Non-Domestic Rating (Multipliers and Private Schools) Bill

Committee (1st Day)

Amendment 1

1: Before Clause 1, insert the following new Clause— “PurposeThe purpose of this Act is to vary some non-domestic rating multipliers and to remove the charitable exemption from private schools.”Member’s explanatory statement This amendment sets out the purpose of this Act and is intended to invite the House to consider whether the Bill meets the Government's stated aims of protecting the high street and encouraging investment.

My Lords, I welcome the Minister back to his place and say that the whole House was sorry to hear of his family’s loss.

We on these Benches welcome this Bill as a narrow tinkering of a broken system. It may have some beneficial effects, but I remind your Lordships that the non-domestic rates system has been broken for years, and if this tinkering distracts from a full and proper review of the system, then it is a malign influence rather than a benefit.

From scrutinising the Commons debate on this Bill, it seems that the Government sought to limit debate by asserting that its purpose was to use multipliers to manipulate the non-domestic rates of a subset of businesses in what it calls high streets. This measure is focused on retail, hospitality and leisure hereditaments. Having done this, the broad government claim is that our high streets will somehow be protected and that investment will be encouraged. In wording Amendment 1, we attempted to include words that spelled out the spirit of the Government’s Commons claims, but I have to say that the Public Bill Office resisted all attempts to include the concept of protecting high streets and encouraging investment in the purpose statement. The PBO has confirmed the narrow nature of this Bill.

The Government cannot have it both ways. If they accept the restraints of their own handcuffs and restrict this Bill to varying multipliers for this subset of businesses, the Minister cannot claim to be protecting high streets. There are at least three reasons that make this true. First, high streets are much more than retail, hospitality and leisure, as we will see from various groups of amendments. If the Government’s actual purpose is to protect high streets, they would spread its activity more widely. This will be effectively asserted from these Benches and from those of His Majesty’s loyal Opposition.

Secondly, the Government present no evidence that their claims to be protecting high streets will actually come to pass. As we know, the non-domestic rating system is complex. It is further complicated by the application of reliefs, which will vanish as these multipliers arrive. Increasing the multipliers for larger businesses is another complication. In addition, there is the issue of valuations—this is the elephant in the room that this Bill ignores. They are always up. There are many puts and takes that affect the individual business rates that a business pays and what its competitors pay, yet there has been no attempt at an impact assessment. I have to put it to the Minister that no one actually knows the effects that this Bill will have.

My Lords, I stand to introduce the second group, in which, conveniently, there are three amendments, all in my name—

We are still on group 1. We will come to group 2 in the fullness of time.

My apologies.

My Lords, I will speak to Amendment 1 and to my notice opposing the Question that Clause 1 stand part of the Bill. I was pleased and interested to see that the Liberal Democrats had tabled a purpose clause, given that they have criticised purpose clauses tabled by my Conservative colleagues on other Bills. On the purpose clause tabled by my noble friend Lord Davies of Gower—

As a point of information, I have proposed purpose clauses for at least six Bills in the last three years.

I will continue. When my noble friend Lord Davies of Gower tabled a purpose clause on the Terrorism (Protection of Premises) Bill, the noble Baroness, Lady Suttie, argued that it was unnecessary because it restated some of the language in the Long Title of the Bill. In contrast to the amendment that we are debating today, my noble friend Lord Davies’s amendment included a legal duty on the Secretary of State, as well as establishing a purpose clause giving it legal effect. This is all water under the bridges, though, and we hope that our friends on the Benches to my left will not criticise our use of purpose clauses when scrutinising future Bills. As I say, we on these Benches are very comfortable with purpose clauses which seek to probe the intentions of the Bills that this Government are bringing forward, so I welcome the noble Lord’s amendment.

As the noble Lord, Lord Fox, says in his explanatory statement, there is a real question mark over the Bill’s impact on the Government’s plan to deliver on their stated aims of protecting our high streets and encouraging investment. Later in this Committee, I will seek to probe the impact of the Bill on larger anchor stores, which are often the key drivers of the footfall on our high streets and keep smaller businesses alive. I will also seek to understand more fully the impact that the Bill will have on the retail and major food shops, including supermarkets, which people across the UK rely on.

We know that the Government’s original intention was to hit international businesses that have large, warehouse-style business premises, such as Amazon and other international tech giants, but it is not clear that the Bill achieves that goal effectively. There is a risk that the increased costs of multipliers will be passed on to consumers in very unexpected ways. The higher multipliers that the Bill will introduce are a tax on business. We need to understand better what impacts this business tax will have on jobs, growth and prices. The impact assessment that the Government have published to date is utterly inadequate. Although I am really very grateful to the Minister for his engagement on the Bill so far, I feel that we will need to hear much more detail from the Dispatch Box on the real-world impact of the Bill if we are to proceed with it.

My Lords, let me start by expressing my gratitude for the kind words from the noble Lord, Lord Fox, in relation to my not being present for the Second Reading because of the tragic loss of my mother, and I extend my gratitude to everyone in the House. I had a good look at the Second Reading, and I appreciate all the tributes that were made during this difficult time of my life.

It has been a lively start to this afternoon’s proceedings, but I thank the noble Lord, Lord Fox, and the noble Baroness, Lady Pinnock, for tabling Amendment 1. It will be appropriate alongside this amendment to consider whether Clause 1 should stand part of the Bill. I understand that there is concern that the Bill before us does not deliver on the Government’s stated intentions. I am grateful for the contributions of the noble Lord, Lord Fox, and the noble Baroness, Lady Scott, but I must disagree with their position.

The Bill delivers on the Government’s commitment, as announced at the Autumn Budget, to introduce from 2026-27 permanently lower tax rates for retail, hospitality and leisure properties and, as also announced at the Autumn Budget, the introduction of a higher tax rate on the most valuable properties—those with a rateable value of £500,000 and above—to fund that permanent tax cut sustainably. Clauses 1 to 4 of the Bill enable this.

Furthermore, the Bill also delivers on the Government’s commitment to remove the business rates charitable relief tax break from private schools—a tough but necessary decision that will secure additional funding to help deliver the Government’s commitments to education and young people. Clause 5 delivers this.

The noble Lord, Lord Fox, has pointed out that the Bill is not a comprehensive reform of the business rates system—he actually used the word “tinkering”. He is of course correct: the Bill does not deliver on the entirety of the Government’s ambitions in this space, and it has never tried to do so. The Government have been clear that the Bill is the first step. Transforming the business rates system to one that is fairer and that protects the high street, supports investment and is fit for the 21st century is a multi-year process and one that the Government will be delivering over this Parliament.

Noble Lords have said there is uncertainty and that there is a lack of transparency in the Government’s plans. Again, I must disagree. The Transforming Business Rates discussion paper, published at the Budget, sets out the priority areas for business rates reform, including how to incentivise investment and growth, how to tackle avoidance and how to ensure the system is more responsive. The paper invites stakeholders to have a conversation with government on these and other improvements to the system that they may wish to suggest, all driven by the Government’s overarching objectives for reform: to protect the high street, encourage investment and create a fairer system that is fit for the 21st century.

I appreciate that noble Lords may have questions on the timeline for these reforms. On 17 February, the Treasury published Business Rates: Forward Look, which provides an update on key milestones for the Government’s overall business rates reform agenda. Without this Bill, the Government will be prevented from taking that first vital step to transforming and rebalancing the business rates system to make it fairer.