Non-Domestic Rating (Multipliers and Private Schools) Bill

Earl of Lytton Excerpts

Report stage
Tuesday 18th March 2025 Lords Chamber

Moved by

[The Earl of Lytton]

2: Clause 3, page 3, line 26, after “hereditament” insert “other than a qualifying retail, hospitality or leisure hereditament”
Member's explanatory statement
This, together with another amendment in the name of the Earl of Lytton, would have the effect of leaving large RHL properties paying the standard multiplier rather than the supplement, consistent with previously stated policy intentions.

[The Earl of Lytton (CB)]

My Lords, as this is the first time I have spoken at this stage of the Bill, I declare an interest as a chartered surveyor, a member of the Rating Surveyors’ Association, and a member of the Institute of Revenues, Rating and Valuation. In fact, these are the three bodies referred to in Amendment 32, which is in this group, under the name of the noble Lord, Lord Thurlow.

I thank the Minister for his willingness to engage and for yesterday’s meeting—I appreciate that very much. If it is any comfort to him, that is at least part of the reason why I felt that I should not press these amendments today, most principally because they go to the heart of the philosophy of how the financial backcloth of rating is dealt with. That would be a very diffuse target at which to try to aim at this stage in the Bill.

Before dealing with Amendment 2 and speaking to Amendment 11, which is also in my name in this group, I remind your Lordships how we got here. During our deliberations in Grand Committee, the Minister referred to the 2024 Budget, in which the Chancellor set out a Budget to “fix the foundations” and to take

“difficult but necessary decisions on tax, spending and welfare to repair public finances, to increase investment in public services and the economy … Part of that agenda included transformation of the non-domestic rating or business rates system, including delivering on the Government’s manifesto pledge to support the high street”.

The Government’s manifesto pledge did a good deal more than just support the high street: it talked about dealing with the online giants. That is why Amendment 1, which we just voted on, in the name of the noble Baroness, Lady Pinnock, causes me to remind your Lordships of what I reminded them of at an earlier stage of the Bill: the very large number of non-target species that are swept up by this particular Bill. I enumerated a significant number of them—not all, I might add—of which hospitals were one.

The Minister went on to say that the Government intended to provide

“a permanent tax cut for qualifying retail hospitality and leisure properties and, in doing so, better ensure the ongoing vibrancy of high streets up and down the country”.

He then referred to this whole

“challenging fiscal position that the Government inherited”.

We can fairly say that business ratepayers have been subject to an unsatisfactory means of levying this particular tax for a very long time. I have been on my feet on innumerable cases during the two periods that I have been in this House challenging that perception and showing how this is very negative in its effects on business confidence.

The Minister said that the system

“should work in a sustainable way”.

There are two bits of sustainability: whether the Treasury can balance the books and find the most convenient shortcut through in dealing with its affairs, and what you might call the politically most expedient way. The other way is the one that looks at how businesses make decisions and how the prospect of a surcharge impacts on what businesses do. I have said many times in this House that it is a poor tax that itself starts shifting the dial for people trying to get away from its effects.

The Minister said that

“the Government are asking those with the most valuable 1% of properties to pay more to support the viability of high streets”.

I find it difficult to relate the benefit to the high street by the means shown in this particular Bill. The Minister also said that the process that the Government has alighted on would be equitable and would

“capture the majority of large distribution warehouses, including those used by online giants”.—[Official Report, 24/2/25; cols. GC 444-45.]

Fair enough, but it catches an awful lot else besides, so it is very poorly targeted.

On 17 March, in the other place, in a Written Answer to a Written Question from the shadow Secretary of State for Levelling Up, the Exchequer Secretary commented first on the Valuation Office Agency publishing its official statistics detailing the number of non-domestic properties in England with a rateable value of £500,000 and over, broken down by sector. He then went on to say:

“There is no special category code for ‘internet retail warehouses’. You may find the data for ‘retail warehouses and food stores’, and ‘large distribution warehouses’ helpful”.


I do not find that in the least bit helpful. These are charging people who are not part of the target species. It appears that the Government have no idea how many large warehouses are occupied by the online giants that they claim to be targeting in the first place.

There are lots of questions here, some of which have already been put on previous occasions by the noble Baroness, Lady Pinnock. Why was this threshold set at £500,000? What is the metric? How are the Government able to justify this figure? The manifesto said that the reforms would

“raise the same revenue … in a fairer way”.

When the Government are planning to raise an additional £2.65 billion by making businesses pay for the retail, hospitality and leisure relief and discounts, which up to now have been funded centrally, that makes me wonder precisely what the business of raising the same revenue in a fairer way amounts to.

If the intention was really to charge more to online giants, one would have to ask why the 90% of hereditaments to which the supplement might apply—the £500,000 rateable value and above—are dealing also with warehousing and other things that are clearly outside that. Some 90% of what they propose to charge does not fall within the category of online giants. It goes on from there. I have already raised the question as to why we cannot get to a more comprehensive reform of business rates—already referred to by the noble Baroness, Lady Pinnock—because this is starting to be an active disincentive to businesses.

That question is not answered by saying that other variable cost elements for businesses are better in this country than elsewhere. This is a direct, in-your-face fixed cost that businesses have to deal with. I cannot see that this is consistent with a growth agenda that intends to attract inward investment.

My interrelated Amendments 2 and 11 are aimed at not worsening the situation for the large retail, hospitality and leisure properties, the inclusion of which in the supplement cannot be justified on property terms. I would prefer the discounts to be applied to all such RHL properties, but this would be even less acceptable to the Government. However, it involves the removal of less than 25% of the total rateable value to which the Bill proposes to apply the supplement. When one looks at the mathematics of this, it really does not stack up. Even at the maximum level of potential supplement, it is substantially less than the extra revenue that the Government will raise from shifting the costs of the RHL relief from the Exchequer to the business rate payer—so it is not very large beer.

I said yesterday in a meeting with the Minister, and I say again, that I and a lot of rating practitioners, and certainly business rate payers, would be a great deal happier if we could have an assurance that the Government will move at reasonable pace to remedy the deficiencies of the current business rate system by whatever means. There needs to be comprehensive thought about this whole process so that we do not simply drift on and create more and more division and less and less confidence. Even at this late stage in the process, can the Minister give a reassurance that this is forthcoming within the current Government, for the better achievement of their aims on investment and growth? I beg to move.

[Lord Shipley (LD)]

My Lords, I remind the House that I am a vice-president of the Local Government Association. I have great sympathy with the contribution of the noble Earl, Lord Lytton, and agree with the conclusions that he has so carefully reached. I know that these Benches would support his amendments.

Amendment 32, tabled by the noble Lord, Lord Thurlow, concerns an important issue. The Government promised in their manifesto to make the payment of business rates fairer and more balanced between retail distribution warehouses and high street shops. Indeed, the Chancellor said in the last Budget that she wanted to shift the burden. Yet all the signs are that nothing will happen until next year at the earliest. I hope that the Minister can give us an update on the timing for the outcome of the review that the Government apparently are undertaking. I say that because this is, as the noble Earl made clear, an urgent matter. Business rates are a major burden on retail high street shops. Sainsbury’s said a few months ago that half of its total tax bill is for business rates.

The system needs urgent reform. One step would be to accept the proposals in this group of amendments. In particular, Amendment 32 sets deadlines for when the Government must have acted. I hope that, if there is an opportunity, we on these Benches can support the amendments in this group.

--- Later in debate ---

[Lord Khan of Burnley (Lab)]

My Lords, yes, I can explain that, because we are talking in particular about the retail, hospitality and leisure sector. The point is very clear. We cannot have a system where every year businesses do not know what their business rates bill is going to be. Over the years—I accept that there has been Covid—we have not had a long-term approach to this. This is part of a wider reform of the whole business rates system. I am sure that the noble Baroness will understand that having a multiyear approach to this will provide more certainty and stability for businesses, which will know what their bills will be. The higher £500,000 threshold properties, which amount to 1%, are supporting the retail, hospitality and leisure sector, in particular, across the country.

[The Earl of Lytton (CB)]

My Lords, I am grateful to all noble Lords who have spoken to this group—and in particular my colleague on these Benches, my noble friend Lord Thurlow, for introducing his amendment.

I appreciate that the Minister has effectively gone as far as his brief permits, but I hope he realises that there is a serious job of work that needs to be done. A reforming Government who come in with a manifesto commitment need to do something better than shuffle the chairs on the deck of a ship that appears to have a very large hole in it, as far as I am concerned.

Before I conclude, I will make three or four comments. If the full 10% supplement is applied on top of—I paraphrase —a 55p in the pound multiplier, that is getting on for 20%. Maybe it is 18%—I have not done the maths—but it is a very substantial proportionate increase. On the Minister’s own admission, it serves to disadvantage what he regards as a “very few”, for the uncertain and, indeed, undetermined benefit of what we take to be numerous smaller fry.

We do not know how that is going to work out, as we have explored in previous stages of this his Bill. It does not target the high street; it does not target it with that benefit, at least not obviously so. For all the hospitals, police stations, theme parks, offices and manufacturing units, along with the distribution network of large warehouses serving conventional retail, it will just result in higher costs to consumers, including, indirectly, via local authorities owning leisure centres and installations of that sort.

So the problem does not go away just because the Government have found the least painful strategy for dealing with these things. I think we will be seeing the ill-effects of this for some time to come, not least in the attrition of confidence of which I spoke earlier. However, with that said, I do appreciate what the Minister has done and his willingness to engage and again thank all noble Lords for their contributions. I beg leave to withdraw Amendment 2.

Amendment 2 withdrawn.

--- Later in debate ---

[Lord Shinkwin (Con)]

My Lords, I support Amendment 30 in the name of my noble friend Lady Barran and the noble Lord, Lord Storey. In doing so, I should explain that leaving Clause 5 out of the Bill is the only way to protect all pupils with SEND who attend independent schools, like those I attended, where the proportion of children with SEND is much lower than 50%. I understand the Government argue that protecting only schools where a majority of pupils have education, health and care plans, or EHCPs, is adequate—as if they can ignore the inconvenient truth that almost 100,000 pupils receive SEND support in independent schools without an EHCP.

I wonder whether the Government have joined the dots and thought of the impression that this gives. The sad fact is that, in the Government’s eyes, the damage to many of these children’s life chances seems to be a price worth paying. They are expendable, immaterial, inconsequential, collateral damage, caught in the crossfire of what appears to be an ideological obsession with punishing anyone they perceive as rich. Yet many of these children’s families, as we have already heard from across the House, are not rich and the Government know it, but they seem not to care. They seem not to care that this is a deeply damaging and wholly disproportionate measure which, as we have already heard, will not raise significant revenue but will harm schools and particularly pupils with SEND who, as I did, come from modest backgrounds. Their life chances will be badly affected by its implementation. They seem not to care, but schools could close because of it. They seem not to care about the incomprehensible incompatibility of putting, as we have already heard, even more pressure on an already overstretched state sector, which the Government know and the National Audit Office has shown, is already failing to meet demand. They seem not to care, incredibly, about the mental health of pupils with SEND, which will undoubtedly be hurt by the impact of this measure unless Clause 5 is left out of the Bill. I say again to the Minister that I refuse to believe that this is the Government’s intention, but it is definitely the impression given.

So I fear that we have lost sight of the people who matter most: the almost 100,000 children with SEND who receive SEND support in independent schools without an EHCP. This amendment gives us the opportunity to send a clear message as a House that we stand with them in solidarity and with their families. That is why I urge noble Lords on all sides of the House to support it and to remove Clause 5 from the Bill.

[The Earl of Lytton (CB)]

My Lords, I had not originally intended to intervene on this amendment, but I cannot help but see a wider point of principle that is involved with Clause 5 of the Bill.

I should explain that rating law serves to exempt premises used by charities and occupied for their charitable purposes, with 80% mandatory relief and 20% discretionary relief given by the billing authority. There is also some discretion for billing authorities to give similar treatment to local not for profit or community enterprises. I hope I have got that right.

What disturbs me is that, clearly, the Government think that some charities are more deserving than others. This throws up a wider issue of an arguably discriminatory policy on which a wider debate across the country is warranted. What might be more or less meritorious when considering organisations concerned with human disease, animals, wildlife or conservation, building preservation and so on? But education is the very basis of what we leave and pass on to future generations in knowledge, citizenship and values. I fail to comprehend what this clause in the Bill is, and that is why I feel compelled to support these two amendments. If we do not secure its complete removal, we should certainly have the review advocated by the noble Lord, Lord Black.

I will illustrate some of the consequences of this. I recently visited my old school as part of the Learn with the Lords programme. I ascertained that this Bill, along with other measures introduced by the Government, will cost it an additional £1 million per year and that this is likely to be reflected principally in staff reductions. I happen to know that this school has a very firm commitment to its staff, as it does to its pupils.

So Clause 5 is more than unfortunate; it is retrograde and, I feel, discriminatory. The Government ought to think again about the purpose and formulation of this particular clause of the Bill.

[Baroness Barran (Con)]

My Lords, the Minister has heard three very strong arguments from across the House. The first is that the principle of not taxing education should be respected and upheld. Secondly, there is the principle that charities should not be subject to any kind of political overreach. Thirdly, the Government should not introduce a two-tier system, punishing charities that do not conform to their views. I think we have heard across the House that this sets a very unfortunate precedent.

Finally, there is the point that this policy will not deliver but rather will impact children, particularly vulnerable children, who attend some of the small schools that serve them and their communities all around the country. I would like to test the opinion of the House.