Non-Domestic Rating (Nursery Grounds) Bill

Greg Knight Excerpts

2nd reading: House of Commons
Tuesday 5th June 2018 Commons Chamber

[Rishi Sunak]

It is not quite my place to comment on future immigration policy, but the hon. Gentleman will know that the new Home Secretary is devising a new immigration system for the UK after Brexit. Of course, ensuring that all businesses, not just in agriculture, have access to the talent and the labour they need will be at the forefront of that new system.

The Government have also said that they will use the structural fund money that comes back to the UK following the EU exit to create a UK shared prosperity fund. The needs and interests of rural businesses have to be addressed as part of any future plans.

We firmly believe that the business rates system plays an important role in supporting agricultural productivity. The agricultural exemption from business rates is a key part of this support. It is a broad-ranging and generous tax measure that ensures that no business rates are paid on agricultural land and properties.

[Sir Greg Knight (East Yorkshire) (Con)]

The Bill itself does not define what a “nursery ground” is, but the explanatory notes, which are not considered by Parliament and are not part of the legislation, do contain a definition of what a “nursery ground” is. Why is this? Would it not be better to put the definition in the Bill, or does it exist in other legislation?

[Rishi Sunak]

My right hon. Friend is right. My understanding is that other legislation has outlined the difference between the two, and I will come on to the Court decision that distinguished the treatment of the two.

It might be helpful, for Members who are not aware, if I explain the distinction. A nursery ground is where small plants or trees are propagated or sown with a view to their being sold on to someone else for growing on to their mature state, for sale to or use by the end consumer, whereas a market garden is where fruit, vegetables, flowers or plants are produced to be sold directly or indirectly to members of the public for consumption.

--- Later in debate ---

[Rishi Sunak]

I thank my hon. Friend for bringing up a helpful and important point that is worth clarifying. Under current legislation, garden centres are not exempt from paying business rates because they are not treated as agricultural businesses, which I am sure hon. Members will understand. It would be for the Valuation Office Agency to determine the individual facts of the case that he mentioned, but in general, it is perfectly possible for different parts of an entity to be treated in different ways. In the example he gave of a hybrid, where an agricultural business also had a retail operation, the Valuation Office Agency would be able to treat different parts of the business in different ways, and some may benefit from the agricultural exemption. Another example might be a working farm that also happens to have a retail element—for example, a farm shop—that might not benefit from the agricultural exemption, whereas the rest of the farm would. I hope that that clarifies my hon. Friend’s query.

In developing this legislation, we have worked very closely with the National Farmers Union to make sure that the measure meets our shared aim of ensuring that plant nurseries benefit from the agricultural exemption. I want to put on the record my thanks to the NFU for its invaluable insights and expertise, which has helped us to bring this effective legislation to the House. I very much welcome its support for the Bill.

I also want to put on the record my thanks to my hon. Friend the Member for St Austell and Newquay (Steve Double). He deserves enormous credit for highlighting this issue to both my predecessor and others last year, and he has continued to press the case with Ministers and other parts of the Government. I am glad that he will be able to see the fruits of his labour brought to bear today.

To return to the comment made by my hon. Friend the Member for Harrow East (Bob Blackman), the Bill will not otherwise disturb the existing boundary of the agricultural exemption, so uses beyond agricultural operations, such as garden centres, will continue to be subject to the normal business rates process.

[Sir Greg Knight]

Is the Minister in effect saying that all the Bill does is return the law to the same state we all thought it was in before the case of Tunnel Tech v. Reeves?

[Rishi Sunak]

My right hon. Friend is absolutely right: that is what the Bill seeks to do. It is a limited, targeted Bill that restores the practice previously widely accepted and understood by all participants in the rating system and ensures we will return to the state that existed before the Court of Appeal decision.

While I am responding to my right hon. Friend, let me clarify my earlier point. He asked where exactly the definition of nursery grounds can be found. I am reminded that it is precisely defined in case law, rather than in statute. That is where the definitions used over the years have been developed.

To turn to the business rates system in general, the Government are very clearly using the business rates system to create opportunities and to drive growth across the country. The Government have introduced a range of business rates reforms—worth over £10 billion by 2023—that will benefit the wider economy, including many businesses in rural areas. In April 2017, we permanently doubled small business rate relief to 100%, and raised the threshold from £6,000 to £12,000. As a result of these measures, over 600,000 small businesses—occupiers of a third of all properties—now pay no business rates at all. This demonstrates the Government’s clear commitment to supporting small businesses. We understand the impact of business rates in the rural economy in particular, so at the same time the Government also doubled rural rate relief from 50% to 100% for eligible businesses.

[Rishi Sunak]

My hon. Friend is absolutely right. She will know that I also represent a deeply rural constituency. I have seen at first hand the incredible difference that the business rates exemptions make to small rural enterprises, whether they are small business rate relief, rural rate relief or, indeed, some of the measures to support pubs that the Chancellor has announced in the last Budget or two. All of these measures add up to tangible savings for thriving enterprises, which are indeed the lifeblood of rural areas.

My hon. Friend will know, as I do, that rural areas typically do not benefit from large multinational employers. The backbone of rural economies are small and medium-sized enterprises, for which business rates are often a significant cost to bear. Any relief that the Government can give is always warmly welcomed, and it makes an enormous difference to their profitability and future success.

I am pleased to tell my hon. Friend that the Government continue to listen to business. At the spring Budget last year, the Chancellor announced a £435 million package to support rate payers facing the steepest rises in bills following the revaluation. Further answering calls from businesses, the Government brought forward to April this year the switch in the annual indexation of business rates from the retail prices index to the consumer prices index. That represents a cut in business rates every year. Although bringing forward that measure two years earlier than previously planned might sound technical, it is worth £2.3 billion over the next five years.

Furthermore, at last year’s autumn Budget the Chancellor also announced an increase in the frequency of property revaluations from every five years to every three years following the next revaluation. That will ensure that bills more accurately reflect properties’ current rental value and relative changes in rents. The 2018 spring statement announced that the next revaluation would be brought forward to 2021 from 2022, so that businesses can benefit from the change as soon as possible. After that, three-year revaluations will take effect in 2024.

To deliver on that commitment, the Government have already introduced secondary legislation to set the valuation date for the next revaluation on 1 April 2019, allowing the Valuation Office Agency to start preparing for a 2021 revaluation. The Government will introduce primary legislation to change the date of the next revaluation to 2021 in due course. The British Retail Consortium recognised that that was a positive move to improve the fairness of the system, and I look forward to meeting its representatives shortly.

In spite of all that, the Government are not resting on our laurels. We are also reviewing the wider taxation of the digital economy, and the Chancellor has been clear that we need to look more broadly at the overall taxation of the digital economy. The Government are working internationally to ensure that corporate tax rules deliver fairer results for certain digital businesses. We will use the output of those discussions to help inform consideration of the wider business tax system, to ensure that all businesses make a fair contribution to the public finances and that business rates continue to support the stability of local government funding.

[Sir Greg Knight]

I am grateful to the Minister for his generosity in giving way. What would be the position of a business adversely affected by the Court of Appeal decision? Would it be able to claim compensation for any losses suffered?

[Rishi Sunak]

I am happy to tell my right hon. Friend that businesses will absolutely be able to claim back any business rates they have paid from 1 April 2015. In Wales, businesses will be able to claim back to 1 April 2017. It might help Members if I explain the difference between the two dates.

The business rates system in England has relative lists of valuation dates—there is a 2010 list and a 2017 list. When we reach a certain point, it is then impossible to go back and change the list from the beginning. In this case, for any decisions that the Valuation Office Agency made after the spring of 2016, it was only possible to go back and change people’s bills to April 2015. Our understanding is that only a handful of businesses have been caught, and they will be able to use this legislation and subsequent regulations to appeal to the Valuation Office Agency and receive a refund backdated to when they first started paying bills.

[Sir Greg Knight]

Will the Minister clarify something—and if he cannot answer today, will he write to me? In addition to claiming back what has already been paid, will the businesses affected be able to claim costs and any other expenses arising out of the money that they erroneously had to pay?

[Rishi Sunak]

The businesses will not be able to claim costs; the new “check, challenge, appeal” system allows them to make a no-cost filing with the Valuation Office Agency, so there will be no cost to them as they claim back the bills they paid. However, it is important to note that, when they paid, the bills were not paid in error; they reflected the circumstances on the ground at the time.

I said that I would clarify why the date in Wales is different from the date in England. It is purely on the advice of Welsh Government officials. They do not believe that any businesses have been caught up by this in a way that would impact their previous list. In Wales, therefore, any active businesses caught up in this will only have their bills backdated to 2017 at the start of the new and current ratings list. Further retrospective dating is therefore not required.

--- Later in debate ---

[Matt Warman (Boston and Skegness) (Con)]

We are always being told that debates in Parliament should be about real people, not statistics, and in that spirit, for me, this debate is about cabbages and flooding, not business rates per se.

This matter first came to my attention when the Black Sluice drainage board came to me deeply concerned about the prospect of losing £23,000 as a result of the levy. Worrying though that was, it turned out that a business in my constituency—it is incredibly rural, and in many areas business rates payments are very little, which is why I have some concerns about business rates retention, although we will gloss over that—was, although set to see its drainage levy fall by £23,000, faced with a business rates rise of well into six figures. So my drainage board—one of several in my constituency—was in a state of some confusion over the prospect of not having enough money to keep people’s feet dry, and my local businesses were in a state of perturbation at the prospect of going bankrupt.

This anomaly was a real issue for my constituents, as it was for those of my hon. Friend the Member for Chichester (Gillian Keegan). When I went to see R. Fountain & Son, the business in my constituency, I was delighted to discover not just its confidence in expanding its business, this potential problem aside, but how much it led not just Lincolnshire—a pretty difficult place to lead when it comes to growing brassicas—but the country in terms of its technology. In collaboration with the National Farmers Union, whose work on this I pay particular tribute to, it alerted me to the anomaly arising from the Tunnel Tech case and the ramifications of that case for it and others running glasshouses across my constituency.

[Sir Greg Knight]

I believe that my hon. Friend’s constituency contains two villages called Bicker and Wrangle, which I have always thought would make an excellent name for a law firm.

It was suggested earlier that there should be a compensation fund for those who had had to pay rates in the past, and also for local authorities that had suffered loss. What is my hon. Friend’s view on that, and who does he think should pay for such a fund?

[Matt Warman]

My constituency also contains a village called Old Leake, which is in the same ward as Wrangle. “Wrangle and Old Leake” surely has some comic potential as well. I agree with my right hon. Friend that businesses that have paid out—I should say that I do not believe that Fountain is in that position—should be entitled to the refund that the Minister suggested, and the Government should consider establishing such a fund if compensation is due.

Having been exempted from rates since 1929, the businesses to which I have referred were faced with a number of factors that they had previously never even had to consider incorporating in their business models. I understand that glasshouses, which are obviously of huge concern to a constituency such as mine, have been exempted since the 1990s. An issue on which businesses throughout this section of the economy have been entirely predicated was upended by the courts almost overnight.

I agree with the hon. Member for Oldham West and Royton (Jim McMahon) that the Government deserve some credit for seeking to clarify what might have been an important issue had the system been allowed to persist. There was real concern—not just among businesses in my constituency—when it became obvious that the Valuation Office Agency was going down this path. I began by saying that the issue was about brassicas and flooding, but in fact it is about the jobs that would have been at stake. If the Government had not intervened to clarify the position, people would undoubtedly would have found themselves out of work.

I pay tribute to my hon. Friend the Member for Nuneaton (Mr Jones), who at the relevant time had ministerial responsibility for these matters. Having visited those at R. Fountain & Son and reassured them that I was confident that such an extreme situation could only be the result of a mistake rather than Government policy, I had the extraordinary and delightful experience of mentioning that to my hon. Friend in a Lobby—he may not even remember it—and being told that the Government were already looking into the matter. It was a pleasure to be able to go back to businesses in my constituency and say that the Government would not be daft enough to increase their business rates so suddenly and massively.

To be honest, however, it was an even greater pleasure to go back to the drainage board. While I obviously care greatly about businesses throughout my constituency, the work of drainage boards in Lincolnshire is particularly and enormously valuable. They do huge service to the broader economy, and provide a great deal of reassurance through their work with the Environment Agency across the broader flooding landscape. Given that, according to the Association of British Insurers, my constituency is at greater risk of flooding than any other, I am particularly alive to that.

As I have said, my constituency is largely agricultural, and we are grateful for the business rates retention pilot. The Department is obviously aware of what must be done to ensure that business rates retention works for the areas to which it is applied, and that we do not end up losing out overall and accidentally giving more money back to the Treasury. I know that it does not intend that to happen in any circumstances.

I hope that Members will bear in mind that the Bill represents a useful endeavour to fix a problem that would have had a real impact not only on the local economy and jobs in my constituency, but on the availability of cabbages throughout the country, about which I know the House cares deeply. I also hope that, while accepting my praise for his swift action, the Minister will bear in mind that it highlights what business rates retention may well look like as we proceed with what I consider to be a worthwhile and popular policy.

--- Later in debate ---

[Rebecca Pow]

I thank my hon. Friend and apologise to you on his behalf, Mr Deputy Speaker. However, he made a useful intervention, because I am going to come on to that point. That issue was causing concern among many businesses, because it would have cost some of them hundreds of thousands of pounds, and some smaller businesses could have been wiped out, so this is a serious point.

[Sir Greg Knight]

First, does my hon. Friend share my disgust that not one Liberal Democrat MP is in the Chamber to discuss an important matter affecting rural communities? Secondly, although retrospection in law is generally to be frowned upon, does she agree that it is most welcome in this case because we are righting a perceived wrong?

[Rebecca Pow]

We began this debate on a cross-party basis, and I am loth to say anything more controversial, but he makes an exceedingly good point about the Liberal Democrats. They were large in the south-west, but we wiped them out—as one does with a weed wiper, to use another horticultural term. The south-west is a rural region, and gardening and horticulture are important parts of our economy. One would have thought that the Liberal Democrats might have realised that and turned up, but yet again it is the Conservative party that speaks up for the rural community, and I am proud to be part of that community. [Interruption.] The hon. Member for Stroud (Dr Drew) is also here, of course.

The south-west has a good climate for horticulture, as does Chichester, and horticulture and gardening are important in Taunton Deane. We have some wonderful open gardens and visitor attractions, such as at Hestercombe and Cothay, hundreds of private gardens, and many allotment holders, many of whom have plants that started their lives in the nurseries that we are talking about today. I had a marvellous Sunday planting out my fuchsias, geraniums and alyssums into my tubs and containers, and they would have started life at one of those nurseries. I had a lovely time, and the weather was beautiful.

To get back to the Bill, which is going to come to fruition today—to use another horticultural term—nursery grounds were exempt from non-domestic rates from 1928 until recently, when the Court decision that we have heard about found exemptions to be an incorrect application of the law. As I said, that change caused a huge amount of worry in the nursery industry, where margins are tight. The Horticultural Trades Association reported that the change would be detrimental to the industry, inevitably driving up costs if nurseries had to pay business rates that they had not been paying previously, and that those costs would be passed on to the consumer. As Conservatives, that is not something that we are in favour of.

--- Later in debate ---

[Nigel Adams]

I absolutely agree with my hon. Friend. In fact, without his amendment on the Local Government Finance Bill, I am not entirely sure that we would have got to this measure so quickly, so he should be congratulated, along with the NFU and everybody else who has contributed to the Bill.

Mr Deputy Speaker, I am wearing a new set of glasses. I thought that the clock said 6.59, but it actually said 6.49, so, if you do not mind, as there are so many Members in the Chamber, they may very well want to hear some more about what this Government are doing for the rural economy.

[Sir Greg Knight]

I am most grateful to the Minister for giving way. Perhaps he should have gone to Specsavers. Will he say a little bit more about compensation? Some of the people who have to pay rates, which they will now get back, may have deferred business investment decisions, based on a business expense that they were not expecting. There is an arguable case in future for our looking at the issue of compensation again.