I beg to move amendment 52, in clause 42, page 30, line 8, leave out from “14” to end of line 21 and insert

“Schedule 3 and this section.

(2) The remaining provisions of this Act come into force on 1 April 2019.”

This amendment would provide that the provisions of the Bill as enacted, other than the provisions relating to telecoms relief, guidance about notices relating to non-domestic rates and the provision relating to preparatory expenditure for digital services come into force on 1 April 2019.

With this it will be convenient to discuss amendment 54, in clause 42, page 30, line 8, leave out from “14” to end of line 21 and insert

“Schedule 3 and this section.

(2) The remaining provisions of this Act shall only come into force after the Secretary of State—

(a) has conducted a review into the future of business rates, and

(b) has assessed the impact of the future of business rates on local government finances.”

This amendment would require the Secretary of State to conduct a review into the future of business rates and their impact on local government finances before the commencement of the Bill (save for the provisions under sections 8, 13, 14 and Schedule 3).

Amendment 52 would allow key provisions, including telecoms relief, the issuing of key bits of guidance and the commencement of digital preparatory work, to be implemented after the Bill receives Royal Assent, but it would delay the coming into force of all other provisions until 1 April 2019.

The reason for the amendment is that the delay would allow more public scrutiny of the impact of 100% business rates devolution after the implementation of some of the other key elements of the proposals, such as the fair funding review, the needs assessment and the detailed regulations. A consultation was also launched by the Minister last week. One would hope that by 2019 the responses will have been made fully public and that we will be able to assess the impact of 100% business rates devolution in each local authority across the country. There might be scope, where there are problems, for further conversations with Ministers before the legislation passes and we are set on a path that might be difficult for one or two local authority areas.

A series of additional annual local government finance settlements will, of course, provide an opportunity to scrutinise the overall position of local government finances as details of the new systems bed down fully. When does the Minister expect the annual local government finance settlement provisions to be implemented? That will tell us whether tomorrow’s annual local government settlement debate will be the last one, or whether there will be other opportunities for hon. Members to raise concerns annually about the state of financing for local public services.

We want key bits of the Bill to proceed, but there are many unknowns about how it will work in practice. It would be sensible to pause once the Bill comes into force, in order to allow more information to become available about how the system will work in practice. Let us remember the particular challenge currently faced by local authority public services: social care is in crisis. I am sure that no one in this Committee would want 100% business rates devolution inadvertently to worsen the situation.

Efforts have apparently been made by the Cabinet Office, which has been tasked with coming up with proposals for the long-term future of social care. By then we might have some clue of what is emerging from that review, which might or might not give confidence to local authorities and the many critical charities such as Age UK that observe carefully what is happening. More importantly, it might reassure those who are getting older that the care they deserve will be in place. If we rush ahead and allow the Bill to become law before all those additional details are available, there is scope for concern about whether the problem will have been addressed.

There are big concerns for those authorities that do not have huge amounts of space for business expansion of the sort provided by property-based, Amazon-style warehouses, of which I think the hon. Member for North Swindon is a fan. He sees Swindon potentially benefiting from that type of expansion as a result of this Bill. Clearly, some local authorities could experience that type of expansion, but others will not. I have given the example of Allerdale Borough Council, which has a whole series of natural barriers to that type of economic growth.

I rise just to confirm that Swindon is benefiting from huge economic growth and a fall in unemployment of more than 60% since 2010 and that 8,100 more people are in jobs. I would welcome any businesses that want to relocate to a growing, successful Swindon.

I welcome that. I can only hope, given what the hon. Gentleman has just said, that there are no businesses in Swindon that are worried about the revaluation of business rates, which is what he implies. Perhaps we can discuss that issue when we consider amendment 54.

We know that the social care system is in crisis. We do not want to make that worse, but we also know that a series of other statutory services are not being properly funded either. Full business rates devolution potentially provides the opportunity to close some of the £5.8 billion funding gap that the Local Government Association has identified. However, there is a “but” to that. One of the few things we do know as a result of the summary consultation document published last week is that Ministers intend to axe the £3 billion public health grant that currently goes to local authorities, plus the rural services grant, which may interest the hon. Member for Thirsk and Malton. They have also confirmed the abolition of the Greater London Authority transport grant.

Already, therefore, some of that potential additional £12.8 billion of business rates has been spent, just in the two weeks that we have been considering the Bill. Hopefully, by 2019, we will know exactly what additional responsibilities Ministers want to require of local government and whether there will be any section 31 grants to help to pay for those additional responsibilities. As a result, we will be in a better position to assess the long-term financing of local government.

There is also the question of whether the system of business rates is affordable. I will dwell on that issue in speaking to amendment 54. One of the benefits of amendment 52 is that it would delay the triggering of the majority of the Bill’s provisions, which would give us the chance to have a period to assess properly whether the business rates system is fit for purpose. In that context, I offer amendment 52 as a sensible opportunity to pause, to reflect on local authority financing and to consider whether the business rates system is entirely fit for purpose, or whether there are other ways that we need to think about in terms of the financing of local government.

There is huge concern across councils up and down the land—not only Surrey County Council, but across local government—about their finances. The last thing we want to do is to make the situation worse by getting wrong the implementation of this particular proposal.

Let me turn to amendment 54, which you, Mr Gapes, very generously allowed the debate to begin on. The question is: do business rates work for businesses, do they work for local authorities and do they work for public services? It seems to me, given the huge concern that exists about the business rate revaluations and given other concerns about how local government will be financed, that there should be a full review of business rates before this Bill comes into force.

Given that six of Amazon’s nine distribution warehouses are set to have a fall in business rates, given how little it pays in corporation tax and given how high the business rate bill is going to go up by for many small and medium-sized businesses in our high streets, we have to wonder whether we have the system as correct as we might. The British Retail Consortium has repeatedly voiced the concern—and so did we, earlier in the Committee’s consideration of the Bill—that online retailers have an advantage in terms of costs over businesses that rely on bricks and mortar, not just because their liabilities are lower but because they can offer cheaper prices compared with those on the high street who have to pay business rates. What does that mean for the long-term future of our high streets up and down the country? My hon. Friend the Member for Oldham West and Royton and, to be fair, the hon. Member for North Swindon alluded to the importance of our high streets as community centres and the sense of place that we all value.

Reputable media outlets such as The Times have suggested that online retailers are rated at less than one eighth of the valuation per square metre of some small shops. That is a huge cost differential. Whether it is fair is an open question but, as our economy begins to change significantly and technology moves forward rapidly, we need to think about whether we are levying tax on business in the most appropriate way.

Business rate revaluation hits businesses hardest in areas that have seen rapid property price increases. London is one of the most severely affected areas. It is not just London, though, that is severely hit. I want to come on to Southwold in Suffolk, just south of the Waveney constituency. Sadly, the hon. Member for Waveney is not with us today. He might usefully have reflected on that story. However, we do know that many businesses in Suffolk have raised their concerns.

How significant are the increases in London? You will be interested in this, Mr Gapes, given the constituency you represent. I am sure that the hon. Member for Thirsk and Malton will take this particularly seriously, even if he does not like London very much. The FSB says that business rates in the capital are set to increase by 11%. In some parts of London, the increases are much more significant than that. For example, in Islington, rates are set to increase on average by 27%, and in the City of London, by 25%. In some areas of Mayfair, the increase will be as high as 415%. In the constituency of my hon. Friend the Member for Lewisham, Deptford, the business rate is set to increase by an average of 36%. My hon. Friend the Member for Eltham, who could not be here this morning, will see business rates increase on average by 21% in his borough of Greenwich. Forgive me for being mildly parochial, but in Britain’s most important borough, Harrow, business rates are likely to rise by an average of 14%. In Hillingdon, which is next to Heathrow airport—set to benefit from a third runway—rates will increase by an average of just 1%.

I hear what the hon. Gentleman says. He knows that this is an independent revaluation, not a revaluation that has been directly undertaken by the Government. If he is so opposed to the way this revaluation has been undertaken, why did his party not oppose it when it went through both Houses of Parliament?

I must gently say that not even we thought that the Government could get this so badly wrong. I want to come on to the question of resources for the Valuation Office Agency, which have been significantly cut and are leading to many delays in appeals by businesses that have genuine concerns about their revaluation, which has not helped either.

There is a more general point. As politicians, we cannot always predict what is going to happen, but we should be willing to react when circumstances change. There is such concern across the business community about the potential impact of the revaluation on small and medium-sized businesses that it is time that we listened to those concerns.

My hon. Friend mentioned a situation I am in. I bear no candle for London, with due apologies, Mr Gapes, but I understand from the Federation of Small Businesses that the Government are really on the back foot. Small business rate relief will benefit 16% of businesses in London but 32% of businesses in the rest of England.

My hon. Friend makes his point and he may have the chance to expand on it. It is worth listening to the FSB. In a London context, it is calling for higher inner and outer London small business rate relief thresholds to reflect the specific problems faced by small businesses in the capital. In inner London, it argues that the threshold for 100% relief should be a £20,000 rateable value, tapering to £23,000. In outer London, where rateable values have fortunately increased by a slightly lower percentage, it believes that the threshold for 100% relief should be £15,000, tapering to £18,000. It suggests that Ministers might be tempted to look at a system of transitional relief. That has happened in previous revaluations. However, it wants small businesses to have certainty for the future. Although transitional relief would be helpful, its argument is that the system needs a fundamental look-at to reflect the problem properly.

Order. I think I have been very tolerant so far in allowing the discussion to range over matters that could potentially not be within the scope of the two amendments. I should be grateful if the hon. Gentleman focused specifically on the amendments.

Absolutely, Mr Gapes. I would not want to do anything other than that. I gently make the point that businesses continue to have concerns about the way in which business rates are levied, and that local councils are concerned about whether the business rates system will provide sufficient revenue for the provision of statutory services. We can understand their concern. Therefore, I think that it is right that we have tabled amendment 54 to require the Secretary of State to review the future of business rates and their impact on local government finances before the commencement of the Bill.

I gently suggest that, if business rates do not have the support of the business community, it will make it very difficult for local councils that want to explore with that community the case for investment in infrastructure in their area, of the type we have been discussing, under the business improvement districts or the property owner levy. We have heard the Minister confirm that there is potential for an extra 4p on business rates as a result of the way the legislation has been drafted. In the context of the anger about the business rates revaluation, Labour Members are worried that local authorities may not have the support they need for investment in their authorities, if they want to encourage businesses to think about business improvement districts.

We should take seriously the concern that some businesses—in particular online businesses—are not contributing as much as they might to local government finances, whereas businesses that are active on the high street are dependent on having a significant property. In that context, I think of the newsagents on Southwold High Street that is set to see a staggering average increase of 177% in its business rates as a result of revaluation. We hear of impacts up and down the country—on wine merchants, on nurseries. Given how little online businesses have to pay in comparison with those bricks-and-mortar businesses, one has to wonder whether there will be sufficient resources available to local government as the 100% business rate devolution takes place.

Let us also remember the business rate change initiated by the last Chancellor—sacked for incompetence, as we know, by the Prime Minister—switching from using RPI to CPI and the potential, according to the LGA, for London local councils to lose £80 billion over the next 20 years as a result of that one change.

All of a sudden the hon. Gentleman seems to want to be the champion of small business—something many of us would find difficult to recognise—by saying that business rate bills are too much for businesses. When this Government bring forward a measure in this Bill to reduce the indexation on the business rate multiplier from the higher RPI, to the lower CPI, which would save businesses hundreds of millions of pounds in its first year alone, he seems to oppose it. What is his position?

The Minister is being inaccurate. As he knows full well, we did not oppose that change; we do want to help businesses. We are the party of small business in particular, but the party of business more generally. When business groups make serious representations to us, we listen. They are profoundly concerned about the business rates revaluation. Surely it is also the responsibility of all of us in the House to consider whether business rates will provide sufficient revenue for local authorities to fund essential public services. Local authorities express serious concern to us as to whether, given the huge cuts to revenue support grant, business rates, which will be one of only two key sources of local authority income down the line, will provide enough resource. When one considers too the impact on other public services, such as schools and hospitals—we will look at that, I hope, as part of new clause 4 or 8 I think, this afternoon—

Not this clause.

Definitely not this clause, but it is important to be aware of that in the context of the need for a full review of business rates. I gently suggest to Ministers that they need to take their fingers out of their ears, listen to the concerns of business, the LGA and others and agree to support amendment 54.

I shall focus on proposed subsection 2(a) as inserted by amendment 54, asking for a review into the future of business rates, and why I think the Government ought to support the amendment and accede to that request. I will make a few brief remarks as to why I think a wide-ranging review is necessary.

I referred earlier this morning to the fact that businesses could be faced with six different and overlapping rates: business rates, business rate supplements, business improvement districts, BRS-BIDs, the infrastructure levy and the combined authority supplement or levy. It is a very complex system, it is getting more complex, and it is overlapping.

Some proposals in the Bill would be delayed were a review brought in. The Opposition asked for evidence from the Government on the rationale for bringing in the changes and what they would in fact do. We asked whether there is evidence that the incentivisation—much heralded by the Government—will take place. In the course of the Committee’s consideration of the Bill thus far, I have made six direct requests of the Minister. My excellent researcher, Imogen Watson, has dug out the number of occasions on which the Government were asked for evidence for the measures that would introduced under clause 42 and their phasing, which would be delayed by amendment 53. The Government could have put forward evidence 33 times, and they singularly failed to do so on every occasion.

We read all over the press about the absolute mess with the evidence, which has been provided to one set of MPs—apparently it has been produced for Government MPs, but not, disrespectfully, for Opposition MPs. Certainly my four hon. Friends in the room have received no such evidence. Also, there is conflicting evidence. The Secretary of State—he is a west midlands MP, like me and the Minister—has put forward figures that seem to be contradictory.

There is light at the end of the tunnel, however. According to The Times this morning, an area that was going to be a winner under the system will, under the second round of figures released by the Government, now be a loser. That area is represented by my parliamentary neighbour and the Chief Whip, the right hon. Member for South Staffordshire (Gavin Williamson). When the Chief Whip represents a constituency that will now be a loser, some of the changes may be altered or delayed, and delay is what amendment 54 seeks.

I agree with the FSB and my hon. Friend the Member for Harrow West that the whole system of taxation on businesses at the local level needs to be revamped. Amendment 54 opens the way for that by asking for a review of the future of business rates. Contingent on that review would necessarily be a look at the broader picture. As the FSB’s letter suggested some time ago, we should be looking at a turnover tax, rather than the bricks and mortar taxes that are reinforced by the Bill’s provisions. They are old-fashioned, and we need a more wide-ranging approach.

I thank the hon. Member for Harrow West for tabling the amendments, which would delay the commencement of the majority of the Bill’s provisions. Amendment 52 would delay the commencement of the Bill until 1 April 2019, making exceptions for

“provisions relating to telecoms relief, guidance about notices relating to non-domestic rates and the provision relating to preparatory expenditure for digital services”.

In amendment 54, the hon. Gentleman takes an alternate position, this time proposing that commencement, with the same provisions excepted, be delayed until after the Secretary of State

“has conducted a review into the future of business rates, and…has assessed the impact of the future of business rates on local government finances.”

We have been clear that the Government’s commitment is to implement the 100% business rate retention reforms for the financial year 2019-20 and to make the associated arrangements ahead of that to ensure that that is possible.

The hon. Gentleman raised a point about the annual local government finance settlement. The finance settlement as it stands will continue to be agreed, as is the case now, for the years up to 2019-20. For 2019-20, we will need to lay regulations in advance to ensure the details of the new system are in place for April 2019. I hope that deals with the concern that the hon. Gentleman expressed.

The Bill also provides the framework for the reformed system. Establishing the framework now gives us the opportunity to continue to work with local government and business in the coming months on the details of the reforms. We know that councils in particular welcome that approach. It ensures that councils have continued opportunity to shape the design and detail of the system on the basis of the certainty put in place by the framework provided by the Bill.

That approach echoes the implementation of the 50% rates retention system. Given the importance of the change, we are allowing more time to work with local government on the detail of these reforms. We will need to do preparatory work to ensure the implementation of provisions is tailored appropriately, including drafting regulations before the start of the 2019-20 financial year. That will be essential to ensure that local authorities are suitably prepared for the changes made by the new arrangements. I am sure that the hon. Member for Harrow West would agree that that is of the utmost importance.

Amendment 52 would not allow for that timely preparation, nor would it allow a timely commencement of a number of other provisions in the Bill that directly support businesses and premises owners. It would delay the introduction in rural rates relief, meaning that local shops in rural areas would pay more. It would also delay our commitment to enable authorities to grant reliefs for public toilets, ensuring that those important local amenities are protected.

Amendment 54 proposes that progress on reforms delivered in the Bill should be halted to allow for a review of the business rates system. As I hope the hon. Gentleman is aware, the Government undertook a review of the business rates system as recently as 2015. In fact, the Bill seeks to implement some of the important commitments that the Government made in response to that review. Amendment 54 would risk the delivery of them.

The 2015 review asked for views on the future of the business rates system and received 269 responses from councils and businesses of all sizes up and down the country, as well as business groups and others with an interest, such as rating agents and think-tanks. A clear message from those responses was a majority in favour of retaining a property-based tax. Respondents agreed with the Government’s view that property-based taxes were easy to collect, difficult to avoid and had a clear link with local authority spending.

I have just checked the Bill. The Minister indicated that were the amendments to be agreed that would delay the implementation of relief for rural shops under clause 7. However, under clause 42, clause 7 would not come into force immediately anyway.

Indeed. The hon. Gentleman is right that it comes into force in April 2018. However, if we took the view advocated by the amendment he supports, that change would potentially not be made until 2019 or later.

For the benefit of clarity, is the Minister saying that he does not think there is any case for a review of business rates at the moment?

I am just setting out the case of the situation around the business rate review.

It is a straight question, Minister.

To come back to the hon. Gentleman, who is pressing me now that he has finished reading his phone, I should say that he now seems interested in what I am saying, which is obviously a good thing.

Order. Please can we refrain from the personal remarks and get back to the point?

I will certainly get back to the point, Mr Gapes. As I was explaining, there was a very clear message from the responses we received to the business rate review undertaken in 2015: the clear view then, including from the business community, was that they wanted to retain the current system.

rose—

I will make some progress and then I will take the hon. Gentleman’s intervention.

There were also other clear messages from that review. People called for more protection for small businesses, and we have permanently doubled small business rate relief as a result. That means that 600,000 small businesses —a third of businesses overall—will pay no business rates at all. Understandably, many businesses wanted their rates cut and, in particular, for business rates to be uprated by CPI. The Bill delivers that change, which represents a cut in business rates every year from 2020—a saving of around £370 million in the first year alone and even more in each and every year after that.

People also called for the administration of business rates to be modernised. Again, we have listened and are taking action, including measures in the Bill to make it easier for businesses to receive and pay their bills. Importantly, local authorities called for greater rates retention and increased devolution of rate setting. They said that that would help them to get control of their finances as well as boost growth and respond to the needs of businesses in their areas. Does the hon. Gentleman still want to intervene?

I ask the Minister for a little more clarity. Is he fully satisfied with the business rates regime as it is working at the moment and the proposals in the Bill?

As I said to the hon. Gentleman, we clearly conducted a review in 2015 and we clearly acted on it in accordance with the wishes of the majority of respondents to that consultation.

rose—

Before the hon. Gentleman intervenes again, perhaps he will explain his position on the measure in the Bill to reduce the multiplier. We are reducing the multiplier through the provisions in the Bill and we have clearly said that the multiplier will be based on an indexation of CPI rather than RPI from 2020. That will save business £370 million in the first year of that system alone. Does the hon. Gentleman agree with that? He has seemed to disagree throughout this Committee.

The job of the Opposition is to seek clarity from the Minister, so let me seek clarity from him again now. Does he accept or believe that there is no case for a review of business rates at the moment? It is a simple question—yes or no?

I think I am going to move on because I have answered that question on several occasions.

The Bill delivers on providing a framework for local government to retain 100% of locally raised business rates, giving councils new powers to reduce business rates in their areas to boost growth and providing for Mayors in combined authority areas to seek investment in local infrastructure projects. Amendment 54 suggests that those reforms should be delayed until after further consideration of the impact of business rates on local government finances.

As I have said many times, the move to 100% business rates retention is a reform that councils have long campaigned for. Councils are right to argue that the reforms will help them move to greater self-sufficiency. At a national level, business rates are a relatively stable tax. We recognise that there can be change and volatility locally, and we have been clear that we want to design this scheme in a way that helps councils to manage better those local changes. That is why we are taking measures in the Bill to help councils manage the impact of successful business rates appeals.

We have been clear from the outset that we will continue to make sure that there is a redistribution between authorities so that no council loses out because it currently collects less in business rates. That is why there will continue to be a safety net to help cushion councils from significant falls in their business rates income. Our continuing engagement with local government on the detail of the scheme will help ensure that the aspects of the new system work in a way that helps councils to manage local volatility.

As I have demonstrated, the amendments are clearly unnecessary and would prevent us from delivering on a range of commitments that business and councils have called for. On that basis, I hope that the hon. Gentleman will withdraw his amendment.

I do not intend to press amendment 52 to a vote at this point, not least because I take the Minister’s point about rural rate relief. We would certainly not want to stand in the way of that additional support for businesses in rural areas. We may well come back on Report to the question of a delay.

The Minister has not been convincing on amendment 54. I am disappointed that he has cited previous looks at business rates as an excuse for ignoring the very real difficulties that many businesses will face as a result of the revaluation that has taken place. He ignores the difficulties arising from the cutbacks at the Valuation Office Agency in relation to enabling businesses to have their revaluations considered on appeal in good time. He also ignores the real concerns of local authorities about how much business rates income there will be when Ministers finally decide what additional responsibilities are to be handed over.

We know that just over £3.5 billion of extra responsibility has just been handed to local government, reducing the £12.8 billion pot that Ministers boldly said would be passed over as extra money for local authorities. Those specific additional grants have been cut back. We have heard the Minister confirm that businesses could face an extra 4p on business rates in respect of the multiplier, as a result of the business rates supplement and the BID.

The complacency from Ministers—not just the local government finance Minister, but across the Government—about the situation faced by businesses and local authorities means that I am going to seek to divide the Committee on amendment 54. I beg to ask leave to withdraw amendment 52.

Amendment, by leave, withdrawn.

Amendment proposed: 54, in clause 42, page 30, line 8, leave out from “14” to end of line 21 and insert “Schedule 3 and this section.

‘(2) The remaining provisions of this Act shall only come into force after the Secretary of State—

(a) has conducted a review into the future of business rates, and

(b) has assessed the impact of the future of business rates on local government finances.”—

This amendment would require the Secretary of State to conduct a review into the future of business rates and their impact on local government finances before the commencement of the Bill (save for the provisions under sections 8, 13, 14 and Schedule 3).

Question put, That the amendment be made.

The Committee divided:

Ayes 5, Noes 8.

Question accordingly negatived.

Question proposed, That the clause stand part of the Bill.

The Chair adjourned the Committee without Question put (Standing Order No. 88).

Adjourned till this day at Two o’clock.