Non-Domestic Rating (Lists) (No. 2) Bill

Baroness Bakewell of Hardington Mandeville Excerpts

2nd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords
Monday 18th January 2021 Lords Chamber

[Baroness Bakewell of Hardington Mandeville (LD) [V]]

My Lords, it is a pleasure to follow the noble Baroness, Lady Greengross. I declare my interest as a vice-president of the Local Government Association. I fully support the comments of my noble friends Lady Thomas of Winchester and Lady Randerson on the NDR (Public Lavatories) Bill. It is essential, in terms of equality, that the number of disabled lavatories and access to them should be increased, not only in town centres but in visitor attractions and beauty spots around the country. Other Peers have spoken eloquently on that issue.

Turning to the NDR (Lists) (No. 2) Bill, I have a few points to make. While I support moving the date for compiling the lists to 1 April 2023, this is an opportunity to move from a five-yearly review to one every three years. Other noble Lords have spoken to this issue. I would not support moving to a yearly revaluation as this would be too great an administrative burden on local authorities, but a three-yearly revaluation would be a good compromise.

It is important that we fully understand what is happening to our high streets. During lockdowns, most of the retail and market outlets are not able to trade. Some retail outlets have been able to move their business to online trading and delivery, but most have not. We have reached a stage where enormous warehouses have been constructed to service online business, but they do not contribute in the same proportion as high-street businesses. Now is surely the time to readjust the rating system so that the rateable value and rates paid by high-street retail outlets is radically reduced permanently. At the same time, online warehouse operations should be taxed in proportion to their size, turnover and profitability.

While it has been enormously beneficial to people to be able to buy goods online during lockdown, especially in the run-up to Christmas, the effect on the high street has been catastrophic. Many retail outlets rely on the December trade to see them through the rest of the year. I am sure the Minister does not wish to see a return to the moribund state of our high streets during past recessions. I welcome the rate relief which the Minister has set out to alleviate hardship during Covid, but that is only short-term.

I will speak briefly on mixed hereditaments. Many, many years ago I sat on rating appeal tribunals. While a large proportion were about dates, there were a proportion of mixed hereditaments, with those living in premises above retail outlets which they ran having concerns about their rateable value. The Government have been keen to increase the housing supply by allowing developers to give notice to quit to business tenants in blocks of flats in town centres over retail outlets. These premises were then allowed to be converted into domestic dwellings. These conversions have not been subject to building controls, and in many cases have resulted in substandard accommodation with very limited space.

Can the Minister say whether these newly converted domestic dwellings were subject to reassessment of their rateable value? Were they changed from business rates to domestic rates? Did the local authorities in which the dwellings were situated receive less in rates payments than previously or more? As the Minister knows, local authorities are very dependent on the receipt of rates to help balance their budgets and to fund their vital services to the community.

While providing homes for those desperate to escape sofa-surfing with their long-suffering friends and relatives, it is important that the accommodation provided through office conversions is adequate, meets minimum standards and provides a dignified living space for their residents. I look forward to the Minister’s response on this and other matters in this debate.

[The Deputy Speaker (Lord Russell of Liverpool) (CB)]

The noble Baroness, Lady Altmann, has withdrawn from this debate, so I call the next speaker, the noble Lord, Lord Stunell.

Non-Domestic Rating (Lists) (No. 2) Bill

Baroness Bakewell of Hardington Mandeville Excerpts

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Thursday 4th February 2021 Grand Committee

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, Amendment 3, to which the noble Baroness, Lady Bakewell of Hardington Mandeville, has added her name, raises the important issue of business rate appeal waiting lists.

As we heard at Second Reading, there are still 40,000 unresolved rating list appeals from 2010—11 years ago. As a result of this backlog, local authorities had to divert more than £3 billion from services to deal with the appeals risk from 2010 and 2017. This is an unacceptable situation; I am sure that the noble Lord, Lord Greenhalgh, would agree with me on that. Local authority finances are under extreme pressure, and this unacceptable situation is being made even worse.

The amendment would place a duty on the Secretary of State to conduct and then publish an assessment of the impact of the Act on business rate appeals. This is an opportunity for the Minister to explain the position of the Government and how they are working to deal with this backlog of appeals. I beg to move.

[Baroness Bakewell of Hardington Mandeville (LD) [V]]

My Lords, I draw the Committee’s attention to my interest as a vice-president of the LGA.

It is a pleasure to take part in this debate and speak to the amendment in the name of the noble Lord, Lord Kennedy of Southwark, to which I have added my name. I am familiar with rating appeal tribunals from my previous life when I sat on domestic rating appeals. Some had been waiting in the pipeline to be heard for a very long time. The noble Lord referred to these timelines.

However, this is about business rates. Some years ago, before the Government transferred the retention of business rates to local authorities, unitary and district councils were responsible for collecting business rates but had no say in setting them; nor were they able to retain the rates collected. If the local authority had no major facilities in its area that would attract business rates, this was straightforward. However, if there were major infrastructure projects—I use this term loosely—this caused huge problems as, for reasons best known to the Government, these facilities were expected to pay business rates despite not trading as businesses.

I can speak only from my experience of Somerset but feel certain that this situation will have been replicated across the whole country. Taunton Deane Borough Council and South Somerset District Council were lucky enough to have major infrastructure in their areas. In Taunton Deane, it was the MoD camp at Norton Fitzwarren and a large hospital at Musgrove Park, in addition to several superstores. In the case of South Somerset, it was the MoD Royal Naval Air Station at Yeovilton and Yeovil District Hospital, as well as superstores. The MoD bases and NHS facilities are of course funded from central government budgets in the first place. All these assets attracted business rates covering millions of pounds. The MoD, NHS hospitals and superstores appealed against their business rates—the latter were in a slightly different category as they were trading businesses and, hopefully, making a profit, but millions of pounds were at stake.

The Government informed local authorities that they could, if they wished, agree a lower figure with the appellant. However, any difference from the figure originally set and the lower figure agreed by the local authority would have to be made up to the Government from local householders’ council tax. Many of these pending appeals waited four, five, six or even seven years to be heard. As the noble Lord, Lord Kennedy of Southwark, has just said, we have now been waiting more than 10 years for the 2010 appeals. All this time, local authorities were wondering whether they would be faced with massive bills in unpaid business rates that the Government would be expecting to receive. When appeals were heard and were successful, this money was passported back to central government. However, there was also an expectation that any shortfall would be made up by local authorities, so it was a win/lose situation for local councils and their taxpayers.

We now have a situation where local authorities operate under a business rate retention scheme. However, with high street retail outlets and other town centre businesses under extreme pressure because of the Covid pandemic, huge numbers of appeals against business rate assessments are likely.

Household rates and housing benefit levels are set on a sub-regional basis by the valuation office. Our valuation office was based in Bournemouth; the price of a property in Bournemouth was vastly different from the value of one in South Somerset. Can the Minister say whether business rates are similarly set on a sub-regional level and whether the buoyancy of the local economy is considered?

Previously, our town centres have been made up of well-known retail high street clothing stores, yet these have all but disappeared. The brands are being snapped up by online businesses that buy the brand and stock but not the premises, as we have seen this week. My noble friend Lord Stunell has already referred to this. How are local authorities that now depend on business rates to balance their budgets to proceed with an increasing number of empty properties?

Many businesses will survive: insurance agents, estate agents, solicitors, food outlets and supermarkets. However, many supermarkets have long since withdrawn to retail business parks, where there is a significant turnover of retailers as each goes into administration. Mothercare, Staples and Homebase are examples; their premises are often left empty for a considerable time. It seems that now is the time for a radical rethink of just what the Government expect business rates to deliver and what type of business they propose to be classified as liable for business rates. This will now include large warehouse facilities servicing online purchases.

The exponential rise in online shopping has been the saviour of householders who have either been subject to lockdown or, prior to lockdown, isolating to protect themselves due to their underlying health conditions. From my office window, I have an excellent view of the C-grade road that serves the 12 houses in our area. The number of delivery vans going up and down has dramatically increased since Christmas. Whether it is with home deliveries from supermarkets or deliveries by DPD, Yodel or another, they are extremely busy and often call long after it has gone dark. Apart from the supermarkets, the vans are delivering goods that householders have ordered from online businesses. Surely now is the time for these businesses to play their part in the local economy and pay business rates; the noble Lord, Lord Bourne of Aberystwyth, referred to this.

Non-Domestic Rating (Lists) (No. 2) Bill

Baroness Bakewell of Hardington Mandeville Excerpts

Report stage & Lords Hansard
Monday 1st March 2021 Lords Chamber

[Lord Thurlow (CB) [V]]

I thank the noble Lord, Lord Kennedy, for tabling Amendment 1, which I wish to speak to, and it is a pleasure to follow the noble Lord, Lord Stunell. I declare my interests as set out in the register. I am a non-domestic ratepayer in Scotland, although I know this Bill does not include affairs in Scotland.

The Bill is all about timing; it is not about fairness, fitness for purpose, the impact on business, sorting out the appeals system or any other aspect of what has become, I fear, a broken system. The Bill ignores the most critical timing issue, which is simply that of dealing with the appeals backlog—ratepayers paying the requested sum until an appeal is settled. In the current circumstances, that is critical. We cannot expect the Covid-related rates holiday to last for ever. We have seen a collapse in retail rental values over the past 12 months, and as both the noble Lords, Lord Kennedy and Lord Stunell, have pointed out, it was a crisis long before this. Some tenants are to pay double the appropriate rates bills. This amendment brings the plight of the high street retailer into high relief. The annual report it proposes would focus specifically on small businesses, as set out in subsection (2)(b). I am pleased that it also addresses the elephant on the table of all non-domestic rates discussions in the retail sector: the killer impact of the online assault on the high street, as we have heard from both the previous speakers.

Online retail is not a bad thing and it is clearly the future for a huge percentage of domestic spending. The bad thing is the Government’s inability—after years of notice, for online is not a new phenomenon—to recognise the twin neglects of taxing the profits of online and of fairness in the spread of rates between the high street and that sector. Subsection (2)(d) of the amendment requires that the report address the impact of the revaluation timing on local authority finances. Rates are a critical ingredient in local authority finance, but unfortunately the funding gap that the next revaluation will create will lead to a difficult political challenge: how to replace the fall in rates funding—another reason to delay the reform so desperately needed.

Subsection (2)(e) addresses the subject of waiting lists for appeals, which I mentioned earlier. This has become critical. Waiting list delays are themselves enough to put many out of business—a good example of shooting ourselves in the foot of local authority funding. The end result will be worse.

I must refer also to the fundamental review—a story of delay. It is most disappointing, in that the most vulnerable ratepayers can hardly speak for themselves. This delay will be the death of many small, innovative and hardworking businesses, the very ones the Government claim to champion. Should the noble Lord, Lord Kennedy of Southwark, press for a Division on this amendment, I will certainly support it. But my greatest concern is that the valuation date for the revised NDR lists has been chosen at a point in the market cycle that provides no evidence. In my 40-odd years in this profession, I have seen highs and lows in the rental value market cycle, but I have never seen paralysis. Paralysis is what we now have in the rental market from which the rate levels are derived. It will probably lead, as I explained in Committee, to a huge mass of rating appeals. I ask the Minister to take these comments back to the Government, but I fear that it is too late.

[Baroness Bakewell of Hardington Mandeville (LD) [V]]

My Lords, it is a pleasure to follow the noble Lord, Lord Thurlow, and I declare my interest as a vice-president of the LGA. I congratulate the noble Lord, Lord Kennedy of Southwark, on his composite amendment which neatly brings all the issues that have been debated previously into one. During those debates, all the relevant arguments were made, and I speak today in favour of Amendment 1.

It is important that there be annual rate revaluation reporting. Business rates reviews cannot be left to drift from year to year, especially as so many businesses are struggling. Keeping a careful watch on how revaluations are affecting businesses is vital to ensuring a healthy economic recovery. Towns and high streets are being decimated by the lockdown, as the noble Lord, Lord Kennedy, said. Some three-quarters of retail outlets are closed and many have been boarded up. Only essential outlets are open: supermarkets, pharmacies, opticians and some DIY stores. As lockdown is gradually released, many shops will, hopefully, reopen, but the effect of business rates may be the last straw. This must be monitored to prevent the total decimation of the high street shopping experience.

The Association of Convenience Stores has welcomed the Bill and the revaluation date being moved to 1 April 2023. It sees this as a positive step forward but it has several recommendations that would further assist its operation, including a reduction in the burden of business rates by resetting the business rate multipliers to more sustainable levels.

The whole issue of NDR is a balancing act between the need of funding local authorities and the economic viability of businesses. Local authority finances are stretched to the limit. Government grants have been radically reduced over the years and many councils now only deliver statutory services and these to the minimum standards permitted. It is not that councils do not wish to provide those vital services which communities rely on, such as grants, improved play areas, adequate and dignified social care, after-school clubs et cetera; it is the sad, realistic fact that they no longer have the finance to do this.