Business Rates (Rural Areas)

David Simpson Excerpts

Tuesday 8th September 2015 Westminster Hall

[Jake Berry (Rossendale and Darwen) (Con)]

I beg to move,

That this House has considered business rates in rural areas.

It is a pleasure to serve under your chairmanship, Mr Hollobone—not only for the first time this Session, but for the first time ever. It is also a pleasure to see my hon. Friend the Member for Nuneaton (Mr Jones) on the Front Bench as Minister and to have him respond to the debate.

I am pleased to have secured this important debate, in which I want to raise with the Minister the effect of recent changes to the policy and practice of the Valuation Office Agency, or VOA, and their effect on the rural economy. Our rating system is just over 30 years old. During his excellent Budget speech in March, my right hon. Friend the Chancellor of the Exchequer announced a review of business rates to see what more can be done to ensure that we have a fair system that supports businesses across our communities.

That is set against a background since 2010 of significant steps taken by the Government to support small businesses during the economic crisis. We have supported them by doubling the small business rate relief, ensuring that such relief is automatic, capping increases on business rates and introducing a new business rate discount for high street stores with a rateable value of less than £50,000. However, with the business rate review in mind, I want to draw the Minister’s attention to what I believe are anomalies in the behaviour and practice of the VOA that unfairly penalise people who choose to live and work in the countryside and contribute to our rural way of life.

My constituent Mr Alan Walker of Higher Fairbanks farm was understandably surprised to be contacted earlier this year by the Lancashire office of the VOA. The VOA told him that it wished to visit him to assess his domestic stabling for business rates, despite the fact that the stabling at his home is used solely to keep his family’s horses, which they regard as pets, and that planning permission for the stables specifically precludes commercial use. In what appears to be a classic case of mission creep, the VOA is visiting farms across Rossendale and Darwen assessing what, if any, part of the farm accommodation can be charged business rates.

When Mr Walker challenged the assumption that business rates should be charged on his stabling, he was told that it is a grey area of the law. That statement seems to be backed up by the VOA’s guidance, issued in February 2015, which states that every stable should be considered on a case-by-case basis. Mr Walker has, of course, appealed the VOA’s decision, but if his appeal is unsuccessful he could be charged £3,000 a year in business rates on his stables. Combined with his council tax, that will mean paying more than £5,000 a year in property tax on his home, although it has never been used for any commercial purpose whatever.

In Rossendale and Darwen and across our country, our equine community make a significant contribution to the rural economy. The changes will damage businesses such as our local farriers, vets, horse dentists—apparently such things exist—and farmers who provide feed, as well as businesses that supply tack.

As far as I am aware, this new way of taxing people’s homes has never been discussed in Parliament. It is bizarre that we seem to be applying business rates to areas of people’s houses where they keep their pets. What will the VOA come up with next—the kennel, or the rabbit hutch? I have spent long periods of my life in the doghouse—just ask my wife; I worry about the charge that might be levelled against me.

Sadly, the case I have mentioned is not the only example of unfair taxation being applied to the countryside economy. I was contacted recently by Live Nation, which is concerned about how business rates are assessed against agricultural land that hosts music festivals. They have also been subject to unannounced and undebated changes, putting at risk not only the music festivals, which are enjoyed up and down the countryside, but our Government’s commitment to support rural economies and rural businesses, many of which are struggling to remain viable.

We have only to look at the recent protest over milk prices to know what a tough time many of our farmers are having. Festivals and such events are a huge success story for the UK economy, and in terms of festivals, our music industry is now unrivalled around the world. An analysis in 2014 by the Oxford Economics Institute identified that 9.5 million music lovers attended festivals, gigs or other such events, generating £3.1 billion for our economy. At a time when farmers are struggling to compete and stay financially viable, events such as festivals are an essential part of diversifying their agricultural activity and generating supplemental income. That success story is endangered again by creeping changes by the VOA.

Currently, land on which festivals and events take place is exempt from business rates due to its status as agricultural land. However, the VOA has decided to revisit and reassess festival sites for business rates, resulting in sites being classed as rateable. As with the stables, such revisiting is particularly serious because the new classification is retrospective; landowners have ended up receiving large backdated bills for the past five years. Many sites receive no warning from the VOA that they should expect a retrospective application of rates or a large backdated bill. The large and unexpected bills are damaging to small and medium-sized festivals in particular.

[David Simpson (Upper Bann) (DUP)]

My apologies, Mr Hollobone, for being late. I congratulate the hon. Gentleman on obtaining the debate. He touched on diversification. It seems that farmers are being penalised. It is Government policy to encourage them to diversify into different areas to subsidise their income, yet when they do that, they are penalised. Surely something should be done to give them a period during which they would not be liable.

[Jake Berry]

I thank the hon. Gentleman. There is an opportunity to take advantage of the small business rates exemption, and some farmers in my constituency and beyond who have holiday accommodation have used the exemption where they can have it for free. I hope that the Minister will take all the issues on board, including the hon. Gentleman’s eloquent point, in the reassessment of the way that business rates are charged, with a particular focus on agricultural communities.

Festivals have had to pay large backdated business rates bills to avoid enforcement proceedings by billing authorities. As with Mr Walker and his farm, that has led many festivals to appeal the bills, imposing additional costs and burdens on the VOA. The VOA has provided little justification or explanation as to how it is taking into account the individual circumstances of different festivals, and, as with the stables, there is a serious lack of clarity in the existing ratings manual, making it effectively for a festival organiser to know whether rates will be levied. I gently say to the Minister that although music festivals are not for everyone—they are not for me—they have notable supporters. He will recall that in 2013 the Prime Minister was photographed at the Cornbury music festival—without his shoes on I believe. I hope that when the Minister considers the issues, he will think of those notable music festival fans who may control our future careers.

The final point I wish to make about business rates in today’s debate is the rateable charge levied against cash machines. Over recent years, our rural areas across the country have lost literally hundreds of banks. Every Member here today will be aware of the bank closure programme in their constituencies. It has meant that, for many people, the hole in the wall or the through-wall ATM at the village shop or post office is their last access to cash. The importance of such facilities reflects the fact that about 80% of transactions are still in cash.

In the past five years, the number of ATMs liable to business rates has risen from about 3,000 in 2010 to over 12,000 this year. Each through-wall ATM that is liable to business rates has an average charge of £3,600. Major supermarkets or petrol retailers, such as Shell or BP, may be able to absorb such costs, but a small village store or post office will not. A small village store or post office may be exempt from business rates, due to this Government’s action, through small business rates relief, but creating a second rateable unit at the shop means that it is hit with a bill in excess of £3,000.