Non-Domestic Rating (Multipliers and Private Schools) Bill

Baroness Barran Excerpts

2nd reading
Wednesday 29th January 2025 Lords Chamber

[Baroness Barran (Con)]

My Lords, I would like to add to the noble Baroness’s list of messages to send to the noble Lord, Lord Khan, and his family. I send my very best wishes to them at this time.

I listened very carefully to the speeches made by your Lordships this evening. I am struck by the range of concerns expressed across the House, based, as they appear to be, on a lack of transparency in the Bill and the number of moving parts. In fact, the clarity is so absent that my noble friend Lady Scott and the noble Lord, Lord Fox, ended up with very different analyses of where the impact of the Government’s proposed changes will fall.

The Government are rightly focusing on much-needed growth in our economy, and I do not doubt their commitment to achieving that, but there is a lack of alignment in the actions that they have been taking in order to deliver on that aspiration. This Bill comes after the harmful decision to increase employers’ national insurance and ahead of the impact of the Employment Rights Bill—one where, as the noble Baroness knows, the Regulatory Policy Committee has been deeply critical of the Government’s impact assessment, deeming it not fit for purpose and, crucially, stating that the cost to business will be higher than the £5 billion forecast by the Government. My noble friend Lord Jamieson was spot on when he said that businesses needed to be nurtured and not taxed.

I echo the concerns of my noble friend Lady Scott of Bybrook and other noble Lords. This Bill does not achieve what the Government committed to in their manifesto—namely, the reform of the business rates system: as the noble Earl, Lord Lytton, said, quoting again,

“the levelling of the playing field between the high street and the on-line giants”.

Since the Bill does not do that, it would be helpful to the House if the Minister could explain why.

We are, as the noble Lord, Lord Fox, and other noble Lords have said, once again having to respond to a Bill which does not give us clarity on how it will work in practice and what its impact will be. There has been no proper consultation with businesses, no impact assessment on Clauses 1 to 4 and no clarity on what the business rate multipliers will be. The Minister explained the technical reasons why the latter is the case, but I think—and hope—she could be sympathetic to some of the questions that have been posed to her across the House. If the Bill becomes law without amendment, it will give the Government powers to set business rates multipliers without clarity on how those powers will impact on businesses.

Therefore, can the Minister give the House a forecast for how these proposed changes in business rates will affect council budgets and the revenue they receive, and the revenues to the Exchequer? Ideally, as my noble friend Lady Scott asked, we would like an explanation before we reach Committee. Do the Government have an official estimate of the impact of these measures on jobs? As the noble Baroness knows, retail alone employs 5 million people. She will have seen the forecast from the Centre for Retail Research projecting that more than 17,000 shops are expected to close this year.

It would also help if the Minister could give the House more clarity on the impact on different categories of businesses. We have heard concerns about pubs, leisure centres and anchor stores in high streets. We know that the reduction in small business rate relief from 75% to 40% will have a big impact on many of those businesses, with hospitality, leisure and retail paying just over 30% of all business rates, much larger than their contribution to GDP overall.

We also heard concerns from the noble Earl, Lord Lytton, about the impact on local authority schools, hospitals, police stations and, potentially, our universities. The Minister will have seen calls from the Local Government Association for further clampdowns on business rates avoidance, and I wondered what the Government plan to do to respond to those. The LGA has also called for more flexibility for councils on business rate relief in relation to charities and empty properties and the ability to set their own multipliers, either above or below the national multiplier. My assumption is that that is a reflection of how they feel that they have a real understanding of their local situation and pressures, and want to be able to respond to those. Again, it would help if the Minister could respond to that.

I hope very much that the Minister, who I know does listen, will listen to those concerns from across the business community: from the Association of Convenience Stores to major retailers such as M&S and Sainsbury’s, from leisure centres to hospitality businesses, and from universities to the public sector.

Turning to Clause 5, I thank my noble friends Lord Waldegrave, Lord Maude and Lord Lexden in particular for their extremely eloquent and heartfelt arguments in favour of a more generous and collaborative approach. Certainly, I can speak personally from my time in government and say that we tried to emphasise and encourage more collaboration, and more contribution from independent schools. Now, when faced with a new schools Bill from the Government, we would argue that the flexibilities that have unlocked so much energy, as we heard from my noble friends, in preschools and academies, should be given also to maintained schools.

I went to see the most wonderful primary school—if anybody is in Oldham, I would recommend a visit—last week. It is a maintained school, but it is achieving what it is achieving despite its maintained-school status, rather than because of it. It cannot have all the flexibilities, in terms of timetabling and length of school day, that it would have if it were an academy.

The broader picture for independent schools, as we have heard, feels like continued attack, with the decision to apply VAT to fees part-way through the school year, and now the decision to remove their entitlement to business rates relief for those with charitable status. As we have also heard, schools are also hit by the rise in national insurance contributions and by the increased contribution to the teachers’ pension fund. It is hard to understand this decision in anything other than ideological terms. As we have heard, it does not raise significant sums of money: £70 million out of the £1.8 billion which the Government hope to raise from VAT and this proposal. The same change is not being proposed for stand-alone nurseries, but it will impact nurseries that are part of an independent school. As we have heard from other noble Lords, this seems a curious way, at best, to approach charity law. It will, as we have heard, create a two-tier charity system in which some charities can be disadvantaged fiscally, even when they comply fully with their charitable obligations and serve their communities.

Secondly, we are very concerned about the displacement into state schools of some pupils who are currently in independent schools, particularly those with special educational needs and disabilities. I understand that the Government have estimated this number to be just under 3,000 pupils. As I mentioned to the Minister when we met earlier this week, the national figure is not so important. What is important is what is happening in those local authorities that really have no spare places: in areas such as Surrey or Bristol or, as my noble friend Lord Lexden said, in areas such as Bury and Salford, where small, low-cost faith schools will be hit by this move.

How are local authorities in these areas going to accommodate children whose parents can no longer afford to send them to an independent school, and now need a place in the state system? Where is the capital funding going to come from to pay for these places? There are normally long lead times on pupil-place planning for a good reason; children cannot be accommodated well at very short notice.

While these specific measures will have a relatively small effect on displacement into state schools, we need to be clear that there will still be some displacement, and that is a cost to the state. More importantly, when it comes to individual places, it will be a strain on class sizes in some of our local schools and, ultimately, on parents’ prospects of getting the first-choice school they want their child to go to.

The Minister will know that we are particularly concerned about children with special educational needs and disabilities in this context. Some parents have felt they want their child to be educated privately and have made great financial sacrifices to do so. They have not sought an education, health and care plan because they do not want their child labelled in that way, and some of these children will now enter the state system and put more pressure on stretched SEND teams. What support will the department give to schools and trusts to make this workable? Will it commit to monitoring these moves and reporting on them, including any funding and placement challenges for local authorities, as the LGA has requested?

More broadly, all around the country, independent schools are involved with their local state schools, working in partnership, sharing resources such as swimming pools, theatres, academic staff and more. Have the Government assessed the impact on state schools if it becomes impossible for independent schools to continue these partnerships, as my noble friend Lord Waldegrave explained, having to focus rather on retaining bursaries, in line with their charitable objectives?

Of course, we welcome the carve-out for schools that wholly or mainly educate children with an education, health and care plan, but I would be grateful if the Minister can confirm how many schools this applies to and how many children are educated there.

This Bill raises many more questions than it answers. Maybe one could generously say that the Government’s direction of travel has been sketched out; the detail along the way certainly has not. While the Government talk about importance of certainty, businesses are not getting certainty with the Bill, apart from, of course, charitable independent schools, where the misguided decision to tax some parts of our education system is all too clear. I appreciate I have asked the Minister many questions. I look forward to her reply, but if she is not able to answer all of them, I would be grateful if she could write.