Non-Domestic Rating Bill

Lee Rowley Excerpts

Committee of the whole House
Monday 22nd May 2023 Commons Chamber

[Helen Morgan (North Shropshire) (LD)]

I rise to speak to amendments 1, 2, 3 and 20, as well as new clauses 1 and 2, tabled in my name. I note the excellent speech by the hon. Member for Waveney (Peter Aldous), who tabled amendments with very similar objectives to my own. This Bill is a disappointment to all businesses who are struggling through tough financial conditions. Not only are prices going up for every single purchase that they make, but many small businesses were forced to lock into gas and electricity contracts at astronomical rates last year and are no longer receiving any meaningful support with those energy costs. They may also be struggling with interest rate rises on their borrowings following the period of economic chaos caused by the Government last autumn.

This Government committed to reviewing the system of business rates fundamentally in their 2019 manifesto, but this Bill offers only peripheral changes to an outdated system that does not work for a modern economy. The Bill offers to change the timescale of revaluations from every five years to every three years. This is a welcome reduction, but Liberal Democrats believe that it does not go far enough. The reality for businesses is that a three-year gap between revaluations means that they will continue to pay rates that are far from reflective of the real economic conditions they are operating in. Amendments 1, 2 and 3 would require non-domestic rating lists to be compiled every year and make every year from now on a relevant period for transitional provision under the Local Government Finance Act 1988. Annual revaluations are possible. We only need to look to the Netherlands, where they have been taking place since 1995. There, rateable values are allowed to move with the local economy. This means the tax that businesses are required to pay better reflects the conditions that they face.

I also want to spend a little time on amendment 20, tabled in my name. It is estimated that as a result of the Bill as it stands, 700,000 small businesses who currently pay no business rates at all will need to submit annual reports to the Valuation Office Agency, even when there has been no change to the premises they occupy. These small businesses, like many in North Shropshire, are already plagued by seemingly endless monthly and quarterly Office for National Statistics returns, along with their ongoing tax and financial reporting requirements.

The Bill adds yet another administrative hoop for these businesses to jump through and threatens hefty penalties if forms are completed incorrectly. This piles unnecessary pressure on to small businesses and it will not raise any more tax for public services. These businesses already receive a notification to inform the VOA if there is a material change in their premises, so there is nothing to be gained from this element of the Bill. Amendment 20 attempts to deal with this problem by removing the requirement for annual reporting of no change for those businesses in receipt of small business rate relief. I urge the Minister to support amendment 20, which I intend to push to a vote, and to cut unnecessary red tape for the small businesses we desperately need to help, in order to drive economic growth and breathe new life into the high streets of our historic market towns.

I also wish to speak to new clause 1, tabled in my name. It seems very one-sided to impose punitive fines on businesses for failing to report updates to the VOA on time, without any reciprocal expectations of that agency. As I outlined on Second Reading, dealing with the VOA over changes to a premises can be a protracted affair, and all the time that that is going on, businesses face uncertainty about their rates liability and, critically, cannot plan their cash flow. New clause 1 would require the VOA to report to the Secretary of State on its performance in detail at least once a year. This report should correspond to targets to be set by the Secretary of State. The new clause also calls for the findings of these reports to be laid before Parliament. I have suggested targets, rather than legally binding levels of service, to reflect the fact that no two premises are the same and that updates can be complex and can be challenged, but those targets would at least set an expectation of performance and ensure some accountability for the VOA.

Lastly, I wish to draw attention to new clause 2. I think there is general agreement on both sides of the Committee that we want to see our high streets and market towns thrive. This is especially true in places such as the five historic towns in my North Shropshire constituency, where the local high street is not just a practical place to go to but a social lifeline for many residents. Those high street shops are in competition with online retailers whose warehouse premises have a much lower rateable value per metre squared, putting the high street at a disadvantage. This was confirmed in the Treasury Committee’s “Impact of business rates on business” report in 2019.

Disappointingly, however, the Bill does not take this discrepancy into consideration. Instead, the Government will continue to drain physical retailers through rates that do not reflect the challenges they are already facing, leaving many at a tipping point and struggling to compete on an unfair playing field. New clause 2 would require a review of the impact of non-domestic rateable values on competition in different parts of the retail sector, so that Members could understand the true scale of the issue and inform policy accordingly. This review should be commissioned within six weeks after the date this Act is passed. Overall, I urge Ministers to support these amendments and new clauses in order to improve the Bill, which is just not ambitious enough in fundamentally reforming an out-of-date tax system.

[The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Lee Rowley)]

I am grateful to all colleagues across the Committee for their contributions today. I think all of us spoke on the Bill’s Second Reading, and we have rehearsed the arguments on a number of these points already. It is important to reiterate from the Government Front Bench that this Bill delivers significant reforms for the business rate system. It increases the frequency of revaluations, which I think has been generally welcomed across the Committee today. It also modernises the administration of the tax and it provides new reliefs to support things such as property improvements. Taken along with the nearly £14 billion-worth of taxpayer subsidy for businesses this year, it helps to manage the tax burden amid the ongoing pressures that the hon. Member for North Shropshire (Helen Morgan) mentioned.

I will now turn to the contributions that hon. Members and hon. Friends have made today. My hon. Friend the Member for Waveney (Peter Aldous) made an incredibly constructive set of comments, and I completely understand the sentiments behind many of the amendments he has tabled. He set a challenge at the outset of his speech, saying that he is looking to move towards annual valuations, the removal of complications and the adoption of digitalisation. We are making progress in two of those three areas, which I hope is not bad, and he has indicated that, overall, this is a step in the right direction. We are moving from five-yearly valuations—in reality, they have happened every seven or eight years in some instances in recent years, for good reason—to three-yearly valuations. We are moving towards the collection of further digital data, and we are continuing to support businesses, where we can, through the reliefs we have put in place.

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[Helen Morgan]

rose—

[Lee Rowley]

The hon. Lady is going to tell me exactly where she would find several hundred billion pounds to fill her black hole.

[Helen Morgan]

Amendment 20 is about cutting red tape for small businesses. Does the Minister agree that he is talking about policy objectives that are not relevant to the Bill?

[Lee Rowley]

That tells us everything we need to know about the Liberal Democrats. They want to talk about only this Bill, ignoring every other policy. They look one way when talking to one part of the country, and the other way when talking to the other part of the country. That shows the Liberal Democrats’ lack of seriousness in understanding how taxation actually works, in understanding how to run a modern, dynamic market economy and in understanding how we need to pay our way to make sure our economy is successful in the long term. It is for those reasons that we oppose amendment 20.

[Peter Aldous]

The points I made were genuine. I think this Bill needs to be changed, and I hope the Government will have an open mind in considering whether to do so in the other place. We may well review this situation again.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 ordered to stand part of the Bill.

Clauses 2 to 12 ordered to stand part of the Bill.

Clause 13

Requirements for ratepayers etc to provide information

Amendment proposed: 20, on page 23, line 35, at end insert—

“4LA Paragraphs 4K and 4L do not apply if P is eligible for small business rate relief (for example, because the rateable value of the hereditament for which P is or would be a ratepayer is less than £15,000).”—(Helen Morgan.)

This amendment would exempt businesses in receipt of Small Business Rate Relief Exemption from annual reporting if there is no change to report.

Question put, That the amendment be made.

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[Lee Rowley]

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

It has been a pleasure to support the progress of this Bill through the House. I do not seek to detain the House for long, but let me say briefly that the Bill offers some of the most substantial reform to the business rates system since its inception in 1990 and meets our commitment to reform and reduce the burden of the tax on business. By moving to more frequent revaluations from 2026, we are delivering on a key ask of business. We have been up-front with the House and with businesses that meeting this commitment is a major ask, which is why we have made some changes to the way ratepayers interact with the Valuation Office Agency. That principle was accepted by respondents to the review that predated this legislation.

Our approach has been to listen and to take appropriate action. I have already mentioned the evidence-based approach that we adopted in that review and the close dialogue that we foster with our partners in business and local government. We are also taking action to reform transitional relief, which was the No. 1 one ask from stakeholders on business rates ahead of the 2023 revaluation. That is a major commitment, a major step to supporting fairness and a major improvement in the credibility of our business rates system.

Finally, we are happy to have agreed to the Welsh Government’s request for various measures to be extended to Wales, and also to be supporting Northern Ireland with a data sharing measure.

I conclude by expressing my thanks to all Members for their contributions on Second Reading and in today’s debates. Although we have not agreed on everything, this has been a useful and constructive session. I am grateful to the Clerks of the House for supporting the smooth running of the Bill and to all of the teams across the Department and those in the Treasury, His Majesty’s Revenue and Customs and the Valuation Office Agency for their help in preparing the Bill. I look forward to watching the Bill’s progress in the other place, and I commend it to the House.