Non-Domestic Rating (Alteration of Lists and Appeals) (England) (Amendment) Regulations 2017

Lord Hope of Craighead Excerpts

Monday 11th September 2017 Lords Chamber

[Lord Naseby (Con)]

My Lords, I pay tribute to the noble Earl for giving us an opportunity to clarify the current situation on business rates. My noble friend on the Front Bench will know that I have been asking questions about business rates for a decade now, so I have got a little bit of background in this issue.

I am a marketing man by profession: I looked after the advertising and marketing of a number of retail chains prior to coming to your Lordships’ House and, indeed, prior to entering the other place. Twenty years ago, retailing was conducted entirely on the high street or in retail parks; today, one-third of it—and growing—happens online. In this morning’s Daily Telegraph, it is reported that Ipsos MORI has noted that the crash in footfall since 2007 is well over 20%. That is a huge drop. We have seen a number of chains collapse, including Woolworths and BHS. That is a problem. It is that plunge in footfall and the need to invest in digital technology that is creating a big challenge for small and medium-sized retailers. Moreover, there is a forecast from the British Retail Consortium that 80,000 more shops are likely to close. These are horrendous problems.

I will not repeat any of the points made by the noble Earl in his speech except for one, and that concerns the beta testing stage of the online CCA system early in 2017. We know that there were many shortcomings, but amazingly the whole thing has gone live with nothing having been rectified. I do not think that that is acceptable in today’s world, and I hope that my noble friend can reassure me that something is being done to sort it out.

I am not sure whether I am right in saying this, but my understanding from Answers given by my noble friend to earlier Questions was that the net result of the changes would be revenue neutral. Now we read in the newspapers and professional journals that the system may not be revenue neutral but something closer to £2.5 billion to £3 billion to the benefit of the Treasury. So I would ask my noble friend to put on the record whether it is the Government’s objective that this system should be revenue neutral. If that is the case, can we have an assurance that, if the figures show that all of a sudden the Treasury has picked up £2.5 billion or £3 billion, somehow or other the money will be fed back into the system? That is absolutely vital for the future.

I would just add that the latest figures on empty shops, an issue I have raised on many occasions, are now twice as high as they were before the recession and are running at well over 20%, along with store openings and relettings now down by over 20%.

I would like to add one further point. Why does the UK have the highest property taxes in the whole of the OECD? Property taxes are going up in this country and down elsewhere in the OECD. We are in a situation where they are at 4.1% of GDP; in France, they are at 3.9%, whereas they are at 2.8% in the US and 1.9% across the whole of the OECD. In all of those countries, they have fallen: for us, they are going up.

As an applied practical economist, I know that to make economic sense of Brexit the UK will urgently need to become one of the most business-friendly places in the world. Achieving that requires a low-tax deregulatory agenda, but we seem to be heading in exactly the opposite direction with these SIs that we are debating. Frankly, if that is the way things are going, that will create considerable peril to all our businesses, particularly those in the retail trade, which after all remains the biggest employer in this country. Those businesses are the wealth creators for our future.

Before I forget, I must declare an interest, in that I do have a member of my family in the retail trade.

[Lord Hope of Craighead (CB)]

I hesitate to contribute to this debate because I have nothing like the expertise of the noble Earl, Lord Lytton, or indeed the knowledge of the noble Lord, Lord Beecham, of how these systems operate in practice.

The burden of what the noble Earl was saying is twofold: first, the appeals system in England and Wales is verging on out of control, given the huge backlog that he mentioned. That in itself is a real challenge for the Government to sort out. The second point I take from his speech is that the way in which the Government have tried to address this problem is resulting in unfairness to ratepayers and their advisers, in trying to challenge the valuations that the valuation officer has asked to be entered in the roll. In that respect, he raises what I would respectfully suggest is a very serious issue, which I hope the Minister will feel able to comment on.

I have picked up two points, one in each of the regulations, where I am inclined to think that the regulations as drafted point in the right direction. The first is in SI 155. In Regulation 16, which introduces new regulation 13A, the grounds on which a proposer may appeal to the Valuation Tribunal for England are said to be,

“(a) the valuation for the hereditament is not reasonable;

(b) the list is inaccurate in relation to the hereditament (other than in relation to the valuation).”

I may be wrong, but I took from the noble Earl’s speech that he is criticising the use of the language in that provision and suggesting that it is inconsistent with the primary legislation, which, in Section 42, describes what the local rating list is to provide. Section 41(4) says that before a list is compiled, the valuation officer must take such steps as are reasonably practicable to ensure that it is accurately compiled on 1 April.

There are two issues here. The first is the accuracy of the entry in the list, which describes the hereditament itself. I think “accuracy” is a perfectly correct adjective to use. Whichever side he is on, the valuer must know precisely what the hereditament is that is to be valued. The other side is the valuation side, and it is in relation to that aspect that the adjective “reasonable” is used. It seems to me that that is a proper use of language too. To require that the valuation should be accurate may be asking too much, because a valuation is, after all, an expression of the valuer’s opinion, expertly using his art as best as he can to arrive at a valuation that meets the statutory standard. So, with great respect to the noble Earl, I think that the language in SI 155 is correct and I do not see any grounds for criticism.