Non-Domestic Rating (Lists) Bill

Jim McMahon Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons & Ways and Means resolution: House of Commons
Monday 17th June 2019 Commons Chamber

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

First, may I refer Members to my entry in the Register of Members’ Financial Interests? I am a vice-president of the Local Government Association. We are very supportive of more frequent revaluations. There are growing calls to make sure that that happens, not only to ensure their relevance but to remove any potential sharp cliff edges—the longer a revaluation is left, the more the valuations between regions drift.

The LGA, though, would like the Government to go further, and asks them specifically to reduce the significant backlog of appeals: there are a staggering 65,000 unresolved appeals from 2010 in the system. That is important because local councils have to have £2.5 billion in reserves, in case those appeals are successful and the risk is carried by council services. The LGA also asks for the appeal period to be capped at six months. Again, that would reduce the financial exposure for which local authorities would have to make provision through their reserves. The LGA believes that that would be more appropriate.

We must consider the impact of revaluations with regard not only to the changing nature of demand—including for retail, office and other types of uses—but to the geographical shift away from our regions to London and the south-east, as shown by the most recent revaluation. The net take for the Treasury has to be broadly the same, and the revaluation reflects the increase in value in London and the reduction in the regions.

In the 2017 revaluation, it was only London that experienced an increase in all values across all sectors: retail was up by 26.2%, industry by 15.1%, office by 21.2%, and other uses by 25.7%. Every other region, bar the south-east, experienced a reduction in retail values, including by 1.2% in the west midlands and by 6.8% in the north-east. Although office values were more mixed, Yorkshire and the Humber experienced a decrease in value of 13.25%, followed by the north-east, which was down by 12.5%. A real shift is taking place away from our regions, primarily in the north, towards London and the south-east.

Let me paint what that picture means in pounds and pence, because that is what the Treasury cares about when it comes to business rates. The square mile of the City of London alone is now valued higher than the whole of Wales. Westminster City Council and Camden Council together are worth more than the whole of the north-west of England. Greater Manchester alone is valued higher than the whole of the north-east of England. We are seeing major shifts in values across the country, focusing not just on the capital but on the city bases away from our towns.

Why is that important? As more local authorities move towards business rate retention schemes, all with varying degrees of retention and because of that different degrees of exposure, there will be an impact on those with 100% retention in particular. Councils will be asking—following the next revaluation in 2021, should the Bill go through—what safety net will be in place to ensure that councils with perhaps weaker economic bases are not disadvantaged because they have opted into a business rate scheme. That is not because they have not been working hard to drive their local base—many have been doing that, which is why they went into the scheme in the first place—but because the nature of demand in those places has changed so much.

In Committee, when we have a bit of time to secure evidence to test some of these ideas out, I hope there will be a spirit of wanting to work together to try to make the system work. We have heard some pushing demands from Members who, quite rightly, recognise that council tax and business rates are both very important property taxes which also have limitations. It is important that both are sustainable and fair on the payers.

[Bob Blackman]

The hon. Gentleman provides an analysis, which I recognise, of the changes that took place during the previous revaluation. He also says that there is an opportunity for local authorities to grow their economic base. Has he done any economic analysis of how successful those areas of the country that have seen a greater fall in their valuations have been in attracting businesses, in particular where public services and Government Departments have been devolved to those areas, which can increase the economic basis of those local authorities?

[Jim McMahon]

We have done that analysis. We have spoken to local authorities that are part of the retention scheme and where they have managed to capture the uplift in growth of values. I should say, however, that in combined authority areas and city regions, where we take the locality in the round we are seeing a shift away from towns to cities. The cities are performing very well and we are seeing stability in the retail and office markets, but we are not seeing the same repeated in the neighbouring towns that can be only a mile or two up the road. In terms of net gain, a lot of them will have to bring forward their strategic plans to ensure they are developing enough big employment sites, because it will eventually come down to square footage as we see the nature of it shift.

Let us be honest: we are talking about an online sales tax. The Government have really resisted that. There are some legitimate reasons to be cautious, particularly in terms of EU legislation and what that might mean for a potential challenge, but the fact is that we have not addressed, even within the business rate regime, how completely unfair it is for the high street anchor store —John Lewis, Debenhams and so on—which brings in footfall into town centres and supports the other retailers. The Amazon big shed on the edge of the motorway pays a fraction of the business rates to occupy that space, when it is actually a more productive space direct to the consumer. There is a lot of room to go here, not just to rely on an internet sales tax, but to get around a table, work through the detail cross-party and really test what areas are not controversial. Most people who understand this recognise that the system has to catch up with the changing times. That offer has been on the table for a while and perhaps one day it will be taken up.