Non-Domestic Rating (Multipliers and Private Schools) Bill

Baroness Pinnock Excerpts

2nd reading
Wednesday 29th January 2025 Lords Chamber

[Baroness Pinnock (LD)]

My Lords, I hope I am okay in asking the Minister to pass on my condolences to the noble Lord, Lord Khan of Burnley, and his family at this particularly sad time for them all.

I remind the House of my relevant interests as a councillor and as a vice-president of the Local Government Association. As my noble friend Lord Fox has indicated, a radical overhaul of taxation of business properties is long overdue. Successive Governments have tinkered with the multipliers and valuation periods. In addition, the increasing discrimination of the system against town centre businesses has been recognised and the response has been in the shape of various levels of relief. All that demonstrates, however, is that the non-domestic ratings system is no longer fit for purpose. The Government have admitted that to be the case. Unfortunately, this Bill does not address fundamental reform— at which point, I commend to the Minister the Liberal Democrat policy of a commercial landowner levy; I am sure she will read that with interest.

However, the Bill makes a small step in the right direction by attempting to make a significant change to the balance of rates paid by some small businesses, with a larger share demanded, rightly, of the warehouse distribution sector.

What it fails to do is assess the impact of those changes with the loss of relief that is also proposed. As the noble Earl, Lord Lytton, and my noble friend both said, you cannot deal with one without dealing with the other, and it is very difficult to assess what changes these proposals will make.

We on the Liberal Democrat Benches have long argued that online retailing should have business rates comparable with those of small businesses in town centres. The Bill proposes that retail, hospitality and leisure businesses based in town centres—whatever that means—should have a multiplier that is up to 20p in the pound lower than it is now. The Government’s argument is that these changes will help to support small businesses in local centres and encourage the community and economic value they provide. However, this change is restricted to a sector of businesses located in town centres. Can the Minister first provide a definition of them? I believe she did say, in her opening speech, that a definition of retail, hospitality and leisure businesses will come later. To be frank, I do not think that that is acceptable when we are being asked to understand changes that are going to be made, yet we are not sure of a clear definition of those businesses. Do they include, for instance, council-run indoor markets? Those are retail businesses in town centres: my understanding is that they might be excluded. I would love to know from the Minister, because for me it is an important question.

Can the Minister say why professional businesses in town centres are not able to benefit? Solicitors and accountants are at the heart of the commercial operation in small towns, as are post offices and doctors’ surgeries. If the aim is to support our high streets, all these businesses should be included.

Many local centres also include small manufacturing businesses of various sorts, which provide local employment and are often the source of innovation. Can the Minister explain why these businesses in town centres are excluded? How much better it would be to have a blanket of small businesses in town centres all being part of this reduction in the multipliers.

Out-of-town warehouse distributors have long had a competitive advantage over their bricks-and-mortar counterparts. The Bill proposes that the multiplier for these businesses should be up to 10p in the pound greater than it is now. However, the Bill fails to link the valuations of these warehouses compared with to those in small centres. I think I have quoted this before in your Lordships’ House, but an Amazon warehouse in South Yorkshire is valued at around £25 per square metre, whereas a small shop in my town centre has a valuation of £250 per square metre. That is at the heart of business rates because, if those do not change, tinkering around the edges with multipliers will still leave disadvantages for town centres. That is at the heart of the problem we would seek to address in order to redress the balance between online retailers and those in our town centres.

The other issue concerns larger stores, often located in large town centres, and out of town retail centres. It would be interesting to know how those will be judged in this new Bill. Will they be in that 1% or not? If they are, that will put the business model of some of them in jeopardy. The basis of the valuation of rental values makes life very difficult. Can the Minister explain why it is that, despite the number of empty shops in many towns, the rental valuation does not appear to be on the same declining path? My noble friend had a potential answer to that question when he said that the problem is that properties in many market towns are increasingly owned by a single owner. Certainly, in my local small town, most of the properties are in the ownership of two people, and that makes competitive rental values difficult to achieve. I am sure that the Minister will ask her officials about that.

I am very grateful to the noble Lord, Lord Khan, who I met, and his officials for their time in understanding the impact of all these changes, but the main question I had was not satisfactorily answered, I am afraid. It was, “Where is the impact statement?” I was told that, because impact assessments are not published for tax changes, there was not going to be one, but the Government must have done their sums, so let us see them. Otherwise, we cannot understand. We are all making estimates of the various moving parts, as various noble Lords have said, and how those are going to change. The Government must have done those sums, so it would be really good if they would share them and, if the Minister cannot share them today, perhaps she will be able to before Committee.

I will move on. It is also vital that councils know what the impact will be on business rate income, as that contributes a very large slice of funding for local services. I was told that the overall impact will be neutral, but, in her opening speech, the Minister suggested that, although the overall impact would be neutral, it would be difficult to ensure that no council loses out by these changes. Actually, as I know the Minister understands, every pound for a local council is now critical, so, again, I hope she will be able to find the answer to that before Committee.

I will move on, I think. The other major sector of the Bill is about private schools, about which we have heard various noble Lords speak this afternoon. As we know, it removes the business rate exemption for those schools which are charities, and Liberal Democrats are opposed in principle to the taxation of education. I think in particular of the 100,000 or so children with SEND in private education without education and healthcare plans. Those families will be hit hard by the proposals in the Bill when they are already facing more challenges than most of us. Private education provision has already faced the introduction of VAT and the NIC increases on employers. The removal of business rate exemption is the third financial hit in as many months. Well-endowed private schools will weather the financial storm, but others may not, resulting in increasing pressure on state school places.

In conclusion, this Bill is a small step in the right direction, but it fails to assess all the moving parts. As many speakers have said, the Government should think again about the exemption of relief to private schools, and we urge the Government to rethink the totality of the impact of the Bill on business.