Non-Domestic Rating (Lists) Bill
Public Bill Committee, 25 June 2019.
Geraint Davies (Labour/Co-operative, Swansea West)
Before we begin, I have a few preliminary announcements. Please switch electronic devices to silent. Tea and coffee are not allowed during sittings.
We will first consider the programme motion on the amendment paper. We will then consider a motion to enable the reporting of written evidence for publication and a motion to allow us to deliberate in private about our questions before the oral evidence session. In view of the time available—I apologise for my slight lateness—I hope we can take those matters formally, without debate.
TABLE
Geraint Davies (Labour/Co-operative, Swansea West)
Copies of written evidence the Committee receives will be made available in the Committee Room.
Geraint Davies (Labour/Co-operative, Swansea West)
We will now go into private session to discuss lines of questioning.
Examination of Witnesses
Geraint Davies (Labour/Co-operative, Swansea West)
We will now resume our public sitting and hear evidence from the Association of Convenience Stores, the Federation of Small Businesses and the British Retail Consortium. Before calling the first Member to ask a question, I remind all Members that questions should be limited to matters within the scope of the Bill and that we must stick to the timings in the programme order the Committee has agreed. We have until 10.25 am for this panel. Panel members, would you be so kind as to introduce yourselves for the record?
Geraint Davies (Labour/Co-operative, Swansea West)
Thank you. Does anyone want to ask a question? No. Would the Minister like to kick us off?
Rishi Sunak (Conservative, Richmond (Yorks))
I am happy to come in at the end. Perhaps the Opposition spokesperson would like to start.
Geraint Davies (Labour/Co-operative, Swansea West)
Okay. I call Jim McMahon.
Jim McMahon (Labour/Co-operative, Oldham West and Royton)
Thank you. Welcome, Dominic. It is good to see you. What impact do your members consider that the current business rates system is having on our high streets and town centresQ ?
Jim McMahon (Labour/Co-operative, Oldham West and Royton)
Q Quite often when we hear about the decline of the high street and the pressures in town centres, it is framed as a challenge between the on-street and the online, when actually most of your members will trade in both ways. Do your members have a view on how best to balance the shift to a growing online presence with the cost of occupying high street locations?
Geraint Davies (Labour/Co-operative, Swansea West)
May I just interrupt for a moment? Questions and answers need to be within the scope of the Bill, which is specifically about the timing of bills and business rates, and we should try to constrain ourselves to that very narrow basis and avoid talking about wider issues. Was there a supplementary within scope, Mr McMahon?
Jim McMahon (Labour/Co-operative, Oldham West and Royton)
Q The revaluation period is being brought forward, which is a subject of the Bill. Revaluations obviously have a direct cash impact on the members that each of you represent. With the revaluation that will now take place in 2021, and the subsequent revaluations every three years, should there be scope to review the treatment of direct-to-consumer warehousing—for instance, the Amazon warehouse delivering direct to the end consumer—and the amount of business rates that they pay per square metre compared with the high street department store?
Geraint Davies (Labour/Co-operative, Swansea West)
Again, I do not mean to be difficult, but I am advised that consumer warehousing is not strictly within the scope of the Bill, which is on the timing. Do you want to make a comment within the scope of the Bill?
Geraint Davies (Labour/Co-operative, Swansea West)
Do any other Members want to ask a question within the scope of the Bill? No. I call the Minister.
Rishi Sunak (Conservative, Richmond (Yorks))
Thank you.
Jim McMahon (Labour/Co-operative, Oldham West and Royton)
Q To follow up on that point, when the revaluation is brought forward, that will not dispense with the appeals already in the system—they are still there and need to be administered—and it will just create the opportunity for further appeals. Have your members expressed any concern about the capacity in the valuation office? Do you have any concerns about what it might mean if no additional capacity is brought in and there is a more recent revaluation in 2021?
Rishi Sunak (Conservative, Richmond (Yorks))
A final quick question, Mr Curran. One of the things that the VOA has to do at the moment is to deal with appeals. You just made the point that more frequent revaluations ought to reduce the volume of appeals. Will you elaborate on that point, because, obviously, less appeal work would be an offset to the increased work of more frequent revaluationsQ ?
Rishi Sunak (Conservative, Richmond (Yorks))
Thank you.
Geraint Davies (Labour/Co-operative, Swansea West)
As there are no further questions from Members, I thank the panel for their evidence. Thank you so much for coming along.
We are running ahead of time, and the other panel has not arrived, so I propose that we suspend.
Geraint Davies (Labour/Co-operative, Swansea West)
Welcome. We will now hear oral evidence from the Local Government Association, the Confederation of British Industry and the Chartered Institute of Public Finance and Accountancy. We have until 11.25 am for this panel. I invite the panellists to introduce themselves for the record.
Geraint Davies (Labour/Co-operative, Swansea West)
Thank you. Who will be the first Member to ask a question? I call Jim McMahon.
Jim McMahon (Labour/Co-operative, Oldham West and Royton)
Q Thank you, Chair. I thank the panel members for taking the time to come and give evidence. This is a question for each of you in your different guises. We heard in the previous evidence session that there is concern about the Valuation Office Agency’s capacity to deal with the revaluations and the appeals that may follow. Have you got any views on that?
Jim McMahon (Labour/Co-operative, Oldham West and Royton)
Q My next question is probably more for Richard and Adrian, in terms of your member authorities and your members. It is about the impact of rate retention. Are you confident that the floors and ceilings are sufficient to mitigate a potential shift in values away from many of your member areas? We know that the 2017 revaluation led to significant shifts away from many regions, towards London and the south-east in particular. In fact, only London saw an increase across all value types; many other areas saw declines. Do you have concerns about what that might mean for members who are part of rate retention pilots?
Jim McMahon (Labour/Co-operative, Oldham West and Royton)
I recognise from the outset that this is slightly expanding the scope, but I will try to be disciplined about it. Do your members have a view about the treatment of plant and machinery in the revaluation?
Geraint Davies (Labour/Co-operative, Swansea West)
I think we cannot go there, given the timeframe. You were right to give a warning. Do you have another question that is in scope? Stephen Morgan, you have one.
Stephen Morgan (Labour, Portsmouth South)
Do you have any concerns about the Bill as drafted? That question is for all panel membersQ .
Stephen Morgan (Labour, Portsmouth South)
Q Councillor Watts, you mentioned consultation with the local government sector on the Bill. What would you like to have seen?
Melanie Onn (Labour, Great Grimsby)
IQ am interested, Councillor Watts, in the comment you made in one of your earlier responses about the level of reserves that local authorities have had to retain, pending the outcome of appeals dating back—is it nine years?
Melanie Onn (Labour, Great Grimsby)
Q That seems an extraordinarily long time for anyone to be waiting and holding finance that, as was rightly mentioned, should be being spent in local communities. Do you anticipate that the potential change from every five to every three years will improve that situation for local authorities, or make it harder for them?
On the financial position of local authorities and the level of reserves, are local authorities across the country fully prepared to deal with the potentially increased rate of appeals? The Minister has mentioned that he expects there to be fewer because the rates will be altered more regularly and there will not be such great changes.
Melanie Onn (Labour, Great Grimsby)
Q Do you have any idea of how much is held nationally in reserves for this purpose? Did you mention that?
Graham Jones (Labour, Hyndburn)
Do you foresee any problems with the roll-out of the business rate retention scheme and this Bill? Do you think any anomalies or complexities will emerge from those twoQ ?
Jim McMahon (Labour/Co-operative, Oldham West and Royton)
Q Is there a call from your members for a more fundamental review of business taxation, rather than the silo approach of the review of business rates?
Geraint Davies (Labour/Co-operative, Swansea West)
May I just intervene? Sorry to interrupt. To be in scope, a question has to be about timing, so do you want to rephrase that question to be about the timing of change? Otherwise it is not in scope.
Jim McMahon (Labour/Co-operative, Oldham West and Royton)
The question has been answered. I need no further response.
Geraint Davies (Labour/Co-operative, Swansea West)
Okay. We have time for more questions. I will ask the Minister if he has any questions, but if people suddenly, spontaneously, have questions, I will allow some more within the timeframe, if necessary.
Rishi Sunak (Conservative, Richmond (Yorks))
I am fine, thanks. Thank you for all coming, and thanks for your evidence and comments. Everything has been perfectly well answered.
Geraint Davies (Labour/Co-operative, Swansea West)
So you have no questions?
Rishi Sunak (Conservative, Richmond (Yorks))
No.
Jim McMahon (Labour/Co-operative, Oldham West and Royton)
Q May I ask one question of Richard? Is the LGA making a specific request that the change of date from September to December be reviewed as part of this process?
Geraint Davies (Labour/Co-operative, Swansea West)
As there are no further questions, I thank all members of the panel for their evidence. I invite the Government Whip to move the adjournment.
James Gray (Conservative, North Wiltshire)
Welcome to line-by-line consideration of the Bill, on which we held an evidence session this morning. As in the main Chamber, the usual rules of debate and behaviour apply, as I am sure you all know very well. No amendments have been tabled, so we will consider merely whether each of the four clauses should stand part of the Bill. However, I intend to take all four clauses together for debate, so we will have only one debate.
Compilation of rating lists
Rishi Sunak (Conservative, Richmond (Yorks))
It is a pleasure to serve under your chairmanship, Mr Gray. I hope not to detain the Committee for more than a few minutes.
I hope that by now the Committee is familiar with the three specific improvements the Bill will make to the business rates system: first, it will move the next revaluation in England and Wales to 1 April 2021; secondly, it will move the cycle for revaluations in England thereafter from every five years to every three years; and, thirdly, it will move the latest date by which draft rateable values must be prepared in England and Wales to the 31 December preceding the revaluation. I am glad to say that those substantive changes can all be found in clause 1.
To understand clause 1, we need first to consider the main primary legislation for business rates: the Local Government Finance Act 1988. Part III of the Act concerns business rates; it currently requires revaluations in England and Wales to take place every five years from 1 April 2017. Clause 1 is concerned entirely with amendments to that Act, and specifically to section 41(2A), which provides for revaluations of local rating lists in England
“on 1 April 2017 and on 1 April in every fifth year afterwards”;
to section 52(2A), which does the same for central rating lists in England; and to sections 54A(4)(b) and 54A(5)(b), which provide for revaluations of local and central rating lists in Wales on a date specified by the Welsh Government by order—1 April 2017—and
“on 1 April in every fifth year afterwards.”
That shows in black and white the delivery of our commitment to make the rating system more responsive to changes in the property market and fairer for ratepayers, and to ensure that businesses see those benefits as soon as possible.
Sections 41(5) and 52(5) of the 1988 Act set out the deadline by which draft rateable values must be provided before the revaluation. That is currently set at no later than 30 September. Clauses 1(3) and 1(6) of the Bill move the deadline to no later than 31 December. It is important to remember that that is only a deadline—it is the latest date by which draft rateable values must be prepared. The Welsh Government agree that the deadline for the draft list should be changed to 31 December. Sections 41(5) and 52(5) of the 1988 Act apply to both England and Wales, so the amendments made by clauses 1(3) and 1(6) will automatically change that date in both countries.
Clause 2 will make purely consequential amendments to primary and secondary legislation. The sections of the 1988 Act that concern the transitional arrangements made at the time of each revaluation, and the regulations made under those powers in England, reflect the existing five-year cycle of rating lists. Clause 2 will therefore amend those references to bring them in line with the new cycle of rating lists in England and Wales. It will make no other changes to the powers in those sections.
Clauses 3 and 4 are, I hope, self-explanatory. As is normal practice, the Bill will come into force two months after it is passed. It will give the valuation office the legal basis it needs to complete the valuation exercise for a revaluation in 2021. Since it has already started work on those valuations under the existing legislation and will continue that work over the coming months, there is no need to shorten the normal two-month commencement period.
Jim McMahon (Labour/Co-operative, Oldham West and Royton)
This morning, though brief and focused, we heard from representatives of the Association of Convenience Stores, the Federation of Small Businesses, the British Retail Consortium, the Confederation of British Industry, the Local Government Association, and the Chartered Institute of Public Finance and Accountancy. We place on record our thanks for the time they took to give evidence to the Committee.
The scope of the Bill is narrow, and that was reflected in the discussion we had. However, some themes came out during that session that are worth repeating. Clause 1 brings forward the new ratings list by a year, to 2021—a move that we welcome and that was welcomed by all those who gave evidence earlier today. There were calls for annual reviews, but given the concerns about capacity in the Valuation Office Agency, evolution might be more advisable, which is why we support bringing the new list forward by one year.
One element that was queried by the Local Government Association was the change from six to three months’ notice to billing authorities of the new list, pushing the deadline from “not later than September” to December. That change will hit many local authorities, as they will be presenting—or, in many cases, would intend to have already presented—their budget proposals to council. That is important because, as employers, councils have to meet their statutory obligations to their employees for any changes that might follow, whether for redundancies or any structural changes within the organisation. It is important that councils can meet the January deadline for that, so the notice period is important. I therefore ask that the Minister meets representatives of the LGA as a matter of urgency to address their concerns and decide whether something can be done to minimise the impact of that change.
Clause 2 addresses transitional relief and brings it in line with the new list proposals. There was a broader discussion, which I do not intend to pad out here, about business rates and their impact on the retail sector, the viability of businesses and the future of high streets and town centres. We share the concerns about those issues and would welcome further discussions to create a business rates system that is not only fairer but helps British businesses and industry to thrive in future, rather than—as business rates do at the moment—simply acting as a tax to occupy or exist. There are growing calls for change, and I hope they are heard and acted on by the Government beyond the scope of this Bill.
Rishi Sunak (Conservative, Richmond (Yorks))
I thank the hon. Gentleman for his typically thoughtful comments and join him in thanking all the witnesses we were lucky to hear from this morning.
During this morning’s session, I was pleased that there was widespread support for the principle of the Bill, namely shortening the revaluation cycle to make business rates more responsive to economic conditions. It felt like all participants agreed that three years was the right place to end up, striking an appropriate balance between responsiveness on the one hand and providing some certainty and stability for ratepayers on the other.
I am pleased to tell the hon. Gentleman that my team is already in discussions with the LGA and will continue to be so. It is also in discussions with CIPFA, which participates in a technical working group on business rates and business rate reform to ensure that the process for local authorities submitting their NNDR1 forms by the end of January is not unduly impacted by the change. As in the past, we have been able to work constructively with local government and CIPFA to ensure all the processes that need to happen for revaluation work for the sector, ratepayers and everyone else involved.
To the hon. Gentleman’s last point, and without wanting to stretch the scope of the Bill, I understand what he says. I am glad he recognises the contribution of business to our economy and society—not least providing employment and the funds we need for our public services. We will always be keen to do what we can to support business. With regard to business rates, £13 billion of various reforms have already been enacted by the Government—most recently the retail relief scheme, which provides a third discount to retail high street stores on their business rates bill and has been warmly welcomed. The Government will continue to watch that issue closely.