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

[Mr Nigel Evans in the Chair]

I should explain that in these exceptional circumstances, although the Chair of the Committee would normally sit in the Clerk’s chair during Committee stages, in order to comply with social distancing requirements, I will remain in the Speaker’s Chair although I will be carrying out the role not of Deputy Speaker but of Chairman of the Committee. Therefore, I and whoever else occupies the Chair should be referred as Chairs and not as Deputy Speakers.

Clause 1

Compilation of rating lists

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to consider clause 2 stand part.

One can tell by the enormous crowd in the Chamber that the NDR Bill is going to be the highlight of this parliamentary week. Nevertheless, given that the average local authority delivers over 800 different services which, during this covid crisis, are being brought into sharp focus as to how essential they are as part of the warp and weft of our communities, it is important that we get this right.

This matter has been extensively debated previously, and it is largely of a technical nature. However, I would be pleased to hear the Minister address a point about the timing that has emerged during the Bill’s passage through the House. Among those 800 different services, local authorities provide the billing process to local businesses to ensure that business rates are both accurate and able to be paid on time. It is absolutely critical that they have sufficient time within that process to receive the data from the Valuation Office Agency, to test that with the software supplier who ensures that the bills are physically dispatched to businesses, to resolve any disputes that may subsequently emerge—it is not uncommon for businesses to come back with queries—and then to be in a position to ensure that payment is made in a timely manner.

I entirely understand why, from a Government perspective, it is important to align that process with a fiscal event, which is likely to be an autumn Budget. However, as we have seen, especially in these recent times, there is often a situation whereby the timing of those events needs to move around and change. I hope that the Minister will be able to address the need to ensure that this information is available to local authorities in a timely manner so that businesses have certainty and accuracy regarding these bills. I would like an assurance that if there is a need to change the date of the autumn Budget, there will then be scope within the timetable to provide the information to local authorities, prior to the Budget taking place, to ensure that the bills are available to local businesses in a timely manner, and, indeed, can be paid, so as to be part of the critical funding arrangements for local authorities.

This is not a controversial measure, as the hon. Member for Ruislip, Northwood and Pinner (David Simmonds) has made clear, but I want to put a few points on the record while confirming that the Opposition continue to support the proposals.

Since Second Reading, there have been at least a couple of developments. The first is that the rate of covid infection is rising again, and that makes the case for supporting businesses and local authorities, including through business rate reform, even stronger. The second is that organisations with an interest in this Bill have made it even clearer in conversations with us that although they support the Bill, they are looking for yet more meaningful change. The Bill must be the beginning of root-and-branch reform of the business rate system. Right now, the jobs of people in the arts, retail, hospitality and many other sectors are under threat from the economic impact of the covid-19 pandemic. Those sectors and others need help to get through the rising wave of infections, and they need that help as urgently as possible.

Business rates, as currently set up, do not fairly reflect the rental value of the premises occupied, and they have created regional imbalances. A further and growing unfairness is that retailers that occupy shops in high streets pay far more in tax than online retailers do—that situation is, disappointingly, incentivising the decline of our high streets. Research by Revo shows just how acute the regional imbalance can be. In the north and the midlands, the rate rise is almost 12.5 times greater than the rise in rental values, compared with just four times greater in the south. If the Government are serious about levelling up, they need to address that anomaly.

Getting the business rate system right is essential, and it should be seen as part of the support that the Government must provide to businesses and local authorities to help the economy to recover fully. The Government have been too slow to support businesses and local authorities during the pandemic. According to the Local Government Association, the Government have left councils facing a £3 billion funding gap, which means that support for local economic recovery may be cut precisely when it is needed most.

I know that the Bill is to do with England and Wales, but given that we face potentially the greatest recession that we have had in our lifetimes, there is a need for flexibility in non-domestic rating. Does the hon. Gentleman believe that with the Bill, the Government have given us the flexibility to respond to whatever the future may give us?

The hon. Gentleman makes an important point about the need for flexibility. The situation ahead is very unpredictable and uncertain, and we need the flexibility to support businesses and local economies, whatever circumstances we find ourselves in in a few weeks’ or months’ time.

On Second Reading, my hon. Friend the Member for Blackburn (Kate Hollern) asked the Minister a question that has not yet been answered, so I politely invite him to respond to it today. Given that the Valuation Office Agency has a backlog of 50,000 appeals, some dating back as far as 2010, will he share with the House what conversations he has had with the Treasury about how that backlog will be tackled? Because of the pending appeals, councils, which are responsible for collecting business rates on behalf of the Government, have had to divert more than £3 billion away from frontline services. That figure is very close to the in-year funding gap that is leading to cuts in frontline services across the country, as the second wave of infection rises and the economy slips into recession. What a difference that funding would make, if the Government would only make it available to local authorities and public services on the frontline.

Fixing the business rates system is essential if our high streets are to survive, but the Government must also recognise the key role that local government will play in driving local economic recovery. The Government’s broken promises on council funding will restrict town halls’ ability to support struggling local businesses. I am sure I do not need to remind the Minister just how important local authorities have been throughout the pandemic, and that is why it is so important that they are supported financially. Councils have lost £953 million from business rates income between March and July this year alone, according to the Local Government Association, and that accounts for more than a quarter of all income losses for councils over that period.

I thank the shadow spokesman, the hon. Member for Croydon North (Steve Reed), and my hon. Friend the Member for Ruislip, Northwood and Pinner (David Simmonds) for their contributions.

We are now familiar with the two improvements that the Bill makes to the business rates system. It moves the date for implementation of the next revaluation in England and Wales to 1 April 2023, and it moves the latest date by which draft rateable values must be prepared in England and Wales to 31 December preceding the revaluation. Both changes can be found in clause 1. Clause 2 simply sets the extent and name of the legislation.

In order to understand clause 1, we first need to consider the main primary legislation for business rates, which is the Local Government Finance Act 1988. All of clause 1 is concerned with amendments to the 1988 Act. Part III of that Act concerns business rates, and it currently requires revaluations in England and Wales to take place every five years from 1 April 2017. Therefore, without amendment to the current law, it would require revaluation to take place in England and Wales on 1 April 2022. The Bill changes that date in a straightforward way by amending the 1988 Act to instead provide for the next revaluation in England and Wales to be on 1 April 2023. It does that both for local rating lists and for central rating lists held by my Department and the Welsh Government. Central lists contain large network properties, such as the electricity supply companies.

We can see the change in the Bill—clause 1(2)(a) adds the words “on 1 April 2023”; clause 1(3)(a) makes the change for England and clause 1(4) does so for Wales. The change to the timing of the draft rating list from no later than the 30 September to 31 December can be seen in equally simple terms in clause 1(2)(b) for local rating lists and clause 1(3)(b) for central rating lists.

That date is the deadline—the latest date by when draft rateable values must be prepared. The Bill will still allow the Valuation Office Agency to publish rateable values earlier than the end of December. We fully intend to give ratepayers as much notice as possible of their draft rateable values, the new multipliers and any transitional arrangements that might be included. Historically, these have been confirmed at the time of the autumn fiscal event, so ratepayers will continue to have several months to pay their bill.

My hon. Friend the Member for Ruislip, Northwood and Pinner raised a point about fiscal events and what might happen in different instances. It is worth putting on the record that it is required within law that the multipliers are produced as part of the local government finance settlement, but we are of course cognisant of the fact that a date in February would be too late. I restate our intention to make sure that they are provided earlier than that—in good time—if events transpire as my hon. Friend described.

Does my hon. Friend agree that, when it comes to the Valuation Office Agency, there is a need to recognise that some business rates appeals concern very significant amounts of money—so significant in some cases that they can imperil the financial viability of a local authority? We can cast our minds back to the circumstances of West Somerset District Council, with which I had some involvement in my time at the Local Government Association. The business rates appeal relating to the nuclear power station in that area, which was the main source of business rates for the local authority, was so big that local government reorganisation was the only solution to make the delivery of local government services in that area viable. In my area, Heathrow airport is the biggest single source of business rate payments, and changes in those payments can lead to significant in-year variations in business rates. Can he give me some assurance that his Department is focused on making clear to the VOA the importance of processing these appeals in a timely manner and giving sufficient scope for local authorities to manage the impact?

I thank my hon. Friend for his intervention. He is entirely right to highlight some of the challenges, and I can give him that assurance. The fundamental review of business rates is considering a number of issues, including the frequency of future revaluations. He is right to make that important point.

I am afraid I cannot agree with the hon. Member for Croydon North about local government funding. We have had exchanges on that important point, and we have different views. The Prime Minister announced last week an extra £1 billion of funding for local government. I am aware of the need for certainty, and we plan to explain the distribution of that funding as quickly as we can. The £4.8 billion that has been provided to local government, including £3.7 billion of un-ring-fenced funding, has been a big support to councils, which are doing an incredible job up and down the country and delivering first-class public services in an extremely difficult and challenging environment.

Does the Minister recognise that the complexity of local government finance is a huge part of addressing public concerns? A top-tier authority such as a London borough will have responsibility for a parking revenue account and a housing revenue account, and it will have business rates income and council tax income. Over and above that, it will expect to see regular income from fees and charges for services that it provides to the public on a traded basis. Although some of that is captured by the core spending power measure, which is usually used by his Department as the critical way to explain the financial position of local authorities specifically and the local government sector in general, does he agree that that could be improved, so that Members and our constituents could grasp in a little more detail the impact that these changes have in their town hall or civic centre?

My hon. Friend makes a fair point about the need for clarity of message about the spending power of councils, and I am happy to continue conversations with him about how we can look at that. We believe that core spending power remains the most accurate available method to discuss local government finance. That is why we use it when highlighting, for instance, the 4.4% real-terms increase in local government finance this year as part of the local government finance settlement. I thank him for that intervention. He is absolutely right to put that on the record.

We are trying to give councils the tools they need to ensure that they can implement this revaluation, cognisant of the need to provide clarity as part of a fiscal spending event. I restate the point that if that was not possible, we would follow our obligations.

Will my hon. Friend give some consideration to updating the list, which was originally conceived in the days of Lord Pickles when he was Secretary of State at the Ministry? He sought to gather best practice from across the local government sector. While we recognise that the reduction in the cost of biscuits at meetings was not going to bridge any budget gaps, many in the sector—I pay particular tribute to Sir Ray Puddifoot, the leader of Hillingdon, who has just announced his retirement—are masters of the art of looking at different ways to maximise local authority income within the framework provided by the Ministry, to provide the greatest possible consistency and financial stability to their local authority.

My hon. Friend makes a hugely important point, and it is probably one that could be looked at in the even wider context of sharing good practice by local authorities that are doing such an incredible job. That is why we have tried to ensure, in the support we have tried to give councils during the pandemic, that they have the tools and ability to share best practice. We also facilitate that through my Department and our Government, whether that is the Brexit delivery board, for instance, or any of the other vehicles that we use to share good practice.

I put on record my thanks and appreciation to council representatives, groups and the sector as a whole for their role in sharing and providing good practice. The Local Government Association does an incredible job of bringing that type of guidance and support together and ensuring that there are good forums for councils to meet and discuss a wide range of issues, including the one that my hon. Friend rightly highlights on council funding and finances.

We know that it has been a challenging time for councils throughout this pandemic, but that is why we have distributed the funding in the way that we have, working closely with the Department of Health and Social Care. We are cognisant of the pressures still faced by local authorities, which is why our income scheme, the infection control fund and others have been so important to supporting local authorities throughout this pandemic.

We believe that this is a small but important Bill. We are extremely grateful for the support of Members across the House. We believe it is a common-sense solution to the problem faced by councils. I take on board the wider points about business rates that Members have raised today, and I therefore highlight the wider review of business rates that is being conducted. I am always willing to take further representations about the importance of that review. This is a common-sense Bill, and I am grateful for the support of the House.