Non-Domestic Rating (Preparation for Digital Services) Bill

Jim Cunningham Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons
Monday 13th May 2019 Commons Chamber

[Rishi Sunak]

The measure is even narrower than that; it is simply a paving measure, which I will come on to, that enables that exploratory work to start so that future Ministers will be able to come to this House with firmer proposals, with costs attached, depending on the eventual design of the system that is ultimately decided to be appropriate after extensive consultation with the sector. If my right hon. Friend bears with me, I hope his question will be answered later. If not, I will be happy to have him intervene again.

In the lead-up to the 2016 Budget, the Government undertook a wide-ranging review of the business rates system, in response to public calls to reform. As well as seeking views on the business rates tax itself, the review invited specific feedback on the administration of the rates system, including how business rates are collected.

Responding to the review, business groups called for a number of changes to the way the system is run, including switching the annual indexation of the business rates multiplier to the consumer prices index, rather than the retail prices index; implementing more frequent valuations; and modernising the billing and collection of business rates. I am pleased to say that the Government have already begun reforming the system to implement those changes.

Ratepayers are already benefiting from the change to the annual indexation of business rates from RPI to CPI, which was brought forward by two years, to April 2018. That measure alone is worth almost £6 billion to businesses over the next five years. The Government have also committed to increase the frequency of business rate revaluations from every five years to every three. To ensure that businesses benefit from that change at the earliest point, the Government have further announced that the next revaluation will be brought forward from 2022 to 2021. That will ensure that, as requested, business rates bills more accurately reflect properties’ up-to-date rental value and any relative changes in rents.

The Bill will enable us to begin exploring how to modernise the billing and collection of rates. Businesses in this country are of course already banking, paying bills and making sales online. Our tax system needs to keep pace.

[Mr Jim Cunningham (Coventry South) (Lab)]

Has the Minister seen press reports today that some major companies are calling for a 20% reduction in business rates? Does he have any comments to make about that?

[Rishi Sunak]

It is important to remember that the Bill is much narrower in scope than the design of the business rates system and how individual businesses pay the bills they are given. My hon. Friend the Member for Rossendale and Darwen (Jake Berry), the high streets Minister, is looking forward to winding up the debate, and he will be able to give the House chapter and verse on every single initiative the Government have undertaken to support businesses on the high street. In sum, there has been £13 billion of relief since the 2016 Budget, and a third of all businesses no longer pay any rates at all.

--- Later in debate ---

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

I will not put the House through a rendition of “Happy birthday”—[Hon. Members: “Shame!”] But many happy returns.

Perhaps this is a missed opportunity. It is a shame, really, that the Bill is so narrow, because we have a good five hours where we could have talked about the real threats our businesses face, the dangers to our high streets and the many representations made on this issue. Nevertheless, this Bill is progress. Following the falling of the Local Government Finance Bill when the general election was called, we encouraged the Government to come forward with non-controversial elements of that Bill. Clause 14 was not controversial, so I am glad to see it in this Bill.

Local councils are on the frontline of government, delivering services that people rely on and which both support and enrich our communities on a day-to-day basis. Labour welcomes the modernisation of tax collection and the move to online payment and account facilities. However, the proposal to develop an online payment system led by HMRC, as set out in the Bill, does raise some questions.

Madam Deputy Speaker, I refer you to my entry in the Register of Members’ Financial Interests as a vice-president of the Local Government Association, the body that represents councils, which are the billing authorities responsible for the collection of business rates. It, like me, wants confirmation that the move to develop an online payment collection facility will not change the fundamental and historical role of local councils as billing authorities with the legal responsibility for the collection of business rates. In the design of this new bridging system, to what extent have the Government sought input and representation from local government? Local government has significant experience in designing systems and processes, and it is important to draw on that to make the best of this proposal.

As the Government are investing in digital services, do they intend to streamline this online facility with the check, challenge and appeal process already in place? That would make it easier for businesses to have an end-to-end business rate system in place, marrying in one system the payment mechanism with the ability to check and appeal business rates. What payment mechanism will be in place to transfer funds to local authorities, especially in rate retention pilots? Who will be responsible for the collection of rates, and who will underwrite funds lost through non-collection?

The most critical issue is the wider sustainability of business rates and their role in funding local public services and encouraging local economies to thrive. Local government has already seen severe cuts after nine years of brutal and devastating Tory austerity.

[Mr Jim Cunningham]

One of the reasons that there is a reaction from businesses regarding the level of business rates is that while central Government should have been responsible for funding certain services, they have shoved that on to local authorities, which have had to put that through business rates, just like the police and fire authorities’ precepts.

[Jim McMahon]

It is a matter of fact that the Government are moving towards the self-financing of local government. That is fine if a local authority can generate money through business rates and council tax in its local economy, but if, for whatever reason—usually for historical reasons—it is not able to do that, the Government do not care if councils sink or swim. That is no way to fund adult social care or children’s safeguarding services, or to make sure the homeless get the support they need either. Quite frankly, it shows a callous disregard for the role of central Government in making sure that every area gets its fair share of funding. That is a critical point.

[Mr Cunningham]

Anybody who has any experience of local government—my hon. Friend does, as do I and many others in here—knows that three or four years down the road, though they hint at looking again at business rates, Ministers will come along and tell everybody in local government, “You’re profligate, you’re spending too much, so we’ll cap you.” As I am sure he will remember, we have had all this before.

[Jim McMahon]

The hallmark of local government across parties—this is not a party point—is that people roll up their sleeves and get on with it. They do not complain; instead, they find solutions to the difficult challenges facing the community, but that is made much harder when central Government are disconnected.

Successive Secretaries of State have failed to champion local government, which is why I welcome our shadow Secretary of State having that local government background and experience and really believing in it. I hope he will be Secretary of State in the future, leading on this from the Government Benches. It is critical that the Secretary of State should not batter local government all the time. It needs a champion to celebrate what goes on in every community and, regardless of party affiliation, to fly the flag for what has been proven to be the most efficient arm of government—they are our champions, and we should thank them for all the work they do.

By 2025, there will be a funding gap in local government of £8 billion, and by 2020 local authorities will have faced core funding cuts at the hands of central Government of nearly £16 billion since 2010. That means that councils will have lost 60p for every £1 the Government previously provided to cover local public services. Next year, 168 councils will receive no funding whatever from central Government to meet the cost of rising demand for local public services.

What impact will that have? We can talk about the big numbers, and £16 billion is a huge number and has had a huge impact, but this is really about people and communities—the streets where people live, the communities that bind people together and make places decent places to live. The cuts have had a dramatic impact on government services. Youth centres have closed; libraries have reduced their hours, and hundreds have closed altogether; and meanwhile, social care is on the verge of collapse. Warning after warning has been issued, but the Government, particularly the Treasury, have not come to the table. As a result, our councils are having to make difficult and unwelcome decisions about where to make efficiency savings, and that is hampering their ability to prioritise social good above all else.

Moving to an online payment system administered by HMRC, but with links through to local billing authorities, raises a more fundamental point about taxation on business overall. Currently, many believe it operates in a silo and that the approach to business taxation is very disjointed. While our town centres and high streets are going to the wall, the online giants are making record profits and ensuring that as much as possible is sent offshore. The Government should use this opportunity not just to introduce a digital payment system, but to undertake a more fundamental review of business taxation overall to ensure that tax is generated where the wealth is created and that our town centres and communities are properly supported. We look forward to scrutinising the Bill properly and to hearing answers to the questions posed.