Non-Domestic Rating (Nursery Grounds) Bill

Rebecca Pow Excerpts

2nd reading: House of Commons
Tuesday 5th June 2018 Commons Chamber

[Rishi Sunak]

My right hon. Friend is right. My understanding is that other legislation has outlined the difference between the two, and I will come on to the Court decision that distinguished the treatment of the two.

It might be helpful, for Members who are not aware, if I explain the distinction. A nursery ground is where small plants or trees are propagated or sown with a view to their being sold on to someone else for growing on to their mature state, for sale to or use by the end consumer, whereas a market garden is where fruit, vegetables, flowers or plants are produced to be sold directly or indirectly to members of the public for consumption.

[Rebecca Pow (Taunton Deane) (Con)]

I have been much involved with the horticultural industry, so I am quite aware of the nursery industry, but I believe that many people are not aware of how significant it is for growing produce for our home market. We could grow it even more after Brexit—indeed, we need to—and the Bill will help a great deal by making these businesses more viable.

[Rishi Sunak]

My hon. Friend is, as ever, an incredible champion for agriculture and the rural community. She is right to highlight not only the current contribution of the fantastic horticultural sector to the UK economy in providing such fantastic food and drink for us to enjoy but the opportunities that will come after Brexit, as we make good on the promise of a global Britain where our food and drink exporters can look out to the world around, where demand is growing exponentially, and take advantage of all those opportunities. Consumers around the world will have the opportunity to benefit from high-quality produce developed in this country and always to high welfare standards, of which I know she is also a champion.

It is worth noting that the exemption from business rates for agricultural land has been in place since 1929. Before that, in the early part of the 20th century and before, agriculture benefited from a partial exemption from rates. For almost 100 years, the Government and Parliament have considered that agriculture should not pay rates. This Government and I trust that this Parliament has no intention for any change of direction in this matter.

It has been assumed until now that all plant nurseries where plants or trees are grown in the initial stages of their life, as I outlined, benefited from that exemption. That had always been the understanding of both rating valuers and practitioners, but in 2015, a Court of Appeal decision showed that the exemption did not apply to plant nurseries in buildings where the buildings were not used in connection directly with agricultural land. That does not reflect Government policy, and neither does it reflect our commitment to supporting sustainable growth in the rural economy.

This legislation will ensure that plant nurseries in buildings will once again benefit from the exemption from business rates for agricultural land and buildings. It will restore fairness for hard-working businesses hit by an unexpected tax burden, and it will enable the Valuation Office Agency to return to its former practice of exempting plant nurseries in buildings and removing plant nurseries that have been assessed from the business rates list. Plant nurseries paying business rates since 2015 will be eligible to apply for a backdated refund of their business rates, which will ensure that these businesses do not continue to suffer as a result of a property tax with an impact on the cost of farming and produce.

--- Later in debate ---

[Rishi Sunak]

My right hon. Friend is absolutely right: that is what the Bill seeks to do. It is a limited, targeted Bill that restores the practice previously widely accepted and understood by all participants in the rating system and ensures we will return to the state that existed before the Court of Appeal decision.

While I am responding to my right hon. Friend, let me clarify my earlier point. He asked where exactly the definition of nursery grounds can be found. I am reminded that it is precisely defined in case law, rather than in statute. That is where the definitions used over the years have been developed.

To turn to the business rates system in general, the Government are very clearly using the business rates system to create opportunities and to drive growth across the country. The Government have introduced a range of business rates reforms—worth over £10 billion by 2023—that will benefit the wider economy, including many businesses in rural areas. In April 2017, we permanently doubled small business rate relief to 100%, and raised the threshold from £6,000 to £12,000. As a result of these measures, over 600,000 small businesses—occupiers of a third of all properties—now pay no business rates at all. This demonstrates the Government’s clear commitment to supporting small businesses. We understand the impact of business rates in the rural economy in particular, so at the same time the Government also doubled rural rate relief from 50% to 100% for eligible businesses.

[Rebecca Pow]

I have an urban area in Taunton Deane, but I speak as someone whose constituency is particularly rural. There is a view that there is an increasing divide between urban and rural, particularly in the south-west, where we are largely rural. These business rates exemptions are absolutely crucial. Does the Minister agree that this Government are very much indicating that they understand their importance?

[Rishi Sunak]

My hon. Friend is absolutely right. She will know that I also represent a deeply rural constituency. I have seen at first hand the incredible difference that the business rates exemptions make to small rural enterprises, whether they are small business rate relief, rural rate relief or, indeed, some of the measures to support pubs that the Chancellor has announced in the last Budget or two. All of these measures add up to tangible savings for thriving enterprises, which are indeed the lifeblood of rural areas.

My hon. Friend will know, as I do, that rural areas typically do not benefit from large multinational employers. The backbone of rural economies are small and medium-sized enterprises, for which business rates are often a significant cost to bear. Any relief that the Government can give is always warmly welcomed, and it makes an enormous difference to their profitability and future success.

I am pleased to tell my hon. Friend that the Government continue to listen to business. At the spring Budget last year, the Chancellor announced a £435 million package to support rate payers facing the steepest rises in bills following the revaluation. Further answering calls from businesses, the Government brought forward to April this year the switch in the annual indexation of business rates from the retail prices index to the consumer prices index. That represents a cut in business rates every year. Although bringing forward that measure two years earlier than previously planned might sound technical, it is worth £2.3 billion over the next five years.

Furthermore, at last year’s autumn Budget the Chancellor also announced an increase in the frequency of property revaluations from every five years to every three years following the next revaluation. That will ensure that bills more accurately reflect properties’ current rental value and relative changes in rents. The 2018 spring statement announced that the next revaluation would be brought forward to 2021 from 2022, so that businesses can benefit from the change as soon as possible. After that, three-year revaluations will take effect in 2024.

To deliver on that commitment, the Government have already introduced secondary legislation to set the valuation date for the next revaluation on 1 April 2019, allowing the Valuation Office Agency to start preparing for a 2021 revaluation. The Government will introduce primary legislation to change the date of the next revaluation to 2021 in due course. The British Retail Consortium recognised that that was a positive move to improve the fairness of the system, and I look forward to meeting its representatives shortly.

In spite of all that, the Government are not resting on our laurels. We are also reviewing the wider taxation of the digital economy, and the Chancellor has been clear that we need to look more broadly at the overall taxation of the digital economy. The Government are working internationally to ensure that corporate tax rules deliver fairer results for certain digital businesses. We will use the output of those discussions to help inform consideration of the wider business tax system, to ensure that all businesses make a fair contribution to the public finances and that business rates continue to support the stability of local government funding.

--- Later in debate ---

[Matt Warman]

My constituency also contains a village called Old Leake, which is in the same ward as Wrangle. “Wrangle and Old Leake” surely has some comic potential as well. I agree with my right hon. Friend that businesses that have paid out—I should say that I do not believe that Fountain is in that position—should be entitled to the refund that the Minister suggested, and the Government should consider establishing such a fund if compensation is due.

Having been exempted from rates since 1929, the businesses to which I have referred were faced with a number of factors that they had previously never even had to consider incorporating in their business models. I understand that glasshouses, which are obviously of huge concern to a constituency such as mine, have been exempted since the 1990s. An issue on which businesses throughout this section of the economy have been entirely predicated was upended by the courts almost overnight.

I agree with the hon. Member for Oldham West and Royton (Jim McMahon) that the Government deserve some credit for seeking to clarify what might have been an important issue had the system been allowed to persist. There was real concern—not just among businesses in my constituency—when it became obvious that the Valuation Office Agency was going down this path. I began by saying that the issue was about brassicas and flooding, but in fact it is about the jobs that would have been at stake. If the Government had not intervened to clarify the position, people would undoubtedly would have found themselves out of work.

I pay tribute to my hon. Friend the Member for Nuneaton (Mr Jones), who at the relevant time had ministerial responsibility for these matters. Having visited those at R. Fountain & Son and reassured them that I was confident that such an extreme situation could only be the result of a mistake rather than Government policy, I had the extraordinary and delightful experience of mentioning that to my hon. Friend in a Lobby—he may not even remember it—and being told that the Government were already looking into the matter. It was a pleasure to be able to go back to businesses in my constituency and say that the Government would not be daft enough to increase their business rates so suddenly and massively.

To be honest, however, it was an even greater pleasure to go back to the drainage board. While I obviously care greatly about businesses throughout my constituency, the work of drainage boards in Lincolnshire is particularly and enormously valuable. They do huge service to the broader economy, and provide a great deal of reassurance through their work with the Environment Agency across the broader flooding landscape. Given that, according to the Association of British Insurers, my constituency is at greater risk of flooding than any other, I am particularly alive to that.

As I have said, my constituency is largely agricultural, and we are grateful for the business rates retention pilot. The Department is obviously aware of what must be done to ensure that business rates retention works for the areas to which it is applied, and that we do not end up losing out overall and accidentally giving more money back to the Treasury. I know that it does not intend that to happen in any circumstances.

I hope that Members will bear in mind that the Bill represents a useful endeavour to fix a problem that would have had a real impact not only on the local economy and jobs in my constituency, but on the availability of cabbages throughout the country, about which I know the House cares deeply. I also hope that, while accepting my praise for his swift action, the Minister will bear in mind that it highlights what business rates retention may well look like as we proceed with what I consider to be a worthwhile and popular policy.

[Rebecca Pow]

Does my hon. Friend agree that it is heartening that although people often think that we in Parliament are powerless and are not listened to, when my hon. Friend went to the Minister about his cabbages, the Minister listened and we have done something that will help? That is a positive message. It might be a small thing to many people, but this is a positive message that, with cross-party work, we can make something happen.

[Matt Warman]

I agree with my hon. Friend, and this shows the power of my hon. Friend the Member for Nuneaton, and now the power of the two current Front Benchers. I agree with the Opposition spokesman that it is of course a good thing to work cross party on such an issue, which relates to not an intentional decision taken by the Government, but a decision by the courts that risked upending a long-standing principle.

I pay tribute to the work of my hon. Friend the Member for Nuneaton and those who have continued his work. I hope that the one wrinkle in the potential of the excellent notion of business rate retention will be considered in the context of these sorts of decisions. Such decisions could of course come up again, because people do go to courts, and courts do produce judgments that perhaps surprise all of us. In this case, the decision certainly surprised my drainage board and farmers such as Fountains. I praise the Government and hope we can get on with this as soon as possible.

[Rebecca Pow (Taunton Deane) (Con)]

I am delighted to follow my hon. Friend the Member for Boston and Skegness (Matt Warman), and I want to add my comments on what is a very precise Bill. Although it relates to plants, it is not in any way flowery; it is a tight, neat little Bill that very much that does what it says on the tin—or, we might say, on the plant pot.

The Bill exempts from non-domestic rates buildings that are, or form part of, a nursery ground. That is highly significant for our highly professional and essential horticultural industry, which does not often get as much attention as it deserves. The horticultural industry supplies many fantastic plants for the whole nation, and as the Minister mentioned—I am glad he referred to this—there is scope for the industry to increase.

[Julian Knight (Solihull) (Con)]

I pay tribute to my hon. Friend for her knowledge in this area; in fact, I think she was a TV star in the horticultural sphere for a short time. Is it not true that the changes in the Bill will make it much easier for plant nurseries to grow and be productive?

[Rebecca Pow]

Yes, and I thank my hon. Friend for his intervention. One of the programmes my name was attached to was called “Loads More Muck and Magic.” It was a Channel 4 series and it was all about growing plants organically, which is terribly trendy now, so it was a bit ahead of its time—it was all ponytails and carpets then, though. It was filmed not far from my hon. Friend’s constituency at the Ryton organic gardens at Ryton-on-Dunsmore, which is still a terrific centre for organic gardening. The organisation there was called the Henry Doubleday Research Association, and it did a lot of great work on how to grow plants and what we should all do as growers at home.

My hon. Friend makes the good point that this Bill looks very much at the beginning of the plant chain when people take seeds and grow them—that exciting germination and propagation process that grows up plants, which can then be handed through the chain. I will go into that in more detail shortly, but it is an area that people forget about, even though it is such a valuable part of this important industry.

Although this is a great industry and it is highly valued, it is quite difficult to put an exact value on the horticultural trade. For example, estimates show that the whole gardening industry—that category is very wide, and would include garden tourism and events such as the Chelsea and Hampton Court flower shows—is worth approximately £16 billion to the economy and employs 300,000 people.

Normally, however, the best measure of an industry’s contribution to the economy is gross value added. I am not an economist—I am sure that most of my colleagues are much more knowledgeable about this than I am, particularly the Minister, who I know is very good with his figures—but I believe that GVA measures the value of an industry’s goods or services to the economy, excluding any goods or services used in production. However, that breakdown of statistics is not carried out for the horticultural industry. If it were, we would have a much better figure to show just how important the industry is. Should the Minister ever move to the Treasury—he may well do, given his mathematical brain—he might like to look into that GVA anomaly. That would be incredibly helpful to the nation as a whole, particularly in the light of Brexit. It is hard to grow an industry and attract the investment that it needs if we do not have the exact figures relating to that industry. You might think that I am digressing, Mr Deputy Speaker, but I think this is an important point.

[Julian Knight]

I do not think that my hon. Friend is digressing at all. In fact, she has made a germane point in mentioning the 300,000 people who work in the industry. Does she agree that if we can get people to plant more and get them really interested in horticulture in ways such as this, we could get a great deal closer to self-sufficiency, not only in food but in plants?

[Rebecca Pow]

My hon. Friend is a man after my own heart. I do not know whether you are a gardener, Mr Deputy Speaker, but I am—

[Mr Deputy Speaker (Sir Lindsay Hoyle)]

A reluctant gardener.

[Rebecca Pow]

A reluctant gardener? That’s okay. You can garden from your chair, or in a window box, but you can get your fingers into the soil. My hon. Friend the Member for Solihull (Julian Knight) is absolutely right to say that we could increase our home growing, but we could also increase the health and wellbeing that people get from being engaged in the soil and growing things. Horticulture is such an exciting area to be in, and it is also very good for mental health. My hon. Friend makes an excellent point.

The industry itself believes that if we had the statistics that I was talking about, it would be possible to grow the industry by £18 billion. I am pleased to say that the ornamental horticultural roundtable group, in which I have been much involved, has commissioned Oxford Economics—at the vast expense of £50,000—to look into the value and economics of the ornamental horticultural sector. That is just one section of the horticultural industry, but it is pertinent to what we are talking about today. I urge all my colleagues to join the all-party parliamentary group on gardening and horticulture if they are not already members of it, because we have interesting trips to places such as Chelsea and glean a lot of excellent information. The group is also looking into the issue of growing the horticultural industry in the context of Brexit.

The ornamental plant industry supplies our landscaping industry and our popular gardening sector with wonderful bedding plants and perennials, and it is thought that that sector was worth £1.4 billion in 2017, which represents an increase of 4.8% compared with 2016. So the sector is on the up, and it could increase more. It could be a much more viable industry with this essential business rates exemption, and the more we can grow the industry, the more it will benefit the economy, particularly in the south-west.

[Mr Marcus Jones (Nuneaton) (Con)]

It has been great to hear about the all-party parliamentary group—perhaps I should dig out the details. Coming back to the exemption that the Bill is likely to provide, my hon. Friend has talked at some length about the fact that the industry is now able to grow. Is it not also the case, however, that the tax that was imposed by the Court of Appeal could well have had a significantly detrimental effect on many growers, particularly the smaller businesses that would have been most affected?

--- Later in debate ---

[Mr Deputy Speaker (Sir Lindsay Hoyle)]

Order. I could put the hon. Gentleman on to the speaking list if he would like. I will put him on it with pleasure, but we must have short interventions.

[Rebecca Pow]

I thank my hon. Friend and apologise to you on his behalf, Mr Deputy Speaker. However, he made a useful intervention, because I am going to come on to that point. That issue was causing concern among many businesses, because it would have cost some of them hundreds of thousands of pounds, and some smaller businesses could have been wiped out, so this is a serious point.

[Sir Greg Knight]

First, does my hon. Friend share my disgust that not one Liberal Democrat MP is in the Chamber to discuss an important matter affecting rural communities? Secondly, although retrospection in law is generally to be frowned upon, does she agree that it is most welcome in this case because we are righting a perceived wrong?

[Rebecca Pow]

We began this debate on a cross-party basis, and I am loth to say anything more controversial, but he makes an exceedingly good point about the Liberal Democrats. They were large in the south-west, but we wiped them out—as one does with a weed wiper, to use another horticultural term. The south-west is a rural region, and gardening and horticulture are important parts of our economy. One would have thought that the Liberal Democrats might have realised that and turned up, but yet again it is the Conservative party that speaks up for the rural community, and I am proud to be part of that community. [Interruption.] The hon. Member for Stroud (Dr Drew) is also here, of course.

The south-west has a good climate for horticulture, as does Chichester, and horticulture and gardening are important in Taunton Deane. We have some wonderful open gardens and visitor attractions, such as at Hestercombe and Cothay, hundreds of private gardens, and many allotment holders, many of whom have plants that started their lives in the nurseries that we are talking about today. I had a marvellous Sunday planting out my fuchsias, geraniums and alyssums into my tubs and containers, and they would have started life at one of those nurseries. I had a lovely time, and the weather was beautiful.

To get back to the Bill, which is going to come to fruition today—to use another horticultural term—nursery grounds were exempt from non-domestic rates from 1928 until recently, when the Court decision that we have heard about found exemptions to be an incorrect application of the law. As I said, that change caused a huge amount of worry in the nursery industry, where margins are tight. The Horticultural Trades Association reported that the change would be detrimental to the industry, inevitably driving up costs if nurseries had to pay business rates that they had not been paying previously, and that those costs would be passed on to the consumer. As Conservatives, that is not something that we are in favour of.

[Several hon. Members rose—]

[Mr Deputy Speaker (Sir Lindsay Hoyle)]

Order. I do not mind if you want to pad out the debate, but I am bothered by the fact that we have another Back-Bench speaker to come and I still have to bring in the Front-Bench speakers, so I do not know whether you still want to give way.

[Rebecca Pow]

Thank you, Mr Deputy Speaker. If it will be short, I shall take an intervention from my hon. Friend the Member for Chichester (Gillian Keegan), who has not yet intervened.

[Gillian Keegan]

My hon. Friend was talking about the prosperity of our economy. Does she agree that the growers and the farming industry of the future are important to that prosperity? There are many technological changes coming along in germination, for example, and our growers and farmers do not want to be sat there thinking about rates on particular buildings or polytunnels. The Bill is important to allow flexibility and ensure sustainability so that we have a thriving food economy.

[Rebecca Pow]

That is a good point. Industries such as horticulture are not quick—it takes time to grow plants and for them to go through the cycles, so it is important that businesses have the security and confidence that this Bill will put back into their lives. I am grateful for that.

The HTA has reported that some members are facing bills to the tune of hundreds of thousands of pounds, which we do not want. I am pleased the Bill clarifies the situation and is aligned with the previous practice of exemptions. I am particularly pleased to hear that the funds will be backdated, as the Minister clearly said.

I thank the Minister, because many colleagues on both sides of the House have been to see him, and he has listened. That is what people want from the Government, and we are making the change. This is the right way to go. The turnaround supports the Government’s commitment to a vision of a productive, competitive and sustainable UK agricultural sector, of which horticulture and the plant nursery sector are an important part.

Plant nurseries are under the microscope in the Bill, and they are important to our landscaping industry and to our towns that have been landscaped. Taunton has just received garden town status and will be seeing more landscaping. We want more trees and, as the MP, I have laid claim to that and have said that we must have more trees in our urban environment. Local authorities are not necessarily keen on having more trees, because they claim trees have a high maintenance cost, but we will change their mind.

Plant nurseries are hard-working businesses with soil under their fingernails. They grow plants from seed to germination to propagation, and many nurseries then sell them on to the next stage for businesses to grow them before they ultimately get into the market. That is what the Bill is about—plant nurseries are important stepping stones.

Nurseries will become increasingly important, because we need to increase our home-grown production, if nothing else, to prevent the threat of pests and plant diseases coming in from abroad. There is a terrible disease called xylella that is wiping out olive trees and many other herbaceous and woody commercial plants in Europe. We do not want that in the UK. If we grow more plants at home, and if we help our businesses with business rates exemptions such as this, we can expand and grow our own industry. That is essential, because there is a great line of diseases waiting to march in here on imported plants. We have a very good biosecurity system, but there is always a danger of disease. The more we can help our businesses to grow with Bills such as this, the fewer diseases we will have in this country.

The Bill will help an industry with very tight margins. It is a crucial step, and I know the Minister is taking it all to heart because he is committed to enabling the viability of the agricultural industry, rather than saddling it with a property tax. The Bill is about supporting the economy, and it is vital for the south-west, where horticulture is so important. Horticulture needs to grow, and I hope the Bill and the plant nurseries it supports will blossom.

[Bob Blackman]

rose—