Non-Domestic Rating (Lists) (No. 2) Bill

Luke Hall Excerpts

2nd reading & 2nd reading: House of Commons & Programme motion & Programme motion: House of Commons & Ways and Means resolution & Ways and Means resolution: House of Commons
Wednesday 30th September 2020 Commons Chamber

[The Minister of State, Ministry of Housing, Communities and Local Government (Luke Hall)]

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

This Bill delivers on an important Government commitment and addresses ratepayers’ concerns by setting in law the date of the next business rates revaluation at 1 April 2023. By doing so, we can ensure that future business rates bills will better reflect the exceptional impact of the coronavirus outbreak on the commercial property market.

Business rates bills are based on the rateable value of a property, which, broadly speaking, represents its annual rental value. Rateable values, in combination with the business rates multiplier and reliefs, determine rates liabilities and are assessed by the Valuation Office Agency independently of Ministers. Since the current system of business rates was introduced in 1990, the Government have had frequent revaluations of rateable values to ensure that they remain up to date. Those revaluations ensure that the amount paid in business rates is fairly distributed among all ratepayers, having regard to the value of the property they occupy.

At the revaluation, all rateable values are based on the rental property market at a set date called the valuation date. The valuation date is set prior to the revaluation taking effect, so that the Valuation Office Agency has time to prepare the valuations. For example, at the last revaluation in 2017, the valuation date was 1 April 2015, which means that current rateable values are based on the market at 1 April 2015.

The next revaluation was scheduled to take effect from 1 April 2021 and would have been based on rental values at 1 April 2019. That was decided in spring 2018 and was the right thing to do at the time, but given what we now know about the coronavirus outbreak and its potential to affect the rental property market, it would not be right to continue with the 2021 revaluation. Continuing to implement the next revaluation on this schedule would have created additional uncertainty for ratepayers at an already uncertain time. It would also have meant that the underlying basis for bills would not have reflected the impact of the outbreak on the commercial rental market.

The Government therefore took the exceptional step of postponing the implementation of the next revaluation in order to give certainty to ratepayers and ensure that the next revaluation reflects the changes to market conditions as a result of the pandemic. The Bill will therefore set the date for implementation of the next revaluation in England and Wales at 1 April 2023. The revaluation will be based on rents at 1 April 2021, a date that we have already set using existing powers in secondary legislation.

The Bill will also change the latest date by which the Valuation Office Agency must publish draft rateable values in the lead-up to the revaluation. That date will be changed from 30 September to 31 December in the preceding year, which will allow us to align the publication of the draft rateable values with decisions normally made at any autumn fiscal event on the multipliers and transitional arrangements for the revaluation.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I understand the reasons why we have postponed revaluations on a number of occasions since 2010. Does that not illustrate the changing nature of the commercial world and the need to move to a different system that is more responsive to the realities of trading on our high streets?

[Luke Hall]

I thank my hon. Friend for his point. We are currently undertaking a fundamental review of business rates, and as part of that exercise we are considering the frequency of future revaluations. When deciding whether to have more frequent revaluations, we need to strike the right balance between more up-to-date assessments, which would flow from such a reform, and the uncertainty it could create, with more regular changes to bills, while also taking into account the time it currently takes to process changes and the impact that any changes that might be required would have on the current system. I certainly understand, however, the point that he has continually made about annual revaluations and how that could further improve the system. I am sure that will be considered.

[Sarah Olney (Richmond Park) (LD)]

I have listened carefully to what the Minister has said about the revaluation moving from April 2021 to April 2023, but I wonder whether there is a danger that those properties that might have a substantial revaluation downwards will be paying over the odds on their rates for two further years, at what we all know is going to be an incredibly tough time. I am thinking in particular of retail businesses and a very challenging trading environment. Will he consider changing the date from April 2023 to later in 2021, particularly given the comments he has just made about the need for more regular revaluation?

[Luke Hall]

I thank the hon. Lady for her point. I know it is a matter in which she takes a personal interest and that she has raised it with Ministers. The point stands that we have to have a system that takes into account the impact of the pandemic and, as is the case with the current system, the time it takes the VOA to go through the process. We think that this is the measure required at this time.

We took the step to postpone the implementation of the next revaluation so as to give certainty to ratepayers and to ensure that the next revaluation reflects the changes in the market conditions as a result of the pandemic. The Bill will therefore set the implementation of the next revaluation date in England and Wales as 1 April 2023. On revaluation based on the rents of 1 April 2021, we have, of course, already set that out in secondary legislation.

Business rates is a devolved policy area, but with agreement from the Welsh Government the Bill does also apply to Wales. As in England, the next revaluation in Wales will be implemented on 1 April 2023, and the date of publication of Welsh draft rateable values will also be changed to 31 December. Entirely different legislation applies in Northern Ireland, which has only recently implemented a revaluation from 1 April 2020, and Scotland, where I understand the Scottish Government have also committed to implementing their next revaluation on 1 April 2023. There is, therefore, a good degree of agreement across the UK that the next business rates revaluation is moved, to better reflect the impact of the coronavirus. Notwithstanding some of the points raised, I hope that is accepted across this House.

As I have said, this is an exceptional step and the Government remain committed to frequent revaluations of business rates. The fundamental review of business rates will look at not just the frequency of revaluations but how they are done, and will report on those aspects of the business rates system in spring. However, this is a step that we can take now to improve business rates bills, and that is why we have brought this Bill forward so quickly.

[Jim Shannon (Strangford) (DUP)]

I thank the Minister for bringing forward the Bill. He has set out why it is essential—I and others in this House believe it is, too—in the current economic situation. We need to do all we can to support our businesses and see them through this so that we can reap the rewards in the years to come. When businesses are better off, they are able to help the local economy and pay their taxes to Her Majesty’s Revenue and Customs, national insurance and council pockets. Rather than seeing this as a bail-out, as some do, I see it as a very sensible investment for the future.

[Luke Hall]

I thank the hon. Gentleman for his point. He is right that the Bill’s provisions form only part of the support that we have provided to ratepayers as a result of the pandemic. We have already ensured that eligible businesses in the retail, hospitality and leisure sectors will pay no business rates at all in 2020-21. This is a relief worth £10 billion, which, when combined with the businesses receiving small business rate relief, means that more than half the ratepayers in England will pay no rates this year. This forms part of the business rates measures introduced in England since 2016, which, when taken together, will be worth more than £23 billion over the next five years. These include the doubling of small business rates relief, changes to the threshold, which mean that 700,000 small businesses—occupiers of a third of all properties—now pay no business rates at all, and switching the indexation of business rates from the retail price index to the consumer prices index. That switch alone will save businesses £6 billion over the next five years.

This Bill forms a critical part of the package of reforms and support that we are introducing to business rates, which will result in a property tax that better reflects coronavirus-related challenges in the commercial rental market and provide support to those who need it most, and which is simple and easy for businesses to administer. I commend it to the House.