Baroness Winterton of Doncaster
Main Page: Baroness Winterton of Doncaster (Labour - Life peer)Department Debates - View all Baroness Winterton of Doncaster's debates with the HM Treasury
(4 years, 6 months ago)
Commons ChamberI beg to move,
That the Local Government Finance Act 1988 (Non-Domestic Rating Multipliers) (England) Order 2019, which was laid before this House on 4 November 2019, in the last Session of Parliament, be approved.
This order makes a small but important technical change to business rates. Specifically, it changes the annual inflationary increase in the business rates multiplier from the retail prices index to the lower consumer prices index for the coming financial year. As hon. Members may know, the multiplier is effectively the tax rate applied to the calculation of business rates, be it through the standard multiplier or the small business multiplier. Historically, these multipliers would rise in line with the preceding year’s RPI figure. On this basis, the multipliers were due to increase to reflect the September 2019 RPI figure, which was 2.4%. In Budget 2016, the Government announced that they would switch the multiplier uprating from RPI to CPI indexation from April 2020. [Interruption.]
Order. Will Members leaving the Chamber do so quietly, please?
The autumn Budget 2017 brought forward this implementation date to April 2018. The switch makes a reduction to business rates that is estimated to be worth more than £6 billion over the next five years, and the benefit to business will continue to grow as the business rates multipliers are uprated by the lower rate of inflation year on year. The Government introduced regulations to make this change for previous years, and we are bringing forward this order to do the same for 2020-21.
Before I proceed to outline the detail of the order itself, I would like to set out some of the background for the benefit of the House. The Government recognise that business rates can represent a high fixed cost for some businesses—indeed, many businesses—and we have taken repeated steps to reduce the burden of the tax. Reforms since Budget 2016 include, first, making 100% small business rate relief permanent and doubling the threshold of this relief from April 2017. As a result, more than 675,000 of the smallest businesses do not pay business rates at all. Secondly, increasing the threshold for the standard multiplier to £51,000 from April 2017 has removed many properties from the higher rate of the tax. Thirdly, moving to more frequent valuations by bringing the next revaluation forward one year to 2021 and moving to three-year revaluations after that will make bills fairer by ensuring they more closely reflect properties’ current rental values.
Finally, introducing a new retail discount has cut the business rates bills of small retailers by one third for two years from April 2019. This is providing up-front support to the retail sector at what is proving to be a challenging time for many retailers, and it is worth about £1 billion to businesses.
Looking forward, as confirmed in the statement I made on 27 January, from 1 April this year the Government will increase the retail discount to 50% in 2020-21, and extend eligibility to independent cinemas and grassroots music venues for the first time. We will provide additional support to pubs through a £1,000 discount for pubs with a rateable value of less than £100,000. We will extend the duration of the £1,500 discount for local newspaper office space for a further five years. However, it is important to be clear that the Government recognise that concerns remain about the impact of the tax. That is why we are committed to a further review of business rates, details of which will be announced in due course.
The order before the House is the necessary secondary legislation required to effect the change in the inflationary increase for business rates from RPI to CPI in the financial year 2020-21. It sets out the new equation for setting the business rates multipliers for the coming financial year, so that the September 1.7% CPI figure is used instead of the 2.4% RPI figure.
Given the difference in the multiplier from uprating this year, the small business multiplier in 2020-21 will be 49.9p, rather than 50.3p. The standard multiplier in 2020-21 will be 51.2p, rather than 51.6p. That change represents a cut in business rates every year, benefiting all rate payers and freeing up cash for businesses. The order applies to England—unlike in the last debate, Madam Deputy Speaker, there has not been quite the same interest from Scottish nationalists about this measure, although both provisions apply to England. The Government will provide the devolved Administrations with funding to enable them to offer similar support if they wish, and they will fully compensate local authorities for the income they will lose as a result of this measure.
This measure should not be viewed in isolation, and as I have said, it is one of many introduced by this Government, and their predecessor Governments, to support business. I have mentioned numerous cuts to business rates, including the two-year business rates relief for small retailers. Looking more widely, the UK corporate tax regime remains highly competitive, with the Government having lowered corporation tax from 28% in 2010 to 19% today—the lowest rate in the G20. Beyond that, businesses are benefiting from enhanced tax incentives, including the introduction of the new 2% structures and buildings allowance, and a temporary increase in the annual investment allowance to £1 million.
The statutory instrument that we are legislating for today will contribute to the Government’s efforts to reduce the burden of business rates and make them fairer for taxpayers. As I outlined, on top of the reliefs already in place, the Government are committed to a review of the business rates system, details of which will be announced in due course. In conclusion, this order will change the annual inflationary increase in business rates from the retail price index to the consumer prices index in financial year 2020-21, thereby reducing costs for all business rate payers in England and giving the economy a further boost. I commend the order to the House.
I am grateful to the Minister for his explanation of the order, and broadly supportive of its contents. It does, however, raise some significant questions about the Government’s continued use of the retail price index as against the consumer prices index, and about their approach to business rate reform and local government funding more widely.
Members will be aware that there has been continued argument about the use of RPI as an inflation indicator, as against CPI and CPIH. RPI was de-designated as a national statistic back in 2013, yet it is still often used in areas such as the regulation of train fares, student loan debt, and many occupational pension schemes. CPI has been adopted in this case, but we have no clear explanation why the use of RPI continues in other areas. The Royal Statistical Society has been highly critical of that approach.
After many years of confusion, the Chancellor has now agreed not to cease the production of RPI statistics, but to slowly align them with CPIH, thus ending the situation of, as The Financial Times put it,
“the Office for National Statistics and UK Statistics Authority publishing a key economy measure every month which they accept is wrong, but doing nothing to improve it.”
That is what has been happening over the past few years. I therefore find it quite revealing that, rather than amending the Local Government Finance Act 1988 through primary legislation to make that change permanent, the Government choose to make it yet again, year on year, through secondary legislation. Is this use of orders, rather than primary legislation to designate the relevant inflation measure, to retain flexibility for the Government, or for some other unexplained reason? Either way, it creates a potentially unstable environment for businesses and local authorities, perhaps up to 2025 or beyond.
We have seen no uprating in the existing thresholds at which discounts on business rates apply. I accept that the retail discount has increased from one third to 50%, and been extended to some additional categories of economic operator. I am probing, through parliamentary questions, what proportion of rateable businesses are actually covered, given the low thresholds at which those discounts apply, especially in areas of high property costs.
The Conservative manifesto said that the Government would go further and fundamentally review the business rate system, so it was disappointing that the Minister said—twice—that this would happen “in due course”. Will he please tell us once when that review will at least begin, and what its scope will be? According to the British Retail Consortium, 2019 was the worst year for retail in 25 years. We need some urgency from the Government in dealing with this issue. We also need to deal with the impact of the business rate system on preventing the investment that is required to ensure environmentally friendly business and manufacturing.
Finally, we need to put rating in the context of the overall local government funding settlement. It was disappointing that the Minister did not talk about that at all, but merely about compensation for this measure in the settlement. All Labour Members realise that the Government are suggesting a real-terms cut to local government. Even worse, the alleged increase they are putting into local government is predicated on all councils increasing council tax by the full amount, which they blatantly will not do—smoke and mirrors yet again. We have seen a concerning trend where funding from local authorities in less affluent areas is stripped back at a far faster rate than it is in more affluent areas. The Government’s laughably named fair funding approach would see almost three-quarters of the so-called red wall seats losing out even further. There is great concern among those in local government that reforms to business rates could make this even worse, with 77% of councils saying that they lack confidence in 100% business rate retention.
I hope the Minister will address these concerns, outline a timetable for the review of business rates, indicate whether that review will include considerations of local government, and, above all, let us know whether we will see an end to the current uncertainties around CPI adoption.
It is with great pleasure that I call Paula Barker to make her maiden speech.
On a point of order, Madam Deputy Speaker. I wonder if you could assist me. When we have a public health scare, we expect the Government to be in control. Yesterday, I raised the serious issue of how information about the coronavirus infection was being shared and how getting communications right was crucial to alleviating public concern while also protecting the public. Today we have learnt that the information provided concerning those infected with coronavirus was incorrect. The student did access student accommodation—Vita Student accommodation—despite our being told they had not. There is confusion over how information is being gathered and shared, which could have a serious impact on public confidence in how the coronavirus is being managed. The Government need to get a grip as we may be in the early stages of the management of this infection. Could you, Madam Deputy Speaker, advise the House on whether the Secretary of State for Health and Social Care intends to make a further statement to the House, in particular to address the management of communications surrounding coronavirus, in the light of the latest developments?
I thank the hon. Lady for her point of order, and for giving me notice of it. Obviously the Secretary of State is responsible for the accuracy of what he says in the Chamber, and for the information that is given to the public about this extremely important matter. I have not heard of any intention on the part of Ministers to make a further statement, but those on the Treasury Bench will have heard the hon. Lady’s point of order, and I know that she is well aware of the further routes that she can pursue if she remains dissatisfied with the situation.