Business Rates Relief: High-street Businesses

James Murray Excerpts

Wednesday 4th June 2025 Westminster Hall

[The Exchequer Secretary to the Treasury (James Murray)]

It is a pleasure to speak in this debate with you in the Chair, Ms Jardine. I thank hon. Members for their warm welcome.

I want to extend my thanks, as many others have, to the right hon. Member for Stone, Great Wyrley and Penkridge (Sir Gavin Williamson) for securing this debate—and, indeed, for his kind words about how I am doing my job. I thank all hon. Members for their contributions to the debate and for bringing perspectives from their constituencies to it. Although we have had a fair dose of politics, there have also, in fine Westminster Hall tradition, been moments of cross-party agreement and a desire to find a way forward to support high streets in all our constituencies.

As Members of this place, we all know how important high streets are to our constituents as centres of economic activity and places where people come together. I was glad to hear healthy competition in the claims about who has the best high street and local pubs in their constituency. [Interruption.] I am seeing further bids from the other side of the room. We all know as MPs, and indeed as members of the public in our own right, how high streets unite people. They sustain jobs and are central to the identity of the areas that we represent. That is why the Government are protecting the high street by transforming the business rates system so that it supports investment and is fit for the 21st century. I welcome this opportunity to set out our approach to making that transformation a reality.

As many hon. Members have said, retail, hospitality and leisure businesses are the backbone of our high streets—our shops, pubs and cinemas—but they are contending with changing consumer habits and have faced a series of economic headwinds in recent years, including the pandemic. Online services are undeniably convenient and offer great variety, but it is high streets that bring people together. The problem, as many hon. Members have set out, is that business rates fall more heavily on property-intensive sectors, so it is a priority for the Government to ensure that the burden is permanently rebalanced and that high street businesses are protected.

We inherited a situation in which protection for high street businesses through retail, hospitality and leisure relief was set to end altogether in April this year. That continued a pattern that had become normal under the previous Government; ratepayers would rightly complain that the fact that RHL relief ended every year by default created an annual cliff edge for RHL businesses. What was supposed to be a temporary, stopgap measure was extended year by year following the pandemic by Conservative Governments, who made no attempt to fix the system and give businesses the certainty and stability they need.

That is why at last year’s autumn Budget we announced our intention to change how this is done, by introducing permanently lower tax rates for RHL properties with rateable values below £500,000 from 2026-27. That will give much needed certainty and support to the high street, improving investment and growth in places across England. We intend to introduce two lower RHL multipliers to mirror the existing national small business and standard multipliers. The new small business RHL multiplier will apply to RHL properties with rateable values below £51,000, and the new standard RHL multiplier will apply to RHL properties with rateable values of £51,000 and above, and below £500,000. Those lower multipliers will apply to all RHL properties with rateable values below £500,000. We will have no cash cap per business as the previous Government’s relief had, meaning that all relevant properties will be able to benefit from our approach.

Under our Government, any tax cut must be paid for. We saw what happened when the previous Government ignored that rule. That is why we intend to fund this tax cut by introducing a higher rate for properties with rateable values of £500,000 and above. Those properties represent less than 1% of all properties, but include the majority of large distribution warehouses, including those used by the online giants.

The Government recognise that business rates form a significant part of the costs of some businesses, but we must make difficult choices to ensure that our plans to support the high street are sustainable. That is why we are asking those occupying the most valuable properties to contribute more to support the vitality of the high street.

The rates for new multipliers will be set at the Budget 2025, so that the Government can factor in the upcoming revaluation outcomes and broader economic and fiscal contexts into the decision making. The Non-Domestic Rating (Multipliers and Private Schools) Act 2025 gives Government flexibility in the creation of the new multipliers and their rates within appropriate guardrails, so that the Government do not have unfettered powers. The rate for any higher multiplier cannot be more than 10p higher than the national standard multiplier, while the lower RHL multipliers cannot be less than 20p lower than the national small business multiplier. I emphasise to Members that those are only guardrails, not the intended rates, and the final decisions on the multipliers will be made at Budget in the autumn.

The Government recognise that RHL businesses need support in 2025-26, ahead of the permanently lower tax rates being introduced for 2026-27. Hon. Members today have spoken about the impact of changes to RHL relief on high street businesses in their constituencies, but it is worth emphasising again that without any Government intervention, RHL relief would have ended entirely in April 2025. To avoid that happening, our Government decided to provide a 40% business rates discount to RHL properties up to the cash cap of £110,000 per business in 2025-26.

[Sir Gavin Williamson]

Will the Minister assure us that, given the cross-party agreement in the Chamber today, he will go back to the Treasury and make representations to see if that could be increased to 75% for the intervening year? It would be a great relief not just on finances but on the mental worry of so many businesses if they knew that someone in the Treasury was battling for the return of that 75% relief.

[James Murray]

The permanently lower tax rates will come in in April 2026, so the intervening year is the year that we are currently in. That rate has been set by the Chancellor. The Chancellor makes announcements about rates at fiscal events. The autumn Budget is where she sets out those rates, in the same way that she agreed, at the autumn Budget last year, what the rate would be for RHL relief for the current year, 2025-26. At the autumn Budget this year, she will set out what the permanently lower rates will be thereafter. I would say to businesses looking at their finances this year that from April ’26—from the next financial year—the permanently lower rates will come in. Indeed, it will benefit a broader variety of shops on the high streets, because we are not continuing the cash cap of £110,000 per business.

[Mr Mohindra]

One of the likely consequences of the Minister’s proposals is that tenants will look to change their rateable value. Can he assure the House that the Valuation Office Agency will have sufficient resources to ensure that any appeals are done as quickly as possible to give the certainty that our high street retailers and hospitality deserve?

[James Murray]

I thank the hon. Gentleman for raising the issue of the VOA. Its performance is very important for businesses across the country. I am sure that he will have seen our recent announcement that, this year, we are bringing the VOA into His Majesty’s Revenue and Customs, rather than it being an arm’s length body. Part of that is to save on administration costs—to protect the public finances—but it is also to ensure that we can work with it to improve its service as much as possible, to give the best and quickest possible service to businesses involved. I reassure the hon. Gentleman that VOA performance is very high on our agenda.

Hon. Members raised the impact of RHL relief on pubs, which is understandable, given the particular importance of pubs in all our local communities. Indeed, we had a competition for who has the best pub in their constituency. I will just about resist the temptation to list the pubs in my constituency, as I am here as a Minister rather than with my constituency hat on, but hon. Members should pop into the Duke of Kent if they are ever in Ealing North. To put this in context, the extension of RHL relief for this year under this Government is saving the average pub with a rateable value of £16,800 more than £3,300. That is a real, meaningful difference to pubs across the country. The Government have, of course, frozen the small business multiplier for this year as well. Taken together with small business rates relief, more than 1 million properties have been protected from inflationary increases in their bills this year.

Some hon. Members, including the right hon. Member for Stone, Great Wyrley and Penkridge, have argued that the RHL relief in this year should be higher. However, given the Government’s fiscal inheritance, it was not fiscally sustainable to continue the 75% relief, which cost £2.4 billion a year. Crucially, to repeat remarks I have made several times now, our approach from April 2026 will mean no more use of an indefinite stopgap measure. Our approach will instead offer permanently lower tax rates and the stability that those bring for businesses.

The Budget announcements and the changes I have just described reflect the Government’s first steps to support the high street. We want to go further, and modernise the business rates system. At the autumn Budget last year, the Chancellor therefore announced the publication of a discussion paper that sets out priority areas for reform.

[Suella Braverman]

The Minister says that he cannot afford the £2 billion price tag of maintaining the relief introduced by the last Conservative Government. How, then, is he paying for the £30 billion surrender deal in which this Government are giving up sovereign territory, the Chagos islands, to Mauritius?

[James Murray]

I would challenge the right hon. and learned Lady’s use of language, but that issue is rather outside the scope of a debate on business rates.

As I was saying, we published a discussion paper at the Budget last year, which invited the industry to help us to design a fairer business rates system that supports investment and is fit for the 21st century. Since publishing the paper last autumn, my officials and I have met more than 250 stakeholders across a range of sectors, including RHL and local government, and have received submissions from a range of businesses, including those from the constituencies of hon. Members present today. We are analysing the responses in detail, and the data and views shared by businesses will inform the business rates policy development process. In the summer, we will publish an interim report that sets out a clear direction of travel for the business rates system, with further policy detail to follow at the autumn Budget 2025.

It is worth my briefly drawing hon. Members’ attention to the fact that, beyond the business rates system, the Government are taking other steps to rejuvenate our high streets. We are introducing high street rental auctions to revitalise our high streets and tackle empty properties, which we know can fuel a spiral of decline in town centres. Through the English devolution Bill, the Government will introduce a new community right to buy to help communities to safeguard valued community assets. That will empower local communities to bring assets such as empty shops, pubs and community spaces into community ownership, helping to revitalise our high streets and eliminate vacant properties.

Alongside that, the new £1.5 billion plan for neighbourhoods programme will deliver up to £20 million of funding and support over the next decade to 75 communities across the UK, laying the foundation to kick-start local growth and drive up living standards. As part of the programme, local partnerships will be able to fund interventions focused on revitalising high streets. The Government will announce further plans to support high streets in the small business strategy later this year.

As we have heard, hon. Members are rightly concerned about the high streets in their constituencies. We are all passionate about the places where we live and that we represent, and we want them to thrive. As I have set out, the business rates system that this Government inherited has been failing to give high streets the long-term, certain and stable support they need, instead providing only stopgap help through RHL relief that has kept changing and has been repeatedly extended ahead of an annual cliff edge.

This Government are fixing the foundations of the business rates system, and that starts with permanently rebalancing the burden of RHL properties through introducing permanently lower tax rates from 2026-27.

[Stuart Anderson]

I really like the idea of permanently lower tax rates. Can the Minister confirm that that is for all businesses, and that no businesses will receive tax rises?

[James Murray]

I thank the hon. Gentleman for his question. As I set out, the new lower multipliers of RHL properties will apply to all RHL properties with rateable values below £500,000. There will be a standard RHL multiplier and a small RHL multiplier for properties with rateable values of £51,000 and below. The definition of an RHL property will broadly follow the definition by which RHL relief is currently allocated. That will be set out in guidance, but hon. Members can expect that to operate in a similar way.

The advantage of our approach of permanently lower tax rates and multipliers is that they do not have a cap in the way that the previous Government’s relief did, of £110,000 per business. All properties within the RHL definition with rateable values of less than £500,000 will be able to benefit from this support, helping all the shops that contribute towards high streets across the country.

Beyond the changes to the RHL multipliers, I have also had the chance to set out some of the wider work that we are undertaking to transform business rates over the course of this Parliament and create a fairer, modernised system that is fit for the 21st century. I thank the right hon. Member for Stone, Great Wyrley and Penkridge and all hon. Members who have contributed to the debate.