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

Lord Greenhalgh Excerpts
Wednesday 10th November 2021

(7 months, 3 weeks ago)

Grand Committee
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Baroness Blake of Leeds Portrait Baroness Blake of Leeds (Lab)
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My Lords, I thank noble Lords for drawing attention to the inadequacies of the situation that we are in. Until February this year, I was leader of Leeds City Council and we had the difficult job of working with businesses, when the complexity of the welcome resource that was available was challenging, to decide who was worthy of getting the relief and who was not. The comments made today just highlight the difficulties that local authorities are still having to face. I speak now as a vice-president of the LGA and am mindful of its input to this debate.

I thank my noble friend Lord Hunt for focusing on one specific sector and area, because that helps us to understand just what particular sectors are going through. We know that language schools are not the only area having problems but the noble Earl, Lord Lytton, referred to the loss of expertise, knowledge and experience. All those things add up to what we hope will be viable businesses as we emerge from this. In line with the comments they made, and continued by the noble Lord, Lord Cormack, we are faced with a situation across business and local authorities where there is now a lack of confidence, and concern at the lack of consistency and certainty. I hope that the Minister will be able to put our minds at rest on this.

We have had a good discussion regarding our concerns about how the figure of £1.5 billion was achieved. My concern here is that while we talk in terms of billions, we actually need to drill it down to the cost for businesses. I think what we are looking for collectively in the answers is a recognition of the urgency and the detail, and to hear when and how this is to be brought forward.

Lord Greenhalgh Portrait The Minister of State, Home Office and Department for Levelling Up, Housing & Communities (Lord Greenhalgh) (Con)
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My Lords, I am grateful to noble Lords for the opportunity to speak to the benefits of Clause 1 of the Bill, which has received broad support throughout its passage. I will shortly come to the particular concerns of the noble Lord, Lord Hunt of Kings Heath, and the noble Earl, Lord Lytton, as well as those of the noble Baroness, Lady Garden of Frognal, so ably put by the noble Baroness, Lady Pinnock. They eloquently set out their objections, wanting to promote a wider debate about the need for clarity around guidance and the urgency of this measure. I will endeavour to respond to those concerns.

Clause 1 provides that coronavirus and the Government’s response to it should not be considered a legitimate basis for a successful material change of circumstance appeal. There are many thousands of these appeals currently in the system; the passage of the Bill will ensure that they do not stand. It is important that we clarify through this legislative measure that the impact of coronavirus will be accounted for at the next revaluation, rather than becoming a legitimate ground for appeal between revaluations. Failing to do so would clog up the courts, undermine local government finances and cause the MCC legislation to be used in a way that was not intended when it was passed. As noble Lords will recall, the provision for MCCs was not intended to reflect market-wide economic effects, which are rightly considered at general revaluations, the next of which will be in 2023.

The Government have received widespread support from parliamentarians in both Houses for this measure. There has been general approval of Clause 1 as a necessary measure to remove a significant source of financial uncertainty from local government, as well as to ensure that the law relating to business rates appeals operates as intended. The noble Lords who tabled this amendment provided by way of explanation that they wish to prompt a wider discussion of the Government’s plans relating to the £1.5 billion of business rates relief that we have promised, on top of the £16 billion of relief already provided to businesses throughout the pandemic.

As the Government have made clear, the £1.5 billion is intended to enable local authorities to provide targeted support to the sectors most affected by the pandemic but which have not benefited from support linked to business rates. Within those sectors, the relief will enable councils to award relief to businesses that they consider the most affected by the pandemic, using their local knowledge and, obviously, having regard to the government guidance. I am confident that it will prove to be a far more effective and faster way of directing support to businesses impacted by the pandemic than the MCC challenge process. That is in part because councils use their local knowledge of their area and ratepayers will ultimately be responsible for decisions on the award of relief. It would not be right for Ministers here to say whether particular ratepayers or types of ratepayers will benefit from the £1.5 billion scheme.

Work is ongoing between my department, the Treasury, the Valuation Office Agency and local authorities to prepare guidance to support the relief process. The shape of the final guidance, and how in practice we will smoothly pass decisions on this relief scheme to local authorities, will need to reflect various factors, including the existing framework of government support, information held by local authorities and their capacity to administer schemes quickly. We will continue to work on the relief fund and prepare the guidance for publication as soon as the Bill receives Royal Assent. We are of course mindful of local authorities’ need for an effective set of parameters within which they can design their local schemes. Local authorities should stand ready to develop and deliver their schemes as soon as they are able.

The noble Earl, Lord Lytton, wanted to know where the £1.5 billion figure came from. It is quite clear that local government made provision, as reported, of almost £1 billion for Covid MCC challenges for 2020-21. That was, in effect, being held in reserve rather than being spent on local public services. This measure enables that £1 billion that is currently provisioned to deal with challenges to go towards the effective delivery of local public services. Of course, it is a matter for local authorities themselves to determine. That certainly gives them the freedom to release that money that is currently tied up if we do not proceed with this piece of legislation.

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

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

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

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

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

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

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

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

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

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

Lord Greenhalgh Portrait Lord Greenhalgh (Con)
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I will start with the new clause proposed by the noble Baroness, Lady Pinnock, and the noble Lord, Lord Fox. This would require the Government to carry out an assessment of whether the business rates measure in the Bill improves the wider system of business rates.

I remind noble Lords that Clause 1 is limited in scope. The Government are making a targeted intervention through the Bill to ensure that the law concerning material changes of circumstances operates as it should do as regards the impact of coronavirus on rateable values. The Government are not, by contrast, offering the Bill as a means of introducing significant reform to the business rates system. Indeed, it would be wrong to do so. The Bill is narrow in its focus precisely so that Parliament can deliver certainty on this issue, with minimal delay, to those that need it, particularly local authorities.

I appreciate that many noble Lords wish to see more substantial changes to the business rates system, as pointed out eloquently by the noble Baroness, Lady Pinnock, and I can provide good news in that regard. Noble Lords will have seen the Chancellor’s Budget Statement and may have read the final report of the Government’s business rates review, published alongside the Budget. The Government have committed to changes to improve the business rates system through delivering more frequent revaluations, starting from the next revaluation in 2023. This answers widespread calls from stakeholders and will help deliver a more timely, and hence fairer, distribution of business rates.