Non-Domestic Rating (Lists) (No. 2) Bill

Report

My Lords, the Hybrid Sitting of the House will now resume. I ask all Members to respect social distancing.

Members will be called to speak in the order listed. Short questions of elucidation after the Minister’s response are discouraged. Any Member wishing to ask such a question must email the clerk. The groupings are binding. A participant who might wish to press an amendment, other than the lead amendment in a group, to a Division must give notice in debate or by emailing the clerk. Leave should be given to withdraw amendments. When putting the question, I will collect voices in the Chamber only. If a Member taking part remotely wants their voice accounted for if the question is put, they must make it clear when speaking on the group.

Amendment 1

1: After Clause 1, insert the following new Clause— “Annual Rates Revaluation Reporting (1) Within three months of the passing of this Act, and every twelve months thereafter, the Secretary of State must publish a report on the timing of business rates revaluations and lay it before both Houses of Parliament.(2) Each report must contain an assessment of the impact of the timing of business rates revaluations on—(a) the prosperity of towns and high streets,(b) the prosperity of small businesses,(c) the ability of high street businesses to compete with online businesses,(d) local authority finances, and(e) business rates appeal waiting lists.(3) Each report must contain a statement detailing how the Valuation Office Agency and local authorities have been consulted in relation to the timing of business rates revaluations.(4) Each report must make a recommendation as to whether action from the Government needs to be taken to prevent adverse impacts arising from the timing of the rates revaluation.”

My Lords, I draw the attention of the House to my relevant registered interests as a vice-president of the Local Government Association, chair of the Heart of Medway Housing Association and as non-executive director of MHS Homes Ltd.

Amendment 1 seeks to place a new clause in the Bill whose purpose is to require the Secretary of State to publish a report on the timing of business rate revaluations and to lay that report before the House. The report must address the issues I have laid out in proposed new paragraphs (a) to (e) of my amendment. Each point needs careful attention.

Our high streets were in crisis before the pandemic, and the position has been made even worse over the last year. Hardly a week goes by when we do not hear of struggling high streets and well-known businesses leaving the high street for good, or questions being raised as to their future viability. Sir John Timpson, chairman of the wonderful Timpson Group, addressed this very point this morning on Radio 4, reflecting on the work he did looking at our high streets for the Government before the pandemic. The Bill does not address that fact, but merely moves the date of the revaluation so that it better reflects the effects of the pandemic. While that is welcome, it falls a long way short, and the Government have missed an opportunity here to do more to save our high streets.

I do not think one can disagree with the points set out in my amendment. If the noble Lord is going to resist the amendment, can he set out what he and his department are doing to support the prosperity of our towns and high streets? That must go much further than the towns fund, or other small schemes with limited funding. What must happen is fundamental help for all our towns and high streets. Small shops and small businesses on our high streets deserve support as they will be a crucial to our economic revival, including the much loved British pub, which is at the heart of local communities. I also draw the attention of the House to my being vice-chair of the All-Party Parliamentary Beer Group. I very much support its work, and the part that pubs play in our community lives.

We must also address the completely unfair situation that exists between high street businesses and online businesses, which we have discussed many times in your Lordships’ House. There is a much wider debate to be had about business rates as a method of raising finance, but if business rates are levied there must be fairness in the system. There are too many examples today that highlight an unfairness between the high street and online businesses which must be addressed, and this amendment seeks to give the Government the tools to do just that. Business rates raise money for local government and are a key part of its finances. We recently debated a pilot scheme that the Government have under way to increase the funds raised for local authorities through business rates, and again this needs to be looked at, as does the question of appeal.

If the Government do not take the opportunity that the amendment gives them today, I hope they will go back and reflect on these issues. If not, there is no doubt that we will be here year after year, trying to address the serious problem facing our high streets, which the pandemic has accelerated. I hope the Government will take this matter seriously. I beg to move.

My Lords, I speak in support of Amendment 1, just moved by the noble Lord, Lord Kennedy. It is a real pleasure to follow him and his very measured and careful support for the need to tackle the issues on which I too will comment.

I am disappointed that the Government and the Minister have not thought fit to take on board the range of sensible improvements put to your Lordships’ House in Committee. A wide range of noble Lords spelled out the difficulties that an unamended Bill will impose, particularly on the hard-hit retail sector, where the devastation of Covid-19 lockdowns on top of a decade-long decline in high street sales has wiped out a long string of household names, as the noble Lord, Lord Kennedy, rightly rehearsed

The Chancellor’s emergency business rates relief has certainly been a life saver. The Association of Convenience Stores says that four out of 10 of its members would have gone out of business without that support in the past year. It is no wonder that many Conservative MPs are calling on the Chancellor to extend that scheme, and to provide some continuing support to the high street, at least until Covid restrictions are fully lifted. I hope he will do that but, as we discussed in Committee, that could all be in vain if those retailers are then left waiting for years for the revaluation, which this Bill will trigger, to come into effect. The big risk is that the cavalry will arrive too late—in time to count the dead, but too late to bring success to the high street.

Today’s amendment is in default of any response so far by the Government to these issues. It requires an annual audit of the heavy burdens borne by some, especially high street retailers, alongside the unearned tax holidays given to others, particularly distribution centres and the gigantic out-of-town warehouses of the online retailers. Those businesses are booming and occupy property that is virtually untaxed under the present regime, compared to the high street trader.

I thank the noble Lord, Lord Kennedy, for tabling Amendment 1, which I wish to speak to, and it is a pleasure to follow the noble Lord, Lord Stunell. I declare my interests as set out in the register. I am a non-domestic ratepayer in Scotland, although I know this Bill does not include affairs in Scotland.

The Bill is all about timing; it is not about fairness, fitness for purpose, the impact on business, sorting out the appeals system or any other aspect of what has become, I fear, a broken system. The Bill ignores the most critical timing issue, which is simply that of dealing with the appeals backlog—ratepayers paying the requested sum until an appeal is settled. In the current circumstances, that is critical. We cannot expect the Covid-related rates holiday to last for ever. We have seen a collapse in retail rental values over the past 12 months, and as both the noble Lords, Lord Kennedy and Lord Stunell, have pointed out, it was a crisis long before this. Some tenants are to pay double the appropriate rates bills. This amendment brings the plight of the high street retailer into high relief. The annual report it proposes would focus specifically on small businesses, as set out in subsection (2)(b). I am pleased that it also addresses the elephant on the table of all non-domestic rates discussions in the retail sector: the killer impact of the online assault on the high street, as we have heard from both the previous speakers.

Online retail is not a bad thing and it is clearly the future for a huge percentage of domestic spending. The bad thing is the Government’s inability—after years of notice, for online is not a new phenomenon—to recognise the twin neglects of taxing the profits of online and of fairness in the spread of rates between the high street and that sector. Subsection (2)(d) of the amendment requires that the report address the impact of the revaluation timing on local authority finances. Rates are a critical ingredient in local authority finance, but unfortunately the funding gap that the next revaluation will create will lead to a difficult political challenge: how to replace the fall in rates funding—another reason to delay the reform so desperately needed.

My Lords, it is a pleasure to follow the noble Lord, Lord Thurlow, and I declare my interest as a vice-president of the LGA. I congratulate the noble Lord, Lord Kennedy of Southwark, on his composite amendment which neatly brings all the issues that have been debated previously into one. During those debates, all the relevant arguments were made, and I speak today in favour of Amendment 1.

It is important that there be annual rate revaluation reporting. Business rates reviews cannot be left to drift from year to year, especially as so many businesses are struggling. Keeping a careful watch on how revaluations are affecting businesses is vital to ensuring a healthy economic recovery. Towns and high streets are being decimated by the lockdown, as the noble Lord, Lord Kennedy, said. Some three-quarters of retail outlets are closed and many have been boarded up. Only essential outlets are open: supermarkets, pharmacies, opticians and some DIY stores. As lockdown is gradually released, many shops will, hopefully, reopen, but the effect of business rates may be the last straw. This must be monitored to prevent the total decimation of the high street shopping experience.

The Association of Convenience Stores has welcomed the Bill and the revaluation date being moved to 1 April 2023. It sees this as a positive step forward but it has several recommendations that would further assist its operation, including a reduction in the burden of business rates by resetting the business rate multipliers to more sustainable levels.

The whole issue of NDR is a balancing act between the need of funding local authorities and the economic viability of businesses. Local authority finances are stretched to the limit. Government grants have been radically reduced over the years and many councils now only deliver statutory services and these to the minimum standards permitted. It is not that councils do not wish to provide those vital services which communities rely on, such as grants, improved play areas, adequate and dignified social care, after-school clubs et cetera; it is the sad, realistic fact that they no longer have the finance to do this.

The understandable increased cost of social care for the elderly, children looked after, and those with learning and physically disabilities has taken every spare pound councils might have had to provide extra provision for speciality services. Without access to business rates, many local authorities will not even be able to provide the statutory minimum level of service in many areas.

Potholes—a constant running problem on the many rural C roads—are becoming deeper and wider. How are local authorities meant to balance the needs for decent roads against the needs of children looked after and adults with learning disabilities? I do not expect the Minister to provide the answer today, but the question will need to be addressed by central and local government working together.

In Committee, I spoke about business rate appeal waiting lists and times and will not repeat my arguments today, but the length of waiting lists should be kept under constant review. The noble Lord, Lord Thurlow, referred to the impact of delayed appeals. An appeal left waiting for years, is a properly elected council waiting years for its legitimate funding. This makes budgeting all but impossible. The ACS suggests reforming the appeals system by shortening the statutory timeframes for the VOA to respond to checks and challenges and improving the transparency of data used to inform valuations. Has the Minister considered this?

Lastly, I want to speak about the ability of the high street to compete with online businesses. Currently, that is an inability. The online business fraternity, previously in most cases, offered free delivery, but the purchaser had to pay the cost of returning unsuitable goods. Nowadays, if you purchase online you are more likely to be offered free returns but be charged for the initial delivery. This encourages purchasers to buy, as they can clearly see the delivery charge, whereas returning a bulky item could be expensive, if free returns were not offered. This has altered the playing field.

With high street retail outlets closed in lockdown and many businesses going under altogether, online is the only way in which to access the goods and services we have been used to. It is extremely frustrating, to put it mildly, for those paying business rates, to see vast profits accumulated online without the need to pay business rates. This has led to a total distortion of the marketplace.

The Minister will have heard these arguments many times, so he and his colleagues in Government have had plenty of time to come up with an answer. What are the Government going to do to ensure that online businesses are treated in the same way as those on the high street, in shopping centres and in business parks around the country? The ACS recommends introducing an online sales levy or an alternative rating methodology for online distribution warehouses and using the revenue raised to reduce bills for retail stores to support the viability of high streets and local services. Have the Government considered this? It is essential this element is addressed for the sake of all businesses concerned and for the funding of local authorities. I fully support the amendment in the name of the noble Lord, Lord Kennedy, and look forward to what I hope will be a positive response from the Minister.