Part of Non-Domestic Rating Bill - Report – in the House of Lords at 4:00 pm on 19 September 2023.
My Lords, now that we have begun Report, I remind the House that I am a vice-president of the Local Government Association.
I have said previously that there are many good things in this Bill. When we have moved amendments, as we are doing today, the aim is to make it a better Bill. The Government—any Government—face huge challenges with business rates. Inflation-linked rises in the cost of business rates is one challenge, and I think it is generally acknowledged that business rates have simply got too high for many businesses to cope with. Proportionately, when you go back one or two decades, business rates are indeed very high.
A second problem lies with internet sales, which, frankly, are destroying the high street. One-third of retail sales are now online, and that is having a devastating effect. Just two days ago, the British Retail Consortium wrote to the Chancellor, calling on him to freeze property taxes in order to prevent further high-street closures. As the consortium said, a rise would have the impact of
“threatening the viability of many shops and hindering the industry’s capacity to invest”.
I subscribe to that view, and I hope that when we come to the Autumn Statement some indication will be given that that will be the Government’s intention.
As I said in Committee, while I welcome revaluations moving to every three years, I would prefer them to be every two years, because valuations that are more up to date reduce costs and confusion and make life easier for lots of businesses. I see this Bill as a staging post to getting to two years—we shall look at that in a future group. I would also prefer locally set multipliers and would like to think that the Government would look at greater fiscal powers for local government over the next two or three years. That said, this Bill makes positive changes, and I would now like to address the amendments that I have put down to make the Bill even better.
In moving Amendment 4, I will also speak to Amendments 16, 17 and 18. The intention of Amendment 4 is to remove the prohibition on a billing authority giving relief on a hereditament occupied by a billing authority, precepting authority or GLA functional body. These prohibitions prevent authorities awarding relief to premises such as markets which they own. This was a particular issue in the 2020 retail, leisure and hospitality relief, where billing authorities found that they could not give relief to premises of which they, or a precepting authority, were the occupier—including, for example, local authority markets. My amendment, which is supported by the Local Government Association and by the National Association of British Market Authorities, would address this problem.
There are in the country some 1,150 markets, of which 84% are operated or controlled by local authorities. They perform a vital role in the retail sector and our community infrastructure, and many have long histories. During the recent Covid pandemic, however, these markets were unable to enjoy the substantial financial help provided by the Government on business rates because of a restriction in Section 47 of the Local Government Finance Act 1988 that prevents a local authority giving relief to itself or to a precepting authority. Local authority markets were obliged to bear the full burden of business rates while many businesses and, indeed, markets operated by private and community organisations were able to take advantage of the substantial help provided by the Government.
In 2022, the National Association of British Market Authorities carried out a major survey of our markets. Stall occupation in many markets has fallen significantly from 2018, when the last survey took place. The number of traders continues to fall: five years ago, there were 32,000 market traders; last year, the number had fallen below 30,000. Many local authorities report having to subsidise their markets to enable them to continue operating. With the many demands on local authority budgets, there is a prospect of these subsidies being withdrawn to protect front-line services, which could threaten the continued existence of many markets, many of which are a venue for information on a wide range of public services, making available banking, library and health services where such services are no longer represented at other venues in the area.
The Government have previously changed their position on this general issue as they granted a specific exemption to Section 47, providing that local authority public conveniences should no longer be liable for business rates. This earlier concession provides added support for the amendment now being sought.
Amendment 16 would require the Secretary of State to consult on the benefits and practicality of a system of accreditation for rating advisers. This amendment seeks to explore an avenue to combat the rogue and unprofessional practices of some rating advisers. It is about having a consultation, because the new system defined in the Bill will get more complex, with new reporting requirements and demands for greater accuracy. There will be greater demand for rating advisers. In my view, such rating advisers should be accredited and maintain professional standards if they offer commercial services. Therefore, I advocate a consultation on what steps should be taken.
Amendment 17, supported by the noble Lord, Lord Black of Brentwood, who is unable to be here today but whom I thank for his support, provides that advertising rights in respect of social infrastructure sites, including bus shelters, other advertising rights granted by contracting authorities and public telephone kiosks shall be exempt from local non-domestic rating. The current business rates system is challenging the viability of advertising-funded social infrastructure and community services. It is now increasingly at risk. Yet these sites return value to local communities through rental payments, service provision, their installation, their very existence, their cleaning and their maintenance, as well as any other social investment, including living roofs, air quality sensors and solar panels, all of which help local authorities meet their net-zero targets. If a business rates exemption applied, it could lead to higher investment directly into local communities. Councils can benefit from rent, revenue and profit sharing currently amounting to around £143 million a year, paid directly to them, but it is claimed that the new legislation that the Bill represents puts this at risk.
From a recent article I read on the matter, the problem seems to be that business rates may increase every three years. If I had my way, there would be a two-yearly review, so it is possible that in some cases business rates would increase every two years. Industry agreements with councils, however, typically have a term of seven to 15 years, so business rates may therefore increase at least five times during a standard contract term. That assumes that business rates are increasing—which they could—so regular changes to business rates would make financial planning for such contracts much more difficult than it currently is and would require the industry to hedge against future rates increases. It may well impact on the amount of support that local authorities have.
There are 36,000 advertising sites subject to business rates. Every one is valued, invoiced and paid individually. There is a huge amount of work for the Valuation Office Agency, local councils and operators. Yet social infrastructure sites are low-value, accounting for only a quarter of all business rates income generated by advertising rights. This amendment is about only social infrastructure sites. I hope the Minister will be able to respond positively to doing some further work on this. I accept that we need to build support across all parties and levels of government, but there is an interest here in supporting our social infrastructure.
Finally, I come very briefly to Amendment 18, which states:
“The intention of this amendment is to introduce into law the power to make anti-avoidance regulations, as provided for in Part 4 of the Non-Domestic Rates (Scotland) Act 2020. The amendment mirrors Part 4, with such changes as to make it applicable to UK law”.
It would help to have further action on business rates avoidance, along the lines introduced in Wales and Scotland, to ensure that the rules on reliefs, such as empty property and charitable relief, are applied fairly. I know the Government are considering this issue and any update the Minister can give would be helpful. It is estimated that around 1% of total business rates income—around £250 million—is lost to business rates avoidance each year. It may be only 1% but it is a substantial sum and therefore anything the Government do to replicate what is now happening in Scotland and Wales would be very helpful in England. I beg to move Amendment 4.