Levelling-up and Regeneration Bill

Debate between Lord Thurlow and Baroness Pinnock

Committee stage
Wednesday 22nd February 2023 Lords Chamber

[Baroness Pinnock (LD)]

My Lords, good debate. I agree.

[Lord Thurlow (CB)]

My Lords, I was concerned that, after quite a sky-level discussion of missions and strategy and things, Amendment 42 was going to be very specific and granular. We have had some outstandingly worthwhile speeches in the last few minutes, and I congratulate all those who sponsored the Bill and who have spoken so far.

I was going to speak in a granular sense as well about insurance, proposed new subsection 3(e) in the nine small but specific letters of this amendment that we are forcing the Government to address, if it is adopted, in the event that a report says that this should be done in the interests of levelling up. We have had such a good exposition on insurance scams from the noble Baroness, Lady Fox of Buckley, that I am not going to say what I was going to, which would only repeat much of what the noble Baroness said—but I do hope that we can get into the granular level of these injustices for leaseholders as the Bill progresses.

Building Safety Bill

Debate between Lord Thurlow and Baroness Pinnock

Committee stage
Monday 28th February 2022 Grand Committee

[Lord Thurlow (CB)]

I support the very interesting comments of the noble Baroness, Lady Fox—most interestingly, it is immensely refreshing to listen to an amendment that is driven not only by cost savings for leaseholders but by common sense. In many cases, the sub-contracting of services on multi-let buildings is appointed through external managing agents, who apply a levy; they will charge, let us say, 10% on the fee for the work being done. In the £60,000 example, another £6,000 goes on to the tenants’ bills at the end of the year.

I simply support this proposal. It will be a difficult one for the Minister, but common sense is short in the Bill because of the layers of bureaucracy. This will save money for tenants.

[Baroness Pinnock (LD)]

My Lords, I am very grateful to the noble Baroness, Lady Fox, for raising this issue about the necessity for a building safety manager in every block—this is of course in relation only to higher-risk buildings. However, residents in higher-risk blocks will have a managing agent, to whom they pay a fee—a service charge—who appoints an accountable person, for whom there will be an additional cost, and possibly a principal accountable person, if that is necessary. On top of that, each block will have to have a building safety manager. As the noble Baroness, Lady Fox, pointed out, adding on those roles considerably adds to the costs for each of the leaseholders; their service charge will rise considerably as a consequence.

I too have had discussions with some of the cladding campaign groups about the potential £60,000 role and the costs which will pass inevitably to them. They are very anxious that their lease will suddenly become unaffordable due to the piling on of costs from these roles.

The further issue in my mind is, as I think the noble Baroness, Lady Fox, said, that there is a duplication of roles. Equally, when there is a confusion about roles—each block might have three people who potentially have conflicting roles—building safety risks will fall between the three. I can find nothing in the Bill that says how each will be accountable. In the end, we come back to this: quis custodiet ipsos custodes—to whom are they accountable?

The Explanatory Notes gives us this as an example:

“The Building Safety Manager may be carrying out day to day functions, as set out in the agreement with the Principal Accountable Person, to assist the Accountable Persons in discharging their statutory obligations. However, the Building Safety Manager could choose to resign of its own volition, and conversely the Principal Accountable Person may find that the service provided by the Building Safety Manager is below standard and choose to dismiss that person. In both circumstances the Principal Accountable Person would need to replace the Building Safety Manager as soon as reasonably practicable.”


I hope everybody understood that. That is my argument: it becomes confused.

One of the issues with building safety and fire safety is that it needs clarity and simplicity. This is not clear and simple. I believe I raised at Second Reading the issue of too many rules causing confusion. When nobody really knows who will do what, it is always a recipe for a potential disaster.

Those are the two points: costs and duplication leading to confusion. The question is this: to whom are they finally accountable—the accountable person or the managing agent? It is not very clear.

The other point is about the competencies—a horrible word—of potential building safety managers. I could not find anywhere in any of the clauses which set out what those should be. The Bill talks about standards but it does not say what they will be. What should be expected of these folk?

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

Debate between Lord Thurlow and Baroness Pinnock

3rd reading
Tuesday 9th March 2021 Lords Chamber

[Baroness Pinnock (LD) [V]]

My Lords, I give my thanks also to the Minister and his officials for the time that was offered for helpful briefings at each stage of the Bill. As the noble Lord, Lord Kennedy, said, it is a very simple Bill just to change the date of revaluations, which start in April this year but come into effect in 2023.

One issue raised during the Bill which we need to keep a watchful brief on is that, because the revaluation is starting this April, with the huge upheaval in market rents due to the pandemic it will be difficult to make assessments of rental value, which could affect the outcome of when businesses start paying in 2023. I hope the Minister can confirm that he will inform the House of any difficulties that arise from the timings of the revaluation.

The other issue discussed during the passage of the Bill, on which there was broad agreement on all sides of the House, was the strategic one about the future of the business rates system. Evidence was provided during all stages of the Bill demonstrating that retailers on the high street were at a huge disadvantage in business rates charged compared to those retailers which were online only. The differential is very large; a small shop in a small town may have a rental value at least five times that of a large online retailer in an out-of-town warehouse.

There is wide concern about the future of our high streets. The vast majority of people want to see the high street retained as a community focus, as the noble Lord, Lord Kennedy, has just described. One policy lever available to the Government to provide stimulus to the high street is a fundamental reform of the business rates system. It cannot for ever be put on the “too difficult” pile that the Government must have. Can the Minister provide the House with any timetable for the long-awaited reform of business rates? That would provide some hope to retailers on our high streets that change will come.

With those questions and comments, I look forward very much to hearing what the Minister has to say.

[Lord Thurlow (CB) [V]]

My Lords, it is a privilege to be asked to make the concluding remarks from the Cross Benches as we complete the passage of this Bill. I congratulate the Minister on steering it through, notwithstanding unsuccessful attempts—certainly from me—to divert the debate down other routes and related avenues. However, it is fair to say that we have been debating this in something of a straitjacket; those of us interested in non-domestic rates had nowhere to turn, try as we might—indeed, try as we did—to draw the failings of the NDR system to the Minister’s attention. He was perfectly within his rights to wear his benign smile throughout—and a tremendous smile it is. Why a straitjacket? Because it is a two-clause Bill, strictly focused on timing alone, to which there were only two amendments; I am aware of the frustrations of at least one other Peer who wished to table one and was unable to do so within the scope of the straitjacket. I congratulate the noble Lords, Lord Kennedy and Lord Moynihan, on successfully navigating these restrictions and tabling their well-founded amendments, both of which I was happy to support.

There are important implications in changing the dates for compiling the lists to two years’ time; I do not disagree with the principle, but I am concerned that the valuation date for determining rateable value, as we have just heard from the noble Baroness, Lady Pinnock, is within weeks. Without rehearsing the valuable and revealing contributions at earlier stages, it would be unwise to ignore the fact that retail and office markets are in crisis. Retail values are in freefall and office values are in pandemic-related confusion as businesses reassess their space occupancy needs. How on earth can the Valuation Office Agency determine rental value in these conditions? I wish it well.

There will inevitably be dramatic reductions in rateable values and a corresponding fall in local authority revenues. Unless the rate poundage is increased, when rates paid could exceed rent, that would be a lightning rod to disaster and a knife to the heart of the small business retail sector in that retail economy. Will the Chancellor continue to support the sector, or could we expect those who do not pay enough to compensate for those who pay too much? I am afraid that, regrettably, the Amazons of this world that do not pay enough will not make up the shortfall.

To conclude, I say to the Minister that I see some light in this dark place I describe. At every stage of the debate in this House, we have had reference to the fundamental review already mentioned. This is the real opportunity to introduce fairness across the landscape of NDR—sadly delayed but vital and urgent. I very much look forward to its publication and the chance for us all to consider it in the shape of a new Bill, no doubt steered by the Minister and his generous smile. I hope, for the sake of the smaller business sector, that it does not arrive too late.

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

Debate between Lord Thurlow and Baroness Pinnock

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Thursday 4th February 2021 Grand Committee

[Baroness Pinnock (LD) [V]]

My Lords, the purpose of Amendment 4, which stands in my name and that of my noble friend Lord Shipley, is to open up a debate about the revolution taking place in the retail sector. It is a revolution that is being accelerated as a consequence of the pandemic, which has resulted in the non-food retail sector being in shutdown for many months, with a very large transfer of shopping to online retailers. Retail analysts suggest that this significant change in shopping habits is here to stay.

Recent reports on the retail sector make the same points. Bill Grimsey, in his report in 2018, described the effect of business rates on the retail sector as “malevolent” and one that hinders growth. Business rates are, of course, just one inhibiting factor that affects the vibrancy of the physical high street. However, it is like a weather vane, indicating that all is not well with the retail elements of our town centres.

The array of shopping giants that have closed in recent years is a health warning that the Government do not appear to be heeding. Toys “R” Us, Maplin, Poundworld and others closed their doors in 2018. This year, a staple of the high street, Debenhams, is finally closing its physical presence on the high street. The Arcadia Group, which includes a string of well-known brands in many towns, is in administration. There seems little prospect of any of them reopening their shop doors; the businesses will simply go online.

The combination of closures is a large hit on many towns, as those businesses provided both an attractive shopping experience and business rates income for local authorities. The Government really do have to address this with some urgency. The problem is well known: physical retailers have financial overheads that their online equivalents do not.

The comparison of overheads in terms of business rates is stark. In my own town of Cleckheaton in West Yorkshire, an average-sized shop on the main street with 30 square metres of floor space is paying at the rate of £250 per square metre, resulting in a rates bill of around £3,750 per annum. A large Amazon warehouse adjacent to a nearby town in Yorkshire has 40,000 square metres of floor space. The rate per square metre for this giant in the retail sector is £45 per square metre. This results in a business rates bill of £900,000 per annum. If Amazon, as an example—there are others—were required to pay at the same rate as this smallish shop in a small town centre in West Yorkshire, its rates bill on this warehouse alone would be £5 million per annum. That is why attempts to save our high street will fail unless this hugely unfair advantage enjoyed by online retailers is addressed—hence the amendment from the Liberal Democrats.

The very least that the Government should do is to review the impact on local high streets and assess whether the new revaluations harm even further the ability of the retail sector to compete successfully with online businesses. We cannot, like the myth of Canute, hold back the tide of change in shopping habits. However, what the Government can and should do is provide a level playing field for retailers. This is not a problem that can be kicked down the high street in the hope that the sticking plasters of high-street and town funds from the Government will stem the demise of town centres; nor is there an easy solution, but then Governments are elected to deal with difficult problems.

There is an urgency in finding a solution, as I have indicated. Will the Minister provide any certainty for high-street retailers that the Government accept that a revolution in retail habits has to be accompanied by a revolution in business rates? I look forward very much to the Minister’s response.

[Lord Thurlow (CB) [V]]

My Lords, I thank the noble Baroness, Lady Pinnock, for tabling this amendment, together with the noble Lord, Lord Shipley.

There is no doubt that an impact assessment of the new valuations on the high street is worthwhile and important. It is actually vital. We have already seen the change in the high street referred to by the noble Baroness, Lady Pinnock. The former retail parades that once flourished now see nail bars, estate agents, coffee shops and charity shops proliferate. I am delighted, of course, for the charity shops and their sector, but please understand that many of these shops are paying a 20% rates bill and are there because their landlords heave a sigh of relief that they have found someone to relieve them of the burden of the empty premises rates that would be applied after they have lost their traditional tenant.

Our high streets and shopping centres are the focus of local communities. Social health and welfare to some extent depend on them. We cannot afford to lose them because of unrealistic operating costs. I was very pleased when the noble Lord, Lord Greenhalgh, referred just now to the Government’s recognition of the importance of vibrant town centres. The health of those centres lies in the gift of the Government, right now, and in their ability to construct fairness in the apportionment of the NDR burden.

This amendment includes reference to the ability of high streets to compete with online. It is an often-discussed subject, and the urgency of rebalancing the rates burden could not be more pressing. The noble Baroness, Lady Pinnock, mentioned Amazon. I saw in today’s Times an appalling reference—appalling to me, anyway— that £1 in every £20 spent on retail is spent through Amazon. I assume this was a reference to last year, or to the last accounting year.

Amazon, of course, is a giant, but there are hundreds of online retail businesses and we are right in the midst of a massive societal transfer of shopping habits from the traditional shop or store in or out of town, in or out of a covered shopping centre, to online. Covid, of course, has forced that rate of change to accelerate faster than it otherwise would—but it was a concern many years ago.

There are numerous constructive proposals to recoup a fairer contribution from the online sector to the tax base. To equitably rebalance the transfer of sales between online and the high street may require a 40% reduction in the high street burden. That is a huge reduction. I am afraid that the Treasury cannot expect revenue neutrality by simply transferring this across to other commercial sectors. The slack is just not there, particularly if we have to take a reduction from the office sector as well. Logistics, industrial and warehousing will not fill the gap. That is a real worry and a concern. Local authority funding has been referred to already, but I am afraid that it is something that needs addressing.

I support the amendment. The health of the high street cannot wait for the results of the fundamental review that was discussed at Second Reading and has been mentioned by the noble Lord, Lord Greenhalgh. I was very grateful for that, but the issue is too pressing.

My principal concern remains the difficulty of assessing rental value in these most uncertain times. I do not think that it will be possible. Appeals may descend into chaos. Certainly, I predict long delays. Rental values will have to be assessed post Covid, not in eight weeks’ time. A short-term arrangement will be necessary for the non-domestic ratepayers on the high street and in the retail sector to cope with the transfer to online, and I hope that the Minister will be able to make some constructive comments to help give comfort to all of us who are concerned.