Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2026

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2026.

My Lords, this debate will also consider the take-note Motion tabled by the noble Lord, Lord Clement- Jones, on the Non-Domestic Rating (Definition of Qualifying Retail, Hospitality or Leisure Hereditament) Regulations 2025.

These statutory instruments form part of a wider package of legislation that gives effect to the new business rates multipliers for qualifying retail, hospitality, leisure and high-value properties. I thank the Secondary Legislation Scrutiny Committee for the detailed and thoughtful consideration of these statutory instruments in its 40th and 48th reports. Business rates are based on a property’s rateable value and a multiplier for each tax year. In the Autumn Budget 2024, the Government announced a comprehensive set of reforms to the business rates system in England, including the introduction of three additional multipliers from April 2026.

The three new multipliers are: a small business retail, hospitality and leisure multiplier for qualifying retail, hospitality and leisure properties with rateable values below £51,000; a standard retail, hospitality and leisure multiplier for qualifying retail, hospitality and leisure properties with rateable values of £51,000 to £499,999; and a high-value multiplier for properties with rateable values of £500,000 and above. In the Budget last November, the Government announced the rates for these new multipliers. These new rates will deliver permanently low multipliers for eligible retail, hospitality and leisure properties with rateable values below £500,000.

The Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2026 prescribe the circumstances in which the new multipliers will apply. The new multipliers will replace the pandemic-era retail, leisure and hospitality reliefs that currently apply. These reliefs were introduced on a temporary basis in 2020, recognising the exceptional circumstances of the time. Continuing these reliefs would cost around £1.7 billion per year. The new multipliers will benefit over 750,000 retail, hospitality and leisure properties. However, unlike the existing relief, they are permanent, thereby providing businesses with greater certainty and support. They are also not subject to a cash cap, meaning that all qualifying properties in a retail, hospitality and leisure chain can benefit. Taking into account the upcoming business rates revaluation, the tax rate that retail, hospitality and leisure properties on the small business multiplier will pay next year will fall by nearly 12p overall. Similarly, the rate for retail, hospitality and leisure properties on the standard multiplier will fall by 12.5p compared with what they are paying now.

To ensure that support for the high street is sustainable, the Government will fund these new multipliers through higher rates on the top 1% of properties, those with rateable values of £500,000 and above. From April, the most valuable properties, such as large distribution warehouses occupied by online giants, will pay a tax rate that is 33% higher than that paid by small high street properties.

My Lords, I wish to speak to the Motion standing in my name on the Order Paper.

I have not secured this debate to oppose the Government’s ambition to support the high street. Permanent lower multipliers for retail, hospitality and leisure are, in principle, a welcome step towards stability. Instead, I have tabled this Motion to highlight a critical flaw in the definition of who qualifies for this support. By drawing the lines of eligibility too narrowly, these regulations inadvertently exclude the engine room of our £8 billion music industry and the R&D hubs of our visual arts sector, threatening the very existence of the UK’s grass-roots creative infrastructure.

Our recording studios face a perfect storm and I know that the noble friends of the Minister, the noble Lord, Lord Brennan, and the noble Baroness, Lady Keeley, are both very supportive of what we are trying to highlight today and regret that they unavoidably cannot be here to say so. I know that the noble Lord, Lord Berkeley of Knighton, would also want to say something if he were able and did not have other engagements. Under the 2026 revaluation, which coincides with these new multipliers, these businesses face an average increase in rateable value of 45%, with some seeing hikes of nearly 100%. Simultaneously, because Regulation 3 excludes them from the retail, hospitality and leisure RHL category, they are denied the lower tax multiplier that their neighbours on the high street will receive.

The Music Producers Guild has provided alarming evidence that 50% of studios surveyed are considering closure within the next year. These businesses operate on ultra-thin margins, often requiring 85% occupancy just to break even. They compete in a global market. If it becomes too expensive to record here, artists will simply move to eastern Europe or the United States. We are already seeing top UK artists recording major projects abroad. The urgency cannot be overstated. I have seen correspondence from the Music Venue Trust highlighting a terrifying reality: directors of these businesses are running their figures for April and realising they will be insolvent. Under HMRC rules, to continue trading would constitute what is called fiscal recklessness, risking personal liability. This means we risk a wave of closures before the first bills even land, simply because the Government have failed to provide certainty.

This crisis extends beyond music. I know that the noble Lord, Lord Freyberg, will want to expand on this. The Contemporary Visual Arts Network warns that artists’ studios face an almost identical situation. Like recording studios, these spaces are the R&D of the creative sector, themselves operating on razor-thin margins to keep workspace affordable, yet because of inconsistent interpretation by local authorities regarding public access, many are excluded from relief. Without clear case studies or guidance, which the CVAN has specifically requested, we face a postcode lottery in which vital cultural assets will be lost.

Furthermore, there is a structural failure in how the Valuation Office Agency assesses these unique spaces. Recording studios do not have their own category and are frequently misclassified as offices. This is nonsensical. Under office rules, a tenant is taxed on the square footage of internal walls. In a high-end studio, soundproofing can be three feet thick, occupying 30% of the floor plan. We are, in effect, taxing these businesses for the dead space that is essential to their craft.

In the Treasury’s steps for legislation that the VOA follows, the Government have created bespoke valuation categories for bingo halls and betting offices. Why does the betting industry get a tailored approach while our music industry is misclassified as office space? We must also ask why rateable values are rising so aggressively. The Music Venue Trust has shared alarming data showing venues facing hikes of 100% to 200%. This is because the VOA is applying a one-size-fits-all retail model to specialised cultural infrastructure.

The current methodology contains two fatal errors. First, it treats essential cultural space—the stage, the backstage, the sound booth—as if it were commercial trading floorspace. Secondly, it assumes that these venues trade all day, like a high street shop. In reality, a grass-roots venue might trade for only 20 hours a week during performances. By ignoring these realities, the system generates fictional turnover figures that no venue can achieve.

Turning briefly to the prescription of multipliers regulations, I note the SLSC’s 48th report, which criticises the lack of a full impact assessment for the new high-value multiplier. The committee warns of “cliff edges”, where a single £1 difference in rateable values triggers a massive tax hike. This high-value multiplier will hit our larger cultural institutions, major concert halls and larger creative workspaces that anchor our cultural economy.

In closing, I have three questions for the Minister. First, will the Government review the eligibility criteria to accept that recording studios are “service providers” akin to the shoe repairers and funeral directors listed in the guidance, and instruct local authorities to treat them as eligible for the RHL multiplier? Secondly, will the Government publish clear case studies for the visual arts sector to ensure that artists’ studios with public access are not erroneously denied relief due to local inconsistencies? Thirdly, if RHL inclusion is rejected, will the Treasury introduce targeted reliefs? Will the Minister commit to exploring a specific relief for music studios, ensuring parity with the 40% relief currently enjoyed by film studios, or instruct the VOA to create a specific valuation category for studios to stop them being taxed on their soundproofing?

We are risking the loss of world-class cultural infrastructure. As UK Music warns, without our studios we miss out on finding the next Adele and we lose our soft power to the US or Europe. We cannot let a rigid definition of retail silence the British music industry.

It might be helpful to the Committee if I explain that we are considering only the first Motion on the agenda at this time. I shall call the noble Lord, Lord Clement-Jones, to move his Motion when we have concluded this debate. We are debating them both, but we can take only one at a time. The one that we are taking now is the first Motion from the noble Lord, Lord Livermore, but the noble Lord, Lord Clement-Jones, has been in order by speaking to his Motion, because it has been grouped with the government Motion.

My Lords, I am very pleased that the noble Lord, Lord Clement-Jones, has called this debate, which is so important for the arts. He has summarised the arguments extremely well. I am grateful, too, to the noble Lord, Lord Livermore, for his introduction.

I am grateful for the briefings from both the Music Producers Guild and UK Music. I am particularly grateful for the conversation I had last week with Gaby Grafftey-Smith, who runs the prestigious Angelic Studios in Northamptonshire. Angelic was founded by musician Toby Smith of Jamiroquai—

“by a musician for musicians”,

as its website eloquently puts it. Since 2017, when Toby Smith sadly died, the studio has been run by Gaby. One of the first things that she told me was that no one runs a studio to make money; they do so out of a passion for music. It is less a business and much more a vocation. The artists and technicians themselves build up the heritage. A studio develops organically in a creative manner. In terms of business, the margins are tight, as the noble Lord, Lord Clement-Jones, said, and there is a ceiling on income, because only so many artists can be booked. The space itself often has to be for the desired sound, which may be created by choirs or a grand piano—a big space.

It is also precious. Gaby talks about the precise mix of cultural and technical specification that make up her recording studio and others. Trust is built up over time between the studio, recording engineer and artist. Each recording studio will have a different character and a different sound; they are all individual. She told me about a drummer for a well-known band, who, having tried different studios across the country, has said that her studio is the only one that provides the right environment for the particular sound that the drummer is trying to achieve.

My Lords, I, too, add my thanks to the noble Lord, Lord Clement-Jones, for setting out the issues surrounding these regulations with such clarity. Like the noble Earl and the noble Lord, I wish to express my gratitude to the Music Venue Trust, UK Music and the Music Producers Guild for their helpful briefings and for joining several Members of this House —the noble Lords, Lord Clement-Jones, Lord Parkinson of Whitley Bay and Lord Bassam, and my noble friend Lord Clancarty—before Christmas to brief the Arts Minister, the noble Baroness, Lady Twycross, on the consequences of these measures for grass-roots music venues, recording studios and artists’ studios. Let me briefly set out how I see the key issues facing each of the sectors affected by these regulations.

For grass-roots music venues, the picture is stark. Despite contributing over £500 million to the UK economy in 2025, the sector remains structurally fragile, with an average profit margin of just 2.5% and over half of venues showing no profit at all. These venues face a collective £7.2 million increase in their tax base from the 2026 revaluation. Hundreds will see rateable values rise by over 50%, with some experiencing increases of 100% or more. The Music Venue Trust projects that between 200 and 300 venues could close over the next four to five years. For venues already operating on razor-thin margins, these are not merely bills; they are closure notices.

For recording studios, the situation is equally perilous. Around 250 studios—roughly half the UK’s commercial studio base—are at risk of closure without mitigation by April 2026. Studios are facing an average business rates increase of 45%, with some experiencing rises of up to 100%.

These are not marginal businesses. Dean Street Studios, created by Tony Visconti and used by artists from David Bowie to Adele, has already closed three of its commercial studios, sold equipment and cut staff by 80%. The Motor Museum in Liverpool, which has supported artists from Oasis to Arctic Monkeys, is fully booked seven days a week, yet it tells us that a mere £50 increase in daily rates would drive away the emerging artists it exists to support. The studio is on track to becoming unviable.

Film studios receive their relief without any requirement for public access. Recording studios, by contrast, provide a service accessible to any member of the public who wishes to pay for it, serving both amateur and professional markets. The committee recommended that this House question the Minister on whether a similar scheme to support recording studios has been considered. I echo that question today: have the Government given consideration to introducing targeted relief for recording studios, equivalent to that provided to film studios?

It is also worth noting that the UK’s approach to premises taxation compares poorly with our European neighbours’. The average premises taxes for grass-roots music venues across the 27 EU nations amount to 0.9% of turnover, ranging between 0% and 1.4%. In the UK, following the latest revaluations, the figure currently stands at 2.93%, almost three times the European average. When combined with VAT differences on tickets, UK venues pay approximately three times what their European counterparts pay in pre-profit taxation. This is not a level playing field. Modest, targeted relief for those sectors would be proportionate and justified for several reasons.