Non-Domestic Rating (Multipliers and Private Schools) Bill

Victoria Collins Excerpts

2nd reading
Monday 25th November 2024 Commons Chamber

[James Murray]

I will come to business rates. The hon. Gentleman will have a chance to respond in full in just a moment. [Interruption.] I see that he is impatient to tell us how much he supports the Bill—or am I misreading the signs from across the Dispatch Box?

As I have said, this Bill will enable the introduction of new multipliers in the business rate system from 2026-27. The provisions in this Bill will enable the introduction of two lower tax rates, which may be applied only to qualifying retail, hospitality and leisure properties. The definition of “qualifying properties” will ultimately be set out in secondary legislation but, for the avoidance of doubt, it is our intention that the scope of these new tax rates will broadly follow that used for current retail, hospitality and leisure relief. These new rates will provide permanent tax cuts, offering certainty to businesses by ending the continued uncertainty of retail, hospitality and leisure relief, which has been rolled over annually since covid-19.

Our intention is for a lower rate that offers a tax cut for retail, hospitality and leisure properties that currently pay the standard multiplier, with a rateable value between £51,000 and £499,999. Another rate will offer a larger cut to the retail, hospitality and leisure properties currently paying the small business multiplier, which are those with a rateable value below £51,000.

We are clear, however, that any tax cut must be sustainably funded. For that reason, the Bill will also enable the introduction of higher multipliers, which can be applied only to the most valuable properties—those with a rateable value of £500,000 and above, which represents less than 1% of all properties in England. The rates for any new multipliers will be set in the 2025 autumn Budget in the light of the outcomes of the 2026 revaluation. The Government recognise, however, that it would be inappropriate to take unfettered powers that allowed the Government to change tax liabilities by unlimited amounts. For that reason, the Bill includes sensible guardrails to limit the use of those powers.

The guardrails determine that the two lower tax rates, when introduced, may not be set lower than 20p below the small business non-domestic rating multiplier, and that the higher tax rates, when introduced, may not be set higher than 10p above the non-domestic rating multiplier. Let me make it clear that those values are maximum parameters and do not represent the changes that we intend to implement. They are guardrails that offer sensible limits with proportionate flexibility. They ensure that the Government can respond to future revaluations as well as the changing economic and fiscal context. As I said, the exact rates for 2026-27 will be set out in next year’s Budget.

Alongside the provisions on multipliers, the Bill contains provisions relating to private schools that will raise around £140 million a year. There are more than 2,400 private schools in England, of which approximately half are charities and are able to benefit from business rates charitable relief. The Bill will remove the eligibility of private schools that are charities for that relief. The Bill provides a specific definition of a private school as

“a school…at which full-time education is provided for pupils of compulsory school age…where fees or other consideration are payable for that…education”

or

“an institution…which is wholly or mainly concerned with providing education suitable to the requirements of persons over compulsory school age but under 19…where the provision of full-time education…is wholly or mainly provision in respect of which fees or other consideration are payable”.

A number of right hon. and hon. Members have questioned how the Government’s plans will affect pupils with special educational needs and disabilities. My officials and I carefully considered the design of the policy, and the provisions in the Bill mean that private schools that are charities that wholly or mainly provide education for pupils with an education, health and care plan will remain eligible for charitable rate relief. To be clear, in answer to the earlier question from the hon. Member for Gosport (Dame Caroline Dinenage), “wholly or mainly” in business rates generally means 50% or more. The Government believe that will ensure that the majority of special educational needs schools will not be affected by the measure.

The measure will operate in addition to the existing business rates exemption for properties used by private schools wholly for the training or welfare of disabled people. That exemption, which we are retaining, means that those types of properties pay no business rates at all. Taken together, the existing and new provisions are intended to ensure that most private special educational needs schools will not be affected by the removal of charitable rate relief.

[Victoria Collins (Harpenden and Berkhamsted) (LD)]

Given the terrible SEND crisis across the country, does the Minister really think that it is good enough that only “most” of those schools will be exempt?

[James Murray]

I hope that the hon. Member will welcome the fact that we have committed an extra £1 billion in 2025-26 to high needs funding in the education system. The Government are committed to reforming England’s SEND provision to improve outcomes and return the system to financial sustainability. I would welcome her support for our measures in that regard.

--- Later in debate ---

[Victoria Collins (Harpenden and Berkhamsted) (LD)]

I grew up helping my mum on the shop floor of small gift shops, and my memories of the wonderful work that she did to build that business and the staff she employed is a real benefit to my life. I also saw how hard she worked and how hard things got. She went down from four shops to one, then came across the classic problem of whether she was able to keep her shop open and battle with online retailers. The costs went up, business rates were too much, and she decided to close and go online.

Frankly, I am tired of us not taking support for small businesses seriously and making a change. This Government had an opportunity to make a difference, but they have squandered opportunity when it comes to business rates reform. I see the impact on businesses in my high streets. I have the privilege of representing several magnificent high streets, in Tring, Berkhamsted, Harpenden, Wheathampstead and Redbourn, but businesses there are struggling yet again. Michelle from Graze Life told me time and again about the impact the cost of business rates had on her business; eventually, she closed her high street shop down. I spoke to Peter from the Oakman Group, a booming business that started in Tring in 2007. The company is a rising star and has received prizes for being one of the best places to work for employees, but Peter now says it is on the edge of extinction. He employs 1,200 people but he says the Budget, including business rates changes, will have an impact of up to £2 million on his business, so he will look to close many of his premises.

[Mr Joshua Reynolds (Maidenhead) (LD)]

My hon. Friend mentions several businesses in her constituency that will be impacted by the changes. I spoke recently to a small restaurant owner in my constituency. They have six restaurants across the south of England and they say that the business rates changes, plus other Budget measures, will cost their business £150,000 just to do what they are doing today. Does she agree with me that that will not encourage such businesses to invest in the UK, open new restaurants and help grow the economy, which we all want?

[Victoria Collins]

Absolutely. That is the message I am hearing again and again. Another business owner in Tring said that they would love to open on the high street but they just cannot afford it. The broken business rates system is affecting our businesses, the people who work there and our communities, which are losing out on fantastic local businesses.

The Minister talked about building a confidence to invest, but business rates directly tax capital investment, rather than taxing profits or fixed stock of land. That needs to change. I reiterate the Liberal Democrats’ call for absolute reform of business rates and the introduction of a commercial landowner levy. That will tax the land value of commercial sites, not productive investments, and boost that productive investment, support our local businesses and help communities and local employers.

Many families have written to me about the changes to charitable rate relief for private schools. I support the calls from the Government Benches to improve all state schools, but parents decide to send their children to private schools for many reasons, including special educational needs, supporting their children’s specialist skills or because of bullying. We have a choice about how we raise that money. Instead of taxing the banks, is it fair to be taxing the education of other children to raise that money?