Non-Domestic Rating (Levy and Safety Net) (Amendment) Regulations 2022

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Non-Domestic Rating (Levy and Safety Net) (Amendment) Regulations 2022.

My Lords, these regulations make changes to the way in which we calculate levy and safety net payments as part of the business rates retention scheme. The changes are necessary to ensure that the calculations reflect the current circumstances of local government and that individual authorities receive or pay no more or less than they should.

Under the business rates retention scheme, authorities that see their business rates income fall significantly in any year can receive a safety net payment. The cost of the safety net is paid for by recovering, through a levy on growth, a percentage of the business rates income of authorities that, in any year, have seen their business rates income significantly increase. The detailed rules about the calculation of levy and safety net payments are set out in the Non-Domestic Rating (Levy and Safety Net) Regulations 2013.

The regulations before the Committee make a number of changes to the 2013 regulations. They do four things. First, they update the 2013 regulations for 100% retention authorities. The Committee will recall that, since 2017-18, the Greater Manchester, Liverpool City Region, West of England, West Midlands and Cornwall authorities have retained not 50% but 100% of the business rates they collect. As a result, we made changes to the levy and safety net calculations to reflect authorities’ higher business rates income. These changes have been reconfirmed periodically in regulations as and when the Government have extended the 100% arrangements.

As things currently stand, the changes to levy and safety net calculations for 100% retention authorities apply in every year up to and including 2020-21. However, because the Government have now confirmed that the 100% arrangements will stay in place in 2021-22 and 2022-23, we need to extend the timeframe over which the changes to levy and safety net calculations apply. This is provided for in regulations.

My Lords, I should first remind the Committee that I am a vice-president of the Local Government Association.

In the House of Commons, these amended regulations took just 15 minutes to be explained and approved, and that seems to be because they are appropriate in the circumstances. The revised levy rate for Greater Manchester looks right, since the pool arrangements, as the Minister said, have ceased. It is also right that the restructuring of a few local authorities has been reflected in new, updated figures.

We should support financial relief from business rates for businesses impacted by Covid being fully compensated to local authorities, in line with previous decisions earlier in the pandemic. It is, however, clearly important that the businesses rates retention scheme works as it was intended to. I think it would be wrong to give safety-net payments to some local authorities when they are already compensated by the Government directly, and the proposals on proxy figures for the limited number of 100%-retention authorities seems appropriate.

All the amendments in this statutory instrument today are technical and sensible. But the context is one of a system of business rates that is no longer fit for purpose. It does, however, generate a huge amount of income. I am left wondering what the Government are now thinking about the future of business rates—so anything the Minister can tell us on that would be most welcome.

Finally, I read the comments of the Secondary Legislation Scrutiny Committee published on 3 February, and I think the committee was right to raise the issue of whether the public are adequately protected against fraud, given public concern about false claims in other areas of Covid support payments. This is, of course, a relief scheme, and relief schemes are part of normal local authority systems and subject to normal audit systems. However, the Minister might wish to confirm that the Government feel adequately protected, given that it is their money that is helping to fund the cost.

My Lords, I thank the Minister for his introduction to this instrument, which, as we have heard, makes various changes to the business rates retention scheme. As we also heard from the Minister, each change is very technical, including amendments to levy and safety-net payments, the restructuring of certain local government areas and the payment by central government of specific grants to local authorities. I will not cover any of the technical detail: the noble Lord, Lord Shipley, amply covered that and asked the questions in these areas that needed to be asked of the Minister, so I will not repeat them.

I will briefly say that Labour supports these changes. However, in the other place when the matter was discussed, some important points were raised about business rates and our high streets. The Minister may remember that yesterday, in the Statement on levelling up, I talked of the need to completely reform and replace the current system of business rates. I appreciate that the terms of the SI before us today are very narrow and that this is not the place to debate that, but I ask the Minister to take our concerns about the current system back to his department. The Government have spoken already about the need to reform the business rates system and have conducted a review, but we have seen little progress to date beyond narrow technical legislation such as that before us today. I encourage the Minister to give his department a nudge. Having said that, we are very happy to support the regulations.

My Lords, I thank the noble Baroness, Lady Hayman, and the noble Lord, Lord Shipley, for their contributions. I thank them both for raising similar issues. While this is a very narrow statutory instrument, it is probably worth saying, thinking about the future business rates is very much a matter for the Treasury. There is a recognition that future business rates need to be thought through. Obviously, there is a review and, self-evidently, there needs to be reform.

Equally, there is the issue alluded to by the noble Lord, Lord Shipley, on what we do about local government in the context of the income for local authorities being council tax and business rates, and business rates fundamentally needing to change to reflect the changing dynamics of our high streets. There is an intellectual debate that can be had about whether we continue to resource equalise, or whether we think about life as a race, whereby we ensure the start line is level and fair and then you get places essentially to compete and, through competition, raise the game. That is an intellectual debate that is entirely proper, not for this statutory instrument, but it one that I like engaging in with people who have a very deep knowledge of local government and care about its future. It is really hard to be fair if you have officials working formulae that only they seem to understand to determine whether a place gets x money or y money. It is job of work that, necessarily, the Secretary of State will be looking at—it is far above my pay grade—but I have been a huge advocate of ensuring that local authorities can be set free to be able to determine their own destinies, rather than being necessarily being always funded from the centre, in the relationship we have today. That is how it has always been, for over 20 years, in my time in local government—but that is not really a matter for today’s debate. I am sure that we will have many debates about this in the Chamber over the coming years.

My Lords, that is what it says in the Explanatory Notes. This issue is whether everybody is auditing it very carefully. That was my question really.

Clearly, we need to ensure there are proper controls in place, both at the local authority level and the Government need to look at it as well. I think that is very wise advice, and we will take that away from this debate.

In conclusion, these regulations are necessary to ensure that the rates retention scheme continues to operate as was intended and that authorities receive the safety-net payments to which they are entitled or make the levy payments due from them. Without these regulations, the amounts paid or received by authorities will be wrong and will impose additional costs on local government as a whole. The regulations ensure that this does not happen, and I hope the Committee will join with me in supporting them.

Motion agreed.