(4 weeks ago)
Lords ChamberMy Lords, I realise that I omitted to refer to Motion P1, which is in the same group. It is consequential on Motion N1 and will depend on the outcome of that Division.
My Lords, I thank all noble Lords who took part in this short debate. We heard concerns that the measures in the Bill for new multipliers do not deliver on the stated intention of the policy as announced at the Budget. I do not agree with that. At the Budget, the Government announced their intention to introduce two lower multipliers for qualifying retail, hospitality and leisure properties and, in particular, to end the uncertainty of annual RHL relief. RHL is a temporary stopgap measure that has been extended year on year since the pandemic, and it does not provide the certainty that businesses require. The Government, through this Bill, are taking steps to address that. It was also announced at the Budget that the permanent tax cut for RHL businesses needs to be sustainably funded. This is an appropriate and prudent approach. The challenging fiscal environment that the Government face requires this, but it goes without saying that any tax cut must be funded as part of sound financial management. To do this, the Government intend to introduce a higher multiplier for the most valuable properties, those with a rateable value of £500,000 and above. The higher multiplier will affect less than 1% of properties in England. This delivers on the policy set out at the Budget by the Chancellor. Furthermore, it represents the Government’s first step to delivering on their manifesto commitment to transform the business rates system to one that is fairer, protects the high street and is fit for the 21st century.
I have explained to noble Lords here today while the amendments tabled in lieu are not necessary. For these reasons and the other reasons I have already set out, I respectfully ask noble Lords not to press their Motions containing Amendments 1B, 2B, 7B, 8B, 13B and 14B.
(1 month ago)
Lords ChamberMy Lords, I add my support to the important comments from the noble Baroness, Lady Scott of Bybrook. The importance of anchors cannot be overemphasised, particularly in smaller towns. We all know a shopping centre near where we live, and not a brick of development for that shopping centre would have been laid if it was not for a pre-let to an anchor.
It is important to explain that. They do not just create the footfall for the retailers generally—which of course they do—but they also catalyse the funding for the developer to build it. They are the anchor. They are the golden goose for the high street. Taxing them more simply risks losing them. The damage to society locally in losing them will be difficult to restore, and social cohesion will suffer. I strongly support the amendment from the noble Baroness, Lady Scott, and will support it if it goes to the vote.
My Lords, these amendments seek to remove anchor stores from the higher multiplier. They also seek to expand the cohort of hereditaments that qualify for the lower multipliers by bringing manufacturing properties into scope alongside qualifying retail, hospitality and leisure.
As set out at the Budget, the Government intend to introduce a permanent tax cut for qualifying RHL properties from 2026-27 by introducing two lower RHL multipliers. The Bill makes provision to enable this through secondary legislation. In consideration of the challenging fiscal environment that this Government face, it is important that the permanent tax cut is funded sustainably, which is why we intend to introduce a higher multiplier to fund the tax cut from within the business rates system. It is the Government’s intention for the higher multiplier to apply to all properties with a rateable value of £500,000 and above. This ensures that sufficient funding is raised to enable the Government to provide that permanent tax cut for RHL properties with rateable values below £500,000.
I thank noble Lords for their contributions on this topic. As she did in Committee, the noble Baroness has set out the important role that anchor stores play on our nation’s high streets. We have heard that they are a linchpin, that they drive footfall and that they help support the broader high street ecosystem by attracting other businesses. The Government recognise this and the information published by the Valuation Office Agency shows that a relatively small number of shops fall above the £500,000 threshold. In my response to the debate on the previous group, I set out that the impact on shops is not widespread. I will not repeat those numbers here.
Furthermore, anchor stores are often part of large retail chains that will also have a number of properties with a rateable value below £500,000 and, in the case of those properties, will benefit from the lower RHL multipliers. Moreover, whereas RHL relief is currently limited to a cash cap of £110,000 per business, the Government intend to have no such limit on the new RHL multipliers to better ensure more widespread support for the high street.
On the amendments tabled by the noble Lord, Lord Fox, the impact of this Bill on the manufacturing sector has been a recurrent theme throughout its passage. In the other place, the Government heard calls for manufacturing to be included in the cohort qualifying for the lower multipliers, citing the threat of tariffs, our isolation from our neighbours and growing competition from other countries. These amendments would bring manufacturing properties with a rateable value below £500,000 into scope of the lower RHL multipliers.
Noble Lords are aware of the difficult task that this Government face. The current fiscal backdrop is challenging and, in this context, I hope they understand that widening the scope of the properties qualifying for the lower multipliers, as well as taking properties out of scope of the higher multipliers, as these amendments seek to do, is likely to dilute the support that the Government are able to provide to RHL properties with a rateable value below £500,000.
Throughout the passage of the Bill, the Government have emphasised our desire to ensure that we move to a fairer, rebalanced and sustainable business rates system. We have been clear that any tax cut must be sustainably funded. To expand the cohort and number of properties qualifying for the lower multipliers while reducing those to which the higher multiplier will apply risks this policy no longer being sustainable—a key principle that the Government have stated throughout the Bill’s passage.
As I said, against the challenging fiscal environment, the Government have to take tough decisions. This is the fairest approach, which ensures a sustainable solution so that the permanent tax cut for RHL can be funded from within the business rates system. Of course, noble Lords have made sensible points. Anchor stores are part of high streets, as is light manufacturing in some areas, a point made by the noble Lord, Lord Fox, in Committee.
The Government are committed to ensuring the longevity and survival of our vibrant and diverse town centres, and there are many ways in which we are pursuing that endeavour. In December, we introduced high street rental auctions, a new power which allows local authorities to auction off the lease of persistently vacant commercial units. The new regulations will make town centre tenancies more accessible and affordable for businesses and community groups, while helping to tackle vacancy on our high streets.
Through the English devolution Bill, we will also introduce a strong new right to buy for valued community assets, which will help this Government safeguard our high streets. This measure will empower local communities to reclaim and revitalise empty shops, pubs, and community spaces, helping to revamp our high streets, increase footfall and eliminate the blight of vacant premises.
Furthermore, at the Autumn Budget, the small business multiplier for properties with a rateable value of under £51,000 was frozen at 49.9p, meaning that, together with small business rate relief, over 1 million properties will be protected from a 1.6% inflationary increase. Alongside this, the Government continue to support our valuable manufacturing sector through other means.
The noble Lord, Lord Shipley, asked what in particular we are doing. At the Autumn Budget, the Government 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 and innovative manufacturing fund. The Budget also saw two key programmes extended, promoting innovation across UK regions and manufacturing. The innovation accelerator programme will continue for another year, focusing on high-potential clusters across the UK. Meanwhile, the Made Smarter innovation programme will continue to be funded, empowering manufacturers to adopt digital technologies and enhancing productivity and sustainability by connecting digital solutions providers with industry.
I hope that it is clear to noble Lords why the Government cannot accept these amendments. The permanent tax cut for RHL properties must be funded sustainably. Furthermore, the Government fully recognise the importance of the British manufacturing industry, but we are supporting that sector through other avenues. It is for those reasons that I cannot accept the amendments in the name of the noble Baroness, Lady Scott, and the noble Lord, Lord Fox, and I respectfully ask them not to press them.
(1 month, 3 weeks ago)
Grand CommitteeMy 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.
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.
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.
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.
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.
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?
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.
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.
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.
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.
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.
(1 month, 4 weeks ago)
Grand CommitteeDoes 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?
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.
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.
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.