Non-Domestic Rating (Multipliers and Private Schools) Bill (changed to Non-Domestic Rating (Multipliers) Bill)

Jim McMahon Excerpts

Consideration of Lords amendments
Tuesday 25th March 2025 Commons Chamber

[The Minister for Local Government and English Devolution (Jim McMahon)]

I beg to move, That this House disagrees with Lords amendment 1.

[Madam Deputy Speaker]

With this it will be convenient to discuss Lords amendments 2 to 19, and Government motions to disagree.

[Jim McMahon]

First, I am grateful to Members of both the Commons and the Lords who have so diligently scrutinised the Bill throughout its passage. Before I address the amendments tabled by the Lords, allow me to remind the House of why we introduced the Bill in the first place. This Government have committed to transforming the business rates system, and the Bill is a first step on that important journey. We want to achieve a sustainable system that is fit for the current economic landscape, and where business growth is supported and ratepayers pay their fair share. I thank the noble Lord Khan of Burnley for taking the Bill through the other place and for being so thorough in his approach. I also thank officers of the Ministry of Housing, Communities and Local Government and my private office for all their work on the Bill.

The Government oppose all the amendments before us today and I will provide further explanation as to why. At the Budget, the Government explained that we wanted to introduce new lower multipliers for qualifying retail, hospitality and leisure properties from April 2026 to address the uncertainty of the temporary, stopgap support provided by the annual RHL relief. Business rates represent a stable source of revenue for local government, meaning that this permanent tax cut must be sustainably funded. That is why the Government also announced our intention to introduce a higher multiplier for all properties with a rateable value at or above £500,000. This Bill makes provision to enable the introduction of those new multipliers, so this is the first step towards delivering on the Government’s manifesto commitment to transform the business rates system to one that is sustainable, protects the high street and is fit for the 21st century.

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

On a point of detail, the Minister says the Bill is a “first step”, so will there be further reforms, following these reforms, to the rest of the business rates system to meet his manifesto commitment to replace the current business rates system completely?

--- Later in debate ---

[Jim McMahon]

I am not going to pre-empt any further decisions on this, other than to say that this represents an important and significant step forward. As a constituency MP, he, like me, will have heard from many small businesses—retailers, hospitality providers or leisure providers—who appreciated the support during covid, but were very clear that there was a cliff edge and that that support was coming to an end. The previous Government did not provide any certainty about what followed, so the Bill ends that uncertainty and hardwires in a permanent relief system to ensure those important businesses that are the foundation of our communities and our economy are supported through the tax system.

[Kevin Hollinrake]

The Minister has already said, as he has in previous speeches, that this is a “first step”, but now he says it is a “permanent” measure. I agree with him that business wants certainty, so it is important that businesses understand: is this now a permanent position that will not be changed, or a first step?

[Jim McMahon]

The answer is that it is both, as I will go on to explain in more detail. It is an important first step, and the relief that is provided, funded through the higher rate properties, will be hard-baked into the system, notwithstanding any future support that may well follow, which we are not pre-empting today.

Lords amendments 1, 6, 7 and 12 would remove qualifying healthcare hereditaments from the higher multiplier, and Lords amendments 2, 5, 8 and 11 would do the same in relating to anchor stores. Considering the challenging fiscal environment, it is vital that this permanent tax cut is funded sustainably. The Government have been clear that they will do that by applying the higher multiplier to all properties with a rateable value at or above £500,000. That accounts for less than 1% of all properties and is the fairest approach. The impact on healthcare properties is limited. As set out in the other place, of the 16,780 properties at or above the £500,000 threshold based on the current rating list and rounded to 10, only 350 are in the health sub-sector. Of those, 290 are NHS hospitals and only 30 are doctors’ surgeries or health centres.

At the autumn Budget, the Chancellor fixed the spending envelope for phase 2 of the spending review. The Government are considering the full range of departmental priorities and pressures as part of the spending review, and that includes any impact of the higher multiplier on public sector properties, such as schools and hospitals. I urge the House to disagree with those amendments.

We recognise the importance of anchor stores, and we are doing a great deal to support the high street in this Bill and elsewhere. While the largest anchor stores may be caught by the higher multiplier, they are often part of large retail chains that will have a number of properties with rateable values below £500,000. Those businesses will, therefore, benefit overall from the lower multipliers.

[Suella Braverman (Fareham and Waterlooville) (Con)]

I appreciate the points that the Minister is making. In Fareham and Waterlooville, we have some fantastic pubs, including the Golden Lion in Fareham, the Chairmakers in Denmead and the Heroes in Waterlooville. Many pubs are hubs of our community and make a valid contribution to the local economy, but they have been trading under challenging circumstances and have been asking for a cut in business rates. What will be the effects of the Minister’s position today?

[Jim McMahon]

The Bill provides a cash saving for exactly the types of business that the right hon. Member talks about. We all understand the importance of pubs to our towns, villages and estates, not just as businesses in the economy but as places for the community to convene, to meet and to build relationships and networks. That is exactly why the measures are being brought in, and in a permanent way, because pubs needs certainty. They know the rising costs of supplies, carbon dioxide and energy have put significant pressure on pub operations, and these measures provide long-term stability that bakes in the support the Government can offer into the system.

Many pubs will be free houses and they will be independent. However, a number of pubs will be part of a brewery chain with managers in place. The measures take away the cash cap of £110,000 per business, allowing, for the first time, multiple operators to benefit. That will benefit pub chains, as well as high street stores, such as Home Bargains, Boots and other retailers. Those businesses draw in footfall, which then supports independent retailers as well. The proposals are rounded and provide long-term stability that is properly funded in a responsible way. On that basis, the Government oppose the Lords amendments as laid out.

Lord’s amendments 3, 4, 9 and 10 are concerned with bringing manufacturing properties into scope of the lower multiplier. If we widen the scope of the lower multipliers in that way, it will dilute the support available to RHL properties or jeopardise the ability of the Government to sustainably fund the lower multipliers. We need to be clear that this is not a wide-ranging offer, but targeted deliberately at supporting our communities, high streets and town centres. That is why the Bill focuses on RHL support. The Government are supporting the manufacturing sector through other means. For those reasons, I urge the House to oppose the amendments.

Lord’s amendments 13 and 16 require the Government to undertake a review of how the provisions to introduce new multipliers may affect businesses whose rateable value is close to the £500,000 threshold for the higher multiplier. The review would need to be put before Parliament three months prior to 1 April 2026 in order for clauses 1 to 4 of this Bill to come into effect. These amendments probe around the way the multipliers in the business rates system currently operate. Those hereditaments on the standard multiplier, or in the future on the higher multipliers, pay rates on that multiplier calculated on all of their rateable value, and not just the rateable value above the threshold. That, of course, generates cliff edges in the rates bills for hereditaments as they move between thresholds, and we acknowledge the presence of those cliff edges—it is a matter of fact.

At the autumn Budget, the Treasury launched a discussion with business on the “Transforming Business Rates” paper. This specifically highlights these cliff edges in the system and considers whether they may act as a disincentive to expand, so I can assure the House that we are already looking at the precise issue identified in the amendment. Reforms are being taken forward through the transforming business rates work and will be phased in over the course of the Parliament. Therefore, we believe Lords amendments 13 and 16 are unnecessary.

Lords amendment 14 would require the Government to commence a review that examines the merits of creating, within three months of Royal Assent, a separate use class and associated multiplier within the non-domestic ratings for retail services provided by fulfilment warehouses in England that do not have a material presence on high streets. The noble Lord Thurlow, who put forward the amendment, made it clear that this use class would apply only to business rates. As he explained in the other place, the key task is to identify those warehouses, as distinct from warehouses used by, say, high street retailers—warehouses that may otherwise look the same.

The Lords amendment would bring together the Government and professional bodies working on business rates to identify those warehouses. We are already exploring that objective through an existing project. The digitalising business rates project will allow us to match property-level data with business-level data from His Majesty’s Revenue and Customs to improve the way in which we target business rates, and to identify property and businesses in the way that the Lords amendment envisages.

[Chris Vince (Harlow) (Lab/Co-op)]

I did not intend to intervene, but I was looking through the amendments, and I see that a lot of them focus on exemptions from the business rates. Does the Minister agree that the way to look at supporting businesses in, for example, the manufacturing industry is through other means, not through changing the business rates?

[Jim McMahon]

We welcome scrutiny through amendments and the insight that the other place can provide, just as we welcomed scrutiny in the evidence sessions and Committee sittings; it adds value. We need to be honest: it is natural for Members to want to widen the scope of legislation during its passage, and to include more. In Government, we have to deal with the art of the possible, which means balancing a number of competing interests, not least the impact on taxpayers in the round. The Bill is targeted at those who need it the most—communities and local economies—and it is fully funded to ensure that it is sustainable. We cannot draw the legislation so wide that it does not stand the test of time and does not cover its own cost. That would not be responsible, and certainly would not be sustainable.

Lords amendment 14 would require the Government to implement the recommendations of the review. Given that we do not know what those recommendations would be, I trust the House will understand that we cannot accept an amendment to accept them blindly in advance.

Finally, Lords amendment 15 and consequential Lords amendments 17 to 19 would strike from the Bill the clause that removes charitable rate relief from private schools that are charities. We are unable to accept these Lords amendments. This Government made a manifesto commitment to raise school standards for every child, break down barriers to opportunity and ensure that every child has the best start in life, no matter where they come from or their financial background. Achieving our ambition involves meeting our commitment to removing the VAT and business rates charitable relief tax breaks for private schools; the approach and design of this policy has been carefully considered in the light of that. The measures are necessary in order to raise the revenue to deliver on the Government’s commitment to education and young people, and to improve the state sector, where—let us be clear—90% of children are educated. This Government are prepared to take the tough but necessary decisions to deliver on those bold commitments, so, as with all the other amendments brought here from the other place, I cannot accept these Lords amendments. I hope that the rest of the House follows suit.

[Madam Deputy Speaker (Caroline Nokes)]

I call the shadow Secretary of State.