Non-Domestic Rating (Multipliers and Private Schools) Bill

Lord Khan of Burnley Excerpts

Committee stage
Thursday 27th February 2025 Grand Committee

[Lord Thurlow (CB)]

My Lords, I will add a few words on this important group of amendments. It is not possible to do an impact assessment at the moment. This has been rushed, and the new valuation list will not be completed for another three or four months. Non-domestic rates are the third-highest cost to most RHL businesses, after rent and employment costs. The third-highest outgoing for these businesses is being discussed here and going into law as we speak before one of the critical ingredients of the P&L of those businesses is known. It will not make good law.

The amendments we have heard about in this group, and some of those to come in later groups, refer to a request for delay to the impact assessment so that these variables are known and businesses are not groping about in the dark trying to understand their profitability and do their business plans. It is not the right moment to be having this conversation, but all will be fine if we allow an extra year to do the impact assessments and the required consultations with the professional bodies that have the expertise, which can then be assessed by secondary legislation.

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

My Lords, these amendments seek to introduce a number of provisions into the Bill requiring reports and assessments of various types. They are concerned with the impact on the RHL—retail, hospitality and leisure—sector, including on local government revenues, businesses more generally and economic growth. Some reports and assessments would be required before Clauses 1 to 4 come into force, and others after.

First, I want to stress to the Committee the importance we attach to being clear and transparent about this policy—who will be affected and the impact it will have on revenue. The principles behind these amendments are sound. It is right that the impact of tax changes should be carefully considered in detail. However, there is a balance to be struck and some of these amendments would place an undue constraint on the Government that would likely delay the new multipliers coming into effect from April 2026. Others would duplicate existing reports or would require reports to be produced before we will have been able to collect any data from local authorities. Through a combination of existing reports and commitments already made, I am confident that we can give noble Lords the assurances they seek.

Amendments 48 and 73, tabled by the noble Lord, Lord Fox, seek to require the Government to undertake an impact assessment of the new multiplier arrangements on businesses, high streets and broader economic growth. Amendment 46, tabled by the noble Baroness, Lady Scott, would introduce a very similar requirement.

Noble Lords will be aware that policies and legislation concerning tax and the administration of tax fall outside the meaning of regulatory provisions as defined in the Better Regulation Framework. Obviously, tax measures are introduced for very different reasons from other types of legislation and are therefore not under the same requirements to be accompanied by an impact assessment. This has been the settled position for many years. In fact, the exemption for tax from the meaning of a regulatory provision was captured in primary legislation passed by this House in 2015. Section 22 of the Small Business, Enterprise and Employment Act 2015 excluded a statutory provision which makes or amends provisions imposing, abolishing or varying any tax, duty, levy or other charge. That exemption now exists in paragraph 2.3 of the Better Regulation Framework.

Nevertheless, the Government understand that there is great interest in the effects of the new multipliers, and the Treasury is committed to publishing analysis of the effects of the new multiplier arrangements when the rates are set in the Budget later this year. The reviews that Amendments 50 and 52 seek to introduce are focused on the changes in business rates paid by qualifying RHL properties and other types of businesses. I believe that what these reviews seek to understand is how the business rates liabilities of affected RHL or other properties have and will change, reflecting on the provision of retail, hospitality and leisure relief since 1 April 2020 and the introduction of the permanent lower multipliers for qualifying RHL businesses and the higher multipliers from April 2026.

Noble Lords will know that retail, hospitality and leisure relief has varied year on year since it was introduced, reflecting the particular economic circumstances, including the terrible economic shock that was created by the Covid-19 pandemic. What is more important to point out, however, is that this relief’s expansion in response to Covid was a temporary, stop-gap measure that has been rolled over repeatedly, leaving businesses in a perpetual state of uncertainty until clarity for at least one more year was provided at Budgets. The new RHL multipliers are ending that uncertainty, introducing permanent lower tax rates that will help qualifying RHL businesses to plan ahead and get on with running their businesses rather than constantly worrying about what the next Budget may bring them.

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[Lord Thurlow (CB)]

Before the Minister sits down, could I point out that these forecasts are all going to be hypothetical? In five months’ time, the VOA will produce, or have access to, the updated new rateable values nationwide. Current rateable values will be history. Therefore, we have to anticipate what those might be. The balancing act between the larger properties subsidising the smaller RHL properties will then be reworked, but we cannot do it at the moment, which is one of the reasons why we feel that time is required for delays to the impact assessment process to take us one further year ahead.

[Lord Khan of Burnley (Lab)]

I thank the noble Lord for making that point. He also talked about delays, which I will pick up in a later group when we talk about implementation; I have not forgotten about the important points he raises. On the point he just made, the Budget analysis takes into account the 2026 revaluation, so that point is covered by the Treasury in its work in the build-up to the Budget.

[Lord Jamieson (Con)]

I did not quite understand that point. The Minister is saying that the revaluation has already been taken into account in the figures that the Treasury is coming forward with. Does that mean he can share the revaluation with us?

[Lord Khan of Burnley (Lab)]

My Lords, let me clarify this for the noble Lord. As I said repeatedly on day one in Committee, the Treasury will publish an analysis when it sets its multipliers at the Budget, but the work that is going on in providing that analysis will consider all the issues, in particular the issue the noble Lord raised about the 2026 revaluation.

[Lord Fox (LD)]

It seems to me that the Government have done an impact assessment; if it is not an impact assessment, it is an analysis that may or may not be an impact assessment. The Minister is saying that he has some data but is not prepared to let us have it, so we have to make this law blind.

[Lord Khan of Burnley (Lab)]

My Lords, I think I have been quite clear in stating that there is clear evidence that there is no impact assessment on taxation. However, what we are asking to do in the Bill is to set the parameters for increasing the multiplier and the flexibility for the higher rate over £500,000; and, for the lower multipliers, to support RHL, as we committed to do in our manifesto. When the Treasury works up to the announcement and makes a decision on the multipliers at the Budget, it will of course publish analysis on what the impact of that will be in 2026.

[Lord Fox (LD)]

I am sorry to labour the point. This may sound rude but it is not supposed to be. Given that the Treasury seems to be driving almost all of this, could we please have a Treasury Minister here, as well as the noble Lord, on Report? It would make sense to talk directly to the department that has actually made the decisions, rather than to the person who is carrying the message.

[Lord Khan of Burnley (Lab)]

My Lords, I take everything that the noble Lord says in a good spirit; I will come back to him on that point. Let me be clear on the remit of the Bill. On when the Treasury will set its multipliers, I understand the noble Lord’s point, but I will go away and see. As I said on day one in Committee, I look forward to meeting all noble Lords who have an interest and amendments. I am happy to sit down and discuss this; if I can get one of my colleagues from the Treasury, subject to availability and diary commitments, I will of course pursue that.

[Lord Thurlow (CB)]

I too do not wish to labour the point but, if I understood him correctly, the Minister said that the ministry already has access to the new valuation list. Yet Colliers, a leading firm of rating surveyors with which I have had extensive discussions on this Bill, assures me that 1 June is when the work from the VOA will be completed. It may have been completed early but, if that is the case, can we please have that detail so that businesses can do their budgets and business plans?

[Lord Khan of Burnley (Lab)]

My Lords, I say directly again that the 2026 revaluation has not yet been completed but, obviously, the Treasury is working on it. It is having conversations with all stakeholders, of course. In fact, it is probably also looking at forward planning on the whole future of business rates. As I said on our first day in Committee, this is the start of a huge strategic focus looking at business rates; this is the first part of it. I assure colleagues that, as soon as the multipliers are announced at the Budget, noble Lords will have an analysis—not an assessment, but an analysis.

[Baroness Scott of Bybrook (Con)]

My Lords, I thank the noble Lords, Lord Fox and Lord Thurlow, for their support on what I think is a really important part of the Bill. It is not about us knowing; it is about businesses knowing. We heard very strongly from the noble Lord, Lord Thurlow, about businesses, particularly those that are around the £500,000 and do not know now whether they are or are not, and the multipliers. They are trying to plan their businesses, hopefully for growth, if we hear what His Majesty’s Government want for them, but how can they do it when they do not know what the third-biggest chunk of their expenditure will be? We are trying to get the Minister to understand how very important that is to this sector.

I thank the Minister for his response but I still think, as can be heard from the questions, that we have a lot of concerns over the lack of clarity on this and, particularly, the full impact assessments. I am more than happy to work with the Minister and the Government to find a way around this, so that we can feel comfortable—not for us, as I have said, but so that businesses can fully assess the impact as soon as possible. For now, I beg leave to withdraw my amendment.

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[Lord Jamieson (Con)]

My Lords, Amendment 47 addresses the issue that, despite the Government’s claim that they would reform the business rates system, the Bill does not offer that. We heard concerns from several noble Lords on the previous day in Committee that this is not a Bill that will support the high street and level the playing field, as promised in the Labour manifesto. My concern is that businesses will face substantially higher costs. These proposals are supposed to support the high street, with a so-called Amazon tax, yet this is clearly not the case. It is a blunt instrument that will substantially increase taxes on all properties with a rateable value above £500,000. As such, it risks harming the very businesses it is purportedly designed to help, such as anchor stores and other retail, hospitality and leisure facilities fundamental to the high street.

There is a second concern that we have already raised: the cliff-edge nature of these proposals. I, like the noble Lord, Lord Fox, have done some very basic analysis of this. For example, a retail, hospitality or leisure business with a rateable value of just under £500,000 would today pay rates of around £175,000, assuming a 0.2 discount and a multiplier of 0.55, whereas if it were to make a small investment and tip over that threshold, it would pay £320,000. Like the noble Lord, Lord Fox, I allow for a little approximation in those numbers. There are plenty of examples of this. For instance, locally to me in Bedfordshire, Luton Hoo, which is currently looking at some investment, has a rateable value of £490,000. Will that investment go ahead, knowing the additional costs? Even more locally—as Members are aware, I am a councillor and I declare my interest as a councillor in Central Bedfordshire—near my own ward, a garden centre in Toddington faces the same issue. Again, I am aware that it is looking at some investments.

We have also touched on the impact of future revaluations. The Minister has been keen to point out that this will impact fewer than 1% of properties and only 3,100 retail outlets. He said that he wants to be clear and transparent, so can he tell us how many additional properties will be above the £500,000 threshold after the next revaluation? I note that the noble Lord, Lord Fox, refers specifically to the idea of a commercial landowner levy as a proposed tax reform to replace the business rates system. I support the sentiment of requiring government to consider genuine reform, rather than the lack of change that the Bill provides. I do not agree with the specific reform proposed by the noble Lord, but I acknowledge the need to adapt the system to ensure that online businesses that operate from out-of-town warehouses pay a fair, proportionate share of business rates. Given that the Bill has been brought forth, it seems reasonable to assume that the Government have delayed any plans they had to reform the system, which will damage businesses up and down the high street. They promised lower business rates but are reducing the relief offered to retail, hospitality and leisure businesses, sending an incoherent message to our high streets. I look forward to the Minister’s response.

[Lord Khan of Burnley (Lab)]

My Lords, Amendment 47 seeks to require the Chancellor to undertake a review of the measures in the Bill, once passed, on broader non-domestic rating policy and to set out what potential changes may be required and/or what alternative approaches to non-domestic rating have been considered. The Government are committed to creating a fairer business rates system that protects the high street, supports investment and is fit for the 21st century. The Government commenced that journey at the 2024 Budget, when we announced our intention to permanently—I say that again: permanently—introduce lower rates for qualifying retail, hospitality and leisure properties from 2026-27, as well as a higher rate on properties with rateable value of £500,000 and above to ensure that the permanent tax cut is sustainably funded.

At the Budget, the Government also published the Transforming Business Rates discussion paper, setting out priority areas for business rates reform and inviting stakeholders to have a conversation with the Government on this matter over the course of this Parliament. The areas of interest for further reform as set out in the paper include: incentivising investment and growth, considering the frequency of revaluations and ensuring that the system is transformed to make it fit for the modern 21st century economy. The paper also focuses on tackling avoidance and evasion; for example, through the Government’s intention to publish a consultation on adopting a general anti-avoidance rule for business rates in England.

I am delighted to say that those conversations with stakeholders on priority areas for reform have commenced and are ongoing. I thank all those stakeholders who have been in contact to offer their valuable insights and experience of non-domestic rating. Furthermore, on 17 February, the Government published the Business Rates: Forward Look policy note, which provides an update on key milestones for the Government’s overall business rates reform agenda. As set out in that note, we are reflecting on engagement undertaken so far and the views expressed as part of that process. It also sets out that we anticipate further stakeholder engagement on specific reform options ahead of the Autumn Budget, when final decisions will be set out.

I am aware that there is support from Liberal Democrat noble Lords and Members of Parliament for the replacement of business rates with a commercial landowner levy. What is important to the Government is that we have a tax that works. It is not the first time that this House has heard suggestions for a tax on land values or a levy on landowners: it was as common a debate in the last century as in this one. What all those debates show is great uncertainty and a lack of evidence of the benefits: any benefits to the high street would be far from certain. We are clear on the need for reform but, to minimise disruption for businesses, the Government will make improvements to the existing system over the course of this Parliament.

Before I conclude, let me address the points that the noble Lords, Lord Fox and Lord Jamieson, raised on investment. They will understand that I am unable to comment on specific examples of live non-domestic rating bills but, as part of the Transforming Business Rates discussion paper, we will look at the effectiveness of the improvement relief scheme, which helps businesses that invest in their property. I look forward to our engagement, post Committee, in more detailed conversations. For the reasons set out, I am unable to accept the amendment. I agree that the system is broken and we are trying to fix it. It cannot go on year after year on an ad hoc basis. We need certainty and sustainability so that people can have a clear and fair system. As we said in our manifesto, we will continue to support leisure, hospitality and retail, and those above £500,000 rateable value—fewer than 1% of properties—will contribute to make sure that our system is fair and balanced.

I hope I have provided reassurance as to the seriousness with which the Government are approaching our stated task of reforming the business rates system, and I ask the noble Lord to withdraw the amendment.

[Lord Fox (LD)]

I thank the Minister for replying; I am not sure that I thank him for his reply. I thank him for acknowledging that the system is broken. When you try to fix something, there is no point in fixing the windows if the roof has caved in and you have subsidence. The scale of the brokenness means that the ambition to reform needs to be somewhat more than I detected from him.

I am grateful to His Majesty’s loyal Opposition for bringing up the cliff-edge point: we have to talk about putting in steps to avoid that cliff edge. The example given was not specific but an imagined, general example. We do not need specifics: we know that if a business is valued at £495,000 and it increases its value just a tiny bit, it is suddenly in a massive tax bracket. The Minister must be able to see that that is a huge barrier to investment. The only way to deal with that is to have not a cliff edge but a gradual approach. We should investigate that process together.

[Lord Khan of Burnley (Lab)]

The noble Lord touched on a point that the noble Lord, Lord Jamieson, made about anchor stores and valuations above £500,000. Let me be clear: many anchor stories in RHL have rateable values of properties in other parts of the country that are less than £500,000, so, equally, they will also benefit from lower multipliers in that bracket.

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[Baroness Pinnock (LD)]

My Lords, Clause 5 is an interesting add-on to the legislation as a whole, which is focused on non-domestic rates as applied to business premises. Here, we suddenly have one sector of businesses being pulled out for special treatment, which is curious to me. It becomes a very strange Bill with Clause 5 added to it. However, for Liberal Democrats, as I have probably said many times in the course of my public sector career, education is the single most important and best investment that any Government can make in our children, their future and the country’s future. The clause is important to us because it relates to education.

The Government’s policy in this Bill, removing the current exemption for relief of business rates, combined with the introduction of VAT and the impact of employers’ national insurance increases, will undermine two important principles for Lib Dems. The first is that education should not be taxed. All education provided by an eligible body, including universities, music lessons and tutoring, is currently exempt from VAT, and VAT should not be imposed on these things—and, hence, neither should business rates. The exemption should not be removed from these schools. The second principle is that parents have a right to choose the education setting that they believe is the best for their children. We champion choice and believe nothing should get in the way of parents making those choices.

The best outcome of all would be that state-funded education was funded at the same level as that experienced by children in the private, or independent, sector. It is curious to me that the gamut of changes that the Government are making in relation to the costs imposed on the private, or independent, sector will not release sufficient funding to make a significant impact on children’s education in the state sector, so it is hard to understand what the Government are seeking to achieve.

It has been an interesting debate. Lots of points of definition have been raised, and I hope the Minister will be able to respond to the interesting points about the importance of having an accurate definition of the sector. I look forward to his response. But in summation: education is most important, and parents have the right to choose, as long as those choices do not have a negative impact on everybody else, which in this case they clearly do not.

[Lord Khan of Burnley (Lab)]

My Lords, Amendments 55 and 62 seek to carve out from the Bill all private schools that charge fees of less than £27,642 per year through exempting schools that meet this criteria from the definition of a private school. I am conscious that other amendments tabled by noble Lords seek to carve out other private schools from the Bill definition, and we will discuss these in more detail as part of today’s proceedings. However, it would be helpful for me to set out the purpose of Clause 5 for when the Committee decides whether to agree the clause. At the same time, I can elaborate further on the meaning of “or other consideration” as per Amendments 56 and 59, and the use of “private school” as opposed to “independent school” in response to the amendments in the name of the noble Lord, Lord Lexden.

The Government believe in parental choice but are also determined to fulfil the aspiration of every parent to get the best education for their child. The removal of business rates charitable relief, as set out in Clause 5, legislates for the Government’s commitment to secure additional funding to help deliver the Government’s commitment to education and young people, including the more than 90% of children who are educated in state schools.

Clause 5 removes the charitable rate relief from private schools by amending paragraph 2 of Schedule 4ZA and paragraph 2 of Schedule 4ZB to the Local Government Finance Act 1988 to exclude private schools from the rules in relation to the application of charitable rate relief. Amendments to the rules in relation to the application of charitable relief can be made only through primary legislation.

The Bill inserts new sub-paragraph (3) to paragraph 2 of Schedule 4ZA to remove charitable relief from occupied hereditaments wholly or mainly used for the purposes of carrying on a private school. Ancillary and support buildings, such as offices, will also lose their relief—for example, classrooms and sports fields that are wholly or mainly used for the purposes of a private school.

The rest of Clause 5(2) is concerned with the definition of a private school. To answer directly the points raised by the noble Lord, Lord Lexden, the terminology “private school” has been used because the term “independent school” includes state-funded academies, which are not in scope of this policy and therefore of the measures in the Bill. The term “private school” has been used to avoid uncertainty regarding which schools are in scope, and I am sure it is not the noble Lord’s intention to bring academies into scope of this Bill.

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[Baroness Barran (Con)]

Before he sits down, can the Minister respond to one point that I made? If he does not have an example today, perhaps he could write to me and share the letter with other Members of the Committee. Does he have a real-life example of where “other consideration” has regularly—or even occasionally—been used in practice to replace fees, either wholly or partly? I have visions of, I do not know, farmers arriving with trailers loaded with whatever it might be. If the Minister does not have an example now, perhaps he could let me know.

I also ask the Minister to confirm something. I take his point about the property value not necessarily being linked to the fees, but can he commit to considering, where a school charges less than the per pupil rate of state funding, whether this policy will still apply?

[Lord Khan of Burnley (Lab)]

My Lords, as the Committee will understand, it is difficult for me to talk about examples at this time, but I take the noble Baroness’s point. I would like to hear more about the examples that she has, in particular to see what examples we can discuss in depth when we meet post Committee. It is difficult to talk about non-domestic rating examples now.

[Baroness Barran (Con)]

To be honest, I do not have examples, but the Bill suggests that fees might be paid by means of “other consideration”. I would be grateful if the Minister could write to me about whether that has ever been used, either wholly, partly, regularly or occasionally.

[Lord Khan of Burnley (Lab)]

I am happy to write to the noble Baroness on those two points; I will also pick them up when we next meet.

[Lord Lexden (Con)]

My Lords, please forgive me: I forgot to make a declaration of interest at the outset. I am a former general secretary of the Independent Schools Council and the current president of the Independent Schools Association, which consists of 700 schools—mainly smaller ones—that will be badly affected by this legislation and other actions of the Government in the realm of taxation.

The Committee will have listened carefully to what the Minister said in response to noble Lords. It is unlikely that the Minister’s reply will have given complete and utter satisfaction in every respect. We will return to these matters on Report. As far as my amendments are concerned, I am sorry that the Minister does not understand the reasons why the word “private” is very difficult because of its connotations. The problem with using it in legislation is considerable.

The Minister referred to the position of academies. Another way could have been found of dealing with VAT without introducing independent schools in the way that this has been done in legislation. There are many serious matters that naturally require further consideration and debate. That is why Report will be so important. I beg leave to withdraw my amendment.

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[Baroness Pinnock (LD)]

My Lords, there are some very important and interesting issues in this group of amendments. The first is about the provision of foundation courses to enable young people to move into further education or training. It is important that the Minister has an answer to the questions of the noble Baroness, Lady Barran, that will put us at ease that they will not be penalised in this way. Often, young people who do foundation courses do so because they missed out earlier in their school careers, for many reasons that might be associated with their family or their own health issues. I do not think the Government would want to penalise those young people by putting at jeopardy those courses available to them.

The next issue, about nurseries, is interesting because different parts of a premises can be assessed separately by the non-domestic/business rate regime. I say to the noble Baroness, Lady Scott, that even in an Amazon building, the facilities for the employees will be rated at a separate value from the rest of the building. For instance, I have been looking—surprisingly—at the implications for large hospitals, which were raised in the debate on Monday. Different parts of the premises will be rated in different ways. If there is a clinic, that is one thing; the main hospital is another; the café is another; a shop is another. It is possible to assess rateable values, for business rate purposes, in the same premises in different ways, so it is possible to assess nursery sections of a private school separately from the rest of the school. Therefore, it is possible to exclude these from the proposals in Clause 5. I look forward to the Minister being able to confirm that that is the case and that nurseries can be readily and easily excluded from business rate applications, even if the Government insist on removing the charitable status from the rest of the premises.

[Lord Khan of Burnley (Lab)]

My Lords, Amendments 57, 58 and 68 from the noble Baronesses, Lady Barran and Lady Scott of Bybrook, concern early years provision and private further education institutions. The definition of a private school in the Bill includes institutions that wholly or mainly provide education suitable to persons over compulsory school age but under 19, where such full-time education is wholly or mainly provided for a fee or consideration. This brings private sixth forms into the scope of the Bill measure but excludes general FE colleges. The Bill also includes a specific carve-out for independent training and learning providers. Due to the mechanisms whereby the Government provide funding to these institutions, it was necessary to provide a carve-out in the legislation to ensure that these institutions did not inadvertently come into the scope of the measure.

The Government’s view is that all schools that offer full-time education to children of compulsory school age and/or to 16 to 19 year-olds for a charge should be within scope of the Bill measure. This is to ensure consistency and fairness in the Government’s treatment of private schools. The Bill measure includes stand-alone private sixth forms as well as those private sixth forms that operate as part of private schools that also cater for children of compulsory school age. Amendment 57 would remove entirely this part of the private school definition, the resulting impact of which would be that all private sixth forms would be out of scope and therefore retain charitable rate relief.

The noble Baroness indicated that through this amendment she is seeking to understand whether institutions providing foundation courses would be considered private schools. Foundation courses are a level 5 qualification and as such are classed as higher education. Foundation courses are in the main provided by higher education institutions such as universities. Institutions that are focused on the delivery of higher education are not within the scope of the Bill, and where they are charities they will continue to receive charitable relief. However, any private sixth forms that provide a few higher education courses, such as foundation courses, will still lose their relief if they are wholly or mainly concerned with providing education suitable to the requirements of persons over compulsory school age but under 19 years old. Given that business rates are a tax on property, the Government believe that this is a sensible line to draw for when the relief is removed.

Amendment 58 would amend the Bill definition of a private school. It would remove the “wholly or mainly” requirement in relation to the concern with providing full-time education suitable to the requirements of persons over compulsory school age but under 19 years old for a fee or consideration in such institutions. In business rates, “wholly or mainly” generally means over 50%. Therefore, under the Bill definition, institutions that are more than 50% concerned with providing education suitable to the requirements of persons over compulsory school age but under 19 years old, and where more than 50% of such full-time education is provided for a fee or consideration, will be within scope of the measure and will no longer qualify for charitable relief.

The inclusion of the “wholly or mainly” test in the further education definition has been drafted in recognition that there may be some state-funded institutions where a small minority of pupils pay a fee for the courses they attend. The Government understand that these circumstances are rare but may include international students undertaking further education courses where they do not qualify for a state-funded place.

The noble Baroness, Lady Barran, asked for examples of institutions that may be around 50%. Regarding these schools, which mainly provide education suitable for those over compulsory school age but under 19 years old, it will be for local authorities to implement this test. I do not think it would be right for us to say whether a particular school passes that test, but we do not expect many of them to be at the margins.

Without including “wholly or mainly” in respect of new sub-paragraph (4)(b)(i), the Bill could inadvertently capture state-funded colleges of further education, which is not the intention of the Government’s policy. Similarly, it could risk capturing fee-paying institutions that predominantly provide higher education courses if one pupil who meets the broader further education definition is present. As set out, it is not the Government’s intention to capture higher education institutions within the Bill’s definition.

I should explain that the impact of this amendment would mean that the presence of one fee-paying pupil within the age bracket as per the current definition may result in the institution being brought into scope of the Bill, resulting in it losing charitable relief. In contradiction to Amendment 57, Amendment 58 would mean that more institutions would be in scope of the Bill and so would lose their rates relief. But I understand the purpose of the amendment, which is to understand better the meaning of the words “wholly or mainly”, and I hope I have been able to clarify that for noble Lords.

Amendment 68 seeks to carve out from the Bill private schools that also provide early years provision. For clarity, private nurseries that are on their own hereditament are not within scope of the Bill definition, and where they are charities they will retain charitable relief. The Government have decided that where private schools that provide for pupils of compulsory school age also have nursery classes within the school, the presence of nursery-age children should not remove the whole school from the business rates measure. This approach best ensures consistency with the underlying policy intent.

It is for individual private schools to decide how they wish to meet additional costs as a result of the business rates measure. The allocation of costs in private schools that also provide early years provision on the same hereditament is a matter for those private schools. It is worth mentioning that government early education and childcare entitlements can be used for childcare in any approved childcare provider; this includes private school nurseries, although the numbers undertaking early years entitlement in private school nurseries are relatively small. Similarly, private school nurseries are also eligible to receive tax-free childcare funding as long as they are registered with Ofsted or an equivalent regulatory body.

Accepting these amendments would remove many private schools from the Bill’s measure. This would reduce the amount of revenue that could be raised and, consequently, may reduce the funding available to the Government to deliver on their commitments to young people and the state-funded education sector, where over 90% of pupils in England are educated. The outcome of the tax changes on private schools will have a significant impact on the Exchequer, enabling the Government to fulfil their commitments on investing in state education and young people. Together with the policy to apply VAT to private school fees, these policies are expected to raise around £1.8 billion a year by 2029-30.

I hope that this provides further clarification on the drafting of the definition, as well as on the Government’s position regarding the inclusion of private further education and private schools that also cater for nursery-age children alongside compulsory school-age children. For the reasons set out, I respectfully ask the noble Baroness, Lady Barran, to withdraw her amendment.

[Baroness Barran (Con)]

I thank the Minister for his remarks and for addressing the points I made in relation to each of these amendments, in particular Amendment 58. I heard the Minister say that relatively few schools or private providers will be at the margins of “wholly or mainly”. I thank him for the example of the international students who might be fee-paying.

On Amendment 68, I understand the Minister’s push-back in relation to exempting a whole school—I hope I addressed that in my opening remarks—but I am grateful to the noble Baroness, Lady Pinnock, for her explanation of how local authorities can separate out different parts within a hereditament. I would be grateful if the Minister could take back to the department that this measure just feels really illogical. It will not be a significant amount of money that is raised by withdrawing the relief where an independent nursery is part of a school but not withdrawing it where an independent nursery is not part of a school, particularly in the light of the noble Baroness’s expert insights into how that could be achieved.

With that, I beg leave to withdraw my amendment.

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[Baroness Pinnock (LD)]

My Lords, Amendments 60 and 61 are important, focusing on children with special educational needs and disabilities. SEND provision is in crisis across the country, whichever sector of school children attend. The reason, as the noble Baroness, Lady Barran, has raised, is the huge delay in assessing children who may need an education, care and health plan, often because of the lack of educational psychologists. There are often very long delays getting what used to be called a statement of need but is now just an EHCP.

The consequences for schools in this sector is that they qualify only if their children have ECHPs, and because ECHPs are so difficult to access, many parents send their children to private school in desperation because their children’s needs are not being adequately met in the state sector. There is no criticism attached to that because there is huge pressure on the state sector. If you have a child with special needs then, if you are able, you look to where those needs are best met.

In the days before children with dyslexia were recognised, parents often took children with severe dyslexia out of the state sector and into one of the several independent schools set up around the country that had the expertise to help those children. I have a lot of sympathy with these amendments because we want all children to have their needs met, but schools helping young people with particular needs are in danger of having their relief removed because of the threshold in the Bill.

There is little recognition that children have special needs even without an EHCP, simply because of the huge backlog. The backlog exists because there is also a funding crisis within SEND. On all those issues, the Government really should think again, particularly on Amendment 61. I hope that the Minister will have some positive words in support of the amendments tabled by the noble Baroness, Lady Barran.

[Lord Khan of Burnley (Lab)]

My Lords, Amendments 60 and 61 are concerned with the carve-out within the Bill’s measures for private schools that wholly or mainly provide education to pupils with education, health and care plans. Amendment 60 seeks to remove the “wholly or mainly” requirement, the effect of which would be to carve out from the Bill’s measures private schools that provide full-time education to any number of persons for whom an education, health and care plan is maintained.

I understand from the accompanying explanatory statement that this amendment seeks to understand the definition of “wholly or mainly”. As I have said elsewhere on a previous group on business rates, wholly or mainly generally means more than 50%. In practice, the Government believe that this will ensure that most private special schools will not be affected by the measure. We expect any private special schools losing charitable rates relief to be the exception; they will potentially be in single figures. Private schools that benefit from the existing rates exemption for properties that are wholly used for the training or welfare of disabled people will continue to do so. This general exemption means that they pay no rates.

I am aware that some concerns have been raised—the noble Baroness has raised them in clear and categoric terms—in relation to the possibility that some mainstream private schools may be just under or over the 50% threshold for the EHCP carve-out within the Bill. In private schools, including private special schools, just 5.7% of pupils have an EHCP, with the majority of those pupils in private special schools. Therefore, we do not expect there to be many mainstream private schools near the 50% threshold.

To add to that point, if there are any marginal cases, the test in law is whether the institution is wholly or mainly concerned with providing education to ECHP pupils. While it will be for the local authority to decide, this wording should avoid the need for schools at the margin to jump in and out of entitlement for charitable relief following small movements in pupils.

The majority of private special school places are funded by local authorities. The 2024 school census shows that in more than 80% of the sector more than nine in 10 pupils have an EHCP plan that stipulates that the place is funded by the local authority.

Amendment 61 would result in the exemption of fee-paying schools from the measure if that fee-paying school wholly or mainly catered to pupils who have special educational needs as defined under the Children and Families Act 2014, and regardless of whether or not those pupils also have an EHCP. The Government are aware of the concerns raised with respect to pupils with special educational needs in private schools that may lose their charitable relief, because the school is not wholly or mainly concerned with providing full-time education to persons for whom an EHCP is maintained. The Government have carefully considered their approach to ensure that the impact on pupils with the most acute needs is minimised.

The Bill provides that schools that are charities and wholly or mainly concerned with providing full-time education for persons with an EHCP remain eligible for charitable rates relief. The Government recognise that where a private school has only a few pupils with EHCPs, it will lose its eligibility for charity relief. Mainstream schools throughout the private and public sector cater for pupils with special educational needs. Most children with EHCPs already have their needs met within mainstream state-funded schools. If an EHCP assessment concludes that a child can be supported only in a private school, the local authority funds the child’s place.

The noble Baroness, Lady Pinnock, touched upon the issue of the wider problem in terms of delay, which I will address. Local authorities aim to process all education, health and care plans and the respective applications in time for the start of the next school year, so that parents can make an informed decision as to which school they send their child to. In special cases, the local authority is able to pre-pay one term’s fees if the education, health and care plan is not complete but the outcome is foreseeable. Likewise, some private schools will forgo the first term’s fees for pupils who are expected to be granted an EHC plan in the future.

The Government are committed to improving inclusivity and expertise in mainstream state schools, restoring parents’ trust that their child will get the support that they need to flourish. Private schools can provide choice, high-quality education, economic benefit and public benefit through partnerships and means-tested bursaries, but most parents cannot choose private schools. We need to improve provision for the 93% of pupils at state schools, and that is rightly our focus. The Government are also committed to reforming England’s SEN provision to improve outcomes and return the system to financial sustainability. The Government will provide an uplift of around £1 billion in high-needs funding in the 2025-26 financial year.

Mainstream schools throughout the private and public sector, as I said before, cater for pupils with special educational needs. Amending the basis on which fee-paying schools are able to retain their charitable rates relief in the way that this amendment proposes would undermine the Government’s intention to remove tax breaks for private schools in order to raise funds to support the more than 90% of pupils who attend state-funded schools. As the Committee will know, the majority of children in England who have special educational needs—with or without an EHCP—have their needs met in the state-funded sector. The approach chosen in the Bill is targeted to ensure that the impact on pupils with the most acute needs is limited.

It is for the reasons cited that I cannot accept the noble Baroness’s amendments, but I hope that, with this further information, I have provided satisfactory explanation as to the Government’s approach and reassurance that the approach adopted ensures that the impact on those children with the most acute needs is minimised. I request that the noble Baroness withdraws her amendment.

[Baroness Barran (Con)]

My Lords, I thank again the noble Baroness, Lady Pinnock, for the vivid picture that she painted in her remarks of the desperation of some parents whose children are struggling in a state-funded school, and who make huge sacrifices to send their child to an independent school. I also thank the Minister for his clarification, as I have understood it, in relation to my Amendment 60. I think he is saying that independent special schools are exempt in this legislation but mainstream ones will not be, because they are extremely unlikely to be anywhere near the 50% threshold in terms of EHCPs.

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[Lord Thurlow (CB)]

I have not added my name to these amendments, but I feel strongly about them. This vital group, articulated so well by the noble Lord, Lord Black of Brentwood, is directly focused on those in need. I want to consider for a minute this group from a different point of view—the point of view, if you like, of the child. The noble Baroness, Lady Pinnock, gave the example of five schools by the age of seven—or seven by the age of five, I do not remember. I was one of those children. My parents were civil servants serving abroad, and they chose to keep me at home well into my teens, whereas most in similar positions were sent back to the UK to attend an independent school and be given the continuity of education that is required at home, wherever home may be.

The price I paid was 13 schools through the course of my education. Most of those were attempts to cram or correct for the next stage, because I was always turning up half way through a term, starting on a Wednesday in a class of 25 people—having never seen any of them before—after coming 3,000 miles. Then I was off again two years later, and there was a different syllabus—and a different language in one case. I ended up here in the UK knowing a great deal about Captain Cook, the South Pacific and the Māori but absolutely nothing about English history or any of the other normal curriculum subjects.

I spent my last few years at school on the back foot in a special independent school, trying to catch up. Had I not had that opportunity, I certainly would not be proud or competent enough to stand here today and address your Lordships. It taught me some self-confidence in the absence of any sort of academic success. University was out of the question. I give this example simply because it is terribly important that those serving abroad, whether in the Armed Forces or in the Civil Service, are given the opportunity to give their children an equal start.

I am very pleased that I had the alternative, because my parents wanted to keep us at home, wherever home was. It did not really do me any harm at the end of the day, but I got no GCSEs, O-levels or A-levels, other than the odd one—usually called something like technical drawing or one of these back-door opportunities. I mention this simply to drive home, perhaps, the importance of what is being discussed, raised by the noble Lords, Lord Lexden and Lord Black, and the noble Baroness, Lady Barran. Let us not destroy the opportunity for those young people.

[Lord Khan of Burnley (Lab)]

My Lords, it is a pleasure to follow that very eloquent contribution about the noble Lord’s personal journey. I will talk first to Amendments 63, 64 and 66, which seek to provide carve-outs from the Bill measure: in the case of Amendment 63, for private schools that wholly or mainly provide full-time education where at least 7% of gross income is spent on means-tested fee assistance; in the case of Amendment 64, for all private schools that wholly or mainly provide full-time education for gifted arts students, such as those attending specialist music and dance schools or performing arts colleges; and, in the case of Amendment 66, for private schools that wholly or mainly provide full-time education where at least 10% of students have at least one parent or guardian serving in the military.

The contributions that we have heard today reflect concerns about how the Bill may affect pupils from lower-income backgrounds, including those from military families, or those who are gifted arts pupils. Providing means-tested fee assistance is one way that charitable private schools can demonstrate public benefit, a requirement that accompanies charitable status. The Bill does not remove the charitable status of private schools and the Government expect private schools to continue to demonstrate public benefit. What is more, we do not think that Parliament should be putting in place incentives for charities to act in the public’s benefit in the way that Amendment 63 might encourage. Acting in the public benefit is something that a charity should inherently wish to do. Charitable private schools will continue to operate as charities and this Bill does not make any tax changes affecting their charitable status. For example, they will still be able to claim gift aid on donations and will not pay tax on their charitable surplus, as for-profit schools are taxed on their profits.

In designing the policy, the Government listened very carefully to representations and reached the view that, with the exception of the existing carve-out in the Bill for private schools wholly or mainly concerned with full-time education for pupils with EHCPs, no other private schools would be carved out of the measure. This approach was adopted because to carve out some private schools and not others would be unfair. However, the Government listened carefully to concerns raised and, in relation to pupils from military families or those attending specialist arts schools, the Government have taken appropriate steps in relation to two government schemes.

I will elaborate further. The Government offer a means-tested bursary scheme for pupils who attend any one of eight specialist performing arts private schools. The music and dance scheme provides means-tested bursaries and grants totalling around £32 million per year to enable children and young people with exceptional potential to benefit from specialist music or dance training. It is available to qualifying families if their child has a place at any one of the aforementioned eight private schools.

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[Baroness Barran (Con)]

My Lords, Amendment 65 is a probing amendment to understand the Government’s thinking in relation to faith schools. As we have heard on numerous occasions in Committee, our concerns about the financial viability of the sector relate to the combination of VAT, the potential increase in employers’ national insurance contributions and now business rates. This combination is potentially most acute for faith schools, for three main reasons.

First, as the noble Lord knows, they often charge lower fees than other independent schools and have less financial resilience. This is particularly true for some Muslim and Jewish schools. Secondly, for parents where choosing a faith school is really important, there will often be no state-funded alternative at all locally, in the case of smaller faiths, or, for the larger faiths, provision with spaces available for these children at short notice.

Finally, if this is the case, we are concerned that this could contribute to an increase in children who are educated at home, which is something I know the Government plan to contain through the Children’s Wellbeing and Schools Bill. Our concern is that the combination of pressures on these schools will cause them to close with the unintended consequences that I have outlined. I would be grateful if the Minister could explain what assessment the Government have made of each of these three risks, and how they plan to mitigate them. I beg to move.

[Lord Khan of Burnley (Lab)]

My Lords, Amendment 65 would mean that a private school with a religious or other special character maintained its eligibility for charitable relief where there is no maintained or academy school of the same religious character or other special character within the statutory walking distance as set out in the Education Act 1996. It would create an additional delegated power within the Bill whereby the Government, by secondary legislation, would be able to define what is meant by a special character. While the amendment does not indicate what may constitute a special character, we understand from the contributions made in the other place, as well as from the noble Baroness’s contribution, that this could be used to carve out schools that follow a particular method of education or provide specialist tuition.

Amending the basis on which fee-paying schools are able to retain their charitable rates relief in the manner in which this amendment proposes would undermine the Government’s intention to remove the VAT and business rates tax breaks for all private schools. As we have said, removal of the business rates charitable relief is necessary in order to raise funds to support the more than 90% of pupils who attend state schools. The Government have carefully considered their approach and have decided that private schools that are charities will be carved out from the Bill measure only where they wholly or mainly provide education for pupils with EHCPs.

It would be inconsistent and unfair to exempt any other types of private schools from this Bill measure. However, the Government value parental choice and recognise that some parents want their children to be educated in a school with a particular faith, ethos or other characteristic, such as following a particular education method. Pupils who follow a particular faith, education method or other characteristic can be accommodated in the state sector. All children of compulsory school age are entitled to a state-funded school place if they need one, and all schools must comply with their obligations under the Equality Act 2010. In addition, schools are expected to promote fundamental British values, including the values of mutual respect and tolerance for those with different faiths and beliefs. The Government are not considering further exemptions to this policy, and therefore there is no need, as the amendment attempts, to give the Secretary of State the power to establish and define new designations of schools’ character in order to then exempt them from this measure. For these reasons, I am unable to accept the noble Baroness’s amendment.

[Baroness Barran (Con)]

The Minister says again that this undermines the Government’s intention, but then in the next breath says that the Government value parental choice. It is one thing to say that a child can be accommodated in a state school—the Minister knows that there are certain parts of the country where even that is not necessarily a given, where state school spaces are very limited indeed and therefore one is putting pressure on parents and children to travel further than is ideal—but there is not the ability to place a child in a school with a specific faith designation, particularly for smaller faiths, in the way that he suggests. I do not think one can say that one values parental choice and then not offer parents something that they have strived to offer to their children.

Again, as in relation to my earlier amendment, these are schools, as I said in my opening remarks, where the fees, particularly in the Muslim and Jewish communities, are often two-thirds or half of a state-funded place. We are very concerned that this will result in children being educated at home, which carries with it certainly limitations in terms of socialisation for those children, at best, and, at worst, potentially wider risks to those children.

[Lord Khan of Burnley (Lab)]

I am conscious that the noble Baroness made a strong point; it has just come to my knowledge that I did not address it in my response. We estimate the overall impact to be that business rates changes will lead to around 3,100 fewer places in the private sector. Of those 3,100 pupils, the Government expect 2,900 to move to state-funded schools. The remaining 200 pupils will be international students returning to schools in their home nations, or domestic students moving into home-schooling.

The noble Baroness talked about home-schooling and mentioned the Children’s Wellbeing and Schools Bill. The Government will introduce a duty on parents to inform their local authority when they choose to home-educate their child. Measures in the Children’s Wellbeing and Schools Bill will ensure that the most vulnerable children do not slip under the radar of the professionals who are there to protect them. I am grateful to the noble Baroness for allowing me to intervene to say that the overall impact of this transition for private schools is on around 3,100 pupils.

[Baroness Barran (Con)]

I thank the Minister for that additional clarification, but the reality is that it is one thing if those 3,100 pupils are spread across the country, but quite another if they are in a handful of local authorities that are already full. I beg leave to withdraw my amendment.

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[Baroness Barran (Con)]

My Lords, it will not surprise the Minister to know that I agree entirely with the amendments tabled in the name of my noble friend Lord Moynihan to ensure fairness and clarity in the treatment of private schools in relation to means-tested fee assistance and business rates. My noble friend was so eloquent and knowledgeable about the benefits of sport to all children. I am sure all across the Committee agree that he gave brilliant examples of both the physical and the mental health benefits. As someone who avoided sport at all costs in school and came to it later in life, I agreed with him and felt slightly guilty as I listened.

By preventing these schools being classified as private schools, the amendment highlights the value of their contribution and safeguards them from financial disadvantage. As my noble friend put so clearly, it would allow them to make sure that the sporting opportunities they offer can continue to grow, since they are so vital for our communities.

Amendment 69 addresses the valuation of sports facilities in relation to non-domestic rates and would ensure that the inclusion of sports facilities, which play such a crucial role in the development of young people, does not unfairly increase the business rates burden on schools. I am worried that the Minister will say that this amendment goes against the spirit of the legislation, so I am going to try a different approach to convince him both that this may amendment be one to focus on and to accept my noble friend’s suggestion to meet in order to try to find a way through.

First, as my noble friend said very clearly, whether we are talking about grass-roots local sport for someone as untalented and unable to hit a ball as I was or sport at the highest possible level, these schools provide opportunities in a way that we do not see widely in our communities. Secondly, my noble friend was clear about the importance of dual use for both local pupils in the wider community who do not attend the school and those who do attend the school.

The last thing I would stress is that the Minister has spoken on several occasions about the importance of raising money to invest in our state schools and the 93% of children who attend them. However, if we sat down to do the maths and tried to work out what it would cost to bring our state schools up to anywhere near the standard of what they can access in their local independent schools, I think we would find that, in capital terms, it is many times the amount that will be raised from VAT and the £70 million through this Bill.

I urge the Minister to take up my noble friend’s invitation to explore this issue and see whether we can find a way through. It is entirely reasonable to raise the bar and encourage independent schools to offer that dual use to make sure that their local communities benefit. Whether you take it from that perspective or a purely financial perspective, these amendments deserve great attention from the Minister.

[Lord Khan of Burnley (Lab)]

My Lords, I will now speak to Amendments 67 and 69 in the name of the noble Lord, Lord Moynihan. I just let him know that I have a great passion for rowing, developed at the time of Redgrave and Pinsent. Unfortunately, I was only two years old when the noble Lord won the silver medal in Munich in 1981, so I cannot classify him as my hero, but I know that he will be a hero to many across the country and the world.

These proposed amendments seek to introduce a carve-out in the Bill for private schools where 10% of students are in receipt of a bursary or scholarship for sporting excellence. I am aware that this type of fee support can be provided to any pupil who meets the requirements set by an individual private school; similarly, it can be provided on a means-tested basis. The other amendment tabled by the noble Lord, Lord Moynihan, seeks to ensure that no part of a private school that is used primarily for sport is included in the valuation of the school for business rates.

Providing means-tested fee assistance is one way in which charitable private schools can demonstrate public benefit—a requirement that accompanies charitable status. As I have stated elsewhere, the Bill does not remove the charitable status of private schools, and the Government expect them to continue to demonstrate public benefit, whether that is through the provision of means-tested bursaries or through other means, such as sharing facilities or working with state sector schools.

Ending the VAT and business rates tax breaks on private schools is a tough but necessary decision to help deliver on the Government’s ambition to eliminate barriers to opportunity by concentrating on the broader picture and towards the state sector, where over 90% of children in England are educated. Barriers to opportunity also appear in the sporting world, as I am sure the noble Lord is aware. The Government are committed to improving access to sports and physical activity for all. Everybody, no matter who they are or where they are in the country, should have access to the best possible provision of sports facilities and opportunities to get active.

These amendments would reduce the scope of the Bill measure by removing private schools from the definition and thus reducing the amount of revenue raised. This would limit the additional funding secured to help deliver the Government’s commitments on education and younger people. Furthermore, it would be operationally unfeasible to implement requiring local authorities to audit the financial operations of charitable private schools to ascertain whether they meet the threshold, as per the amendments, when calculating their business rates bill for the financial year.

I shall now address the other amendment in the name of the noble Lord, Lord Moynihan. I understand that part of the reason for it is a recognition that some private schools share their sporting facilities with neighbouring schools or the general public. As I have said, the Government expect private schools that wish to remain charities to continue to demonstrate a public benefit, such as by making their sporting facilities available more generally. That will not change. The amendment seeks to remove sports grounds from rating valuations. Exemptions of this nature, where part or all of a hereditament is removed entirely from rating valuations, are the most general and exceptional forms of support in business rates. They are reserved for cases such as agricultural land, places of public religious worship and, as we have already heard during the passage of this Bill, certain property used for disabled persons.

Despite the clear value of shared sports facilities at private schools, I do not think that it would be right to confer upon them such a level of benefit, especially when exemptions of this nature are not available to other sports facilities or even to charities more generally. Although these facilities are being used for sports and may be shared with the community, they remain part of private schools and are clearly used for their purpose; indeed, for many private schools, such sports facilities are a vital part of their offer to parents. It would therefore hardly be consistent with the overall purpose of Clause 5 to exclude them.

This story is very personal to me because I was an aspiring cricketer and did not make it through the system. I know that that was because of a lack of facilities and support at my local clubs and my local school, so I understand entirely the premise of what the noble Lord, Lord Moynihan, is attempting to do. I say to him and the noble Baroness, Lady Barran, that I will take this matter away and reflect on it; I will speak to colleagues, officials and other colleagues in the Treasury.

Let me let noble Lords know that the Government are committed to improving access to sport and physical activity for everybody. Sport and physical activity are central to achieving our health and opportunity manifesto missions, with the biggest gains coming from supporting those who are inactive to move more. Everyone, no matter who they are or where they are in the country, should have access to the best possible sports provision and facilities. The Government’s arm’s-length body, Sport England, is investing £120 million between 2025 and 2029 to increase participation in sport and boost diversity at the grass-roots level in order to give more and better opportunities to all young people to explore and develop their potential. This funding will increase and enhance opportunities for talented young athletes in England to explore and develop their athletic potential, regardless of their background or financial circumstances. Through creating more inclusive talent pathways, the Government want to increase participation in sport and boost diversity at the grass-roots level in order to give all young people more—and better—opportunities to explore and develop their potential. Sport England also wants to drive greater diversity within national teams, which will in turn demonstrate to the next generation of young people that they could have the same potential to reach the Games.

The PE and sport premium is a ring-fenced grant for eligible primary schools and other educational establishments. In March 2023, as noble Lords will recall, the previous Government announced more than £600 million of funding for the 2023-24 and 2024-25 academic years. Schools must use funding to make additional and sustainable improvements to the quality of the PE, sport and physical activity that they provide.

I just want to say that this is a vital debate. I thank the noble Lord, Lord Moynihan, for his contribution. The noble Baroness, Lady Barran, said something interesting: she was not interested in sport early on but got into it in later life. Let me be absolutely clear: I learned to swim only last year. I was taught by my daughter; my 10 year-old daughter taught me to swim. I would have loved to have swum much earlier but I did not have the opportunity, resources or means to do that, so I recognise exactly the sensitive nature of what we are trying to do. The Government are supporting this through their work and funding. In particular, I recognise that the PE and sports premium is a ring-fenced grant. We must make sure that all children are supported. I thank the noble Lord for his contribution but, for the reasons I have set out previously, at this moment in time, I am unable to accept these amendments; however, I hope to go away and reflect on what the noble Lord said. In the meantime, I hope that I have provided the noble Lord with satisfactory information in relation to the difficulties and technicalities in these amendments, and I ask him to withdraw his amendment.

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[Lord Khan of Burnley (Lab)]

My Lords, Amendments 70, 71, 72 and 72A, tabled by the noble Lord, Lord Storey, the noble Baronesses, Lady Barran and Lady Scott of Bybrook, and the noble Lords, Lord Black of Brentwood and Lord Lexden, are focused on the impact on state schools as a result of the Bill measure. They seek to require the Government to undertake a variety of assessments of the impact of Clause 5, covering between them: pupil movement; the impact on the state sector; partnerships between private and state schools; changes in staffing; and the availability of faith education to families which desire it. Furthermore, Amendment 72A from the noble Lord, Lord Black of Brentwood, seeks to ensure that any assessment is conducted in the context of broader tax changes affecting private schools since 1 January 2025, effectively seeking to create an all-encompassing review of the Budget tax changes and their effect on private schools.

The Government carefully considered their approach in designing the policy to remove charitable rate relief from private schools. On 29 July, the Government published a technical note on removing the VAT and business rates charitable relief tax breaks for private schools. The Government received and carefully considered over 17,000 responses to this note from a range of tax specialists, private schools, bodies that represent private schools and others. A detailed government response to this was published at the Autumn Budget. During development of these policies, the Government also met numerous key stakeholders representing schools, local authorities and, in the context of the VAT change, the devolved Governments. Furthermore, at the introduction of this Bill, the Government published a note setting out analysis of the impact of the business rates measure. This is available on the Bill’s page.

Two common themes in the amendments proposed are the impact on the state sector in pupil movements and partnership activity with private schools. As I have said previously, the Government estimate that in the long-run steady state, there will be 3,100 fewer pupils in the private sector as a result of the business rates measure. Of these 3,100 pupils, the Government estimate an increase of 2,900 pupils in the state sector in the long term. This represents approximately 0.03% of the total state sector pupil population.

The noble Baroness, Lady Pinnock, in particular, talked about the important point of SEND places. The Government work to support local authorities to ensure that every local area has sufficient places for all children of compulsory school age who need them, and work to provide appropriate support where pupils with SEND require a place at state-funded schools. She raised some really interesting points about reform. The Government are committed to reforming England’s SEND provision to improve outcomes and return the system to financial sustainability. We are providing an almost £1 billion uplift in high-needs funding in financial year 2025-26.

The noble Baronesses, Lady Pinnock and Lady Barran, both talked about whether regional variation with regard to pupil movement may arise as a result of the Bill measure. They said that some regions may be more affected than others. The Government work with local authorities to support place planning and ensure there is capacity in the state-funded sector to meet demand. We have confirmed nearly £1.5 billion of capital funding through the basic needs grant to create school spaces needed over the current and next two academic years, up to and including the academic year starting in September 2026.

As noble Lords know, all children of compulsory school age are entitled to a state-funded school place, and government support ensures that every local authority has sufficient places for children who need them. The Department for Education monitors place demand and capacity as part of its normal processes and will work with local authorities to meet any pressures. Data on the number of school pupils is published every summer. This provides information on the number of pupils at different types of school, so anyone can see how pupil numbers in state-funded schools and private schools have changed.

There have been suggestions that the cost of pupil moves from the private to the state sector will cancel out the revenue raised from the measure. Based on the average 2024-25 per pupil spending in England, the Government expect the revenue cost of pupils entering the state sector as a result of the measure to steadily increase to a peak of around £20 million per annum after several years. Overall, this means that the expected revenue will substantially outweigh the additional cost pressures.

Pupil numbers in schools fluctuate regularly for a number of reasons, and the school funding system in England is already set up to manage that. For individual schools, the Government therefore expect changes in pupil numbers caused by these changes to be managed in the usual way.

I have spoken only about business rates as that is the scope of the Bill. Noble Lords may also be interested in the impact of the removal of the VAT exemption, which has been mentioned. I direct them to the tax information and impact note that was produced to accompany the VAT change, which is publicly available on GOV.UK.

During the course of the Bill’s passage, we have heard a small number of examples of schools stating that they will reduce partnership activity with local state schools or will no longer be able to provide fee assistance. It is for individual private schools to determine how they manage any additional costs arising from the Bill’s measure. However, as set out previously, the Bill does not remove the charitable status of private schools, and they will need to continue to demonstrate public benefit as a requirement of that charitable status.

Data published by the Independent Schools Council indicates that a lot of partnerships relate to the hosting of joint events or providing access to facilities also used by private school pupils. In many of these partnerships, the activity undertaken also benefits the pupils who attend private schools, so it would not be in the interest of the private schools to stop this activity. The removal of charitable relief from private schools does not reduce these schools’ obligation to show public benefit. The Government do not expect partnership activity or fee assistance to decrease significantly.

I will touch briefly on the other areas that noble Lords have suggested should be examined, starting with looked-after children. Local authorities can place looked-after children at private schools where that is in the child’s interest. We do not expect placements funded by local authorities to be impacted by tax changes, as the local authorities can reclaim VAT. As with partnerships, we do not expect charitable schools to stop supporting these pupils as part of their demonstration of public benefit.

Faith has been a common discussion point in not just this group but earlier groups of amendments. As discussed earlier, on a previous group, the Government value parental choice and recognise that some parents want their children to be educated in a school with a particular faith ethos. Do I know that? Yes, I am the Faith Minister. Many stakeholders have been speaking to me about this issue. Pupils who follow a particular faith can be accommodated in the state sector. All children of compulsory school age are entitled to a state-funded school place if they need one and, as previously stated, all schools must comply with their obligations under the Equality Act 2010. In addition, schools are expected to promote fundamental British values, including the values of mutual respect and tolerance for those with different faiths and beliefs.

On the issue of staffing, the Department for Education annually publishes teacher numbers in private schools. Employment of staff is a matter for individual private schools. We do not anticipate that they will substantially reduce staff as a result of the business rates measure.

I appreciate that there is concern in this area, but we should remember that the removal of charitable relief from private schools will raise important revenue that will help the Government to deliver on their commitment to the cohort of the more than 90% of children who attend state schools. This will break down barriers and ensure that all have access to the same opportunities.

I am unable to accept the amendments, but I hope that the further information I have provided, in relation to the analysis and assessment from the Government that have already been undertaken and that we will continue to do, has reassured noble Lords. I hope that the noble Baroness, Lady Pinnock, feels able to withdraw her amendment.

[Lord Lexden (Con)]

The Minister has spoken at length about the Government’s hopes, intentions and plans. Surely, having done all that, it becomes more important to find out what happens in reality over the next few years: how independent schools are affected and how many children have their education disrupted. These matters need to be clearly established, and that surely points to a proper and full impact assessment.

[Lord Khan of Burnley (Lab)]

My Lords, I take the point that the noble Lord had made very strongly and passionately. In relation to this particular aspect and in contrast to the earlier part of our discussion in Committee related to multipliers, this is not a tax-particular perspective, which is why an impact note for the Bill is available. Of course, we are speaking to stakeholders and will continue to do so to ensure that we take everything into account. We have taken everything in account while bringing this Bill forward.

[Baroness Pinnock (LD)]

I thank the Minister for his response. He made the case for Amendment 70 in the name of my noble friends, I think. When I moved the amendment, I cited the 10,000 children expected to move from the private sector to the state sector, and the Minister cited 3,100. That is a discrepancy. Why? It is because they are both estimates. The Minister’s estimates are based on the Government’s analysis of expectation, but so is the private school sector’s.

The second pair of estimates that were cited related to the cost to the state sector of young people moving to it from the private sector. The estimate by the private sector is £92 million a year, whereas I think I heard the Minister quote a figure of £20 million being the anticipated cost after a number of years. He is not shaking his head—maybe I did not hear that figure correctly. However, the point I am making is that, in both cases, there is a discrepancy because these are estimates, not actual figures.

[Lord Khan of Burnley (Lab)]

I just want to clarify the point that I was making: the additional revenue to support the transition to the state sector represents substantially much more revenue than the cost to support that transition.

--- Later in debate ---

[Lord Khan of Burnley (Lab)]

My Lords, I will now speak to Amendment 74, moved by the noble Lord, Lord Thurlow, and Amendments 75 and 76, tabled by the noble Baronesses, Lady Barran and Lady Scott of Bybrook. These amendments seek to delay the implementation of the Bill’s measures. Amendment 74 seeks to delay from 2026 to 2027 the commencement of Clauses 1 to 4, covering the new multipliers. The reasoning behind this proposal, as provided by the noble Lord, Lord Thurlow, is to provide more time to allow for impact assessments and consultations to be conducted.

As I have set out elsewhere during the course of the Committee proceedings, the Treasury has committed to publishing analysis of the impact of the new multipliers at the Budget. To clarify, the 2026 re-evaluation of the multipliers is ongoing and is not yet completed. We expect it to be published around the Budget.

As noble Lords will remember, the Bill is the Government’s first step in transforming the business rates system, and to delay it would delay the Government’s progress in undertaking this broader ambition over the course of this Parliament. Furthermore, it would delay the introduction of the new permanent tax cuts for qualifying retail, hospitality and leisure properties, meaning that those businesses would have to wait a further year for the lower multipliers.

Amendment 75 seeks to delay the implementation of the removal of charitable rate relief from private schools, pending an impact assessment focused on access to university for pupils in private schools in receipt of means-tested fee assistance. Amendment 76 would more generally delay by one year to April 2026 the same measure in Clause 5.

I understand the concerns that the swift implementation of Clause 5 from 1 April this year does not give private schools or local authorities time to prepare for the change—a point which the noble Baroness, Lady Barran, just touched on. However, the Government announced this change in July 2024, stating then that it would be implemented from April 2025, subject to the passage of legislation. As such, private schools have been aware of this change for some time. Private schools that are impacted by the change already pay business rates. They already have a rateable value, they do not have to register with their local authority, and it is very simple for them to calculate their additional business rates bill. As these schools are already known to local authorities, the removal of the charitable relief should also be straightforward from their perspective. The Government are engaging with local authorities to support them through this change.

Delaying implementation of the Bill would forego approximately £140 million per year in funding, delaying the Government’s intended investment to deliver their commitments to education and young people and to support investment in our state sector, where more than 90% of children in England are educated.

The amendments call for an impact assessment. As Members of the Committee know full well, tax measures are not subject to full impact assessments. I continue to say this to the Committee because it continues to be correct, as it was under previous Governments. Despite this, my department has produced detailed analysis of the impacts of Clause 5, which was published alongside the Bill, as I stated earlier.

Amendment 75 also raises the question of access to higher education. Access to higher education should be based on ability and attainment, not background. Opportunity should be available to all, and it is the Government’s aspiration that no groups are left behind. That is why we are seeking, through this Bill, funding for new investment in the state sector.

I am also aware that there is concern across the Committee that the Bill’s measures may result in private schools that are charities reducing their charitable activity, of which the provision of means-tested bursaries is one such activity. It will be for individual private schools to determine how they will meet any additional costs as a result of the Bill’s measures, but they could, for example, reduce surpluses or reserves, cut back on non-essential expenditure, increase fees or use a combination of different approaches.

It is important to note that the measure does not remove the charitable status of these schools and charitable schools will continue to operate as charities. They must continue to demonstrate that they meet public-benefit tests, and the Government expect all charitable schools to continue to demonstrate this to retain their still very favourable status as charities. No other tax changes specific to their charitable status will affect private schools. They will still be able to claim gift aid on donations and will not pay tax on their charitable surplus.

As I have said, we cannot agree to delay the implementation of these measures. I hope that noble Lords can see this and will agree not to press their amendments.

[Lord Thurlow (CB)]

I thank noble Lords who have taken part in this final group, and I thank the Minister for offering an opportunity to meet to discuss this in more detail, which I will take up. I remain concerned about the unintended consequences of the rush to get this through, for both schools and businesses but, with those comments, I beg leave to withdraw the amendment.

Grenfell Tower Inquiry: Phase 2 Report

Lord Khan of Burnley Excerpts

Thursday 27th February 2025 Lords Chamber

[Baroness Pinnock (LD)]

My Lords, 72 people died in the Grenfell Tower fire seven years ago in the most horrifying of circumstances. This phase 2 report on the Grenfell Tower inquiry from Martin Moore-Bick is an excellent analysis and provides a strong challenge to the Government for the decisions they need to make.

It is therefore disappointing that the Secretary of State’s Statement fails to be absolutely clear that the recommendation from the inquiry will be implemented in full. Instead, the words used are that the Government

“accept the findings … and will take forward … the recommendations”.

That is simply unacceptable.

The inquiry exposed a culture of greed and indifference, which must be rooted out of all the organisations associated with this wholly avoidable tragedy—I emphasise that it was wholly avoidable. The Government have a duty to ensure that all buildings with flammable cladding, and where the constructors deliberately omitted fire safety features, are fully remediated, and that the cost is borne entirely by those responsible for those failings.

Leaseholders must not be required to pay anything. Living in a building that is not safe is itself a cause of immense anxiety. Added to that is the scandal of huge rises in insurance costs and service charges, when leaseholders should not be paying anything.

The ministry’s figures show that 9,000 to 12,000 buildings of above 11 metres will need remediation, yet only 4,771 have so far been identified—of which less than half have had work started. The National Audit Office has called for the costs of this work, over and above that funded by the taxpayer, to be placed on developers. That is absolutely right. Can the Minister explain how the costs of this essential work are to be met? For information, the estimate is around £7 billion.

I turn to the 58 recommendations in the report. It recommended a single construction adviser, which the Government have accepted and will appoint. I fully support that. However, Dame Judith Hackitt’s report of 2018, made immediately following the Grenfell Tower fire, also recommended that there be a formal log of every element during construction work, including building improvements which may follow. The report recommended that that log should be signed off by the person responsible for the work. This seems to be the fundamental change that is needed. Can the Minister advise whether this particular change is to be implemented?

One of the other key changes proposed by the Hackitt report was that the overall responsibility for building control should return to the local authority for independent oversight. Can the Minister explain why the Statement simply refers to a “review” of building control? Currently, constructors can appoint their own building inspector. The failure of that system is seen in the fire safety corner-cutting in Grenfell Tower and in many other buildings. Does the Minister agree that an independent building inspector is a key change that has to be made?

The failure of the regulatory system that enabled flammable cladding to be added to the walls of many high-rise blocks is at the heart of this scandal, yet the Statement has little to encourage us to believe that essential reform is coming. The Government have published a construction products Green Paper, which is positive but long overdue. The safety of construction products partly depends on the testing regime, which was exposed in the report as being deficient. What are the Government’s intentions for the future of the Building Research Establishment?

Finally, the report refers to “higher-risk buildings”. It states that

“to define a building as ‘higher risk’ by reference only to its height is … arbitrary”,

and recommends that the use of the building is vitally important. Are the Government intending to review the definition as a matter of urgency, as required by the recommendations in the report?

What is needed now is a sense of urgency and purpose. It is more than seven years since that dreadful fire. Survivors need to see that radical change is being made. The tragedy of 72 lives cruelly ended must not have been in vain.

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

My Lords, I thank your Lordships for your comments today. I know that I speak for all of us when I say that what happened on that terrible night in June 2017 must never be allowed to happen again. It was a national tragedy and an immensely personal tragedy: 72 innocent people, 18 of them children, lost their lives. The Grenfell inquiry exposed damning and painful evidence of political, corporate and individual failings over decades. I thank the inquiry chair, Sir Martin Moore-Bick, and his team, for their hard work over seven years to shine a light on these failings. Yesterday in the other place, the Deputy Prime Minister announced the Government’s response to the Grenfell Tower inquiry’s final report and apologised on behalf of the British state.

I want to say again how deeply sorry I am and this Government are for the failures that led to the tragedy. We accept that the inquiry’s final report must be a catalyst for a long-lasting system change. That message has been re-emphasised by the points raised today. That is why the Government accept the findings of the report and will take forward all the recommendations. Our response addresses all the recommendations and sets out wider reforms of social housing and the construction sector. Alongside this, we published a construction products Green Paper with detailed proposals for rigorous system-wide reform to address the critical gaps in how construction products are regulated.

Reforming construction products means that safety will come first. The culture that allowed the tragedy to happen will be transformed. We are focused on prioritising residents, ensuring that industry builds safe homes and providing transparency and accountability. In doing so, we will rebuild trust. The Government commit to publishing progress on implementing the inquiry recommendations every quarter from mid-2026. Also, we will provide an additional update to Parliament. The Government’s response is explicit on the need to bring about the transformational change that the people of this country deserve. As the Deputy Prime Minister said yesterday, to have anyone anywhere living in an unsafe home is one person too many. Yesterday I joined the Deputy Prime Minister and Minister Norris in meeting the bereaved and victims of the horrible tragedy. It was an emotional and difficult experience, but they need justice.

I will now focus on the issues raised by the noble Baronesses, Lady Scott and Lady Pinnock. On why we are not committing to meet the inquiry’s recommendation on the single regulator, we accept the inquiry’s recommendation and will create a single construction regulator. However, we must avoid creating a conflict of interest within the regulator. We do not believe it appropriate for a single regulator to undertake testing and certification of construction products and issue certificates of compliance. This would create a new conflict of interest within the regulator. It would set the rules, test and issue certificates, and police compliances with those rules. Through our Green Paper, we are putting forward wider measures to significantly strengthen conformity assessment in order to provide the confidence and rigour that is essential as part of that system-wide reform.

We are acting now through the regulators to ensure that enforcement action is taken against safety breaches and that new buildings meet our more rigorous standards. The new building safety regime is stopping bad designs becoming bad buildings. The inquiry exposed regulation of the construction industry as too complex and fragmented. Merging responsibility for regulating construction products and professionals, and monitoring the operation of building regulations, provides the best basis for a regulatory system with clear standards, no regulatory conflict and clarity and certainty on how the industry must conduct itself. In autumn 2025, we will set out further details of the pathway to establish the single regulator.

On the point that the noble Baroness, Lady Pinnock, made, the Government accept all the inquiry’s findings and will take action on every recommendation directed at us. There are 58 in total. Where we have accepted nine recommendations in principle, we will deliver the intended outcome in a slightly different way, to ensure that it meets the aims and is a lasting success. We want to be clear that the Government accept all the inquiry’s findings and will take forward action on every recommendation.

The noble Baroness, Lady Scott, mentioned the remediation acceleration plan. I want to update the House. We are focused on speeding up remediation. The plan will create certainty about which buildings need remediation and who is responsible for that. The plan will make obligations for assessing, completing and regulating remediation clearer, with severe consequences for non-compliance, and give residents greater control in situations of acute harm where landlords have neglected their responsibilities. We will update regularly on that process. The legislative commitments are detailed in the remediation action plan.

On construction products, the noble Baroness, Lady Pinnock, asked what action the Government are taking to address criticisms over the key institutions found culpable in their role. The Government have taken full account of the criticisms in the inquiry report, including those of identified institutions. We are addressing those criticisms through the government response to recommendations, as set out in the Green Paper, as part of the measures for system-wide reform.

[Baroness Sanderson of Welton (Con)]

My Lords, I welcome the news that the Government have accepted all 58 of Sir Martin Moore-Bick’s recommendations—at least, I welcome it in principle, in the same way that the Government have accepted some of the key recommendations in principle.

Recommendation 25 asks

“that it be made a legal requirement for the Government to maintain a publicly accessible record of recommendations by select committees, coroners and public inquiries together with a description of the steps taken in response”.

The Government say they will establish a record on GOV.UK of all recommendations made by public inquiries since 2024, that they will consider making that a legal requirement, and that Ministers will commit to updating Parliament on progress on implementing recommendations.

The problem with this is that it is no different from what happens now. In all the inquiries that I have been involved with, we always get updates on GOV.UK, and, frankly, they do not satisfy anyone because they tend to be dry and unintelligible. Ministers come to Parliament to update us, as the Minister is doing now, but there is no mention of the suggestion that the Government need to detail the steps taken in response to recommendations. Instead, the Government talk about the recommendation of the House of Lords Statutory Inquiries Committee to establish a new committee to deliver that accountability. I sat on that committee and the response from the Government to that was, “This is a matter for Parliament”. I am not clear what is different now and where this gets us. If the Minister could explain that to me, I would be very grateful.

[Lord Khan of Burnley (Lab)]

I thank the noble Baroness for the points that she has eloquently raised. I did not mention this, but I pay tribute to the noble Baronesses, Lady Scott and Lady Pinnock, for the work they have done for many years on this issue, particularly the noble Baroness, Lady Scott, in her role as a government Minister in this area. I also pay tribute to the noble Baroness, Lady Sanderson, for her work with the bereaved and victims’ families in this area.

On her particular points, we are taking forward the inquiry’s recommendation on oversight. There needs to be better accountability for and oversight of how recommendations are implemented. We totally accept that. Robust oversight of the Government’s implementation of the response is essential for this and for all public inquiries. The system needs to be improved, and we are taking forward the inquiry’s recommendations on oversight.

We will create a publicly accessible record on GOV.UK of recommendations made by public inquiries since 2024. We will consider making this a legal requirement as part of a wider review of the inquiry framework. My department will publish quarterly progress updates regarding the Grenfell inquiry recommendations on GOV.UK until they have all been delivered. We will report annually to Parliament, to enable Members to scrutinise our progress and hold us to account.

I say to the noble Baroness that my office is always available, and I am happy to sit down with her and noble Lords across the House if there is anything pertinent that they think the Government need to be doing more of.

[Lord Carter of Haslemere (CB)]

My Lords, my point follows on nicely from that of the noble Baroness, Lady Sanderson. I do not find the Minister’s response totally satisfactory because, in the Government’s response to the Grenfell inquiry report, they accept the need for “robust” scrutiny of the implementation of the recommendations of both public inquiries and inquests. But transparency and accessibility by means of a public record of recommendations is not the same as robust scrutiny of implementation—they are two different things.

Both your Lordships’ Statutory Inquiries Select Committee and the Grenfell inquiry said there should be scrutiny by Parliament, and the Government’s response is silent on that crucial point. Without that, we are, frankly, no further forward. We have seen the disaster that happened at Grenfell following a failure to implement the recommendations of the Lakanal House inquest and the coroner’s prevention of future deaths report. If we had had robust scrutiny of implementation following the Lakanal House disaster, Grenfell probably would not have happened and certainly 72 lives would not have been lost. So are the Government prepared to accept that there needs to be scrutiny of implementation of public inquiry recommendations and inquest recommendations by Parliament?

[Lord Khan of Burnley (Lab)]

My Lords, I thank the noble Lord for making that point. The Government are committed to ensure lasting transparency and accountability by creating a publicly accessible record of all public inquiry recommendations. We need to learn from past mistakes to stop them being repeated and ensure that a clear process is there on reforms. As I said in my previous answer, we will report back to Parliament annually, ensure we have quarterly updates on GOV.UK and continue to meet families and victims.

I was with victims yesterday with the Deputy Prime Minister, listening to the concerns and, naturally, frustrations. Lasting transparency is important; we also want to commit to enforcing a legal duty of candour through a new Hillsborough law. Your Lordships may recall that this is something we have talked about. We need to compel public authorities to disclose the truth, ensuring transparency in major incidents, such as the one mentioned by the noble Lord. We want to hold those responsible for failings to account, and we are committed to that.

[Baroness Brinton (LD)]

My Lords, I declare my interest as a vice-chair of the All-Party Parliamentary Group on Fire Safety and Rescue. I thank the Minister for the information on PEEPs. When is “later in 2025”? It would be useful to know, and I look forward to seeing the detail. I remain concerned that the detail is not quite as clear as some of us with disabilities would like.

Following on from the other points noble Lords have made about the recommendations in principle, with recommendations 43 and 48 it seems that the Government are not quite doing it in full because it sounds like, first, it is onerous and, secondly, it might cost money. Yet one is dealing with voluntary organisations as first responders, and the second, and in my view much more important one, is about codifying the training required for local authorities and other category 1 responders. Why are they only in principle and not accepted in full, with the resources needed?

[Lord Khan of Burnley (Lab)]

My Lords, on the question on PEEPs, the Government have committed funding this year, 2025-26, to begin this important work by supporting social housing providers to deliver residential PEEPs for their renters. Future years funding will be considered at the upcoming spending review. I will come back to the noble Baroness on which part of the year in particular.

The noble Baroness asked why we are not accepting those recommendations in full. I want to be clear: we accept all the inquiry’s findings and will address all the recommendations. However, we have to look at how we work through the recommendations. The commitment is clear—we accept them in principle. But there are different ways of dealing with this. As I said to her on the previous issue about the single regulator, there are some conflicts and we want to make sure that we do this, which is long-lasting, sustainable, makes a difference to people’s lives, and makes people feel comfortable and confident in the system as something they believe in.

[The Earl of Effingham (Con)]

My Lords, I want briefly to highlight that the Grenfell United bereaved families and survivors group said that a single construction regulator could be a significant step forward if it was well resourced and tough on industry failure. How will His Majesty’s Government ensure that the new regulator will be totally independent and have impartial oversight?

[Lord Khan of Burnley (Lab)]

My Lords, the noble Earl makes a good point. We will create a new single construction regulator to bring together oversight and enforcement. This will close gaps in regulation and ensure that those responsible for building safety are held to account. We accept the recommendations and will respond to them. That is something we are working on but, as I said earlier, we have to work through this. As we accept the recommendations in full, we need to do it in a way that does not have any conflicts of interest. It will take time, but rest assured that, for the issue the noble Earl raised, we will take that back, feed it into the system and ensure that we cover the pertinent points he raised.

[Lord Carlile of Berriew (CB)]

My Lords, given the rigour, skill and knowledge shown by Sir Martin Moore-Bick, and taking into account the question asked earlier by my noble friend, will the Government consider inviting Sir Martin in one year’s time and in two years’ time to prepare a short report on the implementation of his recommendations? I am sure that the public and this House would deem it to be of great value.

[Lord Khan of Burnley (Lab)]

My Lords, the noble Lord, Lord Carlile, as always, makes a very important point. We are working on the response to Sir Martin’s report. We accept the inquiry’s findings and will address all the recommendations. I will take that suggestion away and we will have conversations to ensure that we deal with the recommendations and work through all of them. We will explore the opportunity for noble Lords, if not here then in another setting, to have an opportunity to listen to Sir Martin’s recommendations and how the Government are doing.

[The Earl of Lytton (CB)]

My Lords, I welcome the report from Sir Martin Moore-Bick and the Government’s Statement, but there is a legacy issue from what was put in place by the previous Government in terms of support measures for a defined range of properties considered most at risk following the tragedy. In light of the measures put in place concerning remediation under PAS 9980, which is the relevant standard, can the Minister explain what steps are now proposed to prevent that proportionate approach—bearing in mind there is an issue between critical life safety on the one hand and the safety of the building on the other hand? Those are two different risks. What does he propose to prevent that proportionate standard? There is also the issue of the lack of the Building Safety Regulator powers in relation to avoiding full remediation responsibilities where building regulation standards at the time of construction had not been met. The problem is continuing to impede remediation and to trap innocent homeowners with high insurance costs. I wonder if he could comment on that. He may need to write to me.

[Lord Khan of Burnley (Lab)]

My Lords, I kindly accept the invitation to write to the noble Earl, due to the specific nature of the very important question he raised.

House adjourned at 6.23 pm.

Holocaust Memorial Bill

Lord Khan of Burnley Excerpts

Tuesday 25th February 2025 Lords Chamber

Moved by

[Lord Khan of Burnley]

That the Bill be committed to a Grand Committee.

Motion agreed.

Non-Domestic Rating (Multipliers and Private Schools) Bill

Lord Khan of Burnley Excerpts

Committee stage
Monday 24th February 2025 Grand Committee

[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.

--- Later in debate ---

[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.

[Baroness Pinnock (LD)]

Several times already we have queried the decision to make the dividing line £500,000. It would be good to know why that number was chosen. Why not £600,000 or £400,000?

[Lord Khan of Burnley (Lab)]

I will come to the noble Baroness’s points when I come back to the valuations, rest assured.

The Government have been clear that they intend to fund new lower multipliers by raising revenue within the business rates system. The lower multipliers are a necessary tax cut, but a tax cut that must be funded. By limiting it to properties with a rateable value of £500,000 and above, the Government are asking those with the most valuable 1% of properties to pay more to support the viability of high streets. Moreover, by including all sectors within this group, they are doing so equitably and will capture the majority of large distribution warehouses, including those used by online giants—a cohort that I know the noble Lord, Lord Thurlow, has previously raised in relation to imbalances in the business rates system. We are trying to make sure that we have prudent financial management of the economy and a system that is sustainable.

I come back to some particular points. First, the noble Earl, Lord Lytton, spoke in relation to the potential rise of £39 billion, as indicated by the OBR’s Budget report. The OBR forecast assumes that business rates income will vary in line with forecast CPI inflation, estimated growth in the tax base and the change to business rates relief. The main business rates forecast is gross rates yield, net reliefs, net collection costs and other reductions to contributions. The forecast is higher for future years as it assumes that retail, hospitality and leisure relief is removed. The business rates forecast considers measures only after they have been announced at fiscal events. As in normal practice, forecasts beyond 2025-26 are based on a number of assumptions, as the Government have not yet set out their policy beyond that year. This will take place at the Budget later this year: the main business rates forecast will then be updated to reflect it.

As I have highlighted today, the Bill includes constraints that I hope will reassure Members of this Committee. In addition to limiting it to the most valuable properties, the Government cannot set the higher multiplier more than 10 pence above the standard multiplier. The Government have also been clear that this is not the intended rate. It is there to provide flexibility to adapt to outcomes in 2026 following the next revaluation, while acting as a guardrail against concern about excessive increases.

As the noble Lord, Lord Thurlow, will also be aware, the Government keep all taxes under review, including rates and thresholds. As such, I can assure the Committee that the Government will, as a matter of course, actively consider whether the £500,000 threshold should be amended at the 2029 revaluation, as they approach that revaluation.

[Lord Fox (LD)]

Coming back immediately on that point, what criteria will the Government be using for that revaluation? In other words, what are they seeking to confirm or otherwise from it? Can the Minister recognise that the point made by my noble friend, which I am sure will be made otherwise, is that when you multiply two numbers together, if one side of the equation is substantially smaller, the sum becomes low? If the valuations are 100 times less out of town, versus those in town, you can mess around with the other number as much as you like, but it will still be a tiny number out of town relative to town centres. Does he recognise that valuations are crucial to this and that, while this is all well and good, until valuations are sorted out, we really are fiddling around?

[Lord Khan of Burnley (Lab)]

My Lords, on that specific point about criteria, I want to be clear that we have had a one-year ad hoc system and we are trying to build a sustainable system, which will have a three-year rating on non-domestic properties. We want to see how we will get there when we see what the situation is in the fiscal climate; that will be a big part of addressing how the Treasury will set the multipliers. The Bill is not about setting multipliers. It is up to the Treasury to set those. I will come back to the impact in a moment.

In relation to the different level of multipliers, of course it is a complex system. However, the highlight of what we are trying to do is to have a sustainable system that funds itself and, by asking less than 1% of properties to shoulder a bit more, ensures that we support the high street and properties of low valuation. We are trying to have an equitable system that is sustainable and can pay for itself. We recognise that there are different scenarios and situations but, ultimately, we want to ensure that the system is much fairer than it is now and creates more certainty.

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[Baroness Pinnock (LD)]

My Lords, I thank the noble Lords, Lord Jamieson—also known as the noble Baroness, Lady Scott—and Lord Thurlow, for the amendments in this group. I have always in principle supported more powers and influence for local authorities. What I have always said should go without saying, but I repeat it.

However, I am nervous about the amendments from the noble Baroness, which seek to enable local authorities to have discretion over whether the higher multiplier should impact on businesses in their area. This is because, if you look at the Valuation Office Agency’s billing lists, you find that the vast majority—I have not worked out the percentage—of businesses in the £500,000-plus bracket are based in the south-east and London. Therefore, the income from the application of the higher multiplier in those areas is essential for the totality of the business rate take, which is then distributed to fund local authorities across the country. Areas of the country where valuations are much lower absolutely depend on the business rates raised from the south-east and London, and that has been the situation for ever.

If I were a London or south-east authority, I would see anything to encourage businesses as an opportunity and I would use that discretion, but it would be at the expense of councils in the north. Those such as mine in Yorkshire and the Minister’s over the Pennines—I dare not say the county—would suffer as a consequence, because the totality of the business rate take would reduce and the distribution of funding, which is vital for local services, would be less. If the noble Baroness comes up with an amendment which counters that, I could support it, because I support more power and discretion to local authorities. However, as we have a national system, we cannot have little local changes to the benefit of places that currently are fairly well funded or have better income already.

On the amendment from the noble Lord, Lord Thurlow, on defining retail, hospitality and leisure properties, there are later groups which try to get at the detail of this, but it seems to me—maybe the Minister can tell me whether I am wrong or right—that this whole business is associated with the removal of the Covid rate reliefs. Currently I think they are at 75%, to be reduced to 40% and then to zero. It will be quite a big hit to RHL properties to find themselves suddenly facing the totality of their business rate bill.

It seems to me that the essence of the Bill is removing that with one hand in order to provide some relief with the other hand; that is what we have got here. I think that is why the Government are in difficulty in helping us as a Committee to understand the purpose of this. It seems to me that it is that rather than trying to extract more from distribution warehouses et cetera, which we see from the lists provided are not many—of the, I think, 16,000 properties in the £500,000-plus bracket, only about 1,400 or 1,500 are large distribution warehouses. So, my plea is again: let us have an understanding of what this is about. If we had an impact assessment, we would be better able to understand it. I will keep repeating it, so perhaps before we get to Report the Minister will have extracted and published an impact assessment so we can make the judgments that we need to make.

[Lord Khan of Burnley (Lab)]

My Lords, Amendments 3,18, 32 and 37, which were spoken to by the noble Lord, Lord Jamieson, on behalf of the noble Baroness, Lady Scott of Bybrook, and Amendment 43, tabled by the noble Lord, Lord Thurlow, are concerned with the role of local authorities in determining the application of the higher and lower multipliers. Amendment 3 seeks to provide local authorities with discretion over the application of the higher multiplier, and Amendments 18, 32, 37 and 43 are concerned with who sets the definition of a qualifying RHL hereditament.

Currently, the Bill includes a power for qualifying RHL hereditaments to be defined in regulations by the Treasury, as I have said. Our intention is for the definition broadly to follow that currently used in the retail, hospitality and leisure relief scheme. The criteria for the current relief scheme are contained in guidance from this department and are implemented by local authorities. Ultimately, under the current relief scheme, local authorities have the final say over and discretion about who should be awarded the relief. I understand that that is the type of arrangement that the amendments are seeking to reinstate from April 2026 for the lower RHL multipliers.

I should, for completeness, explain to the Committee that Amendment 43 replaces the Treasury’s power to define RHL on the central rating list with the relevant local authority. In fact, the central rating list is operated by the Secretary of State for my department and does not require any local authority involvement. Instead, Amendment 43 would create an unworkable section of the Bill. This would be due to the fact that central list hereditaments cross multiple local authority areas, which would create a lack of clarity around the responsibility. In addition, this amendment would inappropriately insert local authorities into the central list process. I do not think that this is the intention of the noble Baroness. I think it is important to clarify there are currently no eligible properties to be prescribed for the lower multiplier on the central list, and nor would we expect there to be in future.

Moreover, I understand from the helpful explanation provided that Amendment 32, tabled by the noble Lord, Lord Thurlow, is, in a similar way to the amendments tabled by the noble Baroness, Lady Scott of Bybrook, seeking to confer on local authorities the power to determine what is a qualifying retail, hospitality and leisure hereditament. However, as drafted, it does not do that. As drafted, Amendment 32 would completely remove the power to define a qualifying retail, hospitality and leisure hereditament in respect of unoccupied properties from the Bill. In essence, it would mean qualifying RHL for unoccupied properties would remain undefined, as the power would not automatically be granted to local authorities.

However, I understand that these amendments are intended to probe the matter of local decision-making, and that is how I have sought to discuss them here today. As noble Lords would expect from me, I fully support efforts to give local authorities more power and discretion in their areas. The Bill does not disturb the already considerable powers that local authorities have to award relief to ratepayers as set out in Section 47 of the Local Government Finance Act 1988.

However, we have to balance this against the needs of businesses. What we hear from businesses is that they really value certainty. They tell us that the current RHL relief scheme, operated through local discretion, does not give them that certainty. We hear that they do not favour a system where a national relief scheme, such as RHL relief, can be delivered differently by different local authorities. It leaves businesses, especially those with multiple stores, unsure as to where and when they will be awarded relief.

The new lower RHL multipliers will therefore operate through a single set of regulations for all of England, made by the Treasury. Those regulations will still be implemented by local authorities, using their local knowledge, but the definition will be set by the Treasury. This is something that businesses in general would support. We will work with local government over the coming year to prepare these regulations. That goes to the direct question asked by the noble Lord, Lord Jamieson, in relation to our relationships and work with local government; we are doing that already.

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[Lord Thurlow (CB)]

Does the Minister have any comments to make on the possibility of redefining the use classes for the purposes of rating, which would focus on the Amazon generic problem?

[Lord Khan of Burnley (Lab)]

I forgot to mention this to the noble Lord, Lord Thurlow; it would be helpful for him to sit down with me to discuss that, as well as his previous request, as soon as he has time in his diary. This is a discussion that we should have to engage on that particular point.

[Lord Jamieson (Con)]

My Lords, I thank all noble Lords who contributed to our debate on this group of amendments, which deals with the role of billing authorities and the definition of hereditaments.

During the debate, I listened closely to the noble Lord, Lord Thurlow, whom I thank for his support in raising yet again the impact on anchor stores on the high street, which is quite fundamental. I fully support the sentiment of Amendment 32 in his name. It seems plainly obvious that we are closely aligned; I hope that we can work collaboratively before and during Report and that the Minister will both listen to this argument carefully and see what can be done to improve the Bill’s provisions on the definition of hereditaments.

I thank the noble Earl, Lord Lytton, for his support for discretion. The noble Baroness, Lady Pinnock, was concerned that it may mean somewhat less funding for councils in the north of England. That is absolutely not the intention; I would be delighted to look at this matter further and have a conversation outside this Room.

The Minister made a couple of points about certainty. All businesses like certainty but they also want equity. Our concern is about equity and what is reasonable and fair. I was slightly puzzled by what the Minister said—I would be grateful if we could have a conversation on it later—about this idea of “centrally set but locally implemented”. That does not feel like local discretion; it feels like local implementation. I would be keen if he could speak more on that point.

Finally, local authorities have the ability for some local discretion. However, my understanding is that that would be funded locally, which is not particularly desirable.

[Lord Khan of Burnley (Lab)]

I think the noble Lord is saying “Let’s have some conversations to follow this up”. As I have said to all here, I am happy to sit down with any noble Lord or noble Baroness to discuss any point, in particular post Committee, before we get to Report. I would absolutely welcome a conversation with the noble Lord.

[Lord Jamieson (Con)]

I thank the Minister.

We must steer away from blanket definitions issued centrally by the Treasury, which does not have the thorough oversight of local businesses in all parts of the UK. Local authorities have a particular understanding of the business landscape in their areas, so while the definition of hereditaments introduced by the Treasury may work in some places, it will not work everywhere or be appropriate to others. This can be avoided if local authorities are issued with a power to determine a hereditament or other type of property.

As the noble Lord, Lord Thurlow, rightly pointed out in his Amendment 32, local authorities already determine what constitutes a retail, hospitality and leisure relief property. We must therefore ask why the drafting of this legislation provides complete power to the Treasury to define a retail property or a hereditament. Would it not be more suitable for local authorities to define property types? I would argue that, with their first-hand local knowledge, local authorities are best placed to define terms in a way that reflects the realities and suits the needs of their local areas.

Unsurprisingly, many questions have been raised in the debate on this group of amendments, so I look forward to the Minister—I thank him for his willingness to engage with us—providing more clarity on the matters discussed. I hope we will engage positively on the amendments in the name of my noble friend Lady Scott. With that, I beg leave to withdraw the amendment.

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[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.

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[Lord Fox (LD)]

I think I clarified that there were two issues. If the Minister looks in his data, he will find that the Royal Albert Hall is classed as being over £500,000, and I specifically asked about the Royal Albert Hall, so we require an answer to that. The point about grass-roots venues was not about the £500,000; it is about the loss of the relief, from 70% to 40% in the coming financial year, which will put them below the waterline, on average. That was a specific and different question that the Minister may want to answer separately.

[Lord Khan of Burnley (Lab)]

I did say that I would come back to the noble Lord on his specific question.

[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.

[The Earl of Lytton (CB)]

I have just looked up the Royal Albert Hall. It has a £1.9 million rateable value.

[Lord Khan of Burnley (Lab)]

I thank the noble Earl very much for that clarification, but if he looks at my remarks later, he will see that I said that we do not expect “many”—not any—grass-roots music venues to fall above the £500,000 threshold. As I said, although we do not hold data specifically on music venues, we know, for example, that pubs, which often play an important role in the grass-roots music scene, have an average rateable value of only £16,800.

The noble Earl, Lord Lytton, asked how the lower multipliers will affect vacant property. The Bill allows for the lower multipliers to apply to vacant RHL properties. I assure the noble Earl that we intend to apply these new multipliers to occupied properties in the same way as we do to vacant properties. That will be consistent.

The noble Lord, Lord de Clifford, and the noble Baroness, Lady Pinnock, touched on the important point of why an impact assessment has not been prepared. Let me be absolutely clear and repeat my previous points on this: policies and legislation concerning tax and the administration of tax fall outside the meaning of regulatory provisions and are therefore not required to be accompanied by an impact assessment. However, His Majesty’s Treasury committed to publishing an analysis of the new multipliers at the Budget.

A further set of amendments seeks to expand the set of properties eligible for the lower multipliers. This includes widening the lower multipliers to manufacturing properties. I repeat this for the noble Lord, Lord Fox, and the noble Baroness, Lady Scott, who raised this in particular: a further set of amendments seeks to expand the set of properties eligible for the lower multipliers. This includes widening the lower multipliers to manufacturing properties and, more generally, a power to widen the lower multipliers to other sectors.

I acknowledge the intention of the noble Earl, Lord Lytton, to provide greater flexibility within the Bill, should it be deemed appropriate, in future, to apply the lower multipliers to other types of property. However, the Government were clear at the Budget that the intention is for the permanently lower tax rates to apply to qualifying RHL properties from 2026-27, ending the uncertainty of RHL relief that has been extended year on year. This has been an ad hoc system, and year on year is not the most effective way for businesses to plan.

[Lord Fox (LD)]

I think I heard the Minister say, on a different group, that this will apply for three years. On that basis, we cannot really expect a root-and-branch change of the system until either the end or beyond the end of this Parliament. Would that be a reasonable assessment?

[Lord Khan of Burnley (Lab)]

The noble Lord makes an interesting point. This will come into force in 2026-27; we are talking about the revaluation and review being three years after that. Again, this provides more certainty, because we do not want year-on-year unpredictability in an ad hoc system. This is a sustainable process, and it will give us a chance to see what the environment and fiscal climate will be at that time. Again, it is for the Treasury to set the multipliers.

Against the current fiscal backdrop, widening the scope of properties eligible for the lower multipliers would potentially reduce the level of tax cut that could then be provided to that cohort. Similarly, widening the scope may require a higher tax rate on those properties paying the higher multiplier to enable the Government to deliver a permanent tax cut.

The amendments for manufacturing could, of course, widen the lower multipliers somewhere beyond the town-centre and high-street environment. As we have heard from stakeholders, retail, hospitality and leisure businesses tend to occupy properties in higher-value locations with higher footfall, which in turn drives up the rateable value and rates bill. The Bill will rebalance this. The same cannot generally be said for manufacturing, so the case for special treatment for it here is weaker.

The Government are supporting our manufacturing sector through other means. At the Autumn Budget, we announced £975 million for the aerospace sector over five years, over £2 billion for the automotive sector over the same period and up to £520 million for a new life sciences innovative manufacturing fund.

I turn to a point raised by the noble Lord, Lord Fox. Live music venues are currently eligible for the existing RHL relief. The definition of RHL, in terms of the new multipliers, broadly follows the current definition, which will be set later in secondary legislation.

[Lord Fox (LD)]

I am sorry; I am just trying to process that. Are you saying that, going forward, they would continue to benefit from the lower multiples as RHL-qualified businesses?

[Lord Khan of Burnley (Lab)]

In terms of over £500,000, we are going to have the same policy applied to all sectors. We are not doing carve-outs, but in terms of any relief that music venues are having below that, the definition of the new multipliers will broadly follow the current definition and will be set out in secondary legislation later this year.

I think I have answered the question asked by the noble Baroness, Lady Pinnock, but I will make a few points again about the impact on the public sector. The fiscal inheritance demands tough choices in order to fix our public services to create long-term growth and investment that will support businesses, but we have sought to mitigate the worst impacts of these choices. It would not be fair on businesses if we excluded the public sector from the higher multiplier.

In relation to the points made by noble Lord, Lord Fox, and the noble Baroness, Lady Pinnock, I repeat, in particular, that the Government will work to ensure that, as far as practically possible, local government income from business rates is unaffected by business rates tax rate changes. The Government are making good on the promise to reform the local government funding system. I talked about this on the previous group. We will pursue a comprehensive set of reforms for public services to fix the foundations of local government in partnership with the sector and with the principle of giving councils early notice.

There has been a wide-ranging debate on this group. For the reasons that I have set out, I hope the Committee will understand, as we consider these amendments and those in the three groups that follow, that we should not seek to carve out certain properties from the higher tax rate or bring other properties into eligibility for the lower multiplier. I hope that the noble Earl will withdraw his amendment.

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[Lord Jamieson (Con)]

I thank the noble Baroness, Lady Pinnock, for moving this amendment and outlining the unintended consequences of this Bill. The proposal to exempt healthcare from the higher multiplier is an issue that has sparked considerable debate in the wider community.

The amendments in this group propose two key changes: to exempt healthcare from the higher multiplier; and to expand the definition of healthcare to include hospitals and medical and dental schools. These changes seek to address the concern that critical services in the healthcare sector could be disproportionately affected by the Bill’s provisions. These amendments address very real concerns that services could be disproportionately affected through this legislation, revealing further unintended consequences of this Government’s Bill.

Amendment 6 is particularly important as it seeks to remove healthcare from the higher multiplier, directly responding to concerns raised by hospitals and other healthcare providers that are already under significant financial strain. Exempting healthcare from this additional tax burden could protect vital services, ensuring that they can continue delivering essential care without being further impacted by this Bill’s provisions. The National Pharmacy Association has warned that pharmacies across the country are at risk and may be forced to cut hours because of the Government’s triple whammy of increased business costs this April. It cannot be right that access to healthcare is threatened by the Government’s appalling tax policies. Will the Minister give the Committee a commitment today that the Government will change course on their tax policies if it is proven that access to healthcare will be reduced as a result of their policy?

Amendments 20 and 23 seek to clarify and broaden the definition of healthcare, ensuring that medical and dental schools are included in these protections. Given the importance of these institutions in training future healthcare professionals, it is worth considering whether their exclusion from such protections could affect the quality and sustainability of the healthcare workforce—particularly at a time when the sector is facing increasing demand. I would be grateful if the Minister took this opportunity to outline exactly how the Government will safeguard the future of our healthcare workforce in the light of these concerns.

Finally, Amendment 39 repeats the proposal to exempt healthcare from the higher multiplier, reinforcing the argument that this sector should not bear the weight of a tax system that may further stretch its already-limited resources.

I would like to touch on the cliff-edge nature of the £500,000 threshold; this has been mentioned in previous debates by the noble Earl, Lord Lytton, and my noble friend Lady Scott. A local health facility might want to add one consulting room. If that pushes it over the £500,000 threshold, it may no longer be affordable. We need to think carefully about the cliff-edge nature of this measure; I would be grateful if the Minister could provide some additional thought on it and come back to us.

In conclusion, these amendments ask important questions about the impact of this Bill on healthcare sectors. Although the Bill seeks reform, we must ensure that essential services are not disproportionately affected by the higher multiplier or excluded from necessary protections. The noble Baroness, Lady Pinnock, has brought forward a compelling case for the need to reconsider the treatment of healthcare in the Bill. I would be grateful if the Minister took this opportunity to clarify how the Government plan to address these concerns and ensure that vital healthcare services are not unduly burdened; I look forward to his response.

[Lord Khan of Burnley (Lab)]

My Lords, these amendments seek to change the Bill to remove healthcare hereditaments from the higher multiplier. In the previous debate on the amendments in group 4, just a few moments ago, I explained why the Government have taken a sector-agnostic approach to the higher multiplier and not excluded any sector or type of property. Of course, the same considerations apply here. This Government fully support the healthcare sector, but it would not be fair to exclude some and not others. To sustainably fund the lower multipliers, we must ensure that we can raise money from higher multipliers; the only fair way to do this is to apply it to all hereditaments at £500,000 and above.

As I said in the debate on the previous group, it is important to look at the facts. The Valuation Office Agency’s statistics show that, of the 16,780 properties caught by the £500,000 threshold, based on the current rating list, only 350 are in the health subsector. Of these, 290 are NHS hospitals and only 30 are doctors’ surgeries or health centres. These numbers are rounded to the nearest 10 and we do not have separate data on medical or dental schools. The impact on this sector is therefore limited and, where it applies, much of it falls on the NHS. The Autumn Budget fixed the spending envelope for phase 2 of the spending review, which will deliver new mission-led, technology-enabled and reform-driven budgets for departments. We will consider the full range of priorities and pressures facing departments in the round, including any impact of the higher multiplier, when setting these budgets.

On the questions about the Bill creating more cliff edges in the system, the new higher-rate multiplier will apply to properties above £500,000, which will fund and support the high street in a sustainable way. However, the discussion paper published at the Autumn Budget highlights that some stakeholders have argued that cliff edges in the system may disincentivise expansion. It committed to explore options for reform. The Government have recently completed an initial stage of engagement to understand stakeholder views and areas of interest for reform, and we are open to receiving written representations in response to the priority areas for reform. That is open until 31 March 2025.

On the specific question about examples of properties that the noble Baroness mentioned, it would be inappropriate for me to discuss the rate bills of specific ratepayers, especially as one of them is a domestic property. To conclude, set in the context of these facts and assurances of how we will approach the issue in the spending review, I hope the noble Baroness is able to withdraw her amendment.

[Baroness Pinnock (LD)]

My Lords, I thank the noble Lord, Lord Jamieson, for his support for the amendments that I have tabled to try to persuade the Government to think again. The Minister talked about an agnostic approach to the application of the higher multiplier. Now, agnostic approaches are all very well until we see what we catch in the trap. What we have exposed this afternoon is that the Government intend to apply higher costs to the very public services for which they are desperate to have higher funding. They cannot, on the one hand, say that they wish to provide higher funding for some of these important public sector services when, on the other hand, they take some of the funding away. That is the consequence of an ill-considered agnostic approach. I urge the Government to think about having a more targeted approach that includes in its catch more warehouse distribution services and fewer public sector providers of important and valuable public services. At the minute, that is not what is happening.

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[Lord Thurlow (CB)]

I will say a few words in support of the excellent Amendments 8, 9 and 10 in the name of the noble Baroness, Lady Scott. It had not occurred to me but is worth saying here that, just as an anchor is critical to the economic health of the high street and the social contribution that comes with it, so are these very small and vital retailers—if that is the right word—for banking facilities, as well as the small facilities open all hours, 18 hours a day or whatever it may be. They are critical. In fact, they should perhaps be considered in a conversation about revising the use classes order because, as we heard with the good examples given, they are essential to the health of the local community.

[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”.

--- Later in debate ---

[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—

--- Later in debate ---

[Lord Khan of Burnley (Lab)]

My Lords, I thank the noble Baroness, Lady Pinnock, and the noble Lord, Lord Fox, for their Amendments 16, 34, 42 and 51. I understand the intention of these amendments is to understand further, first, what hereditaments will be included in the definition of qualifying retail, hospitality and leisure properties; and, secondly, the intended application of the new multipliers to high streets.

The definition of qualifying retail, hospitality and leisure properties will be set out via secondary legislation later this year, as I repeated earlier. However, I can confirm that the Government’s intention is for this broadly to follow the definition that is used for the current RHL relief; I note that the noble Lord and the noble Baroness are familiar with this definition, as their amendment draws on the guidance published by the Government. When introduced from 2026-27, the new multipliers that this Bill makes provision for will apply to all relevant hereditaments, regardless of their geographical location.

It is the Government’s intention to introduce two lower RHL multipliers: one for RHL properties with a rateable value of between £51,000 and £499,999; and another one for RHL properties with a rateable value of below £51,000. All qualifying retail, hospitality and leisure properties will be eligible for these new multipliers. This approach will best ensure that support is targeted towards RHL businesses based on the high street while working within the existing business rates architecture. We are moving from a stopgap, ad hoc, year-to-year relief scheme to a permanent lower multiplier that provides greater certainty for business.

It is also the Government’s intention to introduce a higher multiplier for all properties with a rateable value of £500,000 and above—a point that I have made previously. Again, this will affect all properties that meet that criterion, regardless of their geographical location. It is the Government’s view that this is the fairest approach and that trying to restrict the application of the different multipliers based on geography would create unintended consequences and would likely drive perverse incentives.

[Lord Fox (LD)]

I thank the Minister for introducing the use of the relief definitions. If I have got this wrong, I am very happy for him to tell me so, but my understanding is that the bottom level of below £49,000, I think, were not paying business rates at all. Is that correct? Will they now be classified along with everyone else and pay business rates with the appropriate reduction put on to them, in which case they will go from paying no rates to some—albeit less than the full rate, as we would have seen it?

[Lord Khan of Burnley (Lab)]

Just to clarify, the noble Lord, Lord Fox, has got it wrong because the zero, as in no business rates, is for rateable values—£12,000 in particular—and it is then tapered, so the relief decreases as it goes to £15,000.

[Lord Fox (LD)]

Do they now come into the system or do they continue to have a zero rate under the proposals of this Bill?

[Lord Khan of Burnley (Lab)]

Just to clarify for noble Lords, there will be no change to small business rate relief—that is not changing—so they will still pay tax.

It is the Government’s view that this is the fairest approach and that trying to restrict the application of the different multipliers based on geography would create unintended consequences and would likely drive perverse incentives. It is also extremely difficult to draw a line around a town centre. I note that the noble Baroness, Lady Pinnock, made a suggestion around using the understanding of the term as per the National Planning Policy Framework, but that framework does not set a definition of a town centre. It should be noted that the framework suggests those centres identified in development plans, but this does not represent a requirement that all centres are identified. We also know that many areas do not have up-to-date development plans and that, therefore, centres that are identified may not reflect current realities.

Such an approach would essentially give local planning authorities the power to determine where multipliers should apply and could restrict their application from smaller retail centres that might be essential to particular neighbourhoods. Furthermore, it could result in the higher multiplier not being able to be applied to large warehouses used by online businesses or other properties with a rateable value of £500,000 or above if they are not located in a town centre, as these would fall outside the definition of a town centre. I do not think that is the noble Lords’ intention, but it is important to clarify that point. I hope that my remarks have helped to clarify the areas of interest and provided reassurance on the Government’s policy in this space. I respectfully ask the noble Baroness, Lady Pinnock, to withdraw her amendment.

[Baroness Pinnock (LD)]

I thank the Minister. I thank the noble Lords, Lord Jamieson and Lord de Clifford, for their supportive comments, as the Minister was not so helpful. Businesses require clarity and certainty. To tell us that secondary legislation will be needed to set out the definition of RHL means that clarity and certainty will be pushed further down the line. The Minister shakes his head, but I wrote down what he said: secondary legislation will set out the definitions. By definition, that will be after this Bill has gone through its processes.

[Lord Khan of Burnley (Lab)]

My Lords, in the very same sentence I said:

“However, I can confirm that the Government’s intention is for this to broadly follow the definition that is used for the current RHL”.

[Baroness Pinnock (LD)]

In which case, I apologise to the Minister. I must have missed that bit of his explanation. We have been saying right from the start that Covid relief would be the definition for RHL, and that is the clarity people need. I hope the Government will inform businesses that, if they currently get Covid relief, they will qualify under this Bill. Equally, we will be pushing the Government to expand that definition. It is not as inclusive as some of us think it should be if the aim is for small businesses to thrive or have reduced costs, as opposed to distribution warehouses and online retailers.

On the last amendment, I disagree with the Minister because the National Planning Policy Framework—which I have read—sets out what a town centre is. Local planning authorities have the responsibility to form a local plan. The Minister is right: far too many local planning authorities have failed in that responsibility. However, the Government have said that they expect local planning authorities to produce a local plan. In that case, all local planning authorities would produce a local plan in which they can define what is included within the boundaries of several town centres within their purview. That is really important because lots of issues follow from being within the purview of a town centre.

I hope that the Minister will perhaps go away and think with his officials about whether this could be used as a definition for businesses within the purview that will be set out in the local plan so that this Bill— the Government have stated that its aim is to help the so-called high street, which, as I have said, will be the town centre—will help businesses to thrive despite the growing competition that they face from online retailers, which, by the very nature of business rates, pay much less than those businesses do in town centres even after this multiplier is applied. With that plea to the Minister, I beg leave to withdraw the amendment.

--- Later in debate ---

[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?

[Lord Khan of Burnley (Lab)]

It is not DHCLG these days; it is MHCLG.

[Lord Fox (LD)]

Whatever it is called these days—they keep changing it, and I never normally address this particular crowd. Was it the Minister’s ministry or was it the Treasury? If it was the Treasury, I rather think we should have a Treasury Minister here to answer the question of why it was a £500,000 limit, because it seems to me that it is a very round, arbitrary number. It would have been more convincing had it been £550,000; it might have looked like some thought had gone into it. This looks like a dart-throwing exercise.

So can the Minister explain what was behind the number? Is it trying to balance the money raised? If so, how can you know when your top rate is a top rate and is not necessarily applied? If it is the nature of a business, what is it about the nature of the business? If it is from an analysis of every single £500,000 business, what criteria were used to make that analysis? In other words, where did it come from?

[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.

Holocaust Memorial Day

Lord Khan of Burnley Excerpts

Thursday 13th February 2025 Lords Chamber

Moved by

[Lord Khan of Burnley]

That this House takes note of Holocaust Memorial Day.

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

My Lords, it is with respect and solemn reflection that I move the Motion standing in my name on the Order Paper. This year marks the 80th anniversary of the liberation of Auschwitz-Birkenau. Many of us have attended Holocaust Memorial Day events across the country, including the national ceremony in London. His Majesty the King attended the commemoration at Auschwitz-Birkenau alongside Chief Rabbi Mirvis, Holocaust survivor Mala Tribich and leaders of 50 countries.

Last week, I had the honour of listening to Holocaust survivor Manfred Goldberg. What struck me was that, although Manfred is now 94, he related what happened to him as a young boy as though it were yesterday. He told us about the heartbreaking moment when, aged 13, he and his mother were sent off to work while imprisoned at the Preču concentration camp. On their return, his little brother Herman was missing. They never saw him again. For over 70 years, Manfred held a small hope that, somehow, Herman had survived and one day they might be reunited. Sadly, that was not to be. Manfred’s story about his little brother brought home to me that, while we rightly remember that 6 million Jews were murdered during the Holocaust, we often miss that 1.5 million were Jewish children.

Manfred’s story touched me deeply, as he spoke of his mother and the loss of her youngest son. I am the youngest son in my family and I recently lost my dear mother. I take this opportunity to give my heartfelt thanks to noble Lords for all their kindness shown to me in the last few weeks. It does not really matter how old you are; the loss of a mother affects you deeply. My mother was an inspiration: one important thing she taught me, which is so relevant to today’s debate, is that we must never forget the lessons of history. The history of the Holocaust provides lessons for the whole world. It shows us what can happen when hatred takes over a society, when barriers are created and fellow humans are treated as something different—something to be despised.

Nazi ideology can be hard to comprehend. It was ruthless and fearsome. Children like Manfred’s younger brother Herman were especially vulnerable to Nazi persecution. Nazi Germany and its collaborators murdered not only 1.5 million Jewish children but tens of thousands of Romani Gypsy children, 5,000 to 7,000 German children with physical and mental disabilities living in institutions, as well as many Polish children and children residing in the German-occupied Soviet Union.

Along with elderly people, children had the lowest rate of survival in concentration camps and killing centres. People over 50 years of age, pregnant women and young children were immediately sent to gas chambers at Auschwitz-Birkenau and other killing centres. Until mid-1943, all children born in Auschwitz, regardless of origins, were murdered, usually by phenol injection or drowning. Later, non-Jewish newborns were allowed to live. They were entered in the camp records as new arrivals and tattooed with a prisoner number.

Due to woeful conditions in the camp, few lived long. Children born to Jewish mothers were routinely murdered. Thousands of Jewish children survived this brutal carnage, many because they were hidden. With identities disguised, and often physically concealed from the outside world, these youngsters faced constant fear, dilemmas and danger. Theirs was a life in shadows, where a careless remark, a denunciation or the murmurings of inquisitive neighbours could lead to discovery and death.

Of course, none of these stories could be preserved without the men and women with the courage to tell them—women such as the remarkable Lily Ebert MBE, who died at home in London in October last year, aged 100. Her life after Auschwitz showed that, even in the face of unspeakable evil, the human spirit can triumph.

Ann Kirk BEM died earlier this year, at the age of 96. She arrived alone in London aged 10 on the Kindertransport. She dedicated her life to raising awareness about the horrors of Nazism. Anne was married to Bob Kirk BEM, who also came to the UK on the Kindertransport and died late last year, aged 99. They were a wonderful couple who dedicated their lives to sharing their story—a story of how they left their home and parents as children and made new lives in the United Kingdom.

Anne met Bob at a social hub for Jewish refugees called Achdut, which means togetherness. The couple married in 1950 and had two children. It was not until 1992 that they told their sons about their background, after being invited to speak at an event commemorating Kristallnacht at Northwood synagogue. It was during the couple’s speech that their children discovered the truth of their upbringing. I often think how hard it must be for survivors to give their testimony, to return to those moments, to remember those darkest of days and to recount how loved ones—husbands, wives, sons, daughters—were taken away.

I want also to take a moment to debunk the idea that we did not know what was happening. From 1942 onwards, reports of the mass murder of Jews in continental Europe began to reach Britain. As the tide of the war turned against Germany and its allies, the British Jewish community started to plan for post-war relief work. Jewish aid workers began, after the liberation, to report that some children had survived the Nazi concentration camps.

In May 1945, Leonard Montefiore, a well-known philanthropist, travelled to Paris to meet with the heads of Jewish organisations. Before returning home, he wrote to Anthony de Rothschild, chairman of the Central British Fund—now World Jewish Relief—outlining a scheme to bring

“a few hundred children from Bergen-Belsen or Buchenwald”

to Britain. On his return to London, Montefiore drew up detailed arrangements planning not only how he was going to get the children to Britain but how he was going to give them the best possible care.

The British Government approved his proposal and granted permission for 1,000 child survivors to be brought to the UK. At this point, it was believed that no more than 5,000 Jewish children in central and eastern Europe had survived the Holocaust, and those would be cared for in allied and neutral countries such as Sweden and Switzerland, so the Home Office’s offer of 1,000 visas was a fitting response.

That said, the offer of help from the British Government was not without conditions. The children had to be aged 16 years or under and would be granted permission to stay in the UK for only two years. They were not to cost the taxpayer a penny and the Central British Fund was to be financially responsible for the entire cost of looking after them. The money to do this was to be raised privately. It was later stipulated that only children who had been in concentration camps would be admitted to the UK, although the age limit was raised to 18 in 1946.

In the end, just over 700 children came to Britain. They were known as the boys, even though there were girls too, and they arrived in five groups. The first group arrived in August 1945, is known as the Windermere boys and was made up of 300 children. The second group arrived in October 1945, is known as the Southampton boys and was made up of 152 children. The third group arrived in March 1946, is known as the Belgicka boys and was made up of 149 children. The fourth group arrived in June 1946, is known as the Paris boys and was made up of 101 children. The fifth group arrived in April 1948, is known as the Schonfeld boys and was made up of 21 children.

Their story is less well known than that of the Kindertransport, through which 10,000 Jewish children were saved in the aftermath of Kristallnacht in 1938. The boys set up the ’45 Aid Society in 1963. They wanted to say thank you and to give back to the society that had welcomed them. Over time, the running of the ’45 Aid Society has passed to the children of the boys—often referred to as the second generation—the custodians of the testimonies and life stories of the boys. They keep their testimonies alive and make them relevant for future generations, through educational activities, community events and fundraising.

I want to thank these custodians, but I really want to say a special word to the survivors. Every day that you have lived, and every child and grandchild that your families have brought into this world, have served as the ultimate rebuke to evil and the ultimate expression of love and hope. We need only to look at today’s headlines to see that we have not yet extinguished man’s darkest impulses, but none of the tragedies that we see today may rise to the full horror of the Holocaust.

The individuals who are the victims of such unspeakable cruelty make a claim on our conscience. They demand our attention: that we do not turn away; that we choose empathy over indifference; and that our empathy leads to action. That includes confronting the rising tide of anti-Semitism around the world. We have seen attacks on Jews in our streets and in the streets of major western cities. We have seen public places disfigured by swastikas.

Some foreign Governments continue to rinse their history, and some are not willing to recognise that the Nazis could not have done this alone; they needed willing partners. It is up to each of us, every one of us, to forcefully condemn any denial of the Holocaust. It is up to us to combat not only anti-Semitism but racism, bigotry and intolerance in all their forms, here and around the world. We cannot eliminate evil from every heart or hatred from every mind. What we can and must do is make sure that our children and their children learn their history so that they might not repeat it. We can teach our children to speak out against a casual slur. We can teach them that there is no “them”, there is only “us”.

I have had the honour of attending many Holocaust Memorial Day events over the last couple of weeks, each one different and yet all the more meaningful. My department funds the Holocaust Memorial Day Trust, and this year granted an additional £80,000 to the existing annual grant of £900,000, to ensure that the Holocaust Memorial Day ceremony was televised on the BBC. I have been told that 2 million people tuned in to the ceremony.

As we approach the 25th anniversary of the Stockholm declaration, it is important to take stock of the International Holocaust Remembrance Alliance’s achievements. IHRA is perhaps best known for its non-legally binding definition of anti-Semitism. There are many other tools relating to accessing archives and safeguarding sites, and a toolkit to fight Holocaust distortion. These are just a few of the tools developed by IHRA in partnership with the experts, and I pay tribute to the work of the noble Lord, Lord Pickles, in particular, in this area.

IHRA is important because it holds each and every one of us to account. We all have issues with our history. The problems we face today are more complex and more subtle. It has been a long process even for democratic countries to confront their own problematic history. Year on year, we see countries rinse their history and rehabilitate people. Well-known anti-Semites morph into nationalists or become heroes in the fight against communism. It was only in 1995 that the French Government accepted responsibility for the deportations and deaths of over 70,000 Jews and Austria finally dispelled the myth of being Hitler’s first victim and made amends to Austrian Nazi victims.

In the United Kingdom and the United States, we need to come to terms with the fact that we did not open our borders and accept Jews fleeing the Nazis. Earlier, I mentioned the Kindertransport. In the case of the UK, we accepted children but not their parents. Most of the children never saw their parents again.

The work of the Holocaust Educational Trust, the Association of Jewish Refugees and the Holocaust Memorial Day Trust to ensure that we never forget is more important than ever, especially as the number of Holocaust survivors is dwindling. Each and every one of us who has had the privilege of hearing first-hand testimony has a duty to keep their memory alive.

That is why we remain determined to create the UK national Holocaust memorial and learning centre in Victoria Tower Gardens—a place where we can learn about the Holocaust, a place which will ensure that we never forget where hatred can lead. Subject to the passage of the Bill, and to recovery of planning consent, we hope to begin construction before the end of this year.

These words of Holocaust survivor and Nobel laureate Elie Wiesel are very important:

“Never shall I forget that night, the first night in camp, which has turned my life into one long night, seven times cursed, and seven times sealed. Never shall I forget that smoke. Never shall I forget the little faces of the children, whose bodies I saw turned into wreaths of smoke beneath a silent blue sky”.


It has been 80 years since the Soviet Army liberated Auschwitz-Birkenau, the Americans liberated Buchenwald and the British liberated Bergen-Belsen. We owe it to those who were murdered, those who survived and those who liberated the camps to never forget and to ensure that every generation knows where hatred and indifference can lead.

Before I end, I would like to pay tribute to my noble friend Lady Anderson. We all know how dedicated she is to tackling anti-Semitism and all forms of hatred. She has never given in, despite appalling levels of abuse directed at her. She is someone I greatly admire.

As a man of faith and as the Faith Minister, I think it is only fitting that I end with the following words penned by the late Chief Rabbi Jonathan Sacks—may his memory be a blessing:

“We know that whilst we do not have the ability to change the past, we can change the future. We know that whilst we cannot bring the dead back to life, we can ensure their memories live on and that their deaths were not in vain”.


I look forward to everyone’s contributions, in particular, the maiden speeches of my noble friends Lord Katz, Lord Evans and Lady Levitt. I beg to move.

Community Engagement Principles and Extremism Definition

Lord Khan of Burnley Excerpts

Wednesday 22nd January 2025 Lords Chamber

[Lord Jamieson (Con)]

My Lords, does the Minister agree that, in addition to reviewing the definition of extremist organisations and the community engagement strategy, we should also review the wider communication policy regarding acts of extreme violence and terror to maintain an open dialogue with the general public and prevent the spread of misinformation?

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

My Lords, let me first of all say that national security will always come first for this Government, and we will always treat the threat of extremism with the seriousness that it requires. The noble Lord makes an interesting point. I confirm to the House that the Government take the threat of extremism very seriously and will continue to work with partners to tackle extremism in all parts and forms. That is why the Home Secretary commissioned a rapid review of extremism in 2024. The Government will set out their approach to countering extremism in due course and will update Parliament accordingly. I am sure that many of the issues that the noble Lord raised will be part of that review.

[Baroness Pinnock (LD)]

My Lords, knowledge and understanding of communities is crucial in this regard. Councillors are elected to serve their communities and know them well. Does the Minister agree with that proposition? Does he also agree that plans to create large wards make that more challenging for councillors? Will the Government therefore keep ward sizes appropriate to their role in knowing and representing their communities, and will the Government provide additional support to councillors in that critical role?

[Lord Khan of Burnley (Lab)]

My Lords, let me reassure the noble Baroness that, having been a councillor for 16 years in the wonderful district of Burnley, I understand the fantastic work that local councils do. I reaffirm the Deputy Prime Minister’s position that we want to work in equal partnership with the local authorities and we want to give them more power. I would not be able to comment on the size of the wards because that is the responsibility of the Minister, Jim McMahon, in the other place.

[Baroness Hazarika (Lab)]

My Lords, I am sure the whole House will agree that this work could not be more important or timely. As a Muslim woman, can I ask the Minister what has been done to engage with women and girls’ voices? It feels like our voices are often ignored, and certain very noisy male groups dominate the conversation. Will the Minister acknowledge that it is often women and, sadly, girls, who are the victims of extremist violent behaviour?

[Lord Khan of Burnley (Lab)]

My Lords, my noble friend makes a series of excellent points. I totally agree about extremist behaviour and its disproportionate impact on women and girls. Let me reassure the noble Baroness that we are looking at ensuring that we have more female voices—not just female voices, but young female voices—in the faith space. Let me also let the House know that I have been up and down the country and have engaged not just with the major faiths but with every faith in our country. That has been a privilege, but I have learned that there need to be more female voices in the faith space.

[The Lord Bishop of Manchester]

My Lords, a decision under the previous Government about a particular Islamic organisation being characterised as extremist led to the defunding and collapse of the national Inter Faith Network. I wonder if the Minister agrees that the Inter Faith Network provided a vital role in co-ordinating interfaith work at a national level. We do great things at local level, but we need some national work as well. Will he urge His Majesty’s Government to commit to refunding the Inter Faith Network?

[Lord Khan of Burnley (Lab)]

My Lords, I pay tribute to the right reverend Prelate, with whom I have worked closely in the interfaith area in the north-west of England. I totally agree about the work of the Inter Faith Network. It is important that there is a national forum. Although we will not be bringing back the Inter Faith Network as it was previously, we are looking to ensure that that work is brought back and we are exploring ideas. My department, the MHCLG, has just commissioned some research and a consultation on what form that will take in future, so that there is a national interfaith presence that the Government can regularly engage with.

[Lord Robathan (Con)]

My Lords, given the changes to the definitions of extremist organisations, can the Minister please reassure me and the House that the Provisional IRA remains defined as a terrorist and extremist organisation? Can he therefore take back to his colleagues in government the real fear that many of us have that members of the Provisional IRA, including Gerry Adams, will be compensated in some way by the British taxpayer?

[Lord Khan of Burnley (Lab)]

My Lords, I think it is just for me to say that I will take back the noble Lord’s concerns.

[Viscount Brookeborough (CB)]

My Lords, will the Minister consider that there are a lot of good lessons to be learned from Northern Ireland on community relations? Those relations have come on a great deal, and that is often about creating neutral spaces and reasons for communities to come together that are not related to being extreme or not getting on. It is about getting people on the fringes of those extremists to enjoy life together for other reasons—and that may be sport or art—on neutral ground. Often, when you target people to bring them together, those people naturally resist being brought together, so it is about doing it from ground level up, and doing it because people want to enjoy doing things together.

[Lord Khan of Burnley (Lab)]

My Lords, the noble Lord made some interesting points. On the initial point about community relations, I reassure him that that is very important, and it is why counter-extremism has gone back into the Home Office. In my department, I am the Minister responsible for cohesion. We work with different communities to ensure, up and down the country, we hear those diverse voices, not just faith-based voices but from different communities, different diasporas and different parts of the country. So I reassure the noble Lord that this work is happening and we are working with our partners and across the country.

[Lord Harries of Pentregarth (CB)]

Did the Minister see the result of a rather disturbing poll the other day that one in five people between the ages of 18 and 45 would rather have a strong leader than democracy? Democracy, of course, is about solving one’s political problems without violence. Does he agree that there is a failure at the moment in our country to encourage people in schools to really understand democracy and believe in it? It is not the only aspect of the matter, but we want children to come out of our schools believing in democracy and in doing these things without violence.

[Lord Khan of Burnley (Lab)]

My Lords, the noble and right reverend Lord makes a strong point about ensuring that we provide more education about and awareness of the importance of democracy. Democracy unfortunately is also being attacked by malign actors and foreign interference, as we have seen evidence of in recent weeks and even in previous elections. I reassure the noble and right reverend Lord that I am having those conversations with the Department for Education and the Minister responsible to ensure that we can look at focusing education and getting more understanding of democracy, so our citizens understand and appreciate the historical struggle for democracy and celebrate our system. Although there are challenges, it is a wonderful system and we need to ensure that people engage with it.

[Lord Ahmad of Wimbledon (Con)]

My Lords, just a small point first: countering extremism always has sat in the Home Office. I should know, as I was the first Minister for Countering Extremism in the Home Office. Linked to that, a lot of the extremism is imported from other parts of the world and it is important to stop it at source. Can the Minister assure this House that there will be an integrated approach to ensure that the foreign threat is also dealt with?

--- Later in debate ---

[Lord Khan of Burnley (Lab)]

My Lords, the noble Lord makes an excellent point about making sure that there is an integrated approach. I do not want to pre-empt the conclusion of the rapid sprint, which the Home Secretary has not completed yet, although there were some initial findings in December. The Deputy Prime Minister has made sure that community cohesion, community relations and working with communities come within MHCLG and the Home Office takes responsibility for counter-extremism. I know that was the situation when the noble Lord was in post, but when I came into post it was not the situation. Clarity has now been found. That work is important and the Home Secretary is leading on it.

[Baroness Whitaker (Lab)]

My Lords, on a point of clarification, because Hansard is a journal of record, will my noble friend the Minister confirm, in answer to the noble Lord, Lord Robathan, that Gerry Adams was never a member of the Provisional IRA—as he would himself say—but was a leader of the IRA which took, of course, a significant part in the Good Friday agreement? He was not in the Provos.

[Lord Khan of Burnley (Lab)]

I say to my noble friend that I am not in a position to comment on that. I think it is a conversation that the noble Baroness needs to have with the noble Lord and settle it outside.

Political Parties: Donations from Abroad

Lord Khan of Burnley Excerpts

Wednesday 22nd January 2025 Lords Chamber

[Lord Dubs]

To ask His Majesty’s Government what plans they have to control or limit donations from abroad to British political parties or pressure groups.

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

My Lords, as set out on 15 January by my noble friend Lady Taylor of Stevenage, the Government committed in our manifest to protect democracy by strengthening the rules around donations to political parties. Foreign money has no place in our elections and the rules already provide clear safeguards against foreign interference. We are considering changes that will help further protect our system from such risks. Details of these proposals will be brought forward in due course.

[Lord Dubs (Lab)]

My Lords, the Minister will not be aware, but I wanted to donate to the Democratic campaign on the internet. I could not do so, not because I am living in this country but because I do not have an American passport. I think we have to tighten up our arrangements a bit. Foreign money is undermining our democracy, whether it is donations to particular parties or, more insidiously, to pressure group. There are reports in the papers that an environmental pressure group is going to be funded from the States in order to undermine our attitude to climate change. We need to act quickly.

[Lord Khan of Burnley (Lab)]

My Lords, my noble friend makes an excellent point about individuals who are not eligible to vote here. There are rules that govern individuals and organisations that campaign in elections but are not standing in political parties. While it is clear that foreign donations to political parties are not permitted, the Government recognise the risks posed by malign actors who seek to interfere with and undermine our democratic process. My final point is that the rules exist to give the public more confidence in the way third parties interact with the political system. They ensure that campaigning in a transparent manner will prevent any individual, company or organisation exerting undue influence on our elections.

[Lord Fowler (CB)]

I agree entirely with the noble Lord, Lord Dubs, but is there not a case for a review that goes rather wider than just political contributions from overseas? We have the issue, for example, of whether there should be a cap on all contributions made. Surely, above all, we need a system that is entirely honest and seen as such around the world. Compared with some of the things that are happening now, that would not be a bad example.

--- Later in debate ---

[Lord Khan of Burnley (Lab)]

My Lords, the noble Lord makes an excellent point. A cap on donations is not a current priority, but strengthening the rules around donations is. By law, it is the responsibility of political parties to take reasonable steps to verify the identity of a donor and whether they are permissible. We will take any necessary steps to ensure that those requirements are tightened and abided by.

[Lord Maude of Horsham (Con)]

My Lords, will the Minister give an undertaking that his Government will follow the practice in the latter part of the last Labour Government, where Jack Straw, who had responsibility for these matters, was absolutely meticulous in ensuring that among the major established parties there was consensus on any changes that were undertaken?

[Lord Khan of Burnley (Lab)]

Any proposals that we bring forward are likely to require legislation, and although the Government have not included this in the timetable for this Session, we have promised to do it in our manifesto. I can assure all noble Lords that, once we have developed our proposals, we will inform Parliament and consult widely.

[Lord Wallace of Saltaire (LD)]

My Lords, I am very happy to find that the Conservative Party has rediscovered the idea of consensus now that it is in opposition. I am not sure we want to ban all foreign donations, particularly those from pressure groups and think tanks, but transparency is essential. We need to know who is funding these bodies. Will the Government look again at the need for transparency in reporting where funds come from for all think tanks—left wing, right wing or whatever—that are involved in attempting to influence the political process?

[Lord Khan of Burnley (Lab)]

I think it always good to have consensus across the House and in politics. On the noble Lord’s point about transparency, as stated, we are looking at strengthening the rules around donations. To do so, we will look at all the evidence and in due course we will set out our proposals.

[Baroness Hayter of Kentish Town (Lab)]

My Lords, I raised before the issue of permitted donors who live abroad being able to give to political parties. The last Government went ahead with that, despite opposition from this side. Similarly, they brought in ID for voting against our recommendations. I welcome the rather belated view that we should have a negotiation, and perhaps the Opposition would like to say that, this time, they will co-operate this time and not try to do something by themselves.

[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.

[Lord Rogan (UUP)]

My Lords, aside from its historic support for terrorism, murder and mayhem, Sinn Féin/IRA is unique in the United Kingdom political system because it receives much of its funding from the Irish Republic and the United States. Over the past five years, Friends of Sinn Féin, the party’s fundraising arm in America, banked more than $2 million. Although laws in the Republic of Ireland prohibit money raised abroad to be sent there, Friends of Sinn Féin can legally send money to Northern Ireland. Can the Minister tell me when His Majesty’s Government intend to close this loophole, which would not be acceptable in any other part of the United Kingdom?

[Lord Khan of Burnley]

My Lords, I am sure the noble Lord will understand that I cannot comment on individual cases. I agree with him that political parties registered in Northern Ireland can accept donations from Irish sources, such as Irish companies that meet the conditions. Allowing Irish donations to the Northern Ireland parties recognises the special place of Ireland in the political life and culture of Northern Ireland and is consistent with the principles set out in the Belfast/Good Friday agreement. However, Irish donations are subject to the same scrutiny by the Electoral Commission as donations from any other permissible donor.

[Baroness Foster of Aghadrumsee (Non-Afl)]

My Lords, last Wednesday, in response to the noble Lord, Lord Blunkett, the noble Baroness, Lady Taylor of Stevenage, said:

“Government take the threat posed by disinformation and foreign actors interfering in our democratic processes very seriously”.—[Official Report, 15/1/25; col. 1123.]


We have already heard from the noble Lord, Lord Rogan, about the amount of money which comes from America into Sinn Féin’s coffers, but that is not the only issue. Its social media accounts are run by a company in Serbia. Will the Minister look at that as well?

[Lord Khan of Burnley]

The noble Baroness makes an interesting point. My direct answer would be that we continue to work with the Department for Science, Innovation and Technology and the Defending Democracy Taskforce to mitigate the risk that disinformation and misinformation and AI-driven election interference pose to the UK’s democratic processes. On social media, there are already robust donations and third-party campaigner spending rules in place. The Government remain alert to any technological or other relevant changes in the electoral campaign landscape.

[Lord Rennard (LD)]

My Lords, for the last 25 years, political parties in this country have been legally obliged to declare the source and scale of all their donations above a very modest level. Why should the same rules not apply to political pressure groups trying to influence the political process?

[Lord Khan of Burnley (Lab)]

My Lords, there are already robust spending and donations rules in place for third-party campaigners, which pressure groups would fall under. These are individuals or organisations that campaign in elections while not standing as political parties or candidates. Further rules exist in relation to transparency around those seeking to influence UK policy. The lobbying Act 2014 ensures there is transparency around meetings between Ministers and ministerial groups. The regulation of all-party parliamentary groups is a matter for Parliament.

Older People’s Housing Taskforce

Lord Khan of Burnley Excerpts

Monday 16th December 2024 Lords Chamber

[Lord Best]

To ask His Majesty’s Government when they will implement the recommendations of the report from the Older People’s Housing Taskforce, published on 26 November.

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

My Lords, the Government are thankful to the chair of the task force, Professor Julienne Meyer, and all its members for producing such a comprehensive, detailed and well-researched report. I recognise the importance of improving housing choices for older people, and I thank the noble Lord, Lord Best, for all he does on this issue. We are committed to taking action on older people’s housing and will consider this issue as we develop our long-term housing strategy.

[Lord Best (CB)]

I thank the Minister for that positive response, and I congratulate Professor Julienne Meyer and her task force on a really good report. Have the Minister and his Government paid particular attention to at least three of the key recommendations from this report, such as that 10% of all affordable housing should be for older people, that planners should require a percentage of all major developments to be for older people, and that stamp duty should be exempt where an older person is downsizing, rightsizing, making way for and releasing a home for a family elsewhere?

[Lord Khan of Burnley (Lab)]

My Lords, I recognise how important the right housing arrangements are in supporting people to live independently and well. The Government will set out details of new investment to succeed the 2021 to 2026 affordable homes programme at the spending review. The National Planning Policy Framework outlines that local authorities should assess the housing needs of different groups, including older people, and reflect this in their local plans. We have strengthened the National Planning Policy Framework to encourage the delivery of mixed-tenure development. For most of those looking to downsize, the stamp duty due on the new property will be small. Stamp duty is an important source of revenue to provide essential services, and the Government have no further plans for relief for those looking to downsize.

[Lord Young of Cookham (Con)]

My Lords, further to the Question from the noble Lord, Lord Best, and the Minister’s reply, the task force published its report two weeks ago, before the Government published their National Planning Policy Framework, and, despite what he says, that policy framework does not reflect the major recommendations of the task force. Will the Government publish a detailed response to all the recommendations of the task force, and will they implement some of the recommendations in the forthcoming planning Bill?

[Lord Khan of Burnley (Lab)]

My Lords, we consulted on reforms to the National Planning Policy Framework and published our response on 12 December. We are determined to create a more diverse housing market that delivers homes to meet a range of needs. On the noble Lord’s particular point, we will respond to all 44 recommendations of the task force. However, my honourable friend in the other House, Matthew Pennycook, will look at this in the wider housing strategy.

[Baroness Pidgeon (LD)]

My Lords, the report of the task force mentions the LGBTQ+ communities only once, yet there is a growing need and desire for inclusive LGBT+ affirming retirement accommodation, as provided by organisations such as Tonic Housing. What plans do the Government have to address these specific needs?

[Lord Khan of Burnley (Lab)]

My Lords, the noble Baroness makes an important point. As I said, the task force report was published two weeks ago, and we are looking at each of its 44 recommendations to make sure that our housing needs are diverse for the country. It is in the national interest that the Government ensure that we have housing that reflects the country and that we take into account the needs of people of all backgrounds and all ages.

[Baroness Pitkeathley (Lab)]

My Lords, in considering the housing needs of older people, is the Minister mindful that many older people are also caring? It is not at all uncommon for people in their 70s to be caring for people in their 90s, or for people in their 80s to be caring for older adult children with special needs. Will these responsibilities of older people also be considered when looking at housing needs?

[Lord Khan of Burnley (Lab)]

My Lords, my noble friend makes a very important point. On carers, the Government are committed to ensuring that families have the support that they need. I want to ensure that people who care for family and friends are better able to look after their own health and well-being. The Department for Work and Pensions announced its intention to bring forward an independent review of the issue of overpayment of carer’s allowance in cases where earnings have exceeded the entitlement threshold. The Government are committed to reviewing the implementation of carer’s leave and examining the benefits of introducing paid carer’s leave.

[Lord Foulkes of Cumnock (Lab Co-op)]

My Lords, does my noble friend agree that it is very important to have intergenerational development so that there are not ghettos of older people in one place and ghettos of young people, particularly students, in another? If developments are intergenerational, they can help each other. Will he therefore discourage the kinds of developments I see in Edinburgh—no doubt they are elsewhere too—where private developers build blocks for students which seem to me to be purely to make some additional money rather than in the interests of the students themselves?

[Lord Khan of Burnley (Lab)]

My Lords, the noble Lord makes an interesting point about intergenerational living. Unfortunately, I cannot comment on that particular case, but I am happy to take it away with me and have a private conversation with him.

[Baroness Finlay of Llandaff (CB)]

My Lords, what levers do the Government plan to have to ensure that the recommendations in the report, such as accessible bathrooms and toilets, with doors to bathrooms that open outwards, are actually built into all new plans because of a high incidence of falls in the home? These affect not only morbidity but mortality rates. Similarly, how will they ensure that stairs are properly designed, as we previously debated, to decrease the number of falls of old people on stairs?

[Lord Khan of Burnley (Lab)]

The noble Baroness makes a very important point. I understand that accessibility in new homes—and accessibility standards for buildings in general—is an important concern. Housing is one of this Government’s top priorities. Everyone deserves to live in a decent home where they feel safe. We will set out our policies on accessible new-build housing shortly, and we will make sure that accessibility is a part of the discussion when we bring forward our new housing strategy.

[Baroness Winterton of Doncaster (Lab)]

My Lords, in planning for older people in housing and with regard to accessibility, is it not also important to ensure that this accommodation is near accessible bus routes, for example? Will my noble friend the Minister look at how devolved powers can be used to ensure that local authorities work together with, for instance, local bus companies to ensure that proper provision is provided for older people in what can be isolated areas?

[Lord Khan of Burnley (Lab)]

My noble friend makes a very important point. I will take it away with me and discuss it with Minister Pennycook. It will also be a cross-departmental discussion with the Department for Transport to ensure that the particular issues that my noble friend raises are addressed and thought of when moving forward so that we can make not only the house accessible within, but the route to the house.

[Lord Jamieson (Con)]

My Lords, I declare my interest as set out in the register, particularly that I was a member of the Older People’s Housing Taskforce. It is widely acknowledged that supported accommodation can significantly benefit the health and well-being of older people. That has the additional benefit of saving social care and the health service considerable costs. In addition, if it is placed in urban areas, it can support town centre regeneration.

However, due to the additional facilities, the building costs of supported accommodation are substantially higher than those of mainstream accommodation. In recognition of this, one of the task force’s recommendations to help to deliver supported accommodation was that it should not be subject to demands as heavy as the affordable housing and Section 106 planning obligations of mainstream housing. Will the Minister confirm that the Government will support this?

[Lord Khan of Burnley (Lab)]

The Government will publish a housing strategy that will set out a long-term vision for the housing market that works for communities, building 1.5 million high-quality homes and the biggest increase in affordable housing in a generation. Supported housing plays a vital role in delivering better life outcomes, improved well-being and health, as the noble Lord mentioned, and greater independence for many vulnerable people, including older, disabled and homeless people.

We recognise the challenges local authorities are facing as demand increases for critical services. We have listened to voices across local government and have announced £4 billion in additional funding for local government services at the Budget, including £1.3 billion, which will go through the settlement.

[Lord Ranger of Northwood (Con)]

My Lords, as the noble Lord, Lord Foulkes, mentioned earlier with regard to intergenerational housing, my community and many other communities have grown up with the older generation living with us, and it has helped in caring and sharing, by both young and old, as families stay together. That has faded a bit over the decades, but it is still happening. However, the challenge for communities and families in continuing to do that is ever-increasing with the costs for caring for older people. Is the task force looking at that in its report?

[Lord Khan of Burnley (Lab)]

The noble Lord makes an interesting and important point. When my honourable friend Minister Pennycook looks at the 44 recommendations from the task force—I thank the task force once again for its hard work in this area—we need to ensure dignity and a better quality of living for all generations. However, as the Question from the noble Lord, Lord Best, outlines, there is a particular issue in relation to older people’s housing. We need to ensure that the housing strategy reflects the mixed tenure of houses to be built and to work closely with local authorities up and down the country to ensure that they can decide what the needs are for their area.

Political Donations: Cap

Lord Khan of Burnley Excerpts

Thursday 5th December 2024 Lords Chamber

[Lord Rennard]

To ask His Majesty’s Government what plans they have to cap donations to political parties.

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

My Lords, the Government have committed to reforming political finance rules. We are considering changes that will help protect our system from foreign interference, such as tighter controls on donations. For example, the Electoral Commission has pointed to a need to consider the rules on company donations. Details of these proposals will be brought forward in due course.

[Lord Rennard (LD)]

My Lords, people are absolutely astonished when they discover that there is absolutely no limit whatsoever to how much money can be given by one individual to a political party. This week, Transparency International has produced analysis showing how dark money from dodgy sources can infect British politics, and Unlock Democracy has produced an excellent Democratic Integrity white paper. Will the Minister undertake to ensure that his department properly considers these reports? Is it not high time that the Government accepted the recommendation of the Committee on Standards in Public Life that there should be a £10,000 maximum cap on the sum any individual can give to a party?

[Lord Khan of Burnley (Lab)]

My Lords, let me first address the noble Lord’s question about reports, in particular that of Transparency International. The Government are committed to safeguarding the integrity of our democratic processes and, as I am making clear today, we will be taking steps to strengthen protections against foreign interference in our elections. We are seeking and remain open to evidence from stakeholders, particularly on threats to our democracy. Our primary concern is reducing the threat of foreign interference.

Political parties play a vital role in our democracy, and it is important that they be able to fundraise effectively and communicate with the electorate. My department is currently developing proposals to give effect to these commitments. We are engaging with key stakeholders such as the Electoral Commission and the Committee on Standards, and we will update the House in due course.

[Baroness Hodge of Barking (Lab)]

My Lords, does the Minister agree that it is vital that the new Government take every step to clean up our politics—on political donations and beyond? Does he agree that, as well as a cap, we need greater transparency in respect of political donations? For example, for all donations over £200, we should know the identity of the donor. Does he also agree that we need to ban all foreign donations, cutting off the infiltration of Russia and China into our politics, and that we need to strengthen the remit and powers of the Electoral Commission to ensure both the integrity and legitimacy of our donations?

[Lord Khan of Burnley (Lab)]

My noble friend makes a number of excellent points. To summarise, I agree that there is a lot more we have to do as a Government. We committed in our manifesto to protecting democracy by strengthening the rules on donations to political parties. While it is clear that foreign donations to political parties are not permitted, the Government recognise the risk posed by malign actors who seek to interfere with and undermine our democratic processes. We will take the necessary steps to make sure that effective controls are in place, in order to ensure that democratic processes are safeguarded.

[Lord Forsyth of Drumlean (Con)]

Further to the Question from the noble Lord, Lord Rennard, the largest ever donation to the Liberal party was made by a convicted fraudster, Michael Brown. In looking at any changes in the law, will the Government consider forcing political parties that, like the Liberal party, have received money from fraudulent sources to return it to the victims of the fraud?

[Lord Khan of Burnley (Lab)]

My Lords, the noble Lord makes an interesting point; however, it is not for me, as a Minister, to consider, but for other parties. This is a decision for political parties on how they operate.

[Lord Beamish (Lab)]

My Lords, does the Minister agree that a key point in a democracy is that donations and the sources of them are transparent? Therefore, I urge him to look at unincorporated associations and change the rules. This has been used by the Conservative Party on an industrial scale to make it very difficult to know where large sums of public money affecting our elections are coming from.

[Lord Khan of Burnley (Lab)]

My noble friend makes a very interesting point. I reassure him that we are going to look at the whole issue of electoral reform, and we will bring legislation forward. There is nothing timetabled in this Session, but it is difficult to specify a particular date. We will take away the issues my noble friend raises and consider them when we bring legislation forward, looking at not just political donations but wider electoral reform.

[Baroness Finn (Con)]

My Lords, if His Majesty’s Government intend to cap donations to political parties, can the Minister confirm that this cap will also extend to clothes and glasses?

[Lord Khan of Burnley (Lab)]

My Lords, all I can say is that the point the noble Baroness makes is not relevant to the Question asked by the noble Lord, Lord Rennard.

[Lord Dodds of Duncairn (DUP)]

My Lords, will the Minister look again at the backdoor loophole whereby foreign donations to political parties find their way to Northern Ireland through the Irish Republic? In 2022, over $1 million was raised by Sinn Fein, and before the Northern Ireland Assembly elections in May 2022, money from that source found its way to Sinn Fein in Northern Ireland. Will the Minister undertake to look again at that issue—it was raised in the other House many years ago—and take action?

[Lord Khan of Burnley (Lab)]

I thank the noble Lord for making that point. I assure him that I will contact colleagues in the Northern Ireland team, and we will revert back to him.

[Lord Taylor of Goss Moor (LD)]

My Lords, I think the Minister accepts that there is an urgent need to tackle foreign donations, malign actors and donations funnelled through companies that may not, in reality, actually operate in the UK. This is an extremely serious issue, notwithstanding comments from the Conservative Party.

The secondary issue, however, is the one raised by my noble friend: the substantial donations made within the UK. Limiting donations in the UK to small figures would not just democratise the process but would get parties to focus again on membership, which has been in spectacular decline in the UK as parties focus their efforts on just a handful of seats and very major donors. That is not healthy for democracy. Incidentally, if we were to cap that, it might make an interesting change to the representative nature of this Chamber, too.

[Lord Khan of Burnley (Lab)]

My Lords, the noble Lord makes a number of points. I reassure him that we want to ensure that the Government’s focus is on our manifesto commitment to strengthen integrity in our democratic process. Democracy is precious, and we want to make sure that no malign actors can contribute to it and that any foreign interference is stopped. However, it is for political parties themselves, under law, to ensure the nature of the donation and the background of the company or individual making it.

[Lord Hayward (Con)]

My Lords, the Minister is aware of my long-standing concern about the use of anonymous opinion polls and other forms of campaigning, either in a general election or prior to one. Will the Minister please ensure that he talks to the excellent new chief executive of the Electoral Commission to establish that it uses all the powers it currently has available to check on the issues I have identified, and, if it does not have the necessary powers, that it is given them through changes in legislation where necessary?

[Lord Khan of Burnley (Lab)]

My Lords, the noble Lord and I met the new chief executive of the Electoral Commission, and we will continue to have those conversations—together, if need be, given the noble Lord’s expertise in this area. The noble Lord is quite right: the Electoral Commission plays an important part in the UK’s democratic system, promoting public confidence in democratic processes and ensuring their integrity. On his question about anonymous donations, I will take it away and ensure that we come back to him with some more facts and information.

[Lord Grocott (Lab)]

Does my noble friend recall that the last Government thought it wise, and legislated accordingly, to ensure that people who had lived abroad for more than 15 years and had no intention of ever living in the United Kingdom again should be enfranchised? Can he tell us, in the light of material gathered since the last election, precisely how many more people were given the franchise as a result of that? I have heard estimates of around 2.5 million. What have been the costs involved in ensuring that these people are identified and known to be bona fides residents at whatever residence they last lived at in the United Kingdom? Finally, can he tell us what proportion of the 2.5 million actually exercised their right to vote? He will not be able to answer all of that right now, but will he please send me an extended reply?

[Lord Khan of Burnley (Lab)]

To the noble Lord’s surprise, I can answer his question. The total number of overseas voters registered was 191,338, according to the Electoral Commission’s recent report on the 2024 general election. The noble Lord made a very interesting point. Overseas voters have the right to participate in UK parliamentary elections, including the right to donate to the parties or candidates they support. However, foreign money is not permitted, and it is a criminal offence to facilitate an impermissible donation. Political parties can accept donations only from registered electors. Overseas electors are subject to the same counter-fraud measures as domestic electors, including having their identity confirmed as part of the registration process. On his other questions, I will write to him.

Shared Prosperity Fund: Wales

Lord Khan of Burnley Excerpts

Wednesday 4th December 2024 Lords Chamber

[Baroness Wilcox of Newport]

To ask His Majesty’s Government what progress they have made towards giving decision-making over the allocation of the Shared Prosperity Fund to democratic representatives in Wales, as set out in the Labour Party Manifesto 2024.

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

This Government are committed to restoring relationships with devolved Governments and showing the utmost respect to the devolution settlement. We are working closely with the Welsh Government to discuss our commitment to restore decision-making on structural funding to representatives of Wales. My noble friend will be pleased to hear that my colleague, Minister Alex Norris, will meet his ministerial counterpart in the Welsh Government this week to discuss this very important issue.

[Baroness Wilcox of Newport (Lab)]

I thank the Minister for that Answer, because the era of doing things to Wales, rather than with Wales, is surely at an end. When will proper devolved decision-making reflect both our distinct Welsh needs and UK-wide objectives? While I am on my feet, let me say llongyfarchiadau mawr—many congratulations—to the Wales women’s football team on reaching the Euro 2025 finals and making history.

--- Later in debate ---

[Lord Khan of Burnley (Lab)]

My Lords, I add my congratulations to the Wales women’s football team on reaching the Euro 2025 finals.

My noble friend makes a very important point. Having worked alongside her for many years, I have deep respect for her passion for the prosperity of local government in Wales. This Government know that uncertainty about local allocations is causing concern for our partners in local government. My department is working tirelessly to confirm local allocations and we intend to publish them shortly. I am pleased that we have been able to announce that the fund will continue for a further year. This transitional arrangement will provide a period of stability in advance of wider local growth funding reforms beyond March 2026, when we will work with the Welsh Government to honour our manifesto commitment to return decision-making on these funds to representatives of Wales.

[Baroness Bloomfield of Hinton Waldrist (Con)]

My Lords, llongyfarchiadau i chi on bringing football into this Chamber—a rare event these days, of course. The shared prosperity fund was a central part of the Conservatives’ levelling-up agenda, which involved the allocation of funds to elected local authorities, which know their communities best. Given that the shared prosperity fund already works with local authorities throughout Wales, what benefit will be achieved by extending decision- making powers to Senedd Members, who are not always known for their sensible financial decision-making?

[Lord Khan of Burnley (Lab)]

My Lords, I politely disagree with the noble Baroness. The previous Government funded many local growth programmes, including the UK shared prosperity fund. However, they did not make adequate provision in the Budget to do so. This Government have been clear that they will take the difficult but responsible decisions to ensure we fix the foundations of our country’s finances and, more importantly, meet the commitment in our manifesto. From March 2026, we will work with our Welsh Government counterparts to ensure that the allocation of that money is decided by people in Wales.

[Lord Watts (Lab)]

My Lords, the previous Government announced a levelling up fund, but we saw a lot of words but no funding. Will this Government’s attempt to level up be more successful in getting more resources to the regions that need them?

[Lord Khan of Burnley (Lab)]

My noble friend raises an important point. Many aspects of levelling up did not work, not just in Wales but across the United Kingdom. The Government are having a transitional year, during which we will work with our Welsh Government counterparts to ensure what is best for local projects and local communities. As for the future, the answer is yes: we will ensure that the Welsh Government have enough time to plan and decide on structural funding so that they have the best ability to put the money into their local communities.

[Baroness Humphreys (LD)]

Llongyfarchiadau mawr i dîm merched Cymru o’r beinciau yma hefyd—congratulations to the Welsh team from these Benches as well. I draw your Lordships’ attention to my registered interests. I thank the Minister for his announcement. It will bring some clarity about what will happen to the voluntary sector in Wales in the next 12 months. There has been uncertainty, added to which the third sector will be hit by the NICs rise, which will lead to higher costs that will need to be covered in any follow-up funding. Will the Minister ensure that the input and involvement of the third sector is sought through the NCVO and the WCVA, and that multiple-year funding agreements are in place to ensure the continuation of vital projects?

[Lord Khan of Burnley (Lab)]

My Lords, the noble Baroness makes an important point. The short answer is yes: we will ensure that our counterparts in Wales have those discussions. I will pass the message on to my honourable friend in the other place so that the third sector is also a part of his discussions with the Welsh Government on how we can work closely together as central government, devolved government and the third sector.

[Baroness Smith of Llanfaes (PC)]

My Lords, at present, Wales gets 23% of the shared prosperity fund. If the SPF is included in local government funding in England, this risks money being redirected through the Barnett formula. Will the Minister agree that a needs-based formula is better than a population-based formula for funding?

[Lord Khan of Burnley (Lab)]

I understand the noble Baroness’s point. However, we have to recognise that there were no plans from the previous Government for the funding going to the devolved Governments. We have brought in a transitional year to prepare for post March 2026. All these conversations are yet to be had. I cannot make any particular comment on them, but I will come back to the noble Baroness once we finalise our proposals for after March 2026.

[Lord Evans of Rainow (Con)]

My Lords, can the Minister give a definition of shared prosperity? Can he enlighten the House on what role private sector business will have in that shared prosperity in Wales?

[Lord Khan of Burnley (Lab)]

I thank the noble Lord. As I said to the noble Baroness, Lady Smith, we are having discussions with all counterparts. However, it is important to recognise that people in Wales will have a huge say on how that money will be invested in terms of local growth, businesses and working together in partnership.

[Lord Hain (Lab)]

My Lords, I associate myself with my noble friend Lady Wilcox’s question, including her congratulations for our magnificent Welsh women footballers. Does the Minister agree that the previous Conservative Government penalised Wales massively, including by pretending that the shared prosperity fund could somehow substitute for European Union economic funding? Taken together, the £243 million loss of rural EU funding and the £772 million shortfall in EU structural funds add up to more than £1 billion. So much for making Brexit work; for Wales, it has been absolutely disastrous.

--- Later in debate ---

[Lord Khan of Burnley (Lab)]

My Lords, I agree with my noble friend. The previous Government made no plans for the UK shared prosperity fund past March 2025. We will extend the fund for a transitional year. Many local growth programmes, including the UK shared prosperity fund, were funded by the previous Government despite them not making adequate provision in the Budget to do so. This Government have been clear that they will take difficult but responsible decisions to fix the foundations of the country’s finances.

[Lord Harlech (Con)]

My Lords, I declare my interest as a business owner in Wales. You cannot have prosperity without good infrastructure. Since 2023, the Welsh Government have cancelled all roadbuilding projects. I have asked this question before: will the Minister seek to have discussions with his Senedd counterparts about getting some of those roadbuilding projects going again?

[Lord Khan of Burnley (Lab)]

I have great admiration for and friendship with the noble Lord from the previous Government, when I was an Opposition Whip and he was a Whip. These are the conversations that my honourable friend Alex Norris MP is currently having, so I would not like to pre-empt them. I will also be visiting Wales to meet my counterpart in my portfolio, and I will raise that particular point.

[Baroness Hayter of Kentish Town (Lab)]

We look forward to welcoming the Minister to Wales. Can he say, more broadly than the fund, what action the Government are taking to spread growth and prosperity more evenly across Wales?

[Lord Khan of Burnley (Lab)]

My noble friend makes an excellent point. The UK Government are committed to addressing regional inequalities and supporting growth across the whole of the UK. Through the Council of the Nations and Regions, we will address this, working with devolved Governments. As well as the shared prosperity fund, we are taking other initiatives. For example, we will continue to support the four city and growth deals which cover the whole geography of Wales. Through the freeports and investment zones programme, we are delivering significant economic interventions into each corner of Wales, with freeports established in the north-west and south-west of Wales, and great progress has been made on establishing investment zones in north-east and south-east Wales. When I visit Wales, I promise that I will learn a few words of Welsh.