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

Steve Reed Excerpts

Committee stage & 3rd reading & 3rd reading: House of Commons & Committee: 1st sitting & Committee: 1st sitting: House of Commons
Tuesday 20th October 2020 Commons Chamber

[David Simmonds (Ruislip, Northwood and Pinner) (Con)]

One can tell by the enormous crowd in the Chamber that the NDR Bill is going to be the highlight of this parliamentary week. Nevertheless, given that the average local authority delivers over 800 different services which, during this covid crisis, are being brought into sharp focus as to how essential they are as part of the warp and weft of our communities, it is important that we get this right.

This matter has been extensively debated previously, and it is largely of a technical nature. However, I would be pleased to hear the Minister address a point about the timing that has emerged during the Bill’s passage through the House. Among those 800 different services, local authorities provide the billing process to local businesses to ensure that business rates are both accurate and able to be paid on time. It is absolutely critical that they have sufficient time within that process to receive the data from the Valuation Office Agency, to test that with the software supplier who ensures that the bills are physically dispatched to businesses, to resolve any disputes that may subsequently emerge—it is not uncommon for businesses to come back with queries—and then to be in a position to ensure that payment is made in a timely manner.

I entirely understand why, from a Government perspective, it is important to align that process with a fiscal event, which is likely to be an autumn Budget. However, as we have seen, especially in these recent times, there is often a situation whereby the timing of those events needs to move around and change. I hope that the Minister will be able to address the need to ensure that this information is available to local authorities in a timely manner so that businesses have certainty and accuracy regarding these bills. I would like an assurance that if there is a need to change the date of the autumn Budget, there will then be scope within the timetable to provide the information to local authorities, prior to the Budget taking place, to ensure that the bills are available to local businesses in a timely manner, and, indeed, can be paid, so as to be part of the critical funding arrangements for local authorities.

With those observations, I take my seat and look forward to hearing the furious and enthusiastically engaged debate that will doubtless follow.

[Steve Reed (Croydon North) (Lab/Co-op)]

This is not a controversial measure, as the hon. Member for Ruislip, Northwood and Pinner (David Simmonds) has made clear, but I want to put a few points on the record while confirming that the Opposition continue to support the proposals.

Since Second Reading, there have been at least a couple of developments. The first is that the rate of covid infection is rising again, and that makes the case for supporting businesses and local authorities, including through business rate reform, even stronger. The second is that organisations with an interest in this Bill have made it even clearer in conversations with us that although they support the Bill, they are looking for yet more meaningful change. The Bill must be the beginning of root-and-branch reform of the business rate system. Right now, the jobs of people in the arts, retail, hospitality and many other sectors are under threat from the economic impact of the covid-19 pandemic. Those sectors and others need help to get through the rising wave of infections, and they need that help as urgently as possible.

Business rates, as currently set up, do not fairly reflect the rental value of the premises occupied, and they have created regional imbalances. A further and growing unfairness is that retailers that occupy shops in high streets pay far more in tax than online retailers do—that situation is, disappointingly, incentivising the decline of our high streets. Research by Revo shows just how acute the regional imbalance can be. In the north and the midlands, the rate rise is almost 12.5 times greater than the rise in rental values, compared with just four times greater in the south. If the Government are serious about levelling up, they need to address that anomaly.

Getting the business rate system right is essential, and it should be seen as part of the support that the Government must provide to businesses and local authorities to help the economy to recover fully. The Government have been too slow to support businesses and local authorities during the pandemic. According to the Local Government Association, the Government have left councils facing a £3 billion funding gap, which means that support for local economic recovery may be cut precisely when it is needed most.

The country is facing a long, hard winter ahead as we contend with the effects of covid-19, and we must provide all the support we can to local authorities and local businesses to get our communities through this safely.

[Jim Shannon (Strangford) (DUP)]

I know that the Bill is to do with England and Wales, but given that we face potentially the greatest recession that we have had in our lifetimes, there is a need for flexibility in non-domestic rating. Does the hon. Gentleman believe that with the Bill, the Government have given us the flexibility to respond to whatever the future may give us?

[Steve Reed]

The hon. Gentleman makes an important point about the need for flexibility. The situation ahead is very unpredictable and uncertain, and we need the flexibility to support businesses and local economies, whatever circumstances we find ourselves in in a few weeks’ or months’ time.

On Second Reading, my hon. Friend the Member for Blackburn (Kate Hollern) asked the Minister a question that has not yet been answered, so I politely invite him to respond to it today. Given that the Valuation Office Agency has a backlog of 50,000 appeals, some dating back as far as 2010, will he share with the House what conversations he has had with the Treasury about how that backlog will be tackled? Because of the pending appeals, councils, which are responsible for collecting business rates on behalf of the Government, have had to divert more than £3 billion away from frontline services. That figure is very close to the in-year funding gap that is leading to cuts in frontline services across the country, as the second wave of infection rises and the economy slips into recession. What a difference that funding would make, if the Government would only make it available to local authorities and public services on the frontline.

Fixing the business rates system is essential if our high streets are to survive, but the Government must also recognise the key role that local government will play in driving local economic recovery. The Government’s broken promises on council funding will restrict town halls’ ability to support struggling local businesses. I am sure I do not need to remind the Minister just how important local authorities have been throughout the pandemic, and that is why it is so important that they are supported financially. Councils have lost £953 million from business rates income between March and July this year alone, according to the Local Government Association, and that accounts for more than a quarter of all income losses for councils over that period.

The Opposition welcome the measures in the Bill, but only as a first step in the much wider reform that is needed to create a level playing field for businesses and to support our high streets to recover.

[The Minister for Regional Growth and Local Government (Luke Hall)]

I thank the shadow spokesman, the hon. Member for Croydon North (Steve Reed), and my hon. Friend the Member for Ruislip, Northwood and Pinner (David Simmonds) for their contributions.

We are now familiar with the two improvements that the Bill makes to the business rates system. It moves the date for implementation of the next revaluation in England and Wales to 1 April 2023, and it moves the latest date by which draft rateable values must be prepared in England and Wales to 31 December preceding the revaluation. Both changes can be found in clause 1. Clause 2 simply sets the extent and name of the legislation.

In order to understand clause 1, we first need to consider the main primary legislation for business rates, which is the Local Government Finance Act 1988. All of clause 1 is concerned with amendments to the 1988 Act. Part III of that Act concerns business rates, and it currently requires revaluations in England and Wales to take place every five years from 1 April 2017. Therefore, without amendment to the current law, it would require revaluation to take place in England and Wales on 1 April 2022. The Bill changes that date in a straightforward way by amending the 1988 Act to instead provide for the next revaluation in England and Wales to be on 1 April 2023. It does that both for local rating lists and for central rating lists held by my Department and the Welsh Government. Central lists contain large network properties, such as the electricity supply companies.

We can see the change in the Bill—clause 1(2)(a) adds the words “on 1 April 2023”; clause 1(3)(a) makes the change for England and clause 1(4) does so for Wales. The change to the timing of the draft rating list from no later than the 30 September to 31 December can be seen in equally simple terms in clause 1(2)(b) for local rating lists and clause 1(3)(b) for central rating lists.

That date is the deadline—the latest date by when draft rateable values must be prepared. The Bill will still allow the Valuation Office Agency to publish rateable values earlier than the end of December. We fully intend to give ratepayers as much notice as possible of their draft rateable values, the new multipliers and any transitional arrangements that might be included. Historically, these have been confirmed at the time of the autumn fiscal event, so ratepayers will continue to have several months to pay their bill.

My hon. Friend the Member for Ruislip, Northwood and Pinner raised a point about fiscal events and what might happen in different instances. It is worth putting on the record that it is required within law that the multipliers are produced as part of the local government finance settlement, but we are of course cognisant of the fact that a date in February would be too late. I restate our intention to make sure that they are provided earlier than that—in good time—if events transpire as my hon. Friend described.

Moving the date of the draft rating list also has implications for local government, which has a share in business rates income through the business rates retention scheme. On that point, I assure the Committee that my Department has held discussions with representatives of local government, including the Local Government Association. We intend to make any adjustments as are necessary to the rates retention scheme to ensure that locally retained income is, as far as practicable, unaffected by the revaluation. That will give councils the assurances they need over locally retained rates income. In the revaluation, we will also ensure that local government will have what it needs to issue the new bills in a timely way.

The hon. Member for Croydon North raised an important point about VOA appeals and was quite right to do so. It is worth saying that the new business rates appeals system introduced in 2017 is operating smoothly and ratepayers have been able to make appeals throughout this difficult period. The large volume of appeals under the previous list system showed why the system was in need of reform, with large numbers of speculative appeals clogging up the system and over 70% of appeals leading to no change. The VOA recently delivered some key improvements to the system, addressing specific concerns from stakeholders, including new features frequently requested by customers and agents to make the system easier to use.

The hon. Member for Croydon North is right to highlight that there are still some outstanding cases from 2010. The majority of those cases have been held up by litigation pending the outcome of a Supreme Court case concerning the rateability of ATMs. The Supreme Court issued a decision on the matter on 20 May this year, and the outstanding cases are now being settled. The VOA is engaging with stakeholders and has agreed a timetable to deal with these cases, and I will keep it under close review. He is right to raise that.

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[Steve Reed]

I will not rehearse my points on the wider issues of local government finance where there is disagreement across the Benches; that is all on the record. I will just welcome this Bill and the changes that it proposes to the system. They are needed, but as has been accepted on all sides, they cannot be a substitute for the much wider changes that will be required to support our high streets through some very difficult times in the months and years to come. In particular, we need to focus on how we support bricks-and-mortar retailers to compete on a level playing field with online retailers if we want our towns, high streets and districts not just to survive, but to thrive long into the future.

Question put and agreed to.

Bill accordingly read a Third time and passed.

[Mr Deputy Speaker (Mr Nigel Evans)]

In order for everybody to leave the Chamber safely and for the main players in the next debate to take their positions, we will suspend the sitting for a relatively brief period. If it is possible to have the Dispatch Boxes sanitised as well, I would be very grateful.