Non-Domestic Rating (Multipliers and Private Schools) Bill

Committee (2nd Day)

Amendment 46

46: After Clause 4, insert the following new Clause— “Review of impact on businesses, high streets and economic growth(1) The Secretary of State must review the impact of sections 1 to 4 of this Act on—(a) businesses,(b) high streets, and(c) economic growth.(2) The review must consider—(a) the impact on different types of business, including small businesses;(b) the impact on businesses operating mainly or solely on high streets;(c) whether the provisions have had a measurable impact on economic growth, and if so what that impact has been.(3) The Secretary of State must lay a report of the review before Parliament within six months of the day on which those sections take effect.”Member’s explanatory statement This amendment would require the Secretary of State to review the impact of sections 1 to 4 of this Act within six months.

My Lords, in moving Amendment 46 I will also speak to my Amendments 53 and 54, which are all borne from the lack of detail in the Bill and the failure to publish an impact assessment for its first four clauses. The Government are asking us to agree to a Bill without clarity on the substance and the financial impact, and one which will make a real problem for businesses on the high street. They are asking us to support the Bill despite not providing any assessment of how it will impact on the high street and, while they promise to reduce business rates, the only thing that we know is certainly being reduced at this stage is the relief we offer to retail, leisure and hospitality businesses.

My Amendment 46 calls for a review of the impact of Clauses 1 to 4 on businesses, high streets and economic growth. There is no impact assessment published alongside the Bill that covers its first four clauses and no commitment to publish one when the multipliers have been decided. This is entirely unacceptable; it seems unlikely that the Government would pursue a Bill without clarity as to what impact it will have. In order to have an informed debate, we need to know what the Government think the material impact will be. If they are so certain that they are reducing the amount of tax that businesses pay through business rates, it would make sense to publish an impact assessment detailing how such an objective will be achieved.

My Amendment 53 is borne from the same concerns about the lack of information and asks for an annual report as to how much money is raised through the provisions in Clauses 1 to 4. Again, there is no detailed information to accompany the Bill and we are being asked to agree to a measure despite not knowing how it will impact on the very businesses it taxes. Amendment 54 seeks to include an annual report that breaks down the revenue from business rates by type of business, so that it is possible to evaluate how successful this arbitrary threshold is at placing further burdens on online giants, rather than on small and larger independent shops and pop-up businesses.

My Lords, as we have heard from the noble Baroness, Lady Scott, this group is about understanding the impact of the Bill. To help us focus on why this is important, my noble friend Lady Pinnock and I have produced our own notional one-dimensional impact assessment.

If a property had a rateable value of £100,000, before Covid it was paying close to £50,000 in rates. Then, when the pandemic came, if—and only if—it qualified for relief, that £50,000 would benefit from a 75% reduction. In this case, the business owner would have been paying only £12,500. Rolling forward, what do we find when the Covid relief is completely lifted? The rateable value has not changed; it is still £100,000. So, by our calculation, if—and only if—the full multiplier reduction is applied, that business will be paying £30,000 in non-domestic rates.

I am sure the Minister can spot where we are heading on this. Yes, the business will nominally have a reduction in its rates, but those are the rates it was paying before the Covid relief. In reality, it will have gone from paying £12,500 to £30,000; that is what will be hitting the business. I have two questions for the Minister. First, allowing for our slight approximations to make the maths easy, is this broadly correct and, if not, what is the actual analysis? Secondly, how on earth will this bring benefits and investment to the high street?

As the noble Baroness points out, it is right to talk about the impact assessment, both before the implementation of the Bill and once it has been implemented. The accelerated timeline for the Bill’s implementation has left insufficient time for stakeholder consultation, particularly regarding measures affecting distribution warehouses and out-of-town retail premises, as the noble Baroness just mentioned. Therefore, my noble friend Lady Pinnock and I have tabled a number of amendments to help probe different aspects of the impact the Bill will have. When we get to Report, we will hope to refine this—that is, if the Government have not put forward their own amendments, which I expect they will because this makes so much sense and is so important to the Bill.

My Lords, I will add a few words on this important group of amendments. It is not possible to do an impact assessment at the moment. This has been rushed, and the new valuation list will not be completed for another three or four months. Non-domestic rates are the third-highest cost to most RHL businesses, after rent and employment costs. The third-highest outgoing for these businesses is being discussed here and going into law as we speak before one of the critical ingredients of the P&L of those businesses is known. It will not make good law.

The amendments we have heard about in this group, and some of those to come in later groups, refer to a request for delay to the impact assessment so that these variables are known and businesses are not groping about in the dark trying to understand their profitability and do their business plans. It is not the right moment to be having this conversation, but all will be fine if we allow an extra year to do the impact assessments and the required consultations with the professional bodies that have the expertise, which can then be assessed by secondary legislation.

My Lords, these amendments seek to introduce a number of provisions into the Bill requiring reports and assessments of various types. They are concerned with the impact on the RHL—retail, hospitality and leisure—sector, including on local government revenues, businesses more generally and economic growth. Some reports and assessments would be required before Clauses 1 to 4 come into force, and others after.

First, I want to stress to the Committee the importance we attach to being clear and transparent about this policy—who will be affected and the impact it will have on revenue. The principles behind these amendments are sound. It is right that the impact of tax changes should be carefully considered in detail. However, there is a balance to be struck and some of these amendments would place an undue constraint on the Government that would likely delay the new multipliers coming into effect from April 2026. Others would duplicate existing reports or would require reports to be produced before we will have been able to collect any data from local authorities. Through a combination of existing reports and commitments already made, I am confident that we can give noble Lords the assurances they seek.

Amendments 48 and 73, tabled by the noble Lord, Lord Fox, seek to require the Government to undertake an impact assessment of the new multiplier arrangements on businesses, high streets and broader economic growth. Amendment 46, tabled by the noble Baroness, Lady Scott, would introduce a very similar requirement.

Noble Lords will be aware that policies and legislation concerning tax and the administration of tax fall outside the meaning of regulatory provisions as defined in the Better Regulation Framework. Obviously, tax measures are introduced for very different reasons from other types of legislation and are therefore not under the same requirements to be accompanied by an impact assessment. This has been the settled position for many years. In fact, the exemption for tax from the meaning of a regulatory provision was captured in primary legislation passed by this House in 2015. Section 22 of the Small Business, Enterprise and Employment Act 2015 excluded a statutory provision which makes or amends provisions imposing, abolishing or varying any tax, duty, levy or other charge. That exemption now exists in paragraph 2.3 of the Better Regulation Framework.

The noble Lord, Lord Fox, gave us some illustrations of changes in rates bills during Covid. As I said, RHL relief was introduced reflecting the economic shock of Covid. This Bill will provide a permanent answer and I do not think it is right to draw comparison between these two very different situations.

As I have stated elsewhere, noble Lords will appreciate the need to ensure that tax cuts are sustainably funded, hence the Government’s intention to introduce the higher multiplier for the most valuable properties. A lot of existing data is already available on these hereditaments that may qualify for the various multipliers. As I will explain, detailed data on reliefs is already published by my department every year. Also, the VOA publishes annual data showing an analysis of the rating list by sector and sub-sector and by region and local authority. In light of this Bill, the VOA last week published data on the property counts and rateable value for properties with a rateable value over £500,000.

Amendment 52 seeks a review to understand how changes to business rates liabilities for qualifying RHL businesses have differed between local authority areas over the time period. I understand the noble Baroness, Lady Pinnock, is particularly interested in how the introduction of multipliers will impact on local government income.

The measures in the Bill will affect the level of business rates income in different areas, as different geographies will have different concentrations of qualifying RHL businesses or businesses with a rateable value of £500,000 and above. However, the Government are committed to ensuring, as far as practicably possible, that local government income is unaffected by business rates tax policy changes. Beyond this Bill, the Government are making good on the promise to reform the local government funding system. To help deliver this, and as intended since 2013, business rates growth will be subject to redistribution across the country through a business rates reset in 2026-27.

Finally, Amendments 53 and 54 focus on the amounts raised as a result of Clauses 1 to 4. My department has already established detailed processes in place to collect and report on the business rates collected by local government. In fact, we report on annual forecasts for the coming year—NNDR 1 returns—and then on the actual amounts collected by the local government, NNDR 3 returns. These are published on the department’s website at both national and local authority level and, from the 2026-27 NNDR 1 onwards, will reflect the new multipliers from Clauses 1 to 4.

I appreciate that there is great interest here and I trust that my reassurance that His Majesty’s Treasury will be publishing analysis of the new multiplier arrangements at the 2025 Budget allays noble Lords’ concerns. The Government, as a matter of course and good practice, keep all tax policy under review. As such, to seek to impose such a requirement in legislation is not necessary. I respectfully ask the noble Baroness to withdraw her amendment.

Before the Minister sits down, could I point out that these forecasts are all going to be hypothetical? In five months’ time, the VOA will produce, or have access to, the updated new rateable values nationwide. Current rateable values will be history. Therefore, we have to anticipate what those might be. The balancing act between the larger properties subsidising the smaller RHL properties will then be reworked, but we cannot do it at the moment, which is one of the reasons why we feel that time is required for delays to the impact assessment process to take us one further year ahead.

I thank the noble Lord for making that point. He also talked about delays, which I will pick up in a later group when we talk about implementation; I have not forgotten about the important points he raises. On the point he just made, the Budget analysis takes into account the 2026 revaluation, so that point is covered by the Treasury in its work in the build-up to the Budget.

I did not quite understand that point. The Minister is saying that the revaluation has already been taken into account in the figures that the Treasury is coming forward with. Does that mean he can share the revaluation with us?