Amendment 1

Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill - Report – in the House of Lords at 6:39 pm on 1 December 2021.

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Baroness Pinnock:

Moved by Baroness Pinnock

1: Clause 1, page 2, line 20, at end insert—“(7A) Before the first determination to which this section applies is made, the Valuation Office Agency must publish a statement outlining—(a) how many checks, challenges or appeals in relation to a material changes of circumstances due to the coronavirus pandemic it has received and what the total monetary value of those checks, challenges or appeals is, and(b) its assessment of the impact of this section on the ability of the current system of business rates to—(i) provide an effective form of funding for local authorities; and(ii) support town centres and local high streets.”Member’s explanatory statementThis amendment would require the Valuation Office Agency to publish information on applications relating to a material changes of circumstances, and whether the changes introduced in this Act will support local authorities, town centres and high streets.

Photo of Baroness Pinnock Baroness Pinnock Liberal Democrat Lords Spokesperson (Levelling Up, Communities and Local Government)

My Lords, I draw the attention of the House to my relevant interests as set out in the register, as a vice-president of the Local Government Association and as a member of Kirklees Council. I am speaking on Amendment 1 in my name and that of my noble friend Lord Fox, and on Amendment 2 in the name of the noble Baroness, Lady Blake.

I and my colleagues support the principle of the proposals—as I have said at every occasion—in relation to the non-domestic rates element of the Bill. Businesses have faced challenging circumstances due to Covid, and these challenges remain. Understandably, businesses have reviewed their position, and some have decided to use the VOA check, challenge, appeal process to seek a reduction in their business rates. The VOA publishes quarterly statistics of the numbers of businesses using the process to appeal their rates. The statistics do indeed show a spike in both the check and challenge elements of the process. For example, there were around 80,000 checks requested in the March to June quarter of 2020 —this spike compares with an average of around 10,000. However, 70,000 of these checks were quickly resolved. There were around 22,000 challenges in the next quarter, but fewer than half seem to have been resolved. There is clearly a significant increase in the volume of claims being received by the VOA. However, the value of these claims, including the value of successful claims, is not revealed.

Throughout the course of the Bill, I have been concerned to establish the evidence base for its proposals, including, importantly, the total value of successful and potentially successful claims which would result in a loss of business rates income. A loss in business rates income has a direct and adverse impact on local government finances, which have already been squeezed dry. Responding in Committee to similar concerns that I raised, the Minister was unable to give a categoric assurance that there would be no loss of income for local government. The Minister stated then that

“central government will meet 75% of the costs of irrecoverable losses in business rates income for 2020-21.”—[GC 522.]">Official Report, 10/11/21; col. GC 522.]

Can the Minister confirm that local government will not be paying for any losses in business rates due to Covid?

Further, it is widely accepted that the existing system of business rates is ineffective and woefully inadequate in ensuring that retail businesses that use online ordering are paying at the same rate as those on traditional high streets that the Government often profess to want to support but lamentably fail to.

Amendment 2, in the name of the noble Baroness, Lady Blake, seeks a review of the impact of the changes and of whether business rates are fit for purpose. Any government review with recommendations to try to fix this broken system is welcome, and we support the sentiments in this amendment. I beg to move.

Photo of Baroness Blake of Leeds Baroness Blake of Leeds Opposition Whip (Lords), Shadow Spokesperson (Housing), Shadow Spokesperson (Communities and Local Government)

My Lords, I declare my interests, particularly as a vice-president of the LGA. I will speak to Amendment 2, in my name, and to Amendment 1, as introduced by the noble Baroness, Lady Pinnock.

As we begin Report, I remind the House that we are broadly supportive of the Bill and recognise that action needs to be taken swiftly. The measure in the Bill to rule out Covid-19-related material change of circumstances business rates appeals—that is quite a mouthful—coupled with the announcement of £1.5 billion in funding to provide additional targeted support to those businesses that have not already received rates relief, provides some certainty for local government.

The noble Baroness, Lady Pinnock, referred to the impact on the finances of local government, and that of course broadens out to the challenges of the whole pandemic period. In Committee, I was reminded that, only nine months ago, I was the leader of the second largest metropolitan authority in the country. The financial aspects around Covid back then were incredibly concerning, and they continue to be so.

I emphasise the real concern expressed across the local government sector about how that figure of £1.5 billion was arrived at. It sounds a significant amount of money—and indeed it is. The point I keep coming back to is whether it matches the need that it is there to cover. Is it sufficient to prevent businesses falling through the cracks? Will it address the Government’s long-term neglect of the UK’s high streets and local businesses?

I draw attention to the wider issue that remains: whether business rates are fair and effective. In October, the CBI, along with 40 trade associations—including the British Retail Consortium, UKHospitality and the SMMT—representing about 261,000 businesses, called for the reform of the current business rates system, stating that the

“existing, outdated and outmoded business rate regime acts as a drag on … a high wage, high productivity and high investment economy.”

Amendment 2 seeks to get to the heart of this issue for businesses up and down the country. It would ensure that a report is produced on whether further legislation is needed on factors which may or may not be taken into account in making a relevant determination in relation to business rates. Her Majesty’s Opposition would like a root-and-branch reform of the business rates system, to make it fair and to help bricks-and- mortar retailers compete with online tech giants. Such reform cannot come soon enough. Data from the ONS in October revealed that up to 332,000 businesses, employing over 800,000 people, are at risk across the country. We need to shift the burden of business taxes to create a level playing field, moving away from one that punishes investment, entrepreneurship and the high street.

I look forward with interest to hearing the Minister’s comments, particularly referring back to the discussions that we had in Committee. A significant number of concerns were expressed from all sides of the Chamber at the way that this legislation has been brought forward; we need to put a marker down around that. Having said that, given the critical situation facing businesses, and therefore local authorities, and therefore communities, we recognise the need to move forward with the legislation, but we need to recognise that there are some very serious questions still to be answered.

Photo of Lord Leigh of Hurley Lord Leigh of Hurley Conservative 6:45, 1 December 2021

My Lords, I want to add my comments on Amendment 2. I remind the House of my interests: I advise SME businesses and am also a landlord.

Increasingly, a number of people that I talk to, specifically in the retail sector, are very concerned that the Government are not listening to their concerns in respect of rates. Over the last 18 months, a number of companies have gone through CVAs. As a result of those CVAs, they have entered into turnover-based rents with landlords, enabling them to carry on trading from particular locations. But the size of the rates has meant that, despite having turnover rents, they are not able to carry on trading from retail premises, specifically because of the rates; more importantly, they are not able to open new locations that would otherwise be economically viable because of turnover rents, specifically because of rates.

I do not expect my noble friend the Minister to answer these concerns in this debate on this amendment, but business, particularly the retail sector, would like it acknowledged that the Government are aware of, focused on and planning steps to address this issue.

Photo of Lord Greenhalgh Lord Greenhalgh The Minister of State, Home Department, Minister of State (Department for Levelling Up, Housing and Communities)

I thank noble Lords for raising two important issues. The noble Baroness, Lady Pinnock, asked whether we will have data to know whether the £1.5 billion is enough and that we are not short-changing local government in any way. The noble Baroness, Lady Blake of Leeds, wanted to know about the future of business rates reform, given that we are seeing the economy shift to online and that many bricks-and-mortar businesses are struggling to pay their rates bills. I will try to address those points in turn.

I can give the noble Baroness, Lady Pinnock, some assurance on the availability of VOA statistics, which tell us about the adequacy of the Government’s support. During 2022, the VOA will provide new data specifically marking out Covid-related MCCs but, even in the existing data sets, we can get an insight into the nature of these cases. I quote more recent figures from October: as of 30 September 2021, 63,780 challenges were outstanding in England, the vast majority of which are on hold pending this Bill. Far more challenges could come forward from ratepayers who have already made checks—a check being the first stage in appealing the rateable value of one’s property. In the period since April 2020, the VOA has received more than 400,000 checks. So, there is a wealth of statistical evidence out there and it will be enhanced next year. This evidence cautions against any suggestion that we should introduce a like-for-like compensation for Covid-related reductions in rateable value, which, on account of this Bill, will rightly not materialise. That was never the intention, and we should not seek to create an equivalence.

On the point made by my noble friend Lord Leigh of Hurley and the noble Baroness, Lady Blake, we recognise that particular industries have been hit very hard by the pandemic. We have statistics on the drop in gross value added by industry, and there is a wide range of reductions by sector. That comes to the question of how we divide the £1.5 billion, which I will return to in the debate on the next group of amendments.

Let me give the Government’s most up-to-date position. Following the conclusion of the business rates review, the Government will shortly consult on measures arising from that review and seek to bring forward legislation in due course. The consultation was published only yesterday and explicitly anticipates future legislation to deliver major reforms. These include three-yearly revaluations, a major ask of ratepayers, support for property improvements and support for green plant and machinery. So, noble Lords should have complete confidence that there will be an opportunity for them to consider, debate and scrutinise these measures and the Government’s overall business rates policy.

I should have declared my residential and commercial property interests as set out in the register; I forgot to do that right at the beginning. I must underline that I have not been involved with any material change of circumstance approach, but I recognise that many businesses, including many small businesses, are waiting eagerly to hear how we will resolve this situation.

Photo of Baroness Pinnock Baroness Pinnock Liberal Democrat Lords Spokesperson (Levelling Up, Communities and Local Government)

My Lords, I thank the Minister for his response. We clearly had evidence of the volume of appeals by businesses. I am still concerned about the value of those and whether sufficient money is being made available to recompense businesses, but we will come to that in the next debate. Having said that, I thank the Minister for his reply and beg leave to withdraw the amendment.

Amendment 1 withdrawn.

Amendment 2 not moved.