Non-Domestic Rating (Preparation for Digital Services) Bill

John Redwood Excerpts

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

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

I beg to move, That the Bill be now read a Second time.

This Government are committed to ensuring that the tax system is fit for the 21st century, that it is designed around the needs of the taxpayer and that we minimise as far as possible the administrative burden for businesses paying their taxes. The Government are also clear that this system should reflect and take full advantage of modern technology, and use that to make the process as simple and efficient as possible for taxpayers.

This very narrow Bill will support those aims in the context of the administration of business rates. This extremely short and simple measure will simply allow us to start exploring future digital reform of the business rates system. The same clauses appeared in the 2017 Local Government Finance Bill and passed through Committee without Division. The hon. Member for Oldham West and Royton (Jim McMahon) was present during those debates, and I hope the clauses will receive the House’s support again today.

[John Redwood (Wokingham) (Con)]

Can the Minister give an idea of the cost involved and what sort of efficient and better system might emerge?

[Rishi Sunak]

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

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

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

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

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

--- Later in debate ---

[John Redwood (Wokingham) (Con)]

I have declared my business interests in the Register of Members’ Financial Interests, but I am not speaking for them of course; I wish to speak on behalf of the retail businesses in my constituency, as others have already done.

While I am sure it is well intended and necessary to develop a digital payment system for this tax, can the Minister reassure us that it will not be used as a device by the Treasury and others to accelerate payments and to damage further the cash flow of the shops and other businesses that have to pay it? There is the temptation to use the power of digital technology to have real-time information and then to knock the money off for the tax rather more quickly, when the timing of tax payments may be an important part of cash-flow planning, particularly of retail businesses.

I hope that Ministers are sensitive to the current position in many high streets up and down the country. Large chains and other sizeable independent shops are struggling because their cost base is very high, and they are competing with online retailers who have nothing like the same cost base in terms of property and staff numbers. They are finding it difficult to manage, and another hit on their cash flow from the Government would not be welcome.

Rents are now falling in shops generally in England and Wales, the area covered by the Bill. Some retailers are talking about reductions of 25% or 30% as and when the rents on various shop properties become due for review. That relief is welcome to some extent, but it takes time, because many of the leases are for several years and have to mature before renegotiation is possible. Some retailers must go through the agony of a voluntary administration to secure a change in their rents. Another problem is the fact that rents can go down through market processes, but rates never go down, except in the case of very small shops that benefit from one of the exemptions. So the total property cost does not fall at anything like the percentage that the market is suggesting that it should, because the Government element is very fixed. I hope that Ministers will be sensitive to that.

I realise that this is not the occasion—much as many of us would like it to be—for a proper debate on the balance of business rate taxation and its impact on the retail sector. However, in Wokingham, a lot of money has just been spent on refurbishment and the provision of new and more attractive space in the town centre. Securing the first lettings is an important part of promoting a more active town, but over-avaricious taxation, speedier payments and other changes in how the business rate is handled could offset what will otherwise, we hope, be a good-news story.

That is my prime concern, to which I hope the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for Rossendale and Darwen (Jake Berry), will respond. I am delighted that he will be winding up the debate, because I know that he is very conscious of and sensitive to the need to do more to help retailers, and I am sure that he will mention that.

I should like to follow up my earlier intervention on the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak). It would be good, at some point—it may not be possible today—to have a better idea of the scope of the survey and of the costs that might be involved. Will it be conducted by our own Government officials, or will there be consultancy contracts? If there are consultancy contracts, will we get value, and will we be consulting people who actually know what they are talking about, so that we can end up with something that we are proud of?

The Government have a duty to taxpayers to ensure that money is well spent. It would be useful to have any more information that the Minister can give about the kind of sums that the Bill might authorise, and what the purpose is. What more can they learn that Her Majesty’s Revenue and Customs does not already know from running perfectly good systems for a range of taxes on people and businesses? A fair amount of them are now handled electronically, so presumably there is quite a lot of in-house experience and expertise that could be drawn on. We always want to make the best possible use of the talent that the Government already have and the information that they have already gleaned both through their own researches and by buying it in through consultancies. I hope that Ministers will have some ability to discipline that work and to ensure that it is timely and provides value for money.