Non-Domestic Rating (Chargeable Amounts) (England) Regulations 2022

Earl of Lytton Excerpts

Tuesday 20th December 2022 Lords Chamber

[The Earl of Lytton (CB)]

My Lords, I declare my interest as a chartered surveyor and valuer once upon a time in the employment of the Inland Revenue Valuation Office, and a member of the Rating Surveyors’ Association, of whose annual parliamentary reception I am pleased to be the sponsoring Peer.

Bearing the mark of Cain in that respect, I thank the Minister for convening a drop-in session yesterday, even though my noble friend Lord Thurlow—who I am glad to see here—and I very nearly missed it. I am grateful that she has moved these regulations and for her explanation. They are very welcome and long overdue.

I warned the Minister, however, that my welcome would include some finger-wagging, so here goes. Although these regulations right an historic wrong, they do not by any test make it all okay. Leaving aside the impenetrable algebra of Parts 1 and 2 of these regulations—I do not recommend any noble Lord to pursue that too diligently—this measure is rendered necessary because of the effects of transition on those who, at revaluation, have their assessments reduced.

As noble Lords will know, transition is designed to smooth the adjustment process and prevent a cliff edge but, due to Treasury insistence on enshrining in law the principle of fiscal neutrality, the phasing in of increases is currently matched and compensated for by a miserably slow phasing down of reductions. In short, those whose assessments are reduced, possibly due to sectoral overvaluation of one sort or another, often do not see the benefits within the lifetime of a valuation list—the five-year life of a revaluation as at present. In fast-changing situations, this matters quite a lot and frankly is objectively unfair.

Although these regulations set out to redress that gross injustice, there is a sting in the tail, in that the £1.6 billion subsidy that enables these regulations to function will be clawed back from business rate payers in the last year of the 2023 revaluation lists, due of course to the question of fiscal neutrality. The only thing that stands in the way and would eliminate that is the long-promised move to a further and as yet undelivered overhaul of the entire system. I am very grateful to the Minister for her comments and hope that other speakers may be able to enlighten us on the likelihood of that. This may not be dealt with before the end of the current Parliament—it may be beyond that—and it will need all-party buy-in.

The business rate pays a huge and disproportionate amount towards local government finances. It is more than nearly any equivalent recurring property tax anywhere in the western world; we ought to bear that in mind. It has gone up by nearly 90% since 2001, far more than any increase in rents and rather more than the increase in profits, one might suppose. Pro rata it is disproportionate by reference to many other comparators as well, including by capital or rental value, floorspace, demands made of local government services and rate of increase—particularly when compared with that other local government source of finance, council tax. It is driving away enterprise, commitment and investment from the nation’s high streets, encouraging moves to cheaper or off-pitch locations, home-based enterprises and internet trading. As an aside, I comment that if the provision for enforced rental auctions of high-street retail property is still in the levelling-up Bill when it gets to us, it will mean, if anything, an admission of failure and an act of desperation that I think likely to backfire.

I welcome this limited measure for what it is, but wag my finger at the lack of action over the elephant in the room that sits behind it. Noting that the 2023 revaluation does not reduce many of what one might suppose the most seriously affected sectors—namely, retail and food operations—by more than about 10%, and bearing in mind that we are talking about 1 April 2021 as the valuation point, I think that we are at a tipping point. If nothing is done and we are not careful, the once-workable business rate system will become so tarnished and broken by mismanagement, lack of care, gaming of the system and denial of any sense of equity that abolition will be the unanswerable endpoint.

The Government’s 2023 revaluation support package is welcome but none the less papers over many cracks. Can the Minister tell us the position on the technical review consultation, which is now more than a year old? Can she give a categoric assurance that there will be comprehensive business rates reform in the life of the 2023 revaluation that can command the support of opposition parties? I will put it another way: when will we get a non-domestic rating Bill providing comprehensive reform and a move to three-yearly revaluations, doing away with transition and the need for a Treasury free bet of fiscal neutrality? Finally, will the Government rein in HM Treasury, address the excessive demands on the tax yield from this source, and move to a fairer tax take before it is too late?