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.