Business Rates (Rural Areas)

John Howell Excerpts

Tuesday 8th September 2015 Westminster Hall

[Jake Berry]

I thank the hon. Gentleman. There is an opportunity to take advantage of the small business rates exemption, and some farmers in my constituency and beyond who have holiday accommodation have used the exemption where they can have it for free. I hope that the Minister will take all the issues on board, including the hon. Gentleman’s eloquent point, in the reassessment of the way that business rates are charged, with a particular focus on agricultural communities.

Festivals have had to pay large backdated business rates bills to avoid enforcement proceedings by billing authorities. As with Mr Walker and his farm, that has led many festivals to appeal the bills, imposing additional costs and burdens on the VOA. The VOA has provided little justification or explanation as to how it is taking into account the individual circumstances of different festivals, and, as with the stables, there is a serious lack of clarity in the existing ratings manual, making it effectively for a festival organiser to know whether rates will be levied. I gently say to the Minister that although music festivals are not for everyone—they are not for me—they have notable supporters. He will recall that in 2013 the Prime Minister was photographed at the Cornbury music festival—without his shoes on I believe. I hope that when the Minister considers the issues, he will think of those notable music festival fans who may control our future careers.

The final point I wish to make about business rates in today’s debate is the rateable charge levied against cash machines. Over recent years, our rural areas across the country have lost literally hundreds of banks. Every Member here today will be aware of the bank closure programme in their constituencies. It has meant that, for many people, the hole in the wall or the through-wall ATM at the village shop or post office is their last access to cash. The importance of such facilities reflects the fact that about 80% of transactions are still in cash.

In the past five years, the number of ATMs liable to business rates has risen from about 3,000 in 2010 to over 12,000 this year. Each through-wall ATM that is liable to business rates has an average charge of £3,600. Major supermarkets or petrol retailers, such as Shell or BP, may be able to absorb such costs, but a small village store or post office will not. A small village store or post office may be exempt from business rates, due to this Government’s action, through small business rates relief, but creating a second rateable unit at the shop means that it is hit with a bill in excess of £3,000.

[John Howell (Henley) (Con)]

My hon. Friend describes a situation in which a bank has been closed down in a constituency, which often happens in rural constituencies such as mine. Has he found that the current position inhibits people from taking up ATMs in the transfer of that banking business to another business?

[Jake Berry]

I thank my hon. Friend for his contribution; I will come on to the effect of that, but the short answer is yes. Cash machine operators have warned that the attachment of business rates to through-wall ATMs makes them uneconomic, particularly in rural areas where there is low footfall and their use is not as common. They have estimated that 1,000 existing ATMs, let alone ones that we would hope to bring into our communities following a bank closure, are at risk.

An additional danger for our village shop, post office or former bank is that many of the small businesses in the village will do the majority of their transactions in cash. If people’s access to cash is suddenly a car or bus journey away, some of our most vulnerable rural residents, who will not have access to transport, will be forced to leave their village or small town to access cash and, having made the journey, will also do their shopping outside the village. As with festivals and stables, taxation of ATMs is described by the VOA as an area where some inconsistencies exist. Those inconsistencies are leading to the removal of cash machines or large, historical and significant claims for rates. It is currently estimated that 1,000 or so cash machines are at risk of removal due to the charge.

I believe that the charges were brought about by action we took in 2012. Correctly, in an attempt to encourage local authorities to seek business growth in their areas, the Government empowered local authorities to retain 50% of business rates, with the idea that they would go out and find new businesses, in the towns, villages and countryside, and encourage them to open in their areas. Local authorities now collect £26 billion a year in business rates—to put that into context, I should say that it is a bigger money spinner for local authorities than the fuel duty.

As we hoped, we have seen significant behavioural change by both local authorities and the VOA since 2012, but not in the way we hoped. Instead of localism and the encouragement of new businesses, local councils seem to have been inspired to carve out stables in people’s homes for a pet tax, festivals for a party tax and ATMs for a cash tax. I hope that the Government will urgently address such anomalies in their business rate review.

I make a final appeal to the Minister. During that review, can we look at putting a mechanism in place so that, when the VOA changes policy on the collection of business rates, that is announced and we have the opportunity to discuss the impact of that change here in the House? I say that because these unknown changes, which MPs find out about through their postbags, are seriously impacting on and damaging rural businesses. I hope and believe that, as part of our review, we will ensure that that does not continue.

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[The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Marcus Jones)]

Thank you, Mr Hollobone, for calling me to speak. It is a pleasure to serve under your chairmanship.

I congratulate my hon. Friend the Member for Rossendale and Darwen (Jake Berry) on securing this debate on the important issue of business rates, and in particular on how business rate rules apply in rural areas. I assure him that during this debate I will not take off my shoes, and I hope that I will not end up in the doghouse as a result of my comments.

My hon. Friend referred to several rural businesses. The rural economy is significant, contributing around £120 billion to the English economy in 2013. Our commitment to supporting businesses, including rural firms, was reflected in the Budget, when the Chancellor repeated what we have always said; the best way to create jobs and raise living standards over the long term is to support businesses, to increase productivity by making them more competitive, and to prioritise investment in skills and infrastructure. Therefore, the Budget set out a plan to back business and support productivity by introducing another cut in the corporation tax rate, increasing the level of the annual investment allowance, raising the employment allowance, introducing high-quality apprenticeships and committing sustained investment to the strategic road network.

As for specific support for rural areas, between October 2012 and March 2015 the five pilot rural growth networks helped more than 3,200 businesses, gave advice to more than 1,000 individuals interested in starting a business, created 530 new businesses, and created and safeguarded more than 1,200 jobs. As part of the new £3.5 billion rural development programme, the Department for Environment, Food and Rural Affairs is also investing nearly £500 million to benefit rural businesses, people and communities.

Before I talk about the future of business rates and our review of them, I will set out the action that we have taken on those rates since the 2010 election. We have doubled small business rate relief for more than five years. We have also given local authorities powers to grant their own discounts entirely as they see fit, because they know their local areas best and can use those powers to support any rural business they choose, and where they provide relief we automatically fund 50% of the costs. We have also introduced the business rates retention scheme, which provides an incentive to authorities to encourage local growth. In addition, we have introduced more than 20 enterprise zones, and we have plans for more.

I turn now to the reviews that we are currently undertaking. Through our review of business rates administration, we have listened to businesses to find out the changes to business rates that they want to see. Therefore, we will ensure that from 2017 the business rates system properly reflects the structure of a modern economy, and provides clearer billing and better information-sharing. The Enterprise Bill will also introduce a faster and more efficient appeal system. In addition, in the 2014 autumn statement the Chancellor announced a wider review of business rates, and I assure my hon. Friend that in that review we will certainly take full account of the position of rural businesses and the other matters raised in this debate. We expect that review to report by the end of 2015.

I turn now to the specific issue of cash machines and business rates. Business rates are paid on non-domestic properties and are the means by which those businesses contribute towards the cost of local services. Cash machines are a non-domestic use of property and therefore are included in business rates. It is for the Valuation Office Agency to decide, based on the facts, whether an automated teller machine should be separately assessed for business rates. That is decided independently of Ministers, based on the facts of each case, and we do not intervene. However, where cash machines are assessed for rates, it is fair that the cash machine operators, which include banks and other financial organisations, pay rates alongside other sectors, such as retail and offices. The rules also ensure that the rates assessments of cash machines reflect the value of specific sites. Busy sites have a much higher rateable value than quiet sites, and this approach is based on actual market rents that are agreed and paid by the cash machine operators.

Furthermore, we have given local authorities the power to grant local discounts. We have urged them to support access to cash machines that are free to use through their local discount powers. Those powers can also be used, for example, to support cash machines on high streets or in rural locations, so they take into account the comments made by my hon. Friend. Where councils use those powers, we will automatically meet 50% of the cost. As I said earlier, we are currently conducting a review of business rates and we will certainly take into account the comments on business rates of my hon. Friend and those of other hon. Members who have contacted me on this issue.

[John Howell]

I wonder whether the Minister will allow me to give a plug for that review. I am conducting a review of businesses in my own constituency, and I know that they see business rates as just another tax. It would be extremely good for them to see something in return for paying their business rates—something that they have control over.

[Mr Jones]

I thank my hon. Friend for that intervention and it is always good to get the views of businesses, both in Henley and across the country. I will certainly take into account what he has said and I will feed those comments into the ongoing review.

I turn now to the issue of stables and local taxation. Property is subject to either council tax or non-domestic rates, which are commonly known as business rates. The boundary between the two can certainly be complex, but broadly speaking stables are only likely to be included within the council tax band if they are sited within the domestic curtilage of a property and used for purposes on a domestic scale appropriate to that property. It is for the VOA to apply the legislation and case law to the facts of a particular case.

All ratepayers have the right of appeal to an independent tribunal. Of course, a stable property that is separately rated may be eligible for business rate relief, which I think is the case in the situation that my hon. Friend the Member for Rossendale and Darwen referred to. Where a stable is taken into account in a council tax assessment, that may well result in a council tax band increase. So it is not necessarily the case that someone will pay more when a stable or stable block is separately assessed.