The following Answer to an Urgent Question was given in the House of Commons on Monday 19 January.
“Colleagues will have heard what the Prime Minister and the Chancellor have said on this matter in recent days. I will not add further comments on the specifics in responding to this Urgent Question. When there are further comments to be made, I am sure they will be made in the usual way.
At the Budget, the Government announced a comprehensive set of reforms to business rates. We have created a new, sustainable system with permanently lower multipliers for retail, hospitality and leisure businesses. Business rates are, in line with the usual timelines, revalued every three years, and new valuations that were set in train by the previous Government come into effect in April.
It was right to support businesses during Covid, but the previous Government went into the election with plans to scrap the temporary support entirely in 2025. If they had won re-election, they would have removed that support overnight last April. If the Opposition had intended to extend the relief, why did they not say so and why was that not included in their forecast or projections?
We on this side of the House have chosen a different path: we extended the support at a lower rate in 2025-26 and are slowly unwinding it over the coming three years, with the help of £4.3 billion of transitional support. I think all Members can agree that it would not be sustainable for a £1.7 billion annual temporary Covid tax relief to remain fully in place at the end of the decade. At the same time, our reforms to rebalance the underlying design of the business rates system towards high-street businesses will be implemented in April.
The new, lower tax rates will be introduced for 750,000 RHL businesses, funded by a higher rate on the most valuable properties, including for the online giants. That is worth almost £1 billion and means that smaller high-street businesses will have a tax rate that is 25% lower than businesses with the largest properties. That is being supported by a significant support package, as I said, worth £4.3 billion over the next three years. As a result, over half of ratepayers will see their bills flat or falling next year, and around a third of properties pay no business rates at all, as they receive 100% small business rate relief.
I look forward to supplementary questions from the shadow Chancellor, the right honourable Member for Central Devon, Sir Mel Stride, and other Members, and I look forward to seeing whether the shadow Chancellor can keep a straight face, given that he knows his Government never did enough for our high streets: 7,000 pubs closed over the 14 years the Conservatives were in power; shops were shuttered on high streets up and down the country; the council services that keep our high streets clean and vibrant were cut to the bone; investment was down; and the public suffered from the longest squeeze on living standards on record. That is the legacy for our communities—one that we are turning around”.
My Lords, we have more bad news this morning from the ONS on job numbers in hospitality. That makes it even more important that we receive clear answers to the following questions. Why did the Government not get the new rating arrangements right first time in the Budget, when we now know that they already had the relevant information on pubs from the Valuation Office Agency? Following briefing to the FT last week, not only pubs but also restaurants and hotels do not know where they stand from 1 April. This is agony for them. When will the Government make a clear statement of their intentions?
As the noble Baroness knows, and as I have said before, the previous revaluation was based on property values during the Covid pandemic, which meant that rateable values were much lower. That means that some businesses, including retail, hospitality and leisure venues, are now seeing an increase as a result of this valuation. At the Budget we therefore announced three elements of support at a total cost of £4.3 billion. We implemented transitional relief; we have capped the increase for any business whose value has increased so that they are no longer eligible for small business rates relief; and we have expanded the supporting small businesses scheme.
But, as the noble Baroness quite rightly says—and as I have acknowledged in your Lordships’ House before—the revaluation means that pubs and others will struggle in relation to the business rates applicable to them. That is why we are working with the sector to ensure that it gets the support it needs. Noble Lords will have heard what the Prime Minister and the Chancellor have both said on this in recent days. I will not add to that now or comment on speculation. When there are further comments to be made, I am sure I will be back here to discuss them with noble Lords.
My Lords, given that grass-roots music venues and recording studios do not qualify for RHL relief because of the way “visiting members of the public” is defined, will Ministers commit to reviewing or amending the eligibility criterion so that businesses integral to the creative economy are not excluded?
I absolutely hear what the noble Lord says, and I understand the points he is making. As I said, noble Lords will have heard what the Prime Minister and Chancellor have said in recent days. I will not add to that now, but when there are further comments to be made, I am sure I will be able to discuss them with the noble Lord.
My Lords, when we are talking about business rates, are any of the many thousands of Turkish barbers, as they are so called, vape shops and nail bars—which are all cash only and which have infected our villages, towns and cities—paying any business rates? Are any of them paying tax? We know that most of them are about money laundering, organised crime and county lines drugs. They are getting away for free. The whole thing seems to be for free, and they are laughing at us. Meanwhile, our pubs and our hospitality as a whole are on a knife-edge of existence. How is that fair?
I agree with a great deal of what the noble Baroness says. HMRC has announced substantial measures to crack down on some of the businesses she mentioned, and I think she will have seen several of them closing in recent months. She is quite right that more needs to be done. She is absolutely right to talk about the importance of the hospitality industry, and we completely recognise that. It plays an incredibly important role in the UK economy, employing more than 2 million people. It is vital to the life of high streets across the UK, and we will do what we can to support it.
My Lords, I will repeat the adage I used formerly: measure twice, cut once. Does the Minister understand that there is real urgency to get response and relief now within the hospitality industry and for pubs, as they face uncertainty? Many, believing that the blows had ended, went ahead and hired or invested and are now unsure whether they are economically viable. Has the Minister looked at the impact of this uncertainty, particularly on the independents, which I understand are disproportionately affected?
I understand and agree with a lot of what the noble Baroness says. It is important that we are able to create certainty for those businesses, but we did spend £4.3 billion at the time of the Budget in support of exactly the businesses she described. We are implementing transitional relief to cap the amount that bills increase for businesses that would otherwise have seen big increases. For any business whose values increase so that they are no longer eligible for small business rates relief, we are capping that increase, and we have expanded the supporting small businesses scheme. As I say, that is at a total cost of £4.3 billion, so we absolutely recognise the issues facing those businesses. The revaluation means that pubs and others will struggle in relation to the business rates applicable to them, which is exactly why we are working with the sector to ensure that it gets the support it needs.
My Lords, the retail and hospitality industries are often where youngsters who find it difficult to get into the workplace get their first foothold. Understandably, there have to be increases in the overheads that these organisations are paying, but can the Minister look at ways in which these organisations might be helped to bring some of those people who really need their first job into the employment market?
The noble Baroness is absolutely right about the important role that those businesses play in giving young people their first jobs, and I agree with her. We are taking significant measures to help the UK hospitality sector, which employs more than 2 million people and is vital to high streets across the UK. Based on recommendations from the licensing taskforce, we published a new National Licensing Policy Framework for the hospitality sector at the time of the Budget. We are exploring planning reforms to help pubs and hospitality to expand, and the hospitality support fund has helped pubs in rural areas to diversify, ensuring that they can continue in their role as vital community hubs.