Non-Domestic Rating Bill

Lord Etherton Excerpts

2nd reading
Monday 19th June 2023 Lords Chamber

[Lord Etherton (CB)]

My Lords, I declare my interest as the owner of investment retail property in the high street. I am extremely grateful to the Minister for her clear and illuminating introduction to the Bill, and to the noble Lord, Lord Shipley, and the noble Earl, Lord Lytton, who have covered a wide range of the issues. Many of us, including myself, have spoken about this issue of business rates in the context of the Levelling-up and Regeneration Bill, so I will keep my comments very brief.

As the Minister has outlined, there are good provisions in this Bill. A reduction of time between revaluations from five years to three is a good move. Indexing non-domestic rating multipliers to the consumer prices index rather than RPI is obviously welcome. Introducing rates reliefs for improvements to property and heat networks is also desirable, and allowing the Treasury to give businesses the immediate benefit of rates reductions while maintaining transitional relief for rates increases is good. Undoubtedly, a great number of positive things have come from the Bill.

However, as noble Lords have pointed out, there are significant flaws and omissions, and I want to deal with them briefly. First, I take up the question of the obligation to notify the VOA of any changes affecting a property’s retail value. This is separate from the annual return, and its effect is to extend a reporting obligation to businesses that currently pay no business rates due to reliefs. They will have to send information to the VOA—a purely bureaucratic exercise that will not result in any increase in the business rates receipts. It is, for them, just a bureaucratic headache, and they will have to do this within 60 days of the change or face a penalty. I question whether this is an appropriate obligation for the people I have mentioned, who pay no business rates and would not pay any, despite the change I have indicated. It has been suggested that an additional 700,000 businesses may have to send such information, pursuant to that duty to notify.

So far as the material change of circumstances is concerned, I agree with both noble Lords who have spoken before me. I can see no good reason why legislation or other public body advice that may impact on rateable value should not be taken into account as a material change of circumstance. The Minister referred to vaping, but many other circumstances could indeed have an impact on rateable values through legislation. We cannot predict this, but simply banning outright any possibility of that sort of change through legislation having an impact on rateable values seems to me to be quite wrong. One suggestion from one of the people who briefed us was that changes in the laws relating to energy protection certificates might have an impact.

The next matter is annual revaluations. I would certainly support the suggestion of the noble Lord, Lord Shipley, that, if we cannot have annual revaluations, we should at least go for two-yearly revaluations in the interim. Getting as near as you can to the actual date in respect of valuation and payment is obviously of great value to everybody, and particularly to businesses operating through retail trade.

I also support both noble Lords’ view that consideration should be given to changing the antecedent valuation date, which is normally two years before the list is applied. Property values are already two years out of date before the first rates bill is set according to the valuation appeal. That antecedent valuation date should be set at one year, as in Scotland, as has been referred to, to bring valuations as close to current market conditions as possible.

I think the noble Earl, Lord Lytton, mentioned that limiting the new improvement relief to 12 months does not seem to make much sense. It will certainly do little to encourage long-term investment. There should be a permanent abolition of downwards transitional phasing but we do not currently find that in the Bill.

At the end of the day, the point I want to emphasise is that the problem here is, quite simply, that business rates are too high. The background for this discussion is that the Centre for Retail Research has found that more than 17,000 shops closed in 2022 and more than 5% of retail staff—150,000—lost their jobs last year through insolvencies and store closures, and there is no doubt that a major contributing factor to that is the business rates system in England. The current rates have been referred to; the standard multiplier for 2023-24 is 51.2p in the pound. We can contrast that with the uniform business rate multiplier of 34p at its introduction in 1990. Again, I agree with the noble Lord, Lord Shipley, that the 49.9p in the pound business multiplier for small businesses is too high.

In both the Conservative Party’s 2019 election manifesto and the December 2019 Queen’s Speech, there was a commitment to

“protecting your high street and community from excessive tax hikes and keeping town centres vibrant”

and to make sure that the business rates revaluations and valuations achieved that. The Levelling-up and Regeneration Bill focuses on failing high streets and town centres, and there is no doubt that to a large extent that is due to one of the only overheads that retailers cannot negotiate away or down—the rates.

The failure to reduce the uniform business rates significantly is all the more surprising bearing in mind the Office for Budget Responsibility’s forecasting that income from business rates will rise to nearly £36 billion by 2027-28 from its current level of £28.5 billion. We must do something much more dramatic about this than we currently find in the Bill.