Non-Domestic Rating (Lists) Bill (Second sitting)

Debate between Jim McMahon and Rishi Sunak

Committee Debate: 2nd sitting: House of Commons
Tuesday 25th June 2019 Public Bill Committees

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

It is a pleasure to serve under your chairmanship, Mr Gray. I hope not to detain the Committee for more than a few minutes.

I hope that by now the Committee is familiar with the three specific improvements the Bill will make to the business rates system: first, it will move the next revaluation in England and Wales to 1 April 2021; secondly, it will move the cycle for revaluations in England thereafter from every five years to every three years; and, thirdly, it will move the latest date by which draft rateable values must be prepared in England and Wales to the 31 December preceding the revaluation. I am glad to say that those substantive changes can all be found in clause 1.

To understand clause 1, we need first to consider the main primary legislation for business rates: the Local Government Finance Act 1988. Part III of the Act concerns business rates; it currently requires revaluations in England and Wales to take place every five years from 1 April 2017. Clause 1 is concerned entirely with amendments to that Act, and specifically to section 41(2A), which provides for revaluations of local rating lists in England

“on 1 April 2017 and on 1 April in every fifth year afterwards”;

to section 52(2A), which does the same for central rating lists in England; and to sections 54A(4)(b) and 54A(5)(b), which provide for revaluations of local and central rating lists in Wales on a date specified by the Welsh Government by order—1 April 2017—and

“on 1 April in every fifth year afterwards.”

That shows in black and white the delivery of our commitment to make the rating system more responsive to changes in the property market and fairer for ratepayers, and to ensure that businesses see those benefits as soon as possible.

Sections 41(5) and 52(5) of the 1988 Act set out the deadline by which draft rateable values must be provided before the revaluation. That is currently set at no later than 30 September. Clauses 1(3) and 1(6) of the Bill move the deadline to no later than 31 December. It is important to remember that that is only a deadline—it is the latest date by which draft rateable values must be prepared. The Welsh Government agree that the deadline for the draft list should be changed to 31 December. Sections 41(5) and 52(5) of the 1988 Act apply to both England and Wales, so the amendments made by clauses 1(3) and 1(6) will automatically change that date in both countries.

Clause 2 will make purely consequential amendments to primary and secondary legislation. The sections of the 1988 Act that concern the transitional arrangements made at the time of each revaluation, and the regulations made under those powers in England, reflect the existing five-year cycle of rating lists. Clause 2 will therefore amend those references to bring them in line with the new cycle of rating lists in England and Wales. It will make no other changes to the powers in those sections.

Clauses 3 and 4 are, I hope, self-explanatory. As is normal practice, the Bill will come into force two months after it is passed. It will give the valuation office the legal basis it needs to complete the valuation exercise for a revaluation in 2021. Since it has already started work on those valuations under the existing legislation and will continue that work over the coming months, there is no need to shorten the normal two-month commencement period.

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

This morning, though brief and focused, we heard from representatives of the Association of Convenience Stores, the Federation of Small Businesses, the British Retail Consortium, the Confederation of British Industry, the Local Government Association, and the Chartered Institute of Public Finance and Accountancy. We place on record our thanks for the time they took to give evidence to the Committee.

The scope of the Bill is narrow, and that was reflected in the discussion we had. However, some themes came out during that session that are worth repeating. Clause 1 brings forward the new ratings list by a year, to 2021—a move that we welcome and that was welcomed by all those who gave evidence earlier today. There were calls for annual reviews, but given the concerns about capacity in the Valuation Office Agency, evolution might be more advisable, which is why we support bringing the new list forward by one year.

One element that was queried by the Local Government Association was the change from six to three months’ notice to billing authorities of the new list, pushing the deadline from “not later than September” to December. That change will hit many local authorities, as they will be presenting—or, in many cases, would intend to have already presented—their budget proposals to council. That is important because, as employers, councils have to meet their statutory obligations to their employees for any changes that might follow, whether for redundancies or any structural changes within the organisation. It is important that councils can meet the January deadline for that, so the notice period is important. I therefore ask that the Minister meets representatives of the LGA as a matter of urgency to address their concerns and decide whether something can be done to minimise the impact of that change.

Clause 2 addresses transitional relief and brings it in line with the new list proposals. There was a broader discussion, which I do not intend to pad out here, about business rates and their impact on the retail sector, the viability of businesses and the future of high streets and town centres. We share the concerns about those issues and would welcome further discussions to create a business rates system that is not only fairer but helps British businesses and industry to thrive in future, rather than—as business rates do at the moment—simply acting as a tax to occupy or exist. There are growing calls for change, and I hope they are heard and acted on by the Government beyond the scope of this Bill.

[Rishi Sunak]

I thank the hon. Gentleman for his typically thoughtful comments and join him in thanking all the witnesses we were lucky to hear from this morning.

During this morning’s session, I was pleased that there was widespread support for the principle of the Bill, namely shortening the revaluation cycle to make business rates more responsive to economic conditions. It felt like all participants agreed that three years was the right place to end up, striking an appropriate balance between responsiveness on the one hand and providing some certainty and stability for ratepayers on the other.

I am pleased to tell the hon. Gentleman that my team is already in discussions with the LGA and will continue to be so. It is also in discussions with CIPFA, which participates in a technical working group on business rates and business rate reform to ensure that the process for local authorities submitting their NNDR1 forms by the end of January is not unduly impacted by the change. As in the past, we have been able to work constructively with local government and CIPFA to ensure all the processes that need to happen for revaluation work for the sector, ratepayers and everyone else involved.

To the hon. Gentleman’s last point, and without wanting to stretch the scope of the Bill, I understand what he says. I am glad he recognises the contribution of business to our economy and society—not least providing employment and the funds we need for our public services. We will always be keen to do what we can to support business. With regard to business rates, £13 billion of various reforms have already been enacted by the Government—most recently the retail relief scheme, which provides a third discount to retail high street stores on their business rates bill and has been warmly welcomed. The Government will continue to watch that issue closely.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clauses 2 to 4 ordered to stand part of the Bill.

Bill to be reported, without amendment.

Non-Domestic Rating (Lists) Bill (First sitting)

Debate between Jim McMahon and Rishi Sunak

Committee Debate: 1st sitting: House of Commons
Tuesday 25th June 2019 Public Bill Committees

[Rishi Sunak]

Thank you.

[Jim McMahon]

Q To follow up on that point, when the revaluation is brought forward, that will not dispense with the appeals already in the system—they are still there and need to be administered—and it will just create the opportunity for further appeals. Have your members expressed any concern about the capacity in the valuation office? Do you have any concerns about what it might mean if no additional capacity is brought in and there is a more recent revaluation in 2021?

Martin McTague: I can certainly answer that. There is widespread concern about the lack of capacity in the VOA. It is bizarre that the solution seems to be that you impose a six-month cap on appeals. That is effectively saying, “It’s so difficult to get these appeals through the process that we are going to cap the time required to do it.” Yet the information is not available to the business rate payer to be able to challenge things easily. The point that you made at the beginning—that the VOA is fundamentally under-resourced to deal with this change—needs to be addressed quickly.

Edward Woodall: I agree with Martin. The feedback I get from my members is that there is a lack of capacity at the VOA to allow them to engage meaningfully in the process and talk to individuals. There is also a challenge, which we will probably come to, about the structure of the process it has developed—check, challenge, appeal—and people’s ability to interact with that, which is causing difficulties.

Dominic Curran: Absolutely. Our members are enormously frustrated with the VOA on a day-to-day basis. The appeal system is clogged up at best. It needs better resourcing. There certainly should not be a cap on appeals, in terms of the time length. But more frequent revaluations would, to an extent, reduce the need for appeals, because valuations would be less out of date, although they would probably still be somewhat out of date.

[Rishi Sunak]

Q A final quick question, Mr Curran. One of the things that the VOA has to do at the moment is to deal with appeals. You just made the point that more frequent revaluations ought to reduce the volume of appeals. Will you elaborate on that point, because, obviously, less appeal work would be an offset to the increased work of more frequent revaluations?

Dominic Curran: The argument is strongest if we were to move to a system of annual revaluations. With an annual revaluation, it almost would not be worth appealing a valuation that you thought was wrong, because it would change in a year’s time anyway. The other effect would be that the valuation probably would not be so wrong, because your annual changes would be on a much smoother line—looking at it on a graph—whereas if we revalue every seven years, as we have, you get quite a steep change. Obviously, somewhere between seven years and one year, the line gets smoother and smoother. It is a question of judgment which number we pick. Using that logic, three years should have fewer appeals than five or seven, but one year should have fewer than three. We will see how good the VOA is at dealing with three-yearly revaluations.

--- Later in debate ---

[Rishi Sunak]

No.

[Jim McMahon]

Q May I ask one question of Richard? Is the LGA making a specific request that the change of date from September to December be reviewed as part of this process?

Councillor Watts: We are, yes. In effect, our request is that we would welcome further conversations with the Government about getting a date. We understand the arguments for shifting it, because it is quite a long time and 30 September is quite early in the process. However, for one year out of three when that impacts on the potential local government announcement, we would like to understand more about how the Government would like to co-ordinate between this announcement in December and the local government spending announcement having to be earlier than it, because that is a change in precedent. We cannot push the local government spending announcement each year beyond 31 December—it is already too late where it is, given that local budget setting for any authority of size is effectively always concluded before the spending settlement on the basis of guesswork, then tweaked when the settlement is announced in the House.

Oral Answers to Questions

Debate between Jim McMahon and Rishi Sunak

Monday 17th June 2019 Commons Chamber

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

I am not quite sure where the right hon. Member for Uxbridge and South Ruislip (Boris Johnson) was, but a number of Tory leadership contenders were queuing up on last night’s TV debate to pledge their loyalty to adult social care and their desire to see it properly funded. Now that there is a queue of Conservatives who are finally waking up to the adult social care crisis facing this country, what assessment does the Minister make of the amount of money needed to plug the gap?

[Rishi Sunak]

We are doing that work with our colleagues in the Department of Health as we speak, to ensure an accurate reflection of the pressures as we go into the spending review. Those pressures are real; everyone acknowledges that there is an ageing demographic at the top end of social care, but working-age adults now account for half of the budget. It is right that we get the demographics right and that we go into the spending review with a robust case for the amount of funding that social care requires.

Non-Domestic Rating (Preparation for Digital Services) Bill

Debate between Jim McMahon and Rishi Sunak

3rd reading: House of Commons & Committee: 1st sitting: House of Commons
Monday 20th May 2019 Commons Chamber

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

It is a pleasure to serve under your chairmanship, Dame Eleanor.

The Government have made significant reforms to the business rates system since our wide-ranging review in 2016. Responding to the needs of ratepayers, we are building a system fit for the 21st century. The tax system must keep pace with the way business operates today, and that means a modern, online system that makes it easier for businesses to manage their bills in one place.

Today’s measure is a small step towards that modern system for business rates. It will give Her Majesty’s Revenue and Customs the ability to carry out the early design work so that it can explore how a new system can be delivered. It does not implement or commit us to a particular approach, and the Government will work closely with local government and businesses when we come to develop detailed proposals. We need the Bill because HMRC’s statutory functions do not currently extend to the administration of business rates. As I have said, further primary legislation will be needed for HMRC to implement the outcomes of this work, so this House will have a further opportunity to look again at the project.

On the detail of the Bill’s clauses, HMRC’s functions are set out in primary legislation in the Commissioners for Revenue and Customs Act 2005. These functions relate to the collection and management of revenue, as set out in section 5 of the Act, and do not extend to the administration or payment of non-domestic rates. Clause 1 therefore provides HMRC with the ability to incur expenditure in connection with digital services to be provided by it for the purpose of facilitating the administration or payment of non-domestic rates in England. Subsections (2) and (3) define digital services and non-domestic rates respectively. Clause 2 sets out that the amendment will extend to England and Wales but apply only to England.

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

It is a pleasure to serve under your chairmanship, Dame Eleanor.

When we debated the Bill’s Second Reading last week, we were careful not to stray too far from what is a very narrow Bill. The benefit to the Minister was that he was able fill a speech by reading out the Bill. I shall not speak just for the sake of it; I shall cut straight to the chase.

I accept completely that this is enabling legislation to allow Her Majesty’s Revenue and Customs to develop the framework and the product offer, but there are still many outstanding questions that the Government need to answer at this stage, because they are fundamental to the approach that is being taken. For instance, will local councils retain their primary role as billing authorities? Who will underwrite the non-collection losses for businesses that opt to use the new digital system? How frequent will HMRC’s payments to local authorities be?

To what extent will local government be involved in the co-design of the system? As was pointed out on Second Reading, there is a great deal of expertise in our councils when it comes to designing systems and processes and bridging systems across different software products, and I think we can tap into that expertise to ensure that the system is fit for purpose. I am sure that the Minister does not want his CV to bear the legacy of an inadequate IT system, a fate that has befallen many Ministers who have gone before him in various Departments.

We want those fundamental questions to be answered, ideally before work starts and money is spent—and that brings me to my next point: we still do not know how much money will be spent. Oddly, a money motion was tabled but did not proceed to a Division, and there was no explanation even of the ballpark figure: not even a rough estimate of how much the new system might cost. The cost must be weighed against the benefits to HMRC and businesses, and it must be established whether we are getting value for money for the investment.

I must be careful not to stray too far from the subject of the debate, but the Bill does not address the underlying chronic underfunding of local public services. The Minister really must deal with the issue of the £8 billion funding gap, to which we have referred very often in the House.

We do not intend to divide the Committee, but if the Minister is not able to answer those questions today, it would be useful if, at the very least, Ministers could respond in writing.

[Rishi Sunak]

Let me deal briefly with the hon. Gentleman’s points. He asked some specific questions about the design of the system. As we established on Second Reading, I cannot give him the answers, not because I am trying to hide something but simply because I do not know them at this stage, and nor does anyone else. The Bill will enable HMRC to start its scoping work, and the questions that the hon. Gentleman rightly posed about the design, who will do what, and how intensive the work will be—or, indeed, how light-touch it might be—will be answered during subsequent analyses. Further primary legislation is likely to be required, so the House will have an opportunity to debate those changes.

On Second Reading, the hon. Gentleman raised an interesting point about the potential integration of the new challenge and appeal system with whatever new platform is designed. That point is worthy of consideration. Again, however, at this stage no one knows how much that would cost, how long it would take, or whether it would be a worthwhile addition to the plan of work. I hope the hon. Gentleman will forgive me: I am not being evasive, but we are beginning a process that will answer all those questions and others.

Similarly, I cannot give the hon. Gentleman a specific figure in relation to the budget, because we do not know what the overall system will look like. What I can say is that HMRC’s initial scoping work will be done within its existing resources and budgets, will not, in general, involve the use of consultants, and will hopefully lead to a proposal which, during the spending review, HMRC can decide whether to adopt, depending on the outcome of the review.

Of course local government and, indeed, business should be extensively engaged in the process. I know that HMRC is committed to that, and the hon. Gentleman would no doubt hold me and Treasury Ministers to account if it were not the case. Typically, Select Committees would take evidence from HMRC in hearings as the system was being designed and rolled out over subsequent years, and I have no reason to doubt that that would happen in this instance.

The last question the hon. Gentleman posed was specifically about the frequency of payments. I am pleased to be able to tell him that this was also brought up on Second Reading. Currently, businesses tend to have at least the opportunity to spread their business rates payment over 10 different instalments over the year. That right is prescribed in regulation—the Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 1989—so that flexibility is already in place and is taken up by many businesses. If there was to be any change to that, it would require this place to pass new regulations, so I think the hon. Gentleman can rest assured on that point.

I hope that answers all the hon. Gentleman’s questions, and I ask Members to agree that, if we can take clauses 1 and 2 together, they stand part of the Bill.

District Council Finances

Debate between Jim McMahon and Rishi Sunak

Wednesday 1st May 2019 Westminster Hall

[Rishi Sunak]

My right hon. and learned Friend makes an excellent point about an issue on which he has represented his constituents many times in this place. Just last week I responded to my hon. Friend the Member for Mole Valley (Sir Paul Beresford) in an Adjournment debate on this topic, and I highlighted that exact issue. Enforcement is important, as a recent consultation picked up.

Although this area is not my specific responsibility, the Secretary of State is considering, and I think has already committed to, making more funds available later this year—£1.3 million, I believe—to district councils through the planning delivery fund to tackle this exact issue, and I know that my colleagues in the Home Office are considering greater powers for the police and other bodies to enforce in the first place. I hope my right hon. and learned Friend knows that the Government take seriously the inconvenience and distress caused to settled communities through illegal and unauthorised encampments, and that we are committed to making improvements.

It is important that parks and green spaces are well funded. That is why the Government launched the £1 million pocket parks fund in 2016, which led to the creation of more than 80 new green spaces for local communities to enjoy. That fund had a phase 2 earlier this year, with almost 200 new pocket parks created. Districts are again are playing the lead role in that work.

[Jim McMahon]

The Minister needs to demonstrate some balance and reflect that there have been real-terms cuts in open space funding of 41% and in sports and recreation of over 70%. If the Government are committed to parks, open spaces and a quality environment, what will they do to replace the funding cut so far?

[Rishi Sunak]

Funding for all green spaces and such services is not ring-fenced by central Government. It would not be right for me, sitting in Whitehall as a Minister, to dictate to every single local authority how it should prioritise its resources between social care, homelessness, parks and planning enforcement. Every area will have different priorities, and it is right that local authorities make those decisions. The Government recently unveiled a range of initiatives around parks—not just the pocket parks programme but an additional several million pounds of funding for the renovation and upkeep of parks or children’s playgrounds that have fallen into disrepair. We have established the Parks Action Group to bring people from the industry together, and we funded the Heritage Lottery Fund and the National Trust with money for their accelerator to innovate new parks models. Indeed, we are also developing a new apprenticeship standard for 21st-century parks managers. On parks and green spaces the Government are firmly on the front foot, supporting local areas to ensure that their green spaces are there for their communities.

To the hon. Gentleman’s broader point, I would be the first to acknowledge that all local authorities, whether district, upper tier or unitary, have faced difficult times over the past years. They deserve enormous tribute for the fantastic job they have done in ensuring high-quality public services and public satisfaction in what they are doing at a time of constrained finances. That is thanks to their innovation and creativity, as was put so well by my hon. Friend the Member for Rugby. We all know why we were in that situation: when the Government came into office in 2010, we were left with a £100 billion deficit, and savings had to be made across government. Again, I pay tribute to those in local government for playing a starring role in helping to bring our public finances back to a sustainable position.

Housing was mentioned by many speakers. Building the homes that our communities need is another great challenge of our time, and the Government have placed trust in districts to help solve it. One key recommendation in the report was the removal of the housing revenue account borrowing cap. That was the No. 1 request from districts, and I am pleased that the Government have responded to that, which has unleashed the potential for districts to get on and build the homes we need. Similarly, the Government listened to district council calls for continuity and stability on the new homes bonus and responded by committing an additional £20 million to maintain the baseline this year, ensuring that district councils will receive more than £300 million in new homes bonus payments in 2019-20. Through all these measures, we are making every effort to create a housing market that works for everyone, and in doing so creating a country that works for everyone.

The hon. Member for Stroud mentioned uncertainty, and I acknowledge that issue. We are at the end of a spending review period, so naturally there will be some uncertainty as one set of programmes comes to an end and we wait for the spending review for certainty about what will replace them. The Government recognise the role that incentivising districts and authorities more generally to build houses has played in helping to get the number of new homes up to its highest in more than a decade. There were more than 220,000 last year, and I am sure that at this moment my hon. Friend the Minister for Housing is considering how best we can continue to incentivise local authorities in the new spending review. I am always committed to providing certainty as early as possible for councils of all stripes so that they can make the long-term plans that we have heard are so important.

It is worth dwelling for a minute on housing. I visited the constituency of my hon. Friend the Member for Rugby to see the fantastic work of his local council, replacing old high-rise blocks and improving the stock of houses for social rent. As my hon. Friend said, the council deserves credit for being on the front foot, forward thinking and keen to get on and provide the homes that our young people, and indeed all our communities, need.

I thank my hon. Friend for calling the debate on this vital issue. On my list of seven things, the one I have not touched on is freedom and flexibility. Perhaps this goes to the heart of the tension between the Government and the Opposition on how much to trust local government to get on with it. I am firmly and instinctively a localist. I want to be able to give and devolve powers down to the lowest possible level. It is good for our democracy and for our civic society if decisions are taken closer to the people they affect. I will be arguing where I can during the spending review process for greater freedoms and flexibilities for all local authorities. Indeed, at every meeting and engagement I go to, I ask local councillors, whether they are from parish or town councils all the way up to big metropolitan devolved mayoral administrations, for the ideas they have that I can debate, kick around with the team and put into the mix when we come to the spending review.

[Jim McMahon]

rose—

[Sir Oliver Heald]

rose—

[Rishi Sunak]

I will first take an intervention from the hon. Member for Oldham West and Royton.

[Jim McMahon]

It is part of the nature of this place that we can be mischievous at times, but let us not be under any illusion: this tension is not caused by trust in local government. We all respect the role that councillors play and we trust them to know what is best for their area. Fundamentally, this is about the sustainability of local council finance and the historical local tax bases that inform an entirely devolved financial model. That is the only tension—this is not about trust; it is about financial sustainability.

[Rishi Sunak]

I thank the hon. Gentleman, and I will now take an intervention from my right hon. and learned Friend.

[Rishi Sunak]

I firmly agree with my right hon. and learned Friend. Planning and housing can be contentious in local areas, but one way to relieve that tension is to ensure that local communities feel that they are shaping the developments taking place around them. I saw that when I visited my right hon. and learned Friend’s constituency, and his point is well made.

The hon. Member for Oldham West and Royton asked the Government to be radical. They have been radical by introducing neighbourhood planning. They have devolved planning power to local communities, often at parish or town level, so that that community can create its own neighbourhood plan, supported financially by incentive payments over the last few years. That plan is then given significant and strong legal weight in the planning process, which puts local communities, at a small level, in control of their destinies on the ground. That is central Government sitting here in Whitehall, being radical, and trusting and empowering local communities to construct the housing that they need and think appropriate for their areas.

I can debate this issue with the hon. Gentleman, but we must recognise that there are two sides to this coin. If one argues for more freedom, flexibility and trust in local government, one must also believe that local governments are able to shape their own destinies. It is no good saying that local governments are not able to sustain themselves and require constant handouts from central Government, yet also saying that they should be empowered to do everything they want. If central Government are shovelling money around the system, national politicians will always rightly be in charge of that system of redistribution. The more that money is raised locally, the more that local government will have the right to say, “Let us do things the way we want. You do not have the right to dictate to us what we do because you do not provide us with our funds.” There will of course be differences in the abilities of different areas to raise funds, and there will always be some element of redistribution, but local areas cannot be considered completely static entities with no ability to be creative, dynamic and improve their financial sustainability.

[Jim McMahon]

If the Minister is arguing in favour of growing the local tax base, we are entirely in agreement. If local authorities can demonstrate that through their actions they have grown the local economy, and therefore the local tax base, we should discuss how they benefit from that success. That is not the same, however, as the historical inherited tax base that many local authorities rely on for their funding, which includes the housing stock and business rate base. We need to separate out the two things. We need fair funding to ensure that public services are properly and sustainably funded, and a proper incentive for local authorities to grow the local economy and tax base.

[Rishi Sunak]

I am pleased to say that that is exactly what the Government are doing. The fair funding review is a blank sheet of paper on which we can consider the relative needs of local areas. It is bottom up, and driven analytically and empirically by the evidence, so that we figure out the right element of need for each local area, and then add a system of redistribution to ensure that funding gets to the right place. I am pleased the hon. Gentleman supports the incentive mechanism. An argument I hear a lot—I think I have also heard it from him, so I am glad if I misheard it previously—is when councils say that they have no ability to grow and will therefore need more handouts. I would take issue with that. Yes, the starting bases may be different, but that does not mean that areas cannot look creatively and entrepreneurially at how to create growth and generate resources for their local community. I believe in growth and driving prosperity locally, because I think that is the only sustainable way to pay for public services. Whether money comes from national or local government, it will come only if the economy is growing and generating tax revenue, and that is why I am keen to focus the conversation on driving economic growth.

This has been an excellent debate, and I was glad to hear all the contributions on the importance of district councils. Funding is important, and the big point is the elimination of the negative revenue support grant—I am not entirely sure that the hon. Member for Oldham West and Royton supported that when we unveiled it in the local government finance process. That is worth almost £153 million to the local government sector. District councils were big beneficiaries of the Government ensuring their commitment that the business rates baseline would not change over that period. I am glad that the Government were able to meet that big ask, which benefited 140 shire districts.

We all agree about the vital role of our district councils, their connection with communities and proximity to those affected by their decisions, and the importance of those decisions in ensuring that communities enjoy stronger local economies and better lives. It is my pleasure to represent district councils for the Government. I pay tribute to everything they do, and will continue to champion them for as long as I have this role.

Local Government Funding

Debate between Jim McMahon and Rishi Sunak

Wednesday 27th March 2019 Westminster Hall

[Rishi Sunak]

I acknowledged right at the beginning of my speech the difficult financial climate that local government has suffered over the last few years. I am not trying to pretend it has not—I acknowledge that. The point is that the Government are absolutely listening and responding. A billion pounds more is almost a 3% rise in funding. That is more than the economy is growing by, and it is more than inflation.

[Sir Christopher Chope in the Chair]

[Jim McMahon]

The Minister is correct that councils have £1 billion more to spend on public services today than they did this time last year, but that is because of the pressure that has been applied to council tax payers. People are paying more and more council tax for less and less in the way of public services. By the way, the data shows that, in England, there have been cuts of £4.5 billion to neighbourhood services and £3.5 billion in real terms to transport services. That is the cost in the community—the £1 billion goes nowhere near covering that. Surely he knows that.

[Rishi Sunak]

It is nice that we are now talking about whether the increase in funding is enough. I am glad we have moved the debate on. It is also good to hear Labour Members talking about the importance of council tax. We believe in keeping people’s council tax bills down. They will be 6% lower in real terms this year than they were when this Government came into office, and they have risen slower than under the last Labour Government, when they increased at an annual rate of almost 6%. This Government are committed to keeping council tax bills low, and it is important that we are mindful of that.

Many points were made, and I want to try to address as many as I can in the time available. I would like to do so through the framework with which I look at local government, given the sheer range of things it does. Local councils do three important things: support the most vulnerable in our society, drive economic growth in their areas and build strong communities. I believe very much that this Government are backing them in doing all three of those vital tasks.

First, as we heard, local government helps the most vulnerable in our society. Local authorities are the first to reach out those who fall on hard times, and I am delighted that our recent settlement provides them with increased funding to do exactly that. Councils have told this Government that the most acute pressure they face is in adult and children’s social care, so in the recent settlement and Budget, the Government responded with an additional £650 million for adult and children’s social care this year. That includes £240 million to ease winter pressures and the flexibility to split the remainder between adult and children’s services as local preferences dictate.

We also champion authorities that put innovation at the heart of service delivery. We heard a lot about money, but the outcomes that that money delivers are just as important. We should be focused not just on what goes in but on what comes out. The Government will focus relentlessly on ensuring that taxpayers’ hard-earned money is well spent.

On children’s care, about which we heard a lot, a recent National Audit Office report noted the enormous variation in performance and cost among local authorities. That is nothing to do with the political colour of those authorities; it is just down to differences in leadership and management practice. That is why it is important that the Government are backing practices in Leeds, Hertfordshire and North Yorkshire with an £84 million fund, and taking their models, which deliver higher-quality outcomes at lower cost, across the country.

The hon. Members for Colne Valley and for Stockton North (Alex Cunningham)—and indeed the hon. Member for Croydon North (Mr Reed), who is no longer in his place—rightly mentioned the importance of early intervention, in which I strongly believe. I have been a relentless champion of the troubled families programme since I have had this job. He is not here anymore, but the hon. Member for Croydon North will have seen the Secretary of State make a very significant speech last week about the progress of that programme and how it is transforming children’s lives on the ground, getting people into work and keeping people out of the criminal justice system.

Knife crime is also important. That is why a £10 million extension was recently made to the troubled families programme, specifically to support families against youth crime. That funding is now benefiting 21 areas that bid into the programme to tackle that vital issue. The hon. Gentleman talked about funding running out. That is because we are at the end of a spending review period. Of course, in the spending review, I and the Government will be batting very hard for a successor programme to the troubled families programme. The Secretary of State committed to that last week, and I wholeheartedly support it.

I am also passionate about technology, which has the potential to be transformative. I recently launched an innovation fund to help councils embrace the digital revolution. Technology helps deliver services better on the ground and find ways to save money. Together with the LGA, we are developing a tool to help councils to benchmark, analyse and drive their performance. I believe there are considerable opportunities across local government to improve lives, save money and transform services, and we will pursue them all relentlessly.

The second thing local authorities do is drive economic growth, ensuring that every part of our country can prosper. Ultimately, that is the only sustainable way to fund the public services that we have heard so much about and we all care passionately about, and it is the only way to improve living standards in our communities. There may well be fundamentally different points of view on that. The Government believe that, rather than being funded by central Government handouts, local authorities should be empowered and rewarded for their entrepreneurship. Indeed, even Labour Members expressed different points of view about the degree of autonomy local government should have to raise its own money and about over-reliance on things such as business rates—the single largest way for local areas around the world to raise income. It is all very well saying we want more local autonomy, but we must understand what that means in practice.

Our business rates retention scheme does exactly that, putting power in the hands of local authorities to reap the benefits of their hard work. This year, on top of the £46 billion I mentioned, local authorities will retain an additional £2.4 billion of business rates growth. The 15 new business rates retention pilots across the nation, from Northumberland to Southampton, demonstrate this Government’s commitment to backing councils’ ambitions for their local economies.

--- Later in debate ---

[Rishi Sunak]

No, I will finish my point. Where the Government do have a role to play is in ensuring that the tax system is in line with modern practice. When it comes to business rates retail relief, which gives retailers a third off their business rates bill for the next two years, is the latest in a long line of measures that mean there will be £13 billion of business rates reductions by the end of this Parliament. That means a third of all businesses will pay no business rates.

[Jim McMahon]

That is a fair point, but the Minister will recognise that that is nowhere near enough. Because of the threshold that is in place, a local Marks and Spencer would not benefit from the type of relief that is being offered. He must accept that, unless we deal with international taxation and business taxation in the round rather than just having business rates coupled to local government spending, it will never be fair, and we will still be in a situation in which a cleaner or a server in Starbucks pays more tax than Starbucks itself. How can that be sustainable?

[Rishi Sunak]

The idea that this Government are not doing that is an old chestnut. This Government have brought forward more ways to clamp down on international tax than any previous Government and £14 billion extra has been collected. This Government put in place the first diverted profits tax and at the last Budget announced a digital services tax, which we will put in place in line with international peers.

[Jim McMahon]

Will the hon. Member give way?

[Rishi Sunak]

I am conscious of time, so I will make progress. If those peers do not act, then we will act unilaterally. The Government are addressing the point.

I agree with the hon. Member for York Central that high streets are important. That was also mentioned by the hon. Member for Stockton North, who talked about his high street, which I know as it is near my constituency. This Government understand the importance of high streets in creating living, breathing communities. That is why a £675 million high streets transformation fund was announced at the last Budget for all local authorities. I encourage Members to talk to their local authorities and bid for the fund. It is there to fund transformational projects that revitalise high streets and comes on top of the Treasury business rate reductions. The Government are agreeing with and backing local authorities to ensure that high streets remain the beating, vibrant hearts of communities. We are in agreement and there is financial support, through tax reductions and this fund, to support high streets. However, shopping habits are changing and retailers, high streets and planning authorities have to adapt. Business rates are only one part of the answer.

The last thing to touch on is building strong communities. We have talked about high streets and other points. Ultimately, local authorities are making people more proud of the places where they live, partly by building houses that people want to call home, whether through the new home bonus or through the lifting of the housing revenue account borrowing cap. Again, the Government are responding to what local government has asked for and delivering it for them.

Oral Answers to Questions

Debate between Jim McMahon and Rishi Sunak

Monday 28th January 2019 Commons Chamber

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

Thank you, Mr Speaker. I was frantically trying to think of a question when you called me just now. I refer Members to my entry in the Register of Members’ Financial Interests.

The number of children in need is up, the number of looked-after children is up and the numbers of child protection plans and child conferences are up, yet the Government grant has gone down. This year, children’s services face a £1 billion funding gap—£3 billion by 2024-25—and the Local Government Association, the Children’s Commissioner, Action for Children and our councils have all warned that children will be at risk. So where’s the money?

[Rishi Sunak]

The hon. Gentleman should know that last year £1 billion more was spent on children’s services than when we came into office and that the recent Budget announced an extra £420 million that could be spent on children’s services. Government Members are, however, concerned with outcomes, not just the amount of money we plough into things, which is why the Department for Education is working closely with the best-performing areas to spread best practice across the country.

Local Government Funding: Merseyside

Debate between Jim McMahon and Rishi Sunak

Tuesday 30th October 2018 Westminster Hall

[Rishi Sunak]

Thank you, Mr Hollobone. I think the hon. Lady was being snide about the fact that Merseyside is a business rates retention pilot. I am sure that the £54 million that Merseyside will keep this year in additional funding as a result of the pilot is nothing to be snide about, and will make an enormous difference on the ground, helping the people I know she cares about. Many other local authorities across the country would be happy to be one of the pilot areas, so if she thinks that Merseyside would rather not be one and would give up the opportunity to others, I would be happy to talk to her afterwards.

[Jim McMahon]

Will the Minister give way?

[Rishi Sunak]

I will try to make some progress.

Business rates retention is not the only incentive for local growth, as it sits alongside the other support the Government give to local authorities’ wider ambitions through local growth deals. For example, £2 million has been invested to create the first dedicated digital skills academy in the UK, at the City of Liverpool College, and more than £13 million has been invested in a highway infrastructure scheme comprising a series of essential and integrated improvements along the A565 corridor. In sum, the Government strongly support Merseyside’s economic growth, whether through direct investment or business rates retention, and thus enable it to fund services over the years to come.

Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill

Debate between Jim McMahon and Rishi Sunak

Tuesday 16th October 2018 Commons Chamber

[Rishi Sunak]

I agree that land banking should be looked into. The hon. Lady will be aware that my hon. Friend the Member for North Dorset (Simon Hoare) is currently looking at that issue. Interim findings have been published and more findings will be coming out shortly. I hope that she will be happy to wait for the findings of those reports.

Nor are we proposing to change any other arrangements for charging premiums. It will rightly remain a matter for local authorities individually to decide whether and what premium to charge. In making these decisions, local authorities should of course consider local circumstances, as we have discussed, as well as the guidance issued by the Government.

It is right that we target particularly the homes that are empty for excessively long periods in this way. To be sure, they are likely to be few in number— potentially 11,000, as we heard from my hon. Friend the Member for Walsall North (Eddie Hughes)—but where they exist, they can indeed be a nuisance and a blight on their community. Such properties may even become sites of crime and antisocial behaviour. It is right that local authorities are equipped with greater powers in these difficult cases, where a 100% premium may be ineffective. We are proposing that these higher premiums come into effect slightly later than the original measure, which was announced at last year’s autumn Budget. This will give homeowners sufficient notice of the change. The 200% premiums will come into effect from 1 April 2020, and the 300% premiums a year later. The original proposal, of which people have had good notice, will come into effect from 1 April 2019, as planned.

We recognise the crucial importance of ensuring that premiums are applied fairly. That is why in 2013 the Government published guidance reminding local authorities to take into account the specific reasons a local property is empty, as indeed we heard from my hon. Friend the Member for Harrow East (Bob Blackman). In the light of this amendment, I can confirm that the Government will take a fresh look at the guidance with the aim of publishing revised guidance ahead of the introduction of the 200% and 300% premiums. This refreshed guidance will be subject to consultation, of course, and we will welcome the opportunity to benefit from the experience of local authorities, council tax payers and others when the time comes. In particular, we are keen to ensure that the guidance clarifies that premiums must be applied with due consideration to issues facing low-demand areas and cases of hardship. We expect to revisit the wording of the guidance to set out clearly the Government’s expectation that premiums are not applied where homeowners can demonstrate that their properties are genuinely on the market for rent or sale and appropriately priced.

Another area we expect to consider is cases where homeowners, as my hon. Friend the Member for Harrow East noted, are struggling to complete or afford renovations that are necessary before the property can be occupied or sold on and where they can demonstrate progress and hardship.

I am delighted to bring forward this amendment, which has been termed the escalator amendment. I am grateful to all colleagues, the Select Committee and partners in the rating agencies for helping to get this amendment and this Bill to the House. By strengthening the incentive for owners of long-term empty properties to bring them back into use, this amendment will surely come as good news for local government, for families seeking a place to live and for the affected local communities as a whole. I commend it to the House.

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

It takes a very good education to be able to talk at length without saying much at all.

We are at the end of a process as we reflect on the Lords amendment, which I should say is entirely in line with Labour’s manifesto. If anything, it could have gone much further. While the Lords have suggested a 10-year period regarding the charge on empty properties, the Labour manifesto proposed that after a year, because we recognise not only that there are lots of people on the housing waiting list and many people who are homeless—sofa-surfing and on the streets—but that these properties are often a blight on their local communities. It is right that the owners of the properties are held to account, and a charge is one way of doing so. Of course we welcome the amendment, but we would have liked it to go much further.

We have heard in Committee and in the Chamber that the staircase tax was about listening to the interests of business and how the business rates system was adversely affecting them, but it is slightly odd that of all the issues that businesses are raising when it comes to business rates, this is the sole one that has been picked out for this place to address. There is absolutely nothing about the condition of our high streets and town centres, and nothing about business rates’ impact on our pubs. There is no recognition that while we have rural rate relief for the last pub in a village, council estates are not given the same luxury for the last pub on the estate. Businesses are raising plenty of important issues.

Fundamentally, we see with rates the same thing that we are seeing with council tax: we are incrementally putting more and more pressure on what is a diminishing resource in many places. We have seen that with the revaluation, where the value shifted to London and the south-east, and certainly away from my region. The Conservative party has been in power for 10 years, through the coalition and more recently with the support of the Democratic Unionist party, and the housing shame in this country is a national scandal.

Non-Domestic Rating (Nursery Grounds) Bill

Debate between Jim McMahon and Rishi Sunak

3rd reading: House of Commons & Committee: 1st sitting: House of Commons & Legislative Grand Committee: House of Commons
Tuesday 10th July 2018 Commons Chamber

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

It is a pleasure to serve under your chairmanship today, Dame Rosie. I should like to start by reiterating this Government’s commitment to supporting the sustainable growth of farming and horticultural businesses. We firmly believe that the agricultural exemption from business rates plays an important role in supporting this aim and boosting agricultural productivity. This measure will therefore help to drive our ambitions for a more dynamic and self-reliant agricultural industry. Until a Court of Appeal ruling in 2015, the long-standing practice of the Valuation Office Agency had been to apply the agricultural exemption to all plant nurseries. However, the ruling clarified that the exemption did not apply to plant nurseries in buildings that were not occupied together with agricultural land, and used solely in connection with agricultural operations on that or other agricultural land. This does not reflect Government policy, and neither does it reflect our commitment to growth in the rural economy. The Bill will therefore amend the Local Government Finance Act 1988 and enable the Valuation Office Agency to return to its former practice of exempting all plant nurseries solely consisting of buildings. It will also enable the VOA to exempt those plant nurseries that have been assessed since the ruling.

The Government have been consistently clear that they would take action on this matter. In March 2017, we set out our intention to legislate in a written ministerial statement. A further written ministerial statement was made in 2018, restating our intention to legislate and for the first time confirming that the measure would have retrospective effect in England from 1 April 2015. In Wales, the measure will have effect from 1 April 2017. The Bill delivers on that commitment and, once enacted, it will restore the previous practice and enable refunds to be provided to the handful of plant nurseries that have already been assessed for business rates as a consequence of the Court of Appeal ruling. While the Bill will restore the practice of exempting plant nurseries and buildings, it will not otherwise disturb the existing boundary of the agricultural exemption. The Bill amends schedule 5 to the Local Government Finance Act 1988, which determines the extent to which certain hereditaments are exempt from business rates.

Turning specifically to clause 1, it amends paragraph 3 of schedule 5 to the 1988 Act, providing that a building that

“is or forms part of a nursery ground and is used solely in connection with agricultural operations at the nursery ground”

will, subject to the passage of this Bill, be exempt from business rates. Clause 1 also contains a provision that the measure will have effect from 1 April 2015 in England and from 1 April 2017 in Wales, as requested by the Welsh Government. That will ensure that the measure has the intended retrospective effect and that refunds can be provided as necessary.

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

Dame Rosie, you will be pleased to hear that the Bill is non-contentious. It simply fixes the position as it was before the 2015 Court of Appeal ruling and, on that basis, the Opposition are happy to allow the Government to go ahead without objection.

It was said both in the press and when the Local Government Finance Bill was in Committee before the election that the Government were pledging to right the wrong of the Court of Appeal’s hearing after listening to businesses’ concerns, but several other similar representations have been made. For example, in towns where the banks have closed and there is no post office, a convenience store might step in to install a cash machine, but it would straight away be taxed on the turnover of the cash machine, which could take the store over the threshold for small business rate relief. There have been calls for that issue to be examined, but we are yet to see any progress.

Another big issue affecting many high streets and town and city centres is the impact of business rates on the viability of retail. We see companies go under on an almost weekly basis because they cannot afford to meet the high running costs of operating in primary locations. Communities resent seeing their local high streets and town centres go downhill, and businesses and representatives of other organisations have made the same point, but the Government have offered nothing comprehensive in response, because there would be a big bill.

However, the truth is that if we want to save our town centres and high streets, we must be bold and fully examine how such premises are taxed if they are to have any future. This goes beyond business; this is about communities. When people talk about how well or badly their communities are doing, they will often point to their town centres and high streets as a barometer. When people see the roller shutters pulled down or boards over windows, that has a material effect on how they feel about their community, and the Government ought to take note of that.

When the Local Government Finance Bill was in Committee, the Opposition made the offer that where there were non-contentious issues on which local government was seeking progress, we were happy to sit down and go through a plan for the legislation that ought to be brought forward. That would be done away from partisan interests because it is the right thing to do for our communities, and I look forward to the Minister arranging such a meeting.

Oral Answers to Questions

Debate between Jim McMahon and Rishi Sunak

Monday 18th June 2018 Commons Chamber

[Rishi Sunak]

This Government have ensured that all local authorities have increased resources to deal with all the various services they have to provide, including children’s services, on which, I am pleased to say, over £9 billion will be spent this year. The hon. Lady mentions reserves. She may know that last year reserves in her local authority were actually higher than they were five years ago.

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

We all want to live in a Britain where young people are safe, well cared for and nurtured, but for too many real life is very different. They rely instead on council safeguarding services to give them the protection they need, the very services that are facing a £2 billion funding gap and that have already overspent by £600 million. The question is simple: when can we see real action, with real money going directly to children’s services?

[Rishi Sunak]

As I just said, £9 billion is going to children’s services just this year. As the hon. Gentleman knows, we are undertaking a fresh review of the relative needs and resources of all local authorities. As part of that work, there is ongoing work with the Department for Education to understand in detail the specific drivers for children’s services up and down the country. I look forward to his contributions to that piece of work.

Rating (Property in Common Occupation) and Council Tax (Empty Dwellings) Bill

Debate between Jim McMahon and Rishi Sunak

Committee Debate: 1st sitting: House of Commons
Tuesday 1st May 2018 Public Bill Committees

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

It is a pleasure to serve under your chairmanship, Mr Wilson. I thank all Committee members for being here promptly to discuss this technical but important Bill, which I hope will not detain us for too long.

Clause 1 delivers on the commitment made by the Chancellor at last year’s autumn Budget to address what became known as the staircase tax. The clause will restore the previous practice of the Valuation Office Agency from before the Supreme Court decision in respect of contiguous properties in the same occupation or ownership. We discussed on Second Reading the background to why the measure is necessary, and I have provided more detail about the measure in correspondence with the Select Committee on Housing, Communities and Local Government. I will not repeat that background, other than by saying that the clause is welcomed by the rating surveyor profession and supported by the Federation of Small Businesses.

The clause amends section 64 of the Local Government Finance Act 1988 to provide that, in a defined set of circumstances, two or more hereditaments shall be treated as one. Those circumstances, which are described in new subsections (3ZA) and (3ZB) of section 64, are: where the hereditaments are occupied by the same person or, if they are empty, owned by the same person; where the hereditaments are contiguous—that is defined later in the clause, and I will come to it shortly—and, in respect of occupied hereditaments, where none is used for a wholly different purpose. That will restore the rule that applied before the Supreme Court decision that contiguous hereditaments are assessed as one.

In preparing the clause, we had to ensure that we replicated previous practice in respect of the meaning of “contiguous”. The clause therefore introduces new subsection (3ZD), which defines what is contiguous for these purposes. New subsection (3ZD)(a) provides that

“two hereditaments are contiguous if…some or all of a wall, fence or other means of enclosure of one hereditament forms all or part of a wall, fence or other means of enclosure of the other hereditament”.

That ensures, for example, that two adjacent rooms on the same side of a common corridor separated by a wall are contiguous, but that two rooms on opposite sides of a common corridor are not. It also ensures that two buildings on the same side of a road that share a common party wall are contiguous, but that two buildings on opposite sides of a street or common access road are not. Importantly, that replicates the previous accepted practice of the VOA.

New subsection (3ZD)(b) provides that hereditaments on consecutive storeys of a building are contiguous if

“some or all of the floor of one hereditament lies directly above all or part of the ceiling of the other”.

That ensures that consecutive storeys of a building are contiguous but excludes non-consecutive storeys where the intervening storey is in a different occupation or ownership. Again, that replicates the previous practice of the VOA.

We believe that this approach ensures that hereditaments would still be contiguous, even if a wall or floor plate separating the hereditaments contained a space such as a service void occupied by the landlord. However, respondents to the consultation and the Select Committee were less certain on that point. We therefore decided to put that beyond doubt by adding the words at the end of subsection (3ZD) that make it clear that hereditaments

“are not prevented from being contiguous…merely because there is a space”

such as a service void between them in a different occupation or ownership.

Finally, new subsection (3ZC) ensures that chains of contiguous hereditaments in the same occupation or ownership will still meet the tests. For example, it will ensure that floors 3, 4 and 5 of a building in the same occupation are treated as contiguous and as one hereditament, even though floors 3 and 5 are not themselves contiguous.

The change in the VOA’s practice following the Supreme Court decision affected the 2010 rating list as well as the current 2017 list. That has led in some cases to sudden and dramatic backdated rate demands, which have been of particular concern to the estimated 1,000 small businesses that, as a result of the decision, have lost the generous small business rate relief they rely on. Clause 1(2) therefore ensures that the measure applies retrospectively to 1 April 2010 in support of affected ratepayers.

That is why it is so important that the Bill does not go beyond the objective of restoring the previous practice that applied. I am pleased to say that, by working with organisations such as the Rating Surveyors Association, we are confident that we have met that objective, which the Select Committee confirmed in its report on the Bill.

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

It is a pleasure to serve under your chairmanship, Mr Wilson. I repeat my thanks to the Minister for making the effort to meet before the Committee to go through some of the technicalities of the Bill. That will save the Committee from a headache. However, there are still some questions outstanding, including about the loss of income to local authorities. The autumn Budget book said:

“Local government will be fully compensated for the loss of income as a result of these measures.”

That was stated by the Chancellor, but it is not what is being offered today. Local authorities are being told that they will not be compensated because in effect they are in no worse a position had the High Court ruling not been made. That point was raised by my hon. Friend the Member for Sheffield South East (Mr Betts), the Chair of the Housing, Communities and Local Government Committee, and we know from his subsequent contributions that the Select Committee continues to have those concerns.

Nor do we know yet what the impact will be across different local authorities, because that information has yet to be provided. We have not been provided with data to understand the local authority-by-local authority impact, so we do not know, for instance, how many are caught in 100% rate retention schemes, where they will have to pay costs. Nor do we know whether there are particular concentrations of properties in local authorities or whether they are spread evenly throughout the country, where such an impact would be marginal. We should endeavour not just to make legislation that we believe to be in the public interest—of course, that is important—but to make good legislation, with a solid, tested evidence base and with any necessary questions asked at the appropriate time. I would say now is the appropriate time to ask such questions. Let us see the detail on the local authority-by-local authority impact, particularly as the Government do not seem to be honouring the commitment they made in the autumn Budget.

The other, broader point—I will be careful not to stray too far from the Bill—is that the Government have taken into account what the business community told them and the Bill reflects that. I welcome that. The Government have been flexible and considered the impact of unintended consequences, which is a measure of good government. It is not a measure of bad government that could be perceived as, for instance, a U-turn. I recognise that our politics sometimes supports that type of language. In that context, I find it difficult to understand why other concerns raised following the revaluation and technical fall-outs of the business rate system have not been taken into account, such as the impact on cash machines in convenience stores.

In my town of Royton, the last bank is due to close. It will be the sixth bank to close in the town centre. The convenience store stepped up and provided a cash machine, so that people in the town could access money to do their shopping and, of course, support the market on the precinct, which relies heavily on cash transactions. A cash machine in the town is very important, but the turnover of that cash machine now contributes to the rates liability of the premises. A convenience store that would previously have been under the small business rates relief threshold, and would probably not be paying business rates at all, will in some situations now pay business rates because the turnover of the cash machine takes it over the threshold.

Good government means taking into account the impact of that and recognising that if convenience stores are stepping up when the banks are pulling out of towns, they ought to be supported, not be at a financial disadvantage as a result. That is just one example, but there are others that have been raised by the business community, the Federation of Small Businesses and the Association of Convenience Stores. We ought to reflect on that.

I would welcome some detail on that, even if provided at a late stage, after Committee, and I know that the Chair of the Select Committee would too. Many of these issues are not politically contentious—that is the spirit in which we made our previous offer and in which we are working today. There is broad support for them in the community, and we ought to work together to try to see them through. There were a number of items in the Local Government Finance Bill, which fell when the election was called, that need to be progressed, because local government is asking for them to be progressed. We ought to get together, see which of those elements have cross-party support and take them forward sooner rather than later.

[Rishi Sunak]

Let me put on record my thanks to the hon. Gentleman for, as ever, the constructive way in which he approaches our discussions on this and other measures.

To turn to his first point on compensation for local authorities and what was said in the Budget document of last year, the reference to compensation in that document specifically related to the switch to the consumer prices index in business rates indexation and the extension of the pubs relief scheme. I fully appreciate that the document could have been clearer on that point. As a result, my Department issued a letter to all local authorities two days after the Budget to make it clear that local government would not be compensated for this specific tax measure. As we have previously reiterated, we consider those extra revenues to be a windfall that came as a result of a Supreme Court decision.

The new legislation will ensure that the position is restored to where we were beforehand, so there should be no net loss to local authorities. That said, the hon. Gentleman raised the issue of rates retention. We are aware of his point—that under the rates retention scheme, some local authorities may see a small impact on their overall retained business rates. That would potentially occur in pilot areas, where the percentage of rates retained locally is different in the year that the refund will be paid, compared with the year in which the authority first received the windfall from the Supreme Court decision. We have previously said that it is very hard, if not impossible, for us in the Department to quantify that impact, but officials believe that it is small. That said, we are considering the points made in the submission by London Councils and the Greater London Assembly on that issue.

On the broader support for businesses through the business rate scheme, I am delighted that hon. Gentleman welcomes our support of small business. This is one measure, but there are others. I point to the Budget last year and the year before that, where we doubled small business rate relief, which was widely welcomed by businesses, including the FSB. We took almost 600,000 smaller business out of rate relief. In addition, there was a £435 million package to target ratepayers who face the steepest bills as a result of the revaluation. That included something that was warmly welcomed in my constituency and I am sure many others: the £1,000 pub discount voucher, which has also been taken up.

Lastly, we brought forward by one year the indexation of business rates from the retail prices index to the consumer prices index, which is worth some £2.3 billion over five years. Hopefully, the hon. Gentleman will agree that that shows strong support for small business. Another measure that the FSB has welcomed, and which was part of the Local Government Finance Bill that fell at the last election, was business rates relief for plant nurseries—a measure that was also the result of a Supreme Court decision that changed settled practice and which had cross-party support. He will be aware that we recently laid a written ministerial statement recommitting the Government to legislate to reverse that decision. Indeed, that decision will be made retrospectively, so that plant nurseries will be exempt from business rates and treated as agricultural property. I look forward to working with him on that, and hopefully getting his support when the time comes.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Higher amount for long-term empty dwellings

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Jim McMahon]

The Labour party supports the Bill, but our manifesto suggested going further. Rather than a 200% premium, there would be a 300% premium and consideration of bringing the empty period to a year. There is a reason for that: the housing markets across the country are very different. The Bill will not address the problem of the concentration of empty homes in London. Figures provided by the House of Commons Library show that 20% of City of London properties are empty. In Westminster and in Kensington and Chelsea, one in 10 properties are empty.

Such properties are owned by people who think nothing of paying twice the amount of council tax that a usual resident does because they have the financial means to pay it without that having an impact on their pocket. I am not sure that this measure goes anywhere near where it needs to go to address the region of the country with the largest housing demand. We know about the housing pressures in London and that many of the properties are held by property investors, a number of which are foreign-based. The measure will not address that, and the Government have not made a determined effort to address it.

It is bad enough that properties that have been in the community for some time are being bought up, but it is a scandal that brand-new properties—whole tower blocks in some cases—are built, but in the evening there are no lights on because not many people live there. They are built but held as investments with no intention of people living there. The Government need to think about what financial measures they can use to encourage owners of properties in that very particular market to bring them back into use. We build houses for people to live in, not for wealthy institutions to hold with no intention of anybody ever living in the property.

In some housing markets—we experience this in the north of England—empty homes are the result of a broken housing market. The Labour Government introduced the housing market renewal project to address a fundamentally broken housing market in which there was no latent demand from local people to buy the properties, and those who were able to buy a property did not want to live in the areas where properties were empty. When the housing market renewal scheme was cancelled in 2010, the Government turned their back on those areas.

Some areas have been brought back into use, and many local authorities are introducing innovative schemes. In Liverpool and Stoke, local authorities are selling empty properties for £1 as a way to encourage people to get on to the housing ladder. We know from reports that the people who have benefited respect the schemes. The properties would not have been on the housing market had it not been for those schemes, so it is a double win. The initiative enables empty properties to be brought back into use and gives somebody the chance to get on the housing ladder when in other circumstances they would not be able to afford to do so.

In other areas with similar housing characteristics, a number of properties were earmarked for demolition under housing market renewal—the properties were purchased and the windows boarded up—but the Government removed the money in 2010. The boards came off the windows and the properties were sold to private landlords. Taxpayers are paying through the housing benefit bill for what is generally substandard accommodation in areas with a broken housing market, and are doing so for properties that generally do not meet the decent homes standard. In Greater Manchester, 40% to 50% of the £350 million a year we pay in housing benefit to private landlords is for properties that do not meet a decent standard.

The country could use that money better to provide decent, safe properties with good solid tenures where people enjoy living, in areas where there is a high-quality environment and the roads are safe, and where play areas provide a safe place for children to play, not just terraced streets that were built to support mill workers. Now that the mills have closed, those houses are just not desirable for many people. The Government need to take a broader view of how empty homes affect different parts of the country, and they must bring forward more active proposals for London, given how wealthy investors are holding properties. We also need a plan for areas where the housing market is weak. These measures will go some way to addressing that problem, but they will not address the inherent weakness in the local housing market where the owner-occupier element is weak.

We need a genuinely joined-up plan. This is not about a sticking plaster to support local authorities that have had their budgets cut dramatically, or about raising tax; this is about bringing empty homes back into use. The Government’s response, particularly since the empty homes fund was deleted, seems to be: “Well, if local authorities bring homes back into use, they will be the beneficiaries because they will get a new homes bonus payment”. However, the new homes bonus payment is retrospective, and we would be expecting local authorities to find money from their base revenue budget to bring empty homes back into use at a time when many of them cannot afford to pay for social care and children’s safeguarding. The Government need to come forward with a plan and funding to support local authorities to bring empty homes back into use. Taxing people who own those properties is one element of that, but in some cases direct grant funding will be needed to bring accommodation back into use.

[Rishi Sunak]

I thank the hon. Gentleman as always for his thoughtful comments. The two substantive points he mentioned were whether the level of the premium is too low at 100%, and whether two years is too long as a measure for an empty property. On whether the premium is too low, we need to strike a careful balance between providing a strong incentive for bringing empty homes back into use, and not disproportionately penalising homeowners who may be struggling to sell or rent out a property or to complete any major renovations that might be required. We believe that doubling the premium cap strikes the right balance. Scotland and Wales also have a premium of 100%, but I understand the hon. Gentleman’s point.

On whether the qualifying period for an empty home should be less than two years, it is worth noting—I know this from the correspondence that the Department receives—that some owners of empty homes face circumstances that make it difficult for them to bring their empty homes back into use quickly. That could be a renovation or the time taken to put something on the market with a difficult set of conditions. There may also be delays as a result of the probate process, for example. Again, I think the two-year period strikes the right balance.

[Jim McMahon]

Any scheme, even with a 12-month qualifying period, can have exemptions that take into account individual circumstances. There is already a scheme to deal with properties that are under probate, which is clearly outside the control of the executors who are trying to dispose of it. That can be managed. However, a number of landlords own properties and have no intention of letting them out. They will simply flip them over into different names to avoid paying the tax, and a more concerted effort to deal with such issues is important. The truth is that it would be much more difficult for people to keep flipping the property if we had a 12-month period—they can currently do it every 24 months.

[Rishi Sunak]

The hon. Gentleman is right that there are exemptions. For example, there is a six-month council tax free period for probate, and then the clocks starts. The problem is trying to define ex ante the individual circumstances in which it might be fair to have a period of more than one year. That is why we believe two years is the right amount of time—it provides flexibility but also serves somewhat as an incentive to bring homes back into use—but I understand his point, and why people would take a different view on what the right period should be.

On the broader strategy for empty homes and local authorities, I agree with the hon. Gentleman that there are examples of individual local authorities coming up with good, innovative ways to tackle to problem of empty homes. He mentioned some, but I am aware of examples in Bolton and Kent where local authorities have come up with successful ideas, whether loans, discounts or other schemes, to bring empty homes back into use. That is why our approach is the right one. He might disagree with the quantum of funding but, at £7 billion, the new homes bonus is substantial and acts as an incentive to local authorities to come up with schemes to bring homes back into use. They will be financial rewarded—I appreciate that that will be after the fact, but that is as it should be—for success in bringing empty homes back into use. That serves as a carrot, which is the right approach. Rather than the Government telling each local authority exactly what to do, we provide a framework for rewarding good behaviour and let individual local authorities innovate. Hopefully, increasing the premium today will serve only to improve the situation.

The hon. Gentleman is right to point out that, in the long term, we should not rely on that as a source of funding. We would rather not have empty homes, and want to ensure that everybody who wants a home has one to live in. The fewer empty homes there are, the better.

Question put and agreed to.

Clause 2 accordingly ordered to stand part of the Bill.

Clause 3

Extent, interpretation and short title

Question proposed, That the clause stand part of the Bill.

Draft Non-Domestic Rating (Alteration of Lists and Appeals) (England)(Amendment) Regulations 2018

Debate between Jim McMahon and Rishi Sunak

Tuesday 13th March 2018 General Committees

[Rishi Sunak]

I would be delighted to write to you, Mr Rosindell, and to other members of the Committee on that point. Before I confirm that, however, in the short term, I urge hon. Members to ensure that riding stables in their constituencies appeal to their local authorities for discretionary relief, as I have encouraged my auction marts and riding stables to do. The Chancellor announced a £325 million fund to deal with cases that were not captured by the other reliefs put in place around the time of the revaluation.

[Jim McMahon]

On the unintended consequences of the revaluation, the Association of Convenience Stores has raised the matter of the introduction of cash machines in convenience stores. When high street banks close in a precinct, village or town centre, so there is no cash machine, and a convenience store steps up to provide one, the turnover of that cash machine goes towards its rateable value. Will the Government look at that as part of their review?

[Rishi Sunak]

I do not have the full details on that issue, but I would be happy to look into it. As the hon. Gentleman will know, the VOA makes decisions independently of Government, according to its guidelines, so it would be inappropriate for a Minister to interfere on an individual case. On his broader point, however, if the system is not picking something up properly, I would be happy to look at that.

My hon. Friend the Member for Amber Valley talked about the appeals process and how exactly it will work. In the old system, everything automatically turned into an appeal. In the new system, there will be two stages before an appeal—check and challenge—which anybody can avail themselves of. First, the appellant will ensure that the basic details of their business rates valuation are correct. Secondly, they will engage with the VOA to discuss that. Those two stages will hopefully mean that there is less reason to go to a formal appeal—although the appellant will still have the right to do that—which should reduce the incidence of spurious appeals.

I hope that I have covered all the points made by hon. Members and that I have assured the Committee that the Government are providing appropriate safeguards to ensure the fair operation of penalties, particularly through the right of appeal. It is clearly in everyone’s interest to ensure that the appeals system is underpinned by accurate information. I commend the regulations to the Committee.

Question put and agreed to.

Draft Non-Domestic Rating (Alteration of Lists and Appeals) (England)(Amendment) (Regulations) 2018

Debate between Jim McMahon and Rishi Sunak

Tuesday 13th March 2018 General Committees

[Rishi Sunak]

I would be delighted to write to you, Mr Rosindell, and to other members of the Committee on that point. Before I confirm that, however, in the short term, I urge hon. Members to ensure that riding stables in their constituencies appeal to their local authorities for discretionary relief, as I have encouraged my auction marts and riding stables to do. The Chancellor announced a £325 million fund to deal with cases that were not captured by the other reliefs put in place around the time of the revaluation.

[Jim McMahon]

On the unintended consequences of the revaluation, the Association of Convenience Stores has raised the matter of the introduction of cash machines in convenience stores. When high street banks close in a precinct, village or town centre, so there is no cash machine, and a convenience store steps up to provide one, the turnover of that cash machine goes towards its rateable value. Will the Government look at that as part of their review?

[Rishi Sunak]

I do not have the full details on that issue, but I would be happy to look into it. As the hon. Gentleman will know, the VOA makes decisions independently of Government, according to its guidelines, so it would be inappropriate for a Minister to interfere on an individual case. On his broader point, however, if the system is not picking something up properly, I would be happy to look at that.

My hon. Friend the Member for Amber Valley talked about the appeals process and how exactly it will work. In the old system, everything automatically turned into an appeal. In the new system, there will be two stages before an appeal—check and challenge—which anybody can avail themselves of. First, the appellant will ensure that the basic details of their business rates valuation are correct. Secondly, they will engage with the VOA to discuss that. Those two stages will hopefully mean that there is less reason to go to a formal appeal—although the appellant will still have the right to do that—which should reduce the incidence of spurious appeals.

I hope that I have covered all the points made by hon. Members and that I have assured the Committee that the Government are providing appropriate safeguards to ensure the fair operation of penalties, particularly through the right of appeal. It is clearly in everyone’s interest to ensure that the appeals system is underpinned by accurate information. I commend the regulations to the Committee.

Question put and agreed to.

Oral Answers to Questions

Debate between Jim McMahon and Rishi Sunak

Monday 12th March 2018 Commons Chamber

[Rishi Sunak]

The hon. Lady is absolutely right to highlight the important work that prevention plays. Nobody wants to see a child in need in those circumstances, which is why this Government have committed almost £1 billion to the troubled families programme over this period in the spending review. As recent results have shown, that is reducing the number of children in need after heavy intervention from their key workers in the programme.

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

Last week, the respected National Audit Office published its report on the financial sustainability of local authorities. It made clear the significant challenges faced by councils and the vital services that they deliver. Can the Secretary of State prove that he is on the side of local councils and place in the House of Commons Library any submissions that he has made to the Chancellor ahead of the spring statement?

[Rishi Sunak]

I also read the National Audit Office report with interest. I was pleased to see that it made very positive comments about the Department’s work in getting to grips with the challenges across local government and making sure that the sector is properly resourced and looks forward to the reviews that are being put in place to improve funding and business rates retention.

Telecommunications Infrastructure (Relief from Non-Domestic Rates) Bill

Debate between Jim McMahon and Rishi Sunak

Ping Pong: House of Commons
Tuesday 23rd January 2018 Commons Chamber

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

I congratulate the new Minister on his promotion. I look forward to working with him on matters of common interest such as local government finance, which is a niche subject that does not always attract wide attention, but it is important, and it is important that we see reform. I made that offer to his predecessor, and most of the issues are not partisan at all. They are technocratic but essential, and if there is room for us to work together, we should seek to do so.

I am pleased to see the Bill return having been amended in the Lords, and I am pleased that the Government have received the amendments in the way they have. As we have seen in our debates, this is not necessarily a subject that gets Members excited or that results in mass attendance, but the people who do attend understand how important it is. This financial relief is intended to ensure that as many parts of England and Wales as possible benefit from high-speed fibre broadband. A financial incentive is an important mechanism for achieving some of that.

We were very probing in Committee and, unsurprisingly, we will be looking to see how the Bill works in practice. In particular, can we ensure that this is not just a tax relief for the big providers and that it gets to the smaller providers, too? Can we ensure it has a net effect on the extension of fibre broadband, or will it basically provide a subsidy for installations that would have happened regardless? Have we been able to reach a position where the providers themselves are satisfied that the Bill goes some way towards balancing the revaluation that they met with a degree of concern? I read recently in the Financial Times that BT and Virgin had hinted at the possibility of considering legal action against the revaluation, and I am interested to know the outcome.

Fundamentally, the Bill does two things. First, it rescues an element of the Finance Bill that fell when the election was called. The Bill contained many important reforms that were not contentious or party political but would have allowed local government finance to catch up with the changing times. I encourage the Minister to look at other provisions in the Bill to see what else could be brought forward to benefit local government.

Secondly, the measure proves that the Government can look at financial incentives for business growth, but business rates, of course, cover a wide range of business activity. It has been a long-standing criticism that we have not yet managed to address the impact of the treatment of plant and machinery, for instance, on business investment in new technologies and in new plant and machinery in those premises.

That has also been a concern on our high streets. When banks and building societies close, they are often the only provider of a cash machine in town. When a local convenience store agrees to take on the cash machine, it generally finds itself in a worse position at the end, despite providing a community service, because the turnover at the cashpoint will count towards its rateable value.

I raise those two points because I think there is a demand in industry and the community to ensure that business rates add value to our communities, rather than detract from them. As we embark on Brexit, we need to ensure that our country is in the most robust position possible to attract investment and ensure that we have strong infrastructure.

Finally, I pay tribute to Members in the other place, particularly Lord Kennedy, who spent a great deal of time on the issue and was involved in amendment 2. Let us see whether it makes a difference on the ground, because we pass legislation here not for the sake of it, but to make a material difference to public policy and the community. I will be waiting with interest to see whether this has a net effect on infrastructure investment.

[Rishi Sunak]

I thank the hon. Member for Oldham West and Royton (Jim McMahon) for his kind words of welcome. He has a long and distinguished track record in local government, and I very much look forward to working with him in the constructive manner he outlined. He made a couple of points that I would like to address briefly. The first point was about who is eligible for the relief. As he knows, it is available for any company deploying new fibre. One of the expectations and hopes for the relief is that it will bring more alternative and smaller providers into the market. We will be watching that closely, as I know he will, because we would all welcome a broader diversity of suppliers.

The hon. Gentleman made a good point about the relief being gamed, and ensuring that it is targeted specifically at new fibre deployments. That was raised in the Commons stages by my right hon. Friend the Member for Wantage (Mr Vaizey), and indeed in the other place by Baroness Harding of Winscombe. I am pleased to tell the hon. Gentleman that, following those exchanges, my Department worked extensively with Gamma Telecom and Ofcom to conduct a detailed study of the potential for the relief to be gamed. The results of that analysis clearly support the conclusion that, based on the evidence available to date, neither the Government nor Ofcom expect the rate relief for new fibre to give rise to gaming in the system. Without going into the details, simply the cost of deploying new fibre, withdrawing dark fibre, opening up the ducts and then reconnecting everything would in almost all cases be more expensive that the saving from business rates.

The hon. Gentleman mentioned other measures in the Local Government Finance Bill and the importance of ensuring that we have a business rates system that supports economic growth. I wholeheartedly agree with him and am keen to use the opportunity for the business rates reset, the revaluation and the fair funding formula to ensure that our financial system does indeed support local authorities in their aspirations to grow their local economies.

I put on record my thanks to Members in the other place and, of course, the officials who brought me up to speed on the legislation incredibly quickly. I also thank my predecessor in this role, my hon. Friend the Member for Nuneaton (Mr Jones), who did so much to get the Bill to the point at which we are in a position to approve it. As I have said, demands on broadband are doubling every couple of years. It is vital that we stay ahead of that need and move quickly to implement the relief scheme that has been promised. I am delighted that we are making good progress on the draft regulations, which will be implemented swiftly. I am grateful to Members in this House and in the other place for the swift progress we have made. This is only one small part of the Government’s strategy, but it is an important one called for by all stakeholders.

Lords amendment 1 agreed to, with Commons financial privilege waived.

Lords amendments 2 to 13 agreed to, with Commons financial privilege waived.