Growth and Infrastructure Bill

Supplementary Memorandum submitted by Geraldeve LLP

(GIB 50)

Clause 22 – Postponement of the 2015 Non-domestic Rating Revaluation

Summary of our Supplementary Evidence from Geraldeve LLP

We refer to our written evidence dated 12 November and in particular to paragraph 6.3 in which we made initial reference to the document issued the same day by the Valuation Office Agency ‘VOA’s high level estimates of non-domestic rental and rating assessment movements for England’.

We have now had an opportunity to read and analyse this data and are able to expand upon and justify the comment we made at 6.3b that ‘The only basis on which the VOA is able to claim that 800,000 businesses would have seen increased bills at the 2015 revaluation is to include in that number the 520,000 hereditaments which on its own admission it had no data readily available to analyse and therefore it had to make an unsubstantiated assumption that they would have faced increases in rates liability.’

Gerald Eve subscribes to a database which provides fortnightly updates of the entire Rating List which has enabled us to identify the numbers of properties within each of the property uses referred to in the VOA analysis.

In justifying the postponement of the 2015 revaluation of business rates, Valuation Office Agency data has been used by ministers to claim that "800,000 premises would have seen a real term increase in their rates at a 2015 revaluation. This compares to 300,000 seeing reductions"

These estimates are by the VOA’s own admission high level, imperfectly calculated and not a projection of what would happen at an assumed 2015 revaluation antecedent valuation date of 1 April 2013.

The more serious issue that the VOA data does not support ministers’ claims. Based on a reasonable reading of the evidence presented, the VOA data indicates that about 350,000 premises would have seen a reduction in rates, and 377,400 would have seen increases. 645,000 would see no material change. No conclusions can reasonably be drawn on how many of the other 387,500 would have seen increases or decreases.

Analysis of VOA Data

As the VOA acknowledges (page 2), there are limitations on the estimates it has produced:

· It states that these "are not forecasts; at this stage of the revaluation cycle and process it was only possible to provide high level estimates as at January 2012 and are not a projection to the assumed 2015 revaluation AVD (the valuation date) of 1 April 2013."

· Further, it says "neither the rental data nor the judgements have been subjected to the rigour of moderation and validation that we would expect to apply during a normal revaluation exercise"

· It has excluded the Central Rating List, comprising around 5% of England’s rateable value, from its calculations.

Aside from the methodology used by the VOA, of greater concern is the subsequent reporting of this data to make the claim that 800,000 premises would have faced increased bills at a 2015 revaluation and only 300,000 would face decreases.

The VOA analysis is focussed on 1,230,000 premises in the ‘bulk classes’ (shops, office and industrial). Table 3 (page 6) shows that actually 320,000 of the bulk classes would see an overall fall in tax payable. However, further commentary (the third bullet point, page 8) identifies a range of property types in the ‘other’ category that would see an overall fall in tax payable. These number about 30,000, so therefore there are a minimum of 350,000 premises that would see a decrease, not 300,000 as claimed by ministers.

There are 530,000 properties in the ‘other’ category (ie other than shops, offices and industrial). All the 530,000 ‘other’ properties are shaded mauve indicating that they would face tax rises greater than 2%.

Table 3 shows that 290,000 bulk class properties would have faced increases. Therefore the only basis on which one can claim that 800,000 premises would face an increase is to assume that 510,000 of the 530,000 ‘other’ properties would have faced increases, which is obviously incorrect. In fact a maximum of 500,000 ‘others’ could be facing an increase, as the VOA itself identified 30,000 which would see decreases.

Bullet point 1 on page 8 identifies ‘Sports and Leisure’ as seeing no change. Bullet point 3 on page 7 identifies ‘Hotels outside London’ as seeing no change. These are uses in the ‘other’category comprising 22,500 premises and so, whilst all 530,000 ‘others’ are shaded mauve suggesting they would all face increases, there are a maximum of 477,500 ‘others’ that could face increases.

The VOA claims to have evidence to support increases for sectors that make up just 87,400 properties out of this 477,500 (London hotels, public houses, theatres, self-catering, caravan parks and petrol forecourts).

Of the remaining 390,100 there are 96,300 other properties (bullets 5 & 6, page 8) for which the VOA openly admits to not having any relevant evidence because they "require data which was not readily available" and "it was assumed that …" Nonetheless, despite the total absence of evidence they have been included within the category of ‘other’ property as ones that would have faced increased tax bills.

This leaves an additional 293,800 that have been shoved into the increases category with as good as no justification. There is comment about some properties (unknown number) being valued in respect of construction costs facing increases, but the evidence base is so flimsy it is not credible.

In conclusion, the number who would benefit from the revaluation is on the VOA’s own data clearly far greater than the Government claims and the suggested 800,000 increases is incorrect on the VOA data and requires sweeping unjustified  assumptions.

Based on what can be reasonably inferred from the VOA’s estimates and the evidence it says it has collected, about 350,000 (320,000 ‘bulks’ and 30,000 ‘other’) premises would see their bills fall, and about 377,400 (290,000 ‘bulks’ and 87,400 ‘other’) premises would see their bills rise.

There is no justification or support for the claim that 800,000 premises would have seen increases.

November 2012

Prepared 1st December 2012