Non-Domestic Rating (Multipliers and Private Schools) Bill

Jim McMahon Excerpts

2nd reading
Monday 25th November 2024 Commons Chamber

[The Minister for Local Government and English Devolution (Jim McMahon)]

I thank all hon. Members who have contributed to this enthusiastic and impassioned debate. Whether they were speaking from the Government or the Opposition Benches, their speeches were genuinely rooted in the communities that people live in and that we represent. In a way, it has brought out the best of Parliament, but we could not quite avoid the party politics and the rewriting of history from the Conservative party.

Shall we really take lessons on saving the high street from the Conservatives, who oversaw mass bank closures and the decimation of retail on the high street, with 6,000 pubs closing in local communities? They are now the farmers’ friends, but when they were in government they oversaw the closure of 7,000 agricultural businesses. Where were they when the energy market and labour supply challenges were decimating farmers? They were nowhere to be seen. Now, though, they come riding on the horse—[Interruption.] Would the shadow Minister like to intervene? Come in, please.

[David Simmonds]

Because he was here for it, as I was, the Minister will recall the last Government’s massive intervention in the energy market to keep our lights on in this country. Will he tell the House whether the Government will keep the small business rates relief? Will he answer that question?

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[Jim McMahon]

I can answer this question: it is the impact that matters. Whatever Opposition Members say as the farmers’ friends, the truth is different: 7,000 businesses closed on their watch. That is what the evidence says.

Let me move on to the reasoned amendment. This Government are fully committed to protecting and supporting our valuable high streets. The fact is that retail, hospitality and leisure rates relief was due to end in its entirety by the end of March 2025, which would have meant a cliff edge for businesses. At the Budget, we stepped in to prevent that by extending the relief further this year by 40%, with a cash cap of £110,000. We have also frozen the small business rates multiplier for 2025-26. Taken together with the small business rates relief scheme, that means that more than 1 million properties will be protected from any inflationary increases next year. That is 1 million properties protected by this Government.

[Mike Wood (Kingswinford and South Staffordshire) (Con)]

By the Minister’s logic, are we to assume that support on business rates for hospitality and retail is to end in April 2026?

[Jim McMahon]

That really was not worth giving way for. I have literally just said that 1 million properties will be supported against inflationary increases next year. The 40% will continue, with a cap of £110,000. That is exactly what this Bill is intended to do. If the hon. Gentleman supports it, he can join the Government in the Aye Lobby and vote for it.

We know from businesses that the current scheme of discretionary relief does not provide the certainty needed. That is why the Bill will enable a permanent tax cut for retail, hospitality and leisure businesses from 2026-27 through new lower multipliers, ending the year-by-year uncertainty that the previous Government hardwired into the system. That is doing what businesses have been calling for. That rebalancing—from out of town to in town, from online to on street—is exactly what people have called for in communities and in business, and Opposition Members know it. Their frustration is that they did not do it in the 14 years that they had in office. It is down to us to take the steps that are needed in government now, and we are happy to do so.

The reasoned amendment raises concerns about the impact on schools in the state sector. I can assure the House that protecting and improving state education is at the forefront of the Government’s mind. In fact, we estimate that only 2,900 more pupils will enter the state sector as a result of the removal of the business rates relief for private schools. Let us be clear about what that means in reality: that goes down to about 300 a year. In any given year across England, 60,000 pupils will move between schools; this is 300. We need to keep that in context, because we have heard a lot of scaremongering about the transfer, but that is what the evidence says. That evidence is placed in the House of Commons Library, in case Members want to take time after this debate to go and look. There might even be enough time to find the documents before the vote if they want to bring themselves up to speed.

Importantly, this is about providing much-needed investment in the state school sector. Just how many parents say, “We need specialist support for SEND, because the mainstream provision is not adequate”? How many parents—by their own admission, among Opposition Members—choose to pay for private education because they do not have faith in mainstream provision? Despite what Opposition Members have said about the glory years of the past 14 years, the truth that parents and pupils on the ground feel is very different, and they know it. We have to repair mainstream provision so that parents and pupils can go with confidence to their local school, knowing that they will get the support that they need—support for all pupils, not just some.

Several hon. Members have mentioned the impact on faith schools. I want to offer some comfort. Of course we value and understand parental choice, but based on the evidence submitted through the HMT consultation, as well as the analysis undertaken by the Department for Education on removing the charitable rate relief, it is not apparent that private faith schools will be affected by this measure any more than non-faith schools. There is no evidence of disadvantage.

[Iqbal Mohamed]

Will the Minister give way?

[Jim McMahon]

I want to make progress in the time that I have, and to wind up within the 10 minutes.

The key point is that all children of compulsory school age are entitled to a state-funded school place if they need one, and all schools—and they know this—are required to follow the requirements of the Equality Act 2010 relating to British values and to promote an environment that encourages respect and tolerance towards families of all faiths and none.

A number of Members have rightly mentioned SEND provision—it has been a significant part of the debate, for understandable reasons. We have ensured on the face of the Bill that private schools that are charities and “wholly or mainly” provide education for pupils with education, health and care plans remain eligible for business rates charitable rate relief. Furthermore, private schools that benefit from existing rate exemptions for properties that are wholly used for the training or welfare of disabled people will continue to do so. Taken together, we believe those policies mean that most private special educational needs schools will not be affected by these measures at all.

We recognise that some pupils with special educational needs and disabilities will be in private schools, but without local authority funding in place, as it is judged that their child’s needs can be provided for within the state sector. Of course, parents will still be free to choose whether to be in the state sector or to remain in the private sector—that is a very important point to make. Local authorities aim to process all education, health and care plan applications in time for the start of the next school year, but in special cases, the local authority is able to prepay one term’s fees if the process is not complete. Likewise, some private schools will forgo the first term’s fees for pupils who are expected to receive their education, health and care plan in the future.

Turning to high streets, the Government are wholly committed to rejuvenating our high streets. We want to support the businesses and communities that make our town centres successful. That is why through this Bill, the Government intend to introduce permanently lower rates for retail, hospitality and leisure from 2026-27, in order to protect the high street. That tax cut will be fully funded and sustained through a higher tax on the most expensive properties—the 1% of properties that have a rateable value of £500,000 or more. The new tax rates will be set out in next year’s Budget to factor in the business rate revaluation outcomes and the broader economic and fiscal context at that time.

We were clear in our manifesto that we would look at the business rates system and support our high streets, and we meant it. We know that our high streets and town centres are the beating heart of our communities, but over the past 14 years, they have struggled to keep their heads above water. Think about all those household names that have gone to the wall—that are a thing of the past, not the future. Think about all the banks and pubs that have closed, and about the shutters that have come down on shop premises that were once the lifeblood of where people live. The previous Government had 14 years to get this right, but they oversaw the decline and decimation of our high streets. People feel that in their hearts, because town centres are more than just a place to do business; they are a place for a community to come together. That is something the Tories never understood when they were in government, but it is something that this Government absolutely understand.

With the leave of the House, I thank all hon. Members who have contributed to this important debate. This Bill is the first step on the road to transforming the business rates system. The measures within it will provide certainty and support to our vibrant high streets, enabling the delivery of a permanent tax cut that is sustainable and that finally levels the playing field between the high street and online. The Bill will also help break down barriers to opportunity, supporting all parents to achieve their aspirations for their children. We need to bear in mind, of course, that the vast majority of children in this country—over 90%—are in state schools. This investment will see them given the support that they need and deserve, and that, frankly, they have waited a long time for. I commend the Bill to the House.

Question put, That the amendment be made.

The House proceeded to a Division.

[Madam Deputy Speaker (Caroline Nokes)]

Because of a problem with the Division bells in Portcullis House, I am going to allow an additional minute for this Division.

Non-Domestic Rating (Multipliers and Private Schools) Bill (First sitting)

Jim McMahon Excerpts

Committee stage
Wednesday 11th December 2024 Public Bill Committees

[The Minister for Local Government and English Devolution (Jim McMahon)]

Q Thank you, Mr Watson, for taking the time to be here and for the insight you have provided on that first question. I am interested in the point about the number of multipliers. If I understand you correctly, there is a risk that the more multipliers you provide, the more confusion there might be in the system. However, the counter-argument—this is certainty our position—is that the business rate system is a blunt tool almost by design, and that by creating this different approach, we can better target the support that we provide not only for retail, hospitality and leisure, but for the large footprint occupiers, warehouses and distributors, where we create that pool of funding. I am interested to get an insight into how you and your members would see that balance being struck in the right way.

Gary Watson: As a professional body, we sometimes have quite diverse views, because we have those working in local government, for example, and then we have those working in the private sector, and they can have some quite different views sometimes. Standing back and looking at what our preference would have been, before we saw the Bill, the whole relief system is very complicated at the moment. The reliefs do not interact with each other, and it is confusing for the ratepayer and perhaps for the local authority. We could have looked at the reliefs as a whole and started again. What we have are the multipliers, and that is what we have to work with. If we had the choice at the beginning, we might have looked at some more targeted form of mandatory relief, but we are where we are.

The important thing is that we will make it work, and I think the Bill gives the Government the flexibility to change. What you found with the pandemic, for example, was that the property tax system, to some extent, came to the fore, because it allowed Government very quickly to not only get money out of the door but target it to certain types of business.

The key issue will be that, assuming the Bill gets Royal Assent, the secondary legislation has to be very clear on the types of business that the Government want to support with the different multipliers, and perhaps the exclusions that they want to consider. That also allows the Bill to be flexible, so it is not as if that is all you have to work from. By keeping it in secondary legislation, things will change. Importantly, we have found over the last 10 years that, because it is all under section 47 of the Local Government Finance Act 1988, it allows Government to bring things in really quickly whether or not there is any new Bill. There is no delay, and local government can get that money and support out of the door really quickly. It also allows local government to plan on the financial side as well.

[Jim McMahon]

Q On that point, is that not why this measure is so important? If we think about the types of shocks that many businesses face, the pandemic was exceptional but also profound. Having that flexibility to move quickly and adapt was very important to the system.

With the current system, aside from it being temporary, short-lived and a cliff edge, the business did not know whether it was going to continue, and if it was going to continue, in what guise. It also had the impact of capping the amount of relief that could be given to any business at £110,000.

How do you and your members perceive the high street? From the Oldham perspective, when I look at the high street, national retailers such as Boots and Specsavers are actually the foundation of many high streets alongside local independent retailers, but previously they were locked out of the temporary scheme. It would be interesting to get your views on that.

Gary Watson: In terms of the high street, the companies that you named are there and they are often the draw, which is a benefit to the smaller ones. When we lose some of the more well-known retailers on the high street, those properties do not stay empty too long—certainly the smaller ones—because people move in very quickly. Sorry, I did not get the other part of the question.

[Jim McMahon]

Q The first part of the question was more about how agile the system can be. Providing for secondary legislation as part of this Bill is about having that agility and being able to move to recognise any shocks in the system to ensure that, if there is a hit to the local economy, or the high street in particular, the system can move quickly enough at the right point to save it.

Gary Watson: That is one of the criticisms of the rating system. Outside of section 47, it was not flexible and could not adapt very quickly. I think it has to be a good thing to have that flexibility both in the multipliers, including the higher one and the lower one, and in how it allows you to direct the particular relief. It is good for the rating system, including those who pay the rates and local government.

[Vikki Slade (Mid Dorset and North Poole) (LD)]

Q I would like to touch on that further. The Bill will give the Treasury the power to apply those additional multipliers. Do you feel that should be a local decision? You have hit the nail on the head; the way business rates work can be impacted by a local situation, such as a retailer going out of business or there being very high rents. Do you think that the Bill gives local areas the ability to think about how they might need to apply different multipliers? Would you like to see more regional or local implications, rather than it all coming through the Treasury?

Gary Watson: I go back a long time in business rates; I was working in rating up until 1990 when it was very much the local authority that set the rate and collected the rate. That was one of the reasons why they went to a national non-domestic rate in 1990. I think the councils have a key role to play. That is why I am keen for the relief system to give local authorities an element of discretion so that they can direct reliefs to certain types of rate plan. That goes for not just the high street but the wider picture.

In terms of ensuring an element of consistency, it was interesting that when the reliefs were coming in during the pandemic, there were a lot of local authorities turning around and saying, “Can’t you just tell us what it is?” Then central Government were saying, “You wanted the discretions and now you want it controlled. You can’t have it both ways,” so I think it is a balance. It raises so much money: all the strengths of a property tax are there for both central Government and local government, and for the ratepayer as well. It is about getting that balance.

Controlling the central rate is right, but making sure that councils have an element of discretion, whether through variance in the multiplier or a particular relief, is something to be considered. But again you have to be careful, because local government is different in lots of different areas. There are different challenges in lots of local authorities, and you are sometimes trying to have a rating system that fits every part of the country. That is why you need that flexibility there.

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[David Simmonds]

Q You mentioned that the Bill would have a positive impact on the vast majority of your stores. Can you just walk us through how you have reached that calculation, particularly with reference to the different types of environments in which those stores are located and the different footprints they will have?

Paul Gerrard: We have about 2,750 properties, of which about 220 are not classed as retail, hospitality or leisure. Those will be depots, our funeral business, care homes, our headquarters and so on. We have about 2,500 stores, and of those about 62% have a rateable value of less than £51,000, and just over one third have a rateable value of between £51,000 and £500,000. They will go into what we are assuming will be the two lower multipliers. We do not know what the levels will be below the standard multiplier but, taking the industry’s working assumptions of 10p and 20p, that will have a significant impact.

The properties we have outside that group, which are either non-retail, hospitality and leisure or are bigger than £500,000, make up 20% of our rates bill. They will not benefit—in fact, we would expect the rates bill for the big properties to go up—so there is a bit of a balance, but for us overall, it will significantly support our stores. In addition to our 2,500 stores, the Co-op also wholesales to another 5,000 or 6,000 independent stores. I have talked to colleagues in those businesses and, again, this new structure of rates will significantly support those independent small stores as well.

[Jim McMahon]

Q For the record, I refer to my entry in the Register of Members’ Financial Interests. Mr Gerrard, many of the stores that you operate are not on the high street or in town and city centres; they are often the last remaining store on the estate in a community. How do you think this Bill might contribute to making those more viable? During the pandemic, when children were being educated from home and given vouchers to get meals during the day, we found that there were significant retail deserts in large parts of the country where that immediate meal was not available, bar the local convenience store on the estate or in the local neighbourhood. From that perspective, beyond the high street and town centres, what impact do you think these measures might have?

Paul Gerrard: You are absolutely right; many of our stores are on high streets, but a lot are just local stores that will be the corner shop on a street. The rates bill is significant—as I said, it is one of the top three costs that we have, alongside our people. As you know the Co-op has always paid the Living Wage Foundation’s real living wage, because we think that is the right thing to do, and that is for every colleague, regardless of age or employment status. The other top cost is rent, and then the third one is rates.

I do not think we close stores because of rates, but the current rate system makes it really difficult for some stores to be viable. If we then add to that issues around crime—I have given evidence in this place before on that—there are a lot of costs hitting us. The proposals here are particularly important for those small stores. I think about two thirds of our stores are underneath a £51,000 rateable value, and that rates bill will have a significant impact on the viability and profitability of those stores. You are right that, during the pandemic, when we were all told to stay at home to keep safe, my colleagues and shop workers throughout small stores went in and made sure that the shops were open so that people could get food and water to live.

As I said before, I think we saw in technicolour how important small stores are. The retail sector is multichannel and there are lots of different parts to it, and those different parts play different roles and have different impacts. Small stores are the beating heart of communities. We have done some work, which we are just refreshing, that says that, if you have vibrant high streets, you have better mental health. You have a whole range of better outcomes, and those small stores are at the heart of it.

[Jim McMahon]

Q Leading on from that, one of the other measures in the proposals would remove the current cap on the temporary relief so that multiple operators, including national operators such as the Co-op and others, will benefit more from this scheme. I am interested in your view, because you will no doubt have a view on the tax system in the round and the impact it has on the business overall. Is it recognised that there is an attempt being made here to make sure that those national retailers are as important to the high street and communities as independent retailers, and actually it is the ecosystem overall that makes a place thrive?

Paul Gerrard: I think it is very welcome. We are a national business of little shops; we have 2,500 little shops all around the country, and those little shops bring different economies of scale from, say, a big box in a huge retail park on the outskirts of town. This is very much looking at the kind of shop, rather than the kind of business, and I think that is important. As I said, we wholesale to 5,000 independent stores, and we see this all the time. It is about the nature of the shop, where it is and the impact it has on communities, not just commercially, but socially. A few years ago, we ran a campaign with the British Red Cross on loneliness, and our colleagues would tell me that very often, for the most vulnerable people in societies, the only people they would speak to were in the local shop, such as my colleagues in the Co-op or staff in a Nisa or a Sainsbury’s Local. They are really important as a kind of shop, and that is what I think this Bill recognises.

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[David Simmonds]

Q May I ask specifically what your view is on small business rate relief?

Edward Woodall: Small business rate relief is incredibly important for our membership as it helps the very smallest businesses to get relief. It also has some very specific features. It is automatically applied, and there are tapers between £12,000 and £15,000 rateable value. It really supports the very smallest businesses in our sector, which trade in rural locations and often serve isolated communities. We are very keen that, with any change in business rates legislation, we get some reassurances that there is a strong commitment to retaining small business rate relief. As much as the multipliers are very helpful to businesses at the larger end of our membership, it is really important that we protect that small bit. The small business rate relief is a great mechanism for doing that.

We have lots of suggestions about how we might improve small business rate relief in the future, to make it work better for more retailers. With the upcoming revaluation, we are likely to see higher retail prices and, as a result, the thresholds need to index up with that higher cost, otherwise businesses are going to start to slip out of the small business rate relief support. Certainly, as much as we welcome this Bill, we would like to hear more about what we can do to improve small business rate relief, to help the smallest businesses in isolated locations.

[Jim McMahon]

Q Thank you for giving time to give evidence today, Mr Woodall. You explained the nature of your members and the fact that their businesses are very much anchors of the community. They are the place that provides the food, but also, in many places, they provide access to finance, post office facilities, postal services and so on. How many of your members do you assess will benefit from the measures, given that the relief is targeted at retail, hospitality and leisure businesses of the scale you talk about?

Edward Woodall: Very much the majority of the membership. The breakdown of the membership is that about 71% are independently operated across the convenience sector, and the other third are operated by multiple retailers—they might be a Co-operative, a Sainsbury’s Local or a Tesco Express. The large majority of those premises will sit under the £51,000 rateable value or still use the standard multiplier. Of course, when you take into account hospitality and leisure, we understand that that will be lower as well. So overall, most convenience retailers, as small format retailers trading from spaces under 280 square metres in secondary locations, will benefit from the lower multiplier.

[Jim McMahon]

Q On the point that you made about the potential to improve the system more generally, clearly we want this to be a measure that supports the fabric of community. In the end, these are retail businesses, but they are often the places that bind communities together. That is very much the way that we as a Government perceive them, and perceive the value of our high streets and our precincts in our villages and towns. From your perspective, what measures could be taken to really target the measure to ensure the support is given where it is needed?

Edward Woodall: On the multipliers, we will have to see if the rate of the multipliers is going to have an impact overall. I gave some examples of where you set the multipliers determining how much businesses can invest. What is described in the Bill is well targeted for retail, hospitality and leisure, to support the areas my members trade in and the types of businesses that the communities want in those locations. If we look at our polling about the most desired services on local parades, convenience stores, post offices and pharmacies come top, and all of those trade out of similar premises. Hopefully, it will help our sector, but it will also help the other businesses that trade in those locations as well to continue to deliver those services too.

[Vikki Slade]

Q Thank you very much for coming in to give evidence. On the timing, we know that retail, hospitality and leisure relief will reduce to 40% in April, but these measures will not come in until the April after that. Do you have any concerns about the impact on convenience stores during that year, before we know what will be happening the following year?

Edward Woodall: If you talk to convenience retailers now about business rates, what is in the front of their minds is the reduction in retail, hospitality and leisure relief, which has gone down from 75% to 40% from April next year. That is a big hit, among a cumulative burden of other measures that were announced in the Budget. That is concerning for them. They talk to us a lot about that, as part of the overall Budget package being challenging—and it was a big challenge, with £660 million costs for the sector.

That said, we knew that the retail, hospitality and leisure relief was introduced as a temporary measure during the covid pandemic, so we welcome the fact that it has not disappeared completely but has been tapered. We also welcome the principle that is set out in the Bill that we are giving a bit more permanency to support for retail, hospitality and leisure businesses on the high street in the future. There has been a cycle of changes in the policy over time, so hopefully this will give us a bit more of a stable footing to understand that. That does not just help us; it helps the other businesses from the retail industry that are thinking about investing in those locations too, but also those from hospitality and leisure.

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[David Simmonds]

Q We have heard some evidence on appeals and the decisions that will arise from this. Clearly, there is a degree of uncertainty because, if we do not yet know what the multipliers are, businesses cannot plan for that. Do you have a view about whether the current system is fit for purpose to address what may arise? If not, what measures would you like to see to make it work better?

Tom Ironside: On the existing system and its fitness, or its ability to actually handle what may arise, I think there are long-standing concerns about the ability of the appeals system to respond effectively, with long backlogs and people reporting that they exit one revaluation not having resolved issues from the previous ones. There are real long-standing issues that need to be tackled.

Inevitably, if you look at the approach that is being taken, the introduction of a new threshold will create additional tension for companies that sit just above that threshold, and that is likely to increase the number of appeals. It may also have an impact on investment decisions as you get close to the threshold, because there is a marginal tax rate impact, which could be very significant if you move from being in receipt of a discount for retail property through to seeing an upward multiplier under the existing proposal.

[Jim McMahon]

Q Thank you for attending the evidence session, and for the written evidence that you have provided by way of preparation for the meeting. I think there is an acceptance in the evidence that you have given that any business rate system ends up having to draw the line somewhere; it is the nature of the multipliers and of the value that you apply. It stands a fact that, when it comes to most of your members, despite the 4,000 that you say will be above the £500,000 threshold, 772,000 are below the threshold. Therefore, it stands the case that the vast majority of your members will be the beneficiaries of the measures taken here.

Also, although it can be portrayed—and has been during this evidence session—that the relief is being decreased from 70% to 40%, the truth is that the temporary relief over covid was due to come to an end. That was a cliff edge, but this measure provides a permanent relief in legislation, which gives certainty over the long term. It would be interesting to know the views of your members on that.

Helen Dickinson: I just heard the end of the previous session. Obviously we have got to get to the point of implementation, but once we are there the long-term certainty is going to be really important. I completely understand the context in which the covid support was given and how valuable that was. Painful as it may be for many businesses when transitioning from a higher discount to whatever the new system might be, longer-term certainty outweighs that because we will not be limping from year to year waiting to see what that might look like.

In the context of your point about the proportion of businesses and shops that would benefit from the proposals as they stand, I completely agree that the 4,000 shops I mentioned is less than 5% of the total number of shops. Where it becomes much more difficult is that, if you look at that small proportion of shops, it is about a third of the rateable value of all shops.

If you think about it within a retail context, what we are effectively doing is penalising some shops to support other shops. In the competitive landscape of retail, where businesses are competing for consumer business day in, day out, it is distortive to competition. We completely agree that you have to draw a line somewhere, but we think the line should sit outside retail and hospitality, rather than being drawn within retail—and hospitality, she says, with her retail hat on. Does that answer your question?

[Jim McMahon]

Q It does, a bit, but I am not entirely sure it hits at the facts, to be blunt about it. It is not the case, from the evidence, that properties above £500,000 are essentially cross-subsidising those below £500,000. Those above £500,000 are only 7.5% of the total rateable value in the whole system. It is not the case that we are seeing that transfer.

Is it not also the case that many of your members who will occupy premises above the £500,000 will be the larger footprint occupiers, such as supermarkets and big department stores? If we were to move the centre of the cross-subsidy entirely over to warehousing and distribution, they would pay it on the back-end anyway, because Tesco, Sainsbury’s and the rest have huge warehousing and distribution models in their business.

Helen Dickinson: I am trying to think of the best way to answer that without going into too many details and numbers. Again, I agree that with the cross-subsidy we are not talking about going from one to the other within retail. If you look within retail, the rateable value of all of the small and medium-sized retail properties is about £9.2 billion, and there is an additional £4.6 billion of larger properties. Taken together, that is about £13.8 billion, with one third large and two thirds small. As you say, there are many other properties that sit outside retail, including warehouses and distribution centres, but also offices. In fact, I think the biggest chunk of that is offices. We are not just talking about things that will impact retail, like warehouses, coming into the other side of the equation; we are talking about all those other sectors as well.

Going back to what I said at the beginning, if the objective of this is to stimulate local investment in communities—that has to be the goal, because we all, as consumers and customers, want to see our high streets and town centres flourishing and vibrant with a diversity of offer—then we have to be able to find a way for that funding to come from right across the spectrum of properties, whether it is offices, distribution centres or whatever else sits outside. The modelling we have done shows that that is possible within the context of the framework you have laid out.

Tom Ironside: Just to be clear, are we talking about the exemption of shops above £500,000, not the exemption of other sorts of properties?

[Jim McMahon]

Let me make a point of clarity for the record. The 7.5% of total rateable value of the overall business rate tax take was just for retail, hospitality and leisure. It does not take into account offices or warehouses. I thought it was important that we set the context correctly in framing the conversation.

Tom Ironside: We can provide you with clarity on the figures, which we can lay out in a subsequent note, if that is helpful.

[Jim McMahon]

That would be very helpful.

[Vikki Slade]

Q You talked a lot about the retail properties over £500,000, but there is also a cliff edge at £51,000. The Fantastic Things Emporium in Bournemouth is a brilliant treasure trove of lots of microbusinesses that would otherwise not have the ability to be on the high street. Is £51,000 the right level? Should the level exist at all?

Helen Dickinson: I will start and then hand over. Tom highlighted earlier that whenever you have a threshold of some description, there will be a cliff edge risk. I know it is a goal of the current Government, as it was of the previous Government, to ensure that small and microbusinesses get the support they need to be able to grow. There is recognition right across retail that there is a case for a higher discount for really small businesses as they begin to grow and a next-level discount, for want of a better description, for those above that. The threshold risk is there, but the improvements proposed in the discussion paper, which are not necessarily in the Bill, about transparency from the Valuation Office Agency on data and the processes it goes through should at least give a greater ability to get through the appeals process and give people more clarity and certainty. That will hopefully avoid at least some of the consequences of those thresholds.

That is a long-winded way of saying that there is recognition that there needs to be a greater discount for really small and microbusinesses. You have to set a level at some point. Is £51,000 exactly the right figure? Whether it is £51,000 or £500,000, it is important that it indexes with inflation, because otherwise it will get eroded over time. Whether that needs to be in the scope of the Bill is part of the way to address your question. I do not know if that helps. Tom, do you want to add anything?

Tom Ironside: On that final point, in 2001 there was around £40 billion of rateable value on the list. Now we have about £70 billion of rateable value on the list. It is inevitable that if you do not have some sort of uprating mechanism—we have identified the £500,000 threshold, but I suspect that you could make an equal case for the £51,000 one—you erode the benefit and purpose of what is being set out. We feel quite strongly on that front.

--- Later in debate ---

[David Simmonds]

Q Could you share with us an assessment—your view—of the impact that measures in the Bill will have on the affected sectors?

Stuart Adam: There are two sections in the Bill, obviously: one about multipliers and one about private schools. We should probably separate those as they are very different issues.

In terms of the changes in multipliers, this gets widely misunderstood. What gets left out of the equation is essentially the economics, and specifically what the consequences will be for rents. Basically, business rates are not what is killing the high streets, and changes to business rates are not what will save it. As a rough first pass—and we can nuance this quite a lot—when business rates go up or down, rents tend to go down or up almost pound for pound in the long run, which means that business rates do not have a big impact on the cost of premises. That is much more about the supply of property.

There are several nuances to that. One is that to some extent business rates affect the supply of property and that will feed through into rents and affordability. You can think about the effects that this would have on the incentive to build bigger or smaller properties, or properties focused on retail, leisure and hospitality versus other sectors; or the incentives to use properties in one sector versus another; or indeed whether properties are used for commercial purposes or housing, and so on. There will be some effect from those things, and that will affect affordability as a knock-on consequence. That is clearly longer term and second order, and things like the planning regime are much more important.

If you take the supply of properties as given, to that extent, changes in business rates get offset by changes in rent. For example, in the case of the rise in business rates for properties with a rateable value of more than £500,000, I would expect rents to fall by a similar amount over the long term. Again, “over the long term” is a caveat. That is therefore a one-off hit to the owners of the land rather than to the occupiers of the property.

With reduced multipliers for retail, leisure and hospitality, the position is a bit more complicated because it depends on the extent to which there can be shifts of use in properties between different purposes. If properties used for retail, leisure and hospitality are stuck for that purpose and cannot be used for anything else, the same applies, but if shops can be converted into offices and vice versa, the situation is more complicated. We expect that, overall, the reduced multipliers would lead to an increase in rents, but a smaller increase in rents for all properties. Retail, leisure and hospitality would therefore become more affordable, but only to the extent that offices, factories and so on become less affordable. It would still wash out overall in terms of rents, and the beneficiaries would be the landlords rather than the businesses occupying and using them, but there can still be a shift between retail, leisure and hospitality and other sectors of the economy.

[Jim McMahon]

Q Thank you for coming to give evidence today, Mr Adam. I absolutely accept what you said—you are far more qualified than me on these matters, and I will not try to test some of it. However, I can say from my experience in Oldham that businesses are asking for respite and that they have found things very difficult. Although covid has been and gone, the operating environment before covid was difficult for many high streets and town centres, particularly for retail, hospitality and leisure. In some places, particularly where the economy is vibrant and there is high demand for premises, there might be a shift from business rates to rent as the system is moved round, but in most places, where there is not that high demand and there are lots of vacant units, it is about making the activity more affordable so that people can operate and keep their heads above water, and there probably will not be the shift that you talked about.

Stuart Adam: I disagree. I think there still would be that shift over the longer term. Again, these things take time as rental contracts adjust as new tenants are found for premises. The theory is reasonably clear and the evidence that we have, which is fairly thin, supports it pretty much completely. I emphasise that in the short run we would absolutely expect respite for retail, hospitality and leisure sectors at the moment, until there is time for rents to adjust. One thing to bear in mind is that we have had more generous reliefs for retail, hospitality and leisure in recent years, and some rents have been renegotiated during that period. It is also possible that if people, firms and the market expect reliefs that are more like 75% to continue, rents may have gone up, and the fact that the relief is less generous than what it replaces means that they will be worse off in the short run than if the reliefs had never been introduced. Obviously, they are still better off than they would be if the relief were removed completely. My expectation is still that that will be reflected in rents over time.

[Jim McMahon]

Q I accept that up to a point, but the temporary relief that the previous Government brought in to cover the impact of covid on the high street and retail, hospitality and leisure was introduced at a time when the sector was decimated and the country and the economy changed beyond recognition, in a way that none of us had experienced. That is not the world today, but the operating environment is still very difficult. Have you made an assessment of the impact of the previous temporary relief coming to an end in the form of a cliff edge? It was just going to stop and there was no provision for it to continue in any form in the Budget or the overall forecast. What impact would that have had on the high street?

Stuart Adam: The short answer is that we have not, and I am not aware of any good empirical study of what that was likely to do. It is slightly interesting and strange the way it evolved, because of course it was introduced as a relief in desperate times during covid. But as covid was coming to an end, it was made more generous rather than less. It moved up from 50% to 75%, if I remember rightly, at that point. Again, I am absolutely not disputing in any way that it did provide and does provide much needed respite, particularly at times of crisis, but as a long-term permanent thing I do not think the effects are the same.

One thing I completely welcome is that whatever you want to do with this—setting it up as a clear, long-term part of the system rather than having year-to-year uncertainty as to what the number will be and whether it will continue and so on—and whatever decision you make, making it a permanent part of the system is a very good thing.

[Vikki Slade]

Q In Northern Ireland, there is a single regional rate and then a local levy. Do you have views about whether there should be any local influence in terms of these determinants reflecting higher rents, particularly in the south-east or south-west, that put lots of businesses above the £51,000 threshold?

Stuart Adam: There are a number of questions. One is how far the rates should be set locally versus centrally. Obviously there was a history there of them being centralised in 1990. There is a question as to how much localism you want. If you are going to have local taxes, property taxes are a pretty good choice—housing more so than business property taxes. But if you wanted to localise more taxes, business rates would not be a bad choice. There might be things you can do along the lines that we have seen already about, for example, having a ballot of local businesses as a requirement and that kind of thing. There is a case for whether it should be local or central—I do not have a strong view either way.

There is a question as to how far the revenues should be redistributed across the country and whether areas that get more business rates revenue should have more funding as a result. That, again, comes into a broader question about the local government finance system. It is not obvious that just happening to have more high value businesses in an area is a good reason for that area to get more revenue. I think there is a better argument for things such as business rates retention, where you want to give local authorities some incentives, some reward, for having more businesses, encouraging them and generating local economic growth and so on.

There is then a question about whether, even if it is set centrally, the rates and thresholds of business rates should be different across the country. It is not obvious to me that there is a good argument for that, but it is not obvious to me that there is a good argument for it being different across different sizes of business or sectors, either. I would not rule out that you could make a case for it. In those other cases in terms of smaller businesses and retail, hospitality and leisure, you can make a case for it. I am not saying that you should never have any variation, but I would want to hear that argument made clearly. In terms of variation across areas, I do not think I have heard that argument made.

[Jayne Kirkham]

Q I am from Cornwall, where we have full business rates retention, so that puts a slightly different spin on it. Given that that varies across the country, maybe you could mention that. You talked about high street rents going up or down. I come from a place where there are lots of seaside towns and limited space by the water. A lot of our properties are owned by faceless corporations or insurance funds, so the rents are not remotely responsive. They have stayed high for a long time because they are seen as an asset on a balance sheet. We have struggled very much with that. For some places—maybe you would disagree—the business rates are even more important because the rents either take a very long time to have an impact or we are just left with empty properties for a very long time. Would you agree?

Stuart Adam: I think I would disagree. Actually, it is possibly even more true in the cases where properties are owned by big, faceless corporations, because clearly they will want to set the highest rent they can get away with, but the amount of rent they can get away with will depend on the demand for that property, and the demand for the property depends on the level of business rates and rent attached to it.

You would expect rents to adjust in the long run. How long “the long run” is is an interesting question. There is some evidence that it starts to happen in a relatively short period—something like three or four years—but the evidence on that is not great. The rent adjustment probably happens more quickly than it would have 20 or 30 years ago, because commercial rent contracts have become shorter and there is more use of things like commercial voluntary arrangements, which allow rents to adjust more quickly. It can take a fair number of years before rents are renegotiated, contracts come to an end and so on, but I would still very much expect it to happen.

[Jim McMahon]

Q Is part of the tension not that the question described a broken market, but that response describes a functioning market? Is the real issue that many institutional investors would sooner have an empty property with a notional rent attached to it, even if the rent is never achieved, than accept a tenant for a lower rent that would have an impact on their overall balance sheet? Is there not a tension there?

Stuart Adam: Yes, I think that is right. There is an interesting question as to why so many properties are left empty for so long, when it would seem to be in the landlord’s interest to have anyone in there paying them something, rather than no one in there paying them anything. There are certainly aspects in which the market does not function well, but on the whole it still looks to me like a market where, basically, prices are determined by supply and demand, and such evidence as we have seems to support that.

[Patrick Spencer]

Q On this remarkable relationship between taxes and rent, are you saying that there is a uniform relationship across geographies, locations and shop types? There is a big difference between Oxford Street and a town high street; are you saying that the behaviour of rents and taxes does not vary across those situations?

Stuart Adam: Broadly speaking, yes. The rule of thumb that, in the long run, rent will change with rates almost pound for pound will apply across different types of property and location. There is a difference where the tax on the premises is not fixed, for example where it depends on what the premises is used for: I do not think it is the case that reliefs for particular sectors get reflected pound for pound, because the use of the property may vary.

Non-Domestic Rating (Multipliers and Private Schools) Bill (Third sitting)

Jim McMahon Excerpts

Committee stage
Thursday 12th December 2024 Public Bill Committees

[David Simmonds]

It is a pleasure, as always, to serve under your chairmanship, Dame Siobhain. We have tabled a number of amendments to this legislation, but I want to be clear from the outset that we are not proposing to press them to a vote. We hope to have a response from the Minister; in many cases, that will follow up on the evidence that we heard in yesterday’s evidence sessions.

The purpose of amendment 13 is to introduce an element of discretion for billing authorities in the application of the higher multiplier; the significance of local flexibility and discretion in that was highlighted in yesterday’s oral evidence and in written evidence to the Committee. The amendment would ensure that a billing authority, which is the local authority for the area, has discretion to apply a different figure, where the authority considers that it would benefit the local economy or its residents by doing so. That flexibility has been reflected in the business rate system that has been in operation in England since the 1990s.

As we heard yesterday in evidence, the impact of the Bill is considered by most sectors and by most of the witnesses to be moderate. Therefore, the level of flexibility in the Bill does not allow for a hugely different figure from one type of business rate payer to another. However, local authorities are sometimes keen, for example, to support a local business for the purposes of sustaining employment for a period of time or because the local authority believes that the business provides an important local facility. In such an instance, the local authority may see it to be in the interests of local taxpayers to vary the application of the higher multiplier.

[The Minister for Local Government and English Devolution (Jim McMahon)]

Amendment 13 seeks to give local authorities discretion over where the higher multiplier enabled by the Bill should apply. In England, there are currently two non-domestic rating multipliers: the non-domestic rating multiplier for properties with a rateable value of £51,000 and above, and the small business non-domestic rating multiplier for lower value properties. The Bill will enable the Treasury, through regulations, to introduce permanently lower multipliers for qualifying retail, hospitality and leisure properties, and to fund this by introducing higher multipliers for properties with a rateable value of £500,000 or more.

Narrowing the scope of the higher multiplier would inevitably reduce the funding available to support the lower rates for qualifying retail, hospitality and leisure properties. Ratepayers in England may, however, be eligible for a range of different reliefs from business rates. Some reliefs are mandatory and provided for in legislation, whereas others are given at the discretion of the billing authority.

The Bill will not affect the very wide powers local authorities have to award this discretionary rate relief, as set out in section 47 of the Local Government Finance Act 1988. Those powers already allow local authorities to devise and deliver their own relief schemes without the intervention of central Government, where the authority is satisfied that that would be in the interest of its council tax payers. Once the Bill has come into force, local authorities will be able to use their discretionary powers to provide relief, should they so choose, to offset any impact of the new, higher multiplier. I hope that gives enough assurance to the shadow Minister to withdraw his amendment. Local authorities will still have the powers they have always had, with the flexibility to respond to local concern.

Clause 1 adds into the business rate system new additional multipliers, or tax rates. Currently, there are two multipliers, as I set out before: the non-domestic rating multiplier and the small business non-domestic rating multiplier. The legislation for those is found in part A1 of schedule 7 to the Local Government Finance Act 1988. Clause 1 adds a new chapter 3A to part A1 for the new additional multipliers.

As set out by the Exchequer Secretary on Second Reading last month, the introduction of the new additional multipliers that this clause enables is the Government’s first step towards creating a fairer business rate system. The intention of these new multipliers is to first, once set at autumn Budget 2025, provide a permanent tax cut to qualifying retail, hospitality and leisure businesses, ending the uncertainty of annual retail, hospitality and leisure relief. Secondly, it will ensure that the tax cut is funded sustainably through the introduction of higher multipliers levied on the most valuable properties. The new chapter 3A gives the Treasury new powers to set these additional multipliers.

I understand the concerns of hon. Members that we are providing for new taxation through powers in a Bill, but we face a challenge in business rates in setting the multipliers, because demand notices are issued by individual local authorities, and these must be ready to go out several weeks before the start of the financial year. We must confirm and give notice of the multipliers to local authorities before they prepare those demand notices, and that simply does not allow time for us to return to Parliament with a Bill each time we want to change the multipliers.

In recognition of hon. Members’ concerns about providing new taxation through powers in a Bill, clause 1 includes some important safeguards over the use of the powers. First, paragraph A6A(1)(a) of the new chapter 3A ensures that the Treasury cannot set a multiplier that is more than 0.1 higher than the non-domestic rating multiplier. We often, in practice, refer to multipliers as being so many pence in the pound. For example, the current non-domestic rating multiplier is 54.6 pence in the pound. In those terms, this clause ensures that the multiplier cannot be more than 10p higher than the non-domestic rating multiplier.

Secondly, paragraph A6A(1)(b) of the new chapter 3A ensures, in a similar way, that the Treasury cannot set the lower multipliers more than 0.2—20p in the pound—below the small business non-domestic rating multiplier. Thirdly, clause 1(5) ensures that where the Treasury is using those powers to set a higher multiplier, it will need to bring a statutory instrument before the House of Commons in draft for approval before that multiplier can be confirmed. To be clear, those values are the maximum parameters at which the new additional multipliers may be set. They do not represent the changes that the Government intend to implement. The parameters are guardrails that offer sensible limits with proportionate flexibility.

The decision on the level at which the new multipliers will be set will be taken at the autumn Budget 2025, factoring in the impacts of the 2026 revaluation on the tax base, as well as the broader economic and fiscal context. The clause also ensures, in new paragraph A6A(2)(a), that the Treasury cannot set more than two lower multipliers. That reflects our intention to have two multipliers for retail, hospitality and leisure: one for properties below £51,000 rateable value, and one for properties between £51,000 and less than £500,000. However, the new paragraph A6A(2)(b) ensures that we can still make adjustments to those two new multipliers if the hereditament is unoccupied or on the central rating list—although our current intention is for the same multipliers to apply across all occupied, unoccupied and central list properties.

Finally, clause 1(4) ensures that the existing arrangements in chapter 4 of part 1A of schedule 7, which concern the making and giving of notices of the multipliers, will also apply to the new multipliers. It will ensure, for example, that we must give notice of the multipliers as soon as reasonably practicable after they have been calculated, and that they are rounded to three decimal places.

[David Simmonds]

The Minister and I had the joy of parallel careers in local government for many years. I cannot imagine he spent a great deal of that time looking forward to the opportunity to explain non-domestic business rate multipliers in a Bill Committee. However, as he acknowledged, it is important to ensure that there is a sufficient degree of local scrutiny and flexibility so that those local authorities that are billing authorities are able to exercise their discretion in order to support their local economy. I am grateful to the Minister for outlining the Government’s intentions in that respect. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 ordered to stand part of the Bill.

Clause 2

Special authority multipliers

Question proposed, That the clause stand part of the Bill.

[Jim McMahon]

Clause 2 concerns additional multipliers in special authorities. The meaning of a special authority is already defined in section 144(6) of the Local Government Finance Act 1988 as one which on 1 April 1986 had a population of less than 10,000 and a total rateable value per population number of more than £10,000. The City of London Corporation is the only authority that meets that test. The City of London has powers to set its own non-domestic rating multipliers. For example, for the current year the non-domestic rating multiplier in the City of London is 56.4p, compared to the same multiplier in the rest of England of 54.6p. Those existing powers are in part 2 of schedule 7 of the 1988 Act.

Clause 2 inserts new paragraph 9B into part 2 of schedule 7, giving the Treasury powers to make provision for the additional multipliers in the City of London. The Treasury may only do that where it has exercised those equivalent powers in clause 1 for the rest of England. The unique powers of The City of London reflect its special circumstances, notably its very small resident population. The clause reflects the Government’s intention for the new multipliers to apply across England. In clause 2, we have replicated the same safeguards for setting the additional multipliers as apply in clause 1.

Proposed new paragraph 9B(1)(a)(i) of schedule 7 to the Local Government Finance Act 1988 will ensure the higher multipliers in the City of London cannot be more than 0.1, or 10p in the pound, higher than the City’s non-domestic rating multiplier, and proposed new paragraph 9B(1)(a)(ii) will ensure the lower multipliers in the City of London cannot be more than 0.2, or 20p in the pound, lower than the City’s small business non-domestic rating multiplier.

--- Later in debate ---

[David Simmonds]

I have no objection to these measures. Could the Minister confirm, in writing if that is more convenient, that there has been a degree of consultation with the corporation to establish what, if any, impact it would expect on its budget?

[Jim McMahon]

I can confirm in writing the exact consultation that has taken place. Conversations will certainly take place. I return to the point that, if we do not take these measures to include the City of London, there will be many high-value properties that we can use to support retail, hospitality and leisure in the rest of England to which these measures would not be applied. It is an important measure. I will certainly confirm in writing via my officials the consultation that has taken place.

Question put and agreed to.

Clause 2 accordingly ordered to stand part of the Bill.

Clause 3

Application of multipliers

[David Simmonds]

I beg to move amendment 14, in clause 3, page 3, line 25, after “more,” insert—

“and is not a retail premises which is open to customers for more than 18 hours a day”.

This amendment would exempt retail premises which are open to customers for more than 18 hours a day from having the higher multiplier used to calculate their non-domestic rates. It is linked to Amendments 15 and 16.

[David Simmonds]

This group revolves around amendments 14, 17 and 20 and includes consequential amendments on relevant language in further paragraphs. They aim to address an issue that has been raised extensively in public evidence sessions, written evidence submitted to the Committee and the wider debate about measures in the Bill. That is, the circumstances of certain types of businesses, for example those that are unusual in that they are open for very long hours because they may be the only retailer in a location and are therefore of particular significance to that community, or those that are host to a post office. We all hear examples of local post offices co-locating with shops. We are very keen to ensure that those businesses are sustainable for the wider benefit of that community and access, particularly for vulnerable residents, to those services is maintained.

Progress has been made in developing banking hubs, often in premises that are co-located, sometimes with post offices. We know that has been important in ensuring access to cash in communities where it might otherwise be lost, as well as access to more general banking services, for both small businesses and vulnerable residents. These types of business can be absolutely critical, especially in rural locations, but sometimes also in suburban areas where elderly residents in particular may struggle to access those types of shops and services if we do not ensure their continued support.

The purpose of the amendments is to introduce specific exemptions or provisions to ensure that the measures are enacted in a way that continues to support retailers with long opening hours that provide services that might otherwise not be available, access to a post office or access to a banking hub.

[Jim McMahon]

Amendments 14 to 25, tabled by the shadow Minister, would exclude certain properties from the higher multiplier. Properties that are open to customers for more than 18 hours a day, properties that are shared with a post office and properties that are shared with a banking hub would be excluded from the higher multiplier.

These are very important sectors. The Post Office delivers essential services that are hugely valuable to both individuals and small or medium-sized enterprises in urban and rural areas across the country. Those services include mail, parcels, cash, basic banking, utility bill payments and Government and public services. That is why post offices are eligible for the existing retail, hospitality and leisure relief, which gives eligible retail, hospitality and leisure properties 40% relief on their business rates bills, up to a cash cap of £110,000 per person, in the 2024-25 financial year.

With regard to banking hubs, the Government understand the importance of face-to-face banking to communities and high streets, and we are committed to championing sufficient access across the country as a priority. That is why the Government are working closely with banks to roll out 350 banking hubs across the UK. The UK banking sector has committed to deliver those hubs by the end of the Parliament. Over 90 banking hubs are open to the public, and the Government continue to work closely with high street banks to ensure communities and local businesses have access to the banking services they need.

To provide certainty and permanent support for the retail sector and the high street, through the Bill we are introducing permanently lower tax rates for retail, hospitality and leisure properties with a rateable value under £500,000. The existing RHL relief has been repeatedly extended year on year as a temporary stopgap, creating cliff edges for businesses and significant financial pressures. The Government are currently developing with the sector the definition of “qualifying RHL properties”, which will be introduced through secondary legislation in 2025. The sector definitions will broadly follow those already defined in the current retail, hospitality and leisure relief system.

To ensure that this tax cut is sustainably funded, we intend also to introduce a higher rate on the most valuable properties—those with a rateable values of more than £500,000. To be clear, that only applies to the highest value properties, and less than 1% of all non-domestic properties across England. I understand that the hon. Member for Ruislip, Northwood and Pinner wants to exclude some properties from the higher charge. However, the Government want to take a fair approach, which is why we intend to ask all properties with rateable values of £500,000 and above to contribute more to support the high street. The Government do not intend to exclude any properties with a higher value, applying the approach in the fairest possible way.

There are practical implications that make it difficult to apply different multipliers to retailers based on their opening hours. Local authorities require certainty about which multiplier will be applied to which property ahead of the billing year. That cannot be determined based on opening hours, which businesses can rightly change at their own discretion, subject to legal requirements. For the reasons I have set out, the Government cannot accept the amendment, which would carve out certain premises from the higher tax rate. However, I hope the Committee is reassured of the Government’s commitment to post offices, banking hubs and the retail sector.

[David Simmonds]

I am grateful to the Minister for talking us through the complex set of reliefs that are available. It is an issue that colleagues who represent rural areas have been concerned about, because there are often multi-use sites in those areas—a petrol station and a post office, or a banking hub and a small supermarket. Those are potentially larger premises that are critical to the operation of the local community. I am grateful that the Minister has set out how existing reliefs may operate. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

--- Later in debate ---

[Martin Wrigley]

We have tabled this amendment to explore the possibility of including manufacturing businesses. Manufacturing is important, and we know that it is struggling. By adding manufacturing businesses, we might be able to help them in the same way as we intend to help hospitality, retail and leisure. Manufacturing is a vital area that we have lost too much of in the past however many years. This relief would be a small help to enable manufacturing businesses to recover. That is why we would like to add the category of manufacturing to the provision.

[Jim McMahon]

Amendments 1 to 6 deal with eligibility for the new lower multipliers. Under the amendments qualifying manufacturing properties would be eligible for the two new lower multipliers the Bill introduces for qualifying retail, hospitality and leisure properties from 2026-27.

Let me start by highlighting that the Government recognise the importance of the manufacturing sector, and we have identified advanced manufacturing as one of the eight growth-driving sectors as part of our industrial strategy, recognising the contribution it makes to our economy. However, the provisions in the Bill are about delivering our manifesto pledge to protect the high street. To that end, we aim to introduce permanently lower tax rates for retail, hospitality and leisure properties from 2026-27. To ensure that this tax cut is sustainably funded, we intend also to introduce a higher rate on the most valuable properties—those with rateable values of £500,000 and above. As I said before, this represents just 1% of the ratings system; the context is important here.

The measures in the Bill will provide certainty and support for RHL businesses, which are the backbone of the high street. The existing RHL relief has been repeatedly extended year on year as a temporary stopgap. It has created a cliff edge for businesses, and those sectors have repeatedly demanded clarity and certainty. We have been clear that the eligibility for the new lower RHL multipliers will broadly follow those already defined in the current retail, hospitality and leisure relief system. On Second Reading, the hon. Member for Mid Dorset and North Poole spoke about her experience of owning a café and the need for Government support for such businesses. That is precisely why we are enabling the introduction of these new multipliers for those types of property through the Bill.

The amendments in the hon. Lady’s name would expand the scope of this support to include manufacturing properties, but that does not match our intended goal of supporting the high street in a targeted way through the Bill. Against the current fiscal backdrop, extending eligibility to other sectors may dilute the support that the Government can offer to retail, hospitality and leisure properties. It may even require a higher rate on properties with rateable values of £500,000 or more to fund the new lower multipliers sustainably.

I reiterate that the Government are committed to supporting the manufacturing sector. At the Budget, the Government announced £975 million for the aerospace sector over five years, over £2 billion for the automotive sector over the same period, and £520 million for a new life sciences innovative manufacturing fund. For the reasons I have outlined, we cannot accept the amendments, but I hope that the Committee is assured of the Government’s continued commitment to the manufacturing sector.

[Martin Wrigley]

I am a little reassured by the Government’s intentions to support the manufacturing industry and look forward to their efforts to do so. I am certainly reassured by the support for the high street, which is very important to all. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Jim McMahon]

For this grouping, I will first speak to clause 3, then return, after other contributions, to amendment 10 and new clauses 2 and 4.

We have previously discussed clause 1, which allows the Treasury to introduce new additional multipliers. Clause 3 deals with how we will determine which properties those multipliers should apply to. The clause is split into three main parts, dealing with occupied hereditaments in subsection (2), unoccupied hereditaments in subsection (3), and hereditaments on the central list in subsection (4). Properties on the central list are typically utility networks spanning many local authority areas, such as gas, electricity and water networks. Each of those subsections is essentially identical, so, to save the Committee from much repetition, I will explain the provisions on occupied hereditaments in clause 3(2) only.

The most important part of subsection (2) is the small amendment made by paragraph (a) to existing powers in the Local Government Finance Act 1988. Under those powers, the Treasury already has the ability to determine in regulations which multiplier applies to which property. Those powers, in respect of occupied properties, are in paragraphs 10(9) and 10(10) of schedule 42A to the 1988 Act. Clause 3(2)(a) amends that part of the 1988 Act to extend those powers to cover all the additional multipliers. This means that the Treasury will be able to determine, by regulations, which properties pay on which multiplier. Actually, Dame Siobhain, may I just correct the record? I think that I referred to “schedule 42A”, but it is actually schedule 4ZA.

As in clause 1, we have included in clause 3 safeguards on to how the Treasury may use these powers. First, clause 3(2)(b) amends paragraph 10 of schedule 4ZA to ensure, through proposed new sub-paragraph (9B)(b), that the Treasury cannot apply the higher multipliers to any hereditaments with a rateable value of less than £500,000. This will ensure, based on the current rating list, that 99% of hereditaments are unaffected by the higher multiplier.

Secondly, proposed new sub-paragraph (9B)(c) will ensure that the Treasury, when setting new lower multipliers, can apply them only to qualifying retail, hospitality and leisure hereditaments. The precise meaning of qualifying RHL properties will be set out in regulations, but we have been clear that we intend to broadly follow the existing definition that applies to the current relief scheme for those sectors.

Thirdly, the Treasury, when using the existing powers to determine who pays on which multiplier, will need to bring that statutory instrument in draft to both Houses of Parliament for approval before that can be confirmed. This requirement is not on the face of the Bill because the powers already exist, but if hon. Members wish to be reassured on this point, it can be found in section 143(7B) of the Local Government Finance Act 1988.

The power to define qualifying RHL properties—in proposed new paragraph 10(9C) of schedule 4ZA to the 1998 Act—follows the negative resolution procedure, given that this power only allows us to reduce the rates for certain ratepayers.

Finally on clause 3, the existing powers for determining the application of the multiplier allows the Treasury to do that by reference to a list of factors found in paragraph 10(10) of schedule 4ZA to the 1988 Act. This is a non-exhaustive list that includes factors such as its rateable value, its location or its use.

For the introduction of the lower multipliers in 2026, we intend to replicate the process and the broad eligibility in the current RHL relief. As with the current system, local authorities will determine eligibility, but rather than that being against guidance, we will lay down criteria in regulations. Clause 3(2)(c) gives the Treasury the scope also to determine the application of the multipliers by reference to the description that the Valuation Office Agency will put in the rating list.

As I have said, the remaining parts of clause 3 make the same provisions that I have described, but in relation to unoccupied properties and those on the central rating list. It is usual for powers applying multipliers across occupied, unoccupied and central rating list properties to align.

[David Simmonds]

I will speak to amendment 10 and new clauses 2 and 4, which stand in my name. They are designed to address concerns raised in evidence which there was some debate about yesterday: the objective of setting out, as far as we can in advance, the impact these measures would have on affected businesses; providing for a review and scrutiny process to follow up to confirm that the assessment had been correct or otherwise; and seeing what lessons can be learned from it. I appreciate that the Government are very keen to press ahead on this and will be reluctant to accept amendments that have that effect.

None the less, I am sure Members will recognise that when making decisions it is important to have a sense of what the impact is likely to be, in particular when we know that the impact of some of the measures will affect businesses that may be marginal. In many communities the loss of a large supermarket or warehouse or logistics centre that may be affected will have a major impact on the availability of services and local employment. That is the thinking behind bringing these measures forward. With your leave, Dame Siobhan, I will move them for debate.

[The Chair]

With this it will be convenient to discuss new clause 1—Review of impact on businesses, high streets and economic growth—

“(1) The Secretary of State must review the impact of sections 1 to 4 of this Act on—

(a) businesses,

(b) high streets, and

(c) economic growth.

(2) The review must consider—

(a) the impact on different types of business, including small businesses,

(b) the impact on businesses operating mainly or solely on high streets,

(c) whether the provisions have had a measurable impact on economic growth, and if so what that impact has been.

(3) The Secretary of State must lay a report of the review before Parliament within six months of those sections coming into effect.”

This new clause would require a review of the impact of clauses 1 to 4 of the Act on businesses (including small businesses), high streets and economic growth.

[Jim McMahon]

Chair, can I just confirm that we are discussing amendment 10 and new clauses 2 and 4? Or have we moved on to clause 4?

[The Chair]

If you wished to speak to those amendments, it should have been in the previous debate.

[Jim McMahon]

I thought I was going to come back at the end of that debate, but it is fine.

[David Simmonds]

On a point of order, Dame Siobhan, having moved those amendments, I did indicate that subsequent to the debate I would be minded to withdraw them. I have moved them, but I am not aware that we have made a decision on withdrawal.

--- Later in debate ---

[The Chair]

We are now discussing clause 4 stand part and new clause 1.

[Jim McMahon]

New clause 1 would require the Secretary of State to review and report on the impact of the introduction of new multipliers. Let me first set out that I understand full well why the hon. Member for Ruislip, Northwood and Pinner has been pressing this point, and I agree with it in principle. Chair, can I just check that I am speaking to the right provisions?

[The Chair]

We are having a combined debate on clause 4 stand part and new clause 1.

[Jim McMahon]

I will speak to both now. Clause 4 makes two small consequential amendments to the existing legislation to reflect the addition of the new multipliers. There are other amendments we will need to make to regulations to reflect the changes in the Bill, but we will do that using existing powers once the Bill has passed. We have not taken any further powers to make consequential changes.

As hon. Members will know, the Bill provides the basis for how the two new retail multipliers and the higher multiplier will be set. In doing so we are deliberately constraining the maximum levels of the new tax rates by reference to the existing business rate multipliers. Those guard rails prescribed in the legislation provide that the basis for how the new rates will be set will be at the next Budget. For the two retail, hospitality and leisure multipliers, the Bill ensures that the rate may not be more than 20p in the pound lower than the small business rate multiplier. For the higher multiplier, it cannot be more than 10p above the standard multiplier.

I have outlined how the new multipliers will be set at the next Budget, but I trust that hon. Members will also be reassured that when the new multipliers are set, the Treasury intends to publish analysis of the effects of the new multiplier arrangements, taking into account the effects of other changes in the 2026 Budget. The impact assessment that has been referred to in this debate and in the evidence session will be picked up later on in the process. That work will not stop with the next revaluation. As with all taxes, the Government will keep the policy and its effects under review. It is therefore not necessary to impose that requirement in legislation.

With that explanation of the Bill provisions, the process for setting the tax rates, and HMT’s intention to provide analysis of the effects of the new multiplier arrangements, I hope I have provided the necessary assurances for new clause 1 to be withdrawn.

[Martin Wrigley]

I rise to speak to new clause 1. I thank the Minister for his words. It is, as we are discovering, an incredibly complex and arcane way of creating taxes that will have an impact on many high street businesses. While the Treasury analysis will tell us how the multipliers have hit, and the numbers that are done from a taxation point of view, it will not answer whether the Bill has achieved what it set out to do, which is to provide the necessary relief.

New clause 1 looks more at the impact on the businesses and whether the provisions had a measurable impact on economic growth. That is not the same as an analysis from the Treasury of the changes in the bills that are being presented to people; it is looking at the effect and impact, to see whether the Bill is achieving the desired outcome. That is why we would like to see the measurement included.

As an engineer and a scientist, I believe in a feedback mechanism: something that measures what has been achieved against what has been required. We believe that was missing in the Bill, and we would like to see it, which is why we have asked for new clause 1 to be considered. The work is there and will be beneficial to one and all. I do not see it as a significant barrier to the Bill progressing, but as a positive feedback mechanism that will enable us to determine the effectiveness of the support on the desired areas and businesses, including high streets, which are so important.

Question put and agreed to.

Clause 4 accordingly ordered to stand part of the Bill.

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[David Simmonds]

I beg to move amendment 26, in clause 5, page 5, line 37, leave out from “persons” to the end of line 38 and insert

“who have special educational needs.

(5A) In subsection (5) ‘special educational needs’ has the same meaning as in section 20 (when a child or young person has special educational needs) of the Children and Families Act 2014.”

This amendment would mean that a school that is wholly or mainly concerned with providing education to persons with special educational needs would not be a private school for the purposes of the Act, and as a result would retain charitable relief from non-domestic rates.

We are moving on to a different area. This amendment is designed to address concerns raised in evidence, and by many across the House in debates, about the impact on children with special educational needs and disabilities. We recognise that the Government have introduced measures to address some of those concerns, but there have been many changes to the SEND system over the years. In particular, the provision about wholly or mainly providing education to children who are in receipt of an education, health and care plan specifically addresses those at the most significant end of special educational needs and disabilities.

The previous Labour Government introduced a system, in the days of statementing, that included measures called school action and school action plus. If a child had a form of special educational needs that was not so severe that they required the statementing process, but needed additional resources in the classroom, that classification triggered additional resources for the school. In the 2014 reforms, that was morphed into SEN support. Beneath the education, health and care plan, for the most significant levels of need, there is an SEN support set-up whereby local authorities direct additional funding towards schools because children are classified at those levels.

One of our concerns is that some children who have found their way to an independent school—for example, because it has a reputation for providing a good level of support to children with SEN—have not been through a process whereby they have been formally categorised. Gesher in my constituency is an independent special educational needs and disability school that charges fees. A proportion of its students are there because their parents have made the choice, and have not been through a local authority process. Others are there because they have an education, health and care plan and it is the named school paid for by the local authority. All children attending that school have some form of special educational need or disability and are therefore attending private school.

The rationale behind this amendment is that we do not want independent schools that provide education to large numbers of children with SEND but are below the education, health and care plan threshold to be put in a very difficult financial position. Potentially, the Government do not intend to go down that route. Most of us are aware that the extent of SEND provision in the independent sector is very large. Indeed, the amount of money that local authorities have to pay in fees to place significant numbers of children in sometimes very specialist provision is a major concern to them. We also hear from constituents who have identified that a moderate level of special educational needs may be met in the independent sector without the child’s having gone through the process of an education, health and care plan.

We are seeking to ensure that schools that educate children with special educational needs, in a broader sense, are not missed. For those reasons, I commend the amendment to the Committee. I am sure the Minister will have more comments to make, further to what he said in the evidence sessions.

[Jim McMahon]

Amendment 26 would result in the exemption of fee-paying schools from the measure if they wholly or mainly cater to pupils with special educational needs, whether or not those pupils also have an education, health and care plan, as defined in section 20 of the Children and Families Act 2014.

The Government are aware of the concerns raised about pupils with special educational needs in private schools that may lose their charitable relief because they are not wholly or mainly composed of pupils with EHCPs. We have carefully considered our approach to minimise the impact on pupils with the most acute needs. The Bill provides that schools that are charities that wholly or mainly provide education for pupils with EHCPs will remain eligible for charitable rates relief. For business rates, “wholly or mainly” generally means more than 50%. In practice, that will ensure that most special schools are not affected by the measure. We expect any special schools losing charitable rates relief to be the exception; the number may even be in the single figures.

Private schools that benefit from the existing rates exemption for properties that are wholly used for the training or welfare of disabled people will continue to do so. Most children with EHCPs already have their needs met in mainstream, state-funded schools. If an EHCP assessment concludes that a child can be supported only in a private school, the local authority funds that child’s place. Any changes to fees as a result of this measure will not impact on the parents or families of those pupils.

In private schools, just 5.7% of pupils have an EHCP, and they are predominantly in private special schools. Some 97% of pupils with an EHCP in private schools already have their place funded by a local authority. Where an EHCP has not named a private school in its assessment of the child, the parent or carers may choose to place the child in a private school. That is a choice made by the parent, and does not detract from an assessment that a pupil’s needs can be catered for in a mainstream, state-funded school. There may be instances where a child’s parent disagrees with the local authority’s assessment that their child’s needs can be met in the state sector, and the EHCP system is the most appropriate channel for resolving such disagreements. Amendment 26, which would amend the basis on which fee-paying schools can retain charitable rates relief, would undermine the Government’s intention of removing tax breaks from private schools in order to raise funds to support the more than 90% of pupils who attend state schools.

The approach chosen in the Bill is targeted to ensure that the impact on pupils with the most acute needs is limited. That is ensured by exempting schools that wholly or mainly cater to pupils with EHCPs from the measure. As the Committee will know, the majority of children in England who have special educational needs, with or without an EHCP, already have their needs catered for in the state-funded sector. The Government support local authorities to ensure that every local area has sufficient places for all children of compulsory school age who need one, and work to provide additional appropriate support for pupils with SEN requirements at state-funded schools.

--- Later in debate ---

[David Simmonds]

I beg to move amendment 7, in clause 5, page 5, line 38, at end insert

“, or

(b) a local authority makes a determination that they wish to apply discretion to the application of rate relief for the institution within the meaning of section 47 (Discretionary relief) of the Local Government Finance Act 1988.”

This amendment would provide that a school is not a private school for the purposes of exempting it from charitable rate relief if a determination is made to that effect by the billing authority.

The amendment is on a related subject to one that we have already debated, so I will not speak about it at great length. We are very much aware that the independent sector is critical to our catering for special education needs and disability. Its coverage across the UK is variable, especially when it comes to provision for children with very significant special needs that a wide range of SEND provision cannot easily address. A local authority that hosts a small school providing for a very small number of children may wish to exercise discretion.

There are charities of many types that are service providers that charge people fees for the provision of such services. That can include anything from adoption placement to fostering and safeguarding in the children’s sector. A large variety of charities charge to provide services such as home care, and care for adults with disabilities. The point was made yesterday in evidence that there is a risk of creating a two-tier charity sector; a school that charges for providing for children with significant needs might not be considered a charity for the purposes of business rates relief, whereas a charity providing, for a fee, residential care for adults with a learning disability would be eligible for relief. That remains a concern for Opposition Members. We need to make sure that we sustain our network of provision—particularly provision at the complex end of need—in the UK. I look forward to hearing what the Minister has to say on the amendment.

[Jim McMahon]

Amendment 7 seeks to preserve the discretion of local authorities to award relief to private schools. Currently, any charity that uses its property wholly or mainly for charitable purposes is entitled to a mandatory 80% relief. The local authority must award that 80% relief when the conditions are met. The Bill will remove private schools’ entitlement to that mandatory 80% relief. However, it will not disturb the very wide power that local authorities have to award discretionary rate relief above and beyond that.

That power is found in section 47 of the Local Government Finance Act 1988. It already allows local authorities to top up the mandatory 80% charity relief with a further 20% discretionary relief. When the Bill is in force, local authorities can still use section 47 to grant discretionary relief to private schools, if they wish. They can grant relief of 80%, or any other level of relief that they consider to be appropriate. That is a matter for local discretion, and for local authorities to decide. With the assurance that that will still be in place, I hope that the hon. Gentleman will be content to withdraw his amendment.

[David Simmonds]

I am pleased to hear the Minister once again championing the value of local discretion in decision making; I think we mutually acknowledge that it is incredibly important. I am aware that concern remains, particularly in the SEND sector and especially for residential special schools, about how the change will play out. Local authorities may face a Hobson’s choice between being expected to raise a certain amount of revenue by applying the maximum possible business rate to a setting, and doing what they need to do to support the needs and interests of children in their community—and of schools that may be the only centre nationally that can provide for very special needs. However, again, I recognise that the Government have the numbers, so with the leave of the Committee, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

--- Later in debate ---

While this is a small measure, and we recognise, as the Minister set out yesterday, that the impact of the relief will not always be significant, for many individual schools, particularly those that may charge lower fees than the prevailing funding rate for local authority schools—as is particularly common for Muslim faith schools in several cities across the UK—asking them to pay what could be a significant hike in business rates seems a particularly significant imposition. That is particularly true if they are financially marginal, although we recognise that they are not for-profit institutions. It may drive that provision out of existence in a given area where mums and dads really want it and need to access it. Preventing that is the aim of the amendment, which I have moved for the purpose of debate.

[Jim McMahon]

Amendment 8 would require a private faith school to maintain its eligibility for charitable relief if there is no maintained or academy school of the same faith within the statutory walking distance, as set out in the Education Act 1996. The amendment would also provide that schools with a currently undefined special character be exempted from the Bill measure when defined in regulations. The Government value parental choice and recognise that some parents want their children to be educated in schools of a particular faith, but all children of compulsory school age are entitled to a state-funded school place if they need one. State education is suitable for children of all faiths, and all schools are required to follow the Equality Act 2010, which means fostering and promoting an environment that encourages respect and tolerance of children and families of all faiths and none.

We have already made provision to ensure that private schools “wholly or mainly” concerned with providing full-time education to pupils with an education, health and care plan remain eligible for business rate relief. The Government are not considering any further exemptions to the policy, so there is no need to give the Secretary of State the power to establish and define new designations of school character to then exempt schools of that character from the measure in future, as the amendment would provide for.

The Government have listened carefully to arguments on this matter, and have decided that a carve-out for faith schools or similar schools cannot be justified. It is the Government’s position that state-funded education is suitable for all children of compulsory school age. For that reason, we are unable to accept the amendment.

[David Simmonds]

I need to be clear that I am not here to act as an advocate for faith education; I am not personally a fan of it. I recognise the Minister’s point, but we need to acknowledge that many Members on both sides of the House, and many of our constituents, believe very strongly that they should be able to access a school of a particular character.

There will be some children in the state sector who may be able to access, for example, a specialist sports academy with particular facilities to develop and nurture their talent, but such a school may not be available in all parts of the country. An independent school may be the only one able to foster and nurture that talent, and we would not wish to see any measures taken that would deprive anybody of that opportunity. Once again, however, I recognise that the Government have the numbers, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[David Simmonds]

I beg to move amendment 9, in clause 5, page 5, line 38, at end insert—

“(5A) Where a private school offers nursery provision, that school must be considered to be comprised of two separate hereditaments, one of which would be a nursery school.”

The question of hereditaments is certainly not one that I remember from English classes when I was at school, but it is quite significant in the context of business rates. The way in which business rate legislation operates is that it designates a given property, which clearly makes it easier to tax, because the ownership or possession of a property is very hard to move or disguise.

In respect of schools where, for example, there is a nursery on site as part of the overall premises that are considered to be the hereditament for the purposes of business rate legislation, the Opposition are concerned that such premises that would be exempt from business rates or eligible for relief if they were physically separate from the school to which they are connected will not be eligible for that relief because they are on the same site. We know that the Government are very keen, as we were in government, to see an expansion of access to high-quality childcare, a very large proportion of which is in the private sector. The Government—commendably, in my view—have set out a policy of expecting maintained state schools that have nurseries on site to significantly increase the childcare offer to support local parents, which is a very good thing.

In many locations, a nursery connected to a private school may be chosen by parents using tax-free childcare, and there are measures in legislation to support all parents, but primarily lower-income parents, to access that provision. If business rates apply to such premises, however, that would load an extra cost on to them because they are, in effect, co-located and part of a single hereditament.

The purpose of the amendment is to separate those premises out. Where there are premises on a site that become subject to business rates as a result of the Bill, but would not otherwise be subject to them because of their purpose, use and location, they should be considered as separate institutions, so we do not apply the measures to those institutions that we seek through other parts of legislation to support and encourage.

[Jim McMahon]

I am grateful to the hon. Member for tabling the amendment. It may assist the Committee if I briefly explain how the Bill will apply to nurseries and nursery classes within the setting of private schools.

The Bill will ensure that nursery schools, where they have their own hereditament and therefore their own rates bill, will be excluded from the provisions and, where they are charities, will retain their charitable rate relief. That is the effect of proposed new sub-paragraph (4)(a)(iii) to schedule 4ZA of the Local Government Finance Act 1988, at line 23 of page 5, in clause 5.

A nursery school is likely to have its own hereditament and therefore its own rates bill when it is run and occupied by a separate body from the private school. An example would be where a separate charity from the private school runs the nursery. A nursery school may also have its own hereditament if it has its own dedicated buildings site that is located away from the rest of the school. Where the same charity runs the private school with some nursery provision, however, and does so from the same site, it is likely to have one hereditament and one rates bill.

I want to make it clear that private schools that include some nursery classes in the way I have described will still be considered as private schools and will lose their relief entirely. The Government have decided that where private schools that mainly provide education for pupils of compulsory school age also have nursery classes within the school, the presence of a minority of nursery-age children should not remove the whole school from the business rate measure. That approach best ensures consistency with the underlying policy intent.

For that reason, we are unable to accept the amendment. It would not be appropriate to attempt, as the amendment would do, to create new artificial hereditaments for nursery classes at private schools merely to preserve some of the charity relief for that private school. I hope the Committee will recognise the steps we have taken to protect nurseries with their own hereditaments, and it will, of course, continue to be the case that nurseries that are run and occupied by separate charities with their own hereditaments will continue to receive relief.

[David Simmonds]

Once again, I recognise that the Government have the numbers to do as they wish, but I am concerned by what the Minister has outlined. This is not simply an amendment about nursery schools, which are a specific thing. It is about nurseries, which provide childcare. For younger children we have the early years foundation stage, which is not compulsory but is provided and followed by the vast majority of childcare settings, and which aims to ensure a level of educational progression that can be measured from the very youngest children to those who are ready to start school. That is provided in a different way from what is provided by nursery schools, which are specific institutions of which there are several hundred in the country.

In London constituencies such as the one that I represent, it is quite common to find nursery providers that are run as part of private school institutions in the same location, but that are used by parents who have no intention of sending their child on to that private school. Because the fees charged are in line with the local childcare market, and those fees are significantly supported by measures such as tax-free childcare, those nurseries are an affordable means of securing good-quality childcare. Those children will go on to a range of local provision.

I remain concerned about the Bill insisting that a nursery located on a premises shared by a private school within the scope of these measures should be subject to a significantly higher rates bill than if it were located in a physically separate building just down the road. I suspect that that will remain an issue of contention during the passage of the Bill. Clearly, although an impact assessment or a review will not be specifically proposed in the legislation, there will be an opportunity to see its impact in due course. For those reasons, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

[Jim McMahon]

Clause 5 removes charitable rate relief from private schools. Under the current law, all charities are entitled to 80% charitable relief on any properties that they occupy and use wholly or mainly for charitable purposes. That rule is found in paragraph 2 of schedule 4ZA to the Local Government Finance Act 1988, and clause 5(2) amends it to exclude private schools from that rule. Proposed new sub-paragraph (3) removes from charitable relief hereditaments wholly or mainly used to carry on a private school. That will ensure that ancillary and support buildings, such as offices, will also lose their relief—for example, classrooms and sports fields wholly or mainly used for the purposes of a private school.

The policy to remove the eligibility of private schools that are charities from charitable rate relief is a tough but necessary decision that will secure additional funding to help to deliver the Government’s commitment to education and to young people.

[Mr Mark Sewards (Leeds South West and Morley) (Lab)]

It is a pleasure to serve under your chairship, Dame Siobhain. Yesterday, we heard plenty of evidence from lots of witnesses, specifically about private schools. We also heard from Professor Francis Green, who stated that the measure would have a negligible impact on private schools. At the same time, as the Minister stated, it will raise much-needed funds to support the policies that we promised in the build-up to the general election. Does he agree that although this is a tough choice, since the Bill’s impact on private schools is relatively negligible, it is a necessary measure to raise the funds that we need to deliver our policies?

--- Later in debate ---

[Jim McMahon]

That is an important point. There is political intent behind this measure: to deliver on the manifesto commitment. At a time when, let us be honest, trust in politics is tested, delivering on an election manifesto is important. More than that, the vast majority of young people attend state schools.

In every community across the country over the past decade, all of us have seen the impact of reduced support, with many schools struggling. In some cases, that has created demand for private schools, because parents with children who have SEND or other conditions, who do not believe that their needs are being met by the state sector, feel that they have no choice but to look to the private sector. We are determined to rebuild the state sector so that every parent can have confidence that children who need additional support will get it in a mainstream setting.

--- Later in debate ---

[David Simmonds]

I will be brief, because we touched on this matter in the evidence sessions yesterday. The amendment and new clause both seek to ensure that the measures contained in the Bill have a review mechanism and impact assessments. The Minister said earlier that he was minded to proceed, regardless of the outcome, but there will no doubt be an opportunity for Parliament to scrutinise the impacts in due course. It is my intention, subject to the Minister’s response, to withdraw the amendment and new clause.

[Jim McMahon]

Clause 6 provides for when the provisions in the Bill will commence. The provisions in clauses 1 to 4 provide for the new additional multipliers to take effect from 1 April 2026. As hon. Members will have heard, the Chancellor will set out the new multipliers at the Budget in autumn 2025, and those multipliers will take effect from 1 April 2026. Clause 5, which removes charitable relief from private schools, will take effect from 1 April 2025.

As hon. Members will be aware, this Government are determined to fulfil the aspiration of every parent to get the best possible education for their child. It is right that, in pursuing that aim, we focus on the more than 90% of school-age children who attend state schools. The clause will raise approximately £140 million per year by 2029-30. By introducing the clause and the policy to apply VAT to private school fees, the Government will raise around £1.8 billion by 2029-30, which will help to deliver our commitments to education and young people.

Ahead of 1 April 2025, my Department will work with local government to explain the Bill’s provisions so that private schools that should not receive relief can be identified. As we have shown in the impact note published alongside the Bill, we expect around 1,000 private schools across England to be affected by the measures, so we are confident that the relief can be removed from 1 April 2025.

[David Simmonds]

I am sure that most mums and dads will be glad that excellent education is already available in England’s schools, given the transformation that has taken place in standards. However, we are here to concentrate on finances. For that reason, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 6 ordered to stand part of the Bill.

Clause 7

Short title

Question proposed, That the clause stand part of the Bill.

[Jim McMahon]

Clause 7 merely states the short title of the Bill.

Question put and agreed to.

Clause 7 accordingly ordered to stand part of the Bill.

New Clause 1

Review of impact on businesses, high streets and economic growth

“(1) The Secretary of State must review the impact of sections 1 to 4 of this Act on—

(a) businesses,

(b) high streets, and

(c) economic growth.

(2) The review must consider—

(a) the impact on different types of business, including small businesses,

(b) the impact on businesses operating mainly or solely on high streets,

(c) whether the provisions have had a measurable impact on economic growth, and if so what that impact has been.

(3) The Secretary of State must lay a report of the review before Parliament within six months of those sections coming into effect.”—(Martin Wrigley.)

This new clause would require a review of the impact of clauses 1 to 4 of the Act on businesses (including small businesses), high streets and economic growth.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

Question accordingly negatived.

New Clause 5

Local retention of additional receipts

“(1) The Local Government Finance Act 1988 is amended as follows.

(2) In Schedule 7B (Local Retention of Non-Domestic Rates), after subsection (4) insert—

‘(4A) In the case of any billing authority to which 100% local retention does not apply, as far as practicable, the local and central shares are set so that any additional receipts arising from changes made to this Act by the Non-Domestic Rating (Multipliers and Private Schools) Act 2024 are locally retained.’”—(David Simmonds.)

This new clause would provide that local authorities could retain any additional funds raised by the provisions of the Bill.

Brought up, and read the First time.

[David Simmonds]

I beg to move, That the clause be read a Second time.

You will be relieved, Dame Siobhain, to hear that these are the last of the amendments and new clauses that I will move for debate.

The purpose of the new clause is to bring in a measure to support the local retention of additional receipts that come from the measures in the Bill. We know that we have been on a journey with local government finance over many years to ensure a greater degree of local retention of business rate proceeds, something that has had cross-party support. It has been done for a variety of reasons, and partly to encourage local authorities to promote growth in their local business community by growing their business rate base and retaining a greater share of the proceeds.

On this specific Bill, the aim is to ensure that the additional revenue derived from the measures is retained by the billing authority, rather than going to another pool elsewhere. The rationale for that is manifold. In respect of the additional proceeds that may come from private schools that are subject to the measures, we know that local authorities may find it challenging, particularly given the timing of the introduction of this legislation, to ensure that there is a place available for any child who is displaced from the independent sector into the state sector—particularly so if that child has significant special educational needs or disabilities. Therefore, ensuring that those resources are retained locally will give some additional element of resource to local authorities seeking to meet that challenge.

We know that one particular dynamic is that the areas where the private schools are fullest are often also the areas where the state schools are fullest; although there is overall a declining population of children in our state schools in England as a whole—I know that my own constituency and local boroughs are a particular example of that, having seen a very large drop and a significant vacancy rate—that is not the case at all phases of education or in all year groups. Therefore, there is already a significant challenge for those parents who have to seek an alternative place for their child, where the retention of the resource locally would give some additional support.

Further, in respect of the additional revenue that may be raised from a variety of different types of businesses, the retention of that support locally would further enable the local authority to use that money to support its local economy, for example to invest in measures to support employment or the development of new businesses. That would be in line with the agenda being set out by the Government, who wish to see growth as a major priority, and it would create a direct link between the local decisions of the billing authority and the financial outcomes that would follow. For all those reasons, I commend the new clause to the Committee.

[Jim McMahon]

I thank the hon. Gentleman for tabling his new clause. As we have explained, where, as a result of the introduction of additional multipliers from 2026-27, local authorities collect additional business rate income, new clause 5 would allow them to keep that income in its entirety. It would do so by requiring the Government to alter the percentage share of business rates to be retained by local government and the share to be sent to central Government.

In practice, of course, any additional income from the new multipliers introduced by clauses 1 to 4 will vary from local authority to local authority and change from year to year. Those local authorities with fewer large properties may well collect less income as a result of the new multipliers and will therefore be worse off as a result of this amendment. Furthermore, accurate data on that will not be available until some time after the end of the year, whereas the central and local percentage shares need to be set before the start of the year. In practice, we do not think this new clause would effectively achieve the intended outcome. Instead, the Government will work to ensure, as far as is practicable, that local government income from business rates is unaffected by the introduction of new multipliers. That will result in a much fairer and more stable outcome for local government than the one suggested by the new clause.

More generally, the Government have announced their commitment to reform the way in which local government is funded, to return the sector to a sustainable position. That includes the already announced reset to the business rate retention system, as intended when the previous Government established the system. We will use the reset to restore the balance between aligning funding with need and rewarding business rate growth, and we will work in partnership with local government to ensure that the new local government finance system takes into account the impact of the new multipliers on the business rates collected by local government.

I hope I have given the Committee some assurances about how local government income will be protected from the changes in the Bill. In the light of that, I hope that the hon. Gentleman will feel able to withdraw the new clause.

[David Simmonds]

I know that the Minister is a localist at heart and will generally support measures that increase autonomy and decision making at local level. I recognise that the Government have the numbers to reject the measure. I think the point that it is hard to model the outcome was addressed in previous amendments that the Government chose not to accept, and undertaking a forward-looking impact assessment would enable us to understand better the impact of some of the measures. Given the Minister’s observations and the numbers in Committee, however, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Question put, That the Chair do report the Bill to the House.

[The Chair]

I understand that at this point, you all have to be nice to each other. Does anybody want to do that, or are you ready to get on with it?

[Jim McMahon]

Do you mean to say some words?

[The Chair]

Yes.

[Jim McMahon]

I thought you meant generally.

[The Chair]

You can be as general or specific as you like.

[Jim McMahon]

I was going to go on an errand to Tesco to buy some mince pies. This process has been a very useful one. The time that both Opposition parties have given to the preparation of the amendments has really helped the scrutiny of the Bill. That has helped the Government to ensure that the Bill does what is intended, and to provide safeguards to ensure that it does nothing unintended. We have set out our position on the Bill clearly. The spirit in which the Opposition have approached the amendments, by withdrawing them and not pressing them to a vote, and the constructive nature of our exchanges today are to the credit of the Committee.

[David Simmonds]

As always, it has been a pleasure to serve with you in the Chair, Dame Siobhain. In that Christmas spirit, I thank the Minister for his constructive engagement. It is characteristic of several of the Ministers in the Department, and it has been enormously helpful. I put on record my thanks to the Whips; I appreciate that the scheduling of this relatively short piece of legislation meant that it could have taken up a great deal of time. We have recognised the point, which was made impactfully yesterday, that its overall impact is limited and moderate, so we have sought to approach it in the light of that.

We may have a fairly significant disagreement with the Government about the intent behind the Bill, in the way that it approaches both local government funding and the situation with independent schooling, but we have to recognise the numbers. I thank the Minister and his colleagues very much for the way in which they have addressed this.

Non-Domestic Rating (Multipliers and Private Schools) Bill

Jim McMahon Excerpts

Report stage
Wednesday 15th January 2025 Commons Chamber

[David Simmonds]

Having served as a governor in three different state schools during my local government career, I know that many state schools have facilities that they are very happy to share—some have swimming pools, some have libraries, some have adult education facilities. The sharing of facilities among schools of all kinds is normal, but the Bill introduces additional pressure that will take away access to those facilities. Isolated communities in particular, which benefit most from that access, risk losing it.

The basic fact that schools will end up net worse off demonstrates that, contrary to what has been said, this policy fails the basic test of equity and efficiency. It harms some people in our country, with no corresponding benefit to anybody else. Let me address the argument proposed by a number of Members that the consequences are marginal. We heard a lot of evidence from different people. The hon. Member for Erewash (Adam Thompson) referred to an academic who has built a career writing tracts attacking the private education sector. That is not somebody I consider to be an expert. I will take the word of mums and dads, the Independent Schools Council, institutions that represent people across our country and the House of Commons Library over the word of a single left-wing academic.

The hon. Member for Wolverhampton North East (Mrs Brackenridge) said, “It’s not fair because schools in the state sector pay business rates.” She may not be aware that there is already an 80% mandatory business rate relief for voluntary aided, foundation and academy schools, and 100% of all state school business rates liability is paid for by central Government anyway, so no school budget is burdened by the cost of business rates, whereas the consequence of the Bill will be that every independent school is burdened by those costs.

Many of us in this Chamber will see the added value that independent education brings. Many of those experts whose opinion we value have spoken profoundly about the fact that so much of our special educational needs provision is in the private sector. I made reference in Committee to Gesher school in my constituency. I defy any Labour Member visiting Gesher to come away saying, “That is a private business that deserves to be taxed.” Such institutions have emerged—in many cases over a long time—to cater to very specific and profound special educational needs and disabilities, and they are looking aghast at the consequences of the Bill.

There are a number of reasons for that, some of which are technical. The Government’s solution is to introduce the “wholly or mainly” provision. Schools that wholly or mainly provide places for children with an education, health and care plan—by which the Government mean 50% or more—will be exempt from the provisions. The problem with that policy is that many children who have well-established, diagnosed special educational needs and disabilities do not have an education, health and care plan.

Indeed, beneath statementing, which was the term at the time, the previous Labour Government introduced a number of tiers: school action and school action plus. Children with moderate to severe special educational needs and disabilities could fall into those categories and be supported in a mainstream setting. The statementing and education, health and care plan process was only ever intended to make provision for children with the most significant and severe needs. That is already the case across the state sector. We know from the evidence of many parents up and down the land that they found provision in local independent schools, and at their own cost, for children who had not qualified or had not yet achieved an education, health and care plan. It is very clear that the Government’s solution underestimates, and falls well short of accounting for, the number of children with special educational needs and disabilities. This is a Government whose Secretary of State for Education stood at the Dispatch Box last week and talked about how much they believe in inclusion. Well, their actions in support of this Bill say otherwise.

The Bill also fails to address the needs of parents who wish to secure a place for their child at a school that has a special character. This is particularly important in rural areas, but it is an issue across the country. We all know that there are schools that have the ability to provide specialist training or coaching in a sport that a child excels in and wishes to pursue, and there are schools that have a faith or cultural identity that is incredibly important to the family.

By requiring all those types of school to pay these significantly hiked taxes, this Government are bearing down on choice in the education sector and pushing up costs for mums and dads. These are not wealthy families, but ordinary people in this country who are seeking to do the best for their child and who, in some cases, are willing to take on the responsibility of paying for their child’s education even if they could still pursue the opportunity of an education, health and care plan for them through the state system. They choose to do the right thing by their child, and this Government will be penalising them.

The amendments we have tabled seek to address the shortcomings I have described as best we can. We will also support some of the amendments tabled by other parties where they clearly fulfil our shared objectives, but as the speeches and other contributions to this debate by Conservative Members have shown, there could have been so many more amendments seeking to get this Bill right.

In conclusion, all of the hereditaments that are covered by this Bill are important to our economy and to growth, and in many cases they are vital to our communities. Since the Chancellor’s Budget, growth has flatlined, inflation has revived, borrowing costs are rising and employment opportunities are diminishing. It is not too late for this Government to choose a different path, and we invite them to do so this afternoon.

[The Minister for Local Government and English Devolution (Jim McMahon)]

Before I speak to the amendments tabled by the hon. Members for Mid Dorset and North Poole (Vikki Slade), for Ruislip, Northwood and Pinner (David Simmonds) and for St Albans (Daisy Cooper), I thank Members from across the Chamber for their contributions and for the constructive spirit, by and large, in which they have engaged with the Bill since its introduction. Although they are not always seen, with evidence sessions and Committee stages not always being prime-time TV viewing—it is a curse, but that is the way it is—those deliberations are nevertheless essential. The contributions that were made by Members from all parts of the House in probing and scrutinising the Bill were valuable, and I hope that all Members found them interesting.

I will begin by speaking to the amendments concerning the impact of the new multipliers. New clause 1, tabled by the hon. Member for Mid Dorset and North Poole, would require the Secretary of State to review the impact of clauses 1 to 4 on businesses, high streets and economic growth within six months of those clauses coming into effect. The hon. Members for Ruislip, Northwood and Pinner and for St Albans have proposed two other new clauses. New clauses 2 and 3 would seek to impose in legislation a requirement for an analysis of the impact of the new business rate multipliers at varying points ahead of, or following, implementation of the Bill. New clause 3 also seeks to require an assessment of how the application of the new multipliers would differ between retail, hospitality and leisure businesses occupying different numbers of properties, and to compare that assessment with the impact of retail, hospitality and leisure relief from the 2020-21 financial year to the 2025-26 financial year.

We agree in principle with the points that hon. Members have raised through their new clauses. It is right that the Government consider the effects of their policies on businesses, on the high street and on economic growth, and indeed within different sectors. It is the policy of the Government that those businesses should feel a material benefit as a direct result of these measures, so let me set out how we propose to do that.

It states in the Bill that the two new retail, hospitality and leisure multipliers may not be set at more than 20p in the pound lower than the small business multiplier. The Bill also places appropriate restrictions on the higher multiplier: when it is set, it cannot be more than 10p in the pound above the standard multiplier, and cannot be applied to properties with a rateable value of less than £500,000. It is important to state that those are not the intended tax rates, but the maximum parameters to be introduced through the new business rate multipliers. As we explained during the Bill’s passage through the House, the actual tax rates will be set at the 2025 Budget, taking into account the effects of the 2026 business rate revaluation, as well as the broader economic and fiscal context at that time.

[Daisy Cooper]

The Minister has been here throughout the debate, and he will have heard a number of my interventions. I accept his point that those figures will not be published until Budget 2025. May I ask if he is in a position to give a cast-iron guarantee that small independents, with a small number of hereditaments, will not be subsidising organisations that have many, such as the big chains?

[Jim McMahon]

I did hear the hon. Lady, and I think we all accept the principle of needing to target or get support to those important small businesses, which we can all identify in our constituencies. With respect, I think there was a degree of conflation with the temporary reliefs brought in during covid, which the previous Government did not account for, that were always going to come to an end.

Our challenge was how to reconcile ongoing support for the high street with a permanent relief in law so that businesses know exactly where they are and can plan ahead with certainty. The choice we made was far fairer: to target higher-value properties of more than £500,000, which are generally—but, I accept, not entirely—the large-footprint warehouse and distribution premises used by the big online retailers.

The shadow Minister used the example of the stationery provider in my constituency. It is an online retailer, so it ought to be paying more. Why? Because for a long time—and we have all heard this from our constituents and industry—we have needed a rebalancing from online to on-street and from out-of-town to in-town, and that is exactly what this targeting does. It was never intended to be a continuation of the relief that was only temporary during covid. It is about rebuilding the foundations, and that is exactly what we have set out to do.

[Daisy Cooper]

I completely accept that point, and I am very sympathetic to the fact that the Minister inherited a sticking-plaster system from the previous Government. If during the course of this year his Government’s own analysis proves what I have discovered from the House of Commons Library research, will he ensure that the Government at least do not rule out introducing a new small business relief in a targeted way to support such small independent businesses?

[Jim McMahon]

As with all tax policies, we will keep this under review, and I say that in a very general sense. We absolutely believe that the businesses that are the backbone of our high streets, town centres and communities would, were it not for these measures, go bust. They would not be viable and they would feel the heat very quickly. However, because of the measures we are taking, businesses will be able to plan with certainty for the future, knowing that they have a Government acting in partnership with them in that enterprise.

[David Simmonds]

I appreciate the Minister’s point, but clearly no Parliament binds its successors, so every Parliament must make its own decisions. A lot of Members have asked about small business rate relief. It would be helpful to have some certainty from the Dispatch Box about the Government’s intentions on that. Can he give us that certainty tonight?

[Jim McMahon]

I can certainly give the certainty that we are providing in law for a permanent relief for retail, hospitality and leisure businesses, and we will fund that through a very targeted additional payment for properties of more than £500,000, which will primarily be the online retailers occupying big warehouses and distribution centres. It is a promise to shift from the online to the on-street, as I talked about.

Before we move on to vote on the amendment, I will make some progress. The House will know that tax policy and legislation are not subject to the same requirement for the impact assessments that accompany non-fiscal policy decisions. Nevertheless, the Treasury is committed to publishing an analysis of the effects of any multipliers at Budget 2025, which we hope will go some way to reassuring hon. Members that we will be considering the impacts of this policy carefully before the new rates are set.

The Government will continue to keep the policy and its effects under review as a matter of course, because we believe it is good practice to do that for all taxes. However, we want to make it clear to hon. Members that the Government have heard them, and we understand the importance of robustly understanding tax changes, which is something to which we have already committed. I hope this commitment to understanding the effects of the new tax rate when it is introduced will enable hon. Members not to press their proposed new clauses.

Amendment 9 would give local authorities discretion over whether the higher multipliers enabled by the Bill should be applied. The Bill would enable the Treasury, through regulations, to introduce permanently lower multipliers for qualifying retail, hospitality and leisure properties, and to fund this by introducing higher multipliers for properties with a rateable value of £500,000 or more. As we explained in Committee, we do not have any plans to narrow the scope of the higher multipliers as doing so would reduce the funding available for the very targeted support for lower multipliers for uses that everyone in the Chamber supports.

That does not mean that local authorities will be unable to apply local discretion to rate bills. As was set out in contributions, local authorities already have wide-ranging powers for discretionary rate relief as set out in section 47 of the Local Government Finance Act 1988 where the authority is satisfied that that would be reasonable, having regard to the interests of council tax payers. We assure the House that those discretionary powers are unaffected by the Bill and remain in place. Given that local authorities will be able to use those discretionary powers to provide relief, including for ratepayers subject to the higher multiplier, the amendment is not required. I hope that assures hon. Members.

I turn to amendments 1 to 6, which would widen the scope of the lower multipliers so that qualifying manufacturing properties would become eligible alongside retail, hospitality and leisure properties. In the Bill Committee, the hon. Member for Newton Abbot (Martin Wrigley) spoke of the vital importance of manufacturing to the British economy and of how providing them with a permanent cut to their business rates could help them to recover.

Let me reiterate the Government’s support for the manufacturing sector as a whole. It is said that Britain is a nation of shopkeepers, but it is also a nation of innovators, creators and entrepreneurs. Our manufacturing sector helps bring many of those ideas to life, and we understand its importance. But the Government must also support our high streets—the hoteliers, restaurateurs and publicans—and that is especially important with a property tax such as business rates as those sectors rely on good locations, which in the business rates system are often valuable locations. If they did not have that targeted support, they would feel the hit very strongly.

Through the Bill, we are delivering our manifesto pledge to protect valuable town centres and high streets by enabling the introduction of permanently lower taxes for qualifying retail, hospitality and leisure properties from 2026-27, ending the uncertainty of the annual retail, hospitality and leisure relief that has been rolled over year on year since the covid-19 pandemic. We have been clear throughout the process that this tax cut must be fully funded. Therefore, against the current fiscal backdrop, a widening of the scope of properties eligible for the lower multipliers might dilute the support that the Government were able to provide, or its impact might even require a higher tax rate for properties with values of more than £500,000 to fund such new multipliers. However, we respect hon. Members’ points of view and agree that our manufacturing sector should be recognised and supported.

Advanced manufacturing is one of the eight growth-driving sectors identified as part of the Government’s industrial strategy. At the autumn Budget, the Government announced £975 million for the aerospace sector over five years, over £2 billion for the automotive sector over the same period, and £520 million for the new life sciences innovative manufacturing fund. That is how the Government intend to support the innovators, creators and entrepreneurs mentioned earlier. Because we have this package in place to support manufacturing, we cannot accept the amendments, but I hope that I have been able to provide hon. Members with reassurance as to our commitment to support the sector, which I am sure the whole House recognises is vital.

I turn to amendments 7 and 8. While clause 5 will remove business rates charitable relief from private schools, the amendments would introduce new provisions or expand existing provisions in the Bill to ensure that certain private schools remain eligible for business rates charitable relief. Amendment 7 would result in a fee-paying school retaining its relief if it wholly or mainly catered for pupils with special educational needs as defined under section 20 of the Children and Families Act 2014, whether or not those pupils have an education, health and care plan. Amendment 8 would result in a private faith school or a private school with a special character maintaining its eligibility for charitable relief if there were no maintained or academy school of the same faith or special character within the statutory walking distance set out in the Education Act 1996. Although amendment 8 does not indicate what may constitute a special character, we understand from previous contributions in the House that that would include schools that follow a particular method of education. Amending the basis on which fee-paying schools are eligible to retain their charitable rates relief in the manner in which the amendment proposes would undermine the Government’s intention to remove tax breaks for private schools. As we have said, the removal of the tax break is necessary to fund school support for the over 90% of pupils who are educated in the state sector.

The Government have carefully considered their approach to minimising the impact on pupils with the most acute needs. The Bill provides that private schools that are charities and that wholly or mainly—by over 50%—provide education for pupils with an education, health and care plan will remain eligible for charitable relief. As hon. Members will be aware, most children with special educational needs, with or without an EHCP, have their needs met in mainstream state-funded schools. If an EHCP assessment concludes that a child can only be supported in a private school, the local authority directly funds that place.

Where an EHCP has not named a private school, the parents or carers of the child may choose to place that child in a private school, but that is a choice made by the parents and does not detract from the assessment that the pupil’s needs can be catered for in the mainstream state-funded sector. In instances where a child’s parents disagree with the local authority’s assessment that their needs can be met in the state sector, the EHCP system is the most appropriate channel to resolve such disagreements.

The Government are aware of the concerns raised by hon. Members and others that pupils with special educational needs in private schools may lose their charitable relief. The Government believe that most private special schools will not be affected at all by the Bill. In fact, we expect any private special schools losing eligibility for private relief to be the exception; according to our assessment, they could be in the single figures. It is important that we keep it in that context.

[Richard Tice (Boston and Skegness) (Reform)]

Will the Minister give way?

[Jim McMahon]

I do not have time for any more interventions.

Private schools that benefit from the existing rates exemption for properties that are wholly used for the training or welfare of disabled people will continue to do so. The majority of children in England with special educational needs, with or without an EHCP, have their needs met in the state sector already. The Government’s ambition is for all children and young people with special educational needs or a disability to receive the right support to succeed in their education as they move into adult life.

As Members know, all schools are required to follow the Equality Act 2010, which includes fostering and promoting an environment that encourages respect and tolerance of children and families of all faiths and of none. We have listened carefully to arguments relating to exempting faith schools from the Bill, and we have decided that a carve-out for faith schools or schools with other special characteristics cannot be justified. For those reasons, we are unable to accept amendment 8.

Finally, amendment 10 would delay the removal of charitable rates relief from private schools by one year to April 2026. To eliminate barriers to opportunity, we need to concentrate on the broader picture of the state sector, where most children are educated. Ending the tax breaks on VAT and business rates for private schools is a tough but, in the end, necessary decision that will secure additional funding to help deliver on the Government’s commitments to education and young people. Together, these policies are expected to raise over £1.8 billion a year by 2029-30—essential funding to improve the education of the vast majority of school-age children. Delaying their implementation would forgo about £140 million, which, frankly, cannot be justified.

The House has heard a good range of amendments to the Bill, and I hope that I have been able to address them all. Although we are not able to accept the amendments, I hope that the assurances that I have outlined are accepted and Members feel able to withdraw them. If not, the Government cannot support them.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Jim McMahon]

I beg to move, That the Bill be now read the Third time.

I take this opportunity to acknowledge all who have contributed to the Bill’s passage through this House, particularly my private office team, for the support that they have offered during this process, officials in my Department, for the outstanding work that they have done, and colleagues in the Department for Education and the Treasury, as well as Clerks of the House, for supporting the process of this Bill.

The Bill honours the Government’s manifesto pledge to end business rates charitable rate relief for private schools in England and to fundamentally reform the business rates system. We are kickstarting this endeavour through the introduction of lower tax rates for retail, hospitality, and leisure properties.

I thank all Members who contributed to the evidence sessions, the Committee stage and today’s debate. I hope, even though there were disagreements on parts of the new clauses and on the amendments, that there is at least an acknowledgment that we have gone a long way to ensure that we get to the heart of what this Bill is intended to do when it comes to the high street and our town centres. In the end, whatever the differences—and let us be honest there are plenty—we all know how important our small businesses are to the viability of our high streets. We all recognise that these are more than just places in which to do business; they are places that people look to as the heart of their community. They are always more than the sum of their parts. Hopefully, Members will see that these measures will really make a dent in this area.

I also place on the record our thanks to those who gave evidence to the Public Bill Committee, including: the Institute of Revenues, Rating and Valuation; the British Retail Consortium; the Co-op Group; M&S; the Shopkeepers’ Campaign; the British Property Federation; and the Independent Schools Council. They have enabled us to scrutinise the Bill properly and to get evidence from professionals who understand what things are like on the ground, and that, I believe, added value to the process.

I thank those who attended and gave evidence in Committee for their time and willingness to share their expertise. I also wish to extend my thanks to hon. Members who attended the Public Bill Committee to ask questions, to foster debate, and to contribute to discussions as we take these important first steps to transform the business rates system.

The Bill will help to secure additional funding to enable the Government to deliver their commitments to the majority of children who attend state schools, which is the second part of this Bill. Ending tax breaks for private schools is a tough but necessary decision. It will come as welcome news to most parents in England, as it represents the Government’s determination to break down the barriers to opportunity and ensure that all children get a high-quality education. Let us be absolutely clear: more than 90% of children in this country go to state schools and they deserve the best, too. Now they are going to get it.

Let me assure Members that the education system in England is prepared for the relatively small number of pupils who may move as a result of the measures in this Bill. Much of what we have heard about churn in the system is not supported by the evidence and, in the end, it runs the risk of scaremongering. We need to reflect on the fact that there has always been change in the system, even before these measures were introduced. Importantly, we are organising to make sure that parents and pupils receive support if they need it, but we believe that will be around the edges.

The Bill will also provide certainty to high streets by making provision to introduce a permanent tax cut for retail, hospitality and leisure properties. We have heard a lot about the change from the covid relief to the permanent, baked-in relief that we are providing through the Bill. The Opposition have said a number of times during the Bill’s passage that it represents a reduction, but a degree of honesty is required. The Opposition know, as do we, that there was no provision—not a single pound or penny—for the continuation of the temporary relief provided during covid on which retailers, hospitality providers and leisure providers were relying.

The Opposition know that that is a fact, as do we. The only difference is that while the Opposition were willing to political point score, while businesses were waiting for maturity and for an answer to the problem, we were getting on with the job of government, and providing the permanent support that businesses need. How will we pay for it? We have heard the Opposition say a lot that they do not support measures, but they always support the investment. They support the investment in state schools, but not the measures to generate the income. They support the measures to support high streets, but seem not to support the measures to ensure that premises with a value of £500,000 or more pay more into the pot.

The reality is that this has not just come out of the blue. The Conservatives had 14 years to address the imbalance from the online to the on-street, from the out-of-town to the in-town, and they did nothing, so it is, frankly, ridiculous for them to try to present themselves during the passage of the Bill as the champions of enterprise, of our town centres and of small businesses. They now have an opportunity. We have sorted out the amendments—they were nonsense, and most people would accept that—but on Third Reading we get to vote on the substance of the Bill. The Opposition could do the right thing. They could change course and back support for state schools to get them the money that they need. They could back measures to get money to the high street in our town centres and do the right thing. Now is the time to show that they will be the mature Opposition that they promised to be, but I expect that that will not be the path they choose. Luckily, the Government are getting on with the job. I commend the Bill to the House.

[Madam Deputy Speaker (Caroline Nokes)]

I call the shadow Secretary of State.

Non-Domestic Rating (Multipliers and Private Schools) Bill (changed to Non-Domestic Rating (Multipliers) Bill)

Jim McMahon Excerpts

Consideration of Lords amendments
Tuesday 25th March 2025 Commons Chamber

[The Minister for Local Government and English Devolution (Jim McMahon)]

I beg to move, That this House disagrees with Lords amendment 1.

[Madam Deputy Speaker]

With this it will be convenient to discuss Lords amendments 2 to 19, and Government motions to disagree.

[Jim McMahon]

First, I am grateful to Members of both the Commons and the Lords who have so diligently scrutinised the Bill throughout its passage. Before I address the amendments tabled by the Lords, allow me to remind the House of why we introduced the Bill in the first place. This Government have committed to transforming the business rates system, and the Bill is a first step on that important journey. We want to achieve a sustainable system that is fit for the current economic landscape, and where business growth is supported and ratepayers pay their fair share. I thank the noble Lord Khan of Burnley for taking the Bill through the other place and for being so thorough in his approach. I also thank officers of the Ministry of Housing, Communities and Local Government and my private office for all their work on the Bill.

The Government oppose all the amendments before us today and I will provide further explanation as to why. At the Budget, the Government explained that we wanted to introduce new lower multipliers for qualifying retail, hospitality and leisure properties from April 2026 to address the uncertainty of the temporary, stopgap support provided by the annual RHL relief. Business rates represent a stable source of revenue for local government, meaning that this permanent tax cut must be sustainably funded. That is why the Government also announced our intention to introduce a higher multiplier for all properties with a rateable value at or above £500,000. This Bill makes provision to enable the introduction of those new multipliers, so this is the first step towards delivering on the Government’s manifesto commitment to transform the business rates system to one that is sustainable, protects the high street and is fit for the 21st century.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

On a point of detail, the Minister says the Bill is a “first step”, so will there be further reforms, following these reforms, to the rest of the business rates system to meet his manifesto commitment to replace the current business rates system completely?

--- Later in debate ---

[Jim McMahon]

I am not going to pre-empt any further decisions on this, other than to say that this represents an important and significant step forward. As a constituency MP, he, like me, will have heard from many small businesses—retailers, hospitality providers or leisure providers—who appreciated the support during covid, but were very clear that there was a cliff edge and that that support was coming to an end. The previous Government did not provide any certainty about what followed, so the Bill ends that uncertainty and hardwires in a permanent relief system to ensure those important businesses that are the foundation of our communities and our economy are supported through the tax system.

[Kevin Hollinrake]

The Minister has already said, as he has in previous speeches, that this is a “first step”, but now he says it is a “permanent” measure. I agree with him that business wants certainty, so it is important that businesses understand: is this now a permanent position that will not be changed, or a first step?

[Jim McMahon]

The answer is that it is both, as I will go on to explain in more detail. It is an important first step, and the relief that is provided, funded through the higher rate properties, will be hard-baked into the system, notwithstanding any future support that may well follow, which we are not pre-empting today.

Lords amendments 1, 6, 7 and 12 would remove qualifying healthcare hereditaments from the higher multiplier, and Lords amendments 2, 5, 8 and 11 would do the same in relating to anchor stores. Considering the challenging fiscal environment, it is vital that this permanent tax cut is funded sustainably. The Government have been clear that they will do that by applying the higher multiplier to all properties with a rateable value at or above £500,000. That accounts for less than 1% of all properties and is the fairest approach. The impact on healthcare properties is limited. As set out in the other place, of the 16,780 properties at or above the £500,000 threshold based on the current rating list and rounded to 10, only 350 are in the health sub-sector. Of those, 290 are NHS hospitals and only 30 are doctors’ surgeries or health centres.

At the autumn Budget, the Chancellor fixed the spending envelope for phase 2 of the spending review. The Government are considering the full range of departmental priorities and pressures as part of the spending review, and that includes any impact of the higher multiplier on public sector properties, such as schools and hospitals. I urge the House to disagree with those amendments.

We recognise the importance of anchor stores, and we are doing a great deal to support the high street in this Bill and elsewhere. While the largest anchor stores may be caught by the higher multiplier, they are often part of large retail chains that will have a number of properties with rateable values below £500,000. Those businesses will, therefore, benefit overall from the lower multipliers.

[Suella Braverman (Fareham and Waterlooville) (Con)]

I appreciate the points that the Minister is making. In Fareham and Waterlooville, we have some fantastic pubs, including the Golden Lion in Fareham, the Chairmakers in Denmead and the Heroes in Waterlooville. Many pubs are hubs of our community and make a valid contribution to the local economy, but they have been trading under challenging circumstances and have been asking for a cut in business rates. What will be the effects of the Minister’s position today?

[Jim McMahon]

The Bill provides a cash saving for exactly the types of business that the right hon. Member talks about. We all understand the importance of pubs to our towns, villages and estates, not just as businesses in the economy but as places for the community to convene, to meet and to build relationships and networks. That is exactly why the measures are being brought in, and in a permanent way, because pubs needs certainty. They know the rising costs of supplies, carbon dioxide and energy have put significant pressure on pub operations, and these measures provide long-term stability that bakes in the support the Government can offer into the system.

Many pubs will be free houses and they will be independent. However, a number of pubs will be part of a brewery chain with managers in place. The measures take away the cash cap of £110,000 per business, allowing, for the first time, multiple operators to benefit. That will benefit pub chains, as well as high street stores, such as Home Bargains, Boots and other retailers. Those businesses draw in footfall, which then supports independent retailers as well. The proposals are rounded and provide long-term stability that is properly funded in a responsible way. On that basis, the Government oppose the Lords amendments as laid out.

Lord’s amendments 3, 4, 9 and 10 are concerned with bringing manufacturing properties into scope of the lower multiplier. If we widen the scope of the lower multipliers in that way, it will dilute the support available to RHL properties or jeopardise the ability of the Government to sustainably fund the lower multipliers. We need to be clear that this is not a wide-ranging offer, but targeted deliberately at supporting our communities, high streets and town centres. That is why the Bill focuses on RHL support. The Government are supporting the manufacturing sector through other means. For those reasons, I urge the House to oppose the amendments.

Lord’s amendments 13 and 16 require the Government to undertake a review of how the provisions to introduce new multipliers may affect businesses whose rateable value is close to the £500,000 threshold for the higher multiplier. The review would need to be put before Parliament three months prior to 1 April 2026 in order for clauses 1 to 4 of this Bill to come into effect. These amendments probe around the way the multipliers in the business rates system currently operate. Those hereditaments on the standard multiplier, or in the future on the higher multipliers, pay rates on that multiplier calculated on all of their rateable value, and not just the rateable value above the threshold. That, of course, generates cliff edges in the rates bills for hereditaments as they move between thresholds, and we acknowledge the presence of those cliff edges—it is a matter of fact.

At the autumn Budget, the Treasury launched a discussion with business on the “Transforming Business Rates” paper. This specifically highlights these cliff edges in the system and considers whether they may act as a disincentive to expand, so I can assure the House that we are already looking at the precise issue identified in the amendment. Reforms are being taken forward through the transforming business rates work and will be phased in over the course of the Parliament. Therefore, we believe Lords amendments 13 and 16 are unnecessary.

Lords amendment 14 would require the Government to commence a review that examines the merits of creating, within three months of Royal Assent, a separate use class and associated multiplier within the non-domestic ratings for retail services provided by fulfilment warehouses in England that do not have a material presence on high streets. The noble Lord Thurlow, who put forward the amendment, made it clear that this use class would apply only to business rates. As he explained in the other place, the key task is to identify those warehouses, as distinct from warehouses used by, say, high street retailers—warehouses that may otherwise look the same.

The Lords amendment would bring together the Government and professional bodies working on business rates to identify those warehouses. We are already exploring that objective through an existing project. The digitalising business rates project will allow us to match property-level data with business-level data from His Majesty’s Revenue and Customs to improve the way in which we target business rates, and to identify property and businesses in the way that the Lords amendment envisages.

[Chris Vince (Harlow) (Lab/Co-op)]

I did not intend to intervene, but I was looking through the amendments, and I see that a lot of them focus on exemptions from the business rates. Does the Minister agree that the way to look at supporting businesses in, for example, the manufacturing industry is through other means, not through changing the business rates?

[Jim McMahon]

We welcome scrutiny through amendments and the insight that the other place can provide, just as we welcomed scrutiny in the evidence sessions and Committee sittings; it adds value. We need to be honest: it is natural for Members to want to widen the scope of legislation during its passage, and to include more. In Government, we have to deal with the art of the possible, which means balancing a number of competing interests, not least the impact on taxpayers in the round. The Bill is targeted at those who need it the most—communities and local economies—and it is fully funded to ensure that it is sustainable. We cannot draw the legislation so wide that it does not stand the test of time and does not cover its own cost. That would not be responsible, and certainly would not be sustainable.

Lords amendment 14 would require the Government to implement the recommendations of the review. Given that we do not know what those recommendations would be, I trust the House will understand that we cannot accept an amendment to accept them blindly in advance.

Finally, Lords amendment 15 and consequential Lords amendments 17 to 19 would strike from the Bill the clause that removes charitable rate relief from private schools that are charities. We are unable to accept these Lords amendments. This Government made a manifesto commitment to raise school standards for every child, break down barriers to opportunity and ensure that every child has the best start in life, no matter where they come from or their financial background. Achieving our ambition involves meeting our commitment to removing the VAT and business rates charitable relief tax breaks for private schools; the approach and design of this policy has been carefully considered in the light of that. The measures are necessary in order to raise the revenue to deliver on the Government’s commitment to education and young people, and to improve the state sector, where—let us be clear—90% of children are educated. This Government are prepared to take the tough but necessary decisions to deliver on those bold commitments, so, as with all the other amendments brought here from the other place, I cannot accept these Lords amendments. I hope that the rest of the House follows suit.

[Madam Deputy Speaker (Caroline Nokes)]

I call the shadow Secretary of State.

Non-Domestic Rating (Multipliers and Private Schools) Bill

Jim McMahon Excerpts

Consideration of Lords message
Monday 31st March 2025 Commons Chamber

[The Minister for Local Government and English Devolution (Jim McMahon)]

I beg to move, That this House disagrees with Lords amendment 1B.

[Madam Deputy Speaker (Caroline Nokes)]

With this it will be convenient to discuss:

Lords amendment 2B, and Government motion to disagree.

Lords amendment 7B, and Government motion to disagree.

Lords amendment 8B, and Government motion to disagree.

Lords amendment 13B, and Government motion to disagree.

Lords amendments 15B to 15E, and Government motion to disagree to the words restored to the Bill by the Lords non-insistence on their amendment 15.

[Jim McMahon]

I am grateful for the opportunity to consider the Lords amendments tabled in lieu of those to which this House disagreed. I reiterate my thanks to Members of both Houses for their continued diligence in the scrutiny of these measures.

The Bill makes provision to enable the introduction of permanent lower tax rates for retail, hospitality and leisure businesses from April 2026, ending the uncertainty of the temporary RHL relief. The RHL relief stopgap measure creates uncertainty for businesses, as well as a significant fiscal pressure on the Government. This Government are committed to addressing that in the Bill.

The Government face the significant challenge that we must balance the books, so we cannot and should not make tax cuts without ensuring that those tax cuts are funded. The Bill therefore makes provision to enable the introduction of a higher multiplier for all properties with a rateable value at or above £500,000, ensuring that the permanent tax cut from RHL properties is sustainably funded from within the business rates system.

The Bill will also help to deliver another of the missions set out in the Government’s manifesto: breaking down barriers to opportunity. It will remove eligibility for charitable rate relief from private schools that are charities in England. As I have said before in this House, the Government believe in parental choice but are also determined to fulfil the aspiration of every parent to get the best education for their child. To eliminate the barriers to opportunity, we need to concentrate on the broader picture towards the state sector, where—let us remember—over 90% of children are educated. The revenue raised through the removal of charitable relief will help to deliver our commitments to education and young people and will help us to meet our overarching mission of breaking down barriers to opportunity for all.

Lords amendments 1B and 7B seek to allow the Treasury to exclude healthcare hereditaments from the higher multiplier through regulations. Lords amendments 2B and 8B seek to allow the Treasury to exclude anchor stores from the higher multiplier through regulations. The amendments are unnecessary, because the powers that they seek already exist in the Bill. Let me be clear: the powers in the Bill will already allow the Government, should they so choose, to exclude certain properties from the higher multiplier. This is not the intention that I have set out; the Government’s intention is that the higher multiplier will apply to all properties at or above the £500,000 threshold to ensure that local multipliers can be adequately funded. I urge the House to reject the amendments, because they are not required and they duplicate powers that already exist in the Bill.

Lords amendment 13B, tabled by Lord Thurlow, would require the Government to

“undertake a review of how the provisions in this Act may affect businesses whose rateable value is close to £500,000.”

The amendment would require the review to be laid before Parliament within six months of the day on which the Bill is passed. It also specifies that the review

“must consider the merits of a separate Use Class and associated multiplier for retail services provided by fulfilment warehouses that do not have a material presence on local high streets, to apply in England.”

We have previously considered two similar Lords amendments, and our position has not changed. The amendment is unnecessary. The “Transforming Business Rates” work that is under way recognises the cliff edge in the business rates system and recognises that it may act as a disincentive to expanding. I reiterate the assurance that I have previously provided to the House: the Government are already looking at this precise issue.

The second part of Lords amendment 13B would require the Government to undertake a review examining the merits of a separate use class in business rates and an associated multiplier for warehouses that cater for retailers without a material presence on the high street. As has been set out, the Government are already exploring that objective through the projects that have been mentioned. The “Digitalising Business Rates” project will allow us to match property-level data with the business-level data held by HM Revenue and Customs. This will improve the way in which we target business rates. The Government therefore remain of the view that the amendment is not required. I urge hon. Members to disagree to it.

The Government are fully committed to transforming the business rates system. This is simply the first step in a wider programme of change in a system that is long overdue for reform. As the Chancellor set out in the spring statement last week, the Government will publish an interim report setting a clear direction of travel for reform, with further policy details to follow at the autumn Budget. Reforms to the business rates system will be phased in over the Parliament.

Finally, amendments 15B to 15E seek to move the measure to remove the charitable rate relief from private schools from one that is being made by Parliament through this Bill to one that the Secretary of State would make through regulations, subject to the affirmative resolution procedure for that statutory instrument. The Government are committed to delivering on our manifesto commitments, and part of that is removing the charitable rate relief from private schools to raise revenue to help deliver on our commitments to young people and education, including the in state sector where, as I said, most children are educated. The Government’s view is that this is a matter for Parliament to decide, which is why we have invited Parliament to do so through this Bill. Therefore, the amendments are unnecessary, the Government cannot accept them, and we ask the House to disagree to them.

[Madam Deputy Speaker (Caroline Nokes)]

I call the shadow Secretary of State.

--- Later in debate ---

[Jim Shannon (Strangford) (DUP)]

I thank the Government for bringing the Bill forward, but I have to put on record some of my concerns—the Minister will not be surprised. He knows that it is never meant in an aggressive way; I put things forward in this way because it is important that my constituents have a chance to express themselves through me in this Chamber.

First, I echo the concerns of the shadow Minister and the Liberal Democrats spokesperson in relation to hospitals and medical and dental schools. I have some concern over how that will trickle down, as it will inevitably, and put pressure on sectors where it does not need to be. The job of those three areas is to ensure that our hospitals can deliver the care and our medical and dental schools can produce the students with the expertise and knowledge to be the next generation of those who look after us.

My major concern, however, is about private schools. I know the point has been echoed many times, but I cannot let this occasion go without making my remarks, on which I have sought the direction of Madam Deputy Speaker and other parties. Members will be aware of the issue with private schools, and I have spoken about it on numerous times to put forward the argument for the faith schools in my constituency. Parents scrimp and save to ensure that their children can go to those schools and have the standard of education that they wish for them, and they have asked me to put that on record. The reason I persist in raising the issue is that I truly believe that some people of faith will be further disadvantaged when the Bill goes through. I know that that is not the Government’s intention, but it will be the reality, and for that reason I must put it on record.

Although the rating provisions will not apply in Northern Ireland per se, the disadvantage to our sector remains in the removal of the tax considerations, which will affect schools in Northern Ireland. That is where the issue is. For the mainland, the effect is quite clear, but schools in Northern Ireland will be affected as well. I wish to be clear that I oppose these provisions on behalf of faith-based schools on the mainland as well, because parents of children at those schools want the same as those who spoke to me.

I am a very proud member of the all-party parliamentary group for international freedom of religion or belief, and I believe that that extends to parents’ freedom to educate their child with a view to how their faith is worked into that education. Lords amendment 15 has been referred to by the shadow Minister and by the hon. Member for Mid Dorset and North Poole (Vikki Slade). For many parents, confidence that their faith will not be dismantled in the classroom is worth the financial burden of paying into their child’s education, but that is being denied by this legislation. I believe that they all deserve the opportunity to educate their child in a way that they wish, for which they will probably pay handsomely, but these proposals will adversely affect parents’ freedom to educate their child in their religious belief.

The option to home-school is one that parents may not have considered previously, yet may now feel is the only financial option available for them. Those parents may not feel qualified or equipped to deal with the skills that are vital to home-schooling, yet believe there to be no option as they simply cannot afford to pay the uplifted fees. That is the unfair burden that falls on the shoulders of those parents.

I firmly believe that the Government disagree with almost every Lords amendment because the Lords amendments interfere with the public revenue and affect the levy and the application of local revenues. The Commons does not offer any further reason, trusting that this reason may be deemed sufficient. Basically that means, “We need the money.” I have been a Member of this House for almost 15 years and an elected representative for some 40 years as a councillor and a member of the Assembly, and never, ever have I believed that money is the bottom line, and I do not believe that many right hon. and hon. Members believe that. We cannot take faith-based education out of the hands of a certain class of people to punish those high-class schools with swimming pools. Let me assure the House that Bangor Independent Christian school, with its Sunbeams nursery schools, has no pool. Regent House prep in my constituency has no swimming pool either. There are small primary schools that will have difficulty operating when these regulations come into force, and that is simply not right.

I know that the strength of the Labour Government means that this Bill will pass, but I am urging individual MPs across the House to consider who will be punished and to urge the Government to review this tax raid on education, even at this late hour. We believe in the right to live one’s faith, and we cannot tax that right out of reach. That is where this Bill has gone wrong, and has divorced itself from the reality of the people that I represent.

[Jim McMahon]

I think I addressed the majority of the points in my opening speech that have been raised subsequently, but I thank Members for their contributions. We have heard the Opposition’s concern that the multipliers do not deliver on the stated intention of the policy as announced in the Budget. We clearly do not agree with that position. At the Budget, the Government announced their intention to introduce two lower multipliers for qualifying retail, hospitality and leisure properties, to end the uncertainty of the annual retail, hospitality and leisure relief. Also, as I set out in my opening speech, the relief was a temporary stopgap measure. Of course, it has been extended year on year, but it does not provide the certainty that businesses require. It has created a cliff edge.

During our last session—I cannot remember when it was; it feels like it was yesterday—the hon. Member for Thirsk and Malton (Kevin Hollinrake) seemed to acknowledge that the cliff edge that was built in the previous system was providing uncertainty to businesses and their ability to plan ahead. He must surely welcome the fact that this new lower multiplier—this permanent relief—gives all businesses, whether they are retail, hospitality or leisure, the long-term security that they have been asking for and, importantly, in a way that is sustainable and self-financing through the business rates system.

Through the Bill, the Government are taking steps to address all the issues that have been outlined. The chosen approach is both appropriate and prudent, and the challenging fiscal environment that the Government face requires it. Any tax cut must be appropriately funded, under our commitment to sound financial management, so the Government intend to introduce a higher multiplier for all properties with a rateable value of £500,000 and above. It is important to say this to settle some of the arguments: that will affect less than 1% of properties in England. Less than 1% will pay more, but that will fund the lower multiplier, as we all recognise. That will help our town centres and our high streets, and it is what we need to do. This approach delivers on the policy set out in the Budget, and on our manifesto commitment to transform the business rates system to make it fairer and fit for the 21st century, and to protect the high street.

--- Later in debate ---

[Kevin Hollinrake]

The Minister says that the solution that he has alighted on meets his manifesto commitment, but his manifesto says,

“This new system will level the playing field between the high street and online giants”.

That is not what the provision does—not exclusively. He knows that it levies extra taxes, extra business rates, on high street stores, large department stores, supermarkets, football stadiums and many others. They are not online giants.

[Jim McMahon]

The rating system adequately reflects the scale of properties. Less than 1% of properties in the business rates system will use the higher multiplier. That will fund the tax break for those on the high street that will use the lower multipliers. In the evidence session —the hon. Gentleman was there—we heard retailers say, “Of course, that will have an impact on our distribution centres, but we have so many stores that are below the threshold.” That allows national retailers with multiple locations to benefit; in the round, they find themselves better off as a result of this policy. As for rebalancing the situation for online retailers and those on our high streets, that is exactly what this measure does. Big distribution centres will pay for that relief.

I once again thank hon. Members for their contributions, but for the reasons set out, I respectfully ask this House to disagree with the amendments before us.

Question put, That this House disagrees with Lords amendment 1B.

The House proceeded to a Division.

[Madam Deputy Speaker (Caroline Nokes)]

Order. As the escalators in Portcullis House are still not working, I shall allow an additional two minutes for the Division.