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Retailers: Business Rates

Volume 797: debated on Monday 8 April 2019


Asked by

To ask Her Majesty’s Government what steps they are taking to reduce business rates on retailers with physical premises so that they are charged less than those which trade online.

My Lords, business rates are an annual tax on non-domestic property. Bills are based on rateable value, which represents the annual rent the property would achieve if let on the open market, at a set valuation date, as assessed by the Valuation Office Agency.

I refer to my entry in the register of interests. Although anomalies remain, I am grateful for what the Government have done on small business rate relief, but it is not enough given the scale of the challenge in our towns and high streets. Because of the requirement to raise over £30 billion from business rates and the decline in the number of physical shops, the burden of rates is increasing for many retailers. Does the Minister accept that this is no longer appropriate, and that changes in taxation on business property should be carefully considered, perhaps with a freeze on the pernicious multiplier and a move to a framework that is more fit for the 21st century?

My noble friend looked at this area when she was Commercial Secretary to the Treasury. As a result of that review in 2016, a number of changes were made that had a significant impact, such as doubling small business relief from 50% to 100% for those with a value less than £12,000, moving to more frequent revaluations, which were asked for, and moving the multiplier in inflation rates from the RPI to the CPI. All these things are making a difference. It is not that we cannot see the big problems on the high street at the moment, which is why the Chancellor announced his £1.6 billion package in the Budget of 2018.

Can we accept the fact that a bookshop on a high street has such an enormous social echo that it actually makes the high street a lot better? Can we start seeing our bookshops in a different way and not simply as traders in the marketplace?

There is a social value there, and significant steps are being taken on the purely financial side—the retail discount and the small business rate relief apply to eligible bookshops—to protect that vital form of social and intellectual capital on our high streets.

Does the Minister agree that it is becoming depressing that there are so many empty shops, not just in poor parts of the country but even in affluent areas? Is not the problem that there is no level playing field between shops and the online people, either in business rates or in tax dodging? Do we not have to tighten up both those areas and give our high streets a chance?

We have looked at that area, and the Select Committee on Housing, Communities and Local Government is looking at this precise time to see what can be done. We have to remember that options such as an online sales tax would hit many high street stores, because they are hybrid business models that have a physical presence but also an online business.

My Lords, does the Minister accept that taxing just the land value of commercial sites would achieve many of the goals that other questioners have put forward? It would encourage small firms to take on new technology and to expand, and would reduce the business rates for many, with the consequence that they would face a more level playing field with the online players.

The land value option was looked at in the review in 2016, which I talked about earlier. The review concluded that a land value tax would also result in anomalies and problems. Under the business rates system that we have at the moment, it is easy to collect and easy to understand the calculation, which is why we are sticking with it at the moment.

Do Her Majesty’s Government recognise that the high street is still suffering and has been suffering for well over six years now? Against that background, should we not segment off the independent retailers? I am not talking about small retailers: there are independent retailers up and down this country who need help. With business rates at nearly 50% of rateable value, that is a huge fixed cost on any business. Surely we should look at segmenting the high street and finding answers to this problem; otherwise, we will have no high street before long.

That is why the Chancellor took the action that he announced in 2018 and why potentially 90% of businesses can claim the retail discount that we announced for the next two years. We have taken 655,000 businesses out of paying business rates altogether through small business rate relief. These are complex problems, but we are mindful of them and are seeking to address them.

My Lords, as well as shops being boarded up in high streets, the Minister must be aware that 100,000 jobs have gone in the last three years and that for many retailers the situation is at a crisis. I welcome the support for small businesses, but none of the measures that the noble Lord mentioned would have had any impact at all on House of Fraser, Debenhams or many Marks & Spencer stores. When these have closed, it has had repercussions for the economy of whole neighbourhoods. Why does the noble Lord not accept that online retailing is providing fierce competition for many other stores, which need some kind of support?

Those businesses to which the noble Lord refers will have benefited from corporation tax falling from 27% to 19%—it is due to go down to 17%. It is also one of the reasons why, notwithstanding all the points highlighted by the noble Lord, levels of employment in this country are at a record high.

My Lords, does the Minister believe that the relationship between the high street and online retailers is fair in terms of competition? This is a very simple question; it is either fair or not fair.

Let me refer to a quote from the British Retail Consortium. It looked at this situation, and said:

“We fail to see how adding additional new taxes to the industry is really going to resolve the challenges we currently face”.

John Lewis said,

“this would actually have a detrimental effect … high streets need successful retailers with both a physical and online presence”.

I am not saying that this is easy and straightforward. It is complex, but the Government are seeking to come up with flexible solutions that address the concerns.

My Lords, in addition to the measures outlined by the noble Lord, what is the overall government strategy to deal with these matters?

The overall strategy, if the question is about business rates, is pretty straightforward: we collect about £25 billion in business rates, about 25% of which comes from the retail market and the remaining 75% from offices and industrial premises. At the moment, we are seeing the business rate book, if you like, increasing in value. Through the retention scheme, local authorities will get an extra £2.5 billion as a result of the growth of businesses in this country. At the same time, we are looking at how we deal with online businesses to ensure that there is fair taxation. That was the purpose behind the digital services tax.