Business Rates

Marcus Jones Excerpts

Tuesday 30th October 2012 Westminster Hall

[Simon Danczuk]

I agree with the ACS, which does excellent work. The lack of consultation on the revaluation is a massive part of the problem in which the Government now find themselves. In fact, the property agents Colliers have called the decision

“nothing short of a scandal”

and have accused the Government of trying to

“pull the wool over the eyes of business.”

The policy will mean that many businesses will continue to pay more business rates than they should, and it will disproportionately hit regions outside the south-east. I cannot put it better than Richard Farr of Sanderson Weatherall chartered surveyors, who said in Newcastle’s The Journal:

“Those in lucrative locations such as London and the south-east, where rental values have increased, will benefit from the move, whilst hard-hit retailers in northern cities and elsewhere will continue to be suffocated by being charged business rates based on pre-recession values.”

The Minister attempted to defend his policy by saying in The Daily Telegraph this week:

“revaluations are revenue-neutral overall...Suspending the revaluation will not earn the Government a penny”.

What he failed to tell business is that by suspending the revaluation now, he need not increase business rates in the south-east and reduce them elsewhere. Like other examples such as the local government settlement, the new homes bonus and public health funding, business rates have been adjusted to serve a political purpose. If next year’s business rates revaluation were to go ahead as planned, new rates would come into force in April 2015, a month away from the general election. Rates would undoubtedly increase in the south-east and decrease significantly across the north and elsewhere to reflect the adjustment in property values. That is not the kind of news that the Government want to present to heartland supporters a month away from elections.

To top it all off, the Government are attempting to defend their policy further by telling journalists that the move to postpone next year’s revaluation will provide stability for businesses, and that they want to avoid the volatility of significant changes to business rates. The Government do not appear to understand the system of transitional relief, which is designed to reduce the impact of any significant changes in the rateable value.

[Mr Marcus Jones (Nuneaton) (Con)]

Much of the hon. Gentleman’s argument seems to be predicated on the north-south divide. However, there are town centres throughout the country—in the south-east, the south-west, the north, the midlands and across the piece—that are struggling. Does he not agree that the issue is not just a north-south issue but relates to the whole country?

[Simon Danczuk]

I agree. Not only the north but other areas outside the south-east will be adversely affected.

The Government also boast of offering small business rate relief, a policy introduced by the Labour Government. They say that they have given local authorities the power to reduce business rates under clause 69 of the Localism Act 2011, but what they never make clear is that the local authority must pay for any reduction in business rates. In order to cut business rates, a council must cut back on care for the elderly or disabled services. What a fantastic choice to offer local authorities. In Greater Manchester, an area with some of the highest numbers of empty shops in the country, freedom of information requests have shown that not one local authority is using clause 69 of the Localism Act 2011 to reduce business rates. It is a shocking indictment of a toothless Government policy that has made no impact whatever since it was introduced in April and is a completely ineffective tool against high street closures.

To conclude, the Government are trying to postpone a business rates revaluation to protect the south-east while being dangerously complacent about the consequences of businesses elsewhere having to pay until 2017 excessively and unfairly high rates that have lost touch with rental values. The Government are using the desperate euphemism of “stability” when what is really meant is political expediency, and they are boasting about localism powers to reduce business rates that councils are not using and cannot use due to massive budget cuts.

I say clearly to the Minister that businesses do not want an out-of-touch Government telling them that they will have to pay unfair taxes regardless. They want someone on their side who is prepared to fight for a system that takes a fair proportion of taxes and gives businesses the breathing space and support to grow and lead a proper, sustainable recovery.

--- Later in debate ---

[Peter Aldous]

I am grateful to my hon. Friend for raising that important issue. I was not going to raise it myself, but I take account of what he says. The tax on empty properties was introduced under the previous Government. I was still practising then, and there were concerns at that time. I have seen a number of units—they may not have been in the best condition, but they were available, often with a low rental value—demolished by landowners and landlords. Reducing the supply of accommodation can lead to an increase in rents for small businesses that are just getting started.

[Mr Marcus Jones]

On that subject, does my hon. Friend agree that empty property business rates are also an impediment to developers and investors who wish to invest in new build in our town centres, as they may not be able to fill them with tenants straight away? The measures introduced by the previous Labour Government are leading to a situation that is stifling investment in our town centres, rather than encouraging it.

[Peter Aldous]

Yes, I agree. Investing in major town centre refurbishment schemes is expensive and challenging. Such schemes take a long time—often a number of property cycles. We therefore need to provide every incentive and encouragement for investors and developers to invest in town centres; otherwise, they take the easy option of going for out-of-town locations, which exacerbates the vicious circle of draining life and vitality out of the town centre.

I take note of the Valuation Office Agency’s research, which shows that 800,000 premises will see a real-terms rise in rates, while only 300,000 will see their bills fall. Having said that, I am also mindful of the views of Gerald Eve, which I think is recognised as the leading private practice firm in the specialist field of rates. It disputes the VOA’s contention and has carried out its own research, which reaches a different conclusion. We also need to bear in mind that at the time of the current valuation, April 2008, the market was at its peak. There is concern that postponing the review will lead to retailers facing incorrect and historical values for far longer than they should.

My hon. Friend the Member for Rochdale mentioned the backlog of appeals. One reason for postponing the revaluation is to address, and not add to, the backlog. We need to take urgent action to clear the backlog, and I would be interested to hear from the Minister on what proposals there may be. I hasten to add that I have no continuing involvement with any private sector firms, but we need to consider whether this is something that the private sector can do.

Let me turn to the annual increase in business rates. We need to review the mechanism by which that takes place—the increase in line with the retail prices index every September. If, next April, we keep to this September’s 2.6% rate, business rates will have gone up in the past three years by a compound rate of interest of 13.33%. That will mean that £500 million is added to the retail sector’s rates bill. At a time when council tax is frozen, Britain’s shopkeepers are carrying too heavy a burden on their shoulders.

I should like to mention three issues in closing. First, I hope that the Government, as soon as they are able, publish the data on which they have based their decision for postponement. We need to scrutinise this and have a consultation to look at it more closely. Secondly, we need to review the RPI link. Property is a declining proportion of the total economy, yet we are taking more out of it. I do not think that the golden goose has many more eggs left to lay. Thirdly, we need to look closely at the formula by which business rates are calculated. In particular, does the formula accurately reflect the rental value of out-of-town shop and retail park units? In the high street and town centre, people have to pay for a council car park, whereas car parking for out-of-town retailers is right on their doorstep and free. That is a real draw for shoppers, but it is not accurately reflected in the rates formula. I am grateful to hon. Members for listening to me.

--- Later in debate ---

[Mr Marcus Jones (Nuneaton) (Con)]

Thank you for allowing me to speak in this important debate, Mr Caton. It is a pleasure to follow the hon. Member for Stockport (Ann Coffey), who set out a great advert for Stockport and what it has to offer. I congratulate the hon. Member for Rochdale (Simon Danczuk) on securing the debate; I have great respect for his work on issues relating to town centres and our high streets.

I have been slightly disappointed by the debate’s lack of acknowledgment of the general economic picture. Nor has much mention been made of the state of the public finances, which is another extremely important part of the context for the debate. It is worth restating, in support of the coalition Government, that when they came to power in May 2010 there was a car crash of a situation in the public finances and we had the largest deficit in the G20. To put things into perspective, the Government have had to make difficult decisions over the past two and a half years, but positive progress has been made. The deficit has been reduced by 25% in those two years and, throughout the world and in the markets, our country’s economic position is seen as stable. That is reflected in the low interest rates that we still have and which we would not have had were the Opposition in government; those low rates are allowing people to go out and use our shops to support our retailers.

[Helen Jones (Warrington North) (Lab)]

Perhaps the hon. Gentleman also wants to put on the record that when the previous Labour Government left office the economy was growing and unemployment was falling. This Government have presided over the longest double-dip recession that we have ever seen, and that is why people do not have money to spend in shops.

[Mr Jones]

The coalition Government should not take any lessons from the Labour party on economic management. We all know that we had the biggest bust in living memory under the previous Government, that under them the country was running a structural deficit long before the banks went bust and that since this Government came to power 1 million jobs have been created in the private sector. Growth might have only just come back into the economy and things might be slow, but we are building on a sustainable basis and not on the basis of borrowing and more spending, as we saw under the Labour party.

That brings me on to the points that I would like to make with my other hat on, as chair of the all-party group on town centres. I am passionately interested in issues relating to town centres, so I am concerned about the effect of delaying the revaluation. Town centres have been under the cosh for a number of years, internet retail is booming, out-of-town shopping centres are still buoyant and having an extremely good time in the main, and the net effect is that our town centres are currently in decline. Many of the national multiple retailers, which, only a few years before 2008, many of us were probably criticising for creating clone town centres, are now retrenching and consolidating their estates; when leases or break clauses come up, they are deciding to close town centre stores in favour of stores in large retail parks and of investment that they can make in internet retailing, because they can see that the writing is on the wall.

If we decide not to proceed with the revaluation at this point, we risk causing further damage to our town centres. Since 2008, town centre property values in my constituency have fallen like a stone, and rental income has reduced in the prime rental areas by 38%. Business rates are predicated on property value, and not revaluing the businesses in town centres seriously undermines the progress the Government have made on these issues. I welcome the Mary Portas review and am glad that the Government have taken on most of her recommendations, although such work could be undermined by the current proposals and, as my hon. Friend the Member for Waveney (Peter Aldous) mentioned, by local authorities that consider their car parks to be cash cows and think nothing of putting up car-parking charges year on year. We need to be careful that we do not price our town centres out of existence in a number of ways.

It is incumbent on the Government to be more creative. I would not personally advocate putting up business rates throughout the country, but the situation needs to be re-examined. My hon. Friend the Member for Waveney was critical of the valuation office figures for the proposed review, because they were now probably well out of date given the difference in economic circumstances between 2008 and now. The issue, therefore, needs to be looked at more carefully; we need to look at what we can do to support our town centres.

I hope that the Minister can give me, as chair of the all-party group, more confidence that the Government are listening to the concerns of those running businesses in our town centres—small, independent retailers and the large, multiple retailers which are seriously considering withdrawing their stores from many of our town centres. I hope that he takes the message back to the Government and that they reconsider what we can do to support such a vulnerable group of businesses in our community hubs. Most of our constituencies rely on town centres as the community centre for a local area, and we ignore that fact and the community values of our town centres and what they provide at our peril.