Non-Domestic Rating (Multipliers and Private Schools) Bill

Debate between James Murray and Kevin Hollinrake

2nd reading
Monday 25th November 2024 Commons Chamber

[James Murray]

I thank the hon. Lady for her intervention, but what will have a positive impact on state schools across the country is the extra funding that we announced in the Budget. If Opposition Members want to support extra funding for schools, they have to support some of the tough decisions to raise that revenue in the first place. They cannot have it both ways. I know the new Leader of the Opposition is very keen to oppose tax rises while claiming that she supports the investment, but she cannot have it both ways. If Opposition Members want to support extra funding for schools, the NHS and other public services, they have to have some responsibility and accept the decisions that we are taking, or propose some of their own.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Will the Minister confirm the continuation of small business rates relief for the rest of this Parliament?

[James Murray]

I will come to business rates. The hon. Gentleman will have a chance to respond in full in just a moment. [Interruption.] I see that he is impatient to tell us how much he supports the Bill—or am I misreading the signs from across the Dispatch Box?

As I have said, this Bill will enable the introduction of new multipliers in the business rate system from 2026-27. The provisions in this Bill will enable the introduction of two lower tax rates, which may be applied only to qualifying retail, hospitality and leisure properties. The definition of “qualifying properties” will ultimately be set out in secondary legislation but, for the avoidance of doubt, it is our intention that the scope of these new tax rates will broadly follow that used for current retail, hospitality and leisure relief. These new rates will provide permanent tax cuts, offering certainty to businesses by ending the continued uncertainty of retail, hospitality and leisure relief, which has been rolled over annually since covid-19.

Our intention is for a lower rate that offers a tax cut for retail, hospitality and leisure properties that currently pay the standard multiplier, with a rateable value between £51,000 and £499,999. Another rate will offer a larger cut to the retail, hospitality and leisure properties currently paying the small business multiplier, which are those with a rateable value below £51,000.

We are clear, however, that any tax cut must be sustainably funded. For that reason, the Bill will also enable the introduction of higher multipliers, which can be applied only to the most valuable properties—those with a rateable value of £500,000 and above, which represents less than 1% of all properties in England. The rates for any new multipliers will be set in the 2025 autumn Budget in the light of the outcomes of the 2026 revaluation. The Government recognise, however, that it would be inappropriate to take unfettered powers that allowed the Government to change tax liabilities by unlimited amounts. For that reason, the Bill includes sensible guardrails to limit the use of those powers.

The guardrails determine that the two lower tax rates, when introduced, may not be set lower than 20p below the small business non-domestic rating multiplier, and that the higher tax rates, when introduced, may not be set higher than 10p above the non-domestic rating multiplier. Let me make it clear that those values are maximum parameters and do not represent the changes that we intend to implement. They are guardrails that offer sensible limits with proportionate flexibility. They ensure that the Government can respond to future revaluations as well as the changing economic and fiscal context. As I said, the exact rates for 2026-27 will be set out in next year’s Budget.

Alongside the provisions on multipliers, the Bill contains provisions relating to private schools that will raise around £140 million a year. There are more than 2,400 private schools in England, of which approximately half are charities and are able to benefit from business rates charitable relief. The Bill will remove the eligibility of private schools that are charities for that relief. The Bill provides a specific definition of a private school as

“a school…at which full-time education is provided for pupils of compulsory school age…where fees or other consideration are payable for that…education”

or

“an institution…which is wholly or mainly concerned with providing education suitable to the requirements of persons over compulsory school age but under 19…where the provision of full-time education…is wholly or mainly provision in respect of which fees or other consideration are payable”.

A number of right hon. and hon. Members have questioned how the Government’s plans will affect pupils with special educational needs and disabilities. My officials and I carefully considered the design of the policy, and the provisions in the Bill mean that private schools that are charities that wholly or mainly provide education for pupils with an education, health and care plan will remain eligible for charitable rate relief. To be clear, in answer to the earlier question from the hon. Member for Gosport (Dame Caroline Dinenage), “wholly or mainly” in business rates generally means 50% or more. The Government believe that will ensure that the majority of special educational needs schools will not be affected by the measure.

The measure will operate in addition to the existing business rates exemption for properties used by private schools wholly for the training or welfare of disabled people. That exemption, which we are retaining, means that those types of properties pay no business rates at all. Taken together, the existing and new provisions are intended to ensure that most private special educational needs schools will not be affected by the removal of charitable rate relief.

--- Later in debate ---

[Kevin Hollinrake]

I am grateful to the hon. Gentleman for his intervention. I remind him that it was not the Conservative party that voted to leave the European Union, but the people of this country. We respect democratic mandates.

I hope every Member on the Government Benches who walks through the Lobby to support the Bill tonight realises the price their constituents will pay for that decision. If the Government will not publish the likely consequences of the Bill, let me set out what I believe the consequences will be.

The Government claim to be cutting business rates relief for retail, hospitality and leisure businesses in England, but that is not the case. The business rates relief for retail, hospitality and leisure businesses that we introduced cuts 75% off bills, but that support is being reduced by the Labour Government. They are almost halving that relief to 40%, meaning that shops, restaurants, cafés, pubs, cinemas, music venues, gyms and hotels will all see their business rates rise.

[James Murray]

Was that 75% business rates relief for retail, hospitality and leisure businesses due to expire in April 2025?

[Kevin Hollinrake]

As the Minister knows, it had been renewed every year since 2021. The Conservative party supports businesses. When that 75% was passed on in England, the same moneys were provided to Scotland and Wales. What did Wales do? Only 40% relief was passed on, not 75%. That is the Welsh Government’s attitude to business. The Conservative party supports businesses, but the Labour party does not because it does not understand them.

Businesses face a stealth tax from Labour, with a £925 million rise in rates next year. That will add more than £5,000 to the business rates bill for the average pub, on top of £5,000 per year in extra costs for national insurance rises. It will also add more than £9,000 to the rates bill for the average restaurant, on top of the £12,000 national insurance increase, which means an additional £21,000 in total per annum for a typical business.

There will also be an increase of up to £2.7 billion in 2026 through higher business rates via the new multipliers, despite Labour’s manifesto promise not to increase the amount raised by the levy. These tax rises, as the CBI has said again today, will be passed on to workers through lower wages and to consumers through higher prices, making a mockery of Labour’s claim that it would not raise taxes for working people. The British Retail Consortium has warned the Government:

“The sheer scale of new costs and the speed with which they occur create a cumulative burden that will make job losses inevitable, and higher prices a certainty.”

The Bill will replace retail, hospitality and leisure relief with a lower multiplier for businesses with a rateable value below £500,000. That will be funded by the new higher rate multiplier for premises with a rateable value of more than £500,000, as the Minister set out. Setting the threshold at that higher level is a blunt instrument. I can assure the Government that it will have consequences for businesses that are not big online retailers. It will hit large supermarkets, supermarket delivery, large department stores, football and cricket clubs, conference centres and airports. Some of those on whom the new charges will be levied pay tens or hundreds of millions of pounds in rates. At the maximum level, it will mean a 20% increase to their rates bill.

It is no wonder that the outgoing chief executive of John Lewis has criticised Labour’s lack of business rates reform and warned that, alongside the national insurance increase, this is a “two-handed grab” from businesses. The Cold Chain Federation has warned that the business rates changes and the NICs increases could lead to the cost of food and medicine going up. That might be a double whammy for consumers, as the National Farmers Union has warned that the cost of food will go up because of the family farm tax. The Labour Government do not seem to have thought that through. The Labour party used to say that the business rates system created uncertainty, but now KPMG has described the Government’s plan to change the business rates system, as set out in the Bill, as “creating uncertainty for businesses”.

The Bill is silent on the matter of small business rates relief, which is a lifeline for many businesses on our high streets. When the Minister for Local Government and English Devolution winds up the debate, will he confirm that the Government intend to retain small business rates relief for the rest of this Parliament? Business is listening, and it needs to know.

Let me address the sting in the tail of the Bill: Labour’s education tax. The shadow Education Secretary, my right hon. Friend the Member for Sevenoaks (Laura Trott), feels passionately, as do all Conservative Members, that the Government are making the wrong decision. This Bill is part of the Government’s education tax, because removing the charitable rate relief from private schools that are charities goes hand in glove with the utterly wrong-headed, anti-aspirational and counterproductive policy of charging VAT on private school fees.