Non-Domestic Rating (Multipliers and Private Schools) Bill

Lord Thurlow Excerpts

Report stage
Tuesday 18th March 2025 Lords Chamber

[Lord Shipley (LD)]

My Lords, I remind the House that I am a vice-president of the Local Government Association. I have great sympathy with the contribution of the noble Earl, Lord Lytton, and agree with the conclusions that he has so carefully reached. I know that these Benches would support his amendments.

Amendment 32, tabled by the noble Lord, Lord Thurlow, concerns an important issue. The Government promised in their manifesto to make the payment of business rates fairer and more balanced between retail distribution warehouses and high street shops. Indeed, the Chancellor said in the last Budget that she wanted to shift the burden. Yet all the signs are that nothing will happen until next year at the earliest. I hope that the Minister can give us an update on the timing for the outcome of the review that the Government apparently are undertaking. I say that because this is, as the noble Earl made clear, an urgent matter. Business rates are a major burden on retail high street shops. Sainsbury’s said a few months ago that half of its total tax bill is for business rates.

The system needs urgent reform. One step would be to accept the proposals in this group of amendments. In particular, Amendment 32 sets deadlines for when the Government must have acted. I hope that, if there is an opportunity, we on these Benches can support the amendments in this group.

[Lord Thurlow (CB)]

My Lords, I do not wish to talk for more than a moment, as I have Amendment 32 coming in the next group.

[Noble Lords]

It is in this group.

[Lord Thurlow (CB)]

I apologise. In that case, let me just consult my notes.

My proposal is not dramatic and does not involve tax; it tries to define a very difficult aspect of non-domestic rates: the effect on retailers. I thank the Minister for his time last night, when we discussed my proposal at length. However, subject to his comments in a few minutes, I will decide whether to press my amendment later.

--- Later in debate ---

[Baroness Pinnock (LD)]

My noble friend Lord Shipley has just made a powerful case for the disaggregation of manufacturing from the standard multiplier and for those businesses to benefit from the lower multiplier. The economic case is a strong one, as my noble friend has just said, and the Government’s go-for-growth strategy, especially in the context of world events, will fundamentally depend on British manufacturing. More encouragement needs to be provided to the sector to invest and to innovate, and a government decision to reduce the rate burden will be one such indicator that the Government are showing they are determined to support those businesses that produce the wealth on which our public services rely.

The noble Baroness, Lady Scott of Bybrook, has led this group with the case for the Government to take especial notice of so-called anchor stores, on which the viability, as she rightly argues, of our high street absolutely depends. I urge the Government to accept Amendment 4, in my name and that of my noble friend Lord Fox, to show that the importance of manufacturing will be recognised. If the Minister seeks to ignore that argument, then we on this side will test the opinion of the House.

[Lord Thurlow (CB)]

My Lords, I add my support to the important comments from the noble Baroness, Lady Scott of Bybrook. The importance of anchors cannot be overemphasised, particularly in smaller towns. We all know a shopping centre near where we live, and not a brick of development for that shopping centre would have been laid if it was not for a pre-let to an anchor.

It is important to explain that. They do not just create the footfall for the retailers generally—which of course they do—but they also catalyse the funding for the developer to build it. They are the anchor. They are the golden goose for the high street. Taxing them more simply risks losing them. The damage to society locally in losing them will be difficult to restore, and social cohesion will suffer. I strongly support the amendment from the noble Baroness, Lady Scott, and will support it if it goes to the vote.

[Lord Khan of Burnley (Lab)]

My Lords, these amendments seek to remove anchor stores from the higher multiplier. They also seek to expand the cohort of hereditaments that qualify for the lower multipliers by bringing manufacturing properties into scope alongside qualifying retail, hospitality and leisure.

As set out at the Budget, the Government intend to introduce a permanent tax cut for qualifying RHL properties from 2026-27 by introducing two lower RHL multipliers. The Bill makes provision to enable this through secondary legislation. In consideration of the challenging fiscal environment that this Government face, it is important that the permanent tax cut is funded sustainably, which is why we intend to introduce a higher multiplier to fund the tax cut from within the business rates system. It is the Government’s intention for the higher multiplier to apply to all properties with a rateable value of £500,000 and above. This ensures that sufficient funding is raised to enable the Government to provide that permanent tax cut for RHL properties with rateable values below £500,000.

I thank noble Lords for their contributions on this topic. As she did in Committee, the noble Baroness has set out the important role that anchor stores play on our nation’s high streets. We have heard that they are a linchpin, that they drive footfall and that they help support the broader high street ecosystem by attracting other businesses. The Government recognise this and the information published by the Valuation Office Agency shows that a relatively small number of shops fall above the £500,000 threshold. In my response to the debate on the previous group, I set out that the impact on shops is not widespread. I will not repeat those numbers here.

Furthermore, anchor stores are often part of large retail chains that will also have a number of properties with a rateable value below £500,000 and, in the case of those properties, will benefit from the lower RHL multipliers. Moreover, whereas RHL relief is currently limited to a cash cap of £110,000 per business, the Government intend to have no such limit on the new RHL multipliers to better ensure more widespread support for the high street.

On the amendments tabled by the noble Lord, Lord Fox, the impact of this Bill on the manufacturing sector has been a recurrent theme throughout its passage. In the other place, the Government heard calls for manufacturing to be included in the cohort qualifying for the lower multipliers, citing the threat of tariffs, our isolation from our neighbours and growing competition from other countries. These amendments would bring manufacturing properties with a rateable value below £500,000 into scope of the lower RHL multipliers.

Noble Lords are aware of the difficult task that this Government face. The current fiscal backdrop is challenging and, in this context, I hope they understand that widening the scope of the properties qualifying for the lower multipliers, as well as taking properties out of scope of the higher multipliers, as these amendments seek to do, is likely to dilute the support that the Government are able to provide to RHL properties with a rateable value below £500,000.

Throughout the passage of the Bill, the Government have emphasised our desire to ensure that we move to a fairer, rebalanced and sustainable business rates system. We have been clear that any tax cut must be sustainably funded. To expand the cohort and number of properties qualifying for the lower multipliers while reducing those to which the higher multiplier will apply risks this policy no longer being sustainable—a key principle that the Government have stated throughout the Bill’s passage.

As I said, against the challenging fiscal environment, the Government have to take tough decisions. This is the fairest approach, which ensures a sustainable solution so that the permanent tax cut for RHL can be funded from within the business rates system. Of course, noble Lords have made sensible points. Anchor stores are part of high streets, as is light manufacturing in some areas, a point made by the noble Lord, Lord Fox, in Committee.

The Government are committed to ensuring the longevity and survival of our vibrant and diverse town centres, and there are many ways in which we are pursuing that endeavour. In December, we introduced high street rental auctions, a new power which allows local authorities to auction off the lease of persistently vacant commercial units. The new regulations will make town centre tenancies more accessible and affordable for businesses and community groups, while helping to tackle vacancy on our high streets.

Through the English devolution Bill, we will also introduce a strong new right to buy for valued community assets, which will help this Government safeguard our high streets. This measure will empower local communities to reclaim and revitalise empty shops, pubs, and community spaces, helping to revamp our high streets, increase footfall and eliminate the blight of vacant premises.

Furthermore, at the Autumn Budget, the small business multiplier for properties with a rateable value of under £51,000 was frozen at 49.9p, meaning that, together with small business rate relief, over 1 million properties will be protected from a 1.6% inflationary increase. Alongside this, the Government continue to support our valuable manufacturing sector through other means.

The noble Lord, Lord Shipley, asked what in particular we are doing. At the Autumn Budget, the Government announced £975 million for the aerospace sector over five years, over £2 billion for the automotive sector over the same period, and up to £520 million for a new life sciences and innovative manufacturing fund. The Budget also saw two key programmes extended, promoting innovation across UK regions and manufacturing. The innovation accelerator programme will continue for another year, focusing on high-potential clusters across the UK. Meanwhile, the Made Smarter innovation programme will continue to be funded, empowering manufacturers to adopt digital technologies and enhancing productivity and sustainability by connecting digital solutions providers with industry.

I hope that it is clear to noble Lords why the Government cannot accept these amendments. The permanent tax cut for RHL properties must be funded sustainably. Furthermore, the Government fully recognise the importance of the British manufacturing industry, but we are supporting that sector through other avenues. It is for those reasons that I cannot accept the amendments in the name of the noble Baroness, Lady Scott, and the noble Lord, Lord Fox, and I respectfully ask them not to press them.

--- Later in debate ---

Moved by

[Lord Thurlow]

32: After Clause 5, insert the following new Clause—
“Use Class for retail services from fulfilment warehouses(1) Within three months of the day on which this Act is passed, the Secretary of State must instigate a review of 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, to apply in England.(2) Experts in the sector must be consulted to inform the review, including but not limited to—(a) the Royal Institute of Chartered Surveyors;(b) the Institute of Revenues, Rating and Valuation;(c) the Rating Surveyors’ Association. (3) The Secretary of State must publish a report of their conclusions and recommendations within three months of the review being instigated, and lay that report before Parliament.(4) The Secretary of State must implement any recommended changes indicated by the findings of their review within six months of the date on which the report is published.(5) The Secretary of State may make provision to carry out subsection (4) by regulations made by statutory instrument.(6) A statutory instrument containing regulations under subsection (5) is subject to annulment in pursuance of a resolution of either House of Parliament.”Member’s explanatory statement
This amendment seeks to recalibrate the share of non-domestic rates paid by retailers not on the high street through a review informed by expert advice, to be implemented within one year of the passing of this Act.

[Lord Thurlow (CB)]

My Lords, we debated this amendment two or three hours ago. It would level the playing field between internet warehousing and high street shops. I am grateful to noble Lords who took part in that debate and to the Minister for his helpful and constructive suggestions, but I am afraid that they were too vague. The wait will be too long and the crisis for high street shops is pressing, so I would like to divide the House.