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Bob Spink (Castle Point) (Ind): I am grateful to the Government for their recognition of the importance of SMEs. Can the Minister please find a way to ensure that the 2010 revaluation will shift the burden of business rates away from small businesses on our high streets and trading estates and towards much larger businesses, for which business rates are a much smaller proportion of turnover, and often profits?
Ms Winterton: I assure the hon. Gentleman that I will address some of those issues later in my remarks. I think that he needs to separate out the process of revaluation and some of the different types of reliefs that can be made available to small businesses, but I hope that all will become clear as I move through my speech.
Mr. Brooks Newmark (Braintree) (Con): The Minister was kind enough to offer—I am not sure whether it was just for the constituency of my hon. Friend the Member for South-West Norfolk (Christopher Fraser) or on a constituency-by-constituency basis—as much information as possible about how many businesses, not necessarily which businesses, have been helped. Rather than just writing to my hon. Friend, could she put that information in the Library so that it is available to all Members?
Ms Winterton: As I said, I am more than happy to take away requests that have been made for that information, because it is important that we are able to show the help that has been available. Perhaps Conservative Members would like to make a guesstimate of how many businesses would have been helped by opposing all the measures that we tried to take. It would be interesting to see whether they were content to admit that if one says that one is going to do nothing, that is what happens to businesses.
I think that the current business rates system is a fair way of ensuring that the burden of tax is fairly distributed across all businesses. As several of my right hon. and hon. Friends have said, before 1990, rates were set and collected locally. The problem that was seen with that approach was that many businesses felt that they had little or no certainty over their business rate bills: they complained that they might be paying different rates in different areas, and that they might be told of their liability only a few days before the start of the financial year. The system that came into effect in 1990, which was enshrined in legislation introduced in 1988 by the previous Administration, changed the way that business rates were collected, bringing greater certainty, not least because businesses know that between revaluations the multiplier will not change by more than inflation. Many of the issues that we are debating are an integral part of that system.
In 1990, we saw the first business rates revaluation of property since 1973. Before that time, values had become hopelessly out of date; that is why the new system requires revaluations every five years. The point of that, for a business, is that rateable values and therefore rates bills are based on up-to-date information, so the yield from the rates is spread fairly across different ratepayers.
Mrs. Theresa Villiers (Chipping Barnet) (Con): The Minister is speaking at great length about how she thinks that the re-rating system is a fair one. Does she think it is fair that so many businesses in ports have been landed with a huge retrospective rates bill because of Government incompetence?
Ms Winterton: I come later to the fact that we have listened to what representatives of the ports have said. My predecessor, my right hon. Friend the Member for Wentworth (John Healey), listened to what was said about the liability and changed the system so that the payment back is now spread over something like eight years. I do not know whether the hon. Lady is committing her party’s Front Benchers to completely abolishing any responsibility for liability, and I do not know how that would be paid for, but I shall come to the changes that we have made.
On top of what happened in 1990, since 1997 we have introduced measures to improve the system further, including the small business rate relief scheme, which provided more than £260 million a year of help by 2007-08. There has been some mandatory relief, particularly for community amateur sports clubs, and the business rates deferral scheme will allow 1.6 million businesses to defer liabilities totalling about £600 million this year.
Mrs. Ellman: I acknowledge that the Government have tried to address the major problem imposed on businesses in ports because of the retrospective, backdated rates, but does my right hon. Friend agree that that is still a major problem for those businesses? Will she agree to re-examine that important matter?
Ms Winterton: I will come later to some of the facts about how businesses are settling their liabilities and the evidence that we have so far.
Mr. David Lidington (Aylesbury) (Con): May I press the right hon. Lady a little more on the deferral scheme? Surely, as my hon. Friend the Member for Putney (Justine Greening) pointed out, as the Government’s amendment mentions the introduction of the implementing regulations only this July, the reality is that small businesses will be able to defer less even than the 60 per cent. of business rates that the Government have been talking about.
Ms Winterton: I will come in due course to the details that the hon. Gentleman refers to. He is leaping ahead of me.
I return to the comments that have been made about the current system, which, as I have said, was introduced by the previous Administration. It was subject to a thorough review by Sir Michael Lyons, which reported in March 2007. Sir Michael concluded that business rates were a
“successful and stable property tax”.
He felt that there was no case for changing the retail prices index cap on annual charges in the national rate of tax.
It is widely accepted—except, it appears, by Opposition Front Benchers—that the business rates system that the Conservative party introduced is an effective, fair form of taxation, and I have to say that it has been improved by the Labour Government since 1997. If the hon. Member for Putney and the Opposition believe that the system needs changing, it is important for them to explain not only the proposed structure but how any changes would be made. I remind the House that the current system raises £20 billion a year, which goes towards services from which businesses benefit at local government level. If the system is to be done away with, it would be interesting to know the costings for the suggested changes.
Julia Goldsworthy: Does the Minister think that it might be worth considering the inflation measures that the Government use? They have a whole series of measures of inflation, and in this case we had spot inflation in September, which is what has caused the difficulty.
Ms Winterton: As the hon. Lady will know, there are different methods of calculating what the increases will be in pensions and other areas. As she knows, under existing legislation business rates are adjusted every April in line with the retail prices index for the previous September, but I should point out that in the Budget the Chancellor forecast that RPI inflation would fall to minus 3 per cent. by September 2009. The impact of uprating if RPI is negative will obviously be to reduce total business rates in cash terms in 2010-11.
We must understand all the implications of linking to RPI. However, that is the point at which we can consider action that Government could take—as we did—in recognition of the spike in inflation that occurred in September. That is exactly why we introduced the deferral scheme, which will allow business rate payers in England to defer around £600 million for 1.6 million properties and around 3 per cent. of the 5 per cent. increase in 2010-11 and 2011-12.
The Opposition also referred to the plans for the 2010 business rates revaluation. As I said earlier, regular revaluations are an important part of the ratings system because they maintain fairness between all taxpayers. Rental values provide the basis of rateable value, so revaluation ensures that each business contributes, based on up-to-date information. The current rating list dates from 1 April 2005, based on the property market at 1 April 2003. The next revaluation will take place from April 2010, based on rental values at 1 April 2008. However, although the property market has changed since 1 April 2008, the important protection for business is that the revaluation is not intended to raise extra revenue because the overall national multiplier is set to ensure that the average business rate stays the same, allowing change only for inflation. I think that the hon. Member for North Cornwall (Dan Rogerson), whose attention I am trying to get—he is ignoring me; okay, fine—asked about that.
Some rate bills rise and some fall after revaluation, but the average national bill changes only with the rate of inflation. That is how the revaluation would work.
Mrs. Caroline Spelman (Meriden) (Con): It is kind of the Minister to allow me to intervene. Does she understand that the Valuation Office Agency legislation in 1998 led to desktop revaluations? The hon. Member for Liverpool, Riverside (Mrs. Ellman) made a good point. One of the major problems underlying retrospective revaluation for ports is that it is a desktop revaluation and, although all the ports have been encouraged to appeal, it will cause untold damage to business because that revaluation process is theoretical. When revaluation took place in Wales—a pilot that was not followed through—it was not budget neutral and more revaluation led to more people having their tax increased than those benefiting from a reduction.
Ms Winterton: I will deal with revaluation and its effects on ports shortly.
Mr. Chris Mullin (Sunderland, South) (Lab): I know that my right hon. Friend has been in her post for only a few days—
Mr. Mullin: No, not at all. Has she had an opportunity to assess the impact of the empty properties rate on businesses? Several companies in Sunderland face ruin as a result of it. I know that the Government have introduced a concession for properties with rateable values of less than £15,000. However, for example, two business men came to my office last week who employ 80 people and have just been faced with a bill of £130,000 on a property that is empty and unlettable. The business has been running for 50 years and they will have to close it unless some way can be found around the problem.
Ms Winterton: I can assure my hon. Friend that I will come to the issue of empty property rates.
To return to the new valuations—this also picks up on the point that the hon. Member for North Cornwall made—they were completed at the beginning of this month. We are looking at the results, and I hope to be able to say a little more in the next few weeks. However, we can expect those sectors and locations that have done well in recent years to see increases in bills, whereas those that have not fared as well are likely to see reductions. That addresses some of the points that the hon. Gentleman made.
All the rateable values will be published at the end of September. At the same time, we will provide a business rates calculator to help ratepayers estimate their rates bills for 2010. That is something that we introduced in 2005, and it has been helpful to businesses that wish to plan ahead. Under the previous system—this relates to my earlier point—there was a problem, because people did not know what their rates were likely to be, sometimes until the last few weeks of the financial year. However, the excellent business rates calculator will help people to plan ahead. We introduced it because we know how important it is for businesses to be able to plan ahead.
We will make even more improvements to the business rates calculator, so that by October business rate payers will be able to estimate their 2010 rates by using their 2010 rateable values. In addition, for those ratepayers who face increases in the 2010 revaluation, we will introduce transitional arrangements to phase in those increases. Again, although not resiling from the system that was introduced, we are looking at ways of helping people where specific problems have arisen, first, from the 5 per cent. increase and, secondly, from some of the revaluations, and as I have said, we will consult on those.
At the last revaluation, in 2005, we introduced a transitional arrangement scheme, which lasted for the first four years of the five-year rating list. The idea was to ensure that all ratepayers paid their normal rates bills for at least one year of the rating list. Those ratepayers affected will have had four years to plan for their 2009-10 rates bills. The hon. Member for Putney said that the Government had ignored the responses to the 2004 consultation paper. There were 66 responses, and although nine favoured a five-year scheme, 44 favoured a four-year scheme ending on 1 April 2009, so we did listen to the responses in 2004. We also listened, again,
to businesses when they faced increases, and that is why we introduced the deferral scheme. With respect to the ending of the transitional relief scheme, we listened to people, and that is why we introduced the transitional relief scheme for the increases for 2005 to 2009.
With respect to the laying of regulations for the business rates deferral scheme, I can assure the House that we are working on introducing the necessary legislation for the scheme by the end of July, as we explained on 31 March, when it was first announced. Those regulations will cover the deferral of the 5 per cent. retail prices index increase and the deferral of increases faced by those businesses losing transitional relief from 1 April 2009.
My hon. Friend the Member for Sunderland, South (Mr. Mullin) and others have raised the question of empty property reliefs. I am sure that hon. Members will recognise that, previously, landlords had no incentive to find tenants for their empty properties. As a result, rents in UK cities ended up being higher than they might otherwise have been. That is why we removed many of the exemptions and reliefs for empty properties. To reintroduce such a relief would cost as much £950 million a year, which would have to be found from other areas of taxation or through public spending cuts.
Mr. Mullin: I do hope that my right hon. Friend will have a look at this, because this is a much more serious problem than the little note that she has just received from the Box makes out. The Pallion engineering company in my constituency is the last surviving shipyard on the Wear, and its rates are going up from £55,000 a year to £234,000. The Treasury will not get that £234,000, however, because that rates bill will put the company out of business, along with the 200 people who work there. I appreciate that my right hon. Friend has not had much time to get to grips with these issues, but I do hope that she will talk to her opposite numbers in the Treasury about the folly of what is happening.
Ms Winterton: We have tried to listen to the concerns that have been expressed by property owners. That is why, for 2010, all empty properties with rateable values of up to £15,000 will be exempt from rates. Of course I understand the concern that my hon. Friend has expressed, however, and I know that he tries to reflect in the House the concerns of businesses in his area.
Mike Penning (Hemel Hempstead) (Con): I thank the Minister for giving way; she has been exceptionally generous, and I am sure that the House will understand if her speech goes on a little longer because of all the interventions she has taken. The matter of empty property rates is a very serious one, especially for businesses that have no choice but to get out of their premises. In my constituency, for example, the Buncefield oil depot exploded in 2005, and some of the damaged buildings are still unsafe for people to go back to work in, yet the companies concerned are being charged the full rate for buildings that they cannot go back into. Surely that is a ludicrous anomaly in the legislation.
Ms Winterton:
I think that I have addressed a number of issues on this subject. I shall briefly move on to talk about the small business rate relief scheme that was introduced in 2005. One of the issues relating to
automaticity is that, because a local authority does not necessarily know which businesses occupy multiple properties, the ratepayer is asked to apply to confirm that they meet the criteria for the relief. I know that my right hon. Friend the Minister for Housing was sympathetic to the points raised by the hon. Member for Mid-Worcestershire (Peter Luff), but, under his proposal, it would be difficult to avoid placing a considerable burden on local authorities, which would need to establish whether a ratepayer was occupying more than one property. However, we are looking into what more we can do to improve the take-up of small business rates relief and we have already taken steps to amend legislation for 2009-10, so that all eligible businesses in new properties can receive rate relief from their first date of occupation.
Ms Winterton: I am sure that that will not entirely satisfy the hon. Gentleman. I will give way to him, but I then want to make some progress.
Peter Luff: As John Cleese remarks in “Clockwise”,
“I can take the despair. It’s the hope I can’t stand.”
The Government keep on holding out a tantalising fraction of hope. I must tell the Minister that if she is looking for an excuse not to act, that is a pretty pathetic one. There are some very good and compelling reasons for taking action and there are perfectly practical solutions to all the objections raised by the Treasury. I urge the Minister to be utterly robust in her discussions with the Treasury. The time has come for this measure, and her Department—both her Departments—know it. She should not be cluttering us up with excuses, but looking for solutions.
Ms Winterton: Let me briefly address the issue of levying local— [Interruption.] Well, I think I have addressed the hon. Gentleman’s points and the real issues around them. I do not see the point of repeating it all again. I have been pretty clear about where we believe the difficulties lie.
As regards councils having the power to levy local business rate discounts, I have said that we already have several rate relief schemes targeted at businesses, amounting to something in the region of £900 million in 2008-09. Further discounts—this is a point that the Opposition need to answer—would mean that the amount collected would be smaller, so we would have to ask local authorities to contribute more, which would have an effect on council tax payers.
This Government have a great track record in delivering funding and policies that will play a major part in regenerating our cities and supporting our local authorities to ensure regeneration and economic renewal. It is absolutely clear that we understand the impact of the business rates system on businesses and that, particularly because of the international credit crunch and economic slowdown, we are looking at the effects on people and businesses.
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