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National Non-Domestic Rate

Volume 205: debated on Tuesday 10 March 1992

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There is a far better way to help business this year. I have decided to bring forward proposals that will be of early benefit to some 900,000 non-domestic properties, large and small, throughout the United Kingdom.

Business in England and Wales has gained much from the introduction of the uniform business rate in 1990. During the 1980s, when business rates were set by local authorities, poundages in England rose on average by over 37 per cent. more than inflation. Under the new system, rate poundages are capped in real terms.

In some cases, however, the changes in bills have been substantial, and many businesses have faced a difficult adjustment. That is why, when we introduced the uniform business rate, the Government eased the transition by phasing in the losses of those who faced large changes in their bills. But I am well aware that many of the businesses which face large increases next year have also been hard hit by the recession. I have therefore decided that their burdens should not be compounded by real increases in business rates.

The Government propose to amend the transitional arrangements already enacted for next year's business rates in England and Wales to ensure that no business property will face a real increase in rates next year. The bills for properties protected by the transitional arrangements will increase by no more than the rate of inflation, like those for other properties—500,000 business properties in England and Wales will benefit at a cost to the Exchequer of £320 million in 1992–93. The present statutory limits on real annual increases in rate bills will apply again from 1993–94. Since such increases will be from a lower base, there will be a further cost of £220 million in that year.

The present rules mean that new occupiers are not eligible for transitional relief. As the property market has weakened, this has made it more difficult for businesses to move. I therefore propose to allow businesses occupying new premises after midnight tonight to inherit the transitional protection available to the previous occupier, at a further cost of about £25 million. This should help to increase mobility and unlock the property market.

But it would be wrong to concentrate help only on those businesses who lose from the new arrangements. While the transitional arrangements have postponed losses for some companies, they have also delayed the gains for those who did worst out of the old system. I believe that businesses should see the full benefits more rapidly. I therefore propose to accelerate their gains.

From 1993–94 onwards, I propose that all businesses gaining from the 990 reforms should be allowed to have their gains in full. So, by then, no business will be paying higher business rates than it should be doing under the new system.

In the coming year, I propose that the maximum reductions in the rate bills of the gainers should be raised to 22 per cent. in real terms for large properties, and to 27 per cent. for small properties. Those limits are nine percentage points higher than in the current year: 150,000 business properties in England and Wales will benefit at a revenue cost of £85 million in 1992–93.

These changes will not reduce the income of local authorities. Subject to Parliament's approval, the Government will pay extra money into the non-domestic rates pool to make good the shortfall in business rates revenue. These payments will not add to public expenditure.

The Government will introduce special legislation as soon as practicable to implement these proposals. In the meantime, local authorities should send out bills and collect business rates in accordance with the existing legislation and regulations. Business rate bills on properties in transition will be cut, and adjustment made for earlier higher levels of payment, when Parliament has approved the legislation and local authorities can send out new lower bills.

The proposals that I have outlined will apply to business properties in England and Wales, reducing the total business rates bill next year by 3¼ per cent. Scotland and Northern Ireland each have different arrangements for business rates. The Government propose that their total rates bills next year should likewise be reduced by 3¼ per cent. My right hon. Friends the Secretaries of State for Scotland and for Northern Ireland will be announcing the details.

These measures will bring significant and early benefit to many thousands of businesses throughout the United Kingdom. The revenue cost will be £480 million in 1992–93 and £590 million in 1993–94 but will fall away rapidly in subsequent years.