Non-Domestic Rating (Multipliers and Private Schools) Bill

Baroness Scott of Bybrook Excerpts

Report stage
Tuesday 18th March 2025 Lords Chamber

[Baroness Pinnock (LD)]

My Lords, I remind the House of my relevant local government interests, in particular that I am a councillor in Kirklees. At the outset, I wish to express my thanks to the Minister and his officials for their time in discussions on the details of the Bill. I had assurances at those meetings that the measures in the Bill are not designed to increase business rates revenue, although that ignores the consequence of the Bill that, for RHL—retail, hospitality and leisure—businesses, Covid relief disappears, and the difference is partly funded by those businesses. Importantly, the Minister also confirmed that local government funding in totality would not be affected and that, “as far as is practicable”, no individual council would find itself worse off as a result.

What is unfortunate, though, is that the Government have been unable to share the basic assessment that must have taken place to provide the assurances given. Thus there is no clarity about the impact of these changes on individual properties—hence Amendment 1 and consequential Amendments 9, 10 and 17 in my name and that of my noble friend Lord Fox, which seek to understand the impact of the changes on the NHS.

The useful information shared by the Minister from the Valuation Office Agency shows that 290 NHS hospitals will be caught by the new £500,000 threshold. Given that the standard multiplier is currently 0.546, or 54.6 pence, in the pound and the Bill enables the multiplier to increase to 0.646, or 64.6 pence, in the pound, for these higher-band properties, this will cost those hospitals dearly.

I warned the Minister that his failure to provide examples would mean that I did the calculations. For example, the Great Ormond Street Hospital for Children has a rateable value of £5.9 million, and its business rates costs will rise from £3.2 million to £3.8 million, an additional burden of £600,000 per year on business rates alone. The John Radcliffe Hospital in Oxford has a potential business rates increase from £3.4 million to £4.1 million. Going further north to my own county of Yorkshire, the Hull Royal Infirmary could see its bill rising from £1.8 million to £2.1 million. Those are typical figures for hospitals across the country. I do not believe that it is the Government’s intention to reduce hospitals’ ability to drive down waiting lists, yet that will be the impact of these changes and the consequent higher charges.

Amendment 1 seeks to exclude hospitals from the higher threshold multiplier to prevent a further burden of taxation falling on the NHS. The Minister will, I am sure, want to comment on the fact that, while NHS hospitals will see a huge rise in their rates, about one-third of private hospitals have charitable relief of 80% of their rates. He will no doubt say in his reply that it is not possible to allow exclusions to the Government’s scheme, but that just demonstrates that the whole business rates system is no longer fit for purpose, because the rateable values on which it depends are inevitably higher in cities and urban areas, while distribution warehouses benefit in rateable terms from being out of town. The whole system is topsy-turvy.

The Government’s express purpose was to tax those fulfilment warehouses more to help save our high streets—in their words. They failed to say that this will also clobber our NHS. That will not do. Hospitals must be excluded from the higher multiplier. I beg to move.

[Baroness Scott of Bybrook (Con)]

My Lords, first, I declare my interest as a vice-president of the Local Government Association. The amendments in the name of the noble Baroness, Lady Pinnock, seek to retain the standard multiplier for healthcare hereditaments. They address the unintended consequences of the Bill, as we have heard very strongly from the noble Baroness.

As mentioned in Committee, I understand the desire for a reformed business rate system and, indeed, if such a system were proposed, I would be more inclined to support it. But despite the Government’s manifesto commitment to level the playing field between the high street and the online giants, the Bill does not deliver on that. I understand that this is only the first step in the Government’s plans, as I am sure the Minister will point out, but it is not a step in the right direction.

--- Later in debate ---

Moved by

[Baroness Scott of Bybrook]

3: Clause 3, page 3, line 27, after “more,” insert “and is not an “anchor store”,”
Member’s explanatory statement
This amendment, along with others in the name of Baroness Scott of Bybrook, seeks to exempt anchor stores because of their role in increasing footfall on the high street.

[Baroness Scott of Bybrook (Con)]

My Lords, I rise to move Amendment 3 in my name and to speak to its consequential Amendments 8, 12 and 16.

These amendments seek to retain the standard multiplier for anchor stores, given their ability to drive business on our high streets. Throughout Committee, there were several noble Lords who acknowledged the importance of these stores and the role they play in the commercial ecosystem of our high streets up and down this country. I thank the noble Lord, Lord Thurlow, and the noble Baroness, Lady Pinnock, for their support on this matter.

As anyone who has worked in local government will know, when you get an anchor store such as a large Tesco, M&S or Primark—or one of those rare but well-loved independent department stores—on the high street, it allows the high street to flourish. I can certainly attest to that from my experience. The importance of these stores absolutely cannot be overstated. Without them, many high streets would seriously suffer due to the reduced footfall.

It is those very shops that draw people to the high street, and their presence encourages people to spend in the smaller, independent businesses. So the reason that these anchor stores should not be subject to the changes in the Bill is due to their role in aiding those small businesses. The Government claim that the Bill helps small businesses because it will leave them with reduced business rates, but if the anchor stores move away from the high street, they will not be able to sustain themselves at all. The Minister has many times continued to state that there are only a few of these stores in number, but if it is your high street that contains one of these, or if you want to bring one into your high street, then it is very important to you.

Not only will this push current stores away from the high street, but it will also mean that in future, when businesses are evaluating where to open new branches, they will be increasingly likely to choose locations out of town, where property costs less and where they will not be forced to pay the new higher multiplier. Large businesses will leave town centres, and I am concerned about the impact that that will have on the future of our high streets and the reduction in footfall that it will cause.

If the Government continue to increase costs on businesses in the same way as they have begun, there will not be any businesses left on our high streets to tax. The combination of the minimum wage, which we support, and the increase in employers’ national insurance has already led to many businesses increasing their costs or reducing their head count. This may well not be the most costly tax they face, but it could end up being the straw that breaks the camel’s back.

My amendments would give the Treasury the power to define specifically what an anchor store is. I am sure we are all aware that it is not the easiest term to specify, as the Minister mentioned in Committee. I understand that it might be difficult but, with the input of or indeed the discretion for local authorities included, I am sure the definition can easily be reached.

In order to safeguard our high streets, we must protect the businesses that allow them to thrive. We understand the need to create a more fair and equitable system, but that is not what the Bill promotes. As such, we are highly concerned about the consequences, whether intentional or not, that it will have.

I look forward to hearing from the noble Lord, Lord Fox, on the topic of manufacturing. It is a sector of huge importance and must be protected.

I hope the Minister will recognise the importance of exempting these stores and will accept these amendments. If he does not, I intend to test the opinion of the House.

[Lord Shipley (LD)]

My Lords, I support the amendment by the noble Baroness, Lady Scott of Bybrook. The issue of anchor stores seems fundamental in increasing footfall into traditional shopping centres, and it is right that there should be a power to exempt those anchor stores from higher rates.

One note of caution that I want to mention is that a Government would need to ensure that there was not a tendency by landlords to try to increase rents in the face of lower business rates. I am sure there are ways in which that can be done. Where councils are the landlord then they would have control of that, but when the landlord is in the private sector we need a mechanism to ensure that that can be done—and it should be done. If the noble Baroness decides to test the opinion of the House, I am sure she will have the support of these Benches.

The noble Baroness, Lady Scott, mentioned Amendment 4 on manufacturing. My noble friend Fox is in another meeting in the House at this very minute, so I will be saying a few things about that amendment. It is important that something is done to support the manufacturing sector. There has been a drop in confidence in the sector since the autumn. There is a big increase in manufacturers’ costs. Reductions in markets, making business development more difficult, have become very clear. Orders in general are reported to be smaller in size. The Brexit impact urgently requires a reset with the European Union. Manufacturing industry has high energy costs, and there are now concerns surrounding tariffs which are affecting confidence.

--- Later in debate ---

[Lord Khan of Burnley (Lab)]

My Lords, these amendments seek to remove anchor stores from the higher multiplier. They also seek to expand the cohort of hereditaments that qualify for the lower multipliers by bringing manufacturing properties into scope alongside qualifying retail, hospitality and leisure.

As set out at the Budget, the Government intend to introduce a permanent tax cut for qualifying RHL properties from 2026-27 by introducing two lower RHL multipliers. The Bill makes provision to enable this through secondary legislation. In consideration of the challenging fiscal environment that this Government face, it is important that the permanent tax cut is funded sustainably, which is why we intend to introduce a higher multiplier to fund the tax cut from within the business rates system. It is the Government’s intention for the higher multiplier to apply to all properties with a rateable value of £500,000 and above. This ensures that sufficient funding is raised to enable the Government to provide that permanent tax cut for RHL properties with rateable values below £500,000.

I thank noble Lords for their contributions on this topic. As she did in Committee, the noble Baroness has set out the important role that anchor stores play on our nation’s high streets. We have heard that they are a linchpin, that they drive footfall and that they help support the broader high street ecosystem by attracting other businesses. The Government recognise this and the information published by the Valuation Office Agency shows that a relatively small number of shops fall above the £500,000 threshold. In my response to the debate on the previous group, I set out that the impact on shops is not widespread. I will not repeat those numbers here.

Furthermore, anchor stores are often part of large retail chains that will also have a number of properties with a rateable value below £500,000 and, in the case of those properties, will benefit from the lower RHL multipliers. Moreover, whereas RHL relief is currently limited to a cash cap of £110,000 per business, the Government intend to have no such limit on the new RHL multipliers to better ensure more widespread support for the high street.

On the amendments tabled by the noble Lord, Lord Fox, the impact of this Bill on the manufacturing sector has been a recurrent theme throughout its passage. In the other place, the Government heard calls for manufacturing to be included in the cohort qualifying for the lower multipliers, citing the threat of tariffs, our isolation from our neighbours and growing competition from other countries. These amendments would bring manufacturing properties with a rateable value below £500,000 into scope of the lower RHL multipliers.

Noble Lords are aware of the difficult task that this Government face. The current fiscal backdrop is challenging and, in this context, I hope they understand that widening the scope of the properties qualifying for the lower multipliers, as well as taking properties out of scope of the higher multipliers, as these amendments seek to do, is likely to dilute the support that the Government are able to provide to RHL properties with a rateable value below £500,000.

Throughout the passage of the Bill, the Government have emphasised our desire to ensure that we move to a fairer, rebalanced and sustainable business rates system. We have been clear that any tax cut must be sustainably funded. To expand the cohort and number of properties qualifying for the lower multipliers while reducing those to which the higher multiplier will apply risks this policy no longer being sustainable—a key principle that the Government have stated throughout the Bill’s passage.

As I said, against the challenging fiscal environment, the Government have to take tough decisions. This is the fairest approach, which ensures a sustainable solution so that the permanent tax cut for RHL can be funded from within the business rates system. Of course, noble Lords have made sensible points. Anchor stores are part of high streets, as is light manufacturing in some areas, a point made by the noble Lord, Lord Fox, in Committee.

The Government are committed to ensuring the longevity and survival of our vibrant and diverse town centres, and there are many ways in which we are pursuing that endeavour. In December, we introduced high street rental auctions, a new power which allows local authorities to auction off the lease of persistently vacant commercial units. The new regulations will make town centre tenancies more accessible and affordable for businesses and community groups, while helping to tackle vacancy on our high streets.

Through the English devolution Bill, we will also introduce a strong new right to buy for valued community assets, which will help this Government safeguard our high streets. This measure will empower local communities to reclaim and revitalise empty shops, pubs, and community spaces, helping to revamp our high streets, increase footfall and eliminate the blight of vacant premises.

Furthermore, at the Autumn Budget, the small business multiplier for properties with a rateable value of under £51,000 was frozen at 49.9p, meaning that, together with small business rate relief, over 1 million properties will be protected from a 1.6% inflationary increase. Alongside this, the Government continue to support our valuable manufacturing sector through other means.

The noble Lord, Lord Shipley, asked what in particular we are doing. At the Autumn Budget, the Government announced £975 million for the aerospace sector over five years, over £2 billion for the automotive sector over the same period, and up to £520 million for a new life sciences and innovative manufacturing fund. The Budget also saw two key programmes extended, promoting innovation across UK regions and manufacturing. The innovation accelerator programme will continue for another year, focusing on high-potential clusters across the UK. Meanwhile, the Made Smarter innovation programme will continue to be funded, empowering manufacturers to adopt digital technologies and enhancing productivity and sustainability by connecting digital solutions providers with industry.

I hope that it is clear to noble Lords why the Government cannot accept these amendments. The permanent tax cut for RHL properties must be funded sustainably. Furthermore, the Government fully recognise the importance of the British manufacturing industry, but we are supporting that sector through other avenues. It is for those reasons that I cannot accept the amendments in the name of the noble Baroness, Lady Scott, and the noble Lord, Lord Fox, and I respectfully ask them not to press them.

[Baroness Scott of Bybrook (Con)]

My Lords, I thank noble Lords for contributing to this debate and for their support. I would like to say something about Amendment 4, on manufacturing. It is a sector of great importance to our economy, as the noble Lord, Lord Shipley, said. He is correct that in January GDP fell by 0.1%, which was attributed largely to a 1.1% fall in manufacturing output. Not only did manufacturing fall in January but, as the noble Lord said, it fell in the three months to January. Since it was the largest contributor to GDP shrinkage, the importance of this sector cannot be ignored by the Government. If the Liberal Democrats divide the House, we will vote with them.

Anchor stores are incredibly important to businesses on the high street, as we have heard. To lose them would be highly detrimental to the economic viability of most high street businesses. As the noble Lord, Lord Thurlow, said, it will also stop any future new anchor stores being given permission. I am not satisfied with the Minister’s response. Therefore, I wish to test the opinion of the House.

--- Later in debate ---

I hope that I have given the noble Baroness, Lady Pinnock, and the House, a clear assurance that we intend broadly to follow the definition that we currently use for RHL relief. That should give those businesses the assurances that they need. Similarly, I hope that noble Lords appreciate why we cannot provide the analysis that the noble Baroness seeks at this time. That analysis of the new multipliers will be available once they have been set. Having set out that information, I respectfully ask the noble Baroness, Lady Scott, to withdraw her amendment.

[Baroness Scott of Bybrook (Con)]

Before the Minister sits down, I heard for the first time the Minister say “near or above” the higher multipliers. Why would that be? Are the Government assuming the amount of money that they are going to get in future years? It seems to be a new context to this debate that he used those words.

[Lord Khan of Burnley (Lab)]

I alluded to this point in Committee. The review with stakeholders and businesses is currently taking place. We will come back as we look at the reform of business rates. In the context of the business rates review and reform, consideration is being given to hereditaments that are near, above or within a small distance of the £500,000 threshold.

--- Later in debate ---

Moved by

[Baroness Scott of Bybrook]

8: Clause 3, page 3, line 36, leave out “has such meaning” and insert “and “anchor store” have such meanings”
Member's explanatory statement
This amendment, along with others in the name of Baroness Scott of Bybrook, seeks to exempt anchor stores because of their role in increasing footfall on the high street.

--- Later in debate ---

Moved by

[Baroness Scott of Bybrook]

12: Clause 3, page 4, line 7, after “more,” insert “and is not an “anchor store”,”
Member's explanatory statement
This amendment, along with others in the name of Baroness Scott of Bybrook, seeks to exempt anchor stores because of their role in increasing footfall on the high street.

--- Later in debate ---

Moved by

[Baroness Scott of Bybrook]

16: Clause 3, page 4, line 16, leave out “has such meaning” and insert “and “anchor store” have such meanings”
Member's explanatory statement
This amendment, along with others in the name of Baroness Scott of Bybrook, seeks to exempt anchor stores because of their role in increasing footfall on the high street.