising the exceptional circumstances of the time. Continuing these reliefs would cost around £1.7 billion per year. The new multipliers will benefit over 750,000 retail, hospitality and leisure properties. However, unlike the existing relief, they are permanent, thereby providing businesses with greater certainty and support. They are also not subject to a cash cap, meaning that all qualifying properties in a retail, hospitality and leisure chain can benefit. Taking into account the upcoming business rates revaluation, the tax rate that retail, hospitality and leisure properties on the small business multiplier will pay next year will fall by nearly 12p overall. Similarly, the rate for retail, hospitality and leisure properties on the standard multiplier will fall by 12.5p compared with what they are paying now.
To ensure that support for the high street is sustainable, the Government will fund these new multipliers through higher rates on the top 1% of properties, those with rateable values of £500,000 and above. From April, the most valuable properties, such as large distribution warehouses occupied by online giants, will pay a tax rate that is 33% higher than that paid by small high street properties.
I turn to the Motion laid by the noble Lord, Lord Clement-Jones, which relates to the Non-Domestic Rating (Definition of Qualifying Retail, Hospitality or Leisure Hereditament) Regulations 2025. These regulations set out the eligibility for the new multipliers and passed into law last year. The Government’s objective in setting these regulations was to reflect the same definition for eligibility as the existing retail, hospitality and leisure relief. We want sectors that benefited under the previous relief to continue benefiting under this new relief. For example, under the existing relief, businesses benefit if they are wholly or mainly used for retail, hospitality or leisure purposes. That includes the sale of most goods, services, food and drink or entertainment as well as accommodation to the public. These requirements are the same under the new relief.
Similarly, under the existing relief, businesses benefited only where they were used for in-person activity. The same principles apply under the statutory instrument that we passed last year. The Government have retained the same approach to ensure continuity in our support for the sector while making this support permanent and uncapped.
The new multipliers are being introduced alongside a revaluation of non-domestic properties, which the Valuation Office Agency carries out independently every three years. Currently, property values are based on values from 2021, during the pandemic. Values were generally lower at this time due to the unusual economic situation that the pandemic created. Many properties are therefore seeing their rateable values increase at this revaluation, reflecting post-pandemic recovery.
To support affected businesses, the Government announced in the Budget a significant support package worth £4.3 billion over the next three years. First, we are implementing transitional relief, which will cap increases next year by 5% for the smallest properties and up to 30% for the largest properties. Secondly, we are expanding the supporting small business scheme. Currently, the scheme caps the bill increases of those losing some or all their small business rates relief or rural rates relief. We are expanding it to those which are currently eligible for the 40% retail, hospitality and leisure relief. The supporting small business scheme will cap bill increases at the relevant transitional relief cap or £800 per year, whichever is higher.
Together, these schemes will mean that the majority of properties facing increases will see them capped at 15% or less next year, or £800 for the smallest. Even after the revaluation, around a third of properties will pay no business rates at all as they receive 100% small business rate relief. A further 85,000 properties will benefit from reduced business rates as this relief tapers. We have also extended the small business rate relief second property grace period from one year to three years, to support small businesses as they grow.
Following the Budget, concerns were raised about how the valuation methodology for pubs was applied. We have listened and responded to those concerns by launching a review into how pubs are valued for business rates. This review will also cover how hotels are valued and will include extensive engagement from valuation experts, businesses and their representatives. It will report in time for any decisions that follow to be implemented for the 2029 revaluation.
In the meantime, we are taking steps to support pubs for not only next year but the next three years. From April, pubs and live music venues will receive 15% off their new business rates bill on top of the support announced in the Budget. Bills will then be frozen in real terms for a further two years. This support is worth around £1,650 to the average pub and will mean around three-quarters of pubs seeing their bills either falling or remaining the same next year. This decision will mean that the amount of business rates paid by the pub sector as a whole will be 8% lower in 2028-29 than it is today.
The Government are also committed to going further to reform the business rates system to incentivise more investment. That is why we published a call for evidence on the next phase of business rates reform in November last year; that consultation will close later this month, and the Government will respond in due course. We recognise that transforming the business rates system is a multi-year process, and we are committed to working with stakeholders throughout this process to achieve meaningful change.
The reforms being delivered through these statutory instruments will benefit over 750,000 properties across England while ensuring that the top 1% most expensive properties, including those used by online giants, pay their fair share. They will support investment and create a fairer business rates system. I beg to move.
Lord Clement-Jones (LD)
My Lords, I wish to speak to the Motion standing in my name on the Order Paper.
I have not secured this debate to oppose the Government’s ambition to support the high street. Permanent lower multipliers for retail, hospitality and leisure are, in principle, a welcome step towards stability. Instead, I have tabled this Motion to highlight a critical flaw in the definition of who qualifies for this support. By drawing the lines of eligibility too narrowly, these regulations inadvertently exclude the engine room of our £8 billion music industry and the R&D hubs of our visual arts sector, threatening the very existence of the UK’s grass-roots creative infrastructure.
Our recording studios face a perfect storm and I know that the noble friends of the Minister, the noble Lord, Lord Brennan, and the noble Baroness, Lady Keeley, are both very supportive of what we are trying to highlight today and regret that they unavoidably cannot be here to say so. I know that the noble Lord, Lord Berkeley of Knighton, would also want to say something if he were able and did not have other engagements. Under the 2026 revaluation, which coincides with these new multipliers, these businesses face an average increase in rateable value of 45%, with some seeing hikes of nearly 100%. Simultaneously, because Regulation 3 excludes them from the retail, hospitality and leisure RHL category, they are denied the lower tax multiplier that their neighbours on the high street will receive.
The Music Producers Guild has provided alarming evidence that 50% of studios surveyed are considering closure within the next year. These businesses operate on ultra-thin margins, often requiring 85% occupancy just to break even. They compete in a global market. If it becomes too expensive to record here, artists will simply move to eastern Europe or the United States. We are already seeing top UK artists recording major projects abroad. The urgency cannot be overstated. I have seen correspondence from the Music Venue Trust highlighting a terrifying reality: directors of these businesses are running their figures for April and realising they will be insolvent. Under HMRC rules, to continue trading would constitute what is called fiscal recklessness, risking personal liability. This means we risk a wave of closures before the first bills even land, simply because the Government have failed to provide certainty.
Let me draw the Committee’s attention to the 40th report of the Secondary Legislation Scrutiny Committee. The committee explicitly noted the submissions from UK Music and the Music Producers Guild regarding this exclusion. The committee highlighted a glaring inconsistency in government policy. Film and TV studios currently benefit from a specific 40% business rates relief, which the Treasury confirmed will continue. The SLSC invited this House to question the Minister on this matter, so on what basis does the Treasury protect the infrastructure of our film industry while the infrastructure of our music industry, facing identical economic pressures, is left to face what the sector describes as an existential threat?
The Government’s justification for excluding these studios is that they are not reasonably accessible to visiting members of the public. I must challenge this, using the Government’s own guidance. Paragraph 22 lists funeral directors, shoe repairers and key cutters as eligible because they constitute the provision of a service. Recording studios are functionally identical: they provide a specialist service accessible to any member of the public willing to pay for it, be that a professional band, a local choir or a community group. Do the public browse a funeral parlour? No, they book a specific service. A recording studio is no different. If a key cutter qualifies, surely a recording studio does too.
We know that the Government can act when the system creates anomalies. Just weeks ago, following concerns regarding pubs, the Chancellor announced a 15% reduction in bills and a freeze for two years. The Minister in the other place, referring to music venues, said:
“It would not be right to seek to draw the line in a way that includes some and not others”.—[Official Report, Commons, 27/1/26; col. 771.]
Yet that is exactly what these regulations do: they support the venue where music is performed but tax the studio where music is created out of existence. The music ecosystem is a pipeline: if you destroy the creation phase, you eventually starve the venues. The Chancellor justified the pub relief by calling pubs “community assets”. If that is the test, studios that host community choirs, youth education projects and amateur bands must surely pass it.
Reports suggest that the Chancellor is resisting wider relief for hotels and restaurants because she cannot afford to support every business. I understand that constraint, but we are not talking about thousands of hotels; we are speaking of roughly 500 recording studios. The cost must be negligible compared with the £300 million package announced for pubs, yet the value to the £8 billion music industry is existential.
Lord Parkinson of Whitley Bay (Con)
My Lords, we had to hit pause, but I shall resist the temptation to hit rewind and repeat what I said. I was echoing the points that have been made: a lot of the problems here are with the way the Valuation Office Agency tries to understand the particular nature of these important businesses. At the very helpful meeting with the noble Baroness, Lady Twycross—which the noble Lord, Lord Freyberg, alluded to—we heard from a lot of people across the sector. They are frustrated that they have one conversation with the Government but hear something different from the Valuation Office Agency. If there is a way to short-circuit that, I know that they would appreciate it.
There is also the broader question of how the Government value and account for things. Can the Minister say whether, in bringing these measures forward in the discussions that His Majesty’s Treasury had with the Department for Culture, Media and Sport, he was able to talk to the team there that works on the culture and heritage capital programme? That team is working to arrive at a Green Book-compliant way of valuing the wider benefits that we have heard about. That includes the social benefits of our cultural infrastructure in terms of not just our physical and mental health and well-being or tackling isolation and loneliness, particularly in rural areas or areas of deprivation, but trying to put a value on inspiring the future generations of musicians, artists and others.
It seems that the decision here runs counter to the Government’s noble aims in their creative industries sector plan to grow what are already world-leading sectors for the United Kingdom. Nevertheless, they are precarious and challenged by a number of global competitors, which are breathing very heavily down our necks. As the noble Lord, Lord Watson of Wyre Forest, said, we have a very delicate ecology and ecosystem in these sectors, and it is very important that we all do everything we can to maintain that.
Lord Clement-Jones (LD)
My Lords, I am not quite sure, as the procedure is rather arcane, but I think I manage to get a very quick wind-up. The positive thing today is that we have heard so much about our music ecosystem, and people have been celebrating that. The noble Lord, Lord Parkinson, was absolutely right when he talked about the impact of Covid—the perfect storm, in a sense, of inflation, national insurance and so on—but that ecosystem is hanging on. It is still there, and it is absolutely fundamental to the music industry. In a sense, that is the good news; the bad news is that some of the issues we have been talking about today on business rates are going to kill what the noble Earl, Lord Clancarty, called the critical creative infrastructure.
Grass-roots Music Venues
Lord Clement-Jones Excerpts(2 weeks, 5 days ago)
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Lord Livermore (Lab)
I am grateful to my noble friend for the question. I am very happy to meet the groups that he mentioned. He is absolutely right to say that the creative sector is extremely important to the UK economy. It is a major employer and a significant part of our economy. It has been included as a priority sector in our industrial strategy, recognising its high growth potential, particularly through the development and adoption of new technologies.
On business rates, which my noble friend raised, as I have said before in your Lordships’ House, I acknowledge that the revaluation means that sectors such as pubs and music venues will struggle in relation to the business rates applicable to them. That is why we are working with the sectors involved to ensure they get the support they need. Noble Lords will have heard what the Prime Minister and Chancellor said on this in recent days. I will not add to that or comment on any speculation, but where there are further comments to be made I will of course come back to your Lordships’ House to discuss them.
Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)
My Lords, there is plenty of time. We will hear from the Lib Dems next, then the Conservative Benches.
Lord Clement-Jones (LD)
My Lords, given that the Music Producers Guild reports that 50% of recording studios are considering closure within the year, with rateable value increases of up to 100%, will the Minister commit to urgently reviewing their exclusion from the retail, hospitality and leisure multiplier, and their misclassification as office space by the Valuation Office Agency, particularly given that film studios, which are similarly not public-facing, already benefit from 40% targeted relief?
Lord Livermore (Lab)
The Government have been very clear that the lower multipliers will broadly reflect the scope of the current retail, hospitality and leisure business rates relief, which is centred around retail, hospitality and leisure properties that are reasonably accessible to visiting members of the public. If a recording studio forms part of a single property with a qualifying hospitality or retail business, and the hospitality or retail aspect is the main purpose of the property, it will qualify for the lower multipliers.
Competition and Markets Authority Chairman
Lord Clement-Jones Excerpts(1 year ago)
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Lord Clement-Jones (LD)
My Lords, I welcome the Minister to Questions. The Chancellor has said that every regulator, no matter in what sector, has a part to play by tearing down the regulatory barriers that hold back growth. Given the Minister’s background, she will understand the benefits of strong and healthy competition in the digital economy, particularly for SMEs. What assurance can she give the House that the sacking of the chair of the CMA and the appointment of Doug Gurr, a former country head of Amazon, which itself is subject to current and recent CMA investigations, will not lead to weaker competition and consumer protection enforcement? Are the Government still committed to the new digital markets regime that we have all taken several years to install? Are they now going soft on US big tech in a whole range of digital services—operating systems, app stores, browsers, search engines, digital advertising and cloud services—or are we meant now to include our UK SMEs among the so-called blockers?
Baroness Gustafsson (Lab)
I thank the noble Lord for his question, which I have broken down into four points that I hope to address. First, I thank him for his welcome; it is very much appreciated, and it is a pleasure to be here answering questions in front of noble Lords. Secondly, I do not accept the characterisation of us sacking the chair of the CMA; Marcus Bokkerink resigned as chair and the Government are committed to the operational independence of the CMA. Thirdly, on whether the CMA is going soft, especially regarding digital markets, the CMA has new powers under the Digital Markets, Competition and Consumers Act and is already using them fervently for investigations into Google and Apple. The Government are committed to the independence of the CMA and making sure that we create an industry that is open to free and fair competition.