Business Rates

Kate Green Excerpts

Tuesday 30th October 2012 Westminster Hall

[Simon Danczuk (Rochdale) (Lab)]

It is a delight to serve under your chairmanship, Mr Caton.

Since I became Rochdale’s Member of Parliament, the local business community has raised business rates with me time and again, which is one reason why I initiated this debate. The other reason is that I believe the Government’s handling of this particular tax is doing real damage to economic growth. It is also fair to say that, in many ways, the Government’s handling of business rates mirrors the way they have mishandled other broader economic issues and failed to manage Government change.

I will start by providing some broad examples. The Government have talked tough on red tape, but their handling of business rates is making life a misery for thousands of businesses. The Government claim to be interested in helping the high street, but they ignore every retail voice that raises concerns about business rates. The Government talk about transparency and accountability, but they are postponing business rates revaluation without consulting business first. This weekend, through the Deputy Prime Minister, the Government talked about rebalancing our economy away from the City’s square mile to the rest of the country through more city deals, but they are now postponing business rates revaluation, which will have a major adverse effect on businesses in every region except the south-east.

The Conservatives have often peddled the myth that they are on the side of business. Well, if there is one policy that demolishes that myth—most businesses now know this—it is business rates. The Government are playing politics with business rates, which is hurting the high street and the wider business community.

On the recent business rate increases, the Government said in their recent circular:

“As business rates are linked to inflation, there will be no real terms increase in rates”.

On 2 July, the then Minister for Housing and Local Government, the right hon. Member for Welwyn Hatfield (Grant Shapps), said that business rates are having

“only an inflation-level rise”.—[Official Report, 2 July 2012; Vol. 547, c. 567.]

Do the Government think businesses believe that rhetoric? Does the Under-Secretary of State for Communities and Local Government, the hon. Member for Great Yarmouth (Brandon Lewis) think that businesses are oblivious to the fact that last year’s increase was based on an exceptional September, when RPI was at 5.6%? Does the Minister think businesses are not aware that that major rise in business rates gave his Government a windfall in revenue? In 2011, the increase was 4.6%, a cumulative rise of more than £0.5 billion over those two years. Businesses see this Government as disingenuous when they talk about business rates increasing only by inflation.

Although the Government have had a windfall in business rates, including much from the retail sector, they have dedicated little to helping the high street. From the £350 million extra income last year, the Government spent just £10 million on the various Portas programmes. Latest figures show that more than 30 high street chain-store shops are closing every day. Empty shop numbers have gone up, year-on-year sales are down, footfall is down and insolvencies are up. That is the picture of the high street under this Government, and their mismanagement of business rates is a major factor in that.

Every week the newspapers are full of stories of businesses citing high business rates as their reason for pulling out of an area or being forced to close. The chief executive of Britain’s third largest shoe retailer, Kurt Geiger, recently said:

“Business rates actually are what are killing UK retail”.

Retail has accounted for 20% of our gross domestic product, and it accounts for 11% of UK jobs and is the largest private sector employer. Retail is often the first rung on the ladder into employment for young people, but the ladder is now being pulled away by the Government.

We are all aware of the Government’s Portas review, and we all had high hopes for what it might achieve. But we now know the Portas review was just window-dressing. It is no wonder that Mary Portas is now telling industry conferences that she fears her review may have been a “Government PR stunt.” One of Mary’s recommendations in her 28-point plan presented to Government was:

“Government should consider whether business rates can better support small businesses and independent retailers.”

Those words must have gone in one ear of Government and straight out the other, because they have been flatly ignored. Straight after the recommendation, the Government introduced the biggest business rates increase in 20 years.

The Minister said last month on “ConservativeHome”:

“I want to make myself obsolete.”

I do not have a problem with the Minister making himself obsolete—indeed, I welcome it—but I do have a problem with him and his Government making the high street obsolete.

Because of the inflation-busting business rate increases, it is no wonder the Valuation Office Agency has a total of 241,700 outstanding appeals on business rates for the fourth quarter of 2011-12. In that quarter, the VOA managed to clear just 11,960 appeals. Many businesses in Rochdale have testified to the slowness of that process.

[Kate Green (Stretford and Urmston) (Lab)]

I congratulate my hon. Friend on securing this debate and on all the work he does on this subject, which is valued and noticed by the House. He is right to highlight the problems with the Valuation Office Agency, and CVS, a major business rates specialist located in my constituency, has expressed its view that the delays are compounded by cuts in staff at Her Majesty’s Revenue and Customs. Does he agree that that is part of the problem?

[Simon Danczuk]

I do agree with that statement. I am also familiar with the excellent work of CVS in championing appeals for businesses across the country. The lack of resources in the VOA is a concern that I will address in a moment.

It is clear that businesses are having to wait years for the VOA to get round to processing their appeal. By my calculations, the VOA will now take five years to clear its 2010 revaluation appeals. That is just not good enough. In that time a lot of businesses will go bust, having had to pay unfairly high taxes. Setting the taxes at a fairer level could make all the difference and allow those businesses to stay in business.

The question now has to be asked of the Minister: is the Valuation Office Agency fit for purpose? The VOA pointed out in its 2011-12 annual report that it had closed nine offices and that complaints had increased due to the length of time that business rates appeals take. The truth is that the Government have starved the VOA of resources, that appeals are taking far too long, and that as a consequence many businesses are paying too much in taxes, which is putting many businesses out of business.

[Kate Green]

Does my hon. Friend agree that it is a tremendous irony that delays in the VOA, which is one part of HMRC, are causing another part of HMRC to put businesses at risk of bankruptcy by trying to recover tax that businesses cannot afford to pay because their rates have not been properly assessed?

[Simon Danczuk]

That is absolutely right. The failure to run the appeals process successfully is damaging businesses, particularly small and medium-sized enterprises.

As if that were not bad enough, out of the blue, with no notice given, the Government then told us that they had decided to stop the 2015 business rates revaluation and carry it out two years later. There was no consultation with business, no detailed discussion of how the policy might affect economic growth, no consideration of how the policy might prevent the economy from being rebalanced along geographical lines. The British Property Federation’s chief executive says that the move

“embeds injustices in the current system”,

and the British Council of Shopping Centres says that it will have a “very negative impact” on the high street. Those organisations are big figures on the distressed retail property taskforce, which the Government are backing, yet Ministers will not listen to them.

--- Later in debate ---

[Brandon Lewis]

As I have said, the publication of the figures is a matter for the VOA, and one that we are looking to resolve before the Bill’s Second Reading on Monday, but those are the figures from the VOA that we have at the moment. To do the full, detailed calculation, we would need to go through the full revaluation procedure, and the figure for that is just under £50 million. I will come back to that in a moment. We have taken steps to change the legislation, but both Houses—I think that my hon. Friend the Member for Waveney (Peter Aldous) raised the point about reviewing and looking at what is happening—will of course have the chance to examine the policy fully during the passage of the Growth and Infrastructure Bill.

Variation in business rates can have a significant impact on businesses. As has been noted, business rates can add 50% to property costs and can equate to 7% or more of turnover. Large-scale changes in these costs can be very disruptive to businesses at a time when they want to concentrate on delivering growth. That is why we felt that postponing the revaluation was the right thing to do. It provides certainty and stability, allowing businesses to have confidence in what they are doing.

I am aware of concerns that have been heard recently from organisations such as the British Retail Consortium that business rates are generally too high and should not be increased in line with inflation. In fact, the system of increasing the rating multiplier only in line with inflation, which was introduced in 1990, has provided valuable certainty for businesses over the years. It has meant that they have been able to forecast their business rates bill between revaluations and plan accordingly. That was touched on by the hon. Member for Warrington North (Helen Jones), I believe.

The Government have said that they will review the case for uprating in line with CPI instead of RPI, or using a 12-month average instead of the September inflation figure. That commitment still stands. I do understand that in the current economic climate, there are retailers and other businesses that would like lower business rate bills, and there are businesses that would like the Government to raise less money from business rates at the next revaluation. When we consider calls, such as those made today, for lower business rate bills, we have to balance that not just against a system that has capped business rate yields for 22 years, but against the Government’s deficit reduction priority and the tough decisions needed to reduce the deficit. To back up the comments made by my hon. Friend the Member for Nuneaton, it is important, if there is to be that deficit reduction, that we do not make further spending pledges, which is, to an extent, what hon. Members have invited me to do today.

To date, the approach to granting business rates relief has been to target it where support is most needed—on, for example, small businesses, charities, and businesses in hardship. However, we find discussions with groups such as the British Retail Consortium helpful—I will meet it in the next couple of weeks—and will of course continue to keep the rating system under review.

Let me touch on a couple of specific points that were raised. I am aware that there have been delays in relation to rating appeals at the VOA. It has devoted extra resources this year to help to clear the backlog. My officials have regular meetings with the VOA to discuss the appeal numbers. Postponing the revaluation will allow it to deploy more resources to clear the appeals, but we will also be looking to work with the VOA to see what more can be done to clear appeals.

[Kate Green]

I am grateful for that assurance. We look forward to seeing the impact of the additional resources. Will the Minister also commit to ensuring that up-to-date data about the VOA’s performance continue to be published? There have been delays in publishing the statistics, which might mean that worse performance is deliberately being suppressed.

[Brandon Lewis]

I will certainly take that point back to the Department. May I highlight that any ratepayers with an outstanding appeal who are in financial hardship or facing enforcement action from a local authority should contact the VOA directly, because it will look at bringing appeals forward in such cases?