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I beg to move,
That this House
has considered regulation of business rates reduction services.
It is an absolute pleasure to speak under your chairmanship, Mr Hollobone. I must first draw the House’s attention to my entry in the Register of Members’ Financial Interests. I am delighted to have the opportunity to talk about this issue. This debate is obviously the most important event happening in Parliament at 9.30 this morning—no doubt we will not be distracted by anything else that is going on.
This is a very simple issue. It relates primarily to one single company, and I can describe these people as no better than a group of con men, who prey on unsuspecting business people, usually very small SMEs—small and medium-sized enterprises—and con them into signing a very unfair contract, which often is completed after the event, after they have met with the business person. The contract that they tie them into, which is a very long-term contract, effectively diverts tens of thousands of pounds intended to be Government support, Treasury support, to SMEs—usually smaller businesses—from them and into their own bank account. The company that I am speaking about specifically is called RVA Surveyors. This is a company in Manchester run by a gentleman called Stephan Hughes.
The support, of course, is small business rates relief, which is supposed to be there for small businesses; indeed, it is the relief granted by the Treasury to help people through the covid crisis. About half of this support has been diverted from the businesses concerned into the relevant business, RVA Surveyors, and there is not even a service provided. It is a simple letter that is required; all these people do is send a simple letter to the local authority and that effectively diverts the relief.
Dozens of cases are known to Members of this House. I think that 13 different Members of Parliament supported a letter that I wrote to my right hon. Friend the Secretary of State and to the Insolvency Service. They include Stella Creasy, whom I am delighted to see here today, but also other Members who have expressed keen support for this debate, including my hon. Friend Kelly Tolhurst and my right hon. Friend Greg Clark, who is detained at other proceedings this morning.
Dozens of cases are known to Members of this House, but according to RVA’s own website, RVA has about 10,000 clients around the UK, so I think it is safe to assume that hundreds, if not thousands, of businesses have effectively been defrauded in this way. I can describe these people, RVA Surveyors, in no better terms than by saying that they are shysters, carpetbaggers, parasites. It is a simple con trick that they carry out, and this happened to one of my constituents, which is how my attention was drawn to this particular issue. My constituent, Jude Carter, who owns Dreams Hair & Beauty Salon in Hunmanby, is a small businessperson.
Imagine how it is when someone is busy trying to set up a business. These people use a freedom of information request to find out which premises qualify for small business rates relief and which are not currently getting that relief. They then call on that particular business. The businessperson is setting up the business, painting the walls, furnishing the place, getting ready for the first days of trading, and those people come in and say, “We can save you lots of money—just sign this form and we will reduce your business rates.”
There are many business rates reduction specialists that offer a perfectly bona fide service. They will measure the premises, argue with the Valuation Office Agency, reduce the business rates and provide a service for which they quite rightly should be paid. They provide fair terms for that reduction, and both the business owner and the rates reduction specialists then benefit from that reduction in business rates. That is a perfectly reasonable service to offer.
This is entirely different, because the small business rates relief is almost automatically provided for that business. All that business needs to do is notify the council that they are the occupant, that they qualify for small business rates relief, and it will be automatically applied. It is a simple, standard letter. The measure is automatically applied and the rates relief from the Government is automatically provided. Anything up to around £6,000 or £7,000 a year in small business rates relief will be provided to that business.
However, some business owners are not aware that it is automatically provided. Those people go in and tell them, “We can reduce your rates bill—sign here.” They offer a very long-term contract. In Jude Carter’s case, she signed a 12-year contract, and she believes that the contract was amended after the event to become a longer-term contract. It was for a much shorter term, but they changed it.
Jude Carter’s premises had rateable value of £6,300 a year, which means, using the multiplier, that she should be paying around £3,000 a year. Small business rates relief applies, so there should be no rates at all for a small business owner occupying those premises. RVA just writes to the council and that small business rates relief is then applied, so Mrs Carter pays no rates. Some £3,000 have been saved with a single standard letter, and the contract says that Mrs Carter owes RVA 52% of that saving. For one standard letter, for 12 years, she is paying 52% of the saving from which she benefits. Typically, over that 12-year contract, £18,000 has been diverted. The Treasury wants that money to go to Mrs Carter to help her run her business, to keep her in business, but it is being diverted to RVA. It is simply, absolutely wrong.
As I say, contracts are tampered with. Mrs Carter has tried to get out of the contract, she has tried not paying the contract, but RVA has used many dubious tactics to harass her into paying. They ring the premises and speak to her or her staff, to say that the bills are overdue, which causes some distress within the business itself. Nobody wants to think that their business cannot pay its bills, so time and again, Mrs Carter has to pay the bill, despite the fact that there is absolutely no service being provided for that extortionate amount of money.
It is usually the very smallest businesses that fall prey to those tactics—and there are many cynical tactics that are employed. Those people forge signatures. There was one court case presided over by Deputy District Judge Lynds in Clerkenwell and Shoreditch County Court. That case, involving Stephen Snell, has been reported and Judge Lynds dismissed RVA’s claims. RVA will take people to court to enforce contracts. For reasons I shall come on to explain, they are perfectly enforceable contracts—that is, if they have not been forged. However, in this case, it was determined that RVA’s representative had forged a signature. The judge stated:
Ordinarily I would not come anywhere close to make an assessment of these signatures but it’s plain to me” that the signature did not bear any resemblance to Mr Snell’s signature, and he kicked the case out. There is therefore demonstrable evidence of fraudulent activity by that company. It uses other tactics as well. It completes contracts after the event, as I believe it did with Mrs Carter, and it changes them to extend the length of the contract or the percentage that it charges. When it charges 45% plus VAT, that adds up to just over 50% of the benefit received.
The company resorts to harassing owners and their staff, and there is evidence that it lies to the Valuation Office Agency when it assesses premises. It works on a damages-based agreement. According to the law, a reason for the charges has to be provided, but the company provides no reason, so it is debatable whether the contracts should be enforceable in law. Nevertheless, the courts generally enforce the contracts and make the small business pay the amount on the contract.
We are aware of most of these cases because of a very good campaign by Andrew Penman, who writes for the Daily Mirror. He has covered many of these cases time and again and has highlighted RVA’s dubious tactics. A surveyor called Steven Simon is helping my constituent, Jude Carter, with her case. Sadly, the company gets away with such tactics time and again, and the courts rule that the small business has to pay because a contract is enforceable. Even though the contract is patently unfair, the Consumer Rights Act 2015, which makes provision for unfair contracts, does not apply to SMEs, so once a business—even a very small business that probably has all the hallmarks of a consumer—has signed a contract, it is enforceable, however unfair it is.
The only way to tackle the company and to try to challenge the contracts—closing the company would be the most desired outcome—is through the Insolvency Service. I wrote to the Department for Business, Energy and Industrial Strategy. I know my right hon. Friend the Minister will say that perhaps BEIS has a greater jurisdiction over this than the Treasury, and I wrote to BEIS about this. My right hon. Friend the Business Secretary wrote back and said that the Insolvency Service could deal with these situations where there is clear evidence of corporate abuse, fraud, scams and sharp practice. The Insolvency Service wrote to me and said that it did not see the hallmarks of that in my case, which astounds me. There is clear evidence of corporate abuse, fraud, scams and sharp practice.
I should say that RVA Surveyors is not the only organisation involved in sharp practice. There are others, such as SJ Associates. A simple solution would be to extend the consumer protection laws in the Consumer Rights Act to include microbusinesses. There is a precedent for that because microbusinesses were, for example, covered under the Financial Ombudsman Service, and that has now been extended to larger small businesses. In addition, the Financial Ombudsman Service has jurisdiction over some elements of utility contracts between microbusinesses and utility providers. There is a precedent for extending the laws for microbusinesses, which would resolve the problem, because the court would be able to look at the contracts, see that they are patently unfair and strike them out.
Another way to solve the problem would be to reform business rates completely. I have talked to my right hon. Friend the Minister about that on numerous occasions. I believe that business rates as they were first constructed are no longer fit for purpose. Businesses no longer trade only or primarily from high street premises. The business world has moved on. Business rates, based on property, were once seen as the right way to tax businesses, but I do not feel that it is the right way now. The Treasury is looking at this matter, and I know there is another review. In the recent consultation, three solutions were proposed: some kind of land value tax; an online sales tax; and an increase in VAT. The latter would be a much better option than the current business rates system or an online sales tax.
The difficulty with an online sales tax is that it would create more complexity by adding another tax to an already very complex tax system. An online sales tax also assumes that businesses trade one way or the other —online or through retail premises—when actually many trade in at least three ways: online, through high street premises and click and collect. An online sales tax would therefore require a business to think about how it sold a product, whether click and collect, online or through the high street, which would add complexity. An online sales tax also assumes that retail is the only sector affected by the move to online shopping, but that is far from the case.
Due to the opportunities of online activity, there are many new competitors in various sectors, not least the restaurant sector, which sees more and more competition from dark kitchens using Deliveroo, Just Eat and others for deliveries. In my business world—I am in the estate agency business, as you know, Mr Hollobone—we have seen new online competition, too. An online sales tax may look from that retail perspective as if new competition is only for retail in the high street, but that is not the case.
A much simpler way of levelling the playing field between online businesses and high street or premises-based businesses is a simple increase in VAT. It would affect everyone in the same way and, if we increased VAT by about 4p in the pound, we could scrap business rates altogether. Perhaps we could look at the VAT threshold as well, which can be a barrier to some businesses growing. With that, there would be no need for rates and therefore no need for rates relief, no need for rates reductions and no need for the Valuation Office Agency and many of the rates specialists, who could move into the productive economy and do something far more constructive than, say, two surveyors arguing about the rates on a particular property. It would settle the issue once and for all in Parliament and create that fair and level playing field for all businesses. The best thing is that there would be none of the reprobates from RVA, because there would be no business for it to try to hijack, moving rates relief from a business to its own bank account.
That is one way of solving the problem—but we need to solve the problem. It cannot be right that we leave these smallest of businesses at the mercy of complete charlatans such as RVA. I therefore urge my right hon. Friend the Minister to do what he can to persuade the Department for Business, Energy and Industrial Strategy to get the Insolvency Service to look at this, close down RVA and ensure that the relief that he has directed from the taxpayer to small and medium-sized enterprises ends up where he intended.
It is a pleasure, as ever, to serve under your chairmanship, Mr Hollobone. It is also a pleasure to follow Kevin Hollinrake, who has been a doughty campaigner on this issue, and rightly so. He said that 13 of our colleagues are affected. I suspect there are many more but that they have not felt able to raise the issue.
Let us be honest: we recognise that we may not be the main event this morning in Parliament, but these issues are our bread and butter as MPs. They cut across the political parties because a rip-off is a rip-off. When we see companies preying on and exploiting our constituents, who are trying to do that most basic and important thing of setting up businesses and being successful in our local communities, selling a wide range of goods and services to those communities, it inspires anger in all of us and frustration that we cannot do something more quickly to help. I recognise that we may not be the box office hit this morning that we would want to be, but I agree with the Minister—consensus is breaking out—and I hope that we can make progress today on something with a longer lasting effect, because in some sense this should be a simple open and shut case.
Like the hon. Member for Thirsk and Malton, I was contacted by a local resident absolutely at their wits’ end dealing with RVA as a company. They have a small business with one or two employees—not a large multinational—and are trying their best to understand and navigate the range of regulations and rules that they have to abide by, and to understand what they can do to give their business the best fighting chance. Six years ago, like the hon. Gentleman’s constituent, my constituent was contacted by RVA and offered what appeared to be assistance. There are many different companies that would offer assistance to small businesses that seem, on the face of it, to be helpful. It is not just about small business rate relief; often it can be about recycling or rubbish collection—all sorts of areas where there are different rules for businesses than for individuals. For a small business, particularly a sole trader, having someone help them to get their head around them seems like a blessing. Unfortunately, it was anything but a blessing.
The stories are very similar, which is why some of us have been exasperated by the lack of reaction to the company —it has been going on for many years. My constituent was contacted and told that they could reduce their business rate cost; RVA visited the office and took measurements—allegedly on behalf of the council, as though it was part of a public service—and then billed the company for the savings on small business rate relief. But those savings would have been automatically due to the company anyway. My constituent, not unreasonably, did not know the ins and outs of business rate relief. I am sure that if the Minister gave us all a test on it, I would wager that the hon. Member for Thirsk and Malton would beat me, but even he would not know everything about this scheme. To expect our constituents who are setting up a business to know all that information is simply unreasonable. That is why I completely agree with the hon. Gentleman when he uses the term “carpet-bagging”. There might be some more choice terms, but I am very conscious that they would not be not parliamentary language.
My constituent is now part of a long-running legal battle with that company—I will limit what I say to ensure that there is no issue for them but, like the hon. Gentleman, they have issues with the documents that appear to have been falsified and claims about signatures. RVA claims that my constituent agreed to a seven-year contract, when they only had a five-year lease on the premises. It does not make any logical sense. My constituent has had years of torture, causing real distress, through the court case and the impact on their ability to run their business at all.
When people come to us—I am sure the Members participating virtually have had the same experience—we want to help. I thought, surely, this is almost a police matter if fraud is involved. To find that this company is able to continue to operate to this day, ripping off businesses around the country, is deeply distressing. Like the hon. Gentleman, I have pursued this issue with trading standards in the area where the company operates, but I am told that they cannot act. Many moons ago I scrutinised the Consumer Rights Act 2015, where we talked about providing a reasonable service at a reasonable timescale for a reasonable price. None of that is reasonable. I am at a loss to understand why we cannot have stronger enforcement. We have not seen stronger enforcement, which is why this debate is so important.
I hope the Minister is open. I know that he, like me and the hon. Member for Thirsk and Malton, would be aggrieved at seeing people ripped off. My constituent asks for a simple solution: she says that the small business rate should be automatic. Actually, the Federation of Small Businesses has been talking about licensing those companies, partly because, as I say, I do not think the rip-offs are restricted just to companies talking about business rate relief. Small businesses, especially in the post-covid environment, have really struggled over the past 18 months and are getting back on their feet, and they will desperately want help and advice about how best to navigate the new environment that they are operating in. It is entirely reasonable for the FSB to call for those companies to be licensed. We should be thinking about licensing business service companies so that we can stop what the FSB itself calls cowboy practices.
This is a matter for Government, not least because it is changes in Government policy that these companies are exploiting. When changes in business rates relief happen, these companies make their money; they make their money in a way that undermines the very policy of the Government. Governments of all political persuasions have tried to support small businesses. They are trying to pass on money—they are trying to help small businesses with their costs—yet, because of the practices of these companies, they can inadvertently end up charging them more, because the bill comes for the fact that the relief has changed.
I hope the Minister will listen and be not just sympathetic, but proactive, in calling to account the Insolvency Service, asking for an investigation into RVA, and in helping to shut down this awful company once and for all, as well as in learning the lessons from this situation on how we can best support small businesses when it comes to regulation.
We cannot have a debate in this place without talking about the B word, Brexit, and I always thought the concept of red tape and how much more of it might be coming was ironic. Here is a very clear example of where removing red tape could really help to support our constituents and make sure that people are not being ripped off, if only we have the political will to do so. I genuinely hope that the Minister will listen to this cross-party call for action and respond accordingly.
I thank Kevin Hollinrake for highlighting the issue today.
I beg indulgence. The hon. Gentleman and I worked alongside an incredible person and I want to take a moment to place on the record in this House the passing of a gentleman whose work was monumental on regulatory issues. He was a good friend of mine and a good friend of the hon. Gentleman, and well known to many other Members of this House. He was Brian Little. He was one of my constituents, a good friend for nearly all my life, and all his life as well—we were of a similar age. He was a passionate advocate for the underdog, well known in this House in the realms of finance and reform. Brian will be sadly missed. His shoes are difficult to fill. I just want to have that on the record, Mr Hollobone.
May I associate myself with the hon. Gentleman’s words? Brian was a great man—a great man who did much work for many businesses that could not fight for themselves, in the battle against larger banks. He did a tremendous job, in his inimitable way. He was humble. It was never for himself. It was always, as the hon. Gentleman says, for the underdog, fighting an almost impossible battle. He had many a great success in that regard.
I thank the hon. Gentleman for his intervention. His words resonate with my own. The family will be greatly encouraged by our comments.
It is a pleasure to follow Stella Creasy and her reasoned and valuable contribution—a well-thought-out contribution, which we wholeheartedly support. She referred to cross-party support. I hope my comments today will add cross-party support to the two previous speakers.
I understand that the regulations for business rates relief are handled in a different way in Northern Ireland than here on the mainland, and in Scotland, but the issues are the same. The ten-minute rule Bill regarding business rates means that we perhaps can and should take a UK-wide, holistic view of this matter.
I read with great interest the comments that highlight the belief that business rates were designed for a bygone era, where business went hand-in-hand with high street premises. The way we shop is now changing forever and the coronavirus has exacerbated those changes. Online sales now account for 33% of all retail sales, compared with 20% only a year ago.
I have been very impressed with my local council in my constituency of Strangford, which is working with businesses on the high street to retain their presence while they enter online forums. I have seen businesses, many of which were only able to open last week in Northern Ireland, come to terms with the new click-and-collect era and other ways of doing business. As we have watched businesses roll with gut-wrenching punches, it has highlighted to me that perhaps we, too, in this place, must advocate for change that makes sense in the post-covid world, where we are today. I see the wisdom, as I have seen many times in the past, of the rationale of the hon. Member for Thirsk and Malton. I am interested to hear more and learn more of the outworking of the proposals that I have heard from my respected colleague and friend, as well as of those from the hon. Member for Walthamstow.
When I read the Library briefing for today’s debate, I was dismayed but not shocked at the companies seeking to take advantage of struggling businesses who are appealing the rates. The scams were wide-ranging and intricate, and it is clear that the current system leaves itself open for the kinds of abuses that both hon. Members refer to—yet another indicator that something needs to change, and change soon. The FSB contacted and asked me to put on record, as others have done, that they believe business rate companies should be licensed to access business rates records on behalf of businesses. There would be a low barrier to access, but a condition of the license would be to ban cowboy practices. The hon. Gentleman for Thirsk and Malton’s introduction used a lot of descriptive nouns for them without using any bad language, which I thought was quite good and I really relate to that. We could probably think of other things which would be unparliamentary and not appropriate. Nonetheless, it illustrates how we all feel.
While recent business rates reductions during the pandemic were welcome, too many businesses find themselves with an unexpected bill from these companies. Their predatory payment tactics mean that where Government policy reduced the bill to nil, these companies claim the reduction as part of their work, and charge year on year. Many businesses end up with a bill for £1,000 plus, when the only change has been as a result of Government policy. The Government does it, and they do it because that is their job. These guys come along and charge for it, when the Government does all the work. It reminds me of the cuckoo. We all know what the cuckoo does—he jumps into the nest of another bird, eats all the food that the parents give and has nothing to do with the parent birds. These are cuckoo companies and in my opinion deliver something that is totally wrong. Too often the conditions are hidden in the trading terms and conditions.
I welcome the schemes in England, such as extra targeted support packages for businesses and relief for retail, hospitality and leisure businesses, and the corresponding help in Northern Ireland. I put on record my thanks to the Minister and the Government—my Government—for all they have done to help businesses in the constituency of Strangford, and across the whole of the United Kingdom of Great Britain and Northern Ireland. They have kept those businesses afloat and we thank them for it. However, the fact of the matter is that businesses will need ongoing help. Rather than further complex and detailed schemes, now is the time to overview and change the entire system, as the hon. Gentleman for Thirsk and Malton referred to in his introduction. There must be a genuine review of how we can support businesses to survive, maintain a presence, and importantly continue with job creation. I believe we will get a bounce whenever we come out of lockdown, but we need to continue that bounce right through into the months and years ahead. When it comes to business, we have to play the long game, investing in small businesses, and knowing that in the end we will recoup every penny that has been outlaid when jobs continue and taxes are paid in manageable amounts to keep the business open and viable.
In conclusion, I believe the suggestions of the hon. Member for Thirsk and Malton are useful in moving forward, and I join him and the hon. Member for Walthamstow in asking the Government to put serious thought and manpower behind making this change for the good of business, our economy, and consequently, the quality of life throughout the whole of the United Kingdom of Great Britain and Northern Ireland.
I am pleased to begin the summing up in this debate. Like others who have spoken, it is clear that if there had not been other major attractions on elsewhere in the House, there would have been far more people wanting to take part in this debate. I presume that is why Kevin Hollinrake applied for the 90-minute debate. In normal circumstances, I think the 90 minutes would have been heavily over-subscribed. The initial title of the debate that appeared in the business last week made us in the SNP wonder if it was relevant in Scotland at all, as business rates, and everything to do with them, are devolved. However, it is obvious that the concern is not so much about how the business rates system operates in the different UK nations: it is about the regulation of business practices in general.
The hon. Member for Thirsk and Malton spoke very eloquently, and clearly on the back of a significant amount of work to find out his facts, for which I commend him, but he spoke about a problem that is not specifically about the regulation of one particular service; it is about business practices that are dishonest, predatory, unacceptable in any circumstances, illegal in many circumstances and, as Members have suggested, probably illegal in the circumstances that we have heard about today.
I believe that such practices should be illegal, and enforceable not only in the civil courts. There should be circumstances where this behaviour crosses the line and is recognised as criminal activity, so that the directors of the companies concerned can find themselves personally facing financial sanctions or even imprisonment for the damage that they are doing to other people’s businesses and livelihoods.
My concern about the way the hon. Member introduced the debate is that if we close down the opportunity for the shysters, to use his term, to exploit businesses by setting up fake business rates reduction schemes, it will not take them a week to find a new way to scam other honest businesses, or even the same honest business again—for example, the provision of telephone services. A long-established and very well respected household-name business in my constituency was brought close to insolvency by a telecoms scam. A business offered it a better deal on its phone systems than the one it already had.
Many of the practices that the hon. Member mentioned happened to my constituent, and to many others as well—contracts being changed, documents being taken away and never returned, and customers not seeing the contract that was being used against them in a court action. All the practices that will happen with dishonest business rates advisers will happen with dishonest telephone system salespersons, and with dishonest businesses in almost any sector of the economy that we look at.
Although I recognise that there are specific issues about the way that business rates reliefs and reductions operate that can provide an opportunity for dishonest so-called advisory services, we need to look at it much more widely than simply that one service. There are certainly legitimate questions about whether property valuation is the best way to assess businesses’ financial contribution to the whole community. There are legitimate questions about whether property valuation is the best way to tax individuals for their contribution to local council services. There are certainly questions about whether it is sustainable that those are the only two taxes that most councils can vary to any extent in order to fund their services.
Those are discussions for a different day, possibly after the economy has recovered from the shocks of covid and the subsequent lockdown. The difficulty that we face is that a lot of individuals have been persuaded to incorporate their self-employed microbusiness as a limited company, and they did not realise when they did it that they lost almost all the consumer protections that they had as an individual. I put it to the Minister that we might need to look at amending consumer protection legislation so that very small businesses have a degree of consumer protection in the same way that we do as individuals.
Individuals get consumer protection because it is recognised that we are smaller than the people trying to sell us stuff. We often do not have the resources. We certainly cannot afford the lawyers that some of them can. That is why consumer protection legislation was introduced and has been amended. Is it time to apply the same principle to very small businesses? Even though they are businesses, and all businesses in some ways are equal in the eyes of the law, do we need to start introducing special consumer protection legislation that applies to small businesses, regardless of whether they are incorporated? I welcome the Minister’s thoughts on that point.
For the record, when I have done some checks I have found at least one person called Stephen Hughes who has run property-related companies in the Greater Manchester area. There are obviously a lot of companies with RVA or very similar sets of initials in their names. We have to make it clear that companies and individuals who, simply by coincidence, have similar names to those mentioned today are, as far as we can tell, completely innocent of wrongdoing. Nothing we are saying here should be taken to impugn the integrity of anyone other than the specific individual and business named today.
I will bring my remarks to a close with a firm message for the Government: people who set up a business with dishonourable or dishonest intentions, simply to prey on legitimate, honest and hard-working small businesses anywhere in these islands, should not be allowed to trade. If they are still allowed to carry out their nefarious practices, regulation of those businesses is not strong enough—it has to be tightened, and it has to be tightened soon, before we see more valuable small businesses going to the wall.
Thank you, Mr Hollobone, for the chance to respond on behalf of the Opposition to this important debate. I applaud Kevin Hollinrake for having secured the debate on the need to regulate business rate relief services and for drawing our attention to the shocking and distressing detail of what happened to Miss Carter’s business in his constituency and of the wider appalling behaviour of RVA Surveyors.
I welcome the comments made by Peter Grant on the wider need for action on predatory business practices, and those made by my hon. Friend Stella Creasy, who added to the description of the shocking behaviour of RVA Surveyors, reminding us that she is a tireless campaigner for businesses in her constituency. I also recognise the comments of Jim Shannon, who mentioned the need for business rates to be looked at more widely to reflect the modern world and to support our high streets.
Our high streets are only just beginning to be able to get back on their feet after more than a year of covid restrictions in some form. Many of the problems they face, however, did not begin when covid hit; they have faced challenges in making ends meet since long before the pandemic started. In that context, it is shameful that con artists should prey on the financial insecurity of some small and medium-sized businesses at this of all times, and I am sure that all Members welcome the hon. Member for Thirsk and Malton bringing such concerning practice to our attention.
Let us be clear about how some providers of so-called business rate relief services operate. As we have heard, they claim that they will navigate through the local authority’s system on behalf of businesses and perhaps play hard ball with the Valuation Office Agency to negotiate business rate relief for companies. Their claims, however, could not be further from the truth. In fact, some of the businesses that need support most are lured—often on a no relief, no fee basis—into multi-year contracts that entitle the service providers to a huge percentage of any business rates savings made by the company. That results in astonishing and predatory commission fees for arranging benefits that are often applied freely and automatically by local authorities. Many businesses are entitled to small business rate relief, and others in the retail, leisure and hospitality sectors receive grants automatically or can apply through their local council website.
To spell out what that means in practice, let me set out an example, using conservative values nowhere near as bad as the worst cases that have been reported in the media. Take a new small business with a rateable value of about £13,500—a nursery, perhaps, or a small café. Its business rate prior to any relief would be in the region of £6,750. Were it unaware that it was entitled to small business rate relief, it might be tempted to contract with a business rate relief service, which would promise to negotiate a discounted rate for business in exchange for—again being conservative—say a 30% commission on any money saved. The service might stipulate—again, conservatively—a two-year contract, well below the five years or far longer that we have seen in the press or spoken about today.
In the 2019 financial year, that business would have been entitled to a 50% deduction through the small business rate relief. In the following year, covid measures increased that to 100%. Over those two years alone, with just a 30% commission, the provider of that so-called business rate relief service would take just shy of £3,000 off the new café or nursery. That is money that the new business was automatically entitled to and should have benefited from, yet the service provider took it off that business having added no meaningful value.
That is a deeply unethical business practice; it is exploitative, and targets those who need the relief the most. At present, these services are free to prey on vulnerable businesses, because there is no regulation in place and perhaps because too many businesses are unaware of the reliefs they are automatically entitled to. Although the hon. Member for Thirsk and Malton disagrees with me fairly often in the Chamber, I have no disagreement with him whatever in saying that there is no place for this kind of practice in the UK. I look forward to hearing from the Minister what the Government intend to do about this parasitic behaviour, which can do so much to harm small businesses.
I would also be grateful if, as the hon. Gentleman alluded to, the Minister would take the opportunity in his response to set out his position on some of the wider challenges posed by the business rates system to small and medium businesses, particularly those on the high street, which have faced difficulties for many years in making ends meet. I am of course aware that the Government have said that their final report on a fundamental review of business rates will be published in autumn 2021, so perhaps the Minister can start by confirming that this deadline will still be met. While recognising the promised publication date in the autumn, will the Minister none the less take this opportunity to update us on the Government’s thinking regarding any alternatives they are considering to the current system, as introduced in 1988? Can he guarantee that high street businesses will benefit from the reform and that online retailers will be asked to take on a fairer share? Finally, despite restrictions potentially—hopefully—being lifted on
As I have made clear, we agree with the concerns raised by the hon. Member for Thirsk and Malton. He is right to raise them, and I hope the Minister will be clear about what the Government will do to tackle the parasitic behaviour of so-called business rate relief services. As he will know, however, business rates are in need of a comprehensive review, so I would welcome his also updating us on the Government’s latest position on the wider points I have raised.
I thank my hon. Friend Kevin Hollinrake for having secured this important debate on a matter that is of considerable public interest generally, but also locally in his constituency and to those affected by this company. It is a pleasure to speak in a debate that is not disfigured by party politics; all Members have made very constructive contributions, and I am grateful for them.
I will start by expressing my sadness that, inevitably, proceedings elsewhere in this House at the moment are going to be overshadowed by this very important consideration of business rates. I only hope that the media will find some time to indulge Mr Cummings in his comments in between reporting on this vital topic. In a slightly more serious vein, I apologise that the Government have not been able to supply a Minister with specific responsibility for this area to respond to the debate. As Peter Grant rightly said, its focus is not on business rates—although there has been the occasional attempt to crowbar the rest of the business rates system in—but on the reduction services aspect that my hon. Friend raised. That aspect is a matter of business regulation, and therefore falls to the Department for Business, Energy and Industrial Strategy. He and Stella Creasy have also focused on some individual cases of predatory practice by specific companies, and they will understand that I cannot comment in any detail on specific cases. It would set a very bad precedent for a Financial Secretary to do so, given the connection to the tax system in a different context.
I think Members recognise that, at its core, the system of business rates is a relatively simple and straightforward one. Companies and individuals who occupy non-domestic properties are liable for business rates. The rates bill is the product, in the literal, mathematical sense, of the rateable value of the property and the multiplier for the financial year concerned, offset by any rate reliefs. The rateable value is set by the Valuation Office Agency and, broadly speaking, it is the rental value at a set date —presently
In cases where businesses are unsure about the rateable value of properties, there are plenty of helpful resources on the website of the Valuation Office Agency. For example, I can go online and see a detailed valuation of No. 2, Marsham Street, which is the headquarters of the Home Office, and an explanation for how its valuation has been reached. You will be pleased to know, Mr Hollobone, that it has rather a high valuation, as befits its position in central London.
If ratepayers are unhappy with their rateable value, there is an online system known as check, challenge and appeal, which allows them to check the facts and, if necessary, to dispute the valuation that has been reached. This system was introduced to provide ratepayers with a service that is easier to use and understand than its predecessor and that enables quicker resolution of cases. An evaluation of the system last year found that it is working and that ratepayers are getting their cases resolved faster, without the automatic need to make appeals.
Rate reliefs are applied by individual local authorities, but most of these are automatic or require minimal information from the ratepayer. For example, transitional relief, which is used to phase in the effects of revaluations, is entirely automatic. For small business rate relief, rate- payers need only provide a little information about other properties on which they pay business rates, before being able to claim. All rate bills must explain the various reliefs available, and local authorities have many excellent websites that explain how to claim those reliefs.
Much of the £16 billion of relief that the Government have provided to the retail, hospitality and leisure sectors in response to covid-19—this was picked up by Jim Shannon—has been applied automatically to rates bills. So there are many automatic methods of applying reliefs currently within the system. The relevance of that to the present debate is that there is no reason why a ratepayer should have to use an agent to claim rate relief. If they believe they are eligible for relief, they should instead contact their local authority. Of course, that is not in any sense to criticise people who have been found to be clients or would-be clients of the predatory organisations that have been highlighted by Members in the debate.
Let me pick up on the nature of some of the protections that exist within the system, of which there are several. One is the rules that apply to business-to-business contracts and that arise from the Business Protection from Misleading Marketing Regulations 2008, which prohibit advertising that misleads traders. There is also the Misrepresentation Act 1967, which may also apply to business-to-business contracts, and which says that if someone has entered into a contract following misrepresentation by the other party, they would be entitled to rescind that contract. Additionally, if they have suffered loss, they can claim damages against the other party.
Small businesses can seek help through other channels. If a ratepayer feels that there may have been illegal or fraudulent activity, they can choose to take court action, as I understand a number of businesses have successfully done in at least one of the cases under discussion. Alternatively, my hon. Friend the Member for Thirsk and Malton mentioned the Insolvency Service, which offers some protections, although they appear not to have been availing in this case.
It is worth just picking up the point about consumer protections. At present, the services are provided to the businesses that I have described, and consumer protections do not apply in the case that we have described. I note, and my hon. Friend the Member for Thirsk and Malton has argued, that microbusinesses share many of the characteristics of consumers, and he and other Members have therefore argued that they are worthy of protections in their own right. Members have highlighted the predatory practices of the companies they have discussed, which are, I am afraid, also exercised by a relatively small number of other companies, and cause extreme distress to the people who are affected by them.
It is important to note that, in other markets—for example, financial markets—it has proved possible to differentiate between protections afforded to different kinds of people in the client relationship. Therefore, there is a clear case here for the Department for Business, Energy and Industrial Strategy to revisit this area and to assess what further protections can, in principle, be provided. Let me conclude with a very simple message.
I hesitate to stop the Minister in full flow, because it is very interesting to hear what he is saying. I just want to come back on a point he made about businesses being entitled to rates relief automatically. Of course, that does require businesses to know about that. I agree with him, and I think we all agree, that differentiating between businesses—often small businesses —and consumers does not make any sense in terms of the expectation of protection, which is the reason why we have consumer regulations.
However, might he be convinced that it would be helpful in these instances for Government to be proactive in telling people that they might be entitled to rates relief? One reason why this company has been able to exploit people is a lack of awareness of the scheme. Although the Minister may feel that it is relatively straightforward, for a new business, the idea that there might be some things that do not have to be paid and others that do adds complexity. Is there a case, perhaps, in the absence of the further consumer protections we are talking about, for requiring local authorities, when they send a bill, to say, “Most small businesses would be entitled to rate relief, and therefore it is worth your time investigating”?
I thank the hon. Lady for her question. I have already said that all rates bills are required to explain the various reliefs available and that local authorities have, in many cases, excellent websites that explain how to claim the reliefs. Of course, the fact that reliefs in the cases I have described are automatic means that they flow through in and of themselves. That is a very attractive feature, where that can be engineered into the system. Where it cannot, it is for good reasons, and it may not be possible.
I do not think it is right to suggest—I do not think anyone who has participated in this very thoughtful debate would suggest—that there is any easy fix here, but there is a clear case to be addressed. I thank my hon. Friend the Member for Thirsk and Malton for bringing it to our attention and for raising it with the Government. I think the Government—across my colleagues and myself—need to consider what more can be done, both by themselves and in their further discussions with local authorities.
I thank all hon. Members for their support in this debate. Everybody made very well thought through comments. I particularly thank the Minister. There is no doubt that this issue has arisen as an unintended consequence of the generous targeted support from the Treasury for small businesses. Very small businesses, generally, are then subject to predatory behaviour from the rip-off merchants, as has been mentioned by various hon. Members today. In the case of Jude Carter, the contract will divert £18,000—which the Treasury intended to give to her in taxpayer support—from her to RVA. That is simply unacceptable. In many cases—hopefully not in Jude Carter’s case—that would be a matter of life or death for a business of that size; £18,000 is a huge amount of money over 12 years.
Clearly, this is a scam. It is disappointing that the Insolvency Service has chosen not to investigate. It did write back to me, saying that, despite the fact that it does have jurisdiction over scams of this nature, it found no grounds on which to take further action within its powers. It is very surprising that the Insolvency Service will not act in this clear case of abuse by a business of other businesses. It has the power to close down this business. It has the power to strike off directors. I hope it will listen to the debate and act. It has decided to look at the issue again—it recently wrote to me asking for more information about hon. Members who have such cases—so I really do hope it will act.
I appreciate the comments from my right hon. Friend the Minister. This is a specific case, but there are other cases of predatory behaviour inflicted on microbusinesses. I am very heartened to hear what he said. There is a good case for extending the Consumer Rights Act 2015 to cover microbusinesses, which would resolve this problem, because I am sure that these contracts would be struck out by the court on the basis of the very unfair terms. I think there will be other contracts, under which small businesses are subjected to unfair behaviour to persuade them to sign, where the courts could intervene to prevent that behaviour from happening in the future.
I thank all hon. Members for their contributions to the debate, and I hope we can make more progress.
Question put and agreed to.
That this House
has considered regulation of business rates reduction services.