Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill

Kevin Hollinrake Excerpts

2nd reading
Monday 28th June 2021 Commons Chamber

[The Minister for Regional Growth and Local Government (Luke Hall)]

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

The Bill contains two halves: first, a measure that changes the valuation assumptions that are applied when making business rate determinations in the light of covid-19; and secondly, a measure that will provide for the disqualification of unfit directors of dissolved companies. I will start with the first measure before moving on to the second.

The pandemic has presented significant challenges for businesses in all sectors. Our response has been of a similarly unprecedented scale, with more than £280 billion provided throughout the pandemic to protect millions of jobs and businesses. In this year’s Budget, the Chancellor announced an extra £65 billion of support for 2020-21 and 2021-22. The support we have provided for businesses included 100% business rate relief for all eligible retail, hospitality, leisure and military properties for 2020-21, at a cost of £10 billion. Combined with those eligible for small business rate relief, this means that more than half of ratepayers in England will have paid no rates in 2020-21.

At this year’s Budget, we confirmed a further three-month extension to the full 100% business rate relief for retail, hospitality and leisure businesses, followed by a further nine-month period of relief at 66% subject to the cash cap, at a further cost of £6 billion. That takes the total level of support provided to businesses by Government through relief from business rates since the start of the pandemic to over £16 billion.

That is an important context for the Bill, because as well as helping businesses through the pandemic, it is also important that we support local government with the critical role it has in supporting our communities. A vital part of that is the income that it receives from business rates, so while it is necessary to provide rates relief to businesses, it is important that we do so in a way that is targeted and that ensures that those who can still contribute continue to pay this tax.

With that in mind, clause 1 is concerned with how rateable values should be assessed during the pandemic. A business rates bill is calculated by multiplying the rateable value of the property by the multiplier, or the tax rate, and then applying the reliefs. The rateable value of a property is therefore, broadly speaking, its annual rental value at a set valuation date, which in the current rating list is 1 April 2015. All rateable values should therefore reflect annual rental values at 1 April 2015. This provides a consistent tax base for all businesses.

Of course, it is necessary to update the tax base, which is done at regular revaluations undertaken by the Valuation Office Agency. The next revaluation was originally scheduled for 1 April 2021, based on values at 1 April 2019, but last year we took the step of postponing it to 1 April 2023 to ensure that it better reflected the impact of the pandemic; Parliament approved that change by passing the Non-Domestic Rating (Lists) Act 2021. The Act received cross-party support, for which we were extremely grateful.

Outside those general revaluations, a ratepayer can still submit a challenge to the VOA on their property’s rateable value between revaluations for a number of reasons, such as to correct factual errors or reflect a material change in circumstances. If not satisfied with the outcome of the challenge, the ratepayer can appeal the VOA’s decision to the valuation tribunal. It has been an established principle of the business rates system that a material change in circumstances challenge can be made on the basis of a physical change to a property or its locality. For example, a successful MCC challenge could be made following the partial demolition of a property, or significant roadworks near a property that might affect its value.

However, following the pandemic, the VOA received high numbers of MCC challenges seeking a reduction in rateable value to reflect the impact of the pandemic. Of course, the MCC legislation, as first set out in the Local Government Finance Act 1988, was not designed with covid-19 in mind, and the MCC system has never been used in response to economy-wide impacts or shocks. It has therefore become necessary to clarify, as clause 1 does, the treatment of covid-19 in assessing rateable values.

We have been clear that relying on the MCC system to help businesses that need further support in the light of the pandemic is not the right mechanism. It would mean significant taxpayer support going to businesses with properties such as offices, many of which might be able to operate normally throughout the pandemic, at a time when we have provided significant support to those most affected.

For example, the workforce of a consultancy firm based in central London that was previously entirely office-based is likely to have been working largely from home since the start of the pandemic, but the business itself may have continued to operate throughout. Under the business rates appeal regime, it could have argued that its office space had undergone a material change of circumstances due to the reduced occupancy.

If that business’s appeal had been successful, it would have been awarded a business rates reduction, but it would not have been right for it to have a reduced tax liability on that basis, given that it had not actually suffered an economic impact. Relying on the MCC system to support businesses would also mean resolving disputes through the courts, which could take years and create additional uncertainty both for businesses and for local government, which relies on income from business rates to deliver vital local services.

The Bill will therefore ensure that the coronavirus and the restrictions put in place in response to it cannot be used as the basis for a successful MCC challenge or appeal. It will ensure that changes to the physical state of a property can continue to be reflected in rateable values as and when they occur, irrespective of whether they are a result of the coronavirus, but that the general impact of the pandemic on the property market will not be reflected until the next revaluation in 2023. Until then, all rateable values will continue to be based on the property market as at 1 April 2015. This approach is supported by the Public Accounts Committee, which has welcomed the financial certainty that such a measure gives to councils.

Clause 1 applies in England. Business rates policy is fully devolved, so whether the same legislation is necessary in Wales, Scotland or Northern Ireland is a matter for their respective Governments, but we have been working closely with the devolved Administrations regarding the Bill. Although the law in Wales is similar to that in England, different legislation applies in Scotland and Northern Ireland. Of course, the impact of the coronavirus may have been different, so whether the devolved Administrations choose to follow the measures set out in clause 1 will depend on the individual circumstances and choices made in those countries.

We have also supported businesses. We have put £16 billion of support into business rates for the pandemic, and we have announced a relief worth an additional £1.5 billion for ratepayers impacted by the pandemic who have not been able to access business rate reliefs. These new reliefs will be administered by local authorities and will be distributed according to which sectors have suffered the most economically, rather than on the basis of temporary falls in property value. This will ensure that support is provided to businesses in England in the fastest and fairest way possible, and we will continue to work with and support councils and local government to enable ratepayers to apply for the new reliefs as soon as possible.

The second part of the Bill deals with the abuse of the process whereby companies are removed from the register and dissolved. The large majority of company directors are responsible, passionate about their businesses and diligent. They act as effective stewards of the companies to which they are appointed, and I pay tribute to the directors who make such a valuable contribution to our economy and who have fought so hard over the past year to ensure their company’s survival, preserving the jobs and livelihoods of so many within their business and beyond.

Unfortunately there are exceptions, and the business community and the wider public must be protected from those individuals who abuse the privilege of limited liability. Those directors who act recklessly, irresponsibly or even criminally should expect to have to answer for their conduct. That means expecting to have their conduct investigated and, if they had done wrong, facing the possibility of being disqualified from acting as a company director for up to 15 years, depending on the severity of their misconduct. Disqualification protects the public from the actions of those who have demonstrated they are unfit to hold the position of a director of a company, and acts as a deterrent to reckless or culpable behaviour.

Evidence to support disqualification action comes from the investigation of companies and the conduct of their directors. The Secretary of State for Business, Energy and Industrial Strategy may investigate live companies through the powers contained in the Companies Act 1985, and also the conduct of the directors of insolvent companies through similar powers in the Insolvency Act 1986 and the Company Directors Disqualification Act 1986. If such investigations reveal evidence that a director’s conduct has fallen below the standards expected of someone in their position, a period of disqualification can be sought, either through a court application or through an under- taking given by the person to the Secretary of State. A period of disqualification protects the business community and the wider public by preventing the person from acting in the promotion, formation or management of a limited company. Breach of a disqualification order is a criminal offence, and an extremely serious matter.

As things stand, though, there is a loophole in the disqualification regime that some irresponsible directors have been able to exploit. It concerns the situation where a company has been dissolved without entering insolvency proceedings. Dissolution should not be used as an alternative to insolvency proceedings, but there is evidence that some directors have been using the process both as a way of fraudulently dodging the payment of company debts and of avoiding insolvency proceedings and the scrutiny of their behaviour that comes with that.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I support the measures that my hon. Friend is taking in the Bill. He mentioned fraud. I take it that the measures he is talking about would not negate the potential for prosecution of fraud where it was demonstrated that a company director had defrauded the taxpayer by means, for example, of a bounce back loan.

[Luke Hall]

I thank my hon. Friend for that point. He is an expert on these matters in this House, and I look forward to working with him as we deliver the Bill.

When a company is dissolved, the only way the conduct of its former directors can be scrutinised is if it is restored to the register, which is a costly process involving court proceedings. The Insolvency Service regularly receives complaints about the conduct of directors when a company has been dissolved, and many such complaints relate to the use of dissolution to dump the debts of one company, only for a new company to start up in the same business, often with the same directors and the same employees, and often even working out of the same premises. The debts dumped in this way are often large tax debts, awards made by employment tribunals or sometimes even debts owed directly to consumers.

The provisions in this Bill will close the loophole and allow the Secretary of State for Business, Energy and Industrial Strategy to investigate the conduct of former directors of dissolved companies and, where public interest criteria are met, to take action to have them disqualified from acting as a company director.

We consulted on this measure back in 2018 and it received a warm welcome from stakeholders. It has now become extremely important that we get it on to the statute book, so that it can support the business community and the wider economy in recovering from the impact of the pandemic.

This new power to investigate and seek disqualification of former directors of dissolved companies forms part of a package of counter-fraud measures seeking to target any fraudulent behaviour relating to bounce back loan schemes through the abuse of the dissolution process and to ensure the responsible use of public funds. Retrospective provisions in the Bill will mean that, when the new provision becomes law, conduct that is happening right now will become subject to investigation and could be used to support future disqualification proceedings even if the company is dissolved.

The Bill fulfils the Government’s commitment to introducing two important measures: it will make changes to the business rate appeals system and provide for the tackling of abuses associated with the process whereby companies are removed from the register and dissolved. These are two distinct areas of policy, but our approach is consistent. We will ensure the continued operation of a coherent framework, deliver certainty, support businesses to thrive, and allow councils to plan for their finances with confidence and continue to deliver the first-class services on which our communities rely. I commend the Bill to the House.

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[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is a pleasure to be called so early in a debate, Madam Deputy Speaker; I am not used to that happening frequently. I draw the House’s attention to my entry in the Register of Members’ Financial Interests.

I have been involved in business rates as a businessperson for a long time, and I greatly sympathise with businesses that have been hit by coronavirus. We know there is a disproportionate impact on some sectors as compared with others, but I support the Government’s measures here and I will explain why. The Government have put a lot of support in—I think the Minister said it was £16 billion in business rates relief to certain sectors and at least another £10 billion in grants above that. There is £1.5 billion in the Bill for businesses that were not included in those schemes.

The amendment tabled by the hon. Member for Richmond Park (Sarah Olney), who I think will speak next, is flawed. It shows a deep misunderstanding of how the business rates system works. Business rates are not about a business; they are about a property. All business rates are based on a property value. What she is trying to argue is that a business of a different business type, such as a nightclub, should be treated differently in terms of business rates from, for example, a retailer or a bank that might have traded successfully. Asking the Valuation Office Agency to value something on the basis of how a certain business has been hit by coronavirus would turn the business rates system completely upside down, at a time when that would not be particularly helpful.

I understand that more than 300,000 businesses potentially would have taken this route, some of which had not been hit by coronavirus. The amendment would create a huge opportunity—a bonanza—for the legal sector to look at this area and take these things to court. That would ultimately cost the taxpayer a lot of money on many occasions where the businesses concerned had not suffered from coronavirus.

The point is about the material change of circumstance. It is about a permanent change. That is what the measure is there for: a permanent change, as the Minister said, such as a demolition or something that affected all the premises in a locality. This is not about general market conditions. Hopefully, coronavirus will be a temporary thing and the restrictions caused by it will in two or three weeks’ time be long gone. For that reason, I do not support the hon. Lady’s amendment, and I support the Government’s action in terms of a material change of circumstance and restricting the right to take an appeal forward.

Clause 2 concerns former directors of dissolved companies. I absolutely support closing that loophole, too. As the Minister said, often, one sees business owners who will use subterfuge to avoid, for example, the repayment of bounce back loans or the payment of suppliers. That is inappropriate. If there is a direct route to that through going straight to being a dissolved entity, it is absolutely right that we close that loophole.

I listened to the shadow Minister, the hon. Member for Manchester, Withington (Jeff Smith), and he made some very good points about resources for the Insolvency Service. I have worked with it quite a lot on various matters while I have been in this House and it is not the most proactive organisation around. It may be a lack of resources, but certainly there is no point having the regulations if we do not regulate such businesses, and we have to make sure that, if these measures are introduced, the Insolvency Services does hunt down the people who try to avoid their debts, including fraudulently. As I said in my intervention on the Minister, if these debts have been avoided fraudulently, those people should be prosecuted for fraud. As I said in my intervention on the Minister, if these debts have been avoided fraudulently, those people should be prosecuted for fraud. That is another area where we lack resources. The UK has a very poor record on hunting down fraud and financial crime. That is an area where we need to beef up our resources, which would have a huge payback, of course. Consider the relative amounts charged in financial sanctions in the US versus the UK: even accounting for the size of its economy, five to six times more money comes back into the US Treasury through its prosecution of fraud. There would be a big payback for our Treasury if we beefed up resources.

Let me touch briefly on one issue with the Insolvency Service that is not directly related to the Bill but reflects on certain points made by the shadow Minister. I have been trying to get the Insolvency Service to take action against a rogue set of business rates consultants called RVA, who go into unsuspecting small businesses that do not understand that small business rate relief, for example, is freely available; they just need to contact the council and it becomes applicable to their premises and business. They do not understand that, and RVA signs them up to a contract that basically takes 50% of the relief for up to 12 years, for writing one letter to the local authority. That is absolutely wrong. We should close that organisation down now. The Insolvency Service has promised to look at it, but not as proactively as it might.

I will make a wider point on the general issue of insolvency. As many people in this place know, I am co-chair of the all-party parliamentary group on fair business banking. For some time we have had real concerns about the insolvency profession generally, and its probably unhealthy links with some of the people it gets its work from, not least the high street banks. We are doing an inquiry into that alongside the legal firm Humphries Kerstetter. We are taking evidence now and will produce a report in early September on those conflicts of interest. We have seen lots of cases, including one quite recently with KPMG and HIG where both have been fined a significant amount in a draft judgment.

There are some unhealthy alliances here. We need to remove those conflicts of interest and, as the Government have said they will consider doing at some point, move towards an independent, ombudsman-style regulator for the insolvency profession. That does not exist now; it is pretty much self-regulation, which has been proven time and again not to work. I know that is not particularly a matter for today, but this was a good opportunity to get it on the record.

[Peter Grant (Glenrothes) (SNP)]

I am pleased to contribute to this debate. I will confine my remarks to clauses 2 and 3, which are the ones that apply in the whole of the UK. The Minister pointed out that clause 1 does not apply directly to Scotland.

The SNP welcomes the provisions to close the loopholes that have been identified, although they do not go nearly far enough. I am a bit concerned that this is the second or third time recently that a Bill has been brought forward to tighten up on director and company misconduct and company fraud, but it is framed so narrowly that it is almost impossible to amend it to widen its scope or improve it further. Although we will not oppose Second Reading tonight, I hope that we are not too far away from a more comprehensive review of companies legislation with a wider scope so that Members with particular changes they want to see are able to put them forward to be debated by the House.

In effect, the proposals make a slight change to the way in which the directors of a company are allowed to be completely separate from the company itself when things go wrong. The concept of creating a separate legal entity when a limited company is formed is perfectly sound. There were valid reasons for introducing it 150 or 200 years ago, when companies legislation was in its infancy. Many of those reasons are valid today, and we should retain the protection for directors, senior managers and, indeed, shareholders of companies that go to the wall through no fault of their own, through bad luck or misjudgment. But the reasons for protecting company directors do not extend to making it harder to deal with con men, and the occasional con woman, who set out to become millionaires at the cost of other people’s pensions, savings and hard-earned cash.

When there are reasonable grounds to believe that the directors of a company have been guilty of serious misconduct—including criminal misconduct, in some cases—we cannot allow them to delay, reduce or in any way frustrate the result of punitive action just by dissolving the company. That would be like saying that somebody who faces charges under the Road Traffic Acts can get away with it just by scrapping the car. It is not the vehicle that is at fault but the people who were driving the vehicle at the time.

The Government have rightly pointed out that some of the abuses in respect of which they want to tighten up are those carried out by what are called phoenix companies: the directors shut down one company and in essence resurrect the same company, but because they give it a different name, rank and serial number it is legally a different company and all the sins of the previous company are forgotten about.

Directors do not even need to close down the guilty company first: the same abuses can equally well be perpetrated by running two or three—or, in a case I will come to in a moment, 23—parallel companies with exactly the same couple of shareholders and exactly the same couple of directors, and very often no other employees at all. Through a process that is sometimes lengthy, sometimes short, they dump all the liabilities and debts on to one company and shut that one down, while the assets and benefits are hidden away in a separate company, to be shared only by the directors. In those circumstances, surely it is right that the Insolvency Service and other regulators have the unrestricted right to pursue the individual directors, regardless of which company name they hide behind at the time.

It has to be said that if the Government are serious about imposing improved standards of integrity in the City of London, it is unfortunate that they have chosen to present the Bill on the day when one of their own Ministers told the BBC that the standard of integrity in Government conduct by which they want to be judged is what they can get away with electorally. There is a double standard there that is perhaps not directly relevant to this debate, but the Government cannot afford to ignore it.

Let me mention one example of what can go wrong when directors appear to run a company for their own benefit and not for the benefit of those whose money they are supposed to look after. The Nunn McCreesh limited liability partnership was incorporated in August 2012 and dissolved by voluntary strike-off in October 2015. It had only three officers: Phillip Nunn, Patrick McCreesh and a company that they jointly owned called It’s Your Pension Ltd, incorporated in 2013 and dissolved by voluntary strike-off in 2016.

Coincidentally, at the same time that Mr Nunn and Mr McCreesh took the decision to dissolve the limited liability partnership, the Insolvency Service was finding that the LLP had been paid nearly £900,000 for identifying investors for Capita Oak—a name with which Members will be familiar as it was a pension fund that collapsed, taking £120 million of other people’s pensions with it. Capita Oak remains under investigation by the Serious Fraud Office; we do not know whether the part played in the Capita Oak story by Nunn McCreesh and numerous other companies is part of that investigation.

Mr Nunn and Mr McCreesh moved on quickly from their dissolved LLP and set up a whole web of companies —23 at the last count—under the Blackmore brand. Between 2016 and 2019, one of these companies, Blackmore Bond plc, raised £46 million by selling high-risk mini bonds to investors that they knew were completely unsuitable for that type of investment. Blackmore Bond plc went into administration in 2020 and the investors have almost certainly lost all of their £46 million.

[Kevin Hollinrake]

The hon. Gentleman has raised a very interesting case. I am sure he will be aware that the Financial Conduct Authority was warned on numerous occasions about the activities of Blackmore Bond but apparently did nothing about it until it was far too late.

[Peter Grant]

I do not know whether the hon. Gentleman was reading through the back of my notes, but he is only about five or six lines ahead of what I was going to say.

I do not know whether Mr Nunn and Mr McCreesh were ever placed under formal investigation, or whether they might still be under investigation, for their part in the Capita Oak story—for obvious reasons, that kind of information is not shared—but surely the fact that they were able to dissolve their company should not make any difference to the investigations to which they can be subjected and the sanctions they should face if they are found guilty of misconduct in their management of Nunn McCreesh LLP or, indeed, any of the umpteen other companies they have run.

Perhaps if, as the hon. Member for Thirsk and Malton (Kevin Hollinrake) indicated a moment ago, the various regulators had communicated with each other more effectively, the Financial Conduct Authority would have heard loud alarm bells ringing when in 2017 it was alerted to the highly questionable sales techniques that Blackmore Bond was using; perhaps if the FCA had made the link to the dodgy practices in relation to Capita Oak that were carried out by a different company under the same ownership and direction, it would have moved faster than it appeared to do; and perhaps, at least, the investors who ploughed £26 million into Blackmore Bond after the FCA was warned about it would have had some warning that the Blackmore Group might have been better named the Black Hole Group, because that is exactly what it became for £46 million of other people’s money.

I described that one scandal out of the many I could have described to remind the House that we are not just looking at a theoretical loophole here; we are looking at regulatory weaknesses that have allowed chancers and charlatans to make well over £1 billion of other people’s pensions and life savings disappear, and that is before we start to look at the business-to-business frauds that have forced small businesses into liquidation, often at massive financial cost to the entrepreneurs who have set them up.

The provisions in clauses 2 and 3 address just one of those weaknesses, and much more is needed. We need a complete reform of Companies House so that, for example, details of the beneficial ownership of Scottish limited partnerships and other secretive company structures have to be published. We have known for years that SLPs have been used to launder millions of pounds of dirty money created by illicit business activities, usually related to organised crime. We need to see action soon to put a stop to that. We need to reinstate the principle of the reverse burden of proof on senior bank managers, for example. When something goes wrong on their watch, rather than it being up to the authorities to prove that they were negligent, can we go back to requiring the bank manager to prove that they were doing the right thing? This reverse burden of proof often applies in other cases of professional misconduct or questions about professional conduct. All our regulators, including the Insolvency Service and the Financial Conduct Authority, need to be adequately resourced to keep up with the almost limitless ingenuity of the criminals they are trying to keep tabs on. That is about not just the amount of money they have, but the degree of training and experience that their people have, so that the person asked to take a decision as to whether somebody is fit to be registered with the FCA has the experience to know what kinds of warning signs to look out for.

Finally, we need legislation that allows us not just to disqualify directors who are guilty of wrongdoing; it should allow the authorities to order them to pay compensation to the victims. In some cases, I will support that on the basis of a civil balance of proof, which is on the balance of probabilities, rather than the much higher bar of proof beyond reasonable doubt, which is why so many cases that the Serious Fraud Office takes to court never get as far as a conviction. We welcome the provisions in clauses 2 and 3. If the long title and the scope of this legislation had allowed it, we would have been submitting a significant number of amendments to improve it on Report. I hope the time is not too far away when legislation on the wider issue comes before the House so that directors cannot simply avoid disqualification by scrapping their vehicles.

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[Sarah Olney (Richmond Park) (LD)]

I beg to move an amendment, to leave out from “That” to the end of the Question and add:

“this House, while agreeing that the disqualification regime should be extended to directors of dissolved companies, declines to give a Second Reading to the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill because it retrospectively overrules more than 500,000 business rates appeals made by 170,000 businesses, fails to consult the affected businesses to deliver adequate support, puts business and jobs at risk by delaying the delivery of additional business rates relief, ignores the impact of the pandemic on companies that have been excluded from business rates relief, fails to recognise the impact of the pandemic on jobs and businesses in the supply chain of retail, hospitality and leisure businesses from office-based companies to manufacturing firms, severely limits the only route available to tens of thousands of businesses in claiming Government support during the pandemic, sets a troubling precedent for future crises by retrospectively limiting businesses’ right to challenge their business rates bill, fails to bring forward meaningful reforms of the business rates system and risks leading to more job losses and company closures during an economic crisis.”

I am grateful to the Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Sutton and Cheam (Paul Scully) for his engagement on the contents of this Bill. The Liberal Democrats are pleased to support the aspects of it that relate to directors’ disqualification. We have seen far too often how individuals and businesses that are owed money can be defrauded by companies being dissolved and the fact that there is a lack of powers to pursue individuals for debts.

The urgency of introducing new legislation to protect against those practices has been sharpened by the large sums loaned to support businesses throughout the pandemic. The Public Accounts Committee, of which I am a member, recently conducted an inquiry into the bounce back loan scheme, and concluded that the combined fraud and credit risk of the scheme was between £15 billion and £26 billion. Although it was right for the Government to take the action they took and continue to take to protect businesses from the impact of the pandemic and the lockdown, it is now necessary to ensure that as many of those loans as possible can be repaid and to circumvent any possible actions that might fraudulently avoid repayment.

UK businesses, especially those in the worst hit sectors of retail, hospitality, travel and the creative industries, are beginning to emerge from this pandemic with an enormous debt burden. While I welcome these measures to ensure that UK taxpayers are not defrauded, there remains an enormous question mark over how many business owners who have conducted their affairs honestly and with integrity will face a debt burden for many years to come, and the extent to which that will be a drag on the revival of our economy. I urge the Minister to keep this issue at the top of his priority list and to support our indebted small businesses in whatever way he can.

Many businesses will be dealing with their indebtedness by looking to cut costs wherever they can, which will include reviewing all their existing expenses and exploring whether these can be effectively reduced. For many businesses, this will include applying to the Valuation Office Agency for a review of the rateable value of their business premises. Many businesses will be citing a material change of circumstances resulting from the pandemic and the lockdown as the reason for their application. This is an established route for businesses to appeal against the amount of rates they pay. Major crises or changes in the law, such as the foot and mouth disease outbreak or the smoking ban, have previously been accepted as valid reasons for business rates appeals. Many businesses have had their business model permanently changed by covid, and where that will impact on the valuation of the property they operate from, their ratings appeals deserve consideration by the Valuation Office Agency.

I want to pick up on the comment from the hon. Member for Thirsk and Malton (Kevin Hollinrake) about my amendment and to reassure him that it is about the market value, as it were, or the underlying value of the business. He cited nightclubs. I can probably count in decades the last time that I was in a nightclub. I do not know whether he has more recent experience, but it is a really good example of an industry that has been really badly impacted by the pandemic. Of course, not just the operating business model of individual nightclub businesses but the underlying value of nightclub premises will have been impacted, and that will be the material change of circumstances that those businesses will be relying on to contest their business rates.

[Kevin Hollinrake]

Rarely is a property built to be a nightclub. It is a property, which is valued on the basis of its rental value, which leads to the rateable value. That business may change hands and go from being a nightclub to a different kind of business. How could we have a rates system dependent on the business type that occupy premises? That is not how the business rates system works.

[Sarah Olney]

The hon. Member raises a valuable point. Nevertheless, if a property has always been operated as a nightclub business, a change of use, for example, which may well require an appeal to the local planning authority, still has a measurable impact on the value of that property.

I understand that 170,000 businesses have made 500,000 appeals to the VOA for consideration under covid-related material changes of circumstances. The Bill’s provisions retrospectively overrule covid-19 and Government restrictions as valid reasons for business rates appeals, effectively scrapping all 500,000 appeals. Instead, the Government propose a £1.5 billion fund to support payment of business rates for companies previously left out of business rates support—in other words, all those not in the retail or hospitality sectors, who have had a business rates holiday. However, the fund will not be available until after the Bill has received Royal Assent, and its Second Reading has already been delayed for 10 days, so how much longer will businesses have to wait before being compensated for not having paid a fair amount on their business rates?

There has been a lack of consultation with businesses before introducing the Bill and the proposed fund, and many firms will be left struggling with higher costs as a result. That is a direct threat to employment and to the ability of our economy to recover from the pandemic. I tabled the reasoned amendment outlining the Lib Dems’ opposition to the Bill, but I shall not press it to a vote.

Members of all parties in the House agree on the need for review and reform of the business rates regime. It imposes costs on businesses that they are powerless to control and creates an unfair playing field for businesses that do not trade out of rateable premises. The Government could make the simple move of committing to annual revaluations instead of every five years. With that, those businesses that genuinely qualify for a rating reduction would see those benefits much sooner and we could remove the need for an appeals process to reduce their costs. Every effort should be made to support businesses and to save jobs. Implementing a punitive retrospective change in the law to prevent businesses taking practical action to save on their non-staff costs represents a threat to the economy and jobs. The Government could take practical action today to help businesses, but they prefer to proceed with this Bill, which enshrines a concerning precedent that will cause many businesses to struggle.