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House of Commons
Session 2009 - 10
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General Committee Debates
Delegated Legislation Committee Debates



The Committee consisted of the following Members:

Chairman: Mr. George Howarth
Abbott, Ms Diane (Hackney, North and Stoke Newington) (Lab)
Ancram, Mr. Michael (Devizes) (Con)
Brown, Lyn (West Ham) (Lab)
Cruddas, Jon (Dagenham) (Lab)
Dunne, Mr. Philip (Ludlow) (Con)
Follett, Barbara (Parliamentary Under-Secretary of State for Communities and Local Government)
Greening, Justine (Putney) (Con)
Hemming, John (Birmingham, Yardley) (LD)
McDonagh, Siobhain (Mitcham and Morden) (Lab)
Marsden, Mr. Gordon (Blackpool, South) (Lab)
Mercer, Patrick (Newark) (Con)
Rifkind, Sir Malcolm (Kensington and Chelsea) (Con)
Rogerson, Dan (North Cornwall) (LD)
Sharma, Mr. Virendra (Ealing, Southall) (Lab)
Todd, Mr. Mark (South Derbyshire) (Lab)
Walley, Joan (Stoke-on-Trent, North) (Lab)
Eliot Wilson, Committee Clerk
† attended the Committee

First Delegated Legislation Committee

Monday 14 December 2009

[Mr. George Howarth in the Chair]

Draft Non-domestic Rating (Chargeable Amounts) (England) Regulations 2009
4.30 pm
The Parliamentary Under-Secretary of State for Communities and Local Government (Barbara Follett): I beg to move,
That the Committee has considered the draft Non-domestic Rating (Chargeable Amounts) (England) Regulations 2009.
It is a pleasure to serve for the first time under your chairmanship, Mr. Howarth. I am grateful for this opportunity to explain the purpose of the regulations, which is to bring in a transitional relief scheme designed to help the people responsible for more than 467,000 business properties to meet their business rates bills over the next five years. I wish to give a little background on the rating system in this country, as that will provide an important context to the regulations.
Rates have helped to pay local government for the services it provides to businesses in England, in one form or another, for more than 400 years, and the current system of national non-domestic rating was first introduced in 1990. Since then, central Government have set the multiplier used to calculate business rates bills and, I am glad to say, between the revaluations the multiplier has never increased by more than inflation. The 1990 rate reforms also introduced, for fairness purposes, the statutory requirement of regular five-yearly revaluations of rateable values. The revaluations update rateable values, which are based on rental values, and ensure that each business pays its fair share, and no more, of the overall rates burden.
The 2010 revaluation process is carried out independently of central Government by the Valuation Office Agency. The agency uses experienced and professional staff, and to prepare for the 2010 rating lists it has been working since 2007, collecting and analysing more than 300,000 rents—more than it has ever collected. From that evidence, the agency has prepared valuations for the 1.7 million properties in England that are liable for business rates, and six months before the corresponding bills were due to be sent out, it published the new draft rateable values on the internet, in the early days of October this year. The agency has also sent out summary valuations, to enable ratepayers to check them and query any errors. The agency hopes that that advance notice will ensure that the business rates bills are correct before they are finally presented on 1 April 2010. To date, the valuation office has received 82,000 inquiries about the summary valuations and, I am glad to say, almost 60,000 of them have been resolved.
However, those schemes also add to the complexity of the rates bill and the rates bill calculation. To make sure that ratepayers understand how those different types of relief affect their final bills, my Department has worked with the Valuation Office Agency and Business Link to produce a business rates calculator that is now on the Business Link website. That calculator is one of the most popular applications on that website and has received more than 100,000 visits. Such measures ensure that ratepayers have an accurate understanding of their rates bills for the next year.
Revaluations do not raise an extra penny for the Government and more than 1 million business properties—in other words, about 60 per cent. of all business properties—will actually see an average decrease in their rates bill next year due to the revaluation. That should amount to about £770 before inflation. However, others will see an increase. The revaluation will provide a welcome and timely boost to sectors such as industry, which will see rates bills fall by 3 per cent., and regions such as the east midlands where 84 per cent. of business properties will see their rates bill fall as a result of the revaluation.
The regulations provide a transitional relief scheme to help the minority of ratepayers who face increases. That £2 billion relief scheme will ensure that, after adjusting for negative inflation, no small property will face an increase due the revaluation of more than 3.5 per cent. in 2010-11, or 11.5 per cent. for larger properties. That relief will help, as I said at the beginning of my speech, 467,000 business properties. We adopted the scheme after a consultation exercise in the summer that provided us with more information than ever before about the revaluation and its impact. Our chosen scheme secured widespread support, with 60 per cent. of respondents agreeing that we should provide relief over the full five years of the rating list, rather than the four years that was adopted for the previous revaluation in 2005. Some 68 per cent. supported the proposed caps on increases for small properties, including the Federation of Small Businesses. Some 55 per cent. supported the caps on increases for large properties.
Transitional relief works by placing annual caps on changes in rates bills. A more detailed explanation of those caps is contained in regulation 8 of the draft regulations. For example, the caps on increases for small properties before inflation over the five years are, sequentially, 5 per cent., 7.5 per cent., 10 per cent. and then 15 per cent. in each of years 4 and 5. To give a concrete example, a property whose rateable value has increased from £10,000 in the 2005 rating list to £15,000 in the 2010 rating list would, without transitional relief, face an increase in its bill from £4,810 in 2009-10 to £6,196 in 2010-11. That is an increase of 29 per cent. before the reliefs take effect. Transitional relief will place annual caps on that increase. In 2010-11, the increase in the bill will be capped at 5 per cent. before inflation, taking the bill to £5,051 for that year. In the second year, the increase in the bill will be capped at a further 7.5 per cent., taking the bill to £5,430 before inflation, and so on until the full bill is reached. When, as is currently the case, inflation is negative, these caps will be reduced in cash terms. After allowing for inflation, the cap on increases for small properties in 2010-11 is 3.5 per cent. rather than 5 per cent. because inflation is currently minus 1.5 per cent. In our example of a mythical property, the bill after inflation for 2010-11 will be capped at £4,980 before other reliefs. Other rate reliefs, such as the small business rate relief or rural rate relief, are applied after the transitional relief is calculated.
Transitional relief, as it was originally set up, must be self-financing, which means that the relief that some ratepayers get has to be funded by other ratepayers. We considered this carefully at the consultation stage and 66 per cent. of respondents agreed that we should fund the transitional relief by also placing a cap on annual reductions in bills, rather than levying a supplement on all other ratepayers. Therefore, the regulations also provide that those seeing reductions due to the revaluation should have those reductions capped to help pay for the relief. For example, the caps on reductions for large properties are minus 4.6 per cent., minus 6.7 per cent., minus 7 per cent. and minus 13 per cent. in each of the past two years.
To take an example of a property whose rateable value has reduced from £30,000 in the 2005 list to £15,000 in the 2010 list, without the transitional arrangements the bill would reduce from £14,430 in 2009-10 to £6,196 in 2010-11, a reduction of 57 per cent. before any other reliefs. Transitional relief places an annual cap on that reduction to help pay for the other transitional relief. In 2010-11, the reduction in the bill for such small properties will be capped at 20 per cent. before inflation, taking the bill to £11,544 in that year, and so on through the five-year period. When, as is currently the case, inflation is negative, these caps are reduced in cash terms.
The regulations also have to cope with the various changes that can happen to a property during the five years of a ratings list’s life. For instance, the transitional relief scheme must have rules to decide what happens when a property splits or merges with another property or where the rateable value changes. These rules are sometimes complex but they do ensure that no ratepayer is treated unfairly. The rules are not new and local authorities, businesses and other practitioners are extremely well versed in their application. To ensure that these regulations can be implemented in time for the new bills on 1 April 2010, my Department has worked closely with the Institute of Revenues Rating and Valuation and the Local Government Association and we have maintained good working relationships with software companies that support local government. As a result, we are confident that accurate bills will be sent out on time for 1 April 2010.
For the majority of business properties the 2010 revaluation will provide help in the current economic climate. More than a million will see an average decrease next year due to the revaluation of about £770 before inflation. It will also help important sectors, such as industry, and important regions, such as the midlands, with their economic recovery. The relief scheme before us today will provide help for the minority facing increases. After allowing for the effect of negative inflation in September 2009, which will adjust bills throughout 2010-11, no large property will see an increase next year due to the revaluation of more than 11 per cent., and no small property will see an increase of more than 3.5 per cent. The scheme has been widely supported on consultation, and I ask the Committee to join that support today.
4.45 pm
Justine Greening (Putney) (Con): It is a pleasure to serve under your chairmanship for the first time, Mr. Howarth. We do not intend to divide the Committee, because we support the transitional relief scheme. However, I want to raise some serious concerns about why the scheme needs to be in place at all, and about the way in which it will operate when it starts next April. I would like to talk about the 2010 revaluation, the impact that it will have on business, and some of the finer details of the statutory instrument on the transitional relief scheme for the 2010 revaluation.
We have some concerns about going ahead with the 2010 revaluation. The Minister needs to address two key issues, neither of which has been satisfied. First, the Minister says that there is no change in business rates take, which is seriously questionable. Her argument is that we will not raise a single extra penny and that that will be fair. Her claim that only a minority of companies face a rise in business rates gives the impression that only a few business property rates will be affected, but, in fact, 40 per cent. of them will be affected. Some 700,000 business properties face a rise, and I want to address what that means for them.
It is irresponsible for the Minister simply to talk about those properties that will receive a fall in business property rates when we are in the middle of such a difficult recession that has lasted so long. It is a bit like talking solely about employment while completely ignoring the danger of growing unemployment. Surely we should focus most of all on the people who are going to lose and how they will cope with rises in business rates, because, ultimately, these are simply formula-driving changes that will not raise any more business-rate revenue. The process, according to the Minister, will not raise a single extra penny, but it will potentially put the viability of hundreds of thousands of companies across Britain at risk.
The destabilising process could happen across many regions. The Minister says that the changes will not bring in a single extra penny, but she should have done an impact assessment to understand how companies facing business-rate rises will cope. I wonder whether the absence of an impact assessment is because it would have produced facts and data that the Minister did not want to see, which suggests that it is inevitable that some companies will really struggle to pay. The clue and evidence to support my assertion that the scheme will have a destabilising effect on the economy do not lie in the companies on the margins that will slightly win or slightly lose; their viability will not be affected per se, because the companies that will slightly win will not be in a position to employ more people, and the companies that will slightly lose may be able to weather the storm. It is more instructive to consider companies facing particularly big rises or falls, and see how they stack up against one another. That gives a very worrying picture across many regions.
The reality is that there are more big losers than big winners across nearly all regions. Some 134,000 business properties face a 20 per cent. fall or more in business rates, but nearly 250,000 face a 20 per cent. rise or more. In eight out of nine regions, there are more big losers than big winners. Of those most affected by the business rate revaluation that the Government plan for next year just 42,000—or 2 per cent.—will see a decrease of more than 30 per cent., but 155,000 properties will see a rise of more than 30 per cent., which is nearly one in 10. Therefore again when it gets to the margins of those having to cope with dramatic changes we see far more losers than winners. That was one of my concerns. Even with transitional relief, 12 per cent. of properties will see rises in their business rates of 24 per cent. over the next three years; 10 per cent. of large business properties—these are companies employing large numbers of people—will see rises of 32 per cent. over just two years.
Some sectors are hit particularly badly. We heard in a Committee last week about the plight of many rural petrol stations. They provide vital services to the communities that they serve; many of them are effectively village shops where village shops have been on the wane. They have perhaps taken over the role that the local post office might have provided before it was closed. Those are some of the business properties that are facing the largest rises. When I met with the Association of Convenience Stores, it highlighted its grave concerns about rural petrol stations facing massive bill increases. I have three examples to give the Committee.
First, there is Casterton Hill service station in Stamford in Lincolnshire. Its rateable value has gone up by 291 per cent. Then there is Nutbroke service station in Ilkeston in Derbyshire. Its rateable value is going up by 286 per cent. The rateable value of the Southwell Green service station in Nottinghamshire is going up by 145 per cent. It does not just stop there. These are all small companies that are facing large rates bill rises over the next few years, but other sectors are hit too. Football stadiums, for example, are seeing an average rise in their bills of 46 per cent. The bill for Arsenal’s Emirates stadium is going up by 81 per cent. Manchester United’s bill is going up by 71 per cent. The bill for Stoke City’s Britannia stadium is going up by 135 per cent. The average bill rise for the county cricket grounds is 85 per cent. The bill rises I mentioned for the convenience stores will be rises that many rural and urban petrol stations simply cannot afford.
Rugby league grounds have seen their bills rise by an average of 60 per cent. Our nation’s 42 rugby league grounds can expect a business rate tax in that order. Harlequin’s Twickenham Stoop ground will owe nearly £110,000, which is a rise of more than 50 per cent. The home of Saracens, the Vicarage road stadium, faces an increase of £139,000, which is more than double. The bills of zoos and safari parks have risen by 50 per cent. as well. London zoo’s rate bill is going from £260,000 to £660,000 a year, which is a rise of 155 per cent. They are not the only ones. Lifeboat stations are seeing their bills rise by 34 per cent. Coastguard stations are seeing their bills rise by on average 26 per cent. Even beach huts are seeing rises of 19 per cent. and vineyards and wineries will see their bills go up by 18 per cent.
There are a number of sectors and regions, particularly the south-west and London, that will suffer from this 2010 rates revaluation. The Minister says that it will not raise a single extra penny. My concern is that even that is not true. The Minister has said time and time again that it will not raise a single extra penny, but the answers to a parliamentary question that I received last week show that the amount of business rate that the Minister expects to collect will rise next year. In fact, it will rise from £20.6 billion this year to £20.8 billion in 2010-11. The reason she gives for the rise is that although initially the Government will collect 1.5 per cent. more in 2010-11, it will reduce in later years through appeals. That is a bit like issuing a load of parking tickets and then saying, “Actually, because some people will not have to pay them, they will not get the bill.” How would people have reacted if the banks had said, “No, we haven’t overcharged, because we expect to have to pay the money back when people complain”?
This must be the first Government tax for which Ministers have factored incompetence into their calculations. The reality is that it will raise more revenue. For it to be revenue-neutral, it will be up to small and large companies whose business rates bills go through the roof because of a bad valuation to claw money back. On a stand-alone basis, before that happens, it is not correct to say that there will not be a single penny raised. Actually, substantial pennies will be raised from it.
Perhaps the Minister could talk about the analysis that she has done as to how many appeals she is likely to get—they are factored into the calculation—and how long she expects them to take. I am sure that many companies will have to waste time, effort and money on bringing appeals on erroneous rateable value assessments. For them, it will be time, resources and money that they simply cannot afford, and also for taxpayers, who fund the Valuation Office Agency, the appeals process will surely involve time, money and resources that they cannot afford.
The Minister said that the point of the revaluation is fairness, but how can it be fair to have a 2010 revaluation that factors all those errors into its charging? How can it be fair to collect more, before businesses have a chance to make the case that their bill is too high? Perhaps the Minister could take the opportunity to correct the record and to accept that, as it stands today, without the appeals, the 2010 revaluation will collect more money. We have a real concern about that.
I want to come back to the Minister on her argument that somehow businesses that get reductions will be incredibly grateful. I am sure that they will welcome it, because, if one takes 2007-08 as the starting point to compare how much business rate revenue the Government rake in, it was £17.4 billion that year. By next year, it will have risen to £20.8 billion, which means that over the course of the recession, this Government will have raked in about £8.5 billion more in business rates than they were taking at the start of the recession. That is approximately equal to the VAT stimulus, yet this Government will continue to penalise more businesses. An incredibly large 40 per cent.—the Minister calls it a minority—of businesses stand to lose again, after these changes go through.
I have more questions for the Minister. Perhaps she can clarify some further points about the impact of the 2010 revaluation. She confirmed in a parliamentary answer to me that the small business multiplier and the national non-domestic multiplier will decrease by 15.4 per cent. and 14.6 per cent. respectively to offset the rise in rateable value as a result of the revaluation, but my understanding is that the total rateable value has increased by 19 per cent. due to the revaluation. That seems to confirm that the reduction in the multipliers will not be enough to offset the rise in rateable value. Can she confirm how the two figures stack up?
Additionally, I take this opportunity to ask the Minister for the first time about the local government finance settlement in respect of the 2010 revaluation, which shows the national non-domestic rates distributable amount going up from £19.5 billion to £21.5 billion for 2010-11. If she is planning to collect only £20.8 billion of business rates in that year, I am not exactly sure how she is also at the same time planning to have a distributable amount of £21.5 billion when it comes to the formula grant. As she said, business rate is the key funder of local government finance and the services provided to millions of people up and down the country. Will she confirm that there is a £700 million black hole in her local government finance settlement for next year? Will she also explain how, if she has not done an impact assessment, she is going to deal with the black hole that may emerge if companies go out of business and are unable to pay the business rate bill that she is depending on to fund local government next year?
We have some serious concerns. There has been no impact assessment of firms going bust as a result of the 2010 revaluation, which, I should point out, the Minister says will not raise a single extra penny. It seems amazing that a Minister can one week bring in a business rate deferral scheme where a 5 per cent. rise is described as “a significant increase”, but the following week be happy to bring through a revaluation that will see some firms paying 64 per cent. to 148 per cent. more over the next five years. That must have a major impact on the viability of some firms. She says that some regions will do better but the bottom line is that it is naive to assume that businesses operate in a bubble. They do not; they are part of a supply chain with suppliers and customers. If those customers and suppliers are affected by business rate changes that put them under pressure, it is inevitable that all companies and businesses could suffer. That is why it is deeply irresponsible to have no impact assessment of how the 2010 revaluation will work, particularly when it is already such a fragile and unstable time for our economy.
I now come to the transitional relief scheme. I realise, Mr. Howarth, that I am taking some time, but this is probably one of the most important statutory instruments in terms of our economy that will pass through Parliament over the next few months. The consultation on the transitional relief scheme was closed before any details of the rateable values were published for businesses, companies and the public to look at. The Government have cited responses to their consultation as supporting the planned transitional arrangements, but I question how the Minister can expect truly informed views on the scheme, if people were not able to see their new rateable value and so have some idea of what their bill would be. Respondents had to reply to the consultation by 23 September, a week before they knew how much they would have to pay, because details of companies’ new bills were not published until the end of that month. When I asked the Minister about this, she said that the consultation deadline was set to allow the transition arrangements to be made in time.
For the consultation on the last revaluation in 2005, companies were given a month’s notice of what their new bills would be before being asked for their feedback. That consultation ran from 9 August to 29 October, so companies could check their rateable values from 1 October and had four weeks to understand how they would be impacted before the consultation deadline for the transitional relief scheme. This year, Ministers provided the business community and companies with only a limited regional and sectoral analysis of who would face business rate tax rises and not individual bills. I challenge the Minister to explain why it was possible to finish the 2004-05 consultation on 29 October and still have arrangements in place for April the following year, while this year it was necessary to terminate the consultation on 1 October. Is the Minister saying that her Department has become four weeks more inefficient since 2005? Companies have not had the detailed data on which to respond to the transitional relief scheme consultation in the way that they should.
I have a couple of detailed questions about the explanatory memorandum and the statutory instrument itself. Paragraph 7.5 of the explanatory memorandum seems to suggest that the increases in rateable value faced by some businesses—perhaps because they have developed the company, as we would all want—will not be covered by transitional relief if they upgrade their properties and make them more valuable. However, if companies decrease the rateable value of their property they will be enjoying lower business rates, because they will be part of the transitional relief scheme. In other words, if a rateable value goes up and one has to pay more, there is no transitional relief for that. However, if a rateable value is going to fall, somehow one does get transitional relief. That seems inequitable; does the Minister think that that is fair?
On regulation 10, will the Minister clarify the following? Regulation 10(6)(a) talks about
“subtracting U from the amount calculated in accordance with paragraph (3)”
without setting out what “U” is in the formula. It is briefly referred to again on regulation 11 of the statutory instrument. However, it states that
“U has the meaning given by regulation 10”.
That seems very circular. It is not clear exactly what “U” is; I think it may refer to the Business Rate Supplements Act 2009, but I cannot see anywhere in the statutory instrument where that is formally tied back. Does the statutory instrument have all the clauses it needs to operate in the way intended?
We have some real problems here. I think that we are all deeply concerned about how the 2010 revaluation will impact on businesses across all regions of Britain. We are concerned about how it is going to affect the funding potentially for local councils if it has a destabilising effect. Above all, I am concerned that the Minister has made no assessment of those risks. With all of the civil service behind her, I would have hoped that in the worst recession we have had for some time—when we look at the length of it—that would have been a vital piece of analysis, but it has not been done. Unless the Minister can suddenly pull out of the hat the analysis to show that rejigging the formula will help businesses rather than hinder them, I am deeply concerned about the 2010 revaluation going ahead.
It is not good enough to talk about the majority of businesses. The Minister has to take responsibility for what the formula change will mean for the large minority of businesses seeing a rise in their business rates. If they cannot afford it and end up going out of business, that means more jobs lost and that will have an effect on all of us. It means local council services potentially being put at risk when the funding formula has less being paid in through business rates. That is a fundamental question and the Minister has never answered it. My greatest concern is that no work has been done to even try to answer that in the first place. That is unacceptable. For that reason, we do not believe that the 2010 revaluation can go ahead. However, seeing that Ministers are absolutely adamant that it will go ahead, on that basis we will support the transitional relief, because we think that anything that helps businesses navigate their way through the recession is welcome. However, it gives 700,000 business properties a headache in getting through the end of the recession that they can do without. They may have made it all the way through this recession, but some will be put out of business, not by the recession, but by a Government formula, the effect of which Ministers could not even be bothered to check. That is deeply irresponsible and an absolute scandal.
5.10 pm
John Hemming (Birmingham, Yardley) (LD): I am pleased to serve under your chairmanship for the first time, Mr. Howarth.
I almost certainly have to declare an interest. I have various partnerships in various businesses that pay business rates. I presume that all of us who have constituency offices have to declare an interest because of the business rates that we pay on those offices, and I presume that all members of the Committee have declared such an interest.
There are two issues here. One is whether it is appropriate to revalue business rates, but the matter before us is not particularly about that. It is about whether, given that the revaluation is going through, it is appropriate to have floors and ceilings—limitations—on the rates. I intend to focus my attention on that, because a big question is whether we should be doing revaluations every five years.
In the regulations, the increase is limited to 25 per cent. over five years for larger properties, and to 15 per cent. for smaller properties. Five years out from here there will be another five-yearly revaluation, and people who were facing, for example, a 41 per cent. increase—as in a case presented to my hon. Friend the Member for Romsey (Sandra Gidley)—will have had only 15 per cent. of that. What will happen in five years’ time? The Government should consider those issues well before the five years are up, whichever party is in Government and whichever civil servants are dealing with the matter. The formula being produced is complicated and businesses need some certainty. If the rates are kept down to a 15 per cent. increase by 2014 but the poison pill is that they perhaps double after that, that factor comes into financial planning, and is important to the businesses concerned. We need to be concerned about the 4.7 million small businesses in the UK, 97 per cent. of which employ fewer than 20 people. They contribute, however, more than 50 per cent. of UK turnover, and 64 per cent. of commercial innovations come from them. I declare an interest in that I have run various small firms. Sadly, BDO has forecast that 33,900 small businesses will close down in 2009.
I have some specific questions for the Minister. One issue, which is also of concern to my hon. Friend the Member for Romsey, is that there seems to be a different treatment of toilets, partition walls and mezzanines in this revaluation, compared with previous ones. Have the Government issued new guidance to the Valuation Office Agency about which sorts of spaces should be covered in the revaluation? Are there any changes to how partition walls, toilet areas and mezzanines are dealt with? Are the Government able to confirm a maximum level by which any bill for 2010-11 is likely to rise, once the transitional schemes both for revaluation and for the inflationary increases have been taken into account? That is important as well. Do the Government recognise that this is the worst possible time to land small businesses in particular with higher overheads? If people are on the edge, they may decide to give up if they have to pay out a bit of extra cash.
Some businesses may see additional rises between now and the next revaluation as a result of supplements introduced to fund infrastructure projects under the Business Rate Supplements Act 2009. Does either transitional scheme take into account possible business rate supplements, and will reliefs be extended to include a supplement that is introduced after bills for this year have been drawn up? If not, will the Minister consider the case for strengthening the ballot provisions in the Act, so that firms get a say over projects before a supplement is introduced, irrespective of the proportion of a scheme that business rates might fund? Furthermore, will the Minister confirm that if there are any changes to bills as a result of the supplements or any of the changes brought in by these regulations or by the Non-domestic Rating (Deferred Payments) (England) Regulations 2009 that we considered last week, collecting authorities will not have to bear the administrative costs?
As there was a Bill relating to business rates in 2009, the Government could have altered the law so that the inflationary uprating need not have been based on the rate of the retail prices index in September 2008, which would have limited the cumulative effects of inflationary and revaluation-based changes. Did the Government consider using the Business Rate Supplements Bill to introduce flexibility about which month’s RPI rate should be used to determine an uprating? Have the Government considered introducing a scheme whereby inflationary uprating is based on the average of the RPI rate over a whole year? Finally, the whole system of non-domestic rates brings friction to the relationship between local government and local businesses, while the former does not benefit directly from the revenue.
While both transitional relief schemes—that passed last week to deal with the inflationary increase and this set of regulations to deal with the revaluation—are welcome, is it not time to make the whole system of business rates more accountable? Should not local authorities keep at least a proportion of the revenue they collect, and have a role in setting the rate, so that there is local accountability for the burden placed on businesses in particular areas, and competition between areas to bring traders in and to regenerate our town centres and high streets? As it stands, it is not necessarily in a local authority’s interest to develop shopping areas to get additional business rates because they do not see them.
The regulations themselves are quite complex. I declare an interest as a computer programmer. There is a lot of money here for software houses. I have a question about regulation 8 and it is quite a serious point. These things get more and more complicated and it gets very difficult, notwithstanding the pages on the Department’s website explaining how this is all worked out. The calculation of Q in regulation 8(6)(c) is very odd. Why are we not using a standard rounding formula rather than one invented especially for this, which simply adds costs to the software houses? But then that cost is paid for by local government. Using an unusual system for rounding achieves nothing.
There is a debate about whether it is appropriate to revalue every five years—obviously there has to be some process there—and we need to recognise that this generates a poison pill in that people will suddenly face a massive increase in rates unless some consideration is given to the extension of the relief beyond the five years. Notwithstanding that debate, this is a welcome process in terms of constraining the limits because otherwise people would face high increases. To that extent we support the restraints—the floors and ceilings—in these regulations.
5.17 pm
I note from the explanatory memorandum that the Minister admits that companies that are able to benefit from the transitional relief could see increases cumulatively over five years of up to 64 per cent. for small properties, and 147 per cent. for large properties, and still stay within her caps before inflation of 5 per cent. for small companies and 12.5 per cent. for large, ignoring the impact over the subsequent years, for the full five-year period. But that still does not explain the increases that have been notified to me, which I referred to last week, for some filling stations of 250 per cent. in one case and 450 per cent. in another. Some of that may be to do with differences in the nature of the trading operations over five years, but it still seems an extraordinary variance with the caps that have been proposed in this instrument. I sincerely hope that if the Minister is not able to respond to this today that she will allow us to have this meeting to get to the bottom of this before these filling stations go out of business.
5.18 pm
 
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