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Solar Panels: Business Rate Exemption

Volume 776: debated on Thursday 27 October 2016


Asked by

To ask Her Majesty’s Government whether they will reverse their decision to end the business rate exemption for small solar panels from April 2017.

The Government are aware of the solar industry’s concerns regarding the application of business rates on microgeneration and changes that may affect businesses with solar more widely. We continue to engage with the affected parties. Following the business rates revaluation and this year’s Budget, nearly three-quarters of businesses will see no change or a fall in their bills next year, with 600,000 businesses set to pay no business rates at all.

I thank the Minister, but I have to say that if one parish council in Wokingham can find that its business rates are going from £7,000 to £14,000, this will be the death of non-domestic solar roof panels. I urge the Government to look at the impact on schools and parish councils, which will be devastating. Will she also address the unfair and unjust anomaly whereby schools with charitable status will be exempt from the new increased business rates, thus creating a two-tier system that penalises local authority schools?

The noble Baroness is right that there is in this area a curiosity, as I think I would describe it, which is that private schools and academies, being charities, as she said, get an 80% reduction, which is good. We have a system where the impact depends on the ownership, as she will know, of the affected solar project, so we have a situation in which there is a fall on new projects where the electricity generated is sold and an increase where the electricity is used directly by the owner—she mentioned the example of schools. It is not possible to estimate the impact of those changes because it depends on ownership but, as I said in my reply, we are considering the impact and any proposed changes will be made in due course.

My Lords, last year I visited a school in Croydon, which has had to cancel an expansion of its solar installation because of the Government’s cuts to the feed-in tariff. I invite the Minister, when she is sure about the impact of this particular measure, to go with me to that school in Croydon and explain why its solar installation is now going to be taxed and how much it will be taxed by.

As I have said, we are looking at the rate issue. There is also an issue relating to VAT, where HMRC issued a consultation—at the moment, domestic VAT continues to be 5%. The feed-in tariff deployment actually continues. Obviously, the subsidies of solar have come down because the costs have come down to such an extent. Solar has been a big success in this country and it is obviously right that the subsidy levels reflect that innovation and productivity.

I do not think that there are business rates on domestic solar panels—that falls under my right honourable friend Sajid Javid’s department. Businesses have been caught because the rateable values reflect the value of the business property, and there have been changes to the regime that have led to the situation that I have described to the noble Baroness. We are looking at that, but rates reflect, in the long term, the value of property. However, I can see that there is an issue in relation to solar panels.

My Lords, may I press the Minister a little further on the impact—perhaps, I am hoping, the unintended impact—of this decision on some small schools? Is it really intended that small schools should pay business rates, often after significant community fundraising to install solar panels to increase awareness among children and young people of climate-change issues?

We are looking at this, and, in particular, this change to microgeneration, which has had these anomalous effects. In the past, schools have been totally exempt; now, as I have said, the rate system is coming in and biting in a way that perhaps was not intended in the first place. We are looking seriously at the impacts against this background of some doing better out of the system than others. We look forward to making some progress in this area.

Can the noble Baroness tell the House how many more changes of policy impacting on renewable energy and carbon reduction will come from the Government? We seem to have had quite a string of them, all of them rather unexpected. Perhaps they are in response to the cheaper generation issue that the noble Baroness raised, but they have certainly reduced confidence both among domestic and commercial investors and in the renewables industry. Are there many more changes to come?

I think the noble Baroness should take comfort from the signing of the agreement in Paris, the statements we have made and the comments I have made about the carbon budgets that will be put forward in due course. This Government and the last one have made enormous investments in renewables, but nobody could fault us now for looking properly at affordability and at where things can be affordable. Innovation—for instance, on solar—is making things less expensive, and then the subsidy regimes should change. However, of course we understand the need for investor confidence.

My Lords, solar PV has taken the brunt of corrective measures taken by the Government, as in their analysis it is the key reason for the overspend on renewables. In fact, the National Audit Office report shows that solar accounted for only 6% of this overspend. The technology is so popular and affordable. What steps will the Minister and her department take to review this overcorrection, encourage further solar deployment and restore confidence to the sector?

The noble Lord is right that solar has been a success. We have over 11 gigawatts now installed, with 49% of EU investment in solar, so we have strength. We have had to bring down the subsidies for that, although feed-in tariffs and so on continue. My own view is that solar is an important part of the mix, particularly internationally, because there is more sun and less intermittency, which helps us with our climate change targets. However, the noble Lord can be reassured that we are looking carefully at solar, and a lot of our innovation budget is going toward solar and storage to see whether, going forward, we can take those two together and make the technology even more cost effective.