Non-Domestic Rating (Multipliers and Private Schools) Bill
Lord Thurlow ExcerptsThursday 27th February 2025
(4 days, 19 hours ago)
Grand CommitteeRead Full debate Non-Domestic Rating (Multipliers and Private Schools) Bill 2024-26 View all Non-Domestic Rating (Multipliers and Private Schools) Bill 2024-26 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 61-II Second marshalled list for Grand Committee - (25 Feb 2025)
Lord Fox (LD)
My Lords, as we have heard from the noble Baroness, Lady Scott, this group is about understanding the impact of the Bill. To help us focus on why this is important, my noble friend Lady Pinnock and I have produced our own notional one-dimensional impact assessment.
If a property had a rateable value of £100,000, before Covid it was paying close to £50,000 in rates. Then, when the pandemic came, if—and only if—it qualified for relief, that £50,000 would benefit from a 75% reduction. In this case, the business owner would have been paying only £12,500. Rolling forward, what do we find when the Covid relief is completely lifted? The rateable value has not changed; it is still £100,000. So, by our calculation, if—and only if—the full multiplier reduction is applied, that business will be paying £30,000 in non-domestic rates.
I am sure the Minister can spot where we are heading on this. Yes, the business will nominally have a reduction in its rates, but those are the rates it was paying before the Covid relief. In reality, it will have gone from paying £12,500 to £30,000; that is what will be hitting the business. I have two questions for the Minister. First, allowing for our slight approximations to make the maths easy, is this broadly correct and, if not, what is the actual analysis? Secondly, how on earth will this bring benefits and investment to the high street?
As the noble Baroness points out, it is right to talk about the impact assessment, both before the implementation of the Bill and once it has been implemented. The accelerated timeline for the Bill’s implementation has left insufficient time for stakeholder consultation, particularly regarding measures affecting distribution warehouses and out-of-town retail premises, as the noble Baroness just mentioned. Therefore, my noble friend Lady Pinnock and I have tabled a number of amendments to help probe different aspects of the impact the Bill will have. When we get to Report, we will hope to refine this—that is, if the Government have not put forward their own amendments, which I expect they will because this makes so much sense and is so important to the Bill.
Amendment 48 would require the Secretary of State to publish an impact assessment on Clauses 1 to 4 before they come into force—very similar to what we have just heard. Amendment 49 proposes a new clause that would require the Secretary of State to examine the effect of the introduction of the new multipliers on the amount of business rates paid by businesses occupying a single site, compared with those occupying multiple sites. This is because the relief system had a cap on it. That cap goes. The question is: does the multiplier applied across multiple sites mean that some large multisite organisations will bust the cap and benefit substantially at the expense of single-site retailers or not? Because there is no impact assessment, we have no idea. This will, essentially, help us to differentiate the effect between the size and scale of businesses.
Amendment 50 is intended to assess the cumulative impact on businesses of the changes in the Bill with the expected removal of the retail, hospitality and leisure relief—coming to the point I was just talking about. Amendment 52 proposes a new clause that would require the Secretary of State to examine the effect of the introduction of the leisure multipliers on the amount of business rates paid by businesses in different council areas. In other words, how will this affect the regional distribution? The Minister, as someone who comes from the north, will understand that there are significant differences between what happens in the north and the south-east of England. Coming from Herefordshire, I would say that there is exactly the same sort of difference there, if not even greater. Amendment 73 is consequential.
These, taken with the amendment from the noble Baroness, Lady Scott, are all about how we know what the Bill will actually do. The Government have made bold claims about the effect they assert it will cause on Britain’s high streets. On these Benches, it seems there is absolutely no way of supporting those claims because there is absolutely no data.
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.
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 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 Pinnock (LD)
My Lords, I will speak to Amendments 66, 64 and 69B. Children in Armed Forces families have a very difficult time. My noble friend Lady Garden of Frognal’s husband was in the Royal Air Force for 30 years, I believe, and in that time they moved 24 times. By the time their children were nine, they were in their seventh school. That is why so many military families choose to find a boarding school as an option for their children, so that they can have continuity and consistency of education.
I cannot remember how many times I had to move during my school life; it was not seven by the time I was nine, but about five times. Each time you move, it is difficult to get into the system of a new school, make new friends and all the rest of it. There is a very strong argument for children of families in the military to have the exclusion argued for in Amendment 66. At a time when as a country we are thinking more about defence and security and, I guess, trying to encourage more young people to become part of the military in many different ways, they will think about what will happen to their families as they move so constantly. I urge the Minister to give special consideration to Amendment 66.
On Amendment 64, the noble Lord said that musical education has been neglected and allowed to decline. That is absolutely true, and we ought to give a bit of thought to how it has been allowed to decline and when. It is a cause of huge concern to me. I have a daughter who went from a state school to the Royal Academy, so I understand a bit about the importance of musical education. I urge the Government to give more attention to musical education in our state schools. What is particularly discouraging is the decline in opportunities for young people in state schools to learn a musical instrument. In the town where I live, they have declined considerably. In my view that is a tragedy, for the reasons that have been given.
Finally, on Amendment 69B, looked-after children ought to have a special place in our concerns. If there is a charity that I have not heard of that offers some young children who are looked after the opportunity for getting away from the place that has caused a lot of difficulty and trauma in their lives, I hope the Government will look at it sympathetically. I do not know enough about that—although I know quite a bit about children looked after within a local authority setting. But if there is a special opportunity for children who need to escape their surroundings to do so in this way, it ought to be given sympathetic consideration by the Government. I look forward to the Minister giving a good response to these pleas.
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.
Lord Thurlow
Member’s explanatory statement
This amendment seeks to delay the introduction of amendments 1 to 4 from 2026 to 2027 to allow more time for impact assessments and consultations to be conducted.
Lord Thurlow (CB)
My Lords, most of the amendments this afternoon have concerned schools. I want to return to commercial premises in my contribution on this group. Amendments 75 and 76 in the names of the noble Baronesses, Lady Barran and Lady Scott of Bybrook, are included; theirs deal with schools but the core principles of our three amendments are similar.
As we have heard from noble Lords, there is widespread concern at the haste with which the outstanding consultations and studies are to be carried out—presumably to coincide with the rating revaluation, which cuts in in a few months’ time. I am afraid that that is not a good enough reason to curtail the chance to do these studies properly; the noble Lord, Lord Lexden, has just made a powerful intervention on precisely that. We can rush it and create bad law or do it properly and get it right.
As I explained in our debate on the first group this afternoon, there is currently under way an update of rateable values, which, until I heard the Minister’s comments at that time, I understood was not to be completed until June. I am delighted to hear that it is possibly available immediately, as we would all love to see the figures.
It is unfortunate timing, as those businesses and schools will not know their new rateable values until then, yet here we are legislating in ignorance of this new and significant fixed cost. As explained, it is the third-highest cost to an RHL business after staff and rent. I stress that this amendment would change nothing concerning the material content of the Bill. It is merely timing. I simply want a further 12 months to assess the impact on these hundreds, possibly thousands, of businesses, particularly those small businesses that are trying to make decisions regarding future investment, which the country needs to invigorate growth, but cannot until they know their cost base.
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.
Non-Domestic Rating (Multipliers and Private Schools) Bill
Lord Thurlow ExcerptsMonday 24th February 2025
(1 week ago)
Grand CommitteeRead Full debate Non-Domestic Rating (Multipliers and Private Schools) Bill 2024-26 View all Non-Domestic Rating (Multipliers and Private Schools) Bill 2024-26 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 61-I(b) Amendments for Grand Committee (Supplementary to the Marshalled List) - (24 Feb 2025)
Lord Fox (LD)
My Lords, I welcome the Minister back to his place and say that the whole House was sorry to hear of his family’s loss.
We on these Benches welcome this Bill as a narrow tinkering of a broken system. It may have some beneficial effects, but I remind your Lordships that the non-domestic rates system has been broken for years, and if this tinkering distracts from a full and proper review of the system, then it is a malign influence rather than a benefit.
From scrutinising the Commons debate on this Bill, it seems that the Government sought to limit debate by asserting that its purpose was to use multipliers to manipulate the non-domestic rates of a subset of businesses in what it calls high streets. This measure is focused on retail, hospitality and leisure hereditaments. Having done this, the broad government claim is that our high streets will somehow be protected and that investment will be encouraged. In wording Amendment 1, we attempted to include words that spelled out the spirit of the Government’s Commons claims, but I have to say that the Public Bill Office resisted all attempts to include the concept of protecting high streets and encouraging investment in the purpose statement. The PBO has confirmed the narrow nature of this Bill.
The Government cannot have it both ways. If they accept the restraints of their own handcuffs and restrict this Bill to varying multipliers for this subset of businesses, the Minister cannot claim to be protecting high streets. There are at least three reasons that make this true. First, high streets are much more than retail, hospitality and leisure, as we will see from various groups of amendments. If the Government’s actual purpose is to protect high streets, they would spread its activity more widely. This will be effectively asserted from these Benches and from those of His Majesty’s loyal Opposition.
Secondly, the Government present no evidence that their claims to be protecting high streets will actually come to pass. As we know, the non-domestic rating system is complex. It is further complicated by the application of reliefs, which will vanish as these multipliers arrive. Increasing the multipliers for larger businesses is another complication. In addition, there is the issue of valuations—this is the elephant in the room that this Bill ignores. They are always up. There are many puts and takes that affect the individual business rates that a business pays and what its competitors pay, yet there has been no attempt at an impact assessment. I have to put it to the Minister that no one actually knows the effects that this Bill will have.
Thirdly, we know that there are some important consequences for activities that fall outside the retail, hospitality and leisure focus that could be badly affected by the consequences of this Bill. My noble friend Lady Pinnock will highlight the issue of medical and health-related premises, and I will seek to demonstrate that an important sector of our creative industry—independent music venues—will be hit hard. In both cases, we need the Minister to confirm that increasing rates for these activities is an unintended, rather than an intended, consequence. Both these activities are important parts of well-functioning high streets, although of course there are other activities that also contribute. This is a consequence of blunt targeting, and it needs to be sorted.
I propose this amendment with a heavy heart, because the narrowness of the purpose allowed by the PBO identifies the limitations and faults of this Bill. But there is hope. First off, the Minister could accept my noble friend’s Amendment 51, when it comes up. That is a good starting point but, otherwise, I am sure that we can work with the Minister to come up with a new Short Title and Long Title that will allow us to properly set about protecting our high streets. My colleagues and I stand ready to help the Minister in this regard. I beg to move.
Lord Thurlow (CB)
My Lords, I stand to introduce the second group, in which, conveniently, there are three amendments, all in my name—
The Deputy Chairman of Committees (Lord Geddes) (Con)
We are still on group 1. We will come to group 2 in the fullness of time.
Baroness Scott of Bybrook (Con)
My Lords, I will speak to Amendment 1 and to my notice opposing the Question that Clause 1 stand part of the Bill. I was pleased and interested to see that the Liberal Democrats had tabled a purpose clause, given that they have criticised purpose clauses tabled by my Conservative colleagues on other Bills. On the purpose clause tabled by my noble friend Lord Davies of Gower—
Lord Thurlow
Member’s explanatory statement
This amendment, connected to another in the name of Lord Thurlow, seeks to remove the power to introduce higher multipliers for more valuable properties.
Lord Thurlow (CB)
My Lords, after my practice run, for which I apologise, I rise to address this second group. Conveniently, it consists of three amendments, all in my name. Before doing so, I should mention that I was formerly a chartered surveyor and spent several decades working in the realms of commercial property. This included a certain amount of rating, so I have considerable experience. I also beg the Committee’s leave inasmuch as I was unable to take part at Second Reading, but I have read Hansard and spoken to colleagues.
The purpose of Amendments 2 and 4—the latter is consequential on the former—is to remove the power to introduce higher multipliers for the more valuable RHL properties on the valuation list. There is a fundamental flaw in the Government’s proposal to pay for the reduced multiplier, hereditament or—I cannot remember what it used to be called—poundage by taxing the larger organisations. To understand this, we must look for a moment at what characterises a successful high street and distinguishes it from one that withers and fades. Although a high street that has withered will continue trading, it will have lost its heart as a retail centre and lost the social cohesion that it provides to the community. There is a gradual decline in the presence of national multiples, which are the key to high streets’ economic health.
A key presence in a successful high street are the anchor retailers, as we have heard. These may be department stores—though, sadly, few remain—other large retailers, such as Marks & Spencer, or possibly a leisure centre. Importantly, nowadays, it may also be a large supermarket. Most larger towns now have a town centre shopping scheme, of course. These are developments that have been carried out behind the retail frontage, usually, but with one or two shopping units providing access to the prime section of that high street. They are anchored by a large retailing presence: the department store or the supermarket in the shopping centre. They also frequently have the advantage of providing car parking and bus station services to the high street, which are particularly important these days with traffic restrictions and general congestion.
It is important to understand that anchor retailers are the lifeblood of our high streets, many of which are pedestrianised to improve the experience and safety of pedestrian traffic. The proposal to charge the larger retailers or RHL traders premium rates will cause yet more of these anchors to close down. This will structurally destabilise the complementary nature of a balanced retail offer. These anchors, including supermarkets, are already under extreme financial pressure.
It is no accident that the large department stores are fast disappearing from our high streets. To ask the higher NDR companies to pay this extra tax is punishment in the extreme. British Home Stores has gone, as has Binns in the north-east. C&A, which many of us will remember, is a good example of another that was forced to close by its parent because it could not afford all the costs, yet it trades healthily and thrives across continental Europe and in other countries around the world. It closed in this country because it could not afford to trade any longer; there was nothing wrong with its product.
Ironically, the only retailers that can afford the high street costs are the mail order giants, and the Government know who they are. Yet we must tread carefully in taxing the fulfilment centres, which are linked to the remaining high street operators and which, by managing to operate away from the high street, can control their costs and keep operating. They are a very different category from the Amazon generic, if I may use that phrase, which the noble Baroness, Lady Scott of Bybrook, already mentioned.
Amendment 45 probes the wisdom of asking the large ratepayers—£500,000-plus is proposed—to subsidise the RHL discount for smaller traders. As already mentioned, the sweeping and inclusive size-related premium will impact many high street retailers attempting to stay afloat by resourcing their mail order businesses elsewhere. They are not the Amazon generic. Asking the larger retailers to subsidise the smaller ones is robbing Peter to pay Paul. The unintended consequence is that the larger retailers will find it harder to continue. It will be another financial burden for them to bear, and it is too much. High street shops will then close to save costs, impacting in turn the economic health of the town.
The key to all this is to separate the fulfilment centres operating behind the scenes of the high street retailers—the big organisations—from the Amazon generic. Dealing with this is complicated and difficult, and it is a matter of definitions. The solution is to ask the experts. There has been consultation on the Bill, but there has been no impact study of this aspect. There needs to be a simple invitation to the experts in the field—the Rating Surveyors’ Association, the RICS and one or two others—whose profession is focused on these subjects, to come up with proposals, ideas and suggestions that can then be refined and considered as a satisfactory solution to funding the discount that the small RHL players will enjoy. Amendment 45 addresses that funding problem. It should not be the highest ratepayers; they suffer enough. I beg to move.
The Earl of Lytton (CB)
My Lords, I am very grateful to my noble friend Lord Thurlow for introducing this point. I support the general thrust of what he said, although I do not see any great likelihood that this will move the government position at all.
Lord Thurlow (CB)
I thank noble Lords who have taken part in this group. The most important takeaway is that it would be too little, too late to postpone until 2027. The acute pain felt in the high street is great enough for there to be substantial loss of retail presence if we do not move more swiftly. We have heard from all sides of the Committee that the lack of impact assessments on the specific, granular issue of definitions is of very serious concern. It needs only another 12-month delay for consultations with experts to take place.
The noble Baroness, Lady Pinnock, revealed with clarity—the noble Lord, Lord Fox, referred to it as well—that there is a harsh difference between an Amazon warehouse with a rental value, on which rateable values are based, of £4.50 per square foot, versus £45 on the high street. That is a massive difference. Amazon are paying 10%. We are tinkering with the deckchairs if the rate poundage is increased for these larger retailers because it cannot be increased—as the noble Lord, Lord Fox, pointed out—to anything near what will be required to provide balance.
The difficulty is one of definitions. I would be grateful if we could speak to the Bill team before the next stage of the Bill. There is scope to introduce a new use class order specifically for the purposes of rating—not for planning, but rating. This would identify the difference between a fulfilment centre for a high street business and an Amazon generic. If that was offered, I would withdraw my amendment.
Lord Jamieson (Con)
May I deputise? Before I do, I declare my interest as a councillor in Central Bedfordshire. In moving Amendment 3, I shall speak to Amendments 18, 37 and 43 in the name of my noble friend Lady Scott, and in favour of Amendment 32 in the name of the noble Lord, Lord Thurlow.
Amendment 3 seeks to introduce discretion for billing authorities in the application of the higher multiplier. The other amendments in the name of my noble friend Lady Scott—Amendments 18, 37 and 43—question whether the Treasury is the right authority to define these hereditaments. The purpose of these amendments is to seek the Government’s reaction to the proposal that local authorities should have a role in deciding which businesses pay the newer, higher multiplier. Local authorities are in a unique position to comprehensively understand the challenges and circumstances faced by their local businesses, which a centralised body certainly is not.
For all its strengths, we know that His Majesty’s Treasury does not have the local knowledge and in-depth understanding of the needs of individual high streets to make informed decisions on business rates that work in the best interests of the local areas. Local authorities are on the ground and are intimately familiar with the economic, social and cultural landscape of their high streets and areas. From my own experience in Central Bedfordshire, I know the positive impact that a well-run local authority can deliver for its high streets. We are interested to hear how the Government seek to empower councils in these areas. We have heard a great deal from the party opposite about the value of devolution; this is a good example of where the Government should put these sentiments into action. The amendments in the name of my noble friend Lady Scott look to empower local authorities to tailor policy to best suit their local area’s specific needs.
Fundamentally, policy is about not only implementing rules but creating a framework that works in practice. Therefore, it is essential, even if the Government are unable to accept the amendments in this group, that local authorities are consulted properly before the Bill is passed. Can the Minister set out the consultation process undertaken to date and confirm for the Committee the further steps that his department will take to consult local authority leaders on these changes? Can he also update the Committee on how this change to our business rates system will interact with the Government’s wider plans to reorganise local authorities? We know that the environments in which businesses operate vary dramatically throughout the UK. However, this issue is neglected in the drafting of this legislation.
It is concerning that the broad applications of the definitions of hereditaments, which will be determined by the Treasury, will not address these regional disparities and enable a focus on what works locally. When created by the Treasury, definitions are designed with an overarching and national perspective and may risk creating unintended consequences for local businesses. They do not account for the nuances of local businesses, which are well understood by local authorities, so we must be cautious about adopting a one-size-fits-all approach when introducing legislation that will undoubtedly have significant implications for local businesses. The Government risk implementing blanket definitions that are disconnected from the realities faced locally.
Finally, I turn to Amendment 32 in the name of the noble Lord, Lord Thurlow, which seeks to remove the power of the Treasury to define a retail, hospitality and leisure property; this addresses the fact that it is local authorities who decide what constitutes a retail, hospitality and leisure relief property, in line with the government guidance. In tabling this amendment, the noble Lord appears to have many of the same concerns as those expressed in my noble friend Lady Scott’s amendments. I look forward to hearing his speech. We did not discuss this matter before Committee so I was pleased to see on the Marshalled List that I have a friend on this issue on the Cross Benches; I thank and offer my support to the noble Lord, Lord Thurlow, and hope that we can work together constructively after Committee.
To conclude, I hope that all noble Lords will listen carefully to the concerns raised in this group of amendments. I look to the Minister to engage proactively with the issues addressed in this amendment. I beg to move.
Lord Thurlow (CB)
My Lords, the noble Lord, Lord Jamieson, has taken the words out of my mouth. I support much of what he has said.
The starting place for my comments on this group is that the Bill seems to reverse the attempts to regionalise power from the centre; it would take the ability to define these hereditaments back to central government. As the noble Lord, Lord Jamieson, said clearly, the definition of RHL properties needs local expertise. There are regional disparities, to which he referred; it is terribly important to understand that. Regional disparities are huge. This measure is a generic product, but it is subject to huge regional variations. One size does not fit all hereditaments. That is an important starting place. It is no accident that the government guidelines allow local authorities to define RHL in accordance with the existing government guidance. That is very sensible. They are the people on the ground. They understand the give and take, as well as the commercial flows, involved.
A large supermarket on a high street may be the only anchor present in that town, being vital to the health of the high street, probably with a car park or a bus stop, and the only source of sufficient turnover of pedestrians to justify its presence in the high street at all. It has to be understood that, if these anchors pack up and leave, high streets really do suffer. There is a terrible price to pay for letting them go and anything that imperils their presence has to be terribly carefully decided, which is why it is a local issue, not a central government one. I strongly urge the Government to allow local authorities to continue to make these decisions.
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 Fox (LD)
My Lords, this is another example of the blunt instrument in operation. We have talked about increasing tax on public services, some of which have the ability to recover the money via new burdens, while some do not. But these services are offered by private sector organisations, and we know for a fact that they will not get recompense from the Government for this, which will increase their costs, reduce their profit and may eliminate their viability altogether. When post offices and Crown offices are retreating from the high street, this is not a good time for those businesses.
In a moment we will talk about flagship operations. I put it to noble Lords that banks and post offices are flagship operations. People travel to towns to visit a post office and banks, and then they spend their money on other things, so by denuding or putting in peril those sorts of operations, we are removing the attraction of town centres. We are making sure that they do worse rather than better. That is the first point.
Secondly, I have a relative who owns a shop in a country town—I do not have an interest in that shop—and one of their biggest difficulties is banking their money. They have to drive 20 miles twice a week to take bags of money to bank it because there is no longer a bank. The removal of a banking hub would make that even harder. It also drives shops to go fully digital, which means that people who do not want to use digital and want to keep using cash are no longer facilitated by those businesses. I have seen businesses that can no longer handle cash simply because they no longer have the necessary banking facilities.
Once again, we are looking at the RHL sector, but these businesses serve the RHL sector and make their lives operational. I am happy to support the various amendments in this group in the name of the noble Baroness, Lady Scott, and I look forward to the Minister explaining how taxing post offices and banking hubs will help the RHL sector in our town centres and high streets.
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 Pinnock (LD)
My Lords, I thank the noble Baroness, Lady Scott of Bybrook, for this group of amendments which seeks to exempt so-called anchor stores from high streets.
We could do with a definition of an anchor store and, indeed, of a high street, but we will come to that in a later group. High streets vary enormously from small town high streets and market town high streets to larger town centres and city centres. When there is a new retail development in a town or city centre, the phrase “anchor store” often comes into play. It is very clear in the business sector that retail works better if there is one major store, which is a sun around which the satellites of smaller shops and businesses operate. This is the description that the noble Baroness, Lady Scott, provided. However, that is just for a group of retail businesses, often in a new situation—such as an out-of-town retail park, a new retail development within a larger town centre or an existing large business in a town centre, for example a Marks & Spencer or a John Lewis store that has a multitude of operations within it. That enables other businesses to exist and thrive from the footfall that the big name store attracts.
I agree with the noble Baroness, Lady Scott, about the importance of these so-called anchor stores, although I would like to see whether the Government have a definition that can be applied. I agree with her argument that smaller businesses develop and thrive as a result of the draw of a so-called anchor store and, equally, the argument that she makes that, because anchor stores are critical to the business environment for the totality of large, medium and small businesses—retail, leisure, hospitality or otherwise, within the sector—it is important to think about whether those often large retail businesses are exempt from the higher multiplier.
I am thinking of a local town high street where the Marks & Spencer closed and moved out some years ago. It was absolutely clear that that was the focus of shoppers going to that town. Once it went, it caused the closure of a whole section of shops in that town and very difficult situation for the businesses that were left. The town will require government money for regeneration to get back on its feet. That is what happens.
So it is important that the Government, in thinking about the Bill and the impact it will have on businesses, think about the consequences of what they are doing. In a previous group, I raised the consequences for public sector-funded businesses, but this is as important for the future health of our town centres. If you take out the key store around which others, like satellites, are drawn because its business sums no longer add up, the whole area will be on a downward spiral.
I will give the Committee an example from some figures that I remember, so they may be wrong. Take John Lewis, which is a big store. It knows that much of its business will move online. I think its business plan expects 60% of its business to move online. If we put an additional cost, as would happen under the large multiplier, on the remaining 40% of its business, I expect that one of the consequences would be that a greater proportion would move out of the high street to online to reduce those costs. That is not what this Government want to happen. They have argued for the importance of the health of our town centres for all sorts of reasons, not just to support small businesses but to support the community which goes there to meet and so on.
It is important that the Government think about the unintended consequences of this rough and ready Bill because it will potentially have very rough consequences on our high streets, particularly those which depend on a big store as the holder of the rest of the businesses around it. I look forward to what the Minister says, but I hope that he does not use “tough choices” and “fair and sustainable”.
Lord Thurlow (CB)
I will briefly add a few comments. I wholeheartedly support Amendment 11 from the noble Baroness, Lady Scott, in principle. The noble Baroness, Lady Pinnock, has clearly illustrated what happens to a town centre when the anchor departs and the economic health of the shopping environment dies.
The problem we have is that of definitions. When a comprehensive town centre development is designed by developers, it contains, without fail, something called an MSU—a major space unit. That is the anchor, the John Lewis or the Marks & Spencer. When that goes, the only possible replacement, generally speaking, is a supermarket.
If the supermarket becomes the anchor of the economic health of the high street, at the back of a shopping centre, filling the space of the department store that was there before, the supermarket really has to be described as an anchor. I do not disagree with the concept, but it makes the problem one of definitions and gets back to the question of use classes, which we will perhaps be able to speak about with the Bill team at another time.
I agree with the principle of this amendment, but I think it is more complicated. We need to get to the bottom of it, but it is one of definitions.
Renters’ Rights Bill
Lord Thurlow Excerpts(3 weeks, 6 days ago)
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Lord Thurlow (CB)
My Lords, I congratulate the two maiden speakers on their inspiring, eloquent and very interesting speeches. I want to inform the noble Lord, Lord Wilson, that he and I share something in common—I am sorry to see that he is not in his place. My grandfather was the vicar of Sedgefield more than 100 years ago. Furthermore, he also sat in this Chamber, so we have two special causes to celebrate together.
The Bill is big and ambitious, with far-reaching implications not only for occupiers and landlords but for the surveying profession—I should declare that I am, and was for decades, a chartered surveyor, working in this space to some extent. I also have two buy-to-let flats and advise a property development company that develops entry-level housing in England. The surveying profession will be involved; the Courts & Tribunals Service, as we have heard, and the ombudsman services will be dramatically affected. Social services will also be involved, as will, most of all in my opinion, local authorities. That said, I support most of the clauses in the Bill; it is a very welcome addition to the statute book.
Turning to those concerns, this Bill is going to frighten landlords. The noble Earl, Lord Kinnoull, informed us of what has happened in Scotland. That is an excellent market test of what is going to happen here in England and Wales. I too live in Scotland. A nationwide firm of estate agents which specialises in letting property closed its office nearest to where I live after Section 21 was abolished in Scotland. I spoke to them about this, and they said that they did it simply because the market dried up for landlords or they withdrew. They closed their department. All those landlords either sold their properties—most of which would have become second homes—or turned them into holiday accommodation and Airbnb-type alternatives. The only losers were the tenant community, and they have nowhere else to turn—there is a terrible shortage of housing. Do not let us fall into that trap and let that happen here.
Ending fixed-term leases is a mistake. They do not have to be long leases, but there are a lot of enterprising individuals who want to criss-cross the country: they are on secondment; they are on a consultancy project; they might be digital nomads, moving between centres of excellence in their field. They know they are going to be somewhere for three or four years. There is no reason why they should not have a fixed-term contract. The landlord would appreciate it and benefit, and, of course, they would, too—they could call it “home”.
I am concerned about, as we have heard from the noble and learned Lord, Lord Etherton, the courts and tribunal services and the delays likely to result from the logjam of huge increases in the numbers of referrals and complaints. We underestimate the pressure on the ombudsman’s services as these new rules come into play; there will be an awful lot of call on their services.
The impact on local authorities is principally one of resourcing. They have a big role to play in this Bill; there are going to be legions of surveyors having to be trained up in the decent homes standard and the implications of the ability to operate Awaab’s law. There is going to be a significant increase in the need for computers, IT and digital recording, which will include ongoing maintenance. We are a country of some 50 million people—we are not a country like the Nordics, New Zealand or others, where they are dealing with 10% of the size of our population—and these recording systems are immensely expensive to maintain. We are asking local authorities to become policemen, and that is not their role. They will have to enforce the new rules and regulations, which is going to be culturally difficult and will require a lot more employment, training and resourcing. Who is going to pay for it? We know that the local authority system is basically bust financially.
Finally, I do not think that it will work to prohibit rental bidding. Unless I have misread the Bill—I apologise if that is the case—I think that all a landlord has to do to prevent being caught out on rental bidding is to quote an unreasonably high rent, way above estimated rental value, and let the market do its work through a Dutch auction and gazumping, or whatever else it might be. But perhaps I have missed something in the Bill.
In conclusion, I support most of the clauses of the Bill. I am concerned that some will not work, and I am certain that others need review, but I look forward to Committee very much indeed and to discussing all these matters.