Amendment 5

Part of Non-Domestic Rating Bill - Report – in the House of Lords at 4:45 pm on 19 September 2023.

Alert me about debates like this

Photo of The Earl of Lytton The Earl of Lytton Crossbench 4:45, 19 September 2023

My Lords, I congratulate the noble Lord, Lord Thurlow, particularly on Amendment 19. It is a pleasure to follow the noble and learned Lord, Lord Etherton, on this because it strikes at the heart of what I have always felt about the rating philosophy. The noble Lord, Lord Shipley, inferred a few minutes ago that rating is demanding too much of the tax base to which it is applied. I have made the same point myself over many years. I remember one eminent rating surveyor telling me, “You know, once the rate in the pound starts to get near to 50%, things start changing. People’s attitudes start changing”.

I am afraid that HMRC, which has global responsibility for this, has been extremely slow to catch up with what is happening and to realise the paradigm shifts created by the increasing burden of business rates. Leaving aside things such as small business relief and so on, I did a calculation—a few years ago, so the analogy is even more potent now—showing that business rate payers in small premises of between 1,000 square feet and 3,000 square feet were paying materially more by reference to property value and square footage occupied, by some considerable factor, than their residential counterparts. I use that because when I first started working in this area, in what was then known as the Valuation Office, all those years ago, there was a common rating system, and residential and commercial had a common base. That is why I got little old ladies in cottages in Lewes High Street in Sussex complaining that the pub next door, which sold all this liquor, had a rating assessment that was half theirs.

What has happened is that, because of the burdens, markets have shifted. The noble Lord, Lord Thurlow, referred to traders who operate from industrial estates— I think that was one of his examples. I used to joke about this, because the archetypal online operation was a stockroom that was a van on the motorway somewhere, a showroom that was a glossy website, a till that was an online payment portal and a communications system that was a pocket mobile and an email address—this was how the thing operated. People have got very slick, because now you have a big industrial shed at the front of which is a retail and trade counter, which occupies quite a small part of the footprint, and the rest is a big storage shed. We all know the names they have. They sell plumbing, electrical equipment, household goods, all of which you can order online. This is one of the difficulties, because seeing the opportunities of online, many of these operators have seen that the two operate very beneficially with the physical hereditament they occupy as well: the two have a synergy that works effectively. This is absolutely a moment when the Government need to take stock.

The amendment of the noble Lord, Lord Thurlow, refers to high streets. I will return to this in a few minutes when I get to amendments of mine. Unless we get this right, the attrition of high streets will continue, and they will change into something that is not a general purpose destination for people wanting to shop for everyday goods. They will become a sort of entertainment centre with restaurants and bars and the night-time economy. That may be a good idea, but there is an area of conflict here. If we want to bring residential property back into town centres, then residential occupiers do not relish the thought of people turning out at eleven o’clock at night, having had a jolly good time at the bar. That is one of the issues. Another issue is that a lot of these places need to be serviced; they need to have their bins emptied. If there is a local authority or contractor refuse lorry turning up at 6 o’clock in the morning, people will get fed up with that.

We have to start getting this right, as to what the complementary uses are and how to deal with them. More particularly, how do we reverse this process of the alienation of people—who are otherwise willing and able traders—from our traditional high streets? This matters because that is how they are designed and built. That is the social construct that led to the buildings being built and appearing the way they are. I shudder at trying to transform them into totally different uses. When I see things like permitted development for change of uses in town centres, I worry about what will happen and whether that is an irreversible change that will produce more of the conflicts that I have referred to.

Although I slightly shudder every time somebody mentions a review of business rates, because we seem to have an awful lot of them, I think that this is a body of work that needs some serious thought from academics, practitioners and particularly from people like valuers and retailers, because that is where this analysis comes in. The valuers are not making the roles; they are simply interpreting how people go about their business and do their trade. The derivative is a value, and whether it is a rateable value, a capital value or for investment purposes, we need not alienate these purposes. I congratulate the noble Lord, Lord Thurlow, because he has raised an absolutely fundamental point in relation to non-domestic rates.