Non-Domestic Rating (Multipliers and Private Schools) Bill

Daisy Cooper Excerpts

2nd reading
Monday 25th November 2024 Commons Chamber

[Daisy Cooper (St Albans) (LD)]

The Great British high street is on life support. Many bricks-and-mortar businesses are barely surviving and, where they are, it is often against the odds. Changes in our trading relationship with Europe, the covid-19 pandemic, energy prices, the cost of living and the Conservatives’ disastrous mini-Budget have all taken their toll, but for years one measure has stifled high street businesses more than any other: the broken business rates system.

The business rates system is unfair on companies, bad for our local communities and damaging to our national economy. It penalises manufacturers when they invest to become more productive and energy-efficient. It leaves pubs and restaurants with disproportionately high tax bills and it puts bricks-and-mortar shops at an unfair disadvantage compared with online retail giants. In too many places pubs, restaurants and shops are being forced to close, taking with them jobs, opportunities and treasured community spaces, and consumers are seeing the cost of this unfair tax passed on to them.

More broadly, this outdated system inhibits business investment, job creation and economic growth, holding back our national economy, yet for too long it has been allowed to continue. In their 2019 manifesto, the previous Conservative Government promised a fundamental review of business rates to ease the tax burden on smaller businesses. Yet in 2022, when I challenged the then Chancellor, the right hon. Member for Godalming and Ash (Jeremy Hunt), on his personal commitment to making that happen, he admitted in this place that it was

“Another of the promises I now vainly wish I had not made”.—[Official Report, 17 October 2022; Vol. 720, c. 430.]

Businesses are tired of being treated with such cynicism and of relying on a patchwork of last-minute temporary reliefs. They cannot plan, they cannot invest and they cannot grow. They are crying out for fundamental reform and a new, fairer system. Before this autumn Budget, Liberal Democrats called on the Chancellor to reform business rates completely, with a new system, and to do so no later than April 2026. We believe the new system should be based on our Liberal Democrat calls for a commercial landowner levy—a bold move that would deliver a real shot in the arm for our high streets.

Instead of pursuing fundamental reform, instead of fair reform, this Bill is just more tinkering. Rates relief has been a sticking plaster—but, boy, is that plaster being ripped off in April, with a big reduction in relief. Many small businesses now say that the increase in business rates, combined with the increase in national insurance contributions, will be too much for them to absorb.

[Andrew George]

My hon. Friend is making an excellent case. Along with the point I made in my previous intervention about the opportunity for abuse under the rates relief system, particularly by holiday homes, does she accept that the methodology used by the current rating system for parking spaces in out-of-town retail outlets such as supermarkets hands a massive advantage to those supermarkets in comparison with town centre shops, and that we need a rating system that actually levies a rate on that benefit at a level that ensures an even playing field?

[Daisy Cooper]

My hon. Friend is absolutely right that this broken business rates system is unfair in many ways and it is the big giants, online or otherwise, that are getting an easier ride.

The Bill fails to address many other problems with business rates. For example, it does nothing to support businesses outside the three sectors of retail, hospitality and leisure, meaning it excludes key sectors such as manufacturing that are particularly negatively affected by the current system. It does not address the £51,000 cliff edge. Properties with a value over that threshold are not eligible for the small business multiplier, even though they are small businesses, and with rates relief going down, business rates bills for small businesses will go up. From next April, business rates relief for retail, hospitality and leisure will be cut from 75% to 40% and this Bill does nothing to avert that blow.

The Minister said he wants to rebalance business rates. I welcome that direction of travel, if it turns out to be true, but in the absence of an impact assessment, I am particularly worried about unintended consequences. I say this in the spirit of constructive opposition: it appears as though the Government are moving from a system of temporary relief to a lower multiplier. At the moment, a small business enjoys 75% business rates relief, but a very large chain has its relief capped at £100,000. If I have understood it correctly, independent shops will see their relief drop from 75% to 40%, while big chains such as pubcos and supermarkets may see their relief uncapped, which could give them a tax reduction of tens of millions of pounds. I would be grateful if the Minister wrote to me to share some modelling to reassure me that that is not going to happen and that we will not see independent businesses inadvertently subsidising big chain stores and multinationals.

The impact of the Government’s changes to business rates will have a massive effect on small businesses in my constituency. The oldest pub in Britain—or so they claim—Ye Olde Fighting Cocks, will see a whopping increase of £30,000 per year in its business rates alone. The Save St Albans Pubs campaign says that even an average pub in St Albans, with a rateable value of £100,000, will face an additional £19,000 in its business rates bill from April. If we assume that an average pub makes 30p profit per pint, each of those pubs would need to sell an extra 60,000 pints a year, or almost 1,200 pints extra a week—and that is before factoring in the increase in national insurance contributions.

Other low-margin, large-premises businesses, such as children’s soft play activity centres, will also lose out under these changes. DJ’s Play runs much-loved indoor play centres across Hertfordshire, which exist in large warehouse-style premises. The buildings are large, but the profit margins are not. DJ’s Play and many others like it provide a valuable and enriching educational experience for children, but they too will struggle to keep their heads above water.

The Liberal Democrats are also opposed to the Bill because it would levy a tax on education by removing the business rates exemption for private schools that are charities. We are opposed in principle to the taxation of education, because it is a public good. We believe that parents must be given choice when it comes to their children’s education. Many families feel that, whether due to bullying, SEND provision, mental health issues or other factors, the state system cannot meet their child’s needs.

[Josh Fenton-Glynn]

One of the first things the coalition Government voted to do was to scrap the Building Schools for the Future programme, which impacted schools in my constituency including Calder high school, Brooksbank and Todmorden high school. Will the hon. Lady reflect on whether that was a mistake by her party and whether it has prevented state schools from being able to provide for more students?

[Daisy Cooper]

I am grateful to the hon. Gentleman for his intervention. He may know that during those coalition years, both the health and education day-to-day budgets were protected and it was after the Liberal Democrats left the coalition in 2015 that capital budgets were serially raided to pay for day-to-day spending.

To return to my point, there are almost 100,000 children with SEND in private education without education, health and care plans, and it will be those families who bear the brunt of this measure.

We Liberal Democrats have tabled our own reasoned amendment setting out the reasons why we are against the Bill, but I have a number of questions for the Minister that I would be grateful if he could address in his summing up. Will there be an impact assessment that sets out the impact on small businesses on high streets? Will he exclude any new investment from business rates valuations from April, so that businesses that are able to invest in their future will not see that investment pushing up their rates bills even higher? Will he think again and complete the consultation before unfreezing the rates relief, which could badly affect small businesses and our high streets? Will he confirm whether the change from a system of capped temporary relief to an uncapped lower multiplier will inadvertently end up with small businesses subsidising big corporations?

The Government say that they want growth, and so do we, but these business rates changes will stifle the growth of small businesses and high streets at a time when we should be unleashing it. We urge Ministers to think again.

Non-Domestic Rating (Multipliers and Private Schools) Bill

Daisy Cooper Excerpts

Report stage
Wednesday 15th January 2025 Commons Chamber

[Vikki Slade]

I agree that this is a difficult time for small businesses, with so many things changing at the same time—not least the increasing national insurance rates.

To return to the role of the high street, the most successful high streets are moving quickly to reinvent themselves. Since my election, I have been trying to find a high street location for my constituency office. I had decided to base myself in the historic market town of Wimborne, where my mum lived and my children went to school. It is the fastest-growing community in Mid Dorset and North Poole—Ministers have heard me talk about its housing problems many times—and it has great bus routes. I thought it would be a great place to find a small unit easily.

I was wrong, however. The strength of the sense of place, the innovation of its businesses and the hard work of its business improvement district and its town council are such that when a business closes down, others are waiting to move in. I have finally found my new home, which will open by the end of the month when we have fitted it out, but the experience proved what I already knew: the high street can survive, but only when the business community is prepared to give people what they want. Retailers such as Tickles and Co. trade alongside the hospice shop, and old businesses such as Bartletts, which has for 120 years sold smart clothes for all seasons, are able to sustain themselves despite changes in the market.

The Lib Dems welcome the proposal to permanently reduce business rates for retail, hospitality and leisure, and we acknowledge that the financial situation the Government were left by the previous Government makes the 75% discount difficult to maintain, but any discount is worthless if businesses that are trying to stabilise following the covid pandemic, the energy crisis and the shift to online cashless purchasing do not even make it through the next year. As I have said before, that is not the reform that business needs. The Minister has already said that this is just phase 1, but we are incredibly frustrated that he has not taken the opportunity to take things further.

New clause 3, in the name of my hon. Friend the Member for St Albans (Daisy Cooper), focuses our proposals further on the retail, hospitality and leisure sector, and raises valid points about the risk to individual businesses compared with those that have multiple branches. There must be an assessment of that risk alongside a broader impact assessment.

[Daisy Cooper (St Albans) (LD)]

My hon. Friend is giving an impassioned speech about the importance of business rates reform. Does she agree that there is a risk of unintended consequences in what the Government are proposing? At the moment, the 75% relief is capped at £110,000, but when the relief goes to zero in two years’ time, that cap will not exist. House of Commons Library research shows that the net effect could be that small businesses end up being 80% worse off, while big chains such as Starbucks could be 40% better off. Although it is important that we get a review of the impact of business rates, it is also important that we get the differential assessment set out in new clause 3.

[Vikki Slade]

I completely agree with my hon. Friend. One problem is the same law of unintended consequences that we have seen with things like the national insurance increase—which, as we repeat over and over again, is impacting small businesses, hospices, doctors’ surgeries and things like that—when quite understandably, an attempt is made to raise funds from elsewhere.

I want to share the views of Anthony Woodhouse, the chair of Hall and Woodhouse brewery and pub chain, founded and based in Dorset but with a branch just across the way from this place—unfortunately, I am not able to be at its event in Portcullis House because of the timing of today’s debate. Anthony told me that the revaluing of property when a huge amount of money has just been invested to make it fit for a changing market, and before you have even had a chance to benefit from that market, is completely crazy and discourages business investment. As such, it is important that as we look to reform business rates, we examine that issue as well.

Despite our failure to do that, businesses such as Anthony’s are responding to the market. Pubs such as the Olive Branch in Wimborne and the Old Granary on Wareham quay are now places where muddy boots, children and dogs are welcome, and where they sell as many cups of coffee as pints of local beer. The high street needs to morph as businesses have—to be ready and willing to change—but while business rate reform rightly starts with the high street, it is important that it does not end there.

As such, I turn to our amendments 1 to 6, which would add manufacturing businesses to the lower multiplier. The UK has a rich history of manufacturing excellence, and Barclays’ “Made in Britain” report found that a product being made in Britain held an important influence over consumers’ decision to purchase it, with customers perceiving such products to be high quality, reliable and internationally respected. The “made in Britain” tag was found to be worth an addition £3.5 billion a year to our UK exporters, which is why we believe that the lower multiplier should also apply to manufacturing businesses. We need to give those businesses a shot in the arm to ensure they can compete on the world stage. The threats by incoming President Trump to put tariffs on UK products, our continued isolation from our neighbours through an inadequate Brexit deal, and the rapid growth of economies such as China and India represent a real threat to local manufacturing.

Poole Bay Holdings, based in my constituency, stands ready to produce its innovative Koolpak here in the UK. Anybody who has children will know the brand Koolpak—it is that ice pack that is not even ice—and that business has been modifying its equipment so that it can make the product here, in Dorset, to compete with China. It stands ready to drive up those sales. Recognition of such businesses through a lower multiplier, or at least the potential to include them in a lower multiplier if the market becomes more tricky, is the intent behind our amendments.

Turning to amendments 7 and 8, which stand in the name of the shadow Minister, the hon. Member for Ruislip, Northwood and Pinner (David Simmonds), the Liberal Democrats simply do not believe in the taxation of education. Alongside the changes to VAT, the removal of the special status for schools is really disappointing. Therefore, those amendments—which seek to recognise the value of schools for children whose needs are difficult to meet elsewhere, whether those are special educational needs and disabilities or whether people are choosing to educate in a faith school—seem reasonable.

In summary, this Bill is a fair start, and some businesses will feel it is better than the abyss that might otherwise have been. However, the Government could and should have taken different decisions to protect businesses that will face additional costs in just a few weeks’ time. We are often asked how we would pay for it; I welcome that discussion, as there were many proposals in our manifesto, from taxing big banks to asking gambling companies to pay their fair share. On behalf of the Liberal Democrats, I recognise that the Government have worked quickly to bring this Bill forward, but the risks of losing businesses en route to something better are just too great. We need proper reform, so that the businesses of the mid-21st century can weather the storms ahead.

[Adam Thompson (Erewash) (Lab)]

I am grateful for the opportunity to speak again on this Bill, having been part of the scrutiny process in Committee.

The Committee heard representations from a wide variety of experts in related fields, and I was heartened by the news that many experts felt that this Bill would have a positive impact on 98% of the retail stores that make up our communities. In particular, small convenience stores such as the local Co-op or the great British corner shop will see great benefits to their capacity to support staffing, security and other operational functions. Our incredible independent shopkeepers, such as those who populate the high streets of Ilkeston and Long Eaton in my constituency, will have more funds to take on additional staff, improve their security set-ups and gain long-term confidence in their ability to serve our community. These measures represent a simple, common-sense approach to rebalancing the scales in favour of local retailers and away from the online giants, and increasing taxes on the biggest players while relieving the burden on local retailers.

[Daisy Cooper]

The hon. Member may have heard my earlier intervention. He is absolutely right, and I agree with him wholeheartedly, that we have to shift the burden away from small businesses on to big online retailers. However, that could be undermined if all we do is shift the burden on to the big chains. House of Commons Library research says that small independent businesses are going to end up subsidising the big chains. Does he share my concern that this could be an unintended consequence and that the Government must look at it?

[Adam Thompson]

I refer to Hansard for the discussions we had in Committee, but that did not come through in the evidence we heard. However, I respect the fact that the hon. Member has made that point, and I thank her for doing so.

As we heard from the hon. Member for Mid Dorset and North Poole (Vikki Slade), another sector to benefit significantly from these measures is our local pubs. The fine folk frequenting the Sawley Junction in Long Eaton or the Bulls Head in Breaston in my constituency can rest easy that their locals are in safe hands. More generally, the measures we are bringing forward will reduce the tax burden on the hospitality sector, which is considered by many to be overtaxed. I am very glad that the Government have been able to offer something positive to the sector, which has been broadly forgotten for many years.

Some of the Bill’s opponents have suggested that the removal of charitable relief from non-domestic rates for private schools will have a negative impact on the parents of privately educated children, so I was strongly heartened to hear from one of our experts during the scrutiny process in Committee. Professor Francis Greene, professor of work and education economics at the University College London institute of education, noted that this Bill will have a “marginal” effect on the education sector, and that the policy was fair and would generally not have a great deal of impact on the proportion of children in private schools, which has remained broadly constant over the past 20 years, despite a cash-terms doubling in fees.

--- Later in debate ---

[Daisy Cooper]

The right hon. Gentleman is giving an impassioned speech about the case for an overhaul of the business rates system. Why did the previous Conservative Government never get around to doing that?

[Damian Hinds]

Well, I did refer at the start of my speech to the calls over the years for reform. I also said that there are problems with all taxes we levy on individuals or on business and that is why we end up with a blend. What I am talking about now is the fact that this Government are hiking up the total amount that will be taken in business rates, which will fall on major employers and then be felt in our unemployment rate. The Government are trying to do this thing of saying, “We are cutting stuff,” but they are not, because for all of the companies we have heard name-checked, reducing the relief will outweigh the effect of the multiplier. On top of that, we have a revaluation coming up in the near future. That is probably going to mean an increase in rateable values that will compound those higher multiples.

For all those reasons, new clause 2 is both important and a reasonable ask. It says that after a period of time, we should review the real-life effect of these changes and give the Government an opportunity to change course and get back to something that looks a bit like a growth agenda.

I turn briefly to the effect of these changes on independent schools. We have debated in the Chamber on a number of occasions the Government’s overall approach to independent schools. Let me say again that we object in principle to taxing education. It makes us almost unique in the world that we would do such a thing and it will be the first time in our national history that we have done so—it has never been done before by any Labour Government, or any other Government. The tax change we are debating today on rates is not the only tax change or transfer of money from independent schools to the Treasury. They were already facing a big increase—5%, I think—in employer contributions to the teachers’ pension scheme. Like all organisations—public sector, private sector, charitable and voluntary sector—they also have employer national insurance contributions to deal with. And then there is the enormous VAT change.

Specifically on this tax change, it is a fixed cost, as I mentioned at the start of my speech, at a time when there is all this uncertainty around the independent education sector and children will be moving. I will let Members into a secret: no one knows what the ultimate effect will be. We can line up as many experts as we like, but no one knows how many children will be moving, but we know it will be a non-trivial number greater than zero—there will be children moving out of that sector and there is a lot of uncertainty. It therefore seems to be a very unwise time to add, on top of all those other tax changes, a significant change to a fixed-cost tax. The amendments put forward by the official Opposition are therefore very well worth supporting; my hon. Friend the Member for South Northamptonshire (Sarah Bool) made that case very strongly.

On faith schools, we know that whatever the impact assessment says, people of faith, and particularly of smaller faiths, will be disproportionately impacted by this Government’s changes to education. We also know that children with SEND feature particularly prominently in the independent sector. Many of those schools have an awful lot of children who have special needs, but not necessarily—or not yet—an education, health and care plan. Special consideration should be given to both those types of schools: faith schools—if we wanted to narrow it down further, we could say smaller faiths charging low fees to parents—and those catering to children with special educational needs and disabilities.

On amendment 10, with all else that is going on in the independent sector, it is at the very least an exceptionally reasonable ask of the Government that we delay these changes by a year to give the sector a chance to be able to cope and plan.

--- Later in debate ---

[Mr Sewards]

I return to the point I made earlier. We know that we have to support these smaller businesses—these bricks-an-mortar businesses, as the right hon. Gentleman calls them—and the only way we are going to pay for this is by finding the money from elsewhere. We have chosen to cut business rates for smaller businesses, and we are choosing to raise the revenue from the larger businesses and corporations that have been getting away without paying their fair share for far too long.

[Daisy Cooper]

The hon. Member will recognise that it is the Government’s intention to reduce business rates for the smallest businesses, but as I have mentioned a couple of times in this debate, House of Commons Library research shows that if we compare this year to two years’ time, small businesses will end up 80% worse off, whereas the big chains will end up 40% better off. I believe that this is an unintended consequence. Will he urge the Minister, as I am doing, to address that point in his wind-up?

[Mr Sewards]

I am grateful to the hon. Member for that contribution. Of course I have read the House of Commons Library research into this. I also took time to listen to all the witnesses who came forward in the Bill Committee, and they made it clear that the changes in this Bill will benefit small businesses in the long term. I am quite happy with the evidence that they provided to support the changes that the Bill makes.

[Daisy Cooper]

rose—

[Mr Sewards]

I will move on to the next part of my speech, but I am happy to take any further interventions that might be relevant to that point. I am going to talk about the amendments now.

I think new clauses 1 to 3 are unnecessary. The Government will monitor the effects of the new multipliers and, as we know, they will show what those effects have been in Budget 2025. They will do the same in all future fiscal statements, so the monitoring is already going to take place. The hon. Member refers to the impact these changes might have in two years’ time, and the Government will comment on that in all future fiscal statements.

Amendments 1 to 6 are noble, but they would significantly affect and reduce the support that the Bill is able to provide to retail, hospitality and leisure businesses.

--- Later in debate ---

[The Minister for Local Government and English Devolution (Jim McMahon)]

Before I speak to the amendments tabled by the hon. Members for Mid Dorset and North Poole (Vikki Slade), for Ruislip, Northwood and Pinner (David Simmonds) and for St Albans (Daisy Cooper), I thank Members from across the Chamber for their contributions and for the constructive spirit, by and large, in which they have engaged with the Bill since its introduction. Although they are not always seen, with evidence sessions and Committee stages not always being prime-time TV viewing—it is a curse, but that is the way it is—those deliberations are nevertheless essential. The contributions that were made by Members from all parts of the House in probing and scrutinising the Bill were valuable, and I hope that all Members found them interesting.

I will begin by speaking to the amendments concerning the impact of the new multipliers. New clause 1, tabled by the hon. Member for Mid Dorset and North Poole, would require the Secretary of State to review the impact of clauses 1 to 4 on businesses, high streets and economic growth within six months of those clauses coming into effect. The hon. Members for Ruislip, Northwood and Pinner and for St Albans have proposed two other new clauses. New clauses 2 and 3 would seek to impose in legislation a requirement for an analysis of the impact of the new business rate multipliers at varying points ahead of, or following, implementation of the Bill. New clause 3 also seeks to require an assessment of how the application of the new multipliers would differ between retail, hospitality and leisure businesses occupying different numbers of properties, and to compare that assessment with the impact of retail, hospitality and leisure relief from the 2020-21 financial year to the 2025-26 financial year.

We agree in principle with the points that hon. Members have raised through their new clauses. It is right that the Government consider the effects of their policies on businesses, on the high street and on economic growth, and indeed within different sectors. It is the policy of the Government that those businesses should feel a material benefit as a direct result of these measures, so let me set out how we propose to do that.

It states in the Bill that the two new retail, hospitality and leisure multipliers may not be set at more than 20p in the pound lower than the small business multiplier. The Bill also places appropriate restrictions on the higher multiplier: when it is set, it cannot be more than 10p in the pound above the standard multiplier, and cannot be applied to properties with a rateable value of less than £500,000. It is important to state that those are not the intended tax rates, but the maximum parameters to be introduced through the new business rate multipliers. As we explained during the Bill’s passage through the House, the actual tax rates will be set at the 2025 Budget, taking into account the effects of the 2026 business rate revaluation, as well as the broader economic and fiscal context at that time.

[Daisy Cooper]

The Minister has been here throughout the debate, and he will have heard a number of my interventions. I accept his point that those figures will not be published until Budget 2025. May I ask if he is in a position to give a cast-iron guarantee that small independents, with a small number of hereditaments, will not be subsidising organisations that have many, such as the big chains?

[Jim McMahon]

I did hear the hon. Lady, and I think we all accept the principle of needing to target or get support to those important small businesses, which we can all identify in our constituencies. With respect, I think there was a degree of conflation with the temporary reliefs brought in during covid, which the previous Government did not account for, that were always going to come to an end.

Our challenge was how to reconcile ongoing support for the high street with a permanent relief in law so that businesses know exactly where they are and can plan ahead with certainty. The choice we made was far fairer: to target higher-value properties of more than £500,000, which are generally—but, I accept, not entirely—the large-footprint warehouse and distribution premises used by the big online retailers.

The shadow Minister used the example of the stationery provider in my constituency. It is an online retailer, so it ought to be paying more. Why? Because for a long time—and we have all heard this from our constituents and industry—we have needed a rebalancing from online to on-street and from out-of-town to in-town, and that is exactly what this targeting does. It was never intended to be a continuation of the relief that was only temporary during covid. It is about rebuilding the foundations, and that is exactly what we have set out to do.

[Daisy Cooper]

I completely accept that point, and I am very sympathetic to the fact that the Minister inherited a sticking-plaster system from the previous Government. If during the course of this year his Government’s own analysis proves what I have discovered from the House of Commons Library research, will he ensure that the Government at least do not rule out introducing a new small business relief in a targeted way to support such small independent businesses?

[Jim McMahon]

As with all tax policies, we will keep this under review, and I say that in a very general sense. We absolutely believe that the businesses that are the backbone of our high streets, town centres and communities would, were it not for these measures, go bust. They would not be viable and they would feel the heat very quickly. However, because of the measures we are taking, businesses will be able to plan with certainty for the future, knowing that they have a Government acting in partnership with them in that enterprise.