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
rentsmore 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.
The
rateable value that the Valuation Office Agency sets is only one part
of a business rates bill. The amount payable also depends upon the size
of the rating multiplier,
and any reliefs, including the transitional one that we are discussing
and which the individual property holder may be entitled to claim.
Although property values were relatively high on 1 April 2008, when the
rental values on which the 2010 rates bills will be based were set,
that will not necessarily lead to higher rate liabilities. That is
because the rating multiplier is adjusted at each valuation to ensure
that the overall revenue collected remains the same. Thanks to the
elevated property values in April 2008, the multiplier for 2010-11 is,
at 15 per cent., the lowest it has been for 17 years.
However, the Government know that some ratepayers will find it
difficult to pay their rates bill, particularly in todays
economic climate. That is why we have introduced relief schemes such as
the small business rate relief scheme, which provides up to 50 per
cent. relief, and the transitional relief scheme that we are discussing
today.
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 propertiesin other words, about 60 per cent. of all
business propertieswill 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 lists 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
42,000or 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 propertiesthese are companies employing large
numbers of peoplewill 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
Arsenals Emirates stadium is going up by 81 per cent.
Manchester Uniteds bill is going up by 71 per cent. The bill
for Stoke Citys 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 nations 42 rugby league grounds can expect a business rate
tax in that order. Harlequins 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
zoos 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 havent 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 getthey are factored into the
calculationand 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 minorityof 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
months 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 businessesperhaps because they have developed the
company, as we would all wantwill 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?
Another
point relates specifically to London. In the consultation document on
transitional relief, London was one of the regionsalong with
the south-westthat
saw itself as most badly hit. That is deeply concerning, because there
will be many economic commentators who think that if London does not
come out of recession, Britain will not come out of recession. I am
particularly concerned about how small businesses in London are hit by
the 2010 revaluation. Ministers have raised the small business
threshold for when small business rate relief kicks in. Across the rest
of the country that threshold has increased from £15,000 as a
rateable value to £18,000a 20 per cent. rise. However,
in London it has gone up from £21,500 to
£25,500an 18.6 per cent. rise. I am pretty sure, from
memory, that when I asked the Minister about that previously she said
that it was to do with rounding to the nearest £500. However, if
that was true, the actual real rateable value of property at which
small business rate relief would kick in would be at £25,800. My
question to the Minister was why that was not rounded up to
£26,000, rather than rounding it
down.
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
timewhen we look at the length of itthat 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
ceilingslimitationson 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.
increaseas 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
months 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 schemesthat passed last week to deal
with the inflationary increase and this set of regulations to deal with
the revaluationare 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
authoritys 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 Departments 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
yearsobviously there has to be some process thereand 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 restraintsthe floors
and ceilingsin these
regulations.
5.17
pm
Mr.
Philip Dunne (Ludlow) (Con): I am grateful for the
opportunity to support my hon. Friend the Member for Putney in her
concerns about the fuel station increases.
We referred to that sector in Committee last week and the Minister
offered me the opportunity to have a meeting to discuss this directly.
We have taken up that offer but have yet to fix a date, which I hope we
can do as soon as possible. Perhaps in her closing remarks the Minister
can respond to my hon. Friends call for some clarification on
this sector in
particular.
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