Non-Domestic Rating (Preparation for Digital Services) Bill

I beg to move, That the Bill be now read a Second time.

This Government are committed to ensuring that the tax system is fit for the 21st century, that it is designed around the needs of the taxpayer and that we minimise as far as possible the administrative burden for businesses paying their taxes. The Government are also clear that this system should reflect and take full advantage of modern technology, and use that to make the process as simple and efficient as possible for taxpayers.

This very narrow Bill will support those aims in the context of the administration of business rates. This extremely short and simple measure will simply allow us to start exploring future digital reform of the business rates system. The same clauses appeared in the 2017 Local Government Finance Bill and passed through Committee without Division. The hon. Member for Oldham West and Royton (Jim McMahon) was present during those debates, and I hope the clauses will receive the House’s support again today.

Can the Minister give an idea of the cost involved and what sort of efficient and better system might emerge?

The measure is even narrower than that; it is simply a paving measure, which I will come on to, that enables that exploratory work to start so that future Ministers will be able to come to this House with firmer proposals, with costs attached, depending on the eventual design of the system that is ultimately decided to be appropriate after extensive consultation with the sector. If my right hon. Friend bears with me, I hope his question will be answered later. If not, I will be happy to have him intervene again.

In the lead-up to the 2016 Budget, the Government undertook a wide-ranging review of the business rates system, in response to public calls to reform. As well as seeking views on the business rates tax itself, the review invited specific feedback on the administration of the rates system, including how business rates are collected.

Responding to the review, business groups called for a number of changes to the way the system is run, including switching the annual indexation of the business rates multiplier to the consumer prices index, rather than the retail prices index; implementing more frequent valuations; and modernising the billing and collection of business rates. I am pleased to say that the Government have already begun reforming the system to implement those changes.

Ratepayers are already benefiting from the change to the annual indexation of business rates from RPI to CPI, which was brought forward by two years, to April 2018. That measure alone is worth almost £6 billion to businesses over the next five years. The Government have also committed to increase the frequency of business rate revaluations from every five years to every three. To ensure that businesses benefit from that change at the earliest point, the Government have further announced that the next revaluation will be brought forward from 2022 to 2021. That will ensure that, as requested, business rates bills more accurately reflect properties’ up-to-date rental value and any relative changes in rents.

Has the Minister seen press reports today that some major companies are calling for a 20% reduction in business rates? Does he have any comments to make about that?

It is important to remember that the Bill is much narrower in scope than the design of the business rates system and how individual businesses pay the bills they are given. My hon. Friend the Member for Rossendale and Darwen (Jake Berry), the high streets Minister, is looking forward to winding up the debate, and he will be able to give the House chapter and verse on every single initiative the Government have undertaken to support businesses on the high street. In sum, there has been £13 billion of relief since the 2016 Budget, and a third of all businesses no longer pay any rates at all.

I thank the Minister for giving way—he is being very generous. On that point, however valuable and commendable many of the proposals he mentions may be, does he not feel that this is somewhat like fiddling while Rome burns, or indeed many of our town centres burn? There have been calls for a reduction of around 25% in high street business rates, and that could be funded by making sure that the tech giants pay their fair share of corporation tax.

Madam Deputy Speaker, I am loth to get drawn on to topics that are much broader than the very narrow scope of this Bill. However, I am happy to reiterate that I do not think the £675 million high street fund my right hon. Friend the Secretary of State and my hon. Friend the high streets Minister introduced earlier this year is a case of fiddling while Rome burns. The Government are committed to the vibrancy of our high streets through various initiatives that will be outlined in my hon. Friend’s winding-up speech.

Indeed, the Bill is also an important measure; it is a measure that businesses have called for. Given the statutory nature of HMRC, it is impossible to move forward without this short piece of legislation. The reason for that is that businesses today receive separate business rates bills for each non-domestic property they occupy. Large businesses with property in different areas may receive bills from a number of local authorities responsible for issuing bills and collecting payment. It is worth bearing in mind that there are over 300 different billing authorities today, each with its own system of billing for business rates. While I pay tribute to the good work carried out by local authorities in administering business rates locally, the Government’s clear view is that reforming the system to more closely link with the wider management of business taxes led by HMRC could unlock long-term improvements to the current system.

Members will appreciate that implementing any reform of this scale takes significant time and that it is critical that the Government engage with businesses and local government in developing and designing any new digital system; indeed, the hon. Member for Oldham West and Royton brought that up in Committee during consideration of the previous Bill. I am pleased to tell him that the measure before us today will take many years to come to full fruition. The current intention announced by the Treasury is that any new design of the system will not come into force until after the next revaluation, in 2024. What we are doing today is therefore just a very small first step on a journey that requires an enormous amount of engagement and consultation.

Before I call the Opposition spokesman, with the leave of the House, and most unusually, I am sure the House would like to join me in wishing the Associate Serjeant at Arms, who occupies the Serjeant at Arms’ Chair, a very happy birthday.

I will not put the House through a rendition of “Happy birthday”—[Hon. Members: “Shame!”] But many happy returns.

Perhaps this is a missed opportunity. It is a shame, really, that the Bill is so narrow, because we have a good five hours where we could have talked about the real threats our businesses face, the dangers to our high streets and the many representations made on this issue. Nevertheless, this Bill is progress. Following the falling of the Local Government Finance Bill when the general election was called, we encouraged the Government to come forward with non-controversial elements of that Bill. Clause 14 was not controversial, so I am glad to see it in this Bill.

Local councils are on the frontline of government, delivering services that people rely on and which both support and enrich our communities on a day-to-day basis. Labour welcomes the modernisation of tax collection and the move to online payment and account facilities. However, the proposal to develop an online payment system led by HMRC, as set out in the Bill, does raise some questions.

Madam Deputy Speaker, I refer you to my entry in the Register of Members’ Financial Interests as a vice-president of the Local Government Association, the body that represents councils, which are the billing authorities responsible for the collection of business rates. It, like me, wants confirmation that the move to develop an online payment collection facility will not change the fundamental and historical role of local councils as billing authorities with the legal responsibility for the collection of business rates. In the design of this new bridging system, to what extent have the Government sought input and representation from local government? Local government has significant experience in designing systems and processes, and it is important to draw on that to make the best of this proposal.

One of the reasons that there is a reaction from businesses regarding the level of business rates is that while central Government should have been responsible for funding certain services, they have shoved that on to local authorities, which have had to put that through business rates, just like the police and fire authorities’ precepts.

It is a matter of fact that the Government are moving towards the self-financing of local government. That is fine if a local authority can generate money through business rates and council tax in its local economy, but if, for whatever reason—usually for historical reasons—it is not able to do that, the Government do not care if councils sink or swim. That is no way to fund adult social care or children’s safeguarding services, or to make sure the homeless get the support they need either. Quite frankly, it shows a callous disregard for the role of central Government in making sure that every area gets its fair share of funding. That is a critical point.

Anybody who has any experience of local government—my hon. Friend does, as do I and many others in here—knows that three or four years down the road, though they hint at looking again at business rates, Ministers will come along and tell everybody in local government, “You’re profligate, you’re spending too much, so we’ll cap you.” As I am sure he will remember, we have had all this before.

The hallmark of local government across parties—this is not a party point—is that people roll up their sleeves and get on with it. They do not complain; instead, they find solutions to the difficult challenges facing the community, but that is made much harder when central Government are disconnected.

Successive Secretaries of State have failed to champion local government, which is why I welcome our shadow Secretary of State having that local government background and experience and really believing in it. I hope he will be Secretary of State in the future, leading on this from the Government Benches. It is critical that the Secretary of State should not batter local government all the time. It needs a champion to celebrate what goes on in every community and, regardless of party affiliation, to fly the flag for what has been proven to be the most efficient arm of government—they are our champions, and we should thank them for all the work they do.

By 2025, there will be a funding gap in local government of £8 billion, and by 2020 local authorities will have faced core funding cuts at the hands of central Government of nearly £16 billion since 2010. That means that councils will have lost 60p for every £1 the Government previously provided to cover local public services. Next year, 168 councils will receive no funding whatever from central Government to meet the cost of rising demand for local public services.

What impact will that have? We can talk about the big numbers, and £16 billion is a huge number and has had a huge impact, but this is really about people and communities—the streets where people live, the communities that bind people together and make places decent places to live. The cuts have had a dramatic impact on government services. Youth centres have closed; libraries have reduced their hours, and hundreds have closed altogether; and meanwhile, social care is on the verge of collapse. Warning after warning has been issued, but the Government, particularly the Treasury, have not come to the table. As a result, our councils are having to make difficult and unwelcome decisions about where to make efficiency savings, and that is hampering their ability to prioritise social good above all else.

I have declared my business interests in the Register of Members’ Financial Interests, but I am not speaking for them of course; I wish to speak on behalf of the retail businesses in my constituency, as others have already done.

While I am sure it is well intended and necessary to develop a digital payment system for this tax, can the Minister reassure us that it will not be used as a device by the Treasury and others to accelerate payments and to damage further the cash flow of the shops and other businesses that have to pay it? There is the temptation to use the power of digital technology to have real-time information and then to knock the money off for the tax rather more quickly, when the timing of tax payments may be an important part of cash-flow planning, particularly of retail businesses.

I hope that Ministers are sensitive to the current position in many high streets up and down the country. Large chains and other sizeable independent shops are struggling because their cost base is very high, and they are competing with online retailers who have nothing like the same cost base in terms of property and staff numbers. They are finding it difficult to manage, and another hit on their cash flow from the Government would not be welcome.

Rents are now falling in shops generally in England and Wales, the area covered by the Bill. Some retailers are talking about reductions of 25% or 30% as and when the rents on various shop properties become due for review. That relief is welcome to some extent, but it takes time, because many of the leases are for several years and have to mature before renegotiation is possible. Some retailers must go through the agony of a voluntary administration to secure a change in their rents. Another problem is the fact that rents can go down through market processes, but rates never go down, except in the case of very small shops that benefit from one of the exemptions. So the total property cost does not fall at anything like the percentage that the market is suggesting that it should, because the Government element is very fixed. I hope that Ministers will be sensitive to that.