Non-Domestic Rating (Multipliers and Private Schools) Bill (changed to Non-Domestic Rating (Multipliers) Bill)

Kevin Hollinrake Excerpts

Consideration of Lords amendments
Tuesday 25th March 2025 Commons Chamber

[Jim McMahon]

First, I am grateful to Members of both the Commons and the Lords who have so diligently scrutinised the Bill throughout its passage. Before I address the amendments tabled by the Lords, allow me to remind the House of why we introduced the Bill in the first place. This Government have committed to transforming the business rates system, and the Bill is a first step on that important journey. We want to achieve a sustainable system that is fit for the current economic landscape, and where business growth is supported and ratepayers pay their fair share. I thank the noble Lord Khan of Burnley for taking the Bill through the other place and for being so thorough in his approach. I also thank officers of the Ministry of Housing, Communities and Local Government and my private office for all their work on the Bill.

The Government oppose all the amendments before us today and I will provide further explanation as to why. At the Budget, the Government explained that we wanted to introduce new lower multipliers for qualifying retail, hospitality and leisure properties from April 2026 to address the uncertainty of the temporary, stopgap support provided by the annual RHL relief. Business rates represent a stable source of revenue for local government, meaning that this permanent tax cut must be sustainably funded. That is why the Government also announced our intention to introduce a higher multiplier for all properties with a rateable value at or above £500,000. This Bill makes provision to enable the introduction of those new multipliers, so this is the first step towards delivering on the Government’s manifesto commitment to transform the business rates system to one that is sustainable, protects the high street and is fit for the 21st century.

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

On a point of detail, the Minister says the Bill is a “first step”, so will there be further reforms, following these reforms, to the rest of the business rates system to meet his manifesto commitment to replace the current business rates system completely?

[Jim McMahon]

I am not going to pre-empt any further decisions on this, other than to say that this represents an important and significant step forward. As a constituency MP, he, like me, will have heard from many small businesses—retailers, hospitality providers or leisure providers—who appreciated the support during covid, but were very clear that there was a cliff edge and that that support was coming to an end. The previous Government did not provide any certainty about what followed, so the Bill ends that uncertainty and hardwires in a permanent relief system to ensure those important businesses that are the foundation of our communities and our economy are supported through the tax system.

[Kevin Hollinrake]

The Minister has already said, as he has in previous speeches, that this is a “first step”, but now he says it is a “permanent” measure. I agree with him that business wants certainty, so it is important that businesses understand: is this now a permanent position that will not be changed, or a first step?

[Jim McMahon]

The answer is that it is both, as I will go on to explain in more detail. It is an important first step, and the relief that is provided, funded through the higher rate properties, will be hard-baked into the system, notwithstanding any future support that may well follow, which we are not pre-empting today.

Lords amendments 1, 6, 7 and 12 would remove qualifying healthcare hereditaments from the higher multiplier, and Lords amendments 2, 5, 8 and 11 would do the same in relating to anchor stores. Considering the challenging fiscal environment, it is vital that this permanent tax cut is funded sustainably. The Government have been clear that they will do that by applying the higher multiplier to all properties with a rateable value at or above £500,000. That accounts for less than 1% of all properties and is the fairest approach. The impact on healthcare properties is limited. As set out in the other place, of the 16,780 properties at or above the £500,000 threshold based on the current rating list and rounded to 10, only 350 are in the health sub-sector. Of those, 290 are NHS hospitals and only 30 are doctors’ surgeries or health centres.

At the autumn Budget, the Chancellor fixed the spending envelope for phase 2 of the spending review. The Government are considering the full range of departmental priorities and pressures as part of the spending review, and that includes any impact of the higher multiplier on public sector properties, such as schools and hospitals. I urge the House to disagree with those amendments.

We recognise the importance of anchor stores, and we are doing a great deal to support the high street in this Bill and elsewhere. While the largest anchor stores may be caught by the higher multiplier, they are often part of large retail chains that will have a number of properties with rateable values below £500,000. Those businesses will, therefore, benefit overall from the lower multipliers.

--- Later in debate ---

[Madam Deputy Speaker (Caroline Nokes)]

I call the shadow Secretary of State.

[Kevin Hollinrake]

I thank the Minister for his explanation of the Lords amendments. We shall not agree, and I will explain why. I thank the Lords for their careful consideration of the Bill; in particular, I thank the noble Lord Jamieson and the noble Baroness Scott for their scrutiny and amendments.

The legislation comes at a critical time for businesses. The partial withdrawal of retail hospitality and leisure relief—a policy choice by this Government—is hitting businesses hard. The average pub is more than £5,000 worse off as a result of the Minister’s choices. That, together with the Government’s trash-talking of the economy, the £25 billion annual tax rise for businesses by means of the rise in employers’ national insurance, and the prospect of the job-destroying Employment Rights Bill, has led directly to a massive reduction in business confidence. According to the Institute of Directors, business confidence, which stood at a high of plus 5 in July last year, has collapsed to a covid-level low of minus 65.

[Suella Braverman]

My hon. Friend is making a very good speech. What is his advice to the many businesses in Fareham and Waterlooville who have told me—I have lost count of them—that they do not know whether they will survive the next few years, particularly because of the rise in national insurance contributions from employers, the Employment Rights Bill and the anti-business rhetoric? Hiring is down, prices are up and many businesses in Fareham and Waterlooville are beginning to wonder whether it is all worth it.

[Kevin Hollinrake]

My right hon. and learned Friend makes a very good point. These are difficult times. As she knows, I was in business for 30 years, and we go through some difficult times. Many people think that business is easy, but it is not, particularly at times like this, when confidence, including consumer confidence, has gone so low. It means that people are not coming through the door. My advice to businesses is to batten down the hatches and get through this where they can, but inevitably the consequence of these choices will be less employment, lower salary increases and higher prices in shops, public houses and other places. That is the consequence of the choices that this Government have made. The real-world effect of this historic drop in confidence is a 20-year high in business closures. Over 220,000 businesses closed their doors in the last three months of 2024.

When considering the Lords amendments, it is important to remember that the Labour party promised to abolish business rates—another broken promise. The Minister, for whom I have a great deal of time, talks about the art of the possible; what he is saying is that a promise that he and his colleagues made to the electorate in the run-up to the election has been broken. In its manifesto, Labour promised to

“replace the business rates system, so we can raise the same revenue but in a fairer way. This new system will level the playing field between the high street and online giants”.

That is not what the Bill does, so that is also a broken promise. The reason I challenged the Minister a couple of times during his remarks is that I do not understand how the Bill can be both a first step and a permanent change. That makes no sense, and if I were one of the business people for whose rude health we are all responsible, I would like to know exactly what the Government have planned beyond these changes. That is not clear.

I turn first to Lords amendment 14, which would require the Secretary of State to review

“the merits of a separate Use Class and associated multiplier for retail services provided by fulfilment warehouses that do not have a material presence on local high streets”—

in other words, online giants. It is worth noting that the rates regime proposed by this Bill will mean that only around 10% of businesses paying the higher rate will be the warehouses of online giants. In reality, shops, restaurants, cafés, pubs, cinemas, music venues, gyms and hotels will all see their business rates rise as a result of the higher multiplier. We would support a rates regime that would genuinely level the playing field between online retailers and the high street, but this Bill does not deliver that. We therefore support amendment 14’s requirement that the Secretary of State conduct a review on introducing a higher multiplier for fulfilment warehouses. Such a multiplier would mean that important anchor stores for high streets would not be punished.

That brings me to Lords amendments 1, 5, 8 and 11. We all know from our constituencies how important anchor stores, such as supermarkets and department stores, are for attracting footfall and supporting local economies. When people come into the town centre to use an anchor store, they might stop for lunch in a local café or pop into an independent business. Key anchor stores in the Secretary of State’s constituency will be hit by this Bill: Sainsbury’s in Ashton-under-Lyne has a rateable value of £1.24 million, while Marks and Spencer next door has a rateable value of £770,000. These decisions have real-world effects on companies that are not online giants.

We have seen the impact on our communities when anchor stores leave a town. For many anchor stores, being dragged into the higher multiplier by this Bill could be the straw that breaks the camel’s back; those shops have already been hit by the jobs tax, and will be tied up with even more red tape through the Employment Rights Bill. In fact, the British Retail Consortium has warned the Government that

“The sheer scale of new costs and the speed with which they occur create a cumulative burden that will make job losses inevitable, and higher prices a certainty.”

That contrasts with my party’s proud record of supporting businesses, including small businesses, on the high street by cutting business rates, as well as providing billions of pounds of support throughout the pandemic.

While we are talking about high street businesses, can I once again push the Minister on a very important point—the retention of small business rate relief? Many businesses’ livelihoods depend on that relief, so will he say at the Dispatch Box that it will be continued? I have not had clarity, and clearly I will not get clarity today. Is that relief also on the chopping block, maybe at the Chancellor’s emergency Budget tomorrow? Let us see what that brings; we may get clearer answers then. Tomorrow’s last-gasp attempt to go for growth comes after GDP falling by 0.1% in January. That was largely attributed to a 1.1% fall in manufacturing output.

That brings me briefly to Lords amendments 3, 4, 9 and 10. They would make manufacturing hereditaments eligible for the lower multipliers when it comes to local ratings lists. That comes at a particularly important time for our manufacturing sector, which is a crucial part of our economy, whether we are talking about automotive manufacturing, aerospace manufacturing or precision engineering. As we boost capital defence expenditure, it is important that we have a strong and resilient manufacturing base that can supply our brave armed forces. I urge the Government to reflect carefully on the impact of the new rates system on manufacturing, and we will listen carefully to the Minister’s responses on this issue.

Turning to Lords amendments 1, 6, 7 and 12, given that the Government are raising taxes to invest in the NHS, it seems perverse for them to levy higher business rates on the hospitals and GP practices that provide the services that so many of our constituents rely on. It is just weeks since the Government shamefully voted to impose a jobs tax on hospices, pharmacies and GP practices—another double whammy. Labour is giving with one hand and taking with the other.

Before we get to the real sting in the tail of this Bill, I will speak briefly to Lords amendments 13 and 16. Like Members of the other House, we have concerns about the cliff edge that the Bill will create in the business rates system, which the Minister referred to. A business crossing the £500,000 threshold, even by £1, could see a near 20% increase in rates payable. For instance, a business with a hereditament of £495,000 invested in their property—just enough to push them over the threshold—would potentially see an increase in rates from around £175,000 to £325,000 as a result of this Bill. The legislation will stifle investment and growth even further.

Finally, Labour’s education tax—the spiteful and ideologically driven decision to remove the charitable rate relief from private schools that are charities—sits alongside the utterly wrong-headed policy of charging VAT on private school fees. Regardless of people’s views on private schools, it is the view of the Opposition that we should never tax education. We are already seeing the gates of independent schools being locked indefinitely. That pushes more children into state education, increases class sizes and puts more pressure on the public purse, and on councils trying to find placements for students with education, health and care plans. Lords amendment 17 would retain rates relief for private schools in England, sparing them part of a cumulative burden that would otherwise send many of them beyond the brink.

It is not just education that is affected. Since the introduction of this Bill, we have learned that the Government will also levy business rates on nursery schools and sports facilities used by the general public if they are on the site of a private school. That regressive decision will jack up the cost of swimming lessons, and the costs for Sunday league clubs and cadet units. During our time in government, England became one of the top-performing countries for education in the western world. That is a record that this Government seem determined to trash. Years down the line, Government Members will regret having voted for this Bill as they walk down the high street, passing boarded-up shops, school gates locked shut and a local that called last orders for the final time years ago. I urge the Government to consider and agree to the amendments from the Lords to safeguard businesses, schools and communities across the country from more business-damaging and job-destroying tax hikes.

[Mark Sewards (Leeds South West and Morley) (Lab)]

The Bill is necessary to support our high streets. It strikes a fairer balance between small businesses and large, and I am pleased to have contributed during most stages of its progress. I rise to address some of the amendments put forward by the other place, which would reduce the effectiveness of the Bill.

Amendments 2, 5, 8 and 11 seek to exempt anchor stores from the higher multipliers, thus reducing the revenue raised by the Bill overall. By reducing that revenue, the amendments reduce the support available to smaller retail, hospitality and leisure businesses, when providing that support is the entire purpose of this legislation.

I also fear that the definition of an anchor store could create problems for our high streets and town centres. During the debate in the other place it was said that the Treasury could decide what constituted an anchor store, but it was also admitted that it would be a difficult term to define. It is not uncommon, and not untrue, to say that several shops in a high street can indeed lay claim to that title, and I foresee difficulties in this regard if the amendment is passed.

It is also true that anchor stores are often the largest stores in town, usually part of a big chain, supermarkets being an obvious example. The effect of this amendment would be to exempt those larger businesses from the higher multiplier, again reducing the support available to smaller businesses. The entire purpose of the Bill is to support our smaller retail, leisure and hospitality businesses, paid for by that higher multiplier on larger businesses. Unlike the Opposition, we like to ensure that our numbers add up.

[Kevin Hollinrake]

What would the hon. Gentleman say to businesses that are trying to make their numbers add up? In its manifesto and previously, the promise—the commitment—of the Labour party was to level the playing field between online giants and small businesses, but, as the hon. Gentleman can see, that is not what is happening here. Many different premises, including manufacturers and large bricks-and-mortar retailers, are being hit by these increases. What would the hon. Gentleman say to those businesses, given that while there is currently no sign of any increase in their rates, that is exactly what they will see as a result of the Bill?

[Mark Sewards]

The Bill is designed specifically to revive our high streets. The hon. Gentleman will remember, because his party was in government at the time, that our high streets were struggling and suffocating, and it is incumbent on this new Government to revive them. That is why it is so important for us to pass the Bill today. [Interruption.] The hon. Gentleman mentioned manufacturing, and his hon. Friend the Member for Broadland and Fakenham (Jerome Mayhew) chirps from a sedentary position—[Interruption.] I mean “chunters”. I think it important to recognise that the Government are supporting manufacturing too. There are other mechanisms for doing that, but the Bill we are pursuing today, and passing today, is all about supporting our high streets, and I am very proud to support it.

Queen Street is in Morley, in the centre of my constituency. You are welcome to visit it any time, Madam Deputy Speaker. There is a lot on offer, almost of all of which comes directly from small businesses. The Lords amendments to which I have referred do not prioritise them; nor do they prioritise the smaller parades of shops in Farnley, Drighlington, Gildersome and Wortley, and they do nothing for the shops and businesses in Ardsley, Tingley, Robin Hood and Lofthouse. That is why I cannot support them. I back the businesses in Morley high street, along with all the other small businesses that I represent.

Lords amendments 15,17,18 and 19 would, in effect, reintroduce the tax break for private schools. We have had this argument about private schools at the general election, in the House, in Bill Committees and again today, but as a former maths teacher at a state school in Leeds, I am more than happy to cover old ground to reinforce my own argument. The proposed amendments seek to remove an integral part of the Bill that generates the revenue that we need to support our plans in government. I will make no apologies for supporting the 94% of children who attend state schools. We all—and I include everyone in the House—want children to have the best opportunities in life, with the highest-quality teaching and schools to match. It should be a basic function of the state to provide well-funded, excellent state school places for all students, whether their parents choose to take advantage of that or not.

On the Labour Benches, as we have proven over recent months, we are prepared to take the action necessary to ensure that all children can access through the state the education they deserve. The £70 million raised by the measure in the Bill, alongside the other revenue-raising measures we have taken in the Budget, will result and do result in a real-terms increase in per pupil funding for the 94% who attend our state schools. I am very proud to support that. We will never make any apologies for properly funding state schools by ending the tax breaks that were previously enjoyed by private institutions. That is why I will not be voting for the amendments.

To conclude, I am pleased to support the Bill in its current, unamended form. I will support our high streets. It will give confidence to small businesses and it will give state schools the funding they desperately need.