Business Rates

Andy Sawford Excerpts

Wednesday 4th December 2013 Commons Chamber

[Mr Clive Betts (Sheffield South East) (Lab)]

This is an important debate because business rates are clearly an important cost—and a rising percentage cost—for many businesses, particularly small businesses, in the country. Business rates have gone up faster than turnover during times of economic difficulty. They are important for local councils because they comprise more than 50% of their revenue. If the Minister had until the end of the debate to explain the whole system to us, he would still need more time for the details. There is the retention of rates by local authorities, the provision of resources to the Exchequer which are then redistributed to local authorities, the set aside that the Treasury can keep, and the safety nets and the levies that go on to authorities that are in different positions. It is an incredibly complicated system.

One welcome thing that the Minister mentioned is a review of the appeal system. It is completely unacceptable that it can take up to 18 months or longer for appeals to be held. First, for the businesses themselves, they do not know how they will be placed when they are waiting for their appeal to be determined. Secondly, for the local authorities, an appeal casts doubts over their income stream. One thing the Minister could do before the review is announced and then carried out is to ensure that next year the element of hold-back for local authorities is removed. Ministers could take on board any uncertainties about the valuations and how they will work out through the appeal system, rather than leaving the problem for the local authorities to bear.

[Andy Sawford (Corby) (Lab/Co-op)]

My hon. Friend is raising an incredibly important point. There were 173,000 appeals this financial year still waiting to be dealt with at the Valuation Office Agency, and 170,000 at the Valuation Tribunal Service. The review should be very quick, otherwise businesses will go under.

[Mr Betts]

It has to be quick, and it will need more resources being put into it as well. The Minister cannot do this at nil cost. It will be interesting to see how this develops. Hopefully, as my hon. Friend says, it will develop very quickly.

In the longer term, we need a complete review of the business rates system. We need to look at the way in which valuations are carried out. The Local Government Association has called for that review, and I thoroughly support it. It should form part of a wider review of local government finance, and the Select Committee, which I chair, will now be carrying out a review of fiscal devolution to cities on the back of the London Finance Commission, which the Mayor of London has commissioned and which Labour and Tory London boroughs and the core cities have supported. I will not come to a view about whether its proposals are right, but it is interesting that there is now a call for a wider look at the whole basis of property tax in this country and the extent to which it can be devolved down to local authorities.

Were the Chancellor to make any changes tomorrow to business rates for next year—and we hope there will not be a commitment to increase business rates by RPI, as has been the case for the past few years—any reduction must not come at the expense of local councils, which are very hard pressed at this time of austerity and restraint on their spending. Any commitment must be made clear. We need to know the impact of lower business rates not just on councils as a whole but on each individual council in the country— I ask the Minister to put the details in the Library—once the levies and safety nets are taken into account. That must be made explicitly clear for their benefit.

Business rates are a real problem for firms up and down the country. The percentage of their turnover paid in business rates has increased, and that is putting real pressure on small businesses in particular. If the Government recognise that, and recognise the need for action, why are they so mealy-mouthed as to say, “No increase in line with RPI—we will simply reduce that increase to 2%”? If there is a problem, which the Chancellor might recognise tomorrow, why not go that bit further and at least freeze business rates or, even better, take up the suggestion of my hon. Friend the Member for Chesterfield (Toby Perkins) and cut them? If there is a problem, why not address it properly? If there is not, why go for a 2% increase? The Government have a fundamental question to answer on this issue.

The Government must also deal with the disproportionate impact of business rate increases. Firms in different parts of the country are suffering in different ways. In parts of the country where demand has not recovered, where growth has not increased and where there is poverty and deprivation, businesses are suffering more. A revaluation would have addressed precisely that.