Non-Domestic Rating (Lists) (No. 2) Bill

Lord Shipley Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Monday 18th January 2021 Lords Chamber

[Lord Shipley (LD) [V]]

I remind the House that I am a vice-president of the Local Government Association.

First, I want to agree with the concerns expressed by the noble Baroness, Lady Andrews, on the Non-Domestic Rating (Public Lavatories) Bill. I welcome the decision to combine the two Bills for Second Reading, given that there has already been a Second Reading of the Non-Domestic Rating (Public Lavatories) Bill. However, it is also appropriate to consider the two Bills separately as they progress through the House, because they cover different issues.

I shall not say much about the Non-Domestic Rating (Public Lavatories) Bill, as other colleagues on my Benches will cover those issues fully. From my perspective, I welcome the Bill and it is right that the Government have agreed to backdate its implementation to April 2020.

I want to speak on business rates and the need for urgent reform of the system. In his introduction, I think I heard the Minister say on the review of business rates that the Government will be reporting in the spring. I had assumed that the Budget at the beginning of March might be the appropriate time for that to be announced, but it sounds now as though it might actually be early summer. I would be grateful if, when he responds to the Second Reading, the Minister might clarify that.

I accept that a delay in revaluation to 2023 is inevitable, given the coronavirus pandemic. However, revaluation must ensure that local government does not end up being underresourced and that councils are enabled to widen their sources of income. Revaluation, when it comes, will be effective only if there is a root and branch reform of the system, so that it is much fairer to high streets and city and town centres, and raises much more from online retail companies and their warehouses. Valuations in much of retail, hospitality and leisure have become very out of date. We should bear in mind that retailers currently pay over one-quarter of business rates across England and Wales.

I hope the Government will avoid the temptation for further temporary fixes to the system. The system was in great difficulty before the Covid-19 pandemic, but it is now broken. One reason for this is that the current system treats companies in the same way, whether they are making a profit or a loss. This is the consequence of levying taxes on the value of a property as opposed to the value of a business itself. This problem can be made more acute by the need of national and local government to raise broadly the same amount each year from business rates, even if turnover and profits of businesses plummet. Another reason is that the current system does not address the lower business rates paid by companies retailing online and based in out-of-town warehouses. Revaluation must take this into account. I have concluded that we should consider the retail sector as a whole and divide up the tax burden differently, so that online retailers pay their fair share of the total tax bill.

There is a lot pressure to move to an annual system of revaluation. I can understand the arguments for that, but, instinctively, I think that three years would be better. It would reduce administration and allow trends to be more certain.

Finally, there is a very strong case for extending the business rates holiday from April this year. In the current year, the Treasury has written off some £10 billion in business rates, fully exempting around 358,000 properties in retail, leisure and hospitality. The case for continuing the current scheme is strong, probably for another full year, although some selective phasing might be appropriate. That said, the Government should be careful not to give a business rates holiday to companies which do not need it. As an example, large supermarkets—whose profit levels have been rising during the pandemic, as evidenced by their recent results—did not need the help they were given in the current year and so were right to pay it back. The Government should not be borrowing money on behalf of the taxpayer to give it to retailers whose profits are rising. That said, smaller high street retailers, including convenience stores, will certainly justify extra help, well into next year.