Non-Domestic Rating Bill

Lord Thurlow Excerpts

2nd reading
Monday 19th June 2023 Lords Chamber

[Lord Thurlow (CB)]

My Lords, perhaps I may introduce my remarks with the fact that I am floating high on a cocktail of painkillers, in advance of dental surgery tomorrow. If I start mumbling, dribbling or reading out the order of business by mistake—or indeed, if I keel over—I apologise in advance, and please move on gracefully to the next speaker.

I declare my interests as on the register. I am a former chartered surveyor and responsible for property that is subjected to non-domestic rates—but it is in Scotland, which is out of scope.

I fear that the Bill is a missed opportunity. I believe that it passed quietly through the other place, as the noble Lord, Lord Shipley, explained, so it had little scrutiny there. Yet the current system is not fit for purpose: it is clunky, out of date and difficult for ratepayers to navigate. It is also inequitable, because some people pay too much and some too little. The Bill is a start in a number of ways, but why not finish the job? How many more non-domestic rating Bills can we expect?

The Bill addresses some of the concerns but the focus of what is substantially a technical Bill fails to consider major current injustices, which the Government seem reluctant or unwilling to grapple with. I am going to address just four of these headings quickly today. In doing so, I thank the RICS for its help and the Minister and her Bill team for the briefing conversations last week.

My first point is on transparency. The subject of valuation for rating is quite a dark art. Rateable value is assessed by the VOA, as we have heard, and is meant to reflect the estimated rental value of commercial property. Yet, on receiving one’s rating assessment, one sees no reference whatever to the evidence upon which that assessment is based. To probe this opaque state of affairs, where all the cards lie in the hands of the state, it becomes necessary to lodge an appeal—an expensive and time-consuming process. There are thousands of appeals in the queue. Further, small businesses simply cannot afford the cost of an appeal. As we have heard already, they are unlikely to understand the process and will simply accept the assessment. In these difficult times, this pushes their businesses nearer and nearer to closure. As we just heard from the noble Baroness, Lady Thornhill, 47 businesses are going bust in the high street every day. There should be clear transparency as to the evidence used by the VOA.

My second point is about rogue advisers. I beg your Lordships’ pardon; it is on public interest. Small businesses are the backbone of the rural economy, encouraged in so many ways by the Government. The simple example is high street shops. In the hundreds of smaller market towns throughout this country, those small shops now compete with Amazon and others in a fight that they cannot win, certainly not when they are paying rent twice, or certainly another 50%-plus in commercial rates. High streets are the heart of these small communities. Combining shopping with social contact is really the essence of a thriving small society. People bump into each other; they stop to chat, and might go and have a cup of coffee together. This is a vital antidote to loneliness and the mental health risks that are so trumpeted by government. Rates are pushing these small shops out of business. Retailers can control so many of their costs: their labour costs, their inventories and supply lines, their energy use and opening hours. They cannot control rent or rates—but they can negotiate with their landlord.

On rogue surveyors, which has been touched on already, the Bill is changing dramatically the system of non-domestic rates. The resulting fear and misunderstanding from SMEs will almost certainly lead to a major opportunity for these rogue agents. Rating is a very specialised, professional skill and it is essential that those seeking advice do so from the right people. These people should be, as we heard from the noble Earl, Lord Lytton, from the RICS, from the Institute of Revenues Rating and Valuation or from the Rating Surveyors’ Association. That is what they do. What efforts will the Government make to ensure that rogue surveyors are sidelined from this process? Those organisations I mentioned provide standards and governance to their members. There is no point in chasing a rogue surveyor for bad advice. There will be thousands of appeals, possibly tens of thousands.

Finally, I would like to mention the internet threat. Why, oh why, have the Government ducked this issue? It is the elephant in the room in any non-domestic rating discussion. The phenomenal growth and success of the low-cost internet sales model is rendering traditional retailers uncompetitive, as is well known. They of course must evolve too, but not against unfair odds. The Bill does nothing to address the valuation imbalance between these two very different business retailing models. It is almost as though the Government deny that this threat exists. The Bill is the perfect opportunity to deal with this and make it fair. Our high streets are dying and the Government know it. Yet they are missing the golden opportunity to right this wrong, and to improve the rating system to meet the user changes taking place in commerce today.

Many SMEs are too big for the small business reliefs, yet too small to have cash reserves or access to competitive sources of capital. I conclude by reminding the Government that simply throwing taxpayers’ money at the SME sector does not fix the problem. I believe it is some £2 billion a year at the moment, which does not even address the problem. This is a great opportunity missed—so much for the fundamental review. We will return to these subjects in Committee.