Non-Domestic Rating (Multipliers and Private Schools) Bill

Lord de Clifford Excerpts

Committee stage
Monday 24th February 2025 Grand Committee

[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.

[Lord de Clifford (CB)]

I speak in support of this group of amendments. I declare my interest that I do not have the expertise that I have listened to this afternoon, so I will just do my little bit. I thank the Minister for his reply to the questions I sent him on the multiple retail shops that will be affected by this increase due to the larger rate for valued properties.

I support Amendment 5 in the name of the noble Earl, Lord Lytton, and the noble Baroness, Lady Pinnock. There will be 3,260 retail shops affected by these changes, many of which are supermarkets. If the Government increase the multiplier by 0.1%, this would increase costs by about £3.7 million per year on these properties. This would be passed directly on to customers who shop in these shops, supermarkets and hypermarkets, and would also damage the large anchor stores in shopping centres, which are under pressure already from the online warehouses which this Bill tries to target. The noble Lord, Lord Thurlow, has already detailed the value of these large retail stores to the high street and shopping centres much more expertly than I. Therefore, I ask the Minister to consider these amendments urgently, because they will add costs to these businesses.

The Minister also made clear why no detailed impact assessment or calculations have been done. This is due to these rates being set in the Budget, and the revaluation, which will be a disappointment to the noble Baroness, Lady Pinnock. The cost to large businesses is unknown. The Bill could damage these larger businesses just to support smaller ones. As the noble Baroness, Lady Pinnock, stated, we just do not know what the final financial impacts of this will be. I spoke to a leisure business this weekend. It has no idea what its rates will be in 2025-26 and therefore finds it very difficult to budget for what it will have to charge and how it will manage its subscriptions in the coming year.

Regarding Amendment 13, as the noble Lord, Lord Fox, said, the Bill tries to protect the high street. The high street is not only retail, hospitality and leisure, so I support the amendment of the noble Earl, Lord Lytton, to try to ensure some flexibility in the future for these types of businesses to be added in. High street businesses will change in the coming year as high streets need to prosper, with new types of business. These could include veterinary surgeons—a business that I have an interest in—who want to come to the high street and need to be encouraged with possible lower rates.

I support the amendments of the noble Baroness, Lady Pinnock, who spoke with passion about government and local authorities, the noble Baroness, Lady Scott, who spoke in support of the manufacturing industries and the noble Lord, Lord Fox, who spoke in support of music venues—all of which need more clarity and information in this Bill.

[Lord Khan of Burnley (Lab)]

My Lords, the amendments in this group and the three groups that follow seek to change the Bill in two broad respects. They seek to carve out properties from the higher multiplier and to widen those hereditaments eligible for the lower multipliers. These amendments and those that follow would have a significant impact on the scope of Clauses 1 to 4, the potential cost of the lower multipliers and the revenue flowing from the higher multiplier. They would therefore reduce the Treasury’s ability to set sustainable and worthwhile higher and lower multipliers. As such, it is important that we consider these amendments—and those in the three groups that follow—in the overall context of the wider purpose of Clauses 1 to 4.

In the Budget, the Government announced their intention to introduce a permanent tax cut for retail, hospitality and leisure properties from 2026-27 by introducing two permanent lower multipliers for these properties. It is important that any tax cut is sustainably funded, which is why the Government also announced their intention to introduce a higher multiplier for the most valuable properties—those with a rateable value of £500,000 and over—from 2026-27.

--- Later in debate ---

[Lord Jamieson (Con)]

My Lords, I will speak to the amendments in this group in the name of the noble Baroness, Lady Pinnock, all of which address the lack of detail provided by the Government on their intentions with this Bill.

Amendments 16, 34 and 42 probe what types of hereditaments will be included in the definition of retail, hospitality and leisure. I am inclined to assume that the definition will remain the same as that which we used to define the requirements for the retail, hospitality and leisure relief scheme, and these are indeed the criteria listed in the noble Baroness’s amendments.

These may be unnecessary amendments, given that eligibility for retail, hospitality and leisure relief is already set out in the Government’s guidance for the scheme. However, we discussed our concerns about the power of the Treasury to define this in an earlier group. Crucially, businesses that are already worried about this Government’s plans need certainty and to be able to plan for the future. The Minister said that they need certainty; would not putting a clear definition in the Bill be a good way of delivering that? I will listen with interest to the Minister’s response, as we are likely to return to this part of the Bill on Report.

Amendment 51 seeks to probe the intended application of the Bill in relation to the National Planning Policy Framework. I certainly understand the noble Baroness’s confusion because, in the Labour manifesto, the Government promised reform of the business rates system and explained that such reform would include a larger burden on online businesses that operate from out-of-town distribution warehouses. Contrary to those statements, the Bill will actually have negative consequences on the high street. The noble Baroness is right to question whether the Government intended the higher multiplier to affect the high street in the way it will or whether, despite knowing what the impact would be, they chose to proceed anyway. I look forward to the Minister’s response and hope that there will be further clarity from him on the application of the Bill.

[Lord de Clifford (CB)]

I rise quickly to support Amendments 16, 34 and 42 tabled by the noble Baroness, Lady Pinnock, and to reiterate my point about clarity for businesses. Businesses want to plan two or three years ahead but cannot. We have a limbo at the moment for about 18 months to two years, and this Bill leaves us in that position. I ask the Minister to go back to the Government and ask for some clarification—that is, some sorts of figures so that businesses can plan for the future.

Renters’ Rights Bill

Lord de Clifford Excerpts

Tuesday 4th February 2025 Lords Chamber

[Lord de Clifford (CB)]

My Lords, I congratulate the noble Lord, Lord Wilson of Sedgefield, and the noble Baroness, Lady Brown of Silvertown, for their passionate and moving maiden speeches. This Bill will be welcomed by tenants, not only to improve security of tenure of their homes and the quality of properties being rented to them.

The Bill encourages tenants to seek redress against poor landlords for issues they have with their properties, such as repairs, unfair rents and unfair evictions. It increases the reliance on courts, local authorities and ombudsmen to decide on these issues, as has been covered by many Peers. Currently, all these are under pressure, and I look forward to hearing from the Minister what plans are in place to deal with this increased workload.

Also, with the increase in reliance on these bodies, is there a risk that the complexities for tenants on who to contact increases? There are currently 10 organisations that they could contact about these issues. Some clarification for tenants in future would be useful.

Change always creates uncertainty, and this Bill certainly does for landlords, who are already making decisions based on this Bill and its many unintended consequences, some of which I will address.

I welcome the need and reason to give notice to protected tenants, but I ask the Minister for clarification on an issue that came forward to me: if a landlord has a rented property under a shorthold tenancy and has the need to employ a carer for themselves or for a carer to live in that property, could they give notice under ground 5E with only four weeks’ notice? This issue was raised with me—I do not expect an answer tonight.

I am sure that the tenants’ rights and protections to challenge punitive practices such as rental bidding will be circumvented by landlords and letting agents by increasing the asking price of the rented property, especially when the demand is in certain areas, therefore again putting tenants off from putting in offers, as was already mentioned by the noble Lord, Lord Thurlow. The principle of being allowed to take rents in advance is welcome, but one simple rule does not work for a sufficient number of tenants—mainly those who do not have credit history. For example, overseas individuals and families coming to this country to work or study, individuals starting new businesses with less than three years’ worth of accounts, and students with no guarantor may all have the funds to pay rent in advance, but they cannot due to this Bill and will be overlooked in preference of those tenants with regular incomes. I ask the Minister: has any amendment been considered on how we can help these types of prospective tenants?

The reduction of the effective minimum term of three months for tenancies means more uncertainty for landlords. Landlords and letting agents will incur most of the costs of letting a property at the beginning of the tenancy and will therefore be out of pocket on a regular basis. Why do the Government feel the need for such a short starting period to tenancies? Do not landlords deserve some protection for the cost of moving a tenant into a property?

Pet ownership has increased in the past five years, and the importance of pets to individual families has also increased, so the right to request a pet is helpful and welcomed. Would it not be wise to first define a pet in the Bill? Could I suggest that a term such as “companion animal” is used? In the veterinary profession, this category typically includes dogs, cats, birds, rabbits and other small mammals. I think that this would help within the Bill. I thank the Minister for noting my interest in this area as well.

It is acknowledged that pets bring additional dirt and increased wear and tear to properties and, on occasion, cause damage and infestation of fleas. That is why holiday letting markets charge extra amounts when pets are allowed. The Bill has tried to address this concern by asking tenants to pay for pet insurance; as pointed out by the noble Earl, Lord Kinnoull, this product does not exist. I look forward to further discussions on this point with the Minister and in Committee.

There is a shortage of supply of rental properties, and there has been for many years, especially in rural areas, as covered by the noble Earl, Lord Leicester. With the changes in the Bill, rural landlords in areas with good communication to major cities and holiday destinations are changing the use of properties to holiday lets or renting to city weekenders on a common law tenancy basis, which gives the landlord a lot more flexibility. This further reduces the availability of affordable supply of property to local individuals, workers and families, and this is an area we need to address. I look forward to contributing further to the Bill in Committee .

Non-Domestic Rating (Multipliers and Private Schools) Bill

Lord de Clifford Excerpts

2nd reading
Wednesday 29th January 2025 Lords Chamber

[Lord de Clifford (CB)]

My Lords, I join other noble Lords in sending my condolences to the noble Lord, Lord Khan of Burnley, and his family for their recent loss of a senior member of their family.

I express my interest in the non-domestic rates Bill. I wish the House to note my interest in the matter as a non-domestic rates payer for five properties as part of the veterinary business I manage. My knowledge of non-domestic rates is not as extensive as it could be, and certainly not as extensive as that of my noble friend Lord Lytton.

Non-domestic rates reform has been a topic of discussion for many years for businesses. High street retailers, pubs and hospitality venues have been part of my early morning walk, listening to business news while I walk my dog, for many years. Businesses complain about the financial burdens this tax puts on them. I welcomed the Treasury report Transforming Business Rates in October 2024 and the call for evidence from stakeholders by the end of March. Therefore, I feel that this Bill is the start of a transition on business rates reform, and it is certainly not the solution.

I commend the general direction of the Bill in providing a possibly clearer and more certain system for how non-domestic rates are calculated for businesses, as the current rate is confusing, complex and not guaranteed. Two multipliers are included for retail, hospitality and leisure businesses. They are lower than the standard multiplier and possibly apply to two bands of rateable values of up to £500,000, which is welcome. My reservation is that the maximum reduction of 20 pence or 0.2—however it is expressed—will give savings to the RHL sector, but there is no indication from the Government as to the possible level of the lower multipliers that will be announced in the Budget in the autumn.

I agree with the noble Baroness, Lady Scott, the noble Lord, Lord Fox, and my noble friend Lord Lytton that it is difficult at this point to estimate and predict whether these businesses will make a saving in the coming years. Can the Minister say whether an assessment has been made of how much lower the standard multipliers would have to be to ensure that small businesses end up paying less or similar amounts of business rates than they currently pay, including the current reliefs that have been in place since the pandemic? I am aware of one leisure business that is already looking forward to 2026-27 with no indication of any relief expected. It is budgeting for a substantial increase in its non-domestic rates bill of thousands of pounds. As a result, it is looking into how to it can absorb those costs.

I welcome the addition of the higher multiplier for properties with rateable values of over £500,000, which is around 1% of the properties charged business rates. What proportion of the 1% are high street shops? These large shops are vital to our city centres, high streets and shopping centres as they attract great numbers to those locations. If this additional cost burden is too great for these large shops, it could have the opposite effect from the one the Government desire of trying to keep the high street alive.

I thank the Minister’s team for the briefing on the Bill last week and the confirmation that it is intentionally meant to be fiscally neutral, with the only additional funding coming from the removal of rate relief for charitable private schools. I have a concern about the removal of the relief. As expressed in the other place, although relief is being given to schools in which over 50% of their young people have an education, health and care plan, some schools that are charities and educate people with special educational needs do not have EHC plans in place for some of their students. If a school has a large number of these pupils, it may not qualify for relief. Those schools will see a significant cost added to their ever-increasing cost burden.

For families that send a child to these schools, this will add a financial burden. They already face certain challenges and need the extra support of these schools to ensure that the child is educated and can fulfil their potential in life, both at home and in the workplace. Has any further evidence been ascertained on the number of schools that provide education to SEN pupils but would not be eligible for the relief that will be removed?

I listened with interest to noble Lords’ many comments and contributions to this debate and to the issues raised. I look forward to contributing further at the next stage.