Non-Domestic Rating (Lists) Bill

Rishi Sunak Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons & Ways and Means resolution: House of Commons
Monday 17th June 2019 Commons Chamber

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

I beg to move, That the Bill be now read a Second time.

This Bill makes a major improvement to the rating system that delivers on Government commitments and addresses ratepayers’ concerns. It will ensure that business rates bills will be updated at more frequent revaluations to reflect changes to the rental property market. In doing so, it will ensure that business rates become more responsive to economic changes.

Business representatives such as the CBI, the British Property Federation and the British Chambers of Commerce have all asked for more frequent revaluations. They were promised that by the Chancellor at autumn Budget 2017 and again at the 2018 spring statement. This Bill delivers on those promises.

Business rates bills are based on the rateable value of the property, which, broadly speaking, represents its annual rental value. The rateable value is therefore the tax base for business rates and it is assessed by the Valuation Office Agency, independently of Ministers.

Since the current system of business rates was introduced in 1990, the Government have had regular revaluations of rateable values, to ensure that they remain up to date. These revaluations ensure that the amount paid in business rates—money used to fund important local services—is distributed fairly among all ratepayers, having regard to their rental value.

Regular revaluations are an important part of maintaining fairness in the system, but the Government must strike a balance between the uncertainty created by regular revaluations—because it is inevitable that rate bills will change at that time—and the stability of businesses being able to plan for the future.

[Mr Clive Betts (Sheffield South East) (Lab)]

The Minister just made an important point about the fact that revaluations are there to ensure fairness in the system. On that basis, does not council tax completely fail the test? If the Minister really wanted to go down in history, would it not be more appropriate to have a non-domestic rating and council tax valuation Bill?

[Rishi Sunak]

I am not sure I would like to go down in history as the man who revalued people’s homes to tax them more. The Chair of the Select Committee on Housing, Communities and Local Government makes a fair point, but the difference is that the statutory basis for business rates requires that the overall revenue raised remains neutral in real terms, taking account of appeals and increases, so it is necessary to ensure that that happens in practice. As a result of doing that every five years since 1990, the Government have enacted a revaluation.

Following the 2010 revaluation, and in the face of the economic downturn, the planned 2015 revaluation was postponed to 2017. That reflected the need at that difficult time to give businesses more certainty. Quite rightly, however, it also led to renewed interest in business as to how often we should in the future revalue for business rates.

[Bob Blackman (Harrow East) (Con)]

I will not be as mischievous as the Chairman of the Select Committee, but there is an issue that needs to be dealt with. Various Treasury and Ministry of Housing, Communities and Local Government reforms have resulted in many reliefs and opportunities for people to run small businesses without having to pay any business rates at all. Is it not time for a fundamental review of business taxation, to make it fair and reasonable and to ensure that those people who operate online also pay their fair share of business taxation, rather than relying on those businesses that happen to be in situ?

[Rishi Sunak]

I feel like I am being pincered by the illustrious senior members of the Select Committee. Of course, the issue of business rates vexes many people, but my hon. Friend is right to point out that, because of the various reliefs enacted by this Government, it is the case that fully one third of all businesses pay no business rates at all, and that is to be welcomed.

Notwithstanding the fact that I would be straying far from my brief and treading on the Chancellor’s toes if I addressed the broader structure of business rates taxation, it is worth saying that when the Treasury last looked at the issue a few years ago, there was no consensus among the business community about what might replace it. On digital taxes in general, although it is not quite the same, the digital services tax mooted by the Chancellor goes in part towards addressing the issue raised by my hon. Friend.

To return to the Bill, the response of businesses to the consultations and engagements was very clear: they thought that the revaluation cycle should be shortened, and the most popular option emerged as three years. Therefore, this Bill makes three changes to the rating system in England.

First, the Bill will bring forward the date from which the next revaluation takes effect, from 1 April 2022 to 1 April 2021. Secondly, the Bill will ensure that, thereafter, revaluations will take effect every three years, so the next revaluation after that will be in 2024, and so on. Thirdly, the Bill will change the last date by which draft rateable values must be published in the lead-up to the revaluation, from the preceding 30 September to 31 December. That period, during which new rateable values are published before the list comes into force, is known as the draft rating list.

Business rates is a devolved policy area, but the Bill also applies in part to Wales. As in England, the next revaluation in Wales will be brought forward to 1 April 2021. I understand that the Welsh Government are considering options for the frequency and nature of revaluations thereafter, so the requirement for three-yearly revaluations does not yet apply in Wales. Entirely different legislation applies in Scotland and Northern Ireland, but I understand that both countries are committed to having more frequent revaluations.

Hon. Members who have been following the proceedings of the Select Committee on the Treasury inquiry into the impact of business rates will have seen a range of business groups support the move to more frequent revaluations. I will end with a quote from the evidence provided by the Association of Convenience Stores:

“More frequent revaluations will allow rateable values to link more closely with the non-domestic property market and three-yearly revaluations strike the balance between VOA resource and accuracy for business.”

In conclusion, I am very glad to be able to make this improvement to the rating system, and I commend the Bill to the House.

Non-Domestic Rating (Lists) Bill (First sitting)

Rishi Sunak Excerpts

Committee Debate: 1st sitting: House of Commons
Tuesday 25th June 2019 Public Bill Committees

[The Chair]

Thank you. Does anyone want to ask a question? No. Would the Minister like to kick us off?

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

I am happy to come in at the end. Perhaps the Opposition spokesperson would like to start.

[The Chair]

Okay. I call Jim McMahon.

--- Later in debate ---

[The Chair]

Do any other Members want to ask a question within the scope of the Bill? No. I call the Minister.

[Rishi Sunak]

Q Thank you, Chair, and thank you to all the panel members for joining us today. I appreciate that there is a lot of interest in the broader topic of business rates, the structure of business rates taxation, the current plight of the high street, the rise in online shopping andEdward Woodall: Broadly, we are very supportive of the move to shorter revaluation periods. There is overall agreement that the principle of making revaluations shorter to make property costs more closely aligned with what they are today should be the overall ambition. We have come to a three-year window on the basis that it balances the capacity of the VOA to deliver a revaluation in that time period and that it shortens the current five years. It is worth reflecting that, at one point in 2016, properties were valued based on 2008 data. We want to try to avoid that in future. The principle is very positive in the context of an evolving economy and the evolving way that we use property, and we should try to look more closely at how quickly we can revalue these things.

Martin McTague: In principle, yes, we support the move to the three-year revaluation period. We see it as a compromise, because we know it will put a lot of pressure on the VOA. We are concerned that, if pressure is put on the VOA, it might start to transfer to billing authorities. The person who usually ends up getting the bill to pay is the small business at the foot of that process. We are very disappointed in the way that check, challenge, appeal is working and that it is, effectively, creating a system that lacks transparency. The ratepayer cannot see the basis on which they are rated, which means that when they try to challenge any of these things, the delay can be enormous. We think that the fundamentals of the process are still wrong, but the move to three years is a good one.

Dominic Curran: At the risk of having an outbreak of agreement, we also fully support a move to three-year valuations. Five years was too long; I know many call for annual revaluations. There is a spectrum of views among our membership, but we have settled on three years as the right balance, taking into account two factors. First is the balance of stability: for every three years, you know exactly what your rates bill is. Even if that is not perfect, at least you can work on that basis. Second is the capacity of the Valuation Office Agency; as Martin said, we are not convinced that it would necessarily have the resource or capacity to undertake yearly or two-yearly valuations. That is an important area of resource that should be looked at carefully by the Treasury in the upcoming spending review.

[Rishi Sunak]

Thank you.

[Jim McMahon]

Q To follow up on that point, when the revaluation is brought forward, that will not dispense with the appeals already in the system—they are still there and need to be administered—and it will just create the opportunity for further appeals. Have your members expressed any concern about the capacity in the valuation office? Do you have any concerns about what it might mean if no additional capacity is brought in and there is a more recent revaluation in 2021?

Martin McTague: I can certainly answer that. There is widespread concern about the lack of capacity in the VOA. It is bizarre that the solution seems to be that you impose a six-month cap on appeals. That is effectively saying, “It’s so difficult to get these appeals through the process that we are going to cap the time required to do it.” Yet the information is not available to the business rate payer to be able to challenge things easily. The point that you made at the beginning—that the VOA is fundamentally under-resourced to deal with this change—needs to be addressed quickly.

Edward Woodall: I agree with Martin. The feedback I get from my members is that there is a lack of capacity at the VOA to allow them to engage meaningfully in the process and talk to individuals. There is also a challenge, which we will probably come to, about the structure of the process it has developed—check, challenge, appeal—and people’s ability to interact with that, which is causing difficulties.

Dominic Curran: Absolutely. Our members are enormously frustrated with the VOA on a day-to-day basis. The appeal system is clogged up at best. It needs better resourcing. There certainly should not be a cap on appeals, in terms of the time length. But more frequent revaluations would, to an extent, reduce the need for appeals, because valuations would be less out of date, although they would probably still be somewhat out of date.

[Rishi Sunak]

Q A final quick question, Mr Curran. One of the things that the VOA has to do at the moment is to deal with appeals. You just made the point that more frequent revaluations ought to reduce the volume of appeals. Will you elaborate on that point, because, obviously, less appeal work would be an offset to the increased work of more frequent revaluations?

Dominic Curran: The argument is strongest if we were to move to a system of annual revaluations. With an annual revaluation, it almost would not be worth appealing a valuation that you thought was wrong, because it would change in a year’s time anyway. The other effect would be that the valuation probably would not be so wrong, because your annual changes would be on a much smoother line—looking at it on a graph—whereas if we revalue every seven years, as we have, you get quite a steep change. Obviously, somewhere between seven years and one year, the line gets smoother and smoother. It is a question of judgment which number we pick. Using that logic, three years should have fewer appeals than five or seven, but one year should have fewer than three. We will see how good the VOA is at dealing with three-yearly revaluations.

[Rishi Sunak]

Thank you.

[The Chair]

As there are no further questions from Members, I thank the panel for their evidence. Thank you so much for coming along.

We are running ahead of time, and the other panel has not arrived, so I propose that we suspend.

--- Later in debate ---

[The Chair]

Okay. We have time for more questions. I will ask the Minister if he has any questions, but if people suddenly, spontaneously, have questions, I will allow some more within the timeframe, if necessary.

[Rishi Sunak]

I am fine, thanks. Thank you for all coming, and thanks for your evidence and comments. Everything has been perfectly well answered.

[The Chair]

So you have no questions?

[Rishi Sunak]

No.

[Jim McMahon]

Q May I ask one question of Richard? Is the LGA making a specific request that the change of date from September to December be reviewed as part of this process?

Councillor Watts: We are, yes. In effect, our request is that we would welcome further conversations with the Government about getting a date. We understand the arguments for shifting it, because it is quite a long time and 30 September is quite early in the process. However, for one year out of three when that impacts on the potential local government announcement, we would like to understand more about how the Government would like to co-ordinate between this announcement in December and the local government spending announcement having to be earlier than it, because that is a change in precedent. We cannot push the local government spending announcement each year beyond 31 December—it is already too late where it is, given that local budget setting for any authority of size is effectively always concluded before the spending settlement on the basis of guesswork, then tweaked when the settlement is announced in the House.

Non-Domestic Rating (Lists) Bill (Second sitting)

Rishi Sunak Excerpts

Committee Debate: 2nd sitting: House of Commons
Tuesday 25th June 2019 Public Bill Committees

[The Chair]

Welcome to line-by-line consideration of the Bill, on which we held an evidence session this morning. As in the main Chamber, the usual rules of debate and behaviour apply, as I am sure you all know very well. No amendments have been tabled, so we will consider merely whether each of the four clauses should stand part of the Bill. However, I intend to take all four clauses together for debate, so we will have only one debate.

Clause 1

Compilation of rating lists

Question proposed, That the clause stand part of the Bill.

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

It is a pleasure to serve under your chairmanship, Mr Gray. I hope not to detain the Committee for more than a few minutes.

I hope that by now the Committee is familiar with the three specific improvements the Bill will make to the business rates system: first, it will move the next revaluation in England and Wales to 1 April 2021; secondly, it will move the cycle for revaluations in England thereafter from every five years to every three years; and, thirdly, it will move the latest date by which draft rateable values must be prepared in England and Wales to the 31 December preceding the revaluation. I am glad to say that those substantive changes can all be found in clause 1.

To understand clause 1, we need first to consider the main primary legislation for business rates: the Local Government Finance Act 1988. Part III of the Act concerns business rates; it currently requires revaluations in England and Wales to take place every five years from 1 April 2017. Clause 1 is concerned entirely with amendments to that Act, and specifically to section 41(2A), which provides for revaluations of local rating lists in England

“on 1 April 2017 and on 1 April in every fifth year afterwards”;

to section 52(2A), which does the same for central rating lists in England; and to sections 54A(4)(b) and 54A(5)(b), which provide for revaluations of local and central rating lists in Wales on a date specified by the Welsh Government by order—1 April 2017—and

“on 1 April in every fifth year afterwards.”

That shows in black and white the delivery of our commitment to make the rating system more responsive to changes in the property market and fairer for ratepayers, and to ensure that businesses see those benefits as soon as possible.

Sections 41(5) and 52(5) of the 1988 Act set out the deadline by which draft rateable values must be provided before the revaluation. That is currently set at no later than 30 September. Clauses 1(3) and 1(6) of the Bill move the deadline to no later than 31 December. It is important to remember that that is only a deadline—it is the latest date by which draft rateable values must be prepared. The Welsh Government agree that the deadline for the draft list should be changed to 31 December. Sections 41(5) and 52(5) of the 1988 Act apply to both England and Wales, so the amendments made by clauses 1(3) and 1(6) will automatically change that date in both countries.

Clause 2 will make purely consequential amendments to primary and secondary legislation. The sections of the 1988 Act that concern the transitional arrangements made at the time of each revaluation, and the regulations made under those powers in England, reflect the existing five-year cycle of rating lists. Clause 2 will therefore amend those references to bring them in line with the new cycle of rating lists in England and Wales. It will make no other changes to the powers in those sections.

Clauses 3 and 4 are, I hope, self-explanatory. As is normal practice, the Bill will come into force two months after it is passed. It will give the valuation office the legal basis it needs to complete the valuation exercise for a revaluation in 2021. Since it has already started work on those valuations under the existing legislation and will continue that work over the coming months, there is no need to shorten the normal two-month commencement period.

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

This morning, though brief and focused, we heard from representatives of the Association of Convenience Stores, the Federation of Small Businesses, the British Retail Consortium, the Confederation of British Industry, the Local Government Association, and the Chartered Institute of Public Finance and Accountancy. We place on record our thanks for the time they took to give evidence to the Committee.

The scope of the Bill is narrow, and that was reflected in the discussion we had. However, some themes came out during that session that are worth repeating. Clause 1 brings forward the new ratings list by a year, to 2021—a move that we welcome and that was welcomed by all those who gave evidence earlier today. There were calls for annual reviews, but given the concerns about capacity in the Valuation Office Agency, evolution might be more advisable, which is why we support bringing the new list forward by one year.

One element that was queried by the Local Government Association was the change from six to three months’ notice to billing authorities of the new list, pushing the deadline from “not later than September” to December. That change will hit many local authorities, as they will be presenting—or, in many cases, would intend to have already presented—their budget proposals to council. That is important because, as employers, councils have to meet their statutory obligations to their employees for any changes that might follow, whether for redundancies or any structural changes within the organisation. It is important that councils can meet the January deadline for that, so the notice period is important. I therefore ask that the Minister meets representatives of the LGA as a matter of urgency to address their concerns and decide whether something can be done to minimise the impact of that change.

Clause 2 addresses transitional relief and brings it in line with the new list proposals. There was a broader discussion, which I do not intend to pad out here, about business rates and their impact on the retail sector, the viability of businesses and the future of high streets and town centres. We share the concerns about those issues and would welcome further discussions to create a business rates system that is not only fairer but helps British businesses and industry to thrive in future, rather than—as business rates do at the moment—simply acting as a tax to occupy or exist. There are growing calls for change, and I hope they are heard and acted on by the Government beyond the scope of this Bill.

[Rishi Sunak]

I thank the hon. Gentleman for his typically thoughtful comments and join him in thanking all the witnesses we were lucky to hear from this morning.

During this morning’s session, I was pleased that there was widespread support for the principle of the Bill, namely shortening the revaluation cycle to make business rates more responsive to economic conditions. It felt like all participants agreed that three years was the right place to end up, striking an appropriate balance between responsiveness on the one hand and providing some certainty and stability for ratepayers on the other.

I am pleased to tell the hon. Gentleman that my team is already in discussions with the LGA and will continue to be so. It is also in discussions with CIPFA, which participates in a technical working group on business rates and business rate reform to ensure that the process for local authorities submitting their NNDR1 forms by the end of January is not unduly impacted by the change. As in the past, we have been able to work constructively with local government and CIPFA to ensure all the processes that need to happen for revaluation work for the sector, ratepayers and everyone else involved.

To the hon. Gentleman’s last point, and without wanting to stretch the scope of the Bill, I understand what he says. I am glad he recognises the contribution of business to our economy and society—not least providing employment and the funds we need for our public services. We will always be keen to do what we can to support business. With regard to business rates, £13 billion of various reforms have already been enacted by the Government—most recently the retail relief scheme, which provides a third discount to retail high street stores on their business rates bill and has been warmly welcomed. The Government will continue to watch that issue closely.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clauses 2 to 4 ordered to stand part of the Bill.

Bill to be reported, without amendment.

Non-Domestic Rating (Lists) Bill

Rishi Sunak Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Monday 22nd July 2019 Commons Chamber

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

I beg to move, That the Bill be now read the Third time.

I always try to be pithy, Mr Speaker, as you instruct us to be, but this is an important matter, so we shall proceed without too much haste.

Ratepayers have told us that the current system, with revaluations of business rates every five years, has not been responsive enough to changes in the rental market. They have asked us for more frequent revaluations so that the system is fairer and more closely reflects the rents that they actually pay. This small but significant Bill delivers what business has asked for: it moves business rates revaluations in England on to a three-yearly cycle, and brings forward the next revaluation to 2021 so that ratepayers benefit from the change as soon as possible.

I am grateful for the contributions of all Members, both on Second Reading and in Committee, and thank them for their support for the Bill. In the public evidence sessions, we heard from various business groups that expressed their support. I thank them, including the Confederation of British Industry, the British Retail Consortium and the Association of Convenience Stores. I give particular thanks to the Local Government Association and the Chartered Institute of Public Finance and Accountancy for not only their comments in the evidence sessions but their work with my officials to ensure that we can implement the Bill in a manner that meets with their approval.

Lastly, I give thanks to the shadow Minister, the hon. Member for Oldham West and Royton (Jim McMahon), who has been, as ever with these relatively short and uncontroversial Bills, thoughtful and constructive in his approach. I am of course grateful to the Clerks of the House and, indeed, to my team, who have managed to get this important legislation through its various stages with efficiency and effectiveness.

This is a small but important Bill that continues our support for business in this country, and I commend it to the House.