Non-Domestic Rating (Chargeable Amounts) (England) Regulations 2022

Lord Thurlow Excerpts

Tuesday 20th December 2022 Lords Chamber

[Lord Shipley (LD)]

My Lords, I declare my vice-presidency of the Local Government Association. I too welcome the regulations, with some caveats. I agree with the noble Earl, Lord Lytton, that they are welcome and long overdue, and I agree with many of the points that he made, not least on the need for the reform of the business rates system. I am looking forward to hearing the Minister’s reply to his specific points.

The Government have made the right decision to press ahead now with implementing the revaluation because it reflects changes in market value since 2015, a period now of eight years. The decisions on the transitional relief scheme seem appropriate since they will give targeted support for the next five years to those businesses facing increases in their bills, in very difficult economic circumstances; they will freeze the multipliers in 2023-24; they will give extra, specific help to the retail, leisure and hospitality sectors; they will provide extra protection for small businesses that have lost rates relief because their property has been revalued upwards; and, as the Minister said, they will give some 300,000 businesses entitled to reductions an immediate and full implementation of the fall in their bill by ending the policy of downward caps. Welcome though all that is, it represents a temporary fix to a system that has not been working well and needs reform, as the noble Earl said.

The Government have brought forward the next revaluation to 1 April 2026, just over three years away. In my view that is the right timing because rental values, and thus rateable values, over the next three years may face pressures, given the overall state of the economy. It will also present an opportunity to take further account of online retailing. As part of this revaluation, total business rates paid by the retail sector will fall by 20% but the bills of large distribution warehouses will go up by 27%. That is welcome. As the letter dated 16 December from the Financial Secretary to the Treasury says:

“It is right that those sectors that have seen significant growth since 2015 pay their fair share of the tax burden.”


I agree, but the question remains: are they paying their fair share?

I have concluded that we still need a review of the business rates system. I hope that during our debates on the Levelling-up and Regeneration Bill we can examine how that might be approached, because we need more control of business taxation at a local level. I hope we will discuss how that might be done.

[Lord Thurlow (CB)]

My Lords, I declare my interest as a former chartered surveyor, and one who worked in the dark ages in the world of rating. As a former chartered surveyor, I opened the statutory instrument with interest and excitement, and, as we heard from the noble Earl, Lord Lytton, found it was full of what I thought was trigonometry: pages 4 to 26 were theorems, fractions and things that I certainly did not understand. But the objective of the regulations is clear, and I support them.

The position of non-domestic rates has become, I am afraid, a shambles over a number of years. A failure of the authorities to remain abreast of trends in rental value—rateable value should be based on the revaluations in the commercial property markets—has led to a gross imbalance between sectors and, in some cases, competing users within single sectors. That is gross unfairness. This certainly applies to hospitality and leisure sectors, and, in some cases, competing uses, with traditional retail perhaps being most affected.

For several years now, the Government have failed in their promise to address the unfairness in commercial rates to deal with the likes of Amazon, as we heard from the noble Lord, Lord Shipley, and to allow our high street retailers to compete with these big-box retailers. They have a much lower cost of delivery model, and that cost is further increased by the rateable value system. Although we have heard that a 40% increase in industrial and warehouse rates, and a 20% reduction for retail, are proposed, this is de minimis in real terms—it is tiny, and it is not a percentage on like-for-like terms. A 40% increase in industrial rents of £10 a foot and a 20% reduction in the rent of zone A shops of £150 a foot are absolutely not comparable. That needs to be spelled out and made clear, and the Government need to do a great deal more very soon. This injustice continues to be kicked into the long grass at the expense of our high streets, and the important social benefits that they provide continue to decline.

This statutory instrument accelerates the reduction across the piece in non-domestic rates and feathers the increases for those suffering an increase over several years—both of these are to be welcomed. Similarly, freezing the rate poundage is also to be welcomed. The current levels of approximately 50p in the pound are the absolute maximum that businesses can stand. I support this statutory instrument and request that the Minister confirms that there is to be comprehensive rating reform very soon, as earlier speakers have requested.

[Baroness Hayman of Ullock (Lab)]

My Lords, I thank the Minister for her introduction. As we heard from her and other noble Lords, the SI gives relief to businesses, particularly to help them cope with next April’s increase in business rates. We know that many businesses have been struggling following the pandemic, and this, combined with rising energy bills and high inflation, means that they need further support.

While we very much welcome the Government’s provision of relief, we do not think that the regulations go far enough. The Labour Party has been calling for an increase in the threshold for small business rates relief from £15,000 to at least £25,000, because the burden of business rates is disproportionately heavy on small businesses, as we have heard from other noble Lords. Having said that, we do not want to impede the passage of the instrument going forward.

I will ask the Minister a couple of specific questions. Part 10 of the draft Explanatory Memorandum considers the consultation outcome. It says that:

“A total of 102 responses were received”—


despite the instrument intending to help around 700,000 businesses—and that only “16 local authorities” responded. Can the Minister say whether the department feels that there is a reason for such a low response to the consultation? Because of that low response, what further steps have the Government taken, or are intending to take, to engage with those who are affected? We may hear, in broader terms, many of the concerns that have been raised by noble Lords previously in the debate.

The noble Baroness, Lady McIntosh of Pickering, asked about timescales; similarly, I will ask about the fact that we are debating the instrument only today. The instrument comes into force on 31 December, which means that it needs to receive parliamentary approval before the Christmas Recess. But given that the consultation finished in the summer, why has it been left so late to approve it? The Local Government Association made it clear in its response to the consultation that any transitional arrangements for 2023, whether part of the formal scheme or supplementary, should be announced no later than the autumn that has just gone, when the draft list of provisional multipliers was announced. We are debating this on the penultimate day before the Recess, so can the Minister shed any light on why the House has not been given the opportunity to scrutinise it any sooner?

I will make some brief comments on the points made by other noble Lords. The noble Earl, Lord Lytton, and the noble Lord, Lord Shipley, made very pertinent points; I will not repeat them, but we need to consider much of what has been said here, particularly when we consider the pressures on our high streets. I have seen so many shops close down in my local high street since the pandemic, and there is a real worry about how high streets will get back on their feet again. On that point, the noble Lord, Lord Thurlow, talked about competition, looking, for example, at the costs that Amazon has compared with our retailers on the high street. Those are really serious matters, and, if we are serious about rejuvenating our high streets, we must look at how we manage that through the way they are charged and operated under the business rates system.