Small Business, Enterprise and Employment Bill

Debate between Lord Stoneham of Droxford and Earl of Lytton

Monday 12th January 2015 Grand Committee

[Lord Stoneham of Droxford]

I do not take away from my comments because that is exactly how I was behaving in those elections.

The amendment cannot be supported as it stands, although it has good liberal tendencies. It is a very difficult area, as the noble Baroness, Lady Hayter, said. It is difficult to get a balance here between defining by restriction what we can do and opening it up; the general tenor of the Bill is to try to open up the issue to encourage home businesses. The one thing that this amendment does not make absolutely clear is that the tenant or owner must occupy this property, so any tenant or somebody who owns it would have that overriding right, and the planning law does not accept that. Therefore in that sense the amendment cannot be accepted. This is the issue—whether we define the planning restrictions on home businesses in the legislation; the Minister has already told us about the danger.

With great respect to the noble Baroness, Lady Hayter, as regards some of the definitions she has used, she accused the definition of “home business” of being vague, but the fact that you have to take account of the location of a property does not tell you whether you can allow a home business. That will be a matter of judgment, therefore quite vague, whereas the intention of the legislation is to open this up and to encourage home businesses, obviously within the planning restraints that are currently there: you have to occupy the property, you cannot fundamentally change the home for the business, you cannot have people coming to buy from the premises, and you cannot employ people. We know that there is already great flexibility in where we are and that people do those things, but obviously, if they overstep the mark, there is the danger that if their neighbours think that their community life in their residential area is disturbed, they will object and have the grounds for doing so. Therefore this is an area of great interest. I would be in favour of where we are in the Bill, where we do not define it in the legislation, although we may come back to it through regulations. Clearly we cannot accept the amendment because it does not make it absolutely clear, which it has to, that the premises have to be occupied by the owner or the tenant.

[The Earl of Lytton (CB)]

My Lords, the noble Lord, Lord Cromwell, raises an interesting point. Before I go any further, I declare an interest as a practising chartered surveyor. Rating is one of the things I get involved with; I am a landlord of holiday and private rented accommodation as well as business accommodation, so I get a bit of everything here.

The chief difficulty is one of fact and degree about when things move from being “residential property” as a term of art to something quantifiably different. The problem is that they are different tests for different purposes. For instance, there may be a test under regulations that come out as a result of the Bill. A different test may be applied by the Valuation Office Agency to determine what is and what is not a business. When I think in terms of holiday lettings, for instance, I am aware that if a residential property is available to let as a holiday unit for more than 120 days in the year, I think, it is deemed to be a business use. I am not suggesting that there is an issue between holiday letting and home businesses in this instance, but that exemplifies the point about the fact and degree transition.

The empty rates issue would be a live one were it to kick in, because the amount levied under empty rates is typically considerably more than the amount that would be levied under a council tax assessment. I have raised this matter before in the House, and used as an example a property of my own, a 1,000 square foot property let as offices to a business tenant under a conventional contracted-out commercial lease. The rating assessment, off the top of my head, was £12,000 rateable value, and something over £5,500 was payable annually by that small business in business rates.

Fifty yards up the road I occupy a large residential property in band H, but I pay nowhere near £5,500 or so in council tax. My bins are emptied for me within that charge, which, of course, is not the case for the business rate payer. The issue comes about because of the way in which business rates are levied. As I have said before, business rates are disproportionate when compared with residential rates given the services provided and the nature of the accommodation in question. Assessments made on property value, services or any other measure you might choose do not support that differential. There is potential to change this situation through a change of definition and results from a non-domestic assessment, bearing in mind the tests that may be used by the Valuation Office Agency, which is charged with optimising the revenue obtained from those rates. This issue needs to be clarified.