Non-Domestic Rating (Multipliers and Private Schools) Bill (First sitting)

David Simmonds Excerpts

Committee stage
Wednesday 11th December 2024 Public Bill Committees

[The Chair]

We now hear oral evidence from Gary Watson, chief executive of the Institute of Revenues, Rating and Valuation. Before I call the first Member to ask a question, I remind the Committee that questions should be limited to matters within the scope of the Bill. We must stick to the timings in the programme order that the Committee has agreed. For this session, we have until 9.50 am.

[David Simmonds (Ruislip, Northwood and Pinner) (Con)]

Q Good morning, Mr Watson. There has been a great deal of debate about the impact that the measures in the Bill will have on high streets, which contain a variety of different businesses. In opening your evidence, will you share your view of what the overall impact of the Bill is likely to be on our high streets?

Gary Watson: Thank you for the opportunity to speak to the Committee. As a professional body, we have members in both the private and public sectors, so we look at the bigger picture when it comes to non-domestic rate, and the high street is the key part of non-domestic rate, in particular from a local government perspective.

I think it is fair to say that we welcome the focus on the high street. What I mean by that is the giving of some degree of certainty. One weakness, certainly since the Localism Act 2011, is that we have had temporary support—from one year to another. We now have an element of certainty, which is to be welcomed. As a professional body, our concern about giving that support to the high street is to do with the complexity in the rating system. At the moment, we have two multipliers, and we are going up to five or six multipliers. That is difficult for people to understand.

We have had the temporary support for the high street. It is fair to say that the high street is changing; every weekend I go down to my own high street and there are different types of shops. The high street is still thriving, but it is changing in lots of different ways, and the way that the business rate system works needs to be flexible to meet different challenges.

No one high street is the same as another. You have to recognise that a high street in one area of the country is completely different from a high street in another area, but we have a national non-domestic rate system and we very often apply a national system to local issues. Back in 1990, there were no rateable value limits to reliefs; now we have rateable limits all the time, and that means that different areas of the country get treated in different ways. The high street still needs to be a focal part of any Government measures to reform the business rate system.

[David Simmonds]

Q To follow up on that, you have mentioned the key role that local authorities play in the administration of the system. The Bill will introduce provisions whereby the Treasury can make alterations around the multipliers. What is the appropriate time period to ensure that local authorities have sufficient run-in so that any such alterations can be administered correctly? Given that business rate take feeds into a national pooling arrangement, do you have a view about the timescales and the necessary consultation to ensure that, at both Treasury and local authority level, there is clear sight of the impact of those changes on the administration and on the sum of the business rates that are collected?

Gary Watson: Different issues come out of that. Business rates are a major source of local government finance, and local government needs to plan its finances ahead. On ensuring that the high street is aware of the changes, the longer the notice you give, the better. Local government always reacts very quickly, and the high street should be given as much notice as possible— I would normally say a year, although you could pick a different time period. From a planning and local authority point of view, the longer you do a proper consultation—consultation is going on now—to engage with the local community, the better. There will be different high streets in different areas, so you may have more than one high street to focus on. One example of good engagement has been local authorities working with business improvement districts.

It is right to have flexibility. Obviously there are limits, with the two lower and one or more higher multipliers, and you could argue that that creates an element of uncertainty—not knowing what one multiplier will be from one year to the next. But at the moment, you really do not know what you will have from one year to the next, and that does not allow the local authority or the high street to prepare.

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[The Chair]

We will now hear oral evidence from Paul Gerrard, director of campaigns, public affairs and board secretariat at Co-op. For this session we have until 10.20 am. Welcome.

[David Simmonds]

Q Welcome. We are all familiar with your business, which is a mainstay of many of our high streets. Would you be willing to give us your assessment of the overall impact of the Bill on the stores that you represent and your view on what it will do to the retail environment in which they sit?

Paul Gerrard: Thank you for the opportunity to speak to the Committee. The Co-op Group has about 2,500 stores right across the country. They are predominantly small stores; they are convenience stores on high streets and in local precincts. Our rates are significant: they are the third biggest operational cost we have after people and rent, and in 2024 they are expected to be just north of £100 million. Our stores are overwhelmingly small stores in communities, and the point about those kinds of stores and the high streets they are on—

[The Chair]

Order. Mr Gerrard, can you speak up a bit? The broadcasters are having trouble picking you up.

Paul Gerrard: That is not something I often get told, but I will try to speak a little bit louder.

Our stores are overwhelmingly in the heart of communities, on high streets or in precincts, and they are anchor institutions for many in the community. We saw during the pandemic, in technicolour, how all those local stores are genuinely the heart of communities. That is still true now—it is just perhaps a bit quieter and over a longer period. Certainly for us, when you look at communities that are facing tough and challenging times, you will see boarded-up shops. In a sense, that is the flip of a vibrant high street.

There are obviously bits of this Bill that we do not yet know: we do not know, as the previous witness said, what the revalorisation exercise will do and we do not know the precise multipliers. However, as far as we are concerned, this will have a positive effect on 92% of our estate—a significant impact. It will also, as far as I can tell from the data I have seen, positively impact about 98% of all retail stores.

This Bill will mean, I would expect, that some of our properties, depots and headquarters will pay more, but we think the value that shops bring to high streets—not just commercially, but socially—is important, and therefore we should rebalance. We have been calling for that for a long time. We very much welcome this Bill; obviously the detail is to be confirmed, but the policy principle behind it, to support small stores in communities, is absolutely right.

[David Simmonds]

Q You mentioned that the Bill would have a positive impact on the vast majority of your stores. Can you just walk us through how you have reached that calculation, particularly with reference to the different types of environments in which those stores are located and the different footprints they will have?

Paul Gerrard: We have about 2,750 properties, of which about 220 are not classed as retail, hospitality or leisure. Those will be depots, our funeral business, care homes, our headquarters and so on. We have about 2,500 stores, and of those about 62% have a rateable value of less than £51,000, and just over one third have a rateable value of between £51,000 and £500,000. They will go into what we are assuming will be the two lower multipliers. We do not know what the levels will be below the standard multiplier but, taking the industry’s working assumptions of 10p and 20p, that will have a significant impact.

The properties we have outside that group, which are either non-retail, hospitality and leisure or are bigger than £500,000, make up 20% of our rates bill. They will not benefit—in fact, we would expect the rates bill for the big properties to go up—so there is a bit of a balance, but for us overall, it will significantly support our stores. In addition to our 2,500 stores, the Co-op also wholesales to another 5,000 or 6,000 independent stores. I have talked to colleagues in those businesses and, again, this new structure of rates will significantly support those independent small stores as well.

[Jim McMahon]

Q For the record, I refer to my entry in the Register of Members’ Financial Interests. Mr Gerrard, many of the stores that you operate are not on the high street or in town and city centres; they are often the last remaining store on the estate in a community. How do you think this Bill might contribute to making those more viable? During the pandemic, when children were being educated from home and given vouchers to get meals during the day, we found that there were significant retail deserts in large parts of the country where that immediate meal was not available, bar the local convenience store on the estate or in the local neighbourhood. From that perspective, beyond the high street and town centres, what impact do you think these measures might have?

Paul Gerrard: You are absolutely right; many of our stores are on high streets, but a lot are just local stores that will be the corner shop on a street. The rates bill is significant—as I said, it is one of the top three costs that we have, alongside our people. As you know the Co-op has always paid the Living Wage Foundation’s real living wage, because we think that is the right thing to do, and that is for every colleague, regardless of age or employment status. The other top cost is rent, and then the third one is rates.

I do not think we close stores because of rates, but the current rate system makes it really difficult for some stores to be viable. If we then add to that issues around crime—I have given evidence in this place before on that—there are a lot of costs hitting us. The proposals here are particularly important for those small stores. I think about two thirds of our stores are underneath a £51,000 rateable value, and that rates bill will have a significant impact on the viability and profitability of those stores. You are right that, during the pandemic, when we were all told to stay at home to keep safe, my colleagues and shop workers throughout small stores went in and made sure that the shops were open so that people could get food and water to live.

As I said before, I think we saw in technicolour how important small stores are. The retail sector is multichannel and there are lots of different parts to it, and those different parts play different roles and have different impacts. Small stores are the beating heart of communities. We have done some work, which we are just refreshing, that says that, if you have vibrant high streets, you have better mental health. You have a whole range of better outcomes, and those small stores are at the heart of it.

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[Michelle Welsh (Sherwood Forest) (Lab)]

Q I should probably confess that one of my first jobs was working at a Co-op—I do not know whether that is for the register of interests. In my constituency, we have seen the huge impact of a local store closing, especially on the most disadvantaged and most vulnerable. Over the years, I have been concerned about access to healthy food, children’s access to food and the ability of people with young babies to walk to a local shop. For many of my communities in Sherwood Forest, this is not about having food delivered; it is about being able to access it locally and frequently, because people are having to manage their money on a daily basis, not a monthly basis. They are buying one meal at a time, for example. The Co-op has played a vital role over the years and continues to do so.

We have seen the demise over the years of many local stores—not the Co-op, but generally, the store in the middle of the community that knows the local people. When I worked at my local store, I knew that if someone did not turn up for their Sunday paper, there was a problem. Promoting that sort of community feeling crosses all Government Departments, not just those dealing with health and wellbeing. Do you think the Bill will help to ensure that your local stores become more accessible and that you will maintain your connections with your community, and that it will be about working with the Government in all areas that deal with combating poverty and child poverty and improving child health?

Paul Gerrard: The short answer is yes. Fundamentally, the Bill will ease the burden of rates on small retail and leisure premises. That is the bottom line. Two thirds of our estate are below £51,000; they are the sort of shops you just described. The Bill will significantly reduce the burden on them and on shops between £51,000 and £500,000, so I think it will help.

In a number of things we have done, including our loneliness campaign, and in tackling retail crime, we see how shops in general can be anchor institutions for communities. I do not think we always recognise that in policy, but I think the Bill does recognise it in saying that that is, by definition, a good thing. Government could think more about what all sorts of retail can do—not just economically or in terms of jobs, but in terms of the impact they can have in communities. The Bill recognises that as a policy principle, and I think that can be a first step to thinking more about the way shops support and function in communities.

[David Simmonds]

Q A number of Members have mentioned their relationship with the Co-operative party, so I wanted to clarify one point. Does the Co-operative Group still fund the Co-operative party? Is there still a relationship between the two?

[The Chair]

Order. That is outside the scope of the Bill.

Paul Gerrard: I can write to you after the session to explain the relationship.

[David Simmonds]

Q You mentioned the overall impact of this measure alongside national insurance contributions changes and other things, which you analysed, and you said that that would be a significant consideration in your coming to a view on the impact of the Bill. What is your view on the overall impact? You said that you felt that overall it would be beneficial to your business, but there were uncertainties. How do you envisage clarity being brought to the overall impact, so you know what effect it will have on jobs, premises and your investment plans?

Paul Gerrard: We have looked at the Budget and other measures in the round. It is not an insightful thing to say that the employer NICs changes will certainly cost a significant amount of money. On top of that, we have the real living wage; as I said, we pay the Living Wage Foundation living wage, which has cost us probably £160 million over the last three or four years. So there are headwinds coming toward us. I would not underestimate the impact that tackling retail crime could have. It costs the retail sector £3 billion and the Co-op £120 million, so if you can make a 10% or 20% reduction, it will be significant. As I have said, I think the rates proposals are good for the vast majority of retail.

Looking at it in the round, the headwinds we will have to face and the supporting winds are becoming clearer, which allows us to plan. We have plans to grow our business. The environment is challenging—retail always is—but overall we think we are beginning to get the certainty we need. For a national business consisting of small shops, like the Co-op is, we think the rates proposals are really supportive.

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[The Chair]

We will now hear oral evidence from Edward Woodall, Government relations director at the Association of Convenience Stores. We have until 10.40 am for this session.

[David Simmonds]

Q Welcome, Mr Woodall, and thank you for your willingness to give evidence. Can you set out your view of the overall impact, both financial and administrative, that the Bill will have on your members? More specifically, can you give us a sense of how many of your member stores share premises or host other things such as post offices or banking hubs?

Edward Woodall: Thank you very much for the opportunity to give evidence. The Association of Convenience Stores represents the UK’s 50,000 convenience retailers, which trade from premises under 280 square metres—very small premises. To give you a sense of scale, the absolute biggest retailer would have a store that is double the size of a tennis court, and most are smaller than that.

The Bill is very helpful, because most of those stores will benefit from the lower retail, hospitality and leisure relief multiplier. Some 71% of our sector are independent retailers, and a large majority will benefit from the lower £51,000 rateable value threshold. In that sense, it is very positive for the sector, but it is also very positive for the places where they trade. We talk a lot about high streets—we use that as the shorthand term—but actually most of our members trade from secondary shopping parades. About 70% are in those secondary areas, servicing a neighbourhood parade—a small block of perhaps five shops—so they support the provision of services very locally, close to where people live and work. In that sense, the Bill is very beneficial. It will also hopefully help to give some more certainty and permanency to the support to the sector in the long run, and certainty about investments that they can make in the future.

I will give you some examples. For a convenience retailer just outside the small rate relief threshold—with, say, a £15,000 or £16,000 rateable value—if the multiplier were set 5p lower, that business would save something like £1,000 a year. If it were set at 20p—the full extent of the flexibility—the business would save something like £3,000 a year. Those are quite reasonable sums and would enable it to consider investing elsewhere. It could be in new software to help it manage shifts or new a CCTV system to help it address the issue of crime. So overall, the Bill is very positive.

On the question about post offices, there are, I think, 11,500 post offices in the UK, and about 8,000 are hosted within convenience stores in a Post Office Local format. There are lots of other services, such as parcel collection and bill payment. Service provision, which is very high volume, low margin, is a big part of the convenience store business. Sustaining them is challenging within the existing environment, so it is important that the support is targeted in that way.

[David Simmonds]

Q May I ask specifically what your view is on small business rate relief?

Edward Woodall: Small business rate relief is incredibly important for our membership as it helps the very smallest businesses to get relief. It also has some very specific features. It is automatically applied, and there are tapers between £12,000 and £15,000 rateable value. It really supports the very smallest businesses in our sector, which trade in rural locations and often serve isolated communities. We are very keen that, with any change in business rates legislation, we get some reassurances that there is a strong commitment to retaining small business rate relief. As much as the multipliers are very helpful to businesses at the larger end of our membership, it is really important that we protect that small bit. The small business rate relief is a great mechanism for doing that.

We have lots of suggestions about how we might improve small business rate relief in the future, to make it work better for more retailers. With the upcoming revaluation, we are likely to see higher retail prices and, as a result, the thresholds need to index up with that higher cost, otherwise businesses are going to start to slip out of the small business rate relief support. Certainly, as much as we welcome this Bill, we would like to hear more about what we can do to improve small business rate relief, to help the smallest businesses in isolated locations.

[Jim McMahon]

Q Thank you for giving time to give evidence today, Mr Woodall. You explained the nature of your members and the fact that their businesses are very much anchors of the community. They are the place that provides the food, but also, in many places, they provide access to finance, post office facilities, postal services and so on. How many of your members do you assess will benefit from the measures, given that the relief is targeted at retail, hospitality and leisure businesses of the scale you talk about?

Edward Woodall: Very much the majority of the membership. The breakdown of the membership is that about 71% are independently operated across the convenience sector, and the other third are operated by multiple retailers—they might be a Co-operative, a Sainsbury’s Local or a Tesco Express. The large majority of those premises will sit under the £51,000 rateable value or still use the standard multiplier. Of course, when you take into account hospitality and leisure, we understand that that will be lower as well. So overall, most convenience retailers, as small format retailers trading from spaces under 280 square metres in secondary locations, will benefit from the lower multiplier.

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[The Chair]

Welcome. I will hand over to the shadow Minister.

[David Simmonds]

Q Welcome and thank you both for your time today. Your organisation has been quite vocal about the need for this legislation to introduce a retail rates corrector as a means of addressing some of the imbalances. Would you share with the Committee your views about whether anything in the Bill helps to address those concerns, which I know are long-standing ones in the retail sector? Would you then develop that in the context of the Budget, which we have heard a lot of evidence about? It is one of those things that businesses are looking at the overall impact of. Would you tell us your members’ views about the overall impact that the Budget has had and give us a steer as to what that suggests we should be doing in this Bill?

[The Chair]

That is slightly out of scope of the Bill. Could the witnesses comment on it within the context of the Bill?

Helen Dickinson: Certainly. I will kick off. I have been doing this job for 12 years, I think, and business rates have always been a big issue for retailers of all shapes and sizes. There have been many attempts over many decades to look at how the system could be reformed. That recognition that the business rate system as it stands disincentivises investment in communities up and down the country is very welcome. The starting point is a great recognition that there is a need to reform that system. It is also great to see the importance of retail, hospitality and leisure businesses in that context and to be thinking differently about the business rate system and how it applies to those businesses, because for many other industries, business rates are a tiny proportion of their cost base, whereas for retail and hospitality, it is a much more significant part of their costs.

Our headline, in the context of welcoming that and all the potential that it has to stimulate local investment, is that it does not necessarily go quite far enough to be able to deliver the scale of investment and far-reaching change that we need to see up and down the country. The reason for that has to do with the level of £500,000 and above for the threshold. About 4,000 shops currently sit above the £500,000 rateable value threshold. Many of those shops sit on high streets up and down the country. Many of them are what in retail we might call anchor stores: they drive footfall. That is part of the ecosystem where larger businesses and smaller businesses all co-exist, and that is what makes successful high streets.

From a retail point of view, because those 4,000 shops potentially are captured by the threshold, they are, in the way many businesses think about investment, looking at what their customers want in local communities and whether that is an out-of-town shop or a shop in a high street. If you are penalising some shops to support other shops and hospitality businesses, the ability for the ecosystem of investment that we want to drive to reinvigorate high streets is being held back.

I think that is a big question, because of the way the whole Bill is set up. Does that work in the context? Are there enough other properties that are not retail and hospitality businesses to be able to still achieve the parameters of the Bill and the self-funding mechanism that it creates? About 12,000 other properties that are not retail, hospitality or leisure businesses sit above the £500,000 threshold. For those businesses, that business rates change, if there is a higher multiplier, is a tiny proportion of their profits—I think our modelling suggests about 0.2%. For all of the other companies right across the economy, this is a much smaller issue than it is within the retail industry, and the hospitality industry for that matter.

We think that either through the Bill or through some sort of assurance from Government that they will look at it—as I understand it, it does not necessarily have to be done through the Bill and the Government can actually make that decision outside it—we need to really think about how those over-£500,000 properties should be taken out of the upper-level funding elsewhere. The ability to support retail and hospitality businesses in their totality is the way that it should be thought about.

To touch on a bit that may be out of scope, this comes in the context of the significant cost changes that the Budget and particularly the national insurance changes represented. Again, just to put some numbers out there, we looked at this, and the cost of the national insurance change is about £2.3 billion across retail and hospitality. We are talking about a potential benefit of about £1.3 billion if you include all of retail within the scope of the Bill, so it is a lower amount, I suppose, than just the national insurance change. That is another reason why we think it is really important that we include all shops—the context being that nobody ends up paying more, the smaller shops end up paying less, and you just take those larger shops out of the uplift as the way to really drive that investment in local communities.

[David Simmonds]

Q We have heard some evidence on appeals and the decisions that will arise from this. Clearly, there is a degree of uncertainty because, if we do not yet know what the multipliers are, businesses cannot plan for that. Do you have a view about whether the current system is fit for purpose to address what may arise? If not, what measures would you like to see to make it work better?

Tom Ironside: On the existing system and its fitness, or its ability to actually handle what may arise, I think there are long-standing concerns about the ability of the appeals system to respond effectively, with long backlogs and people reporting that they exit one revaluation not having resolved issues from the previous ones. There are real long-standing issues that need to be tackled.

Inevitably, if you look at the approach that is being taken, the introduction of a new threshold will create additional tension for companies that sit just above that threshold, and that is likely to increase the number of appeals. It may also have an impact on investment decisions as you get close to the threshold, because there is a marginal tax rate impact, which could be very significant if you move from being in receipt of a discount for retail property through to seeing an upward multiplier under the existing proposal.

[Jim McMahon]

Q Thank you for attending the evidence session, and for the written evidence that you have provided by way of preparation for the meeting. I think there is an acceptance in the evidence that you have given that any business rate system ends up having to draw the line somewhere; it is the nature of the multipliers and of the value that you apply. It stands a fact that, when it comes to most of your members, despite the 4,000 that you say will be above the £500,000 threshold, 772,000 are below the threshold. Therefore, it stands the case that the vast majority of your members will be the beneficiaries of the measures taken here.

Also, although it can be portrayed—and has been during this evidence session—that the relief is being decreased from 70% to 40%, the truth is that the temporary relief over covid was due to come to an end. That was a cliff edge, but this measure provides a permanent relief in legislation, which gives certainty over the long term. It would be interesting to know the views of your members on that.

Helen Dickinson: I just heard the end of the previous session. Obviously we have got to get to the point of implementation, but once we are there the long-term certainty is going to be really important. I completely understand the context in which the covid support was given and how valuable that was. Painful as it may be for many businesses when transitioning from a higher discount to whatever the new system might be, longer-term certainty outweighs that because we will not be limping from year to year waiting to see what that might look like.

In the context of your point about the proportion of businesses and shops that would benefit from the proposals as they stand, I completely agree that the 4,000 shops I mentioned is less than 5% of the total number of shops. Where it becomes much more difficult is that, if you look at that small proportion of shops, it is about a third of the rateable value of all shops.

If you think about it within a retail context, what we are effectively doing is penalising some shops to support other shops. In the competitive landscape of retail, where businesses are competing for consumer business day in, day out, it is distortive to competition. We completely agree that you have to draw a line somewhere, but we think the line should sit outside retail and hospitality, rather than being drawn within retail—and hospitality, she says, with her retail hat on. Does that answer your question?

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[The Chair]

We now come to oral evidence from Stuart Adam, senior economist on tax at the Institute for Fiscal Studies. For this session, we have until 11.25 am.

[David Simmonds]

Q I know your organisation has had a long-standing interest in the reform of business rates. Given the background, can you start by telling us your perspective on how far the Bill goes to address concerns that you have had and the calls that you have made for that reform to take place?

Stuart Adam: It basically does not do anything about them. We can argue about the pros and cons of what is in the Bill, but it is largely separate from our concerns about it. The discussion paper raises a couple of potential reforms for the longer term that are more related to it. My view is that there is an issue about possibly more frequent than three-yearly revaluations, and particularly trying to shorten the antecedent valuation date period from the valuation to when it takes effect from two years to one year, which would be good. Actually, my ideal would be to move to a land value tax for commercial property, which does not seem to be on the table. Things such as reliefs for improvements for a certain period have been introduced and there is something in there about whether that is working well and should be extended. I have a set of concerns about business rates, but they do not really have much to do with what is in the Bill.

[David Simmonds]

Q Could you share with us an assessment—your view—of the impact that measures in the Bill will have on the affected sectors?

Stuart Adam: There are two sections in the Bill, obviously: one about multipliers and one about private schools. We should probably separate those as they are very different issues.

In terms of the changes in multipliers, this gets widely misunderstood. What gets left out of the equation is essentially the economics, and specifically what the consequences will be for rents. Basically, business rates are not what is killing the high streets, and changes to business rates are not what will save it. As a rough first pass—and we can nuance this quite a lot—when business rates go up or down, rents tend to go down or up almost pound for pound in the long run, which means that business rates do not have a big impact on the cost of premises. That is much more about the supply of property.

There are several nuances to that. One is that to some extent business rates affect the supply of property and that will feed through into rents and affordability. You can think about the effects that this would have on the incentive to build bigger or smaller properties, or properties focused on retail, leisure and hospitality versus other sectors; or the incentives to use properties in one sector versus another; or indeed whether properties are used for commercial purposes or housing, and so on. There will be some effect from those things, and that will affect affordability as a knock-on consequence. That is clearly longer term and second order, and things like the planning regime are much more important.

If you take the supply of properties as given, to that extent, changes in business rates get offset by changes in rent. For example, in the case of the rise in business rates for properties with a rateable value of more than £500,000, I would expect rents to fall by a similar amount over the long term. Again, “over the long term” is a caveat. That is therefore a one-off hit to the owners of the land rather than to the occupiers of the property.

With reduced multipliers for retail, leisure and hospitality, the position is a bit more complicated because it depends on the extent to which there can be shifts of use in properties between different purposes. If properties used for retail, leisure and hospitality are stuck for that purpose and cannot be used for anything else, the same applies, but if shops can be converted into offices and vice versa, the situation is more complicated. We expect that, overall, the reduced multipliers would lead to an increase in rents, but a smaller increase in rents for all properties. Retail, leisure and hospitality would therefore become more affordable, but only to the extent that offices, factories and so on become less affordable. It would still wash out overall in terms of rents, and the beneficiaries would be the landlords rather than the businesses occupying and using them, but there can still be a shift between retail, leisure and hospitality and other sectors of the economy.

[Jim McMahon]

Q Thank you for coming to give evidence today, Mr Adam. I absolutely accept what you said—you are far more qualified than me on these matters, and I will not try to test some of it. However, I can say from my experience in Oldham that businesses are asking for respite and that they have found things very difficult. Although covid has been and gone, the operating environment before covid was difficult for many high streets and town centres, particularly for retail, hospitality and leisure. In some places, particularly where the economy is vibrant and there is high demand for premises, there might be a shift from business rates to rent as the system is moved round, but in most places, where there is not that high demand and there are lots of vacant units, it is about making the activity more affordable so that people can operate and keep their heads above water, and there probably will not be the shift that you talked about.

Stuart Adam: I disagree. I think there still would be that shift over the longer term. Again, these things take time as rental contracts adjust as new tenants are found for premises. The theory is reasonably clear and the evidence that we have, which is fairly thin, supports it pretty much completely. I emphasise that in the short run we would absolutely expect respite for retail, hospitality and leisure sectors at the moment, until there is time for rents to adjust. One thing to bear in mind is that we have had more generous reliefs for retail, hospitality and leisure in recent years, and some rents have been renegotiated during that period. It is also possible that if people, firms and the market expect reliefs that are more like 75% to continue, rents may have gone up, and the fact that the relief is less generous than what it replaces means that they will be worse off in the short run than if the reliefs had never been introduced. Obviously, they are still better off than they would be if the relief were removed completely. My expectation is still that that will be reflected in rents over time.