Non-Domestic Rating (Multipliers and Private Schools) Bill (First sitting)

Adam Thompson Excerpts

Committee stage
Wednesday 11th December 2024 Public Bill Committees

[Adam Thompson (Erewash) (Lab)]

Q Thank you for joining us this morning, Mr Watson. I represent two towns in the east midlands, Ilkeston and Long Eaton. Both the high streets in our towns have suffered for a long time. We have a large number of small retailers and many have closed over a long period. A lot of work has been done locally, in particular by one member of the community, on regeneration of one of the towns especially—basically, clubbing together a lot of small independent retailers who have worked together to bring the community back up. How will the Bill tangibly affect the community and those small retailers?

Gary Watson: We have the Bill, but all the time we have the small business rate relief, which sits there. Obviously, the issue with that is that it is again limited on rateable values. In one part of the country, rateable values will be higher or lower than for the same type of property in another part. The area that might want to be looked at when the next revaluation takes place is to look at the ceilings on those rateable values. At the moment, for the small business rate multiplier, we go up to £51,000. There is that small business multiplier, so if you are trying to target, once we know what the outcome of the rateable values will be at the next reval, it may well be that the support that you could give would be through uplifting the values, as I said.

On the Bill itself, we have the flexibility of the two lower multipliers. To go back to an earlier question, I think it is right to have that flexibility, so that we can vary it depending on the circumstances. It does give flexibility, but we also need to think about the small business rate relief, and that is there anyway. That might be something to look at, in terms of targeting, when it comes to the next reval. I think that would need more secondary legislation, rather than primary legislation.

[Ms Polly Billington (East Thanet) (Lab)]

Q Thank you for your evidence. It has been very interesting. My constituency is made up of three towns, Ramsgate, Broadstairs and Margate, all seaside towns and very dependent on all the sectors we have been talking about—tourism, hospitality, leisure and so forth. You have been talking about the centrally decided approach when it comes to those sectors. What value might there be in an approach that recognises the geographical challenges of particular areas, so that we do not just have a complete free-for-all with local government picking and choosing how to do it? We could say instead, “Yes, we need to have a particular approach when it comes to the geographical challenges of some commercial centres and the high streets.”

Gary Watson: Yes, I think you could look at the Bill giving a framework. At the moment, you have the standard rate and the small business multiplier, and the flexibility with the two lower ones—one or more, depending on how you want to move those forward. From a local authority point of view, there is that national situation, but you then have to look at each of the individual areas, and no one area is the same as another, as I said. They will not always be the same—things will change—and that is where the local authority comes into play, and where you need to have the relief systems in place.

The one thing you have in the legislation anyway—I am sorry to bore you with legislation—is section 47, which allows the local authority to give relief to any ratepayer that it wants to. The only thing it has to take into account is giving due regard to its taxpayers’ interest—and obviously it is, because the taxpayers are benefiting from having a thriving high street. In a way, that relief system is already there, so I think creating the framework is fine. As I said, yes, there is that concern about the complexities of the whole system itself, but you are trying to direct it to make it more agile—as that term has been used.

There is no reason why the framework can be put together through the Bill, but the relief system cannot then be used, say, in the three towns that you referred to—I am a little familiar with those three towns, because one of my council members is from Thanet, so I know it quite well. As I say, I think the relief system is there. The issue you will have then is whether, when it comes to funding those reliefs, local authorities will have all the funding. That is where I always say that you cannot look at the property tax and local government financing separately. When you talk of reforming council tax or business rate, you also have to consider local government finance—the two always have to be considered together.

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[Patrick Spencer]

Q Thank you very much, Mr Woodall. I was struck by what you said about rural convenience stores and the importance of supporting them, and I could not agree with you more. I represent a rural constituency and in the next-door village there is a shop that has been there for years. I am terrified every year that it will go under, yet it is very resilient. Do you think this Bill should make provision for convenience stores that stand alone within rural areas and villages, where they are the only shop left that sells milk, eggs and newspapers? Do you think it is not just about small and microbusinesses, but those that are the only ones left? Do you think there should be a provision in the Bill for them?

Edward Woodall: I certainly think there should be provision of support for rural businesses, particularly those that are the last ones serving a community. They deliver essential services to those communities, and there is a cost to that community if they have to travel elsewhere. Whether it is possible to do that through the legislation is an interesting question. This was picked up in some of the previous evidence that you heard this morning, but there are measures within local authorities’ existing powers to issue discretionary relief to support those locations. That was previously called rural rate relief but it has been taken over by small business rate relief.

The challenge is whether local authorities have the funding to administer that relief. I think it is quite challenging to do that in the Bill, because you get into a space where you start adding more complexity by identifying regions or locations in national legislation. Actually, what we often see is that there are more differences within a region than there are between regions. I agree with the principle of what you are saying, but perhaps the existing powers of local authorities to do that are better, but they probably need support and trust from the Government to allow them to administer it well.

[Adam Thompson]

Q Thank you again for coming in this morning, Mr Woodall—we really appreciate your time. I am very pleased to hear your overall assessment that, for the convenience stores that you represent, the Bill will be positive and benefit the vast majority of them. On the savings made and the tangible effect of this Bill, what will they mean for a shopkeeper in my constituency of Erewash for security implementation, staffing and operations?

Edward Woodall: I tried to give some examples earlier of how businesses might invest. I suppose the first question is: where are the multipliers set? I would encourage the Government to use the flexibility to enable the best possible investment. As the example identified, if you have the multiplier set at a lower rate, the business is starting to save thousands of pounds. That is an opportunity for them to think, “Right, I can update the CCTV system. I might be able to add some new security measures in store.” The Bill can facilitate that investment. I should also say that, with the overall pressures on retailers at the moment, the cumulative burden is very big. They also might have to use that money just to keep operating and managing the costs that go up as well. This Bill can facilitate investment, but the Government have to think about the overall investment environment for retailers, not just through the rates bill by itself.

[Harriet Cross]

Q I understand that James Lowman, the chief executive of the Association of Convenience Stores, has written to the Chancellor following the Budget, and he described how 2025 will be a bleak year for small convenience stores, as they face over £666 million of additional cost. Will the Bill’s changes to the multipliers of domestic rates make a dent in that? Overall, will your convenience stores benefit from the Budget or be disadvantaged by it? How do those two things fit together?

Edward Woodall: You are right that our estimation of the cost of the Budget was £666 million, and we wrote to the Treasury to set that out. As I said, I think the Bill provides more structure and permanency in the support for retail, hospitality and leisure relief. I cannot comment on how much it will do, because I do not yet know where the multipliers will be set, but I think there is an opportunity to make the investment environment for businesses better with this Bill. We are not just looking at one single relief; we are looking at it over a period of time and we have the opportunity to discuss how that multiplier is set. One way in which the Bill could facilitate that better is through the procedure for the setting of the lower multiplier, which is currently by negative resolution in the Bill documents. That might want to move to an affirmative resolution so that we can have a debate on whether it goes up or down in the future, so that we can have a closer discussion on those things.

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[Ms Billington]

Q Sorry to interrupt, but online competition is genuinely a problem with business rates. Having previously been a councillor in Hackney, I know that we got more business rates from Amazon having its headquarters there than the Treasury did from Amazon’s existence in the first place. So there is a difference.

Stuart Adam: What I am saying is that there is a big difference in business rates, but if the business rates are not changing the overall cost of the premises—rent plus business rates—they are not making much difference to the competition. The fact that people can easily shop online is fundamentally what is driving it, rather than business rates. The fact that high street retailers have to pay rent and rates in a way online retailers do not, at least not to anything like the same extent, is absolutely a driver of the difference, but I am just saying that the business rate component of the cost of the premises does not have that much impact on the overall cost of premises, because of the adjustment to rents.

There is a broader question as to what can and should be done to protect the high street. That is largely outside my area of expertise, but I know other reviews and studies have been done on that. I am largely going to duck it because it is outside my expertise, but there are things that can be done outside tax.

[Adam Thompson]

Q Thank you for coming in, Mr Adam. The argument that you have put forward is predicated on the link that you have established between business rates and rent. A quick Google Scholar search implies that a lot of papers out there suggest that that link is broken somewhat by sluggishness in the rental market. Does that not undermine your argument?

Stuart Adam: I would be interested to see which papers on Google Scholar you have seen—

[The Chair]

Order. I am afraid that brings us to the end of the time allocated for the Committee to ask questions, and for this sitting. I thank the witnesses for their evidence.

Ordered, That further consideration be now adjourned. —(Gen Kitchen.)

Non-Domestic Rating (Multipliers and Private Schools) Bill (Second sitting)

Adam Thompson Excerpts

Committee stage
Wednesday 11th December 2024 Public Bill Committees

[Vikki Slade]

Q We heard earlier that 130,000 children with special educational needs are in independent schools, of whom 100,000 do not have an EHCP. If you assume that the majority of those are not in specialist EHCP/SEND schools, the potential is for 100,000 children possibly to make that switch. Do you have any thoughts on how many of those schools might be pushed towards specialising in special educational needs? Do you have any idea of whether we might see a shift in what private schools choose to specialise in going forward?

Professor Green: That is an interesting thought. I do not have a specialist estimate to give you on that. It is a conceivable response. I am not sure that it is a necessarily a bad response if it does happen that way. But, again, I repeat: I do not think there will be a large number in those circumstances.

Inevitably, whenever you make a change like this, there is always someone at the margin who is just kind of tipped over the edge, saying, “I really can’t afford this any more.” I happen to know somebody in that particular position in my area. I am fairly sure that a large number of those people will have to deal with the situation; there may be a 1% or 2% rise in the prices, which might not otherwise have happened, but, of course, prices rise all the time. Prices have gone up many times since the turn of the century, and they continue to go up, so it would be very hard to distinguish the rises associated with this measure from the regular fee rises that go on anyway.

[Adam Thompson (Erewash) (Lab)]

Q Thank you, Professor Green, for joining us this afternoon. You have noted a couple of times already that your assessment is that the impact of this measure will probably be negligible. I was wondering how you might compare that with the cash-terms doubling of private school fees over the last 20 years, from the perspective of families.

Professor Green: Well, I think that is part of the indirect evidence of the fact that there will not be a great deal of impact, because, broadly speaking, the same proportion of the population is attending private schools as 10, 20 or 30 years ago, so it is one of those constants. That is slightly down, but, to be honest, it depends on the fortunes of the top echelons of our income and wealth spectrum—how much they can afford and choose to send their children to private schools. That is the nature of the market.

[Patrick Spencer]

Q Sorry, Professor Green, can we just go back? You said that you would expect 10,000 to 20,000 students to transition out of independent schools and into the state system—

Professor Green: Somewhere between 10,000 and 30,000, and that would be over a five-year period.

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[Vikki Slade]

Q Can I ask about occupation? I am thinking about the hon. Member for East Thanet, and I also represent a coastal community. We had a slightly surprised response when we heard that everything will right itself, when we have whole high streets sitting empty. My understanding is that if you have a higher rate for empty properties, it is likely to force people to take a tenant. Do you think the Bill goes far enough on that, or are there more levers you need to pull to make those empty properties work? I know we already have the rental auction and that that is not in scope, but does the Bill go far enough or can the multipliers be levered even more?

Jim McMahon: It will. We need to stay in scope of the Bill, but the Bill does not sit in isolation. This is a wider package of reform and intervention, reflecting the fact that businesses do not operate in isolation; they are part of an ecosystem in many places. Think about the impact of, say, an anchor department store closing, or a bank branch, a post office or an office block. What that does to the footfall in a place has a huge impact, so we need to take a range of measures. We absolutely understand the importance of town centres and high streets not just to the economy but for identity, pride and confidence in the future. I will be careful not to stray too far out of scope here, but communities often feel they lack the power to take control of their high streets. There are cases where a unit has been left vacant and there is a local business that would take it on, but the landlord is not interested, either because they are absent and missing in action, or because they are an investor where the bulk value is more important than the actual rent that can be collected.

That is why things such as the community right to buy, which gives the community the right to have assets, and a community asset register, which gives protection to assets of community value, are important. It is also important to provide more time for communities to self-organise and maybe take over some of these assets. This is an important step that will go some way to achieving that, but in isolation, it would not be enough, which is why the other steps we are taking will make a difference. Where this will make an absolute difference is that once we have dealt with the empty property, the businesses that occupy it onwards can be that bit more viable, because the business rates will be lessened on their operating costs.

[Adam Thompson]

Q Thank you, Minister, for your time. We have had really interesting sessions today. I represent two towns, as I said earlier, and I am really pleased to represent one where a lot of work has been put in by the community to rejuvenate the town centre. By working together, the occupancy rate has increased, and we have a huge focus on independent businesses, which is really positive.

I want to focus on pubs, because we had a little less focus on that than other areas earlier. I know that like many other colleagues, I would not be here, sitting in this room, if it were not for the emotional and social support of pubs during the election campaign—in my case, the White Lion and the Dew Drop Inn. What opportunities do you feel will be opened up for the pub sector by the Bill?

Jim McMahon: We heard earlier about community pubs. A lot is said about the last pub in a village, and they are lifelines. If everything else is gone—the shop is closed and maybe the post office too—then having a convenient space where the community can come together is important for a number of reasons, not just for social isolation, but for living a decent, fulfilled life where those relationships and experiences matter.

Quite a lot less is said about the last pub on the estate. In the same way that many rural villages feel isolated and disconnected, lots of estates feel completely disconnected from a lot else, such as the convenience stores and things that used to be there, including the local church, the church hall or the scout hall. We need to do far more to make sure that the convenience store and the local pub can survive and thrive. We heard earlier that, given where the thresholds are being set, those are exactly the types of places that will be the biggest beneficiaries of some of the measures in the Bill.

The high street, which is obviously a bit more expensive to operate on because of the nature of rateable values, will also be a beneficiary of the Bill. It is so targeted on retail, hospitality and leisure that those types of uses, which are the backbone of high streets and town centres, will benefit. The same is true for pubs: community pubs and village pubs, but also pubs on the high streets and in town centres, will be in scope to benefit from the Bill.

We heard earlier about the mounting pressure of food costs and energy costs. The cost of carbon dioxide supply for carbonated drinks is extremely high, as is the cost of staffing. The scope of this Bill is narrow and targeted, so there are limitations to what it can do. It cannot fix absolutely everything in the system, but it can play its part. I think we heard today in the evidence sessions that it is absolutely welcomed as part of the answer.