Non-Domestic Rating (Lists) (No. 2) Bill

Sarah Olney Excerpts

2nd reading & 2nd reading: House of Commons & Programme motion & Programme motion: House of Commons & Ways and Means resolution & Ways and Means resolution: House of Commons
Wednesday 30th September 2020 Commons Chamber

[Luke Hall]

I thank my hon. Friend for his point. We are currently undertaking a fundamental review of business rates, and as part of that exercise we are considering the frequency of future revaluations. When deciding whether to have more frequent revaluations, we need to strike the right balance between more up-to-date assessments, which would flow from such a reform, and the uncertainty it could create, with more regular changes to bills, while also taking into account the time it currently takes to process changes and the impact that any changes that might be required would have on the current system. I certainly understand, however, the point that he has continually made about annual revaluations and how that could further improve the system. I am sure that will be considered.

[Sarah Olney (Richmond Park) (LD)]

I have listened carefully to what the Minister has said about the revaluation moving from April 2021 to April 2023, but I wonder whether there is a danger that those properties that might have a substantial revaluation downwards will be paying over the odds on their rates for two further years, at what we all know is going to be an incredibly tough time. I am thinking in particular of retail businesses and a very challenging trading environment. Will he consider changing the date from April 2023 to later in 2021, particularly given the comments he has just made about the need for more regular revaluation?

[Luke Hall]

I thank the hon. Lady for her point. I know it is a matter in which she takes a personal interest and that she has raised it with Ministers. The point stands that we have to have a system that takes into account the impact of the pandemic and, as is the case with the current system, the time it takes the VOA to go through the process. We think that this is the measure required at this time.

We took the step to postpone the implementation of the next revaluation so as to give certainty to ratepayers and to ensure that the next revaluation reflects the changes in the market conditions as a result of the pandemic. The Bill will therefore set the implementation of the next revaluation date in England and Wales as 1 April 2023. On revaluation based on the rents of 1 April 2021, we have, of course, already set that out in secondary legislation.

Business rates is a devolved policy area, but with agreement from the Welsh Government the Bill does also apply to Wales. As in England, the next revaluation in Wales will be implemented on 1 April 2023, and the date of publication of Welsh draft rateable values will also be changed to 31 December. Entirely different legislation applies in Northern Ireland, which has only recently implemented a revaluation from 1 April 2020, and Scotland, where I understand the Scottish Government have also committed to implementing their next revaluation on 1 April 2023. There is, therefore, a good degree of agreement across the UK that the next business rates revaluation is moved, to better reflect the impact of the coronavirus. Notwithstanding some of the points raised, I hope that is accepted across this House.

As I have said, this is an exceptional step and the Government remain committed to frequent revaluations of business rates. The fundamental review of business rates will look at not just the frequency of revaluations but how they are done, and will report on those aspects of the business rates system in spring. However, this is a step that we can take now to improve business rates bills, and that is why we have brought this Bill forward so quickly.

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[Sarah Olney (Richmond Park) (LD)]

I value this opportunity to raise the issue of business rates and their impact on the retail sector. The hon. Member for North Norfolk (Duncan Baker) raised many similar points, but I wish to talk in particular about the value of retail during this incredibly difficult time.

Our retail sector has been essential in helping many members of my community through this difficult period, which has shown the value of a strong retail sector in every town centre to the building of communities. Many of us who have been holed up at home for an extended period have valued the opportunity to get out and about and have face-to-face contact again. I think more of us value that than ever before. For that reason, although this is a very difficult time for the retail sector, I believe it has a strong future, because we cannot replace the value of that face-to-face contact with an online purchase; it is a tremendous boost to one’s wellbeing. We have all become much more aware of the issues of isolation, people living alone, and how the town centre helps to build a strong local community.

Another point that I wish to make about the retail sector is that it has always been a strong source of employment for many people—local employment is so important for many people who find it difficult to access city centres. I draw the Minister’s attention to the fact that the retail sector is a major employer of female workers; that is so important. Research shows clearly that having more women in employment has a strong impact on reducing the number of children in poverty. That is why it is so important to support the sectors that support female employment.

The rates holiday has been essential to helping retailers survive during the pandemic. Like all Members, the Liberal Democrats have welcomed those measures from the Treasury, but I urge the Government to take the opportunity presented by the Bill to reform the existing structure of rates to better reflect the underlying trading environment that many in the retail sector are having to face. Yes, we should to push the revaluation back for the relevant businesses, but perhaps to later in 2021 rather than 2023. We might assume that more businesses to be found in, for example, the north and the midlands will face a reduction in the value of their properties. It would be better for them to take advantage of the reduction in rates sooner rather than later, especially given the challenging trading conditions everybody is going to be facing. I echo what the hon. Member for Blackburn (Kate Hollern) said about more regular revaluations and how that would support our retail industries in a fast-moving property market.

As the hon. Member for North Norfolk said, this is a critical point for the retail industry, and it would be great to see whether we could take the opportunity to rebalance the burden of business rates away from high streets, in recognition of the fact that the retail market is changing in favour of digital outlets, which militates against those retailers that are still based on our high streets. I mentioned the value of high-street shops and maintaining our high streets; we need to see the Government reflect and support that in their rates policy.

I welcome the business rates review, to which we plan to contribute, but I hope it can be done speedily so that we see rates reform take place sooner rather than later, to better support all those businesses that are relying on rates reform to help them through. Will the Minister consider a reduction in the uniform business rate from 50p to 30p, to better reflect how much lower is the volume of retail going through our high streets as people move to digital and online?

[Kevin Hollinrake]

That kind of change to the multiplier would probably cost around £12 billion a year. Does the hon. Lady have any idea of where she would get the money to fill that gap?

[Sarah Olney]

That is an important point and I very much hope that the business rates review will look at it. There is no doubt that online retailers are not currently paying their fair share. Lots of solutions to that problem have been proposed, although I do not think this is the right forum to debate them. There are pros and cons in respect of proposed digital sales taxes, but nevertheless it is a policy area that seriously demands to be looked at. I am sure the hon. Gentleman would agree that high street retail businesses having to bear the brunt of property taxes when they no longer get the lion’s share of the retail market is a situation that cannot continue.

Finally, I just wanted to make the point that we are all expecting a major economic dislocation as a result of the unwind of the furlough scheme and the other measures that the Government have put in place. We are anticipating high levels of unemployment, but one way to mitigate that is through people starting up their own businesses. There are opportunities in the retail sector for those who are looking to start up their own businesses, particularly in constituencies such as mine. We have seen a rise in home working, which has meant that, for the high streets in Richmond Park, there has been a rise in footfall, as people are now at home during the day, instead of perhaps travelling into the city, which is what they would have done previously.

Certainly, speaking to local retailers, I have been quite surprised to find how many of them have thrived over the past few months. They have diversified and found new ways to get their goods to customers. Certainly, the trading conditions are quite strong on our local high streets and, as I say, I believe that that represents opportunities for those who may find themselves out of work in the near future, but I urge the Government to do what they can to lower the barriers to new entrants to the retail markets, so that we can really make the most of these opportunities for new retail businesses on our high streets. That is why I urge the Government to do what they can to address the current rate structure for new businesses.

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[Kevin Hollinrake (Thirsk and Malton) (Con)]

I draw the House’s attention to my entry in the Register of Members’ Financial Interests. I have quite significant interests in the business rates system, in terms of my own business, so hon. Members should take that into account.

To touch on the comments from the hon. Member for Westmorland and Lonsdale (Tim Farron), I absolutely agree with his point about the business rates loophole for holiday cottages, and I hope that the Treasury is listening to that. It is an obvious loophole to close, and it affects North Yorkshire like it affects the Lake District.

I very much support the Bill. I sat on the joint Treasury Committee and Housing, Communities and Local Government Committee inquiry into business rates. We looked very carefully at the frequency of revaluation. We took evidence from a number of different sources. Some nations do the revaluation annually, not three yearly, and that would be better from a business perspective. It would give a more current perspective on the trading environment, although we should bear in mind that all business rates revaluations are fiscally neutral. Some people would benefit from a reduction in their business rates valuation, but that would have to be made up elsewhere by the multiplier changing to come back to the £30 billion a year that business rates raise.

I do not know whether hon. Members have a solution to that problem— I have heard a couple of speeches from Opposition Members who say that the business rates system is not fit for purpose, yet only one solution, from the hon. Gentleman. He suggested, potentially, a land value tax, but that has other inherent difficulties because it is, again, a value-based tax. Business rates are a valued-based tax. It has a correlation with the rental value of a property, which is, of course, inherently tied to the capital value of the premises. As Ronald Reagan once said, “There are simple solutions, but there are no easy solutions.” We might all want reform, but finding reform that works and is fair is difficult—I will, however, suggest something before I sit down. The other issue with the current system is that reliefs and changes brought in as a transitional phase mean that those who should benefit from the revaluations do not do so for some time, in order to try to help with people who are “going up in value”. It is far from a perfect system at the moment.

My first hustings took place in the village I have lived near all my life. One question from the audience was about a local retailer where many of us had shopped—Craggs electrical, a good local white goods retailer selling TVs and the like. It had just closed down after many years in that community. Mrs Craggs was in the audience and the questioner said, “Mrs Craggs’ business has just had to close down because of the situation. She cannot pay her business rates. It is just unaffordable. What are the Government going to do about it?” The reality is that Mrs Craggs’ business was closing down not because of Government business rates, but because of the different shopping trends of all the people in that room; all those people were applauding and saying we should take some action, but the reality is that fewer and fewer of us are buying that kind of stuff from shops. So it is not about what the Government are or are not doing; it is about shopping trends.

As my hon. Friend the Member for North Norfolk (Duncan Baker) mentioned, before the crisis, 20% of shopping was done online but that figure has risen rapidly to 35%, which is making the whole system difficult. Most businesses look at the rent and the business rates when they first take on a premises, and then plug that into their cash flow and decide what they can afford to pay. That is what a good businessperson should do. It is not that the business rates system is anachronistic; the pace of change is the problem. At some point in future, when all this has settled down, businesses will say, “We can afford to pay this rent and these rates”, but the difficulty is being caused by the pace of change.

[Sarah Olney]

I am listening carefully, and I bow to the hon. Gentleman’s expertise on this subject, as I know he has studied it long and hard. We have talked a bit about the divide between digital and high street retail. Does he agree that there is a social good to be achieved in supporting high street retail and that the Government should perhaps express a preference for it over digital through the tax system?

[Kevin Hollinrake]

Yes, I absolutely agree with that. Community is very important to me and our shops are part of those communities. It is dangerous when the Government start picking winners—I do not think that should happen. The forces of free markets and a market economy are the best things to ensure that prices are kept low and levels of services are high for consumers. That is what is most effective. So what we have to try to do, of course, is create a fair and level playing field, and let businesses come in to fill that gap and provide services that people want. That is what we should be looking to do.

In its review of business rates, the Treasury talks about different options, including an increase in VAT, changes to corporation tax and an online sales tax. It seems to land on the online sales tax as the solution, so let me talk about a couple of things that it sets out in that consultation. It sets out not that an online sales tax will replace business rates, but that it will exist alongside them—that is a key thing to understand—and that it will potentially lead to a reduction for retail. So there will be two systems coming together.

I have heard a few Members talk about retail in this debate, but the changes in consumer behaviour are not just about retail. Uber Eats and Deliveroo, for example, deliver to people’s houses often not from takeaway premises on the high street but from mini-establishments off the high street. Travel agents, insurance brokers, banking—all those things are changing because of consumer habits; people do not visit shops anything like as much as they used to. Looking at the problem purely from a retail perspective is wrong; doing so does not understand the problem.

Another issue is what is online? One of my fantastic local butchers in Thirsk is Johnson’s, an order-in butcher’s, which has wonderful meats, but does not seem particularly the type of business that would go online. I visited them during the crisis, because they had set up a delivery service and offer click and collect, as well as traditional shopping. They have even set up a little bot from which you can order, which talks to you using artificial intelligence—very clever stuff and really innovative, which was great; but how would you assign an online sales tax to those different categories? It would be hugely complex for a business to work out what was bought purely online, what was bought on click and collect and what was bought by customers walking into the store. It would make the system more complicated. The more we try to simplify the tax system, of course, the more complicated we make it. There are some inherent flaws in an online sales tax; it is so very difficult. The problem of distinguishing between online, click and collect and physical shopping is inherent in lots of different businesses, John Lewis being an obvious example. It is not clear how such a tax would operate without making the system more complex.

Simple and easy are two different things. The simple solution, which will not be universally popular, is to look at sales tax. We already have a sales tax; it is called VAT. The simplest thing to do would be to raise VAT. We could not just put a hole in the business rates system—some 30 billion quid—without replacing it with something, certainly not given where the public finances are today. Putting 2p on VAT, would raise £12 billion a year; 4p on VAT would raise £24 billion a year. We could also look at the threshold system of VAT, which is a real deterrent for businesses to grow. If we want a simple solution that is effective and crosses all the different sectors, it is there. It is fair and would keep the tax system as simple as possible.

I urge my very good friend the Minister on duty, the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for Rochester and Strood (Kelly Tolhurst), and the Treasury to think about the full extent of the problems, as well as the potential quick wins. When compared with an online sales tax, VAT is a much better system to operate.