Draft Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2023

Kevin Foster Excerpts

Wednesday 24th January 2024 General Committees

[The Financial Secretary to the Treasury (Nigel Huddleston)]

I beg to move,

That the Committee has considered the draft Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2023.

It is an absolute pleasure to serve under your chairmanship this morning, Mrs Murray.

Business rates are a crucial element of the UK’s tax system. They raise over £20 billion per year, which goes to help local authorities fund our country’s vital local services. While business rates provide crucial revenue, over the past few years the Government have taken extensive action to hold the tax rates steady and target support towards those ratepayers who need it. At autumn statement 2023, the Government announced a package of cuts worth £4.3 billion over the next five years to support small businesses and the high street with local tax cuts, including freezing the small business multiplier for the fourth consecutive year and extending the retail, hospitality and leisure relief scheme at 75% for 2024-25.

It is essential that the business rates system runs smoothly, with continuity and stability. These regulations ensure exactly that: they are crucial to maintaining a healthy, stable system for the financial year 2024-25 and beyond. Their primary purpose is to maintain the threshold between the two business rates multipliers. There are two multipliers in the English business rates system—the higher, standard rate multiplier and the lower, small business multiplier. The threshold between the two has stood at a rateable value of £51,000 since 2017, but due to the passing of the Non-Domestic Rating Act 2023 these regulations are required to preserve it at the same level from 1 April 2024 onwards.

[Kevin Foster (Torbay) (Con)]

The Minister will know that, certainly in Torbay, things like the discount on tourism and retail are very much welcomed. But will he confirm that the effect of these regulations not being passed would be that thousands of small businesses across the country would end up paying more business rates?

[Nigel Huddleston]

My hon. Friend has embarrassed me, because he just summarised my eight pages of notes in one paragraph. He is absolutely correct. If we do not do this, hundreds of thousands of businesses across the country—those with a rateable value of between £15,000 and £51,000—would effectively have to pay far higher rates than they otherwise would, and that is the core purpose of the discussion today. I should probably sit down there, but I will carry on just a little bit for the edification of others who probably do not get the principles as keenly, enthusiastically and quickly as my hon. Friend.

The secondary purpose of the regulations is to extend the scope of the small business multiplier to include unoccupied properties, charities and properties on the central list—which I will explain in a moment—with a rateable value below £51,000 and which do not currently receive full rates relief. This will level the playing field for all types of properties, promoting consistency in the system; in other words, it is a simplification. Those properties that move to the small business multiplier for the first time will also receive a tax cut worth around £5 million in total per year.

Hon. Members may appreciate a very brief reminder of the business rates multiplier and what it is. The multiplier is the tax rate used to calculate business rates. The relevant multiplier is multiplied by the yearly rental value of a property, known as rateable value, to calculate its business rates bill before any reliefs are applied. As I have mentioned, there are two multipliers in operation—the small business multiplier and the standard multiplier. The legislative default is for both multipliers to rise by consumer price index inflation each year, but the Government took action at autumn statement 2023 to freeze the small business multiplier for the fourth consecutive year, protecting over 1 million ratepayers from an increase in bills.

The regulations must be made as a result of the passing of the Non-Domestic Rating Act 2023 in October.