Business Rates

Anne Marie Morris Excerpts

Wednesday 4th December 2013 Commons Chamber

[Anne Marie Morris (Newton Abbot) (Con)]

The Government are focused on small businesses and have a tremendous record. In regulation, we have the red tape challenge, with 6,000 regulations scrutinised and 3,000 to be given a severe hair cut. On tax, we have cut corporation tax and the employer allowance is extraordinarily good news, well loved and well liked. On access to finance, funding for lending has been one of the best success stories, but today we are talking about business rates.

As my hon. Friend the Member for Northampton South (Mr Binley) identified, business rates have been with us for a long time. They emanate from the Poor Laws in the 1500s and the Rating and Valuation Act 1925 was the origin of the modern tax, most recently affected by the Local Government Finance Act 1988. It started out very simple: rateable value times multiplier. It is absolutely right to say that over time it has become incredibly complicated. The issue is not only about affordability, although I certainly hope that the Chancellor can do something about that in his autumn statement, but about fairness and lack of transparency. Why is it unfair? It is unfair because rateable value is not calculated in a simple way. It can depend on whether a business is in town or out of town. It can depend on its gross internal area or net internal area, or whether it has a car park. For a large out-of-town store, for example, a car park is not included. The situation is different for pubs, because in the 1800s they were deemed to have a monopoly, so their rates were based not on rateable value or rent, but on turnover. These days, they do not have a monopoly, so that certainly needs to be addressed.

The reliefs are equally confusing. The small business rate relief is fantastic, and it is to the Government’s credit that they have doubled it in their time in office. Hopefully they will consider an extension. Charities still have 80% relief and it really does not matter what rateable value they have. There are special reliefs for some obscure businesses in rural areas. For example, pubs and petrol stations in rural areas get 50% relief, but up to a rateable value of £12,500. There are many other areas that are completely inconsistent.

We need transparency, because businesses do not understand how their rates have been calculated and cannot see what benefit they get. Redress is limited, because appeals can take months and, unfortunately, local authority discretion, which we welcomed in the Localism Act 2011, is not being used, as has been mentioned. With revaluations every five years, there can be a long time to wait.

However, there are solutions. The Government have a fantastic record, but there is more to do. In the short term, a small cap of perhaps 2%—that figure has been mentioned in the media—would be brilliant. I would welcome any extension of the small business rate relief, and I certainly agree with my hon. Friend the Member for Bury St Edmunds (Mr Ruffley) that it should be made permanent.

In the medium term, we need to review the statutory reliefs and consider whether we could revalue every other year—from my conversations with the valuation office, I think that would be possible—which would ease the burden of appeals. If we are serious about allowing businesses to see that they get some value, because half of the money from business rates goes back into the local community, why do we not state on the back of the bills exactly what the council has done for businesses? We might also look at reviewing the use of the multiplier, which currently is used only to distinguish between the different countries that make up the United Kingdom, but it could be used to better target reliefs.

In the long term, I agree with those Members who have said that the current system is simply not fit for purpose. We need a review. We need to look at it in the context of the importance of retail, the high street and small businesses in this country. Let us review the methodology and make it simpler and fairer. Let us look at how we calculate rates for each individual business payer so that they can understand it. Let us look at how we can encourage local authorities to do more to recognise the needs of small businesses and to help them. Let us make the process easier so that the system works.

Business rates remain one of the outstanding issues that need to be addressed. That in no way detracts from the Government’s fantastic record on what they have done for small businesses, but this needs to be addressed.