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Business Rates: Revaluation

Volume 779: debated on Wednesday 1 March 2017


Asked by

To ask Her Majesty’s Government what action they propose to take in the light of the concerns expressed about the increases in business rates facing some businesses.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I refer the House to my interest in the register.

My Lords, a significant majority of businesses will end up paying less as a result of the business rates revaluation and changes to relief. The generous reliefs we are introducing mean that 600,000 small businesses are set to pay no business rates at all. We have also confirmed £3.6 billion of transitional relief to help those companies facing increased bills. We are looking at the hardest-hit businesses ahead of the Budget.

Mary Portas has described the valuation as madness. The chief executive of Sainsbury’s, Mike Coupe, has called for the revaluation to be abandoned. The Federation of Small Businesses is against it. In Southwark, the borough I grew up in, one business in the north of the borough is facing a 50% increase in its business rates—which equates to £66,000 per annum or, to put it another way, three jobs at risk. Will the noble Lord agree to speak to his colleagues in the Treasury to impress upon them the concerns expressed and to make it clear that real substantive action needs to be taken in the Budget to deal with this problem and protect the high streets? Tinkering around the edges will not do.

Yes, my Lords. I should say, however, that the revaluation system has been a constant of life since the 1988 legislation, and three revaluations were held under the Labour Government on exactly the same basis as this one, at arm’s length. But the noble Lord is right: some businesses, particularly larger businesses in London, have been hard hit. My right honourable friend the Secretary of State for Communities and Local Government is speaking with the Chancellor and looking at possible options, and we can expect an announcement in the Budget.

My Lords, does the Minister agree that sometimes we can actually learn from our European neighbours? France exempts 500 bookshops from business taxes, recognising them as cultural assets in their local communities. But our Government want to clobber our bookshops with rates rises that are, on average, 100% in London and up to 50% for a small independent bookshop in Lincolnshire. Meanwhile, large retailers’ distribution centres get massive cuts. I declare an interest as a publisher. Can the Minister confirm that he will look at the impact of this regressive tax on the one in four of our bookshops now threatened with closure?

The noble Baroness makes a powerful case. As I have already indicated, small businesses are set to pay no business rates at all, and we have increased the number of small businesses by moving the threshold to a rateable value of £51,000. Therefore, any business under that will not be paying business rates at all. However, the point is well made and, as I say, there will be action in the Budget for businesses that got steep rises.

My Lords, I do not recognise the Minister’s description of the high streets. Our high streets are in crisis. How can they compete with the likes of Amazon, with their low-rateable land away from the high street? During the coalition, a Liberal Democrat Minister commissioned a review of business rates which was scrapped by the Conservative Government. Can the Minister say whether they now regret scrapping that review, bearing in mind the mess they are in? Can he also comment on the fact that business rates are dealt with by the DCLG—which obviously considers it a good earner—whereas it should really be dealt with by the Business Secretary?

My Lords, there are quite a few questions there. The point that the noble Lord made about the high street and other forms of business activity has some merit, but it is quite separate from the issue of revaluation, which is done at arm’s length. We are open to looking at options, but obviously it will take time and we could not expect to do anything on this before the Budget. As the noble Lord will be aware, the Treasury did look at this in 2015 and, having consulted widely, concluded that the present system was best. However, I appreciate that globalisation, the internet and the vitality of the high street are factors that have to be weighed in the balance, so we are happy to look at this. The noble Lord asked a few other questions. If I may, I will respond to him in writing on those and put a copy in the Library.

My Lords, will the Minister inform the House whether Her Majesty’s Government would look at the feasibility of setting the threshold of business rate relief at a local level, thereby protecting small independent businesses, many of which are now at risk, especially in high-value areas?

My Lords, the right reverend Prelate makes an important point. In a sense, of course, localism is already fed in because the valuation is done locally and should reflect local conditions. As I have indicated, small businesses, with up to £51,000 in rateable value, get the small-business rate; and many small businesses—600,000 in the current rollout from April this year—will be exempt. But the local factor is taken account of by the fact that there is a local valuation that reflects local rental values.

My Lords, not just businesses but council-run schools, among others, have expressed concern about these increases, which will put yet another unacceptable pressure on our education system. Can his department and the DfE perhaps get together to address what are very real concerns?

My Lords, I would be interested in hearing more from the noble Earl on that particular issue. Clearly, as we have found out and as has been true of any revaluation, you always hear from the losers, for understandable reasons, and I am not objecting to that. But once again I remind the House that there are significant numbers of people in large parts of the country, particularly in the north and the Midlands, who benefit from this revaluation, and understandably, they are not the people rushing to the press and saying how wonderful the Government are. It is always going to be those who lose out. But many people have gained from this process.