Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill

Baroness Pinnock Excerpts

Wednesday 10th November 2021 Grand Committee

I say to my noble friend, at the very least put out of their misery those who are going to be affected. This applies to local authorities, which are the beneficiaries, as well as the companies paying the business rates. Please let us know before this Bill comes into force how this money will be distributed, and please tell us when an announcement to that effect will be made.

[Baroness Pinnock (LD)]

My Lords, I draw attention to my relevant interests as set out in the register, as a vice-president of the Local Government Association and a member of Kirklees Council.

My noble friend Lady Garden is not able to be here today, due to another commitment over the way, but she asked me to speak briefly on her behalf. My noble friend is especially concerned about the impact on English language schools. It is a significant issue that these and other businesses may not even qualify for the relief or the grants set out by the Government during the pandemic. The criteria for the qualification of grant funding are desperately needed—the noble Lord, Lord Cormack, has just expanded to that effect. This is a concern that I intend to raise when I speak on the second group in more detail, with its amendments in my name and that of my noble friend Lord Fox.

The noble Lord, Lord Hunt, and the noble Earl, Lord Lytton, have made a compelling case for the Government to move—to quote their favourite phrase—“with pace” to respond to the significant concerns raised. The failure of the Government to act swiftly since the announcement of this potential grant funding in May, and then its confirmation a couple of weeks ago, is putting businesses in jeopardy through no fault of their own. I do not think any Member across the House would do other than condemn that situation. These businesses need to be able to apply for the grants, and for rate relief, to enable their businesses to stay afloat. That is the bottom line for all.

I support what has been said regarding Clause 1 standing part, although I also agree with the noble Lord, Lord Hunt, that we want the Bill to succeed and are using this opportunity to raise these serious points. Those are the words that my noble friend Lady Garden would have said.

[Baroness Blake of Leeds (Lab)]

My Lords, I thank noble Lords for drawing attention to the inadequacies of the situation that we are in. Until February this year, I was leader of Leeds City Council and we had the difficult job of working with businesses, when the complexity of the welcome resource that was available was challenging, to decide who was worthy of getting the relief and who was not. The comments made today just highlight the difficulties that local authorities are still having to face. I speak now as a vice-president of the LGA and am mindful of its input to this debate.

I thank my noble friend Lord Hunt for focusing on one specific sector and area, because that helps us to understand just what particular sectors are going through. We know that language schools are not the only area having problems but the noble Earl, Lord Lytton, referred to the loss of expertise, knowledge and experience. All those things add up to what we hope will be viable businesses as we emerge from this. In line with the comments they made, and continued by the noble Lord, Lord Cormack, we are faced with a situation across business and local authorities where there is now a lack of confidence, and concern at the lack of consistency and certainty. I hope that the Minister will be able to put our minds at rest on this.

We have had a good discussion regarding our concerns about how the figure of £1.5 billion was achieved. My concern here is that while we talk in terms of billions, we actually need to drill it down to the cost for businesses. I think what we are looking for collectively in the answers is a recognition of the urgency and the detail, and to hear when and how this is to be brought forward.

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Moved by

[Baroness Pinnock]

1: After Clause 1, insert the following new Clause—
“Review of the impact of section 1 on small businesses
(1) Within six months of the day on which this Act is passed, the Secretary of State must carry out a review of the impact of section 1 of this Act on small businesses.(2) The review in subsection (1) must cover, but is not limited to, the impact of the changes to the system of determining a material change in circumstances introduced by section 1. (3) The review must make a recommendation as to whether further financial support is needed to support small businesses in light of the changes made by this Act.(4) The Secretary of State must lay a copy of the review before Parliament.”Member’s explanatory statement
This amendment would require the Secretary of State to carry out a review of the impact of section 1 on small businesses.

[Baroness Pinnock (LD)]

My Lords, I shall speak to Amendments 1 and 2, which are tabled in my name and that of my noble friend Lord Fox, and to Amendment 6, which is tabled in the name of the noble Baroness, Lady Blake. They refer to Clause 1, which is the only clause relating to changes proposed in non-domestic rates as a consequence of the pandemic.

My colleagues and I support the purpose of the proposals in relation to non-domestic rates—I hope that gives some cheer to the Minister. The Valuation Office Agency is being inundated with requests by businesses for material change of circumstances checks which cite the impact of the pandemic. There is such a large volume of such checks that if many of them are successful the balance of the business rates system would be fundamentally altered, to the detriment of the total income available for local authority funding.

The proposals to address this are reasonable, except for the issue I and other noble Lords raised at Second Reading, which forms the basis of Amendments 1 and 2. The Bill proposes not to allow a material changes of circumstances check if the pandemic is the sole cause. As we have already heard, in its place there will be a grant system worth £1.5 billion. That figure was confirmed in the spending review but it was announced much earlier this year. As we have heard, there is no clarity about the calculation of that sum.

During the debate on whether Clause 1 should stand part of the Bill, the noble Lord, Lord Cormack, said that the calculation is of a mere £9,000 per potential business, which would probably cover a small shop in small town centre, if it is lucky. That raises serious questions about whether the funding available will cover the very large number of requests that have already been made to the Valuation Office Agency. Does the Minister have any statistics on the number of such checks? Are there any figures relating to the monetary value of the checks that have been made? That would help us to understand whether £1.5 billion is anywhere near sufficient. Many of us think that it is not.

Then there is the question of the criteria that will be used to disburse the funding to local authorities, and then by local authorities to businesses. As the noble Lord, Lord Hunt, said, local authorities will need time to consult. How they intend to distribute the funding will depend on the balance of businesses in their local authority area. As we have heard—perhaps it was in something I read from the English schools people—Bournemouth has a great number of English language schools in its area; its system for disbursing funding will therefore be very different from somewhere where there are no English language schools or other similarly affected businesses.

Those are two big questions that need to be answered. The Minister has said that this Bill will provide “swift certainty”—I think I quote him correctly—for local authorities. I must say, I am missing both the swiftness and the certainty. Perhaps he can tell us how swift “swift” is and how certain “certainty” is.

Can the Minister shed some light on the distribution of the grant funding, including which businesses will be eligible? Clearly, not all businesses will be; otherwise, there is definitely not sufficient funding. Amendment 1 is an attempt to get answers by asking for a review of the impact of the new system on businesses after six months, and for that review to state whether sufficient funding has been made available. I look forward to the Minister giving us some answers on that, I hope, because at the moment, as was said in the debate on the previous group, it is very unsatisfactory for businesses to find that their route to addressing losses as a result of events well outside their control has been cut off, unless the substitute system is as good in terms of compensation.

Amendment 2 takes the opportunity to raise once more the completely unfair business rates system, whereby—I have used this example before—a small town centre shop will, in relative terms, pay many times more than an out-of-town distribution warehouse, which thus gains a considerable competitive advantage while also making greater use of local roads and other local services. This has to be put right. Dare I cite Amazon? I am going to do so. Amazon, because it does retail out of town and in a warehouse, has a relative value in my area of roughly £45 per square metre, whereas a small shop in my little town centre pays perhaps £250 per square metre. That just is not right. They are both doing retail. For one, folk go to the shop to buy; for the other, the warehouse delivers to them. It is just turning the system around. The Amazons of this world do not pay their fair share. Until we get that right, we will not get healthy town centres back again.

It was, I think—again, the Minister will put me right if I am wrong—way back in 2017 that the first reform of business rates was proposed. Four years on, we are still talking about business rates reform, inequality in the business rates system and the need to regenerate our high streets, yet that is the one thing that could help enormously. So Amendment 2 asks for an assessment of the impact of the changes in the Bill in the non-domestic rating system and, crucially, an assessment of whether the changes support our town centres and high streets.

Finally, the amendment seeks a recommendation on whether the business rating system is fair as far as town centre businesses are concerned. There is concern, expressed in both my Amendment 2 and Amendment 6 in the name of the noble Baroness, Lady Blake, about the impact on local government finances. I trust that the Minister will be able to give a categoric assurance that no hard-pressed local authority will lose out financially by the Bill. I look forward to the Minister’s response to the questions I have asked. I beg to move.

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I hope that that covers most of the points made by noble Lords.

[Baroness Pinnock (LD)]

My Lords, I thank the Minister for his extensive reply. I remind him, despite the detail he provided, that I said right at the start that I support the proposals in the Bill. I just want to make two points.

First, it is amazing to me that we are unable to share information from the Valuation Office Agency about the number and monetary value of the MCC appeals that have already been put in. Surely that must form the basis of the £1.5 billion proposed by the Government. I do not know how else we can have confidence that that £1.5 billion is anywhere near sufficient. Perhaps I will pursue that elsewhere.

My second point is about the reform of business rates, which, as the Minister will have picked up by now, I am very concerned about. I understand that a proposal for more frequent assessments was made in the spending review. That is of course welcome, but it absolutely fails to address the fundamental inequalities in the system. There will be no disagreement about that; the only disagreement is about how swiftly—to use the new word which will obviously replace “at pace” —we can address those inequalities. I know it is not easy. I accept that reform of a major taxation system is not easy. However, it is absolutely necessary and overdue. The prospect of another round of consultation just tells me that the long grass approaches.

With those comments, and with thanks for the categoric assurance—which I will check, but I think the Minister gave local authorities a categoric assurance that there would be no additional administrative costs of dealing with the scheme—I beg leave to withdraw Amendment 1, and will not move Amendment 2.

Amendment 1 withdrawn.