Monday 24th April 2023
(1 year ago)
Commons ChamberNon-Domestic Rating Act 2023 Read Hansard Text Watch Debate
This text is a record of ministerial contributions to a debate held as part of the Non-Domestic Rating Act 2023 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Financial Secretary to the Treasury (Victoria Atkins)
I beg to move, That the Bill be now read a Second time.
The House may have spotted that I am not in as full voice as I normally like to be. I promise that is not because I have been participating in the activities that I understand are going on outside in Parliament Square. I hope the House will understand if I do not take quite the number of interventions that I generally like to when opening a debate.
I believe that all of us across the House recognise how important business rates are to council budgets and the funding of core services. This year alone, business rates are set to raise more than £20 billion to fund vital services, from adult and children’s social care to refuse collection. However, business owners have raised concerns about the impact of this tax on their ability to stay competitive. That is why the Government have delivered and will continue to deliver on our commitment to reform business rates.
In the autumn statement, we announced substantial immediate support to help businesses adapt to the 2023 business rates revaluation. Today, we take another major step forward, turning our attention towards longer-term reform with the Non-Domestic Rating Bill. It will ensure a business rates system that is more flexible, transparent and fair.
Before I set out what the Bill delivers, I remind the House of the steps we have already taken to improve the business rates system. From April 2023, we have updated all rateable values for non-domestic properties, reflecting changes in the property market. The revaluation ensured a fairer distribution of bills between online and physical retail. On average, bricks-and-mortar retailers saw decreases of around 20%, but we did not stop there.
In the autumn statement, we announced a support package worth almost £14 billion over the next five years to support businesses. We have frozen the business rates multiplier this year—a £9.3 billion tax cut over the next five years—we have increased the retail, hospitality and leisure relief scheme from 50% to 75%, supporting around 230,000 properties, and we have removed unpopular downwards caps from the transitional relief scheme, ensuring that businesses immediately see the benefit of falling bills.
Turning to the Bill, business owners have been clear that a more frequent revaluation cycle would be extremely helpful. In place of the current five-yearly cycle, the Bill will implement a three-yearly cycle. The most recent revaluation took effect from this April, so the next will take place in 2026 and it will happen every three years thereafter. I understand that colleagues will ask, “Hang on a minute. Why every three years, rather than annually or every two years?”. The reason is that this single measure is a significant shake-up of the business rates system. An initial three-yearly cycle ensures that the Valuation Office Agency has the capacity to deliver these important reforms. I reassure the House that we will of course keep the system under review, with the aim of going even further if we can.
We are implementing a new duty for ratepayers to provide the VOA with information that supports valuation. That will be submitted through a new, simple online service. It brings business rates in line with wider tax practice, and it is a crucial first step towards going further on the frequency of revaluations in the future. We will make the valuation process clearer by increasing the transparency of the VOA’s work. The VOA has already delivered some improvements, but the Bill will allow it to go even further and provide more accessible information to ratepayers on how individual valuations have been reached.
Harriett Baldwin (West Worcestershire) (Con)
The Minister is speaking about the Valuation Office Agency, which gave evidence to the Treasury Committee last week. It reassured us that it was ready for these changes and on track for its computer system changes. Is that consistent with what she has been told?
Victoria Atkins
Yes, it is. Indeed, the VOA is very keen to get moving with this because, while it does a good job under the current system, it understands the difficulties that less frequent revaluations have posed for businesses, particularly given recent history with the pandemic. This is very much part of trying to sew the system together even more tightly, so that the VOA is able to fulfil its obligations to ratepayers.
We are going to clarify what sort of changes or events should lead to changes in rateable values between revaluations, with reforms to material changes of circumstances. Another key reform involves rethinking the way that the two multipliers or tax rates are calculated. We are making the recent practice of uprating the multipliers by the consumer prices index a permanent feature. Defaulting to this lower measure of inflation will help businesses struggling with rising costs. The Bill will also allow the Government to adjust either multiplier to a rate lower than inflation, and to prescribe which properties pay the lower or smaller multiplier, keeping business support adaptable to the fast-moving fiscal environment.
The key driver for all of these changes is to help businesses grow, and in so doing we want to remove barriers to investment and to incentivise growth. We are therefore creating an entirely new 100% relief for ratepayers making eligible improvements to their property. They will not face higher bills as a result of those investments for 12 months. I know that that is something for which businesses, and indeed colleagues, have been asking for some time. We will also enshrine in law the 100% relief for low-carbon heat networks that have their own rates bill. That is something we recently brought in with the support of local authorities, and it has been warmly welcomed by the business community.
The Bill shows that the Government are honouring our promise to British businesses that we will be there for them no matter what, so that they can continue to innovate, expand and thrive in a globally competitive economy. In the last six months, my right hon. Friend the Chancellor has announced almost £14 billion of support to the business rates system, and now through the Bill we are going even further. The Bill creates a modern system that can adapt to the ebb and flow of market tides. It delivers a fairer system that provides greater transparency for ratepayers and a business-friendly system that helps, not hinders, growth and rewards companies that invest. I commend it to the House.
The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Lee Rowley)
It is a pleasure to close this short but constructive debate on the future of the business rates system. As we have heard, our consumer habits are changing faster than ever before and with that come challenges for high-street businesses. The Government have conducted a review of business rates, as promised, and now, through this Bill, we will continue to reform them to better meet the needs of our economy, while sustaining vital taxpayer subsidy for local government.
In the time available, I wish to address some of today’s contributions. I was grateful for the comments of my hon. Friend the Member for Hastings and Rye (Sally-Ann Hart), who raised the important issue of smaller businesses and those in the hospitality and retail sector. I know, as do many of us across the Chamber, that there have been challenges in the past few years. I have seen that in my constituency, as will every Member in their constituency. That is precisely why the combination of what the Government have outlined in the autumn statement and in this Bill seeks to support businesses that are smaller or in those sectors, along with a wider group of businesses from across the economy. We are talking about 75% relief for retail, hospitality and leisure businesses; the removal of downward caps so that there is immediate relief when business rates reduce; and more than £14 billion-worth of relief. I hope that that goes some way to assuaging her concern.
My hon. Friend also rightly raised the issue of annualised revaluations, as did my hon. Friend the Member for Waveney (Peter Aldous), the Opposition Front-Benchers and the hon. Member for North Shropshire (Helen Morgan). As the Financial Secretary to the Treasury, my hon. Friend the Member for Louth and Horncastle (Victoria Atkins), outlined when opening the debate, we absolutely want to see more frequent revaluations. That is exactly why we have brought forward the proposals to move from a five-year revaluation cycle to a three-year one. We think that is a big step forward in making business rates more effective and closer to the businesses that pay them. We also recognise that this will take time and we need to do it in steps. As has been outlined by colleagues, we will continue to look at it and we hope we will be able to make further progress in the years ahead. The British Retail Consortium was mentioned in a number of speeches. Organisations such as the BRC have welcomed this approach, and I hope that Members from across the House will welcome the move to a three-year revaluation cycle.
Hon. Members have raised a point about data. It is always challenging to make the decision about where to request data and where to require it, and how to get the right balance between ensuring that the tax system is effective—we need data in order to make sure of that—and not creating an undue burden on businesses.
The purpose behind the collection of this data is to ensure both that we have the best information possible to make decisions in the future and that we balance proportionately the information that we collect to make sure that the tax is collected in the right way. I say to my hon. Friend the Member for Waveney that, with regard to the administrative questions, we are committed to a soft launch of the collection of this data. We will not activate the compliance regime until we are satisfied that it works, and we will be piloting it further with a range of users. We accept that we need to get this right, but the principles behind ensuring that we have the most up-to-date system, which requires data to achieve, are sound. It will be through the pilot and the review process, following the Bill hopefully becoming law, that we will be able to review the changes to make sure that they work for businesses in the best way possible.
Briefly, my hon. Friend the Member for Waveney also touched on clause 14, which recognises the particular challenge visible during covid. Of course everybody in this House will have hoped that highly unusual and atypical events such as covid could never happen, but because they have, it is incumbent on us all in this place to make sure that we have considered the situation should—hopefully it will never happen—such atypical events happen again in the future. We are trying through clause 14 to recognise that such things may happen, while hoping that they never will. I am grateful to my hon. Friend for his constructive comments. He says that the Bill is a step in the right direction, and we agree. I hope that my comments now have reassured him about those other steps that he is not yet sure about.
The hon. Member for North Shropshire made a number of important points about the burden of business rates, about ensuring that they are proportionate, and about the challenge of taxation in general. She is absolutely right to do so, but it would have made more sense had the Leader of the Liberal Democrats, the right hon. Member for Kingston and Surbiton (Ed Davey), not been out on the airwaves just a few days ago committing himself to spending more money, which the country does not have, and which taxes such as this have to pay for. There is a consistency problem with the Liberal Democrats. For those of us who are not in the Liberal Democrats, we recognise that consistency is something that they have never shown.
Finally, I welcome the fact that those on the Opposition Front Bench will not be opposing the Bill tonight. I also welcome their generally constructive comments, and I hope that I have been able to answer them, but—there is always a but with the Opposition Front Bench—the hon. Member for Luton North (Sarah Owen) suggested that we were waiting for a Labour Government to fix this issue. The question is what the fix would be, because we have put forward a plan that ensures relief for businesses up and down the land. Was she talking about the fix of 2021, when the right hon. Member for Leeds West (Rachel Reeves) was going to scrap business rates? Is it the fix a few days later, after 2021, when it was to significantly change business rates, but not to scrap them? Or is it the fix of 2022 when business rates were to be modernised but without any clarity as to how that would happen. The Labour party says what it needs to say, but it has no plan on issues such as this.
In front of us today is a Bill that improves and modernises our business rates and makes them more efficient and effective, on top of £14 billion of relief for all businessmen and women and all businesses across the country. It makes sure that those rates are as effective and efficient as they can be and that businesses in this country thrive in the future.
Question put and agreed to.
Bill accordingly read a Second time.
Non-Domestic Rating Bill (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Non-Domestic Rating Bill:
Committal
(1) The Bill shall be committed to a Committee of the whole House.
Proceedings in Committee, on Consideration and on Third Reading
(2) Proceedings in Committee of the whole House shall (so far as not previously concluded) be brought to a conclusion three hours after their commencement.
(3) Any proceedings on Consideration and proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion four hours after the commencement of proceedings in Committee of the whole House.
(4) Standing Order No. 83B (Programming committees) shall not apply to proceedings in Committee of the whole House, to any proceedings on Consideration or to proceedings on Third Reading.
Other proceedings
(5) Any other proceedings on the Bill may be programmed.—(Andrew Stephenson.)
Question agreed to.
Non-Domestic Rating Bill (Money)
King’s recommendation signified.
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Non-Domestic Rating Bill, it is expedient to authorise the payment out of money provided by Parliament of any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Andrew Stephenson.)
Question agreed to.
Non-Domestic Rating Bill (Ways and Means)
Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),
That, for the purposes of any Act resulting from the Non-Domestic Rating Bill, it is expedient to authorise:
(1) the payment of sums to the Secretary of State in respect of non-domestic rating,
(2) the payment of those and other sums into the Consolidated Fund.—(Andrew Stephenson.)
Question agreed to.
Monday 22nd May 2023
(11 months, 3 weeks ago)
Commons ChamberNon-Domestic Rating Act 2023 Read Hansard Text Watch Debate Amendment Paper: Committee of the whole House Amendments as at 22 May 2023 - (22 May 2023)
18:09 - The Committee divided: - Ayes: 168 / Noes: 282 - Question accordingly negatived.
This text is a record of ministerial contributions to a debate held as part of the Non-Domestic Rating Act 2023 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
Helen Morgan (North Shropshire) (LD)
I rise to speak to amendments 1, 2, 3 and 20, as well as new clauses 1 and 2, tabled in my name. I note the excellent speech by the hon. Member for Waveney (Peter Aldous), who tabled amendments with very similar objectives to my own. This Bill is a disappointment to all businesses who are struggling through tough financial conditions. Not only are prices going up for every single purchase that they make, but many small businesses were forced to lock into gas and electricity contracts at astronomical rates last year and are no longer receiving any meaningful support with those energy costs. They may also be struggling with interest rate rises on their borrowings following the period of economic chaos caused by the Government last autumn.
This Government committed to reviewing the system of business rates fundamentally in their 2019 manifesto, but this Bill offers only peripheral changes to an outdated system that does not work for a modern economy. The Bill offers to change the timescale of revaluations from every five years to every three years. This is a welcome reduction, but Liberal Democrats believe that it does not go far enough. The reality for businesses is that a three-year gap between revaluations means that they will continue to pay rates that are far from reflective of the real economic conditions they are operating in. Amendments 1, 2 and 3 would require non-domestic rating lists to be compiled every year and make every year from now on a relevant period for transitional provision under the Local Government Finance Act 1988. Annual revaluations are possible. We only need to look to the Netherlands, where they have been taking place since 1995. There, rateable values are allowed to move with the local economy. This means the tax that businesses are required to pay better reflects the conditions that they face.
I also want to spend a little time on amendment 20, tabled in my name. It is estimated that as a result of the Bill as it stands, 700,000 small businesses who currently pay no business rates at all will need to submit annual reports to the Valuation Office Agency, even when there has been no change to the premises they occupy. These small businesses, like many in North Shropshire, are already plagued by seemingly endless monthly and quarterly Office for National Statistics returns, along with their ongoing tax and financial reporting requirements.
The Bill adds yet another administrative hoop for these businesses to jump through and threatens hefty penalties if forms are completed incorrectly. This piles unnecessary pressure on to small businesses and it will not raise any more tax for public services. These businesses already receive a notification to inform the VOA if there is a material change in their premises, so there is nothing to be gained from this element of the Bill. Amendment 20 attempts to deal with this problem by removing the requirement for annual reporting of no change for those businesses in receipt of small business rate relief. I urge the Minister to support amendment 20, which I intend to push to a vote, and to cut unnecessary red tape for the small businesses we desperately need to help, in order to drive economic growth and breathe new life into the high streets of our historic market towns.
I also wish to speak to new clause 1, tabled in my name. It seems very one-sided to impose punitive fines on businesses for failing to report updates to the VOA on time, without any reciprocal expectations of that agency. As I outlined on Second Reading, dealing with the VOA over changes to a premises can be a protracted affair, and all the time that that is going on, businesses face uncertainty about their rates liability and, critically, cannot plan their cash flow. New clause 1 would require the VOA to report to the Secretary of State on its performance in detail at least once a year. This report should correspond to targets to be set by the Secretary of State. The new clause also calls for the findings of these reports to be laid before Parliament. I have suggested targets, rather than legally binding levels of service, to reflect the fact that no two premises are the same and that updates can be complex and can be challenged, but those targets would at least set an expectation of performance and ensure some accountability for the VOA.
Lastly, I wish to draw attention to new clause 2. I think there is general agreement on both sides of the Committee that we want to see our high streets and market towns thrive. This is especially true in places such as the five historic towns in my North Shropshire constituency, where the local high street is not just a practical place to go to but a social lifeline for many residents. Those high street shops are in competition with online retailers whose warehouse premises have a much lower rateable value per metre squared, putting the high street at a disadvantage. This was confirmed in the Treasury Committee’s “Impact of business rates on business” report in 2019.
Disappointingly, however, the Bill does not take this discrepancy into consideration. Instead, the Government will continue to drain physical retailers through rates that do not reflect the challenges they are already facing, leaving many at a tipping point and struggling to compete on an unfair playing field. New clause 2 would require a review of the impact of non-domestic rateable values on competition in different parts of the retail sector, so that Members could understand the true scale of the issue and inform policy accordingly. This review should be commissioned within six weeks after the date this Act is passed. Overall, I urge Ministers to support these amendments and new clauses in order to improve the Bill, which is just not ambitious enough in fundamentally reforming an out-of-date tax system.
The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Lee Rowley)
I am grateful to all colleagues across the Committee for their contributions today. I think all of us spoke on the Bill’s Second Reading, and we have rehearsed the arguments on a number of these points already. It is important to reiterate from the Government Front Bench that this Bill delivers significant reforms for the business rate system. It increases the frequency of revaluations, which I think has been generally welcomed across the Committee today. It also modernises the administration of the tax and it provides new reliefs to support things such as property improvements. Taken along with the nearly £14 billion-worth of taxpayer subsidy for businesses this year, it helps to manage the tax burden amid the ongoing pressures that the hon. Member for North Shropshire (Helen Morgan) mentioned.
I will now turn to the contributions that hon. Members and hon. Friends have made today. My hon. Friend the Member for Waveney (Peter Aldous) made an incredibly constructive set of comments, and I completely understand the sentiments behind many of the amendments he has tabled. He set a challenge at the outset of his speech, saying that he is looking to move towards annual valuations, the removal of complications and the adoption of digitalisation. We are making progress in two of those three areas, which I hope is not bad, and he has indicated that, overall, this is a step in the right direction. We are moving from five-yearly valuations—in reality, they have happened every seven or eight years in some instances in recent years, for good reason—to three-yearly valuations. We are moving towards the collection of further digital data, and we are continuing to support businesses, where we can, through the reliefs we have put in place.
Lee Rowley
The hon. Lady is going to tell me exactly where she would find several hundred billion pounds to fill her black hole.
Helen Morgan
Amendment 20 is about cutting red tape for small businesses. Does the Minister agree that he is talking about policy objectives that are not relevant to the Bill?
Lee Rowley
That tells us everything we need to know about the Liberal Democrats. They want to talk about only this Bill, ignoring every other policy. They look one way when talking to one part of the country, and the other way when talking to the other part of the country. That shows the Liberal Democrats’ lack of seriousness in understanding how taxation actually works, in understanding how to run a modern, dynamic market economy and in understanding how we need to pay our way to make sure our economy is successful in the long term. It is for those reasons that we oppose amendment 20.
Peter Aldous
The points I made were genuine. I think this Bill needs to be changed, and I hope the Government will have an open mind in considering whether to do so in the other place. We may well review this situation again.
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 1 ordered to stand part of the Bill.
Clauses 2 to 12 ordered to stand part of the Bill.
Clause 13
Requirements for ratepayers etc to provide information
Amendment proposed: 20, on page 23, line 35, at end insert—
“4LA Paragraphs 4K and 4L do not apply if P is eligible for small business rate relief (for example, because the rateable value of the hereditament for which P is or would be a ratepayer is less than £15,000).”—(Helen Morgan.)
This amendment would exempt businesses in receipt of Small Business Rate Relief Exemption from annual reporting if there is no change to report.
Question put, That the amendment be made.
Lee Rowley
I beg to move, That the Bill be now read the Third time.
It has been a pleasure to support the progress of this Bill through the House. I do not seek to detain the House for long, but let me say briefly that the Bill offers some of the most substantial reform to the business rates system since its inception in 1990 and meets our commitment to reform and reduce the burden of the tax on business. By moving to more frequent revaluations from 2026, we are delivering on a key ask of business. We have been up-front with the House and with businesses that meeting this commitment is a major ask, which is why we have made some changes to the way ratepayers interact with the Valuation Office Agency. That principle was accepted by respondents to the review that predated this legislation.
Our approach has been to listen and to take appropriate action. I have already mentioned the evidence-based approach that we adopted in that review and the close dialogue that we foster with our partners in business and local government. We are also taking action to reform transitional relief, which was the No. 1 one ask from stakeholders on business rates ahead of the 2023 revaluation. That is a major commitment, a major step to supporting fairness and a major improvement in the credibility of our business rates system.
Finally, we are happy to have agreed to the Welsh Government’s request for various measures to be extended to Wales, and also to be supporting Northern Ireland with a data sharing measure.
I conclude by expressing my thanks to all Members for their contributions on Second Reading and in today’s debates. Although we have not agreed on everything, this has been a useful and constructive session. I am grateful to the Clerks of the House for supporting the smooth running of the Bill and to all of the teams across the Department and those in the Treasury, His Majesty’s Revenue and Customs and the Valuation Office Agency for their help in preparing the Bill. I look forward to watching the Bill’s progress in the other place, and I commend it to the House.
Monday 19th June 2023
(10 months, 3 weeks ago)
Lords ChamberNon-Domestic Rating Act 2023 Read Hansard Text Watch Debate Amendment Paper: Committee of the whole House Amendments as at 22 May 2023 - (22 May 2023)
This text is a record of ministerial contributions to a debate held as part of the Non-Domestic Rating Act 2023 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
Baroness Scott of Bybrook
That the Bill be now read a second time.
The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)
My Lords, this Bill delivers important changes to the business rates system. Business rates are a key component of the way in which local services are funded and are set to raise almost £25 billion this year. However, in recent years, concerns have been raised about the fairness of the tax and its impact on a competitive business environment.
Taking on board these concerns, the Government committed to reviewing the business rates system. We completed this process in October 2021, following extensive engagement with businesses, councils and others. The conclusions were clear: like any tax, the business rates system has flaws but it also has significant advantages that are important to protect. These include the tax’s relative stability, how easy it is to collect, how hard it is to avoid and its clear links to the locations where its revenue is spent. The majority of respondents to our review supported the continuation of business rates and did not support the disruption of a major overhaul. Overwhelmingly, they favoured measures to modernise the tax—especially moving to more frequent revaluations, which I will turn to shortly.
At the conclusion of the review in 2021, the Government announced a £7 billion package of support for businesses over five years, alongside a package of reforms. Since then, the Valuation Office Agency has delivered a revaluation, completing valuations for around 2 million properties in England, which reflects changes in the property market since 2015. Revaluations are crucial to ensuring a fairer distribution of rates bills. This revaluation, for example, rebalanced the burden between online and physical retail: on average, bricks and mortar retailers saw decreases of around 20%.
We made sure that the revaluation was manageable for businesses by introducing a £13.6 billion package of business support, which included freezing the business rates multiplier at a cost of £9.3 billion over the next five years. The Government have therefore provided considerable support into the business rates system while balancing the needs of local communities, which rely on funding for local services. However, we remain focused on the need for longer-term reform.
Throughout our review, businesses expressed their desire to keep business rates as accurate and responsive as possible. The Bill therefore delivers a more frequent revaluation cycle for business rates, moving from five-yearly to three-yearly. Following the revaluation that took effect this April, the next will occur in April 2026 and every three years thereafter. This is a positive step for business as it will ensure that the tax is fairly distributed more frequently. It is a major reform of the system, responding to the calls of many stakeholders, and is deliverable in the short term.
However, I recognise that there have been calls for greater ambition. Let me be clear: we are prepared to explore how we can go further in future. In particular, we wish to reduce the gap between the date against which rateable values are assessed and when they come into force, which has been set at two years for the 2026 revaluation. We will also carefully consider the case for an annual revaluations cycle in the longer term. However, we must take these steps sequentially. To deliver a revaluation, the VOA must carry out 2 million valuations in the time available—a major endeavour. Moving to more frequent revaluations means that other changes are necessary to enable the Valuation Office Agency to compile more accurate valuations at greater speed.
We have heard repeatedly from businesses that getting these valuations right is vital to sustaining public confidence in the tax. We also heard concerns that moving to an annual cycle would increase the volatility of bills and potentially damage the accuracy of valuations. It is therefore right that we monitor the implementation of the first three-yearly revaluation cycle and the supporting reforms before taking further action.
Delivering three-yearly revaluations on a sustainable basis will rely on the VOA having access to more timely and complete information. The Bill therefore introduces new obligations on ratepayers to provide the VOA with relevant information. This will bring business rates in line with other taxes, where self-declaration is absolutely the norm.
As part of our wider modernisation of the business rates system, the Bill also introduces a new requirement on ratepayers to provide a taxpayer reference number to His Majesty’s Revenue & Customs. This small extra step will connect the business rates information held locally by councils with HMRC tax data, delivering benefits such as better targeting of and improved compliance with rates relief schemes. Ratepayers will also be able to provide relevant information to the VOA, and their taxpayer reference number to HMRC, through a single straightforward online service on GOV.UK.
It is entirely right that we consider the potential burden on businesses of new administrative requirements. The Government have taken steps to minimise these burdens, have published estimates of the expected costs and will provide guidance for ratepayers.
I want to address some specific concerns about the VOA duty to notify that have been raised with me. First, on what information the Government are asking ratepayers to provide, the duty is not limited to information that the Valuation Office Agency needs to do its job and no more; it is also explicit on the face of the Bill that ratepayers will be expected to provide to the Valuation Office Agency only information that is within their “possession or control” and which they could reasonably be expected to know would assist the valuation office. The VOA will continue to make use of supplementary sources of evidence in order to minimise the burden on ratepayers.
Secondly, let me provide some reassurance about whether this will be complex for ratepayers. To comply with the duty, in practice a ratepayer will only have to visit GOV.UK, use the online service and answer all the questions asked of them. They will receive multiple reminders to support them in providing the right information.
Thirdly, to ensure that the VOA has the most complete set of information to deliver more frequent revaluations, it will be necessary for ratepayers to confirm each year that the information that the VOA holds on their property is correct. For ratepayers whose information is up to date, this step should take only a few minutes. For those who have not remembered to keep their information up to date, this stage will serve as a further reminder to rectify that.
Finally, we will continue to design the new processes in partnership with businesses and interested parties, and we will not activate the duty until we are satisfied that ratepayers can reasonably and efficiently comply. I thank those noble Lords who came to the drop-in sessions. That gave me the ability to answer those questions up front, although I am of course happy to pick up anything further in winding up.
As we move to more frequent revaluations, the Government have considered how to improve the support that we provide to businesses adapting to changing bills. At last year’s Autumn Statement, the Chancellor announced that he would permanently remove the requirement for revenue neutrality from transitional relief. That change is given effect by this Bill. This means that for the 2023 revaluation, there are no downward caps, which previously restricted falls in bills. Businesses have therefore seen the full benefit of falling bills immediately. As a result, the 300,000 properties with falls in rateable value at the revaluation have seen the full benefit of that reduction in their new business rates bill from April 2023. Going forward, we will use that freedom to permanently fund all future transitional relief schemes without recourse to downward caps. I am happy to give that commitment in the House.
It is also important that we protect the integrity of revaluations. Between revaluations, rateable values should change only for a material change in circumstances, or MCC. MCC challenges are designed for cases such as roadworks outside a shop causing access difficulties. This Bill will preserve that principle by providing that changes in legislation, advice or guidance by a public body are not a material change in circumstances. We consider that such matters are related to the general conditions of the market and so belong in the revaluation process.
Interestingly, the noble Earl, Lord Lytton, identified the scenario of a vaping ban as an example of how this measure could have unwarranted consequences. In fact, his example underlines why we need to clarify the law concerning MCCs. Without this clarity, over recent years the Valuation Office Agency has been forced to consider whether legislation changes such as smoking bans or the introduction of the congestion charge should affect rateable values. The result was uncertainty for the ratepayer and for local government.
In the future, we will have clarity in Clause 14, ensuring that changes in legislation such as that, which clearly concern the general economic conditions and level of rents, are reflected for all at the next revaluation. These revaluations will of course be happening more frequently under this Bill, and any physical consequences of new legislation on a property will continue to be reflected as and when they arise.
This Bill also introduces an important new relief to support businesses investing in their properties, responding to another key stakeholder ask during the review. Currently, our business rates are a tax on the value of the property, so businesses may see an immediate increase in their rates bill for any improvements that they make to their property. From 1 April 2024, this Bill will mean that no business will face higher business rates bills for 12 months as a result of qualifying improvements to a property that they occupy. The Bill prescribes powers for Ministers to set conditions for the availability of the relief, and the Government’s policy on this has been set out in our earlier technical consultation. My department has published draft regulations for consultation so that noble Lords may review how the Government intend to exercise these powers.
Finally, the Bill makes changes to the calculation of business rates multipliers—or tax rates. In recent years, government policy has been to uprate the lower multiplier each year by the consumer price index rather than the higher retail price index. The Bill ensures that the CPI is the default uprating for both multipliers, reducing the potential inflationary burden on businesses. The Bill also provides a power to uprate at a level lower than CPI, and to directly set which properties are subject to which multiplier, allowing the Treasury greater flexibility in the support it can provide.
In conclusion, this Bill modernises the business rates system by bringing valuations more in line with the property market, improving the data underpinning the system, removing barriers to investment and improving fairness. I look forward to hearing the contributions of noble Lords on this important subject. Many of your Lordships have called for reform of this tax for some time, and I am confident that this Bill delivers it. I beg to move.
Baroness Scott of Bybrook (Con)
My Lords, it is a pleasure to close the debate, and it has been a pleasure to listen to such thoughtful contributions. The noble Baroness opposite is absolutely right: I have got a lot of questions. I am bound not to remember all of them, but I will write a letter afterwards to make sure that everything is set. I will also offer more meetings, if noble Lords would like them, before Committee.
It is right that we strive towards the best possible business rates system: one that balances the needs of the taxpayer with the importance of sustainable services in local communities. It has to be a balance. A lot has been said about business rates being too high, but, as we know, if business rates go down, so does the money that local authorities get. We need to get the balance right.
The Government’s review of business rates considered how to improve the tax from a range of angles, and this Bill makes a series of significant improvements which will have considerable benefits for those who pay the tax and those who rely on it. As I said, I am very grateful for the contributions that have been made. I will try to answer as many of the questions as I possibly can, with my many bits of paper.
The noble Lord, Lord Shipley, the noble and learned Lord, Lord Etherton, and many others have suggested that we adopt a short evaluation cycle of one or two years. As I set out in my opening speech, we are happy to consider this carefully in future, once the reforms in the Bill have been implemented. However, it is vital that we approach these changes sequentially to ensure that we can deliver more frequent revaluations and avoid destabilising the tax. If we go too fast, that is what might happen.
The noble Lord, Lord Shipley, asked whether we could increase the threshold in the small business rate relief scheme or otherwise reduce the multiplier. The Government’s generous small business rate relief scheme already sees over a third of properties pay no business rates at all, and that is worth £2.1 billion per year. Further increases in the threshold for the SBRR would be a broad-based and indiscriminate way to provide support, and would therefore be a poorly targeted type of relief. However, the noble Lord welcomed the considerable support we are providing to businesses under the existing schemes, and obviously we will keep them under review.
The noble Lord, Lord Shipley, the noble Earl, Lord Lytton, and the noble Baronesses, Lady Pinnock and Lady Thornhill, and others asked about the transparency and performance of the VOA. If there are any changes, it is important that it can take those changes, work with them and deliver. I assure noble Lords that the VOA will continue to publish targets for its timeliness under the new system and measure performance against them. Current targets cover timeliness on maintenance reports and the check stage of the appeals process. While the new targets will be informed by the development of the new system, the Government are very clear that these must be both ambitious and deliverable. The VOA must deliver on those targets.
The noble Lord, Lord Shipley, referred to the role of land values in the tax such as it is. The Government consider that the arguments in favour of a land value tax are not supported by the evidence. A land value tax would also inevitably increase the tax burden for properties on large pieces of land, such as golf courses or farms, whereas densely developed land, such as that of the Shard, would see lower bills. I understand that he indicated his support for the tax based on rates, which is how business rates work, and I welcome that observation from him.
The noble Earl, Lord Lytton, the noble and learned Lord, Lord Etherton, the noble Baroness, Lady Thornhill, and others asked how we have framed improvement relief and whether it will in fact provide the incentive for property investment—this is very important. The relief is designed to help occupiers make improvements to their existing premises, rather than subsidising general commercial property development. The Government consider that a 12-month relief will allow time for the benefits of the property investments to flow through into businesses. We will keep this under review; in particular, we will review this scheme in 2028.
The noble Earl, Lord Lytton, asked whether we had assessed the impacts of the new duties. We have carefully considered the impact of the duties on businesses and published two impact notes to outline the estimated costs of complying with the new duty. The VOA estimates the cost of the new information duty to be £35 per ratepayer each year. The current system costs ratepayers £15, so this is an increase of £20 each year. The HMRC duty for tax reference number is estimated to be about £2 for most businesses, and no more than £6 in those cases where finding a suitable tax reference number takes a bit longer.
The noble Earl, Lord Lytton, asked whether guidance will be available to help ratepayers comply with these duties. As I said, the Government will not formally activate the VOA duty until we are absolutely satisfied that ratepayers can reasonably and efficiently comply with it through the online service. Guidance and support will be offered to those engaged in the soft launch of the system. As is the purpose of the soft launch, the guidance will be developed as we learn from engagement with users.
The noble and learned Lord, Lord Etherton, raised concerns about those eligible for the 100% relief and whether they should be subject to these duties. Information collected by the VOA on a specific property is often used in the valuation of other comparable properties, many of which may not receive 100% relief. For instance, a small independently owned shop which pays no rates would have to pay business rates if it were occupied by a large chain, such as Co-op. It is important that we have all that information collected for all properties. However, as I said, we will not formally active the duty until we are absolutely satisfied that all ratepayers, including those getting 100% relief, can reasonably and efficiently comply with it.
The noble and learned Lord, Lord Etherton, the noble Baroness, Lady Thornhill, and others set out why the level of business rates is considered too high. As I said, business rates are an essential form of funding for local government, providing vital public services and supporting the Government’s levelling-up agenda. The Government have taken action to hold the tax rate steady over the last three years, protecting businesses from inflationary pressures at a cost of around £3 billion each year from 2023-24. Given the difficult fiscal position, it would not be responsible to cut the rate further, with a 1p cut costing approximately £600 million per year.
The noble Baroness, Lady Thornhill, asked whether the VOA would be able to cope with the reforms. The VOA has plans in place to enable the delivery of the reforms in the Bill; the Government have invested to make that change a reality, with £0.5 billion for the VOA as part of the spending review; this includes funding for important changes to upgrade IT infrastructure and digital capabilities.
The noble Lord, Lord Thurlow, spoke about the transparency of the VOA’s work. The Government committed in the 2020 business rates review to reforming the VOA’s processes to make them more transparent. The duty contained in the Bill is essential for the VOA to implement its offer of improving transparency, and we remain committed to that aim.
The noble Lord also raised important points about the danger of rogue agents, as did other noble Lords. I can assure him that we will be consulting on agent behaviour as part of the avoidance and evasion consultation. As he notes, the majority of agents are legitimate organisations that are typically registered with one of the main professional bodies that he mentioned and provide a valuable service to their clients. Nevertheless, some agents seek to take advantage of their clients or actively to promote rate mitigation strategies. The consultation will, therefore, seek to understand the nature and scale of these issues and identify potential actions that the Government can take to help address these practices. While I am on this subject, I wish the noble Lord a very good day tomorrow. I hope that he will feel much better after it.
I move on to important points raised by the noble Baroness, Lady Pinnock, and all other noble Lords. All brought up the issue that the Government have not addressed the imbalanced treatment of the high street and online businesses. We recognise the concerns that people have raised and we have taken significant steps to tackle this. The Government looked at the case for taxing businesses differently, through our review of business rates and through a separate consultation on an online sales tax. Our review made it clear that people were not supportive of penalising specific sectors or properties through business rates. The Government reviewed the feedback that they received from stakeholders over the online sales tax consultation period and announced at the Autumn Statement of 2022 their decision not to proceed with such a tax.
In summary, the evidence received suggested that an online sales tax would have been extremely complex to design and implement and would create undue administrative burdens for businesses. This includes challenges of defining the boundaries between what is online and what is instore retail, including the knotty issue of click and collect, which came up. Rather than penalising innovative online businesses, we have chosen to focus on supporting those high street businesses most in need, with an improved relief for retail, hospitality and leisure businesses, worth £2.1 billion this year, offering 75% off bills up to a cash cap. That is the way we have decided to do it.
The noble Baroness, Lady Pinnock, also brought up the issue of business rate consultation on avoidance. At the Spring Budget, the Chancellor announced that the Government would consult on business rate avoidance and evasion, and that the consultation will look at the three or six-month period of relief available for empty properties. Our concern is to ensure that landlords are not avoiding paying rates, which I hope gives some reassurance. The noble Baroness also asked about the Government reforming empty property rates. As I said, we will consult on business rates avoidance and evasion and look at that issue further. Our concern is to ensure at all times that landlords are not avoiding paying rates—that is the important part.
The noble Baronesses, Lady Pinnock and Lady Hayman of Ullock, brought up the issue of the cost to local authorities, as did the noble Baroness, Lady Thornhill. I am not sure about this, but I am pretty sure that local authorities will get new burdens, if there are new burdens—but I shall check exactly how that is going to happen and write it in my following letter.
That is as much as I have, but I shall look at Hansard tomorrow. I shall answer all the questions and put the answers that I have already given in writing as well. As I said, we can meet again if any noble Lords would like to before Committee. The changes that the Government are making to the business rates system will help businesses grow and prosper, and I thank noble Lords for their basic welcome of the Bill. The Bill reforms rates so that they more accurately reflect the property market—and we are also addressing the perception that tax is a barrier to investment. The changes in this Bill will lead to fairer and more accurate bills and a more adaptive system, capable of keeping up with the changing modern economy.
Baroness Scott of Bybrook
That the bill be committed to a Grand Committee, and that it be an instruction to the Grand Committee that they consider the bill in the following order: Clauses 1 to 17, Schedule, Clauses 18 to 20, Title.
Monday 3rd July 2023
(10 months, 1 week ago)
Grand CommitteeNon-Domestic Rating Act 2023 Read Hansard Text Amendment Paper: HL Bill 140-I(a) Amendment for Grand Committee (Supplementary to the Marshalled List) - (30 Jun 2023)
This text is a record of ministerial contributions to a debate held as part of the Non-Domestic Rating Act 2023 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
Baroness Pinnock (LD)
My Lords, at the outset of the debate I remind the Committee that I have relevant interests as a councillor and as a vice-president of the Local Government Association.
This group of amendments is significant because it focuses our attention on energy efficiency and on how the business rates system could be adjusted to encourage more businesses to improve the energy efficiency of their premises. Amendment 1, in the name of the noble Lord, Lord Ravensdale, is important in that regard. As he said, an earlier Bill on non-domestic rating focused on relief for energy generation and storage, but not energy efficiency. Energy efficiency is the non-glamorous side of getting to net zero. It is about improving the general energy efficiency of buildings through loft and cavity wall insulation, putting in more efficient heating systems and so on.
I have a high regard for Amendment 1 for the reason that the noble Lord outlined, which is that the payback period for energy-efficiency improvements can be very long. Therefore, giving just one year’s relief is a drop in the ocean. If we want to encourage businesses to make these improvements and to invest in their property by improving their energy efficiency, there must be relief on business rates. This is a positive amendment and, if the noble Lord, Lord Ravensdale, wants to pursue it on Report, I am sure that we will give it positive consideration.
The other amendments in this group, in the name of the noble Earl, Lord Lytton, suggest five years of relief. That is another way forward. I think that we will have to debate five years of relief or unlimited relief. If we are really concerned about getting to net zero, there has to be a real incentive to do so.
I co-signed Amendment 5, in the name of the noble Baroness, Lady Hayman of Ullock, about heat networks because I thought that it was important in itself. The Government have a scheme—the heat network efficiency scheme—which gives grant funding to communal heat networks or district heating schemes. This amendment matches well with that. If the Government are giving with the one hand but taking with the other, that seems a negative approach to encouraging heat network schemes. That is why I very much support Amendment 5 in particular.
Maybe when we get to Report the amendment will not say “2050” but will be unlimited, matching the other amendments in this group, which are making a positive push towards getting businesses, via the relief through the business rates system, to become more energy efficient. These are all good, probing amendments. I know that the Minister is supportive of energy-efficiency schemes and moving towards net zero, so I look forward to her positive response to this group of amendments.
The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)
My Lords, I start by welcoming our new Deputy Chairman of Committees on his first outing today. I think that I am allowed to say that—anyway, I have said it.
These amendments from the noble Lord, Lord Ravensdale, the noble Earl, Lord Lytton, the noble and learned Lord, Lord Etherton, and the noble Baronesses, Lady Hayman and Lady Pinnock, concern the two new business rate reliefs introduced by the Bill: the new improvement relief and a relief for low-carbon heat networks.
First, on the improvement relief, during the review of business rates a key ask from ratepayers was support for those businesses looking to improve their property. Clause 1 delivers on that ask by introducing the improvement relief. The noble Earl, Lord Lytton, asked about the definitions of “improvement” and “relief”. These definitions are in the draft regulations, on which we are consulting. We will consider those matters following consultation.
Clause 1 will ensure that from 1 April 2024 no business will face higher business rates bills as a result of qualifying improvements it makes to a property it occupies, in the 12 months following those improvements. When a ratepayer makes improvements to the rateable part of their property, that is likely to increase its rateable value and, therefore, the rates bill. To deliver the relief, Clause 1 will ensure that, where that happens and the qualifying conditions for improvement relief have been met, that increase in the rateable value will be delayed for 12 months. Clause 3 does the same for the central rating list.
As is common for business rate reliefs, the detailed rules will be in regulations made under the powers in these clauses. My department has published those regulations in draft so that the House may see during the passage of the Bill how we intend to use these powers.
The amendments we are considering in relation to improvement relief, from the noble Lord, Lord Ravensdale, the noble Earl, Lord Lytton, and the noble and learned Lord, Lord Etherton, seek to extend the period of relief from one year to five years and to allow unlimited relief for energy-efficiency improvements.
Of course, I understand the concerns we have heard and why some consider that the relief should be extended. It is a question we face when we come to consider and review all the reliefs in the business rates system. We recognise the importance of energy-efficiency improvements to properties. We have already ensured that eligible plant and machinery used in onsite renewable energy generation and storage, such as rooftop solar panels, wind turbines and battery storage, are exempt from business rates from 1 April 2022 until 31 March 2035. Onsite storage used with electric vehicle charging points is also exempt. We have done this using existing powers.
However, as with all tax breaks, we must balance the need for support with the need to fund the vital public services that those taxes support. In the case of improvement relief, we considered these matters at length during our review and, following extensive engagement with business groups, settled on a 12-month relief.
Under the current system, as one would expect for a tax based on the value of property, businesses may see an immediate increase in their rates bill for improvements they make to their property, where those improvements increase the value of the property, but they may see a lag in the return or income that flows from that investment.
Baroness Scott of Bybrook (Con)
My Lords, I will continue. The 12-month relief will provide a breathing space for the investment to start to generate returns before business rates have to be paid. I know that some feel that 12 months is not long enough to incentivise the types of major refurbishment and improvement often made to properties by landlords and developers. However, as I explained to the House at Second Reading, this relief is designed to help occupiers make improvements to their existing premises rather than subsidising general commercial property development.
The noble Baroness, Lady Hayman of Ullock, asked what “occupied” meant. We already have a current discretionary heat network scheme that we have worked up with full guidance in partnership with the heat network sector and local government. That guidance is already published. Once the Bill receives Royal Assent, we intend to translate that guidance into regulations and to make those in good time to ensure a seamless transition between the current discretionary scheme and the new mandatory scheme. I suggest that noble Lords look now at the guidance as it will make it clear what will go forward. In the meantime, we will work with the heat network sector on the regulations in case they need any tweaking.
Nevertheless, as this is a new relief, it is right that the Government evaluate whether it is working and delivers value for money. Therefore, the Bill as currently drafted includes powers to extend the duration of the improvement relief and in 2028 the Government will review the scheme. That will be the appropriate time to consider whether to continue with the scheme and how effectively the relief is operating. As part of that review, we will consider whether 12 months remains the correct duration for the relief. We have, however, allowed for a longer period of relief for low-carbon heat networks, given the particular role that they play in reducing our dependence on natural gas. That relief runs until 2035. Amendment 5, from the noble Baronesses, Lady Hayman and Lady Pinnock, would extend that to 2050. As with improvement relief, we have to balance the need for support with maintaining the services funded from the tax, as I have said. The end date in the Bill aligns with our ambition to phase out new natural gas boilers by 2035. By that date, new low-carbon heat networks will no longer have to compete with natural gas alternatives. Under those circumstances, we hope that the relief will no longer be necessary and, therefore, 2035 will be the right time to end the relief. However, as with the improvement relief, we will keep this under review and the Bill includes powers for us to extend the 2035 date, if it is necessary at the time.
I hope I have given noble Lords the explanations and assurances that they were seeking and that the noble Lord is able to consider withdrawing his amendment.
The Earl of Lytton (CB)
The Minister mentioned regulations following Royal Assent and I am happy with that, but could she confirm that this will have a consultation process attached to it? She also referred to something that I interpreted as a post-legislative review. What is the framework for that in this instance?
Baroness Scott of Bybrook (Con)
On the regulations, we are consulting at the moment and that will be discussed afterwards. If noble Lords want to put anything in, I suggest they look on GOV.UK. I shall sit down so that the noble Earl can ask his second question because I did not quite pick it up.
The Earl of Lytton (CB)
It was about the post-legislative review and its framework, in so far as it would apply to the workings of the Bill once it gets Royal Assent.
Baroness Scott of Bybrook (Con)
As far as I know, we do not have a framework yet, but as soon as we have—I assume it will go out to some sort of consultation—I shall make sure that noble Lords are aware of when it is issued.
Lord Ravensdale (CB)
My Lords, the noble Earl, Lord Lytton, made a compelling argument for a general extension of improvement relief, as did the noble Baronesses, Lady Pinnock and Lady Hayman, for extending heat network relief. For me, this is all about joining the dots across the legislation, so that we have a coherent picture. As the Minister said, we already have a permanent exemption for renewable energy and storage. All these factors feed into our overall strategic targets, so we need a coherent picture across the legislation. The Minister rightly talked about fiscal responsibility and the need to bear it in mind.
The other side of the picture, to counter that, are all the benefits to increasing private investment—in the case of energy efficiency, lower bills—and the benefits from overall economic growth that would flow from that. I look forward to further discussions with the Minister leading up to Report, but for now I beg leave to withdraw my amendment.
Baroness Hayman of Ullock (Lab)
My Lords, I thank the noble Baroness, Lady Pinnock, for introducing this group with Amendment 7, which seeks to change the Bill so that lists must be produced every two years instead of three. Today’s discussion has demonstrated that noble Lords think that this needs to be revisited and that perhaps three years is too long.
I am quite interested in Amendment 9 in the name of the noble Earl, Lord Lytton, which would allow SIs to be introduced to change it to one or two years. Bringing in flexibility to adopt a shorter cycle without that kind of prescription is a really interesting idea and approach. In principle, we would support that; my only concern is that the SI procedure has not exactly gone entirely smoothly in recent years. To get our full support to move in that direction, we would need to ensure that SIs are managed better than they have been recently.
The noble Baroness, Lady Pinnock, made some important points about the need for business confidence regarding valuations. That is incredibly important, particularly given the uncertainty resulting from inflation, various costs—of energy, for example—going through the roof, the challenges following the pandemic, the business rate holidays that have moved or not moved, and the differences resulting from where in the country you may be. None of that helps with certainty for businesses, particularly those that have retail in different parts of the country.
Another really good point was made about the fact that a small but perfect group is taking part in these discussions. Here we have noble Lords with real and practical experience and knowledge, which I hope will be helpful as we move through Committee.
The Chartered Institute of Taxation has agreed that moving initially to three-year revaluations would provide a balance between the administrative costs and the need for regular revaluation to reflect the economic conditions of business. But it also said that, given the rapidity of changes in business and shopping practices, the Government should consider a phased approach to achieving more frequent revaluations, and that this should remain under evaluation. Given the different amendments we have today and the discussions that we have had, will the Minister consider taking back to her department the introduction of a phased approach? I know that in the letter to noble Lords following Second Reading, she said that the Government will
“carefully consider the case for even greater frequency of revaluations once the new system changes have bedded in”.
That brings us to the point made by the noble Lord, Lord Thurlow, who suggested that waiting for that three-year cycle to bed in might be very helpful. He made the point that we need to listen to the experts and advisory groups and make sure that we get this right, because anything over two years goes out of date very quickly. The Labour Party position is that we should have more frequent valuations. We have talked about them being annual, but of course this has to be right, and it has to work for business.
Finally, on Amendment 14, tabled by the noble Earl, Lord Lytton, on the abolition of downward caps, it is concerning that the downward caps can prevent savings being passed on to businesses and could mean that they unnecessarily pay more in business rates. It is an important amendment, and I would be interested to hear what reassurances the Minister can give the noble Earl.
Baroness Scott of Bybrook (Con)
My Lords, this group of amendments takes us to the heart of the Bill; namely, our commitment to modernise the business rates system through more frequent revaluations. Amendments 7 to 13, from the noble Baroness, Lady Pinnock, the noble Lords, Lord Shipley and Lord Thurlow, the noble Earl, Lord Lytton, and the noble and learned Lord, Lord Etherton, are concerned with the frequency of revaluations. They provide for either the revaluation cycle to move to every two years or for the Government to adopt a two-year cycle by order. The Government fully understand the desire to keep business rates as accurate and responsive as possible. That is why the frequency of revaluations was a key part of our review.
Regular revaluations update rateable values, and so rates bills, to reflect changes in the property market. During the business rates review, we heard from businesses that they overwhelmingly favoured more frequent revaluations. Interestingly, a majority of respondents to the review supported a three-year revaluation cycle. The noble Earl, Lord Lytton, mentioned countries that had annual revaluations, but it is not straightforward or accurate to simply compare our revaluation cycles with places such as the Netherlands. Evidently, a single property tax there covers both residential and commercial properties, so it is a very different system from the one in this country. We also considered annual revaluations, but some stakeholders raised concerns about an annual cycle, such as the increased volatility of bills and potential impacts on valuation accuracy. We therefore concluded that we should move to a three-year cycle of revaluations, and the Bill provides for that, with the next one to take place on 1 April 2026.
Baroness Pinnock (LD)
I shall try to pick up from where I left off. I may or may not have heard the Minister aright so this is just to check. The very good Library briefing on the Bill references the Treasury review into business rates. I shall refer to the Library briefing, then the Minister can say whether or not I have misunderstood. It says:
“On the longer-term proposals, most respondents stated that … revaluations should happen more often”—
we agree with that. But then it says that
“the gap between when the revaluations were assessed and when they came into force should be shorter than the current two years”,
which was one of the points that I was trying to make.
I may have misheard the Minister—if I have, I apologise—but the point that the review was making was to say yes to a shorter gap than five years, and the Government have pitched on to three. At the same time, the assessment year should be shorter than the two years that it currently is—that is what I think the review was saying, and I was trying to say that part of the argument for reducing the gap between the assessment year and the revaluation year is to make it narrower.
Baroness Scott of Bybrook (Con)
The response was three years, because of the reasons that I put forward—but, yes, we have aspirations to squeeze that to two years. That is the issue that we are discussing, and it is absolutely right that we are trying to do that. It is where we would like to get to, but it will take the changes that we are making to the Valuation Office Agency to do that—and then there is the digital aspect, and things like that, which we have already talked about.
Baroness Hayman of Ullock (Lab)
My Lords, as we have just heard, I have Amendment 28 in this group. I thank the noble Lord, Lord Shipley, for his support for my amendment. We tabled this because we are concerned that the VOA may not be sufficiently resourced, particularly as the Bill gives the agency additional responsibilities. The noble Lord, Lord Shipley, has clearly expressed many of the concerns behind the amendment.
I looked at some recent data about the number of staff employed by the agency. The latest figures that I could find showed that it has a full-time equivalent of 3,698 staff, which is not huge, to be honest, particularly as a large number of new responsibilities is being brought its way. The global property consultancy, Colliers International, has described the Government’s plan to reduce the number of VOA offices from 56 to 26 as “a shambles”, and said that it will be a
“nightmare for businesses wanting to appeal their business rates”.
That is another reason why I was concerned enough to table this amendment.
We also know that there have been problems with the VOA managing the number of appeals and the time taken for resolution. I very much support what the noble Lord, Lord Thurlow, said in his excellent introduction to this debate, about the importance of transparency. He also talked about the number of challenges—30%—resulting in reduction. Clearly, that is too high and needs to be addressed—and the VOA needs sufficient resources to be able to do so.
We also know that, often, the number of challenges and the time taken for resolution relate to the number of rogue agents, many of which want to make a fast buck out of this. That is why we support Amendment 34 in the name of the noble Lord, Lord Shipley, which looks to address this. Again, we had discussions about it at Second Reading. We support his amendment and that of the noble Baroness, Lady Pinnock, in this group. In the letter that the Minister sent to noble Lords after Second Reading, she acknowledged that rogue agents need to be looked at and that this would be part of a government consultation. I hope that the Government will take this seriously enough to consider action on this following the consultation, because it seems genuinely to be a problem.
We very much support what Amendments 15 and 17, in the name of the noble Lord, Lord Thurlow, are trying to do to increase transparency in the revaluation process. We hope that that transparency would also reduce the number of appeals, as the noble Lord so eloquently said. Amendment 16, tabled by the noble Earl, Lord Lytton, would also increase transparency, and we would be happy to support it. Clearly, increasing transparency is important, but we have to be careful that amendments we put down on transparency do not have the unintended consequence of adding to the valuation office’s workload without it having sufficient resources—this comes back full circle to what I said at the beginning.
There is also the risk of a major bottleneck in the system, through the new online portal. It would be good to have reassurances from the Minister about how that will be resourced and managed. It is human nature that a large proportion of ratepayers will put in requests for their rental evidence soon after the 1 April date, when the new rating system is published. It would be helpful if the Minister could give assurances that the VOA will be able to respond in time to allow ratepayers and their agents to construct and submit challenges by 30 September—the six-month deadline—because that six-month window for a challenge is a fundamental change to the rating system. We need greater clarity and certainty about exactly how that window will operate, particularly in relation to new tenants and the changes in the list that occur during and after the six-month window. Where is that flexibility?
The Bill states that a ratepayer must provide “annual confirmation” that they have, first, provided “all notifiable information required” or, secondly, that they are “not required to provide” any such notifiable information. Is this confirmation likely to be digital, to fit in with the online system? Will accessible formats be reduced, and will any mitigating circumstances be considered, if a person is unable to complete that confirmation?
As the noble Earl, Lord Lytton, described it, his Amendments 18 to 20 remove the requirements for the annual return. He talked about duplication and unnecessary returns, and it would be helpful if the Minister could provide clarification on that, because a number of changes to how this is done are coming in, and it is important that it works smoothly from the start.
Baroness Scott of Bybrook (Con)
My Lords, group 3 concerns information sharing between the Valuation Office Agency and ratepayers, the performance and capacity of the VOA, and the behaviour of some of our rating agents. Central to this part of the Bill is our commitment to move to more frequent revaluations, delivered by Clause 5. As we have discussed, sustainably delivering this important goal is contingent on increasing the timeliness and quality of the information received by the VOA.
To ensure that the VOA has that timely and complete flow of information, Clause 13 introduces a duty on ratepayers to provide notifiable information to the VOA and to confirm each year that they have met their obligations under that duty. In return, Clause 10 provides the means for ratepayers to access an analysis of evidence used to set the rateable value for their property, which should reduce the need for ratepayers to make a challenge. Ratepayers will be able to access guidance from the VOA, provide information on their property and request evidence on their own valuations, all through an online service. This will be the same online portal through which ratepayers will also be able to provide their taxpayer reference number to meet the other duty introduced by Clause 13.
The noble Earl, Lord Lytton, asked about information if you have more than one property. The VOA will seek to enable ratepayers with multiple properties to provide information about their properties at the same time every 30 days, to limit their administrative burden. We have listened to requests from stakeholders for this functionality, and we recognise that there is also a benefit for the VOA from receiving information in this way. We will work with businesses, agents and software suppliers to rebuild a robust and effective system for ratepayers. The deadline for notification of the underlying changes will remain at the now-increased 60 days, and the same deadline will apply to all, regardless of the means of notification.
I turn to Amendments 18 to 20. As I have set out, Clause 13 includes a requirement on the ratepayers to confirm once a year that they have provided the information required of them—this will be digitally, to respond to the noble Baroness, Lady Hayman—under the VOA duty. Amendments 18, 19 and 20 from the noble Earl, Lord Lytton, and the noble and learned Lord, Lord Etherton, would remove that requirement. I shall explain why this part of the duty is necessary.
Baroness Pinnock (LD)
I think that I have listened very carefully but, on the digitisation of business rates, which I support, did the Minister explain the arrangements that could be made for businesses in remote locations where there is little or no mobile signal and where broadband has yet to reach them, despite what I accept are the Government’s best intentions that that should be the case? I live in the upper Pennines region, where there are businesses and remote farming communities. So far, they do not have either. Ditto in the Yorkshire Dales; I know of businesses there with neither a mobile signal—one that works, anyway—or a broadband connection. What arrangements will be made for such businesses?
Baroness Scott of Bybrook (Con)
I am told that there will be a non-digital availability. I will get all the details for the noble Baroness and I will write a letter, which will also go to the Library.
The Earl of Lytton (CB)
I would like to tease out a little more information following the Minister’s response on Amendment 17. What happens, in effect, is that the evidence is part of an adjudication process. In my professional line of business, there are various stipulations about surveyors acting as expert witnesses and the way in which these things are to be handled. Amendment 17 is particularly important because, when one gets into a situation where there is an appeal pending, there is this little thing about equality of arms. If one party is able to use information that is held confidentially, to the exclusion of the other party, I do not think that equality—that transparency standard—is met. We are talking about what is ultimately something that leads to an appeal before the valuation tribunal.
Can the Minister say whether I have got it right that the VOA can have a protected category of evidence, as it were, that it is not prepared to share? This is something that has come up on my radar when looking at some of the blogs that have come out of the rating surveying world. It is a matter of fundamental importance in terms of the administration of any sort of justice system and adjudication, which is what this is. I would therefore like to pin down the Minister a little more on that point.
Baroness Scott of Bybrook (Con)
I think we made it very clear that the information that can be shared is the information that does not affect the data protection. Therefore, there will be information that cannot be shared because it will affect data protection. Because this is quite a legal issue, I will offer noble Lords a further, in-depth meeting, with lawyers there. If we are to get to the bottom of this, it is better to do that with a lawyer with us talking about the data protection law. Would the noble Earl be happy with that?
Lord Thurlow (CB)
I thank all noble Lords who have taken part in this group. I thought that the reference made by the noble Earl, Lord Lytton, to a timely VOA response was particularly apt, and I was grateful for his support just now on Amendment 17 on confidentiality. I thank the Minister for the offer to follow up.
The comment from the noble Lord, Lord Shipley, that the amendments in this group are simple common sense was one of the most powerful pieces of oratory that I have heard this afternoon, and I hope that it materialises very soon. I admired his well-made comments about the rogue agents, and once again I thank the Minister for her comments in that regard, as to how the Government intend to protect the public. I thank the noble Baroness, Lady Hayman, for identifying a number of concerns over the VOA’s resourcing, which tie in directly.
Baroness Scott of Bybrook (Con)
Group 4 consists of Amendments 22 to 26, tabled by the noble Earl, Lord Lytton, and the noble and learned Lord, Lord Etherton. They are concerned with the application of penalties for non-compliance with the VOA duty. As we have said, we will not initiate the VOA duty until we are satisfied that all ratepayers can reasonably and efficiently comply. There will be a soft launch of the duty, during which time no penalties for non-compliance will be issued and the VOA will raise awareness and expand its engagement with sector bodies and businesses of all sizes. As was said, issuing penalties will be the last resort. The VOA and HMRC will ensure that the new online service is simple to use and will take multiple steps to encourage ratepayers to comply, through reminders and warnings, before issuing a penalty.
Amendment 22 seeks to prevent the imposition of penalties where ratepayers’ errors or omissions are the result of reasonable reliance on VOA guidance. However, it is already the case that the VOA is able to apply penalties only where the ratepayer could reasonably be expected to know that the information would assist the VOA. All ratepayers will need to do to ensure that they are complying is follow guided steps on GOV.UK. If the ratepayer follows this guidance, the VOA will not, under the existing provisions of the Bill, be able to apply penalties. Thus, we do not think that this amendment adds anything of substance to the position as it already stands. If a penalty is issued in error where a ratepayer has relied on VOA guidance, the Bill gives the VOA the power to remit it. Ratepayers will also be able to appeal any penalty applied, and this will be independently reviewed by the valuation tribunal.
Amendments 23 to 25 are designed to address the penalty tariffs applicable to instances where a ratepayer has either failed to notify the VOA or provided false information. I will briefly explain the Government’s approach here. The Bill sets out the maximum level of penalty which the VOA may apply depending on the nature of the failure to comply. Our intention, as set out in our response to the technical consultation, is for the VOA sometimes to levy lower penalties than are set out by the framework of the Bill. Penalties will be levied as a percentage of the change in the rateable value rather than the entire rateable value and, where penalties are issued for a failure to provide information, the minimum penalty will be reduced for those on lower rateable values.
The Bill also introduces an offence where a ratepayer has knowingly or recklessly made a false statement. In these cases, a ratepayer could be subject to criminal sanction. Alternatively, making a false statement will lead to a civil penalty, the amount of which is provided by new paragraph 5ZD. Where the civil penalty is applied, in practice the maximum penalty will be 3% of the change in the property’s rateable value plus a fixed penalty of £500. To address the amendment, the Bill rightly provides a more severe penalty for knowingly or recklessly providing false information.
The point has been made that there should be a cap on daily penalties following an initial instance of failure to provide information. This information can have a direct impact on tax liability, so it is crucial that the duty is underpinned by a fair and proportionate but robust compliance regime. However, I can provide the reassurance that, even after the initial 60-day deadline, ratepayers will receive a reminder, warning and final warning before a penalty is applied. Only after an additional 30 days would the first daily penalty of £60 be issued. Ratepayers will be able to request a review and appeal of any penalties imposed. The daily penalties will be stopped when the ratepayer provides the required information, so as soon as the ratepayer complies, the penalties are effectively capped.
Applying daily penalties in this way is not an uncommon feature of taxation penalty regimes. For example, Schedule 36 to the Finance Act 2008 deals with powers for HMRC to request information from taxpayers and imposes penalties for a failure to provide such information. It includes penalties of up to £60 per day for as long as the non-compliance continues, without an overall cap on liability.
Amendment 26 seeks to alter the burden of proof which the valuation tribunal should apply when deciding whether to uphold a penalty decision. Of course, when considering a higher penalty for a ratepayer who has provided false information, the VOA must in the first place be satisfied beyond reasonable doubt that the information was provided knowingly or recklessly. There is considerable protection for ratepayers already.
Nevertheless, I am grateful to the noble Earl, Lord Lytton, and the noble and learned Lord, Lord Etherton, for raising questions about the appeals process. We will of course review the relevant text. I hope that, given that I have explained why the system of penalties is designed as it is, noble Lords will agree the amendments are not necessary.
The Earl of Lytton (CB)
My Lords, I thank the noble Baronesses, Lady Pinnock and Lady Hayman, for their contributions on this group of amendments. The noble Baroness, Lady Pinnock, referred to the necessary balance here, and I agree. The noble Baroness, Lady Hayman, queried whether the application of criminal charges is properly introduced here, whether the Valuation Office Agency is the right outfit to make that call and whether it will be given the necessary guidance and assistance to make consistent rulings in that respect.
It seems to me that the question is about the discretion of the VOA to do things—its ability to do or not do—as opposed to a legal duty. It seems to me that some sort of duty on the VOA is part and parcel of its overarching statutory duty to, for instance, maintain a correct valuation list. It also seems to me that those duties should mirror the obligations and penalties imposed on the ratepayer, otherwise it is a very asymmetric situation. That is, to some extent, what I was trying to deal with in Amendment 16.
The Minister has given various explanations of the Government’s position here. On Amendment 22 and the question of “reasonably be expected to know”, she said that this covers the guidance given and therefore the amendment does not add anything of substance and that there is a right of appeal. I think I will have to consider carefully what she said. With regard to Amendments 23 and 25, I felt that I had detected a series of typographical errors, but I understand the Minister to have said that they are not errors and that the Bill is deliberately worded that way. I am not sure that on a fair reading that is likely to be the case, so I hope they may be looked into at some stage or other.
On the cap or no cap, I have already pointed out that there is a degree of asymmetry between the approach that has been adopted in the Bill in this respect and what happens with failure to deal with the form of return. I appreciate that there is the “knowingly or recklessly” test, but we have a rather circular argument here because, if the VOA is again the sole arbiter of “knowingly or recklessly” and the thing then proceeds to a tribunal that says something different, I would hope that we could have got to a situation well before then where the ground rules were understood. Is the Minister saying that the wording of the Bill is in all respects what was intended and that there are no typographical errors in it as I had supposed? Will she please clarify that point?
Baroness Scott of Bybrook (Con)
No, there are no typographical errors in the Bill. I think the noble Earl asked that question earlier, and there were none.
Just to be clear on criminal offences and why they are necessary, there is already a criminal offence for providing false information in response to a request for information by the VOA. So we are not putting in a criminal offence—there is already one there as it stands now. It is interesting that criminal charges will be only for “knowingly or recklessly” giving false information. If it is just a false statement, for whatever reason, that would still be a civil penalty.
Baroness Hayman of Ullock (Lab)
My Lords, I will be very brief. The noble Earl, Lord Lytton, has laid out his concerns very clearly and in great detail. At the least, we need clarification. We have talked about the problems around licensing conditions; the hospitality sector in particular is very concerned about the implications of being stuck with a valuation for three years that, bluntly, may not be correct. It would be very helpful to hear what the Minister has to say and for her to give reassurances to the licensing sector that its circumstances will be taken into account.
Baroness Scott of Bybrook (Con)
My Lords, I am grateful to the noble Earl, Lord Lytton, and the noble and learned Lord, Lord Etherton, for their amendment. I understand the concerns around this clause; I will take the opportunity to explain why we consider this measure to be necessary and to set out the limits of its application.
As we have heard throughout the passage of the Bill, more frequent revaluations and the measures we are introducing to support them are central to the reform of the business rates system. It is through those revaluations that the rating system is able to track and reflect changing economic circumstances. In property valuation terms, rateable values are updated at revaluations to reflect changes in economic factors, market conditions and changes in the general level of rents.
Of course, that does not mean that rateable values never change between revaluations. It would hardly be fair if, for example, a ratepayer demolished part of their property but this was not reflected until the next revaluation, or if a new property were built but escaped rates until the next revaluation. Therefore, some changes are reflected in rateable values as and when they happen. Examples include changes to the physical state of the property, the mode or category of occupation of the property or matters affecting the physical state of the locality. These matters, reflected as and when they occur, are called material changes of circumstances—MCCs.
The MCC system has been operating in this way for many years, but, during the coronavirus pandemic, we found that it was not working as intended. Large numbers of challenges were made, seeking reductions between revaluations for the effects of the pandemic, which by their nature were part of the general market conditions. Such general market matters should be considered at general revaluations.
Therefore, the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 clarified the law to ensure that coronavirus and the Government’s response to it were not an appropriate use of MCC provisions. Specifically, that Act ensured that anything done to comply with legislation, advice or guidance given by a public authority and attributable to coronavirus should not be an MCC, subject to some exclusions. The principle in that Act was approved by both Houses, and it received Royal Assent on 15 December 2021.
Clause 14 of the Bill merely takes that principle, clarified and accepted by this House in the 2021 Act in relation to coronavirus, and applies it more generally to all legislation, guidance and advice from public bodies. Changes in such matters are part of the economic factors and market conditions for a property and should be reflected at a general revaluation. This clause will protect the integrity of the rating system and ensure that more frequent revaluations can proceed smoothly. It will protect the system not just for central government but for local government, which relies on the revenue from business rates. The Local Government Association supports this clause and agrees that these matters should be reflected at general revaluations. But this does not mean that these matters are not reflected in rateable values; it just means that they are reflected only at the set date of each revaluation, along with all other economic and general market factors present at that date.
Furthermore, we have limited the scope of Clause 14 to three aspects of the MCC system to ensure that it operates fairly. This is to ensure that physical changes to the property or the state of the locality are still reflected. Therefore, Clause 14 will bite on only three types of MCCs. First, it will catch matters affecting the physical enjoyment of the property but not the physical state. This might include changes in how the property can be used following new legislation or guidance. Secondly, it will catch matters that are physically manifest in the locality but not matters affecting the physical state of the locality. This might include changes to traffic flows and bus or transport services. Thirdly, it will catch the use or occupation of other premises in the locality, which might include the change in use of a nearby property where, for example, the original use has been prohibited by new legislation.
Clause 14 will ensure that matters such as physical changes to a property or to the state of the locality continue to be immediately reflected in valuations, even if they are a result of new legislation or guidance. Clause 14 will also not bite on whether the property is non-domestic or domestic or whether it is exempt. Overall, Clause 14 will preserve a long-established principle by ensuring that matters that go more to the market conditions and general level of rents of a property belong in the general revaluation process. Of course, with more frequent revaluations, these factors will still be updated more often than ever before.
The clause will provide important stability and certainty to the rating list and, therefore, to the vital revenue for local government that flows from the list. Therefore, it would not be prudent to delay the introduction of the clause, as this amendment seeks. I know that the noble Earl will be disappointed that we are unable to agree to this, but I hope that I have set out the basis for taking this measure and also given him some assurances regarding its scope. I will look at Hansard tomorrow and will write to noble Lords with further explanations if I feel that they are required.
The Earl of Lytton (CB)
My Lords, I thank the noble Lord, Lord Shipley, and the noble Baroness, Lady Hayman, for their support in connection with this. Although I understand what the Minister says is the intention of Clause 14, having been taken through it in some detail by more than one expert, I am bound to say that I do not agree with her about the effect of the clause. There is a difference in understanding, and I wonder whether it could be dealt with by a further discussion—the Minister is nodding, which I am grateful for. It is very difficult if somebody reads this in one way and says, “This could cover a multitude of things that could be excluded”, and the Minister says, “Actually, it is not intended to do that and these are the safeguards that we have built in”.
All I can say at this juncture is that I will certainly return to this on Report. I hope that there can be a meaningful dialogue on this in the meantime. It would be wrong for me to go into a detailed unpicking of what the Minister said at this hour and given the other pressures on us. To that end, I beg leave to withdraw the amendment.
Lord Shipley (LD)
My Lords, my name appears on two of the amendments in this group. Underlying the whole group is a major issue: the Treasury now sees business rates as a source of general income to government, but many small businesses see them as a contribution to local services. That has got out of balance.
I strongly support Amendment 36, in the name of the noble Lord, Lord Thurlow, who has just spoken. He talked about the impact of online shopping on small high street outlets and said that there was a public interest case to be made. Indeed, Amendment 29, moved by the noble Baroness, Lady Hayman of Ullock, probes the possibility of reducing the threshold for small business rate relief on high streets. A number of us raised that issue at Second Reading.
A number of issues are raised in this group. I have an amendment on the hospitality sector. It is not clear to me what reason there would be for not having a hospitality sector review, as I propose. It is about assessing the consistency of approach; we have spoken a lot about high streets, but this applies to the hospitality sector as well. There needs to be an assessment of whether there is a consistent approach for setting non-domestic rateable values between hospitality businesses occupying premises of similar size and trading style. I cite public houses, restaurants, live performance theatres and exhibition spaces as examples. This is the kind of thing that government should be doing anyway, but there is a huge policy issue now around what business rates are for and how we make sure that they are being fairly charged.
Baroness Scott of Bybrook (Con)
My Lords, group 6 covers several amendments probing the Government’s support for high street businesses and the wider impact of the Bill. I am grateful for the useful discussions that I have had with noble Lords on what are, undoubtedly, significant issues.
Amendments 30 and 31, from the noble Baroness, Lady Pinnock, and the noble Lord, Lord Shipley, seek a review of the effect of business rates on the retail and hospitality sectors. I recognise that the conditions for businesses in town centres and high streets are concerning for many noble Lords. The Government take these concerns seriously and recognise the impact that increased competition from online businesses, changing consumer behaviour and Covid-19 has had on the fortunes of some high street businesses.
That is why the Government have taken decisive action to ensure that business rates are manageable for ratepayers on the high street. First, 720,000 properties, including many smaller retailers, pay no rates as a result of small business rates relief. Additional support has also been provided for those that do have rates bills: at the Autumn Statement, the Chancellor announced a package of business rates measures worth £13.6 billion. This included a general freeze of the multipliers for all properties, as well as increased support—from 50% to 75% relief—for retail, hospitality and leisure properties, which is worth over £2.1 billion. As we heard, the Government also scrapped downward caps and, as we move to more frequent revaluations through the Bill, we will see a business rates system that better reflects real market values, which was the leading ask of businesses in our review.
I understand that the noble Earl, Lord Lytton, and the noble and learned Lord, Lord Etherton, tabled Amendment 26 to encourage the Government to more actively intervene in how different types of property used in the retail sector are valued. Valuation is, of course, conducted independently by the VOA. All properties subject to business rates are assessed to the same standard of rateable value, which is, broadly speaking, the annual rental value. Properties are valued by reference to the evidence on the level of rents, which is agreed by landlords and tenants for that specific property class. If, at the most recent revaluation, the evidence shows that those open market rental values have increased, rateable values will change with them. Nevertheless, in all cases, the method must result in the common standard of rateable values.
In our review of business rates, the Government sought views on many different ways in which the valuation system could be changed. However, there was strong majority support for retaining the existing basis of rateable value. Therefore, we do not support significant changes to the industry-recognised valuation methodology, as was suggested.
Wednesday 25th October 2023
(6 months, 2 weeks ago)
Commons ChamberNon-Domestic Rating Act 2023 Read Hansard Text Watch Debate Amendment Paper: HL Bill 140-R-I Marshalled list for Report - (15 Sep 2023)
This text is a record of ministerial contributions to a debate held as part of the Non-Domestic Rating Act 2023 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
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The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Lee Rowley)
I beg to move, That this House agrees with Lords amendment 1.
Mr Deputy Speaker
With this it will be convenient to discuss Lords amendments 2 and 3.
Lee Rowley
It is a pleasure to return this Bill to this place after its positive reception, both here initially and in the other place more recently. Reforming business rates was a manifesto commitment, and having concluded our review of rates, the Bill seeks to deliver a fairer and more effective business rates system.
The amendments that the Government invite the House to support today are minor and do not change the policy intentions of the Bill, which we have debated before in this place. Two amendments deal with the penalties regime for the new duty on ratepayers in clause 13—they are designed to ensure that the penalties system is fairer—and the third is a minor and technical amendment that removes some obsolete wording as a result of another part of the Bill. I will deal with each amendment briefly.
Lords amendment 1 concerns the civil penalties that the Valuation Office Agency can apply if ratepayers do not provide information under the duty. These include an additional daily penalty of £60, which may only be applied if a ratepayer persistently fails to meet their obligations following an initial penalty notice. The Government have listened to the views of the experts in the other place and agreed to create an additional safeguard for ratepayers by capping the financial value of penalties that can be imposed under this provision. Daily penalties will be capped at £1,800, equivalent to 30 days’ worth of penalties. This change will also bring the valuation duty in line with the separate duty to provide His Majesty’s Revenue and Customs with a taxpayer reference number, for which a cap on penalties is already in place.
Lords amendment 2 concerns the penalty for the criminal offence of knowingly or recklessly making a false statement, an offence that is subject to higher penalties than simply failing to comply. The Bill prescribes that for a higher penalty to be applied, the VOA must be satisfied beyond reasonable doubt that the ratepayer has made the false statement knowingly or recklessly. Having reflected, we have recognised that we need to apply the same burden of proof to the procedure on appeal. The amendment therefore provides that the valuation tribunal must remit a penalty unless it is satisfied beyond reasonable doubt that the ratepayer has knowingly or recklessly made a false statement. This provides additional protection for ratepayers.
Finally, Lords amendment 3 is a minor and technical change to the Local Government Finance Act 1988, as a consequential effect of the provisions in the Bill concerning business rates multipliers. This is simply a drafting correction to improve the clarity of the statute book, and the Government do not foresee any practical effect.
The Government invite the House to agree to three minor amendments that were unanimously supported in the other place. Lords amendments 1 and 2 refine and improve the compliance framework for the new information duty, and Lords amendment 3 is a minor consequential change to improve the clarity of the statute book. I commend them to the House.
Lee Rowley
I will not seek to detain the House for any more than a few seconds. I express my gratitude to the shadow Minister, the hon. Member for Ealing North (James Murray), for his constructive comments and his willingness to support the amendments, as well as for resisting the temptation to go over again some of the things we have talked about in previous iterations of this Bill.
I also thank my hon. Friend the Member for Waveney (Peter Aldous), who has been involved since the beginning. He has done the House a significant service in both reviewing the Bill and offering his comments during its passage. As he says, this is a significant change and one that I think everybody accepts is a big leap forward, particularly on the revaluation frequency moving from five to three years. While we are on the subject of late 1990s game shows, although in his view we have not yet finished this matter—I accept that we never finish—we are grateful for his “Mastermind” qualities in looking at this Bill over the past few months.
Lords amendment 1 agreed to.
Lords amendments 2 and 3 agreed to.
Economic Activity of Public Bodies (Overseas Matters) Bill (Programme) (No. 2)
Ordered,
That the Order of 3 July 2023 (Economic Activity of Public Bodies (Overseas Matters) Bill Programme) be varied as follows:
(1) Paragraphs (4) and (5) of the Order shall be omitted.
(2) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion three hours after the commencement of proceedings on the Motion for this Order.
(3) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion one hour after their commencement.—(Julie Marson.)