Non-Domestic Rating (Multipliers and Private Schools) Bill

Richard Tice Excerpts

Report stage
Wednesday 15th January 2025 Commons Chamber

[Jim McMahon]

I can certainly give the certainty that we are providing in law for a permanent relief for retail, hospitality and leisure businesses, and we will fund that through a very targeted additional payment for properties of more than £500,000, which will primarily be the online retailers occupying big warehouses and distribution centres. It is a promise to shift from the online to the on-street, as I talked about.

Before we move on to vote on the amendment, I will make some progress. The House will know that tax policy and legislation are not subject to the same requirement for the impact assessments that accompany non-fiscal policy decisions. Nevertheless, the Treasury is committed to publishing an analysis of the effects of any multipliers at Budget 2025, which we hope will go some way to reassuring hon. Members that we will be considering the impacts of this policy carefully before the new rates are set.

The Government will continue to keep the policy and its effects under review as a matter of course, because we believe it is good practice to do that for all taxes. However, we want to make it clear to hon. Members that the Government have heard them, and we understand the importance of robustly understanding tax changes, which is something to which we have already committed. I hope this commitment to understanding the effects of the new tax rate when it is introduced will enable hon. Members not to press their proposed new clauses.

Amendment 9 would give local authorities discretion over whether the higher multipliers enabled by the Bill should be applied. The Bill would enable the Treasury, through regulations, to introduce permanently lower multipliers for qualifying retail, hospitality and leisure properties, and to fund this by introducing higher multipliers for properties with a rateable value of £500,000 or more. As we explained in Committee, we do not have any plans to narrow the scope of the higher multipliers as doing so would reduce the funding available for the very targeted support for lower multipliers for uses that everyone in the Chamber supports.

That does not mean that local authorities will be unable to apply local discretion to rate bills. As was set out in contributions, local authorities already have wide-ranging powers for discretionary rate relief as set out in section 47 of the Local Government Finance Act 1988 where the authority is satisfied that that would be reasonable, having regard to the interests of council tax payers. We assure the House that those discretionary powers are unaffected by the Bill and remain in place. Given that local authorities will be able to use those discretionary powers to provide relief, including for ratepayers subject to the higher multiplier, the amendment is not required. I hope that assures hon. Members.

I turn to amendments 1 to 6, which would widen the scope of the lower multipliers so that qualifying manufacturing properties would become eligible alongside retail, hospitality and leisure properties. In the Bill Committee, the hon. Member for Newton Abbot (Martin Wrigley) spoke of the vital importance of manufacturing to the British economy and of how providing them with a permanent cut to their business rates could help them to recover.

Let me reiterate the Government’s support for the manufacturing sector as a whole. It is said that Britain is a nation of shopkeepers, but it is also a nation of innovators, creators and entrepreneurs. Our manufacturing sector helps bring many of those ideas to life, and we understand its importance. But the Government must also support our high streets—the hoteliers, restaurateurs and publicans—and that is especially important with a property tax such as business rates as those sectors rely on good locations, which in the business rates system are often valuable locations. If they did not have that targeted support, they would feel the hit very strongly.

Through the Bill, we are delivering our manifesto pledge to protect valuable town centres and high streets by enabling the introduction of permanently lower taxes for qualifying retail, hospitality and leisure properties from 2026-27, ending the uncertainty of the annual retail, hospitality and leisure relief that has been rolled over year on year since the covid-19 pandemic. We have been clear throughout the process that this tax cut must be fully funded. Therefore, against the current fiscal backdrop, a widening of the scope of properties eligible for the lower multipliers might dilute the support that the Government were able to provide, or its impact might even require a higher tax rate for properties with values of more than £500,000 to fund such new multipliers. However, we respect hon. Members’ points of view and agree that our manufacturing sector should be recognised and supported.

Advanced manufacturing is one of the eight growth-driving sectors identified as part of the Government’s industrial strategy. At the autumn Budget, the Government announced £975 million for the aerospace sector over five years, over £2 billion for the automotive sector over the same period, and £520 million for the new life sciences innovative manufacturing fund. That is how the Government intend to support the innovators, creators and entrepreneurs mentioned earlier. Because we have this package in place to support manufacturing, we cannot accept the amendments, but I hope that I have been able to provide hon. Members with reassurance as to our commitment to support the sector, which I am sure the whole House recognises is vital.

I turn to amendments 7 and 8. While clause 5 will remove business rates charitable relief from private schools, the amendments would introduce new provisions or expand existing provisions in the Bill to ensure that certain private schools remain eligible for business rates charitable relief. Amendment 7 would result in a fee-paying school retaining its relief if it wholly or mainly catered for pupils with special educational needs as defined under section 20 of the Children and Families Act 2014, whether or not those pupils have an education, health and care plan. Amendment 8 would result in a private faith school or a private school with a special character maintaining its eligibility for charitable relief if there were no maintained or academy school of the same faith or special character within the statutory walking distance set out in the Education Act 1996. Although amendment 8 does not indicate what may constitute a special character, we understand from previous contributions in the House that that would include schools that follow a particular method of education. Amending the basis on which fee-paying schools are eligible to retain their charitable rates relief in the manner in which the amendment proposes would undermine the Government’s intention to remove tax breaks for private schools. As we have said, the removal of the tax break is necessary to fund school support for the over 90% of pupils who are educated in the state sector.

The Government have carefully considered their approach to minimising the impact on pupils with the most acute needs. The Bill provides that private schools that are charities and that wholly or mainly—by over 50%—provide education for pupils with an education, health and care plan will remain eligible for charitable relief. As hon. Members will be aware, most children with special educational needs, with or without an EHCP, have their needs met in mainstream state-funded schools. If an EHCP assessment concludes that a child can only be supported in a private school, the local authority directly funds that place.

Where an EHCP has not named a private school, the parents or carers of the child may choose to place that child in a private school, but that is a choice made by the parents and does not detract from the assessment that the pupil’s needs can be catered for in the mainstream state-funded sector. In instances where a child’s parents disagree with the local authority’s assessment that their needs can be met in the state sector, the EHCP system is the most appropriate channel to resolve such disagreements.

The Government are aware of the concerns raised by hon. Members and others that pupils with special educational needs in private schools may lose their charitable relief. The Government believe that most private special schools will not be affected at all by the Bill. In fact, we expect any private special schools losing eligibility for private relief to be the exception; according to our assessment, they could be in the single figures. It is important that we keep it in that context.

[Richard Tice (Boston and Skegness) (Reform)]

Will the Minister give way?

[Jim McMahon]

I do not have time for any more interventions.

Private schools that benefit from the existing rates exemption for properties that are wholly used for the training or welfare of disabled people will continue to do so. The majority of children in England with special educational needs, with or without an EHCP, have their needs met in the state sector already. The Government’s ambition is for all children and young people with special educational needs or a disability to receive the right support to succeed in their education as they move into adult life.

As Members know, all schools are required to follow the Equality Act 2010, which includes fostering and promoting an environment that encourages respect and tolerance of children and families of all faiths and of none. We have listened carefully to arguments relating to exempting faith schools from the Bill, and we have decided that a carve-out for faith schools or schools with other special characteristics cannot be justified. For those reasons, we are unable to accept amendment 8.

Finally, amendment 10 would delay the removal of charitable rates relief from private schools by one year to April 2026. To eliminate barriers to opportunity, we need to concentrate on the broader picture of the state sector, where most children are educated. Ending the tax breaks on VAT and business rates for private schools is a tough but, in the end, necessary decision that will secure additional funding to help deliver on the Government’s commitments to education and young people. Together, these policies are expected to raise over £1.8 billion a year by 2029-30—essential funding to improve the education of the vast majority of school-age children. Delaying their implementation would forgo about £140 million, which, frankly, cannot be justified.

The House has heard a good range of amendments to the Bill, and I hope that I have been able to address them all. Although we are not able to accept the amendments, I hope that the assurances that I have outlined are accepted and Members feel able to withdraw them. If not, the Government cannot support them.

Question put, That the clause be read a Second time.