Local Government Finance Bill

Earl of Lytton Excerpts

Wednesday 10th October 2012 Lords Chamber

[Lord Williamson of Horton]

My Lords, in this House we are perhaps tempted to call for reviews of many things that we have slight doubts about, and sometimes we have too many of these reviews. However, in this case I support the amendment. I note that later on the Order Paper we have Amendments 79 and 81, which go further than this. They would involve a three-year repeating look at the situation, whereas this amendment proposes that there should be an independent review after three years.

I support Amendment 4A because, as the noble Lord, Lord McKenzie, made clear, the situation between local authorities is not even. They have a differing ability to generate more resources from business rates. This is determined by a lot of factors which they do not control. The most obvious factor is geography. Another is that the business rates relate primarily to buildings and structures, whereas some authorities, if they were doing their best for the economy, might put their emphasis on economic activities such as IT and particularly tourism where they will have expenditure but will not necessarily generate more in the form of business rates. They will spend money on advertising, communications and transport and so on, but they will not get back much in the way of business rates because they are not putting up big buildings and nor are their citizens.

The result of what we have here running for seven years would be changes in local authorities’ resources, which would in due course have consequences for their services and council tax payers. That would vary considerably between the local authorities. I know that there is a biblical precedent for seven lean years and seven fat years, but if I was in the local authority and had seven lean years I would be pretty unhappy about it. It is therefore perfectly reasonable to have an independent look at this. The terms of the amendment are pretty moderate, and I hope that the Government will accept it.

[The Earl of Lytton]

I support this amendment in general. In doing so, I must declare an interest, as this is the first occasion on which I have spoken at this stage of the Bill, as a practising chartered surveyor and a member of professional bodies with a particular interest in the non-domestic rating system.

As the noble Lord, Lord Smith of Leigh, pointed out, we are in an era of most unparalleled uncertainty. One of the greatest areas of uncertainty relates to non-domestic property and its valuation. We have at the moment a valuation list that, as I have said at earlier stages in this Bill, is based on the peak year antecedent date of 2008. It is commonly understood that values over much of the non-domestic property world have fallen materially since then. Possibly the only exception is with supermarkets, which are popularly assumed to pay too little in rates—but I leave that to one side. My concern is with the small to medium-sized businesses that are faced with large rate bills. In the course of the last month, I happened to have reason to attend to a property in the Guildford area where the rent had been reduced by negotiation between landlord and tenant from some £15 a square foot to £5 a square foot, so that the tenant, on a 3,000 square foot building, was paying around £15,000 a year, while the rates payable were over £18,000 a year.

Decisions about the occupation of business premises are increasingly being made as a result of that in effect unavoidable impost on the property and the cost of occupation. Businessmen are now looking, as they did in the early 1990s, when we were here before, at the overall costs of occupation—the rent, the rates, the service charges, and so on. So if the one bit of the system that is not negotiable is the non-domestic rates, that leads to inherent instabilities in the process and a strong impetus to try to avoid that imposition by whatever means. It has ever been thus that when businesses or any other taxpayer feel that they are being unfairly treated and there is an unreasonable impost, things start to happen. There is no plumbing the depths of ingenuity that might be devoted to this particular problem by professional bodies, rate payers and accountants, as well as various other people, all of whom are concerned with the long-term financial well-being and possibly the very survival of the business.