Non-Domestic Rating (Multipliers and Private Schools) Bill

Polly Billington Excerpts

2nd reading
Monday 25th November 2024 Commons Chamber

[Ms Polly Billington (East Thanet) (Lab)]

At the general election, businesses in my community were crying out for change. They felt the need for stability and certainty after more than a decade of chaos and incompetence had hit them all hard. One of the things they welcomed was Labour’s pledge to reform business rates and ensure that the online giants, which suck so much out of our local economies, would pay their fair share. Small town high streets such as those in Margate, Broadstairs and Ramsgate desperately need the support that a change in business rates will give them. It is vital that we create a fairer business rates regime to support investment and protect our high streets.

More widely, I heard real anxiety on the doorstep about the need for more teachers in our schools and access to quality education, so often unavailable for the 94% of children who go to state schools. Reforming business rates for private schools, which serve only 6% of the population, makes sense; it is carefully costed and will make a difference to so many children in Thanet and across our country.

I hope, in particular, that this reform is a driver to increase access to the creative disciplines so that children can learn to expand, develop and harness their imaginations, appreciate the arts in all their forms, with good-quality creative education delivered by qualified teachers who love their subject. It should go without saying, but it does need to be said, that children raised with good-quality creative education have the potential to go on to contribute to our local economy through the creative industries, including by starting their own businesses.

Our business rates system has disincentivised investment and created huge burdens on our high streets. The Conservative party created a cliff edge for high street businesses across the country as temporary reliefs were due to end. Providing certainty through a 40% relief rate and the freezing of the small business tax multiplier is very welcome.

I welcome the Chancellor’s intention to permanently lower rates for retail, hospitality and leisure; this is crucial for constituencies such as East Thanet, where creative industries and tourism businesses are crying out for help. I have been working with the Ramsgate empty shop campaign to revive the town’s high street. Despite its wonderful heritage, thriving creative community and extraordinary environmental assets, Ramsgate’s local economy is far too seasonal, and that makes running a business all year round harder. That in turn has driven many businesses to the brink and left the high street echoing with the silence of empty shops. Spaces that should be seen as an opportunity for entrepreneurs have become a sign of desolation. That must change.

The importance of business rate changes is also highlighted in the other aspect of this Bill: the removal of private schools rates relief. Every parent wants the best for their children; that impulse is not exclusive to those who choose to send their children to private school. There is nothing wrong with ambition. If we are to enable all families to fulfil their ambitions, we must ensure that they all have access to the very best quality education. It is our duty as a society and a country to ensure that all those children’s talents, aptitudes and interests are nurtured.

Vast swathes of working-class children do not have access to the kind of education that would be genuinely transformative. For example, the last Government cut back radically the amount of arts education in state schools, locking working-class children out of the opportunities to find their talent, tap into their imagination, and learn how to play an instrument, express themselves through dance, wield a paint brush, work with clay or look deeply and critically at the world around them and respond to it. They pursued a curriculum that damaged the prospects of those children.

In contrast, private schools know that creative education is good for children’s wellbeing and academic outcomes. That is why they put so many resources into developing it. That is why they allocate the resources, build the assets and invest in the teaching staff to ensure that their children get that access to the creative arts that contribute to society in every dimension.

Unsurprisingly, 40% of those working in the film, TV and music industries were educated at private schools. Who knows the amount of untapped talent in the 94% of children in state schools that we have lost as a country because of the actions of the last Government. It is estimated that the creative sector in the UK is worth £125 billion and employs 2.3 million people. We are limiting ourselves as a country by not giving every child access to creative education. Imagine how much more we could be producing in economic prosperity as well as greater wellbeing if those children had the same access that the 6% have. So, yes, it is right to find that money from the private schools who serve the 6%. Yes, it is right that we find the money for more and better teachers in state schools with a love of the arts; with an enthusiasm for sharing their appreciation and skills; and with an aptitude for spotting talent, rewarding effort and encouraging creativity.

Those small businesses in my community also want to know that the children in our schools become young adults as fully rounded products of our education system, with their imagination, skills and discipline developed ready for the kind of work in the creative industries that drives our economy locally, nationally and globally. If for nothing else, I urge the House to vote for these changes for our children, our small businesses and our economy.

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

Polly Billington Excerpts

Committee stage
Wednesday 11th December 2024 Public Bill Committees

[Adam Thompson (Erewash) (Lab)]

Q Thank you for joining us this morning, Mr Watson. I represent two towns in the east midlands, Ilkeston and Long Eaton. Both the high streets in our towns have suffered for a long time. We have a large number of small retailers and many have closed over a long period. A lot of work has been done locally, in particular by one member of the community, on regeneration of one of the towns especially—basically, clubbing together a lot of small independent retailers who have worked together to bring the community back up. How will the Bill tangibly affect the community and those small retailers?

Gary Watson: We have the Bill, but all the time we have the small business rate relief, which sits there. Obviously, the issue with that is that it is again limited on rateable values. In one part of the country, rateable values will be higher or lower than for the same type of property in another part. The area that might want to be looked at when the next revaluation takes place is to look at the ceilings on those rateable values. At the moment, for the small business rate multiplier, we go up to £51,000. There is that small business multiplier, so if you are trying to target, once we know what the outcome of the rateable values will be at the next reval, it may well be that the support that you could give would be through uplifting the values, as I said.

On the Bill itself, we have the flexibility of the two lower multipliers. To go back to an earlier question, I think it is right to have that flexibility, so that we can vary it depending on the circumstances. It does give flexibility, but we also need to think about the small business rate relief, and that is there anyway. That might be something to look at, in terms of targeting, when it comes to the next reval. I think that would need more secondary legislation, rather than primary legislation.

[Ms Polly Billington (East Thanet) (Lab)]

Q Thank you for your evidence. It has been very interesting. My constituency is made up of three towns, Ramsgate, Broadstairs and Margate, all seaside towns and very dependent on all the sectors we have been talking about—tourism, hospitality, leisure and so forth. You have been talking about the centrally decided approach when it comes to those sectors. What value might there be in an approach that recognises the geographical challenges of particular areas, so that we do not just have a complete free-for-all with local government picking and choosing how to do it? We could say instead, “Yes, we need to have a particular approach when it comes to the geographical challenges of some commercial centres and the high streets.”

Gary Watson: Yes, I think you could look at the Bill giving a framework. At the moment, you have the standard rate and the small business multiplier, and the flexibility with the two lower ones—one or more, depending on how you want to move those forward. From a local authority point of view, there is that national situation, but you then have to look at each of the individual areas, and no one area is the same as another, as I said. They will not always be the same—things will change—and that is where the local authority comes into play, and where you need to have the relief systems in place.

The one thing you have in the legislation anyway—I am sorry to bore you with legislation—is section 47, which allows the local authority to give relief to any ratepayer that it wants to. The only thing it has to take into account is giving due regard to its taxpayers’ interest—and obviously it is, because the taxpayers are benefiting from having a thriving high street. In a way, that relief system is already there, so I think creating the framework is fine. As I said, yes, there is that concern about the complexities of the whole system itself, but you are trying to direct it to make it more agile—as that term has been used.

There is no reason why the framework can be put together through the Bill, but the relief system cannot then be used, say, in the three towns that you referred to—I am a little familiar with those three towns, because one of my council members is from Thanet, so I know it quite well. As I say, I think the relief system is there. The issue you will have then is whether, when it comes to funding those reliefs, local authorities will have all the funding. That is where I always say that you cannot look at the property tax and local government financing separately. When you talk of reforming council tax or business rate, you also have to consider local government finance—the two always have to be considered together.

[The Chair]

That brings us to the end of the time allotted for the Committee to ask questions. I thank our witness on behalf of the Committee for giving evidence.

Examination of Witness

Paul Gerrard gave evidence.

--- Later in debate ---

[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.

[Ms Billington]

Q Sorry to interrupt, but online competition is genuinely a problem with business rates. Having previously been a councillor in Hackney, I know that we got more business rates from Amazon having its headquarters there than the Treasury did from Amazon’s existence in the first place. So there is a difference.

Stuart Adam: What I am saying is that there is a big difference in business rates, but if the business rates are not changing the overall cost of the premises—rent plus business rates—they are not making much difference to the competition. The fact that people can easily shop online is fundamentally what is driving it, rather than business rates. The fact that high street retailers have to pay rent and rates in a way online retailers do not, at least not to anything like the same extent, is absolutely a driver of the difference, but I am just saying that the business rate component of the cost of the premises does not have that much impact on the overall cost of premises, because of the adjustment to rents.

There is a broader question as to what can and should be done to protect the high street. That is largely outside my area of expertise, but I know other reviews and studies have been done on that. I am largely going to duck it because it is outside my expertise, but there are things that can be done outside tax.

[Adam Thompson]

Q Thank you for coming in, Mr Adam. The argument that you have put forward is predicated on the link that you have established between business rates and rent. A quick Google Scholar search implies that a lot of papers out there suggest that that link is broken somewhat by sluggishness in the rental market. Does that not undermine your argument?

Stuart Adam: I would be interested to see which papers on Google Scholar you have seen—