Social Housing Bill (Third sitting)

Patrick Spencer Excerpts

Committee stage
Thursday 29th October 2026 Public Bill Committees

[Gideon Amos]

I welcome the hon. Lady’s question about the details of Liberal Democrat policy, upon which I shall be delighted to expound. The challenge I was making is that the Government’s overall target for homes is mainly for private homes, so we have situations in Taunton where thousands of homes will be imposed on a community that will not be able to afford them or have any access to them. They will not be for local people.

Those targets come alongside the planning reforms, which seem to celebrate a confrontational approach—I think the Labour party called it a “blockers versus builders” approach. The notion that that will somehow lead to more community acceptance of housing development is wrong-headed. That is why we believe that the overall housing target needs to be based on household projections, as it once was, rather than on the current standard method. However, we would stick rigidly to our target of 150,000 social homes.

[Patrick Spencer (Central Suffolk and North Ipswich) (Con)]

I appreciate the hon. Gentleman’s point about housing targets. I remind the Committee that we are interrogating the Bill. One of my criticisms of the Bill is that the forecast for new, additional houses, certainly in the impact statement, is to some extent inaccurate. Can he speak to his disappointment that the Bill does not create the new houses that he and his party clearly want to see?

[Gideon Amos]

To be fair to Conservative Members, which is something I do not often say, they raised the point in earlier sittings that there is too little in the Bill to secure the delivery of social homes—the really affordable homes that we need to see. That is why our new clause 1, the very first amendment that we tabled, would insert such a target into the Bill.

Let me return to the objective of the delivery of social homes. The Budget gave an extra £1.5 billion to the programme, which is incredibly welcome.

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[Lewis Cocking]

As I say, we need to explore all options, and I want brownfield sites to be built out first. I want to protect as much of the green belt as possible. That means looking at how to use areas that have planning permission and have already gone through the planning process—areas in our town centres that residents drive past all the time. The Government need to look at those sites, because there are loads of unbuilt planning applications; we have all had consultations and spoken to our residents about them. All options must be on the table.

We see this in our constituencies all the time. People come to see me at my local surgery to ask why a site has not been built out. We desperately want a care home built on a brownfield site in the middle of Cheshunt town centre. It would be good if the Government gave local councils tools to enable those sites to get built out quicker.

[Patrick Spencer]

I think it would be appropriate to remind the Committee that the purpose of new clause 34 is to force the Government to bring forward a strategy for utilising brownfield sites. It is not about bouncing Opposition parties into make policy on the hoof; it is for the Government to come up with ideas. Will my hon. Friend reaffirm that his point is that the Government should bring forward a strategy to indicate their intent?

[Lewis Cocking]

Absolutely. New clause 34 says that the Government must bring forward a strategy for brownfield sites, which could include a multitude of options. When they do so, the Opposition will look at the benefits of all the items in the strategy, which could include a “use it or lose it” power. That is one example that the Government could review to see what could happen.

The new clause is about using brownfield sites first. I do not think that anyone disagrees with that, so it would be good if the Government accepted it. If they do, the Bill might actually be about building more social housing. At the moment, it does nothing of the sort.

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[Patrick Spencer]

The reality is that when one serves with such an august group of gentlemen, one’s own speech gets slowly whittled down after they have made theirs. However, these are pet projects of mine, because as I said earlier, I am one of those on the Committee who represents a rural community, and in Suffolk we have seen the reality of building houses in areas that are just not suited to it. We have had a number of major weather events over the past 10 to 15 years, and I have not read a single section 19 flood report that did not identify urban sprawl and house building in rural areas, on floodplains or on low-lying land as a major contributor to massive flooding risks in rural England.

As my right hon. Friend the Member for Melton and Syston mentioned, many homes built in rural areas are not near schools, transport infrastructure or high streets. These are not houses that young people want to move into. I use this anecdote all the time, but in my village, which is in the middle of nowhere, we have had 30 units built on the side of the town. Not only are they too expensive, but we do not have any of the utilities that the young people we are trying to solve the housing crisis for want. At the same time, I have Ipswich in my constituency, and it is a mine of brownfield sites.

The new clause could be a huge opportunity for the Government to align their social housing policy with their broader economic agenda of empowering regions, because our economic future is in towns and cities. That is an inevitability: it is where the jobs will be made and where the growth will happen. That is where educational institutions—those anchor institutions, which are so important for the long-term economic viability of these towns—are based. That should not come as a surprise to hon. Members here representing Rugby, Wolverhampton and Durham. The Members for all those places would say, “We want jobs, young people and institutions that embed economic growth, and”—critically—“affordable homes to sit beside them.” What is the point of a thriving town without affordable housing?

[John Slinger]

Does the hon. Gentleman agree that the need for social homes—and for affordable homes, although we are talking about social homes here—exists not only in our towns, but in our villages? If we are to deal with the long-standing problems with the high cost of homes on the private market, we will need social homes across the range of conurbations in our country.

[Patrick Spencer]

We would not argue against that statement one bit. I am not trying to expunge social tenants from rural England. Suffolk is not just a load of farms and tractor driving; we have a lot of working-class towns. We need social housing, but we are talking about the future of social housing, the future of our economy and the future of our dynamism. We have always moaned jealously about the French, the Germans and the Americans for having dynamic economies with engines of prosperity outside the capital city, while we are stuck with a unimodal economy that is so rooted in London—it is crazy that I am making the Prime Minister’s arguments for him from the Opposition Benches, but anyway.

Surely this is an opportunity. If we are going to build 50,000 to 100,000 or 150,000 homes, and if we are going to tackle the 1.3 million people who are stuck on the waiting list for social houses, why do we not make sure that that is aligned with our responsibility for economic growth? We are all bored with hearing from experts, friends and family members about the lack of joined-up policymaking across Government. This Bill, which is not an inconsequential Bill but is one piece of a wide patchwork of legislation, is a good example of how we can align with a wider economic agenda that we can all get behind.

[Matthew Pennycook]

It is a pleasure to continue our proceedings and to see you in the Chair, Sir Roger. After the Opposition’s—to put it candidly—languid approach in our previous sittings, I welcome the fact that they have clearly woken up and are now fully participating in the debate. Partly for that reason, we had a remarkably productive first day in Committee on Tuesday. Our debates on many of the clauses and amendments were predictably spirited; nevertheless, they remained civil and, in the main, constructive. I hope we can proceed in that vein today.

Before I respond to the new clauses, I will make a general point—a point that the shadow Minister is clearly struggling to grasp. Our ambitions to deliver the biggest increase in social and affordable house building in a generation will benefit from the Bill, but they are not entirely dependent on this one piece of legislation. The supply statistics speak for themselves. Let me give the statistics from 2024-25. Overall social and affordable house building: 64,921, the highest level since 2014-15. Social housing on its own: 12,267, the highest level since 2012-13. Council-delivered homes: 10,600, the highest level since 1991-92. That is this Government’s record on social and affordable housing—and, by the way, this was all prior to the initial allocations from our social and affordable housing programme, which have now been made. We have increased supply, we will increase it further, and the Bill will make a material impact on doing so.

I turn to new clause 1. As the hon. Member for Taunton and Wellington is fully aware, we are committed, in line with our manifesto, to delivering the biggest increase in social and affordable house building in a generation, to prioritising the building of new social rented homes and to supporting councils and housing associations to make a greater contribution to affordable supply. In the 27 months for which we have been in office, we have faithfully sought to honour those commitments. We have made the biggest long-term investment in social and affordable housing in recent memory, an investment that was topped up in yesterday’s Budget by a further £1.5 billion pounds, as the hon. Member rightly recognised. We are vigorously prioritising social rented housing, we are rebuilding the capacity of councils and housing associations to borrow and invest in new and existing homes, and we are reinvigorating council house building.

In his more generous moments, the Liberal Democrat spokesperson acknowledged the transformative impact of what this Government have done on social housing supply. I understand—indeed, I welcome and embrace—his encouragement and support for raising our ambition further. However, given the nature of our inheritance from the Conservative party, with social housing supply averaging a historical low of fewer than 8,000 units per year from 2013 to 2024, following the purposeful and deliberate pivot to affordable rented tenures, a target of 150,000 new social homes per year is not currently realistic. A statutory requirement to produce a strategy for delivering such volumes within 12 months of Royal Assent is not a proposition that we can support.

I say gently to the hon. Member for Taunton and Wellington that his party continues wildly to underestimate the costs of supplying social housing on the scale that he proposes. The Government’s estimate of the grant funding required to support the delivery of 150,000 social homes is in excess of £20 billion per year. For obvious reasons, the hon. Member’s party has escaped the kind of scrutiny to which the Government and the official Opposition are subject, but if his party wants that 150,000 figure to be taken seriously it will have to set out a credible funding strategy. To date, it has not done so.

Social Housing Bill (First sitting)

Patrick Spencer Excerpts

Committee stage
Tuesday 27th October 2026 Public Bill Committees

[Matthew Pennycook]

I thank my hon. Friend for sharing his very considerable experience. There is a difference in experience between local authorities that have housing revenue accounts and those that do not, and those that build at scale and those that do not. However, it is certainly the case that councils knowing they can lose stock three years after building it without recuperating that investment is a disincentive to build.

[Patrick Spencer (Central Suffolk and North Ipswich) (Con)]

Will the Minister give way?

[Matthew Pennycook]

I will give way to the hon. Gentleman but then, in the interests of getting to the Opposition new clauses, which I am told they want to speak to, I will make some progress.

[Patrick Spencer]

I appreciate the Minister’s point about recouping councils’ investment, which is why there are elements of the Bill that change that deal for councils. What my residents and I do not understand—and what people across this country do not understand—is why the Government are restricting access to right to buy for a whole group of people, including young people, young parents and people at the beginning of their professional lives, who might want to get on to the housing ladder. It seems they are tackling one problem by focusing on the completely wrong element of the issue.

[Matthew Pennycook]

I think I understand the hon. Gentleman’s point, but I respectfully disagree. It is a problem that local authorities up and down the country build new social homes but then, after three years, they can be purchased. That is leading to an unsustainable outflow of social housing stock from the system. We are not net positive on social homes—we have not been for many years—but the Bill will ensure that we are. It gives an incentive to councils to build, as they will know that they are building more than they are losing, and therefore the 1.3 million people on waiting lists will not increase but decrease over time.

I must turn to the amendments and new clauses tabled by the hon. Member for Orpington. New clause 57 would exempt existing secure tenants from the new 10-year minimum qualifying period introduced by the Bill. As I have said, a core aim of the Bill is to protect social housing stock better and to ensure that more social homes are built than lost. If existing tenancies were excluded from the changes to eligibility rules, the vast majority of tenants would be unaffected by our qualifying period reforms. I have no doubt that that is the hon. Gentleman’s intention, but the result would be homes continuing to be sold as little as three years after a tenancy was secured, and the continued loss of significant amounts of social housing stock. That is not the Government’s aim or the aim of the Bill. For that reason, the Government cannot accept the new clause, and I hope that the shadow Minister will not press it.

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[Matthew Pennycook]

As I have already set out, the Bill’s reforms aim to ensure that the right-to-buy scheme is sustainable, including by ensuring that discounts are set at the right level to enable long-standing tenants to buy under the scheme but without depleting levels of social housing stock.

This Government already took action in November 2024 to reduce the maximum cash discounts, returning those to pre-2012 levels. We subsequently committed to revise the discounts available as a percentage of the property value, so that they align better with the revised cash cap amounts. Clause 6 delivers on that commitment by reducing percentage discounts so that they start at 5% of the property value after 10 years of public sector tenancy, and increase for every extra year of a tenancy up to a maximum of 15%. As is the case now, the percentage discounts will be subject to cash caps that set out the maximum cash discount that a tenant can receive in their area. Aligning the discounts available as a percentage of the property value with the cash caps ensures that those who have been in their homes the longest benefit the most, while avoiding disproportionately large discounts in high-value areas.

The revised percentage discount aims to strike a balance between the responses received during the right-to-buy consultation, in which many respondents supported setting the percentage discounts lower than those proposed by the clause. We are also simplifying the rules by applying a single set of discount arrangements to both houses and flats to make the scheme clearer and more consistent for tenants.

[Patrick Spencer]

Would it be possible for the Government to present some kind of analysis on the impact that this policy will have on the number of sales made available to tenants? That would be important to establishing the long-term economic impact on properties across the country.

[Matthew Pennycook]

I simply refer the hon. Gentleman to the impact assessment. If he has further, detailed questions about it, I am more than happy to answer, but we have set out our analysis of the impact of the Bill and in particular that of the ambition to go net positive on new social housing as a result of the changes we are making.

The clause also extends the discount repayment period from the current five years to 10 years after the original sale, during which time a repurchaser looking to resell the property will be required to repay all or some of the discount on a sliding scale. That measure was supported by 72% of respondents to our consultation and it will ensure that there is less incentive for early resale, which can undermine the purpose of the scheme. It will encourage people buying to retain the property and discourage profiteering.

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.

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[Gideon Amos]

I rise to speak to our Liberal Democrat amendments. New clause 2 would provide local authorities with the power to suspend right to buy in an area completely and bring it to an end. Perhaps for the first and last time, I agree 100% with the hon. Member for Orpington, completely and wholeheartedly; he said that local areas are best placed to decide what is right for them on council housing provision and council housing stock. That is why we would give local authorities the ability to say that they have lost enough council housing. Some 2 million council homes were lost to right to buy and 4 million social homes have been lost altogether. Enough is enough. Local communities should have the right to decide whether they want to continue to see the loss of council homes in their area.

[Patrick Spencer]

The hon. Gentleman talks about council houses being lost to right to buy; it would be remiss not to say they are being gained by tenants who own a property—part of a property-owning democracy that we hold dear in this country.

[Gideon Amos]

If we have a system where 4 million homes have been lost and 1.3 million people are on the council waiting list, something has gone radically wrong. We need a different approach.

[Patrick Spencer]

Will the hon. Gentleman give way?

[Gideon Amos]

From a sedentary position, the hon. Gentleman is asking me to give way, but I have not yet answered his initial question. Yes, we need to find ways to help people into home ownership. That is vital and fundamental to a thriving society. We need to build more homes. We need to provide more and better shared ownership arrangements, as the current arrangements are not working. We need to help people on to the housing ladder. That does not mean we need to erode and diminish our social housing stock.

Social Housing Bill (Second sitting)

Patrick Spencer Excerpts

Committee stage
Tuesday 27th October 2026 Public Bill Committees

[Matthew Pennycook]

Let me start with new clause 40, which seeks to clarify that social landlords can continue to grant fixed-term tenancies.

Fixed-term tenancies will no longer be available within the assured tenancy framework once the relevant Renters’ Rights Act 2025 reforms take effect. I therefore understand that the proposal is aimed principally at ensuring that local housing authorities and other secure tenancy landlords can continue to grant fixed-term tenancies when appropriate.

I want to be clear that the new clause is not needed. Nothing in the Bill prevents secure-tenancy landlords from granting fixed-term tenancies. As I have said, the Bill repeals uncommenced provisions in the Housing and Planning Act 2016, which would have required most new secure tenancies to be fixed-term tenancies. As we have just debated, those provisions were never brought into force and we are now removing them in order to provide clarity. Secure-tenancy landlords will still be able to offer fixed-term tenancies where they consider it appropriate to do so; as I have said, the Bill does not change that. The proposed measures risk repeating what is already the case in law for secure-tenancy landlords and would create confusion by suggesting that the Bill removes flexibility in this area when it does not. For those reasons, I ask the shadow Minister not to press new clause 40.

New clause 58 would require local housing authorities to review lifetime secure tenancies every five years. I made it clear when speaking to clause 17 that the Government support the use of lifetime tenancies because they provide stability and security for households and help people to put down roots in their communities. That is precisely why we are repealing uncommenced provisions in the 2016 Act that would have phased out lifetime secure tenancies in favour of mandatory fixed-term tenancies.

We expect local authorities and other social landlords to make the best and most effective use of their stock to meet housing need. However, we do not believe that a statutory requirement for local authorities to review every secure tenancy once every five years would be an appropriate way to support them in doing so, given the administrative burden that that would entail. We also believe that it would have detrimental impacts on tenants and communities. Those are some of the reasons why the previous Government did not commence the provisions they had legislated for in the 2016 Act.

[Patrick Spencer (Central Suffolk and North Ipswich) (Con)]

I am losing track of the narrative in this debate. The Government do not want to sell the unit to the tenant, but that means they will forgo all the long-term health, economic, social and community benefits of home ownership. At the same time, you want to lock them into lifelong tenancies, which would take their house out of action and reduce its availability to other households that are more in need. Perhaps I have misunderstood the Bill, but that is the narrative that I understand the Government are setting out. Can the Minister confirm that for me?

[The Chair]

Order. I remind Members that I am not involved in any way with this legislation. Members should not refer to the Minister as “you”.

[Patrick Spencer]

I apologise, Mr Western.

[Matthew Pennycook]

I fear that the hon. Gentleman does misunderstand the Bill in a number of respects. First, we are not abolishing or phasing out the right to buy. As I have persistently made clear, we want to ensure that the right to buy is available for long-standing tenants who have lived in—[Interruption.] The hon. Gentleman can intervene once I have answered his first question. I refer to those tenants who have lived in and paid rent on their homes for many years.

I have already made it clear in a previous debate that landlords can already consider the changing needs of tenants through a variety of methods, ranging from tenant surveys to direct engagement. They can already support tenants to downsize, to transfer or to mutually exchange their home if their circumstances change. The new clause would mandate, through primary legislation, a review of every secure tenancy once every five years. I simply put it to the hon. Gentleman—this picks up on the precise reason why the previous Conservative Government did not bring into force the provisions in their own 2016 Act—that that would entail huge administrative burdens for local authorities. We think, because we believe in the principle of secure tenancies in social housing—in terms of the benefits for tenants and for communities more widely—that we should not impose such a statutory review every five years. I am struggling to see how that is incompatible with trying to place the right-to-buy scheme on a fairer and more sustainable footing.

The Government are reviewing how effectively social housing providers are using their stock. That work is considering issues such as under-occupation, overcrowding and how landlords are supporting tenant movement. We will set out findings from that review and the next steps in due course. We think social landlords can, in some instances, make better and more effective use of their stock. That does not necessarily require, as a means to support them to do so, a statutory requirement to review every secure tenancy every five years.

Oral Answers to Questions

Patrick Spencer Excerpts

Monday 7th September 2026 Commons Chamber

[Florence Eshalomi]

I thank my hon. Friend for raising that important initiative in Harlow. Housing First is an important intervention, which evidence has shown can transform the lives of people with complex needs. We are funding Housing First and other forms of housing-led accommodation through our £2.7 billion homelessness, rough sleeping and domestic abuse grant for areas like Harlow. That includes, as I have mentioned, the £442 million for the rough sleeping programme.

[Patrick Spencer (Central Suffolk and North Ipswich) (Con)]

Campsea Ashe is a tiny village with 100 residents, no school, no high street and no major employer, but it has a train station and a planning application that would double the size of the village. If the Secretary of State will not reconsider this blanket policy, will she at least intervene on this specific application?

Oral Answers to Questions

Patrick Spencer Excerpts

Monday 20th January 2025 Commons Chamber

[Angela Rayner]

Yes.

[Patrick Spencer (Central Suffolk and North Ipswich) (Con)]

Suffolk has a huge flooding problem. Part of the problem has been driven by overdevelopment in low-lying rural areas. In her steps to reform the planning system—as well as building more houses, which I totally accept we need to do—can the Secretary of State promise to force councils and developers to properly account for flood risk, ensure that developers are held accountable to residents when developments are badly impacted by floods, and ensure that housing targets favour homes built in dense urban areas?

[Matthew Pennycook]

As I have made clear, we are prioritising development on previously developed brownfield land wherever possible, and we encourage local authorities to look to that option in the first instance. We have made changes to the NPPF to clarify flood risk and issues that relate to it. If the hon. Gentleman writes to me, I will be more than happy to look at the specifics in his area in more detail.

Non-Domestic Rating (Multipliers and Private Schools) Bill (First sitting)

Patrick Spencer Excerpts

Committee stage
Wednesday 11th December 2024 Public Bill Committees

[Vikki Slade]

Q Can I ask you about certainty? The Bill providers the power to introduce multipliers for a given year. With so many stores, you must plan a long time ahead. Do you think that, if we allow changes to be made so frequently, that will be a problem for you?

Paul Gerrard: Your underlying point that businesses like certainty is well made, because we do; we try to plan ahead. If I think back 18 months to the energy crisis, that was unforeseen and caused a real problem. You are absolutely right that certainty is important. Also, though, there is flexibility depending on the economic circumstances at the time—the pandemic allowed a different flexibility—so I think there is a balance there.

What is important is that, in deciding that, there is real transparency and openness. I spent 20 years in government, much of it in the Treasury and Her Majesty’s Revenue and Customs, as it was then. I would say of my time there that perhaps we were not always that open and transparent with business. The more openness there is, and the more that officials can advise Ministers based on what is happening in the business community, the better. I am relatively comfortable about the structure; I think it is the ways of working that are important.

[Patrick Spencer (Central Suffolk and North Ipswich) (Con)]

Q Thank you, Mr Gerrard, for coming to give evidence. I want to put on the record my support for the premise of supporting community shops and stores and providing somewhere for people to go to do their shopping, but you mentioned that the provisions in the Bill will make distribution more expensive. Should we not be more concerned that home delivery, which we know is very important to vulnerable customers, will be more expensive as a result of the Bill?

Paul Gerrard: I think I am right in saying that the Co-op has the biggest quick-commerce business in the country. People order through aggregators and their orders are delivered from our stores; that is something that we have within our business model. Clearly, there will be costs going on to some of the depots and distribution centres and, to keep this revenue neutral, that will bring extra costs. I think that is the price of revenue neutrality. In the round, the impact on small stores and local shops will outweigh the potential risk around home delivery. As I said, we have a home delivery business; I think our quick-commerce business is the biggest in the country for small, quick deliveries. You are right to flag the risk, but in balance we would say that it is a positive thing that we are supporting brick and mortar shops as much as we can.

[Mr Mark Sewards (Leeds South West and Morley) (Lab)]

Q Thank you, Mr Gerrard, for your answers so far; they have been really insightful. We have Co-op shops in my constituency; the Co-op in New Farnley is virtually the only shop in that community. It was an absolute lifeline throughout the pandemic, and it is still a lifeline today, given that there are not other shops. We have had some questions about consistency. Obviously, the aim of the Bill is to provide consistency for businesses—especially those in retail, hospitality and leisure—by providing lower multipliers. You have said how beneficial it will be for about 92% of your properties. Can you talk more broadly about the potential benefits for other retailers?

Paul Gerrard: Certainly. I will make a couple of points. The last time I looked, about 95% of retail was microbusinesses with fewer than 10 employees. From the data I have seen, 98% of retail stores have a rateable value below £500,000. So this helps 92% of the Co-op but, from what I have seen, it helps 98% of the broader retail sector.

In my experience and the Co-op’s experience, high streets and precincts are not made by one business, but you often get one business beginning to drive vibrancy in that place. If one business can make it work, you attract custom and those customers might want to buy other things, so you will get a ripple effect from that. I think this will help communities, because it will make it much more viable for those small stores—either independent traders, or small stores of national businesses like the Co-op—to be in communities. I think the ripple effect will be significant. As I said before, there is a commercial thing there, but, as you alluded to, there is a hugely important social and community perspective as well.

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[Vikki Slade]

Q Thank you very much for coming in to give evidence. On the timing, we know that retail, hospitality and leisure relief will reduce to 40% in April, but these measures will not come in until the April after that. Do you have any concerns about the impact on convenience stores during that year, before we know what will be happening the following year?

Edward Woodall: If you talk to convenience retailers now about business rates, what is in the front of their minds is the reduction in retail, hospitality and leisure relief, which has gone down from 75% to 40% from April next year. That is a big hit, among a cumulative burden of other measures that were announced in the Budget. That is concerning for them. They talk to us a lot about that, as part of the overall Budget package being challenging—and it was a big challenge, with £660 million costs for the sector.

That said, we knew that the retail, hospitality and leisure relief was introduced as a temporary measure during the covid pandemic, so we welcome the fact that it has not disappeared completely but has been tapered. We also welcome the principle that is set out in the Bill that we are giving a bit more permanency to support for retail, hospitality and leisure businesses on the high street in the future. There has been a cycle of changes in the policy over time, so hopefully this will give us a bit more of a stable footing to understand that. That does not just help us; it helps the other businesses from the retail industry that are thinking about investing in those locations too, but also those from hospitality and leisure.

[Patrick Spencer]

Q Thank you very much, Mr Woodall. I was struck by what you said about rural convenience stores and the importance of supporting them, and I could not agree with you more. I represent a rural constituency and in the next-door village there is a shop that has been there for years. I am terrified every year that it will go under, yet it is very resilient. Do you think this Bill should make provision for convenience stores that stand alone within rural areas and villages, where they are the only shop left that sells milk, eggs and newspapers? Do you think it is not just about small and microbusinesses, but those that are the only ones left? Do you think there should be a provision in the Bill for them?

Edward Woodall: I certainly think there should be provision of support for rural businesses, particularly those that are the last ones serving a community. They deliver essential services to those communities, and there is a cost to that community if they have to travel elsewhere. Whether it is possible to do that through the legislation is an interesting question. This was picked up in some of the previous evidence that you heard this morning, but there are measures within local authorities’ existing powers to issue discretionary relief to support those locations. That was previously called rural rate relief but it has been taken over by small business rate relief.

The challenge is whether local authorities have the funding to administer that relief. I think it is quite challenging to do that in the Bill, because you get into a space where you start adding more complexity by identifying regions or locations in national legislation. Actually, what we often see is that there are more differences within a region than there are between regions. I agree with the principle of what you are saying, but perhaps the existing powers of local authorities to do that are better, but they probably need support and trust from the Government to allow them to administer it well.

[Adam Thompson]

Q Thank you again for coming in this morning, Mr Woodall—we really appreciate your time. I am very pleased to hear your overall assessment that, for the convenience stores that you represent, the Bill will be positive and benefit the vast majority of them. On the savings made and the tangible effect of this Bill, what will they mean for a shopkeeper in my constituency of Erewash for security implementation, staffing and operations?

Edward Woodall: I tried to give some examples earlier of how businesses might invest. I suppose the first question is: where are the multipliers set? I would encourage the Government to use the flexibility to enable the best possible investment. As the example identified, if you have the multiplier set at a lower rate, the business is starting to save thousands of pounds. That is an opportunity for them to think, “Right, I can update the CCTV system. I might be able to add some new security measures in store.” The Bill can facilitate that investment. I should also say that, with the overall pressures on retailers at the moment, the cumulative burden is very big. They also might have to use that money just to keep operating and managing the costs that go up as well. This Bill can facilitate investment, but the Government have to think about the overall investment environment for retailers, not just through the rates bill by itself.

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[Jim McMahon]

Q Is part of the tension not that the question described a broken market, but that response describes a functioning market? Is the real issue that many institutional investors would sooner have an empty property with a notional rent attached to it, even if the rent is never achieved, than accept a tenant for a lower rent that would have an impact on their overall balance sheet? Is there not a tension there?

Stuart Adam: Yes, I think that is right. There is an interesting question as to why so many properties are left empty for so long, when it would seem to be in the landlord’s interest to have anyone in there paying them something, rather than no one in there paying them anything. There are certainly aspects in which the market does not function well, but on the whole it still looks to me like a market where, basically, prices are determined by supply and demand, and such evidence as we have seems to support that.

[Patrick Spencer]

Q On this remarkable relationship between taxes and rent, are you saying that there is a uniform relationship across geographies, locations and shop types? There is a big difference between Oxford Street and a town high street; are you saying that the behaviour of rents and taxes does not vary across those situations?

Stuart Adam: Broadly speaking, yes. The rule of thumb that, in the long run, rent will change with rates almost pound for pound will apply across different types of property and location. There is a difference where the tax on the premises is not fixed, for example where it depends on what the premises is used for: I do not think it is the case that reliefs for particular sectors get reflected pound for pound, because the use of the property may vary.

[Patrick Spencer]

Q Have you done any analysis of the variation of impact between renters and freehold owners of shops? On my high street, the shops that own the freehold are the ones that have been there for 15 years, so they have not weathered the same problems that other shops have. Surely at the margin there is an impact on shops that own the property.

Stuart Adam: There are a couple of slightly different things there. The first is that you may have a chain of ownership: possibly a very short-term sub-let, a let, a long-term leaseholder and then the ultimate freeholder. How far and how quickly it gets passed up that chain will partly depend on how long term the contracts are, how easy it is to renegotiate and so on.

The second thing, when talking about what happens as rents adjust, is that a minority of businesses, but a sizeable minority, own their own premises. In the long run, they may not be affected in their capacity as tenants, but they are still affected in their capacity as landlords to themselves, as it were. One way to think about it is that it is almost lump sum redistribution across owners of different properties. If you own the property and your business rates bill goes down—there is no rent. You can imagine charging rent to yourself, but the reality is that you just have a lower bill to pay.

That is a one-off gain in the sense that you could sell that property and get more for it in the same way, so you are just better off if your business rates bill has gone down. Someone else looking to buy it would face a lower business rates bill, but they would have to pay more to buy the property in the first place. So yes, businesses that own their own premises would benefit from a business rate cut—or lose from a business rate increase if we are talking about those above £500,000— in their capacity as owners, essentially, rather than their capacity as the business occupying and using the property.

[Ms Billington]

Q We have a 24% vacancy rate on Ramsgate High Street for many of the reasons that Jayne gave in relation to Cornwall. Do you think that the certainty that this legislation brings will have an impact on establishing long-term help for reviving the high street, particularly when it comes to rents and increasing occupancy? The long-term drivers that have been undermining the high streets are new shopping behaviours—not only post-pandemic behaviours but online shopping. If you do not think that this legislation will help, what will?

Stuart Adam: First of all, I do not want to say that it will do nothing to help. It will certainly do something in the short run, and I am also giving the quite extreme case—the very purest—in the long run. Even in the long run, it will not be quite as simple as I am painting it. There will be some help, but as I say, it is more second order than first order. I also agree, as I emphasised earlier, that the certainty will definitely help.

I also think that we can look at other parts of the business rate system. The treatment of empty properties—empty property relief—is one, which is much more important and more directly targeted at actually getting properties back into use. I know that the Government are concerned, as the discussion paper mentions, about exploitation of empty property relief by people cycling in and out artificially and things like that. I also think that a lot of the struggles of the high street are not caused by business rates. Things such as online competition make a huge difference, and are not driven by business rates.

Non-Domestic Rating (Multipliers and Private Schools) Bill (Second sitting)

Patrick Spencer Excerpts

Wednesday 11th December 2024 Public Bill Committees

[Patrick Spencer (Central Suffolk and North Ipswich) (Con)]

Q The premise of this policy change, as I understand it, is to rebalance fairness back towards local, community-based properties and businesses, which I am in favour of. But can you speak to the impact that the Bill will have on your institutional investors that invest in large warehouse space? What is the importance of that for the UK economy, in terms of supporting our distribution networks and the many businesses that provide goods to our doorstep? What impact will the change of policy have on those businesses?

Rachel Kelly: Our whole economy is interconnected. Those large logistics and distribution warehouses that you talk about will be servicing parts of our retail sector as well. I am sure there will be loads of impacts of this measure that are impossible to predict at this point, but ultimately, increasing the tax rate further makes investment in property harder, and it will make the occupation of property more expensive. Other than that, it is good that the whole economy is shouldering the burden of the higher tax rate, and we would not want that to be intensified further so that individual sectors are solely bearing that burden; I do not think that would be right or sustainable. Ultimately, the higher tax rate will make the tax system less competitive and the occupation of property more expensive.

[Deirdre Costigan]

Q You said at the outset, Rachel, that you wanted the tax system to be more responsive. Would you not agree that rebalancing the tax system in this way is being responsive to those empty shops on the high street, and to the feeling among small businesses and hospitality that it is the online distributors that are not playing on a level playing field and are getting away with being able to undercut them because the tax system currently does not work? The legislation will give us the responsiveness we need to level that up.

Rachel Kelly: Yes and no. Ultimately, if you take a step back, business rates are a tax on the occupation of property, and they are levied on the basis of the value of that property. If you occupy a more valuable property, you will pay more tax. The business rate system is working as the policy intended in that respect.

In terms of making it fairer, the best thing you can do is value property more frequently. Retail rents have been falling for the last 10 or 15 years. In the decade from 2010 to 2020, rents came down 30%, but business rates did not for that sector. Rents are negotiable—rents do respond—but it is business rates that do not. If valuations had kept up with rents, retail would have been paying much less, much earlier, and other sectors that had been growing would have been paying more much more quickly. To my mind, the best way to introduce fairness into the system is to value properties more frequently.

--- Later in debate ---

[Adam Thompson (Erewash) (Lab)]

Q Thank you, Professor Green, for joining us this afternoon. You have noted a couple of times already that your assessment is that the impact of this measure will probably be negligible. I was wondering how you might compare that with the cash-terms doubling of private school fees over the last 20 years, from the perspective of families.

Professor Green: Well, I think that is part of the indirect evidence of the fact that there will not be a great deal of impact, because, broadly speaking, the same proportion of the population is attending private schools as 10, 20 or 30 years ago, so it is one of those constants. That is slightly down, but, to be honest, it depends on the fortunes of the top echelons of our income and wealth spectrum—how much they can afford and choose to send their children to private schools. That is the nature of the market.

[Patrick Spencer]

Q Sorry, Professor Green, can we just go back? You said that you would expect 10,000 to 20,000 students to transition out of independent schools and into the state system—

Professor Green: Somewhere between 10,000 and 30,000, and that would be over a five-year period.

[Patrick Spencer]

Okay, so we will go midway, which, at 20,000, would be a 3.5% reduction in the total independent school population.

Professor Green: Yes, I think that is right.

[Patrick Spencer]

Is that as a consequence of everything that is going on in this context, or just the business rate changes? Do the parameters of that analysis include VAT?

Professor Green: That is the VAT estimate, so I am saying that, if that is the VAT estimate, the business rate relief change is one tenth of that.

[Patrick Spencer]

I just want to clarify that that analysis was based on the total changes that the sector is undergoing, not just specifically the context of the Bill.

Professor Green: Correct.

[The Chair]

Is that the end of all of our questions for this witness? Thank you, Professor Green.

Examination of Witness

Jim McMahon OBE MP gave evidence.

--- Later in debate ---

[Patrick Spencer]

Q Forgive me, Minister, but is this not a bit of a missed opportunity? The Committee has heard a lot of evidence today that, yes, the measures introduced in the Bill, specifically the ones around supporting local shops and our high streets, are probably very fair and reasonable, and that it is about time, but at the end of the day, business rates are not a progressive way to tax individuals and businesses. Taxing capital always allows for businesses that may seem asset-rich or that have asset liabilities to be taxed unfairly.

Why did the Government not go further in looking at alternatives, whether it be a sales tax or a land value tax? I am not a fan of land value taxes—they are another form of capital tax—but why did the Government not look at being more ambitious, instead of retaining a system that may be better in the future but still not ideal?

Jim McMahon: Which taxes are fair is always in the eye of the beholder. People have very different views about the fairness of different taxes in the system. In terms of property tax, I am here as the local tax Minister covering business rates and council tax. They are established taxes and they are understood. There are definitely views about whether they are up to date and fit for purpose, and whether they should be reformed, but however clunky the system is, very few people have an alternative that holds water, is fair, and produces the same level of income to support local public services.

There is always that balance to be struck. With business rates, you are getting a balance between the inherent value of a property, the rent that it can achieve, and the link to capital. We have heard that there are contradictions in some places where the economy is more suppressed, but it is not entirely intended to do that anyway; it is about reflecting the activity that takes place within a property as much as the bricks and mortar. On that basis, it is probably as good as you are going to get.

The question for the Government is how we build in a safety net for those uses that we want to maintain because they are positive for the local community and the economy, but that may be marginal commercially, which is exactly what the Bill is intended to do. But in a self-financing system, as the business rate system is, how do you then draw from other parts of the system in the fairest possible way? I think we have achieved that.

Why? Because a £500,000 rateable value is 1% of the business rate system, and it targets the warehouses and distribution centres for companies that are by and large doing well. Most retail, hospitality and leisure businesses on the high street, such as restaurants, fashion retailers and pubs, are saying, “We are only just keeping our head above water.” In a system that anybody would say is quite clunky, I think this Bill is as good as you will get for rebalancing it fairly, while being targeted enough to get the outcome that you want, which is thriving high streets and local communities who can begin to be proud of the places where they live because they are seeing activity, not windows boarded up and roller shutters pulled down.

[Jayne Kirkham]

Q This is just a point of clarification for me. It is probably really simple. On the larger rate, over £500,000, and the lower multiplier, one witness said that it could still apply to hospitality, retail and so on, so it could still be applied to big hotels and grassroots music venues even if they are over the level. Is that right?

Jim McMahon: At the moment, any property over £500,000 would be subject to the higher value. We are not looking at the moment at sectoral exemptions, but clearly we will take into account the evidence sessions and the discussions that will happen tomorrow. However, it would be fair to say that if you are a retailer with such a square footage that the value is over £500,000, you are likely to be a very big department store, a big out-of-town shed or a supermarket. The assumption in the system is that if you can afford to occupy and run a space of that size, there is room to pay additional business rates on that basis. In the end, it is about giving it to that ultimate use, which is the smaller retail, hospitality and leisure uses that are the backbone of many communities.

Non-Domestic Rating (Multipliers and Private Schools) Bill (Second sitting)

Patrick Spencer Excerpts

Committee stage
Wednesday 11th December 2024 Public Bill Committees

[Patrick Spencer (Central Suffolk and North Ipswich) (Con)]

Q The premise of this policy change, as I understand it, is to rebalance fairness back towards local, community-based properties and businesses, which I am in favour of. But can you speak to the impact that the Bill will have on your institutional investors that invest in large warehouse space? What is the importance of that for the UK economy, in terms of supporting our distribution networks and the many businesses that provide goods to our doorstep? What impact will the change of policy have on those businesses?

Rachel Kelly: Our whole economy is interconnected. Those large logistics and distribution warehouses that you talk about will be servicing parts of our retail sector as well. I am sure there will be loads of impacts of this measure that are impossible to predict at this point, but ultimately, increasing the tax rate further makes investment in property harder, and it will make the occupation of property more expensive. Other than that, it is good that the whole economy is shouldering the burden of the higher tax rate, and we would not want that to be intensified further so that individual sectors are solely bearing that burden; I do not think that would be right or sustainable. Ultimately, the higher tax rate will make the tax system less competitive and the occupation of property more expensive.

[Deirdre Costigan]

Q You said at the outset, Rachel, that you wanted the tax system to be more responsive. Would you not agree that rebalancing the tax system in this way is being responsive to those empty shops on the high street, and to the feeling among small businesses and hospitality that it is the online distributors that are not playing on a level playing field and are getting away with being able to undercut them because the tax system currently does not work? The legislation will give us the responsiveness we need to level that up.

Rachel Kelly: Yes and no. Ultimately, if you take a step back, business rates are a tax on the occupation of property, and they are levied on the basis of the value of that property. If you occupy a more valuable property, you will pay more tax. The business rate system is working as the policy intended in that respect.

In terms of making it fairer, the best thing you can do is value property more frequently. Retail rents have been falling for the last 10 or 15 years. In the decade from 2010 to 2020, rents came down 30%, but business rates did not for that sector. Rents are negotiable—rents do respond—but it is business rates that do not. If valuations had kept up with rents, retail would have been paying much less, much earlier, and other sectors that had been growing would have been paying more much more quickly. To my mind, the best way to introduce fairness into the system is to value properties more frequently.

--- Later in debate ---

[Adam Thompson (Erewash) (Lab)]

Q Thank you, Professor Green, for joining us this afternoon. You have noted a couple of times already that your assessment is that the impact of this measure will probably be negligible. I was wondering how you might compare that with the cash-terms doubling of private school fees over the last 20 years, from the perspective of families.

Professor Green: Well, I think that is part of the indirect evidence of the fact that there will not be a great deal of impact, because, broadly speaking, the same proportion of the population is attending private schools as 10, 20 or 30 years ago, so it is one of those constants. That is slightly down, but, to be honest, it depends on the fortunes of the top echelons of our income and wealth spectrum—how much they can afford and choose to send their children to private schools. That is the nature of the market.

[Patrick Spencer]

Q Sorry, Professor Green, can we just go back? You said that you would expect 10,000 to 20,000 students to transition out of independent schools and into the state system—

Professor Green: Somewhere between 10,000 and 30,000, and that would be over a five-year period.

[Patrick Spencer]

Okay, so we will go midway, which, at 20,000, would be a 3.5% reduction in the total independent school population.

Professor Green: Yes, I think that is right.

[Patrick Spencer]

Is that as a consequence of everything that is going on in this context, or just the business rate changes? Do the parameters of that analysis include VAT?

Professor Green: That is the VAT estimate, so I am saying that, if that is the VAT estimate, the business rate relief change is one tenth of that.

[Patrick Spencer]

I just want to clarify that that analysis was based on the total changes that the sector is undergoing, not just specifically the context of the Bill.

Professor Green: Correct.

[The Chair]

Is that the end of all of our questions for this witness? Thank you, Professor Green.

Examination of Witness

Jim McMahon OBE MP gave evidence.

--- Later in debate ---

[Patrick Spencer]

Q Forgive me, Minister, but is this not a bit of a missed opportunity? The Committee has heard a lot of evidence today that, yes, the measures introduced in the Bill, specifically the ones around supporting local shops and our high streets, are probably very fair and reasonable, and that it is about time, but at the end of the day, business rates are not a progressive way to tax individuals and businesses. Taxing capital always allows for businesses that may seem asset-rich or that have asset liabilities to be taxed unfairly.

Why did the Government not go further in looking at alternatives, whether it be a sales tax or a land value tax? I am not a fan of land value taxes—they are another form of capital tax—but why did the Government not look at being more ambitious, instead of retaining a system that may be better in the future but still not ideal?

Jim McMahon: Which taxes are fair is always in the eye of the beholder. People have very different views about the fairness of different taxes in the system. In terms of property tax, I am here as the local tax Minister covering business rates and council tax. They are established taxes and they are understood. There are definitely views about whether they are up to date and fit for purpose, and whether they should be reformed, but however clunky the system is, very few people have an alternative that holds water, is fair, and produces the same level of income to support local public services.

There is always that balance to be struck. With business rates, you are getting a balance between the inherent value of a property, the rent that it can achieve, and the link to capital. We have heard that there are contradictions in some places where the economy is more suppressed, but it is not entirely intended to do that anyway; it is about reflecting the activity that takes place within a property as much as the bricks and mortar. On that basis, it is probably as good as you are going to get.

The question for the Government is how we build in a safety net for those uses that we want to maintain because they are positive for the local community and the economy, but that may be marginal commercially, which is exactly what the Bill is intended to do. But in a self-financing system, as the business rate system is, how do you then draw from other parts of the system in the fairest possible way? I think we have achieved that.

Why? Because a £500,000 rateable value is 1% of the business rate system, and it targets the warehouses and distribution centres for companies that are by and large doing well. Most retail, hospitality and leisure businesses on the high street, such as restaurants, fashion retailers and pubs, are saying, “We are only just keeping our head above water.” In a system that anybody would say is quite clunky, I think this Bill is as good as you will get for rebalancing it fairly, while being targeted enough to get the outcome that you want, which is thriving high streets and local communities who can begin to be proud of the places where they live because they are seeing activity, not windows boarded up and roller shutters pulled down.

[Jayne Kirkham]

Q This is just a point of clarification for me. It is probably really simple. On the larger rate, over £500,000, and the lower multiplier, one witness said that it could still apply to hospitality, retail and so on, so it could still be applied to big hotels and grassroots music venues even if they are over the level. Is that right?

Jim McMahon: At the moment, any property over £500,000 would be subject to the higher value. We are not looking at the moment at sectoral exemptions, but clearly we will take into account the evidence sessions and the discussions that will happen tomorrow. However, it would be fair to say that if you are a retailer with such a square footage that the value is over £500,000, you are likely to be a very big department store, a big out-of-town shed or a supermarket. The assumption in the system is that if you can afford to occupy and run a space of that size, there is room to pay additional business rates on that basis. In the end, it is about giving it to that ultimate use, which is the smaller retail, hospitality and leisure uses that are the backbone of many communities.