Non-Domestic Rating (Multipliers and Private Schools) Bill

Public Bill Committee, 11 December 2024.

Martin Vickers (Conservative, Brigg and Immingham)

We are now sitting in public and the proceedings are being broadcast. Before we begin, I remind Members to please switch electronic devices off or to silent. Tea and coffee are not allowed during sittings. Today, we will consider first the programme motion on the amendment paper and then the motions to enable the reporting of written evidence for publication and to allow us to deliberate in private about our questions before the oral evidence session. In view of the time available, I hope that we can take those matters formally, without debate.

Martin Vickers (Conservative, Brigg and Immingham)

Copies of written evidence received by the Committee will be made available in the Committee Room.

Martin Vickers (Conservative, Brigg and Immingham)

We are now sitting in public again and the proceedings are being broadcast. Before we start hearing from the witnesses, do any Members wish to make declarations of interest in connection with the Bill? No.

Examination of Witness

Martin Vickers (Conservative, Brigg and Immingham)

We now hear oral evidence from Gary Watson, chief executive of the Institute of Revenues, Rating and Valuation. Before I call the first Member to ask a question, I remind the Committee that questions should be limited to matters within the scope of the Bill. We must stick to the timings in the programme order that the Committee has agreed. For this session, we have until 9.50 am.

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Good morning, Mr Watson. There has been a great deal of debate about the impact that the measures in the Bill will have on high streets, which contain a variety of different businesses. In opening your evidence, will you share your view of what the overall impact of the Bill is likely to be on our high streetsQ ?

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q To follow up on that, you have mentioned the key role that local authorities play in the administration of the system. The Bill will introduce provisions whereby the Treasury can make alterations around the multipliers. What is the appropriate time period to ensure that local authorities have sufficient run-in so that any such alterations can be administered correctly? Given that business rate take feeds into a national pooling arrangement, do you have a view about the timescales and the necessary consultation to ensure that, at both Treasury and local authority level, there is clear sight of the impact of those changes on the administration and on the sum of the business rates that are collected?

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q Thank you, Mr Watson, for taking the time to be here and for the insight you have provided on that first question. I am interested in the point about the number of multipliers. If I understand you correctly, there is a risk that the more multipliers you provide, the more confusion there might be in the system. However, the counter-argument—this is certainty our position—is that the business rate system is a blunt tool almost by design, and that by creating this different approach, we can better target the support that we provide not only for retail, hospitality and leisure, but for the large footprint occupiers, warehouses and distributors, where we create that pool of funding. I am interested to get an insight into how you and your members would see that balance being struck in the right way.

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q On that point, is that not why this measure is so important? If we think about the types of shocks that many businesses face, the pandemic was exceptional but also profound. Having that flexibility to move quickly and adapt was very important to the system.

With the current system, aside from it being temporary, short-lived and a cliff edge, the business did not know whether it was going to continue, and if it was going to continue, in what guise. It also had the impact of capping the amount of relief that could be given to any business at £110,000.

How do you and your members perceive the high street? From the Oldham perspective, when I look at the high street, national retailers such as Boots and Specsavers are actually the foundation of many high streets alongside local independent retailers, but previously they were locked out of the temporary scheme. It would be interesting to get your views on that.

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q The first part of the question was more about how agile the system can be. Providing for secondary legislation as part of this Bill is about having that agility and being able to move to recognise any shocks in the system to ensure that, if there is a hit to the local economy, or the high street in particular, the system can move quickly enough at the right point to save it.

Vikki Slade (Liberal Democrat, Mid Dorset and North Poole)

I would like to touch on that further. The Bill will give the Treasury the power to apply those additional multipliers. Do you feel that should be a local decision? You have hit the nail on the head; the way business rates work can be impacted by a local situation, such as a retailer going out of business or there being very high rents. Do you think that the Bill gives local areas the ability to think about how they might need to apply different multipliers? Would you like to see more regional or local implications, rather than it all coming through the TreasuryQ ?

Harriet Cross (Conservative, Gordon and Buchan)

Good morning, Mr Watson. What impact do you see the changes to the multipliers having on the number of appeals that are coming through the business rate system? Do you think the appeals are more or less likely than at the moment to have a grounding or a basis? Will they clog up the system? What is your position on thatQ ?

Adam Thompson (Labour, Erewash)

Thank you for joining us this morning, Mr Watson. I represent two towns in the east midlands, Ilkeston and Long Eaton. Both the high streets in our towns have suffered for a long time. We have a large number of small retailers and many have closed over a long period. A lot of work has been done locally, in particular by one member of the community, on regeneration of one of the towns especially—basically, clubbing together a lot of small independent retailers who have worked together to bring the community back up. How will the Bill tangibly affect the community and those small retailers?Q

Polly Billington (Labour, East Thanet)

Thank you for your evidence. It has been very interesting. My constituency is made up of three towns, Ramsgate, Broadstairs and Margate, all seaside towns and very dependent on all the sectors we have been talking about—tourism, hospitality, leisure and so forth. You have been talking about the centrally decided approach when it comes to those sectors. What value might there be in an approach that recognises the geographical challenges of particular areas, so that we do not just have a complete free-for-all with local government picking and choosing how to do it? We could say instead, “Yes, we need to have a particular approach when it comes to the geographical challenges of some commercial centres and the high streets.”Q

Martin Vickers (Conservative, Brigg and Immingham)

That brings us to the end of the time allotted for the Committee to ask questions. I thank our witness on behalf of the Committee for giving evidence.

Martin Vickers (Conservative, Brigg and Immingham)

We will now hear oral evidence from Paul Gerrard, director of campaigns, public affairs and board secretariat at Co-op. For this session we have until 10.20 am. Welcome.

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q Welcome. We are all familiar with your business, which is a mainstay of many of our high streets. Would you be willing to give us your assessment of the overall impact of the Bill on the stores that you represent and your view on what it will do to the retail environment in which they sit?

Martin Vickers (Conservative, Brigg and Immingham)

Order. Mr Gerrard, can you speak up a bit? The broadcasters are having trouble picking you up.

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q You mentioned that the Bill would have a positive impact on the vast majority of your stores. Can you just walk us through how you have reached that calculation, particularly with reference to the different types of environments in which those stores are located and the different footprints they will have?

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q For the record, I refer to my entry in the Register of Members’ Financial Interests. Mr Gerrard, many of the stores that you operate are not on the high street or in town and city centres; they are often the last remaining store on the estate in a community. How do you think this Bill might contribute to making those more viable? During the pandemic, when children were being educated from home and given vouchers to get meals during the day, we found that there were significant retail deserts in large parts of the country where that immediate meal was not available, bar the local convenience store on the estate or in the local neighbourhood. From that perspective, beyond the high street and town centres, what impact do you think these measures might have?

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q Leading on from that, one of the other measures in the proposals would remove the current cap on the temporary relief so that multiple operators, including national operators such as the Co-op and others, will benefit more from this scheme. I am interested in your view, because you will no doubt have a view on the tax system in the round and the impact it has on the business overall. Is it recognised that there is an attempt being made here to make sure that those national retailers are as important to the high street and communities as independent retailers, and actually it is the ecosystem overall that makes a place thrive?

Vikki Slade (Liberal Democrat, Mid Dorset and North Poole)

Q Can I ask you about certainty? The Bill providers the power to introduce multipliers for a given year. With so many stores, you must plan a long time ahead. Do you think that, if we allow changes to be made so frequently, that will be a problem for you?

Patrick Spencer (Conservative, Central Suffolk and North Ipswich)

Thank you, Mr Gerrard, for coming to give evidence. I want to put on the record my support for the premise of supporting community shops and stores and providing somewhere for people to go to do their shopping, but you mentioned that the provisions in the Bill will make distribution more expensive. Should we not be more concerned that home delivery, which we know is very important to vulnerable customers, will be more expensive as a result of the Bill?Q

Mark Sewards (Labour, Leeds South West and Morley)

Thank you, Mr Gerrard, for your answers so far; they have been really insightful. We have Co-op shops in my constituency; the Co-op in New Farnley is virtually the only shop in that community. It was an absolute lifeline throughout the pandemic, and it is still a lifeline today, given that there are not other shops. We have had some questions about consistency. Obviously, the aim of the Bill is to provide consistency for businesses—especially those in retail, hospitality and leisure—by providing lower multipliers. You have said how beneficial it will be for about 92% of your properties. Can you talk more broadly about the potential benefits for other retailers?Q

Sureena Brackenridge (Labour, Wolverhampton North East)

Thank you, Mr Gerrard. I am the Member of Parliament for cities and towns such as Wolverhampton and Willenhall, and we have a number of Co-ops and similar stores. I hear today that the Bill brings a welcome certainty and that the majority of Co-op stores will benefit from it. Co-ops and similar stores are important local employers and have been for generations within the community. I wonder whether you could share your thoughts on the impact of that.Q

Lewis Cocking (Conservative, Broxbourne)

Thank you for coming in today to give evidence. You have said that the Bill is going to make smaller stores more viable, and that it will affect your bigger stores. Can you give us a flavour of what that means for your business, and whether it will put you off doing bigger stores and make you concentrate on smaller stores? You have done analysis of where the Bill is beneficial to you, but have you done any wider analysis of what it means for the totality of the high street?Q

Lewis Cocking (Conservative, Broxbourne)

Q The first question was about whether it would put you off doing bigger stores and make you concentrate on smaller stores. Will you give us a flavour of what the Bill means for your business?

Martin Wrigley (Liberal Democrat, Newton Abbot)

Thank you for coming today. The Co-op is a vital element of many of the communities in my area in south Devon. It is a mainstay of many communities. In the Bill I am interested in the jump between the small business rates and the large business rates based on a rateable value of £51,000. Is that an issue for you in terms of deterring expansion and improvement of stores, or is that not something that you worry about?Q

Jayne Kirkham (Labour/Co-operative, Truro and Falmouth)

Hello, Mr Gerrard. Thank you for coming today. I am a Labour and Co-operative MP, so I am pleased to hear that you think the Bill will be good for the Co-operative Group. My first question is about the limit. You say that it will probably help you overall. Perhaps this is hard for you to answer, but for retail as a group, do you think that it is set at the right level?Q

Secondly, you said that the Bill may have positive effects for your smaller stores, in that you may be able to employ more people, and I wonder whether you can expand on that. The Co-operative shops in Truro and Falmouth are having issues at the moment with theft and violence against shop workers, which is not good, and the BID is providing support. Would the Bill give you the leeway to employ more people, even security people?

Michelle Welsh (Labour, Sherwood Forest)

I should probably confess that one of my first jobs was working at a Co-op—I do not know whether that is for the register of interests. In my constituency, we have seen the huge impact of a local store closing, especially on the most disadvantaged and most vulnerable. Over the years, I have been concerned about access to healthy food, children’s access to food and the ability of people with young babies to walk to a local shop. For many of my communities in Sherwood Forest, this is not about having food delivered; it is about being able to access it locally and frequently, because people are having to manage their money on a daily basis, not a monthly basis. They are buying one meal at a time, for exampleQ . The Co-op has played a vital role over the years and continues to do so.

We have seen the demise over the years of many local stores—not the Co-op, but generally, the store in the middle of the community that knows the local people. When I worked at my local store, I knew that if someone did not turn up for their Sunday paper, there was a problem. Promoting that sort of community feeling crosses all Government Departments, not just those dealing with health and wellbeing. Do you think the Bill will help to ensure that your local stores become more accessible and that you will maintain your connections with your community, and that it will be about working with the Government in all areas that deal with combating poverty and child poverty and improving child health?

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q A number of Members have mentioned their relationship with the Co-operative party, so I wanted to clarify one point. Does the Co-operative Group still fund the Co-operative party? Is there still a relationship between the two?

Martin Vickers (Conservative, Brigg and Immingham)

Order. That is outside the scope of the Bill.

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q You mentioned the overall impact of this measure alongside national insurance contributions changes and other things, which you analysed, and you said that that would be a significant consideration in your coming to a view on the impact of the Bill. What is your view on the overall impact? You said that you felt that overall it would be beneficial to your business, but there were uncertainties. How do you envisage clarity being brought to the overall impact, so you know what effect it will have on jobs, premises and your investment plans?

Martin Vickers (Conservative, Brigg and Immingham)

That brings us to the end of the time allotted for the Committee to ask questions. On behalf of the Committee, I thank Mr Gerrard for his evidence.

Martin Vickers (Conservative, Brigg and Immingham)

We will now hear oral evidence from Edward Woodall, Government relations director at the Association of Convenience Stores. We have until 10.40 am for this session.

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q Welcome, Mr Woodall, and thank you for your willingness to give evidence. Can you set out your view of the overall impact, both financial and administrative, that the Bill will have on your members? More specifically, can you give us a sense of how many of your member stores share premises or host other things such as post offices or banking hubs?

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q May I ask specifically what your view is on small business rate relief?

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q Thank you for giving time to give evidence today, Mr Woodall. You explained the nature of your members and the fact that their businesses are very much anchors of the community. They are the place that provides the food, but also, in many places, they provide access to finance, post office facilities, postal services and so on. How many of your members do you assess will benefit from the measures, given that the relief is targeted at retail, hospitality and leisure businesses of the scale you talk about?

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q On the point that you made about the potential to improve the system more generally, clearly we want this to be a measure that supports the fabric of community. In the end, these are retail businesses, but they are often the places that bind communities together. That is very much the way that we as a Government perceive them, and perceive the value of our high streets and our precincts in our villages and towns. From your perspective, what measures could be taken to really target the measure to ensure the support is given where it is needed?

Vikki Slade (Liberal Democrat, Mid Dorset and North Poole)

Q Thank you very much for coming in to give evidence. On the timing, we know that retail, hospitality and leisure relief will reduce to 40% in April, but these measures will not come in until the April after that. Do you have any concerns about the impact on convenience stores during that year, before we know what will be happening the following year?

Patrick Spencer (Conservative, Central Suffolk and North Ipswich)

Q Thank you very much, Mr Woodall. I was struck by what you said about rural convenience stores and the importance of supporting them, and I could not agree with you more. I represent a rural constituency and in the next-door village there is a shop that has been there for years. I am terrified every year that it will go under, yet it is very resilient. Do you think this Bill should make provision for convenience stores that stand alone within rural areas and villages, where they are the only shop left that sells milk, eggs and newspapers? Do you think it is not just about small and microbusinesses, but those that are the only ones left? Do you think there should be a provision in the Bill for them?

Adam Thompson (Labour, Erewash)

Q Thank you again for coming in this morning, Mr Woodall—we really appreciate your time. I am very pleased to hear your overall assessment that, for the convenience stores that you represent, the Bill will be positive and benefit the vast majority of them. On the savings made and the tangible effect of this Bill, what will they mean for a shopkeeper in my constituency of Erewash for security implementation, staffing and operations?

Harriet Cross (Conservative, Gordon and Buchan)

Q I understand that James Lowman, the chief executive of the Association of Convenience Stores, has written to the Chancellor following the Budget, and he described how 2025 will be a bleak year for small convenience stores, as they face over £666 million of additional cost. Will the Bill’s changes to the multipliers of domestic rates make a dent in that? Overall, will your convenience stores benefit from the Budget or be disadvantaged by it? How do those two things fit together?

Sureena Brackenridge (Labour, Wolverhampton North East)

Q To follow on from the question of my hon. Friend the Member for Erewash about security, I have a couple of things to say. Will you confirm the estimated benefit of the proposed business rate relief to small stores? Recently in my constituency, I accompanied my local neighbourhood police team to visit several stores on estates and high streets, as well as in a retail park. One of the things that the stores said directly to me and to the local neighbourhood police teams was about the shocking increase in retail crime—theft and violence—linked to stores directly employing fewer security staff. Will you share your thoughts on the impacts—the benefits—that the savings could make?

Martin Vickers (Conservative, Brigg and Immingham)

I will allow you a brief comment, Mr Woodall, but that is out of scope of the Bill.

Lewis Cocking (Conservative, Broxbourne)

Q In answer to the first question, you said that businesses could save approximately £1,000 or £3,000 depending on size, and then went on to say where they could use that money to make investments in their business or what have you. The businesses I speak to in Broxbourne say that they will have to put that money aside for other measures in the Budget, and in your answer you alluded to businesses being worried about the other measures in the Budget. How do those two marry up? Obviously, with those savings, they cannot invest in their business and put money aside for the other measures in the Budget. What proportion of your members are saying each one of those things?

Lewis Cocking (Conservative, Broxbourne)

Q Have you asked your members that question?

Mark Sewards (Labour, Leeds South West and Morley)

Q I will be brief. We have heard a lot about the cost of measures in the Budget, including in the Bill. Do you accept that there is some positive benefit in providing certainty to business—certainty that has been missing for a while? The measures in the Bill are designed to provide certainty over a longer period, but the measures in the Budget were designed for that as well.

Martin Vickers (Conservative, Brigg and Immingham)

That brings us to the end of the time allotted for this witness. I thank Mr Woodall for his evidence.

Examination of Witnesses

Martin Vickers (Conservative, Brigg and Immingham)

Q We now have oral evidence from the British Retail Consortium. For this session, we have until 11 o’clock. Would the witnesses introduce themselves?

Martin Vickers (Conservative, Brigg and Immingham)

Welcome. I will hand over to the shadow Minister.

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q Welcome and thank you both for your time today. Your organisation has been quite vocal about the need for this legislation to introduce a retail rates corrector as a means of addressing some of the imbalances. Would you share with the Committee your views about whether anything in the Bill helps to address those concerns, which I know are long-standing ones in the retail sector? Would you then develop that in the context of the Budget, which we have heard a lot of evidence about? It is one of those things that businesses are looking at the overall impact of. Would you tell us your members’ views about the overall impact that the Budget has had and give us a steer as to what that suggests we should be doing in this Bill?

Martin Vickers (Conservative, Brigg and Immingham)

That is slightly out of scope of the Bill. Could the witnesses comment on it within the context of the Bill?

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q We have heard some evidence on appeals and the decisions that will arise from this. Clearly, there is a degree of uncertainty because, if we do not yet know what the multipliers are, businesses cannot plan for that. Do you have a view about whether the current system is fit for purpose to address what may arise? If not, what measures would you like to see to make it work better?

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q Thank you for attending the evidence session, and for the written evidence that you have provided by way of preparation for the meeting. I think there is an acceptance in the evidence that you have given that any business rate system ends up having to draw the line somewhere; it is the nature of the multipliers and of the value that you apply. It stands a fact that, when it comes to most of your members, despite the 4,000 that you say will be above the £500,000 threshold, 772,000 are below the threshold. Therefore, it stands the case that the vast majority of your members will be the beneficiaries of the measures taken here.

Also, although it can be portrayed—and has been during this evidence session—that the relief is being decreased from 70% to 40%, the truth is that the temporary relief over covid was due to come to an end. That was a cliff edge, but this measure provides a permanent relief in legislation, which gives certainty over the long term. It would be interesting to know the views of your members on that.

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q It does, a bit, but I am not entirely sure it hits at the facts, to be blunt about it. It is not the case, from the evidence, that properties above £500,000 are essentially cross-subsidising those below £500,000. Those above £500,000 are only 7.5% of the total rateable value in the whole system. It is not the case that we are seeing that transfer.

Is it not also the case that many of your members who will occupy premises above the £500,000 will be the larger footprint occupiers, such as supermarkets and big department stores? If we were to move the centre of the cross-subsidy entirely over to warehousing and distribution, they would pay it on the back-end anyway, because Tesco, Sainsbury’s and the rest have huge warehousing and distribution models in their business.

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Let me make a point of clarity for the record. The 7.5% of total rateable value of the overall business rate tax take was just for retail, hospitality and leisure. It does not take into account offices or warehouses. I thought it was important that we set the context correctly in framing the conversation.

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

That would be very helpful.

Vikki Slade (Liberal Democrat, Mid Dorset and North Poole)

Q You talked a lot about the retail properties over £500,000, but there is also a cliff edge at £51,000. The Fantastic Things Emporium in Bournemouth is a brilliant treasure trove of lots of microbusinesses that would otherwise not have the ability to be on the high street. Is £51,000 the right level? Should the level exist at all?

Martin Vickers (Conservative, Brigg and Immingham)

We have one minute left and two Members have indicated that they want to speak.

Jayne Kirkham (Labour/Co-operative, Truro and Falmouth)

Q I will be very quick. On what you said about the higher limits, it would just be supermarkets, would it not, because they are bigger?

Jayne Kirkham (Labour/Co-operative, Truro and Falmouth)

Q I was going to bring in hospitality and leisure, which is probably something I will ask other witnesses about later. I am from Cornwall, where we have some big leisure and hospitality sites. To look at exemptions purely for shops—

Jayne Kirkham (Labour/Co-operative, Truro and Falmouth)

Then you are looking at a much bigger thing.

Martin Vickers (Conservative, Brigg and Immingham)

I am afraid that brings us to the end of our allotted time. I thank the witnesses for their evidence.

Examination of Witness

Martin Vickers (Conservative, Brigg and Immingham)

We now come to oral evidence from Stuart Adam, senior economist on tax at the Institute for Fiscal Studies. For this session, we have until 11.25 am.

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q I know your organisation has had a long-standing interest in the reform of business rates. Given the background, can you start by telling us your perspective on how far the Bill goes to address concerns that you have had and the calls that you have made for that reform to take place?

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q Could you share with us an assessment—your view—of the impact that measures in the Bill will have on the affected sectors?

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q Thank you for coming to give evidence today, Mr Adam. I absolutely accept what you said—you are far more qualified than me on these matters, and I will not try to test some of it. However, I can say from my experience in Oldham that businesses are asking for respite and that they have found things very difficult. Although covid has been and gone, the operating environment before covid was difficult for many high streets and town centres, particularly for retail, hospitality and leisure. In some places, particularly where the economy is vibrant and there is high demand for premises, there might be a shift from business rates to rent as the system is moved round, but in most places, where there is not that high demand and there are lots of vacant units, it is about making the activity more affordable so that people can operate and keep their heads above water, and there probably will not be the shift that you talked about.

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q I accept that up to a point, but the temporary relief that the previous Government brought in to cover the impact of covid on the high street and retail, hospitality and leisure was introduced at a time when the sector was decimated and the country and the economy changed beyond recognition, in a way that none of us had experienced. That is not the world today, but the operating environment is still very difficult. Have you made an assessment of the impact of the previous temporary relief coming to an end in the form of a cliff edge? It was just going to stop and there was no provision for it to continue in any form in the Budget or the overall forecast. What impact would that have had on the high street?

Vikki Slade (Liberal Democrat, Mid Dorset and North Poole)

Q In Northern Ireland, there is a single regional rate and then a local levy. Do you have views about whether there should be any local influence in terms of these determinants reflecting higher rents, particularly in the south-east or south-west, that put lots of businesses above the £51,000 threshold?

Jayne Kirkham (Labour/Co-operative, Truro and Falmouth)

Q I am from Cornwall, where we have full business rates retention, so that puts a slightly different spin on it. Given that that varies across the country, maybe you could mention that. You talked about high street rents going up or down. I come from a place where there are lots of seaside towns and limited space by the water. A lot of our properties are owned by faceless corporations or insurance funds, so the rents are not remotely responsive. They have stayed high for a long time because they are seen as an asset on a balance sheet. We have struggled very much with that. For some places—maybe you would disagree—the business rates are even more important because the rents either take a very long time to have an impact or we are just left with empty properties for a very long time. Would you agree?

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q Is part of the tension not that the question described a broken market, but that response describes a functioning market? Is the real issue that many institutional investors would sooner have an empty property with a notional rent attached to it, even if the rent is never achieved, than accept a tenant for a lower rent that would have an impact on their overall balance sheet? Is there not a tension there?

Patrick Spencer (Conservative, Central Suffolk and North Ipswich)

Q On this remarkable relationship between taxes and rent, are you saying that there is a uniform relationship across geographies, locations and shop types? There is a big difference between Oxford Street and a town high street; are you saying that the behaviour of rents and taxes does not vary across those situations?

Patrick Spencer (Conservative, Central Suffolk and North Ipswich)

Q Have you done any analysis of the variation of impact between renters and freehold owners of shops? On my high street, the shops that own the freehold are the ones that have been there for 15 years, so they have not weathered the same problems that other shops have. Surely at the margin there is an impact on shops that own the property.

Polly Billington (Labour, East Thanet)

Q We have a 24% vacancy rate on Ramsgate High Street for many of the reasons that Jayne gave in relation to Cornwall. Do you think that the certainty that this legislation brings will have an impact on establishing long-term help for reviving the high street, particularly when it comes to rents and increasing occupancy? The long-term drivers that have been undermining the high streets are new shopping behaviours—not only post-pandemic behaviours but online shopping. If you do not think that this legislation will help, what will?

Polly Billington (Labour, East Thanet)

Q Sorry to interrupt, but online competition is genuinely a problem with business rates. Having previously been a councillor in Hackney, I know that we got more business rates from Amazon having its headquarters there than the Treasury did from Amazon’s existence in the first place. So there is a difference.

Adam Thompson (Labour, Erewash)

Q Thank you for coming in, Mr Adam. The argument that you have put forward is predicated on the link that you have established between business rates and rent. A quick Google Scholar search implies that a lot of papers out there suggest that that link is broken somewhat by sluggishness in the rental market. Does that not undermine your argument?

Martin Vickers (Conservative, Brigg and Immingham)

Order. I am afraid that brings us to the end of the time allocated for the Committee to ask questions, and for this sitting. I thank the witnesses for their evidence.

Rupa Huq (Labour, Ealing Central and Acton)

I remind Members that they must declare any relevant interests before asking questions or speaking to amendments. I am the third person, I think, who Members have had in the Chair for this Bill Committee. We continue with our witnesses.

Rupa Huq (Labour, Ealing Central and Acton)

We have until 2.20 pm for this segment. Dr Malcolm James is a tax and accountancy specialist and a former senior lecturer in taxation and accountancy at Cardiff Metropolitan University. Before I call the first question, I remind Members that they must remain within the scope of the Bill, which is tightly defined, and that we have to stick to the timings. I call the shadow Minister.

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Welcome, Dr James. May I start by asking for your view of the impact the Bill, particularly with reference to high streets?Q57

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

In this sitting, the evidence has so far covered both private schools and high streets. You are a tax and accountancy specialist, so you have a broad overview. Is that correct?

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q Thank you very much. There has been an extensive debate about VAT, although that is outside of the scope of this Bill. We have spent a good deal of time debating the impact on special educational needs schools, a significant proportion of which are in the private sector. Some are paid for directly through fees charged to parents; some are paid for through education, health and care plans supplied by local authorities. Do you have a view about how the measures in the Bill will impact special educational needs provision?

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q Thank you, Dr James, for taking the time to give evidence today. We are particularly interested in the evidence you have amassed on the impact of this proposal. Where should the Government focus in mitigating the impact during the course of the process? To take what I think I have heard, the evidence you have provided is that, as a starting principle, the Government do not need to go here because there are plenty of other options, but the fact is that we have chosen to go here. What we are trying to get from the evidence sessions is that, within the decision that has been taken—

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

I think that rather than hearing a case from the evidence sessions that asserts that this does not need to happen, which we have just spent five minutes doing, it would be helpful to get a sense from you, given that the decision has been made to do this, of your assessment of the impact and the mitigations you would propose, within the scope of what is being proposed, to counter that.

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q But those are provided for in the scope of the proposed legislation. Schools that have more than half of their intake of children in that situation would be exempt—for those in receipt of a local authority EHCP.

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q If it is a stalking horse, it is a fairly mild one. The impact, even if every pound was passed on per pupil, is just over £300 a year—less than £1 a day.

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

These are evidence sessions where we try to glean insights that we have not previously had to inform the Bill and any potential changes. But I am struggling to get from the evidence so far a real sense of the impact. If there is a pound for pound impact with this measure—the business rate treatment for private schools—it amounts to, on average, just over £300 per pupil if it is passed on in its entirety, which is less than £1 a day. On that basis, what assessment has been made on the impact of that from your perspective?

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q But not on this measure. I am happy to conclude my remarks.

Rupa Huq (Labour, Ealing Central and Acton)

If we speak closer to the mike, it will pick us up—the witness is not hearing.

Jayne Kirkham (Labour/Co-operative, Truro and Falmouth)

I am going to try again. You are talking about the EHCP and saying that this might impact on some of the children and parents with EHCPs. The Bill sets out that private schools that are wholly or mainly concerned with the provision of education for children with EHCPs will retain their relief. So do you think there will be much impact on those children? Do you think that will mean they would have to move schools, given that the measure is in there?Q

Rupa Huq (Labour, Ealing Central and Acton)

Any more questions for Dr James? No. In that case, we can move on to our next witnesses. Thank you, Dr James.

Examination of Witnesses

Rupa Huq (Labour, Ealing Central and Acton)

We will now hear oral evidence from UKHospitality, the British Institute of Innkeeping and the Greater Manchester combined authority. We have until five past 3 for this session. We are reliably informed that Sacha Lord, night time economy adviser for Greater Manchester, is on his way. In the meantime, will our two witnesses introduce themselves?

Rupa Huq (Labour, Ealing Central and Acton)

We have until five past 3 for this block of questions. We start with the shadow Minister.

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q Thank you, Dr Huq. Welcome to both of our witnesses. We are aware, as a Committee, that the sector you represent is very significant in the UK economy. Would you be able to give us an indication of how you assess the impact of the measures in the Bill on the businesses and organisations that you represent?

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q May I follow up with a further question, specifically on pubs and hotels? We are aware that the nature of those premises often does not lend them to easy conversion into another business use, unlike a lot of retail shops, for example, which could change between offices and use by different kinds of businesses. Mr Alton, you highlighted sustainability as a concern, given that the Bill, although it embeds it permanently, represents an increase in the business rates cost. What further steps would you like to see taken to help to ensure that sustainability, particularly of hotel and pub premises, is supported through the system?

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q Thank you for giving evidence, and for the insight that you provided, which I thought was very comprehensive and gave a good insight into the industry. We all accept just how important pubs are, not just to the economy, but to our communities. In many places, they are where communities come together, where families meet and where memories are made. In many working-class communities, they are also buildings of note—of interest—that add character. All that is taken, and the work that your members do is appreciated. The Government are trying to give certainty in the system and to say that it is not good enough that, year on year, you do not know what is coming down the line. We want you to be able to plan ahead. We want you to know the Government will stand with you.

There will always be limitations on just how far any Government action can go, but we believe that this is a comprehensive package that gets the right balance between the online retailers and large distribution warehouses, and those on the street and in communities. On the quite stark warning that was issued about the potential for one in four pubs—15,000, potentially—to close, how would that compare with the past 10 years, say, so that we can put it into the context of the number of pubs that have closed in that period?

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q This part of the sector is unique in that turnover is so closely aligned to rateable value in a way that is different from other parts of the system. We accept that. You will know about this from your members, and I hear it all the time as a constituency MP—I have large family brewery, JW Lees, that operates heavily in my constituency, and it is very good—but when margins are tight, how much of that is down to a number of factors that are outside the Government’s control, not least rent? We heard earlier from the Institute for Fiscal Studies, whose evidence indicated that there is a market adjustment: on one side there may well be a rate increase or decrease, but on the other side the rent will move accordingly. I accept that that is outside the scope of the Bill, but it would be helpful to get your assessment of the marketplace, the rent levels that are applied to these businesses and how much those impact viability—well beyond business rates.

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q As a quick supplementary, what is your assessment of the number of your members that will benefit from the measures being taken?

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

That was not my point. I did not use those words.

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q I want to ask about the impact of the multiplier and the discretion around it. One of the things that we are all well aware of is that local authorities, in particular, are very big customers of hotels. They are particularly in search of temporary accommodation, which is especially significant at this time of year. There is often a strong incentive to make sure there is a sustainable hotel sector in a given location to provide for that emergency housing need, as well as for other, wider purposes, such as supporting tourism.

Is it your view that there should be discretion on the part of the billing authority so that if they need a sustainable hotel sector in order to meet temporary emergency housing need, or to accommodate significant numbers of refugees arriving, pending onward placement elsewhere, they are able to negotiate? If those businesses go to the wall because of a lack of profit margin, the taxpayer will have to be billed significantly more because those people will have to be placed in accommodation at a higher cost elsewhere.

Martin Wrigley (Liberal Democrat, Newton Abbot)

Q Apologies for being late; I got caught in traffic behind a tractor. I thank the panel for their evidence. I am a coastal Devon MP, and within my constituency are Dawlish and Teignmouth. We have some major holiday sites in that area that I am fairly sure will fall into the upper brackets. What is your feeling on the changing situation? As I understand it, we have the 75% reduction right now, we are going to the 40% reduction, and then we are going to the multiplier system. Will it cause problems to be chopping and changing every year?

Rupa Huq (Labour, Ealing Central and Acton)

Q Our third witness has arrived. Can you introduce yourself for the record?

Rupa Huq (Labour, Ealing Central and Acton)

We can hear them from here. The first Back Bencher who caught my eye was Polly Billington.

Polly Billington (Labour, East Thanet)

Thank you, Dr Huq. Steve, I would like to ask you a couple of questions on what you were talking about in terms of threats to the pub industry generally. I represent East Thanet, which is made up of Ramsgate, Broadstairs and Margate, which are heavily reliant on the leisure, hospitality and tourism industries. We have a lot of much-loved pubs in our town centres, but I am aware that many have closed over the last couple of decades. What would you identify as the drivers of the closures of those pubs? What are the numbers, just to put some context on the risks you have identified?Q

Polly Billington (Labour, East Thanet)

Q I am really impressed by the resilience of the pub industry in the context of those external drivers, but what legislative, tax or regulatory changes over previous decades have contributed to the crisis in the pub industry? I want to understand the context in which we are operating.

Rupa Huq (Labour, Ealing Central and Acton)

Do any other witnesses have anything to add?

Harriet Cross (Conservative, Gordon and Buchan)

Thank you all for coming. I will aim my question at Mr Alton, but everyone can probably have a go. Mr Alton, you mentioned 15,000 potential closures, and Mr Lord just said 9,000 in Q1 next year. There was also a figure of, on average, 15 employees per pub. That brings us up to about a quarter of a million potential job losses, which will be across the board—not just full-time jobs, but part-time jobs, holiday jobs and starter jobs. It will have a huge impact. Has the sector, or have you, modelled where those are likely to fall, when they are likely to come and how they might be mitigated? Ultimately, what can be done to prevent those losses or to help those people move into other businesses across hospitalityQ ?

Rupa Huq (Labour, Ealing Central and Acton)

Order. The Minister may have been just about to say this, but we have only five minutes left, at least two more Members wish to ask a question, and this is steering a little out of the scope of the specific contents of the Bill.

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

It is almost the opposite, really. Given the context that has been outlined, this is the respite that the industry has been calling for. If we can keep to the scope of the Bill, and what it provides for, that would be helpful.

Jayne Kirkham (Labour/Co-operative, Truro and Falmouth)

Q I have a quick question. I am glad you are here, Mr Lord, because we were talking about the super tax and the £500,000 limit. I am from Cornwall, so I completely understand what you said about large hotels. Will other parts of the leisure sector, such as theme parks, the night time economy, music venues and theatres, be impacted by the super-rate?

Jayne Kirkham (Labour/Co-operative, Truro and Falmouth)

Q What percentage are we talking about across the board—theatres, theme parks and so on, and hospitality? I think you said 7%, which is fairly low.

Sureena Brackenridge (Labour, Wolverhampton North East)

My constituency of Wolverhampton North East does not have a city centre, but we have lots of cafés, brilliant restaurants, microbreweries and pub chains. What benefits will the Bill provide to those small businesses?Q

Mark Sewards (Labour, Leeds South West and Morley)

I have a brief question for Kate Nicholls. You mentioned earlier that business rates always come up as a barrier to extra investment. Please can you talk more about that?Q

Rupa Huq (Labour, Ealing Central and Acton)

Order. I am told that I have to cut you off. Sorry about that. That brings us to the end of the allotted time for this set of witnesses, so we will do a changeover. I thank the witnesses from this panel, and we will move on to the next one.

Rupa Huq (Labour, Ealing Central and Acton)

Q We now move on to oral evidence from the Independent Schools’ Bursars Association and the Independent Schools Council. We have until 3.40 pm, and we are expecting votes as well, just to make it even more exciting. As they take their seats, could the witnesses please introduce themselves for the record?

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q I declare for the record that I have a significant number of independent schools, nurseries and other institutions in my constituency, two of which my family are customers of. We need to stick very much within the scope of the legislation, but the feedback I have had from the sector is that it has felt like a very difficult time indeed, being on the end of a targeted attack on your education sector.

There are a number of proposals on the nature of business rates and how they are applied. A lot of schools are not merely involved in education but have things such as nurseries and other ancillary facilities on site. Could you give us an indication of how your members would be impacted by what is proposed in the Bill? Do you consider that improvements could be made to take account of the fact that, for example, if a nursery is in a separate building on a separate site, it is not within scope, but if it is on the same site, it is within scope?

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q Could one of the panel return to the point about the hereditaments, as in the sites and the impact where you have multiple different types of service on a given site, and where, if those were separated out, they would not be subject to and come within the business rate changes? With nursery care in particular, where they are co-located, the whole site is subject to that.

May I ask about one of the things we will consider tomorrow? I think most of us will have been contacted by constituents who have been displaced from the independent sector but are unable to secure places in the state sector. What about supporting state schools that have to deal with that in-year impact, whereby they will not be funded through the normal autumn-winter pupil count, because that has already taken place, and therefore will have to wait a long time before they see any additional funding? We could consider ringfencing the proceeds locally, so at least that would mitigate some of the impact of that displacement at a local level. I am interested in whether you have a view of what mitigations—by way of local discretion, ringfencing of the proceeds, or otherwise—we could put in place, in particular to help those families who have been pushed out of the independent sector but are unable to secure a funded state school place for their child at this point.

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q To pursue that technical point, under the SEND system in the state sector, as well as the statement—now, the educational, health and care plan—you traditionally had structures such as school action and school action plus. A child whose identified needs were not sufficient to trigger the issuing of an EHCP, but did require additional resource, would get it provided through their state school. Is there a case for saying that any child who might not have a statement, but who would have qualified for school action or school action plus, should also fall within the scope of the exemption?

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q Thank you for the evidence you have given, and for making the time to come to this evidence session, which is our opportunity to get an insight into the nuances and how things feel on the ground. We talk about private schools and the independent sector, but the truth is that those terms represent a broad spread of different types of schools in terms of their make-ups, pupil numbers, financial models and so on. It would be helpful to get a snapshot of the variety of schools in the system, including by perhaps comparing and contrasting a couple of different schools, and then I will follow up.

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q There is a variety of different schools with different specialisms, particularly those special needs schools. Clearly, we have made provisions to ensure that those with more than 50% of pupils in receipt of an EHCP are exempt from this, so they are out of scope. In the end, do you think that many parents feel the need to go to the independent sector because they do not feel that the mainstream provision is adequate? On that basis, is that a reflection that the Government’s priority of rebuilding that mainstream provision, including the significant investment of £1 billion this year, is essentially about fixing the system so that parents have genuine choice, and do not feel that they have to go to the independent sector?

The second point I would make is about the quantum if it was followed through. There will be an assumption that, as a business, schools will look to absorb as much of the additional pressures as possible—I will be honest—in the way that state schools have had to over the last decade. These are the choices that every business has to make to try to make the numbers work at the end of the day. Even if every pound was passed on with these measures, by our assessment, it is about £300 per pupil per year, which clearly is less than a pound a day. I understand that you have given a wider context, but within the scope of the Bill, what assessment has been made of the impact of that average of £300 per pupil per year—if it was passed on in its entirety—on people potentially leaving the sector? Also, what headroom might schools have to absorb it within existing budgets?

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q What I was trying to get to more was—to say “evidence” would be pushing it too far—the assessment that has been made of the impact. We hear language like, “Our parents are aspirational,” but all parents, by and large, are aspirational, regardless of the school their children go to. I am aspirational, and my son goes to a state school; that does not mean I am a lesser parent.

But I do not want the conversation to be about that; I want it to be about making sure that we fully appreciate the Bill’s impact. A lot has been made of the potential displacement of pupils from the private and independent sector into the state sector. It would be helpful to get your assessment of that. Our assessment, based on May 2023 data, says that, in terms of the capacity to receive children, there are around 1 million unfilled vacancies in primary and secondary schools in the state sector. Of that 1 million, how many could come in from the private sector as a result of this measure?

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q It is important to say, though, that the 1 million vacancies I referred to are in existing schools. So the teachers are in the classrooms, and the buildings are there. These are vacancies in the existing school system.

Vikki Slade (Liberal Democrat, Mid Dorset and North Poole)

I am conscious of trying to keep to the Bill, because I am worried that a lot of your comments are really about the state of the independent sector more widely. As has been suggested, the Bill will make a relatively minor change, although I understand that it comes on the back of other things. What thought has been given to how the independent sector might mitigate what is effectively a change to a property tax by rationalising the amount of property it uses? An awful lot of independent schools have an awful lot of land and property, and they could perhaps mitigate the impact by doing that. Has any thought been given to rethinking how you use propertyQ ?

Vikki Slade (Liberal Democrat, Mid Dorset and North Poole)

Q You could probably build a small village on the land owned by each of the independent schools in my constituency. So while I accept that there are schools like the ones you described, there are also schools that might be able to merge to fix this problem.

Rupa Huq (Labour, Ealing Central and Acton)

We have until 3.40 pm, and I have seen six Members indicate they have questions.

Navendu Mishra (Labour, Stockport)

I am grateful to panellists for being here and giving up their time. Private schools have had visibility of the Labour party policy on this matter for a long time. I wonder why the sector seems to be so unprepared for the changes in the light of the new Government coming in and delivering on their manifesto pledge.Q

Navendu Mishra (Labour, Stockport)

Q They seem very surprised.

Navendu Mishra (Labour, Stockport)

I take your point that—

Rupa Huq (Labour, Ealing Central and Acton)

Order. We have eight minutes for six people, so only one question each.

Harriet Cross (Conservative, Gordon and Buchan)

Q My question is very brief, and is relevant to what Mr Lenon said about margins being tight. Is there a figure for the average margin that one of your schools would expect? How might that be affected by the changes to the business rate relief?

Michelle Welsh (Labour, Sherwood Forest)

I want to go back to something that Simon said about special educational needs in independent schools, and how in some cases SEN can be met only by independent schools. Can you give further clarification on that?Q

I spent a long time working with special educational needs in the state sector at every key stage, in both specialised and mainstream state schools. There was not a single case that I saw that was not able to be dealt with in a state school in one way or another. With the further investment this Government are talking about, I think that will change again. I would like some clarity, because if there are such cases, they should be taken up with the local authorities and Members of Parliament—it should not be the case.

Polly Billington (Labour, East Thanet)

Q I notice that the fees of private schools in the Independent Schools Council have doubled in cash terms in the last 20 years. I would be interested in the explanation for that rise—the causes behind it—and the impact on both numbers and the composition of the pupils attending those schools.

Polly Billington (Labour, East Thanet)

Q By how much?

Deirdre Costigan (Labour, Ealing Southall)

Thank you very much for your evidence. I am a former chair of the governing body of a state school, so this is a really interesting conversation. Mr Woodgate, you mentioned that private schools might need to look at redundancies to absorb the impact of the measure. I understand that the student-teacher ratio in private schools is double that in state schools. It is something like 8.5:1 versus 18:1 in state schools, so there are significantly more teaching staff in private schools. If there were to be redundancies, have you made any assessment of whether the impact would be similar to the impact on state schools?Q

Deirdre Costigan (Labour, Ealing Southall)

Q I was specifically asking for a comparison with the state sector. Do you think that redundancies will have a similar impact, a worse impact, or less of an impact in the private sector than in the state sector?

Mark Sewards (Labour, Leeds South West and Morley)

Q I understand that the Minister wanted to move on from this, but on your comments about aspirational parents, the simple fact is that all state school parents are aspirational, and in many cases they will never be in a financial position to send their kids to private school. I wanted to give you an opportunity to clarify that. Secondly, given that over 1,000 private schools closed between 2010 and 2024 without much media attention, how many private schools do you estimate will close as a result of the Bill?

Sureena Brackenridge (Labour, Wolverhampton North East)

Q Thank you for coming and sharing your views and experiences. Business rate relief is in the scope of the Bill. I am a former deputy headteacher who worked across state secondary schools. Private schools, I say, are businesses. I had to juggle reductions and constraints across the budget, with departments such as the science department struggling to ensure that children have the full, hands-on experience—

Rupa Huq (Labour, Ealing Central and Acton)

Order. I hate to do this, but I have to. Thank you, gentlemen—you will vacate your seats, and we will move on to our ninth panel.

Examination of Witness

Rupa Huq (Labour, Ealing Central and Acton)

Rachel Kelly is assistant director of tax and finance policy at the British Property Federation. This is a one-man panel until 4 pm.

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q Clearly, the Bill has wide-ranging impact across different types of property, but I ask this witness to give us a sense—from the perspective of the British Property Federation, which I understand to be largely about the transactions that sit behind property—of what you perceive to be the impact of the measures of the Bill on the day-to-day business of your organisation.

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q As you mentioned, many things going on in the system at the moment have an impact. Clearly, that level of investor confidence is crucial if high streets and the business environment generally are to remain vibrant. What is your view of the impact of the measures in the Bill on investor confidence? Are there any particular points that will either boost that level of confidence or tend to dampen it down?

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q Thank you for coming to give evidence. One thing that we are particularly interested in is ensuring that, within the scope of the Bill—the measures that are being taken, particularly on the multipliers and the reliefs—we understand the impact on the ground in our town and cities, and in the wider economy.

We have heard from other witnesses today about the relationship between business rates and rent levels, and in the end that is a self-correcting system when it works well. It would be useful to get your insight, from your perspective and from the industry’s, about what headroom exists, certainly for institutional landlords. There are a number of us, I think, who reflect on our own local economies and see very high rent levels being quoted for properties that have been empty for many years and have no prospects of getting tenants anytime soon. It would be helpful for us to get a feel of how the system is working as an industry.

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q These measures are very deliberately targeted at those smaller properties in retail, hospitality and leisure that are generally the backbone of our high streets and town centres. Your institutional members, who are investors in those places, must also reflect on the fact that many of those places are really struggling. Where they may be a landlord and the demand just is not there, it will be, by and large, because the business does not believe it can keep its head above water, notwithstanding the rent levels. Do you and your association think that a stable system that has a permanent relief—one that takes away the cliff edge and temporary support, which has been there since covid, to give long-term support—will be good not only for communities but for investors, who will be able to fill those vacant units?

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q It was more about a recognition from industry that, for the institutional investors in property, the Government are going a long way to bake a permanent relief into the system, rather than year-on-year reliefs. That relief can help to fill those units that investors maybe really struggle to let because, whatever the rent levels, they are just not commercially viable for the end user, and these measures will help in that end.

Vikki Slade (Liberal Democrat, Mid Dorset and North Poole)

Q I completely accept the point that a lot of the talk around the Bill is about high streets, because of the particular references to retail, hospitality and leisure. But it is a Bill that affects non-domestic rates and multipliers for businesses. Do you have any thoughts or comments on the fact that there is no reference to manufacturing and how we support manufacturing businesses? Do you think that should be included within the Bill?

Polly Billington (Labour, East Thanet)

Q I am grateful for your evidence, and I am interested to hear your puzzlement about the reality of empty shops. I represent East Thanet, where there are three towns—Margate, Broadstairs and Ramsgate —all of which suffer from empty shops to a greater or lesser extent. Ramsgate has a 24% vacancy rate. Can you explain to me how that might be, and what impact the legislation might have on tackling some of the challenges around large property owners resisting taking on tenants?

Polly Billington (Labour, East Thanet)

Well we must have a lot of irrational investors.

Rupa Huq (Labour, Ealing Central and Acton)

The Clerk is telling me that we are steering away from the scope of the Bill, so I am being told off for allowing it to continue.

Patrick Spencer (Conservative, Central Suffolk and North Ipswich)

The premise of this policy change, as I understand it, is to rebalance fairness back towards local, community-based properties and businesses, which I am in favour of. But can you speak to the impact that the Bill will have on your institutional investors that invest in large warehouse space? What is the importance of that for the UK economy, in terms of supporting our distribution networks and the many businesses that provide goods to our doorstep? What impact will the change of policy have on those businesses?Q

Deirdre Costigan (Labour, Ealing Southall)

Q You said at the outset, Rachel, that you wanted the tax system to be more responsive. Would you not agree that rebalancing the tax system in this way is being responsive to those empty shops on the high street, and to the feeling among small businesses and hospitality that it is the online distributors that are not playing on a level playing field and are getting away with being able to undercut them because the tax system currently does not work? The legislation will give us the responsiveness we need to level that up.

Rupa Huq (Labour, Ealing Central and Acton)

That is the end of this session.

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

On a point of order, Dr Huq. I wanted to check the timings for today’s Committee. The invitations sent out to secure Members’ time had this Committee concluding at 4 pm today and tomorrow.

Rupa Huq (Labour, Ealing Central and Acton)

We are going on until 4.40 pm, although there may be votes. The decisions were made by the Programming Sub-Committee all those days ago.

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

I am referring to the diary invitations that were sent out. Separate information is sent to Members’ diaries electronically from what is on the agreed programme. I want to make sure that we confirm the time with Members. I am more than happy to stay here to conclude today’s business, but we need to ensure that Members know what time they need to book out in their diary.

Rupa Huq (Labour, Ealing Central and Acton)

It sounds like a mismatch in communications. The Clerks will follow up on that.

Rupa Huq (Labour, Ealing Central and Acton)

We have our next witness, Professor Francis Green, professor of work and education economics at UCL. Would you like to introduce yourself?

Rupa Huq (Labour, Ealing Central and Acton)

Theoretically we have until 4.20 pm, but we are expecting to be interrupted. I call the shadow Minister.

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q Welcome, Professor Green. We would be grateful if you set out your view on the impact the measures in the Bill will have on the education sector, on which you are an expert.

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q “Marginal” is a helpful description, because we know that this is a very specific, narrow Bill. Clearly it is part of a bigger context. We know that marginal impacts can be felt more strongly in certain contexts than in others, especially if a business or institution is closer to the edge financially than an equivalent counterpart in another location. King’s in Canterbury may be extremely well padded in terms of its margins, but that will not necessarily be the case everywhere. On the educational impact that may follow from the overall changes, would the measure reduce the impact on provision or the ability of some affected schools to make their facilities available to other schools in a local area? Do you have any view about that?

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q Thank you for taking the time to give evidence and for your direct and matter-of-fact responses, which in a debate that can be emotive is very welcome to an evidence Committee. The Government want to ensure that, in seeing the legislation through, we fully take into account the likely impact on the school system and on the individual pupils and parents, but the fact is that most schools will seek to absorb this, as they would any other operating cost. It would be helpful to understand, if you have made an assessment, the likely displacement of pupils from the independent sector to the state sector as a result of this measure.

Jim McMahon (Labour/Co-operative, Oldham West, Chadderton and Royton)

Q My next point is about the accommodation that we have sought to make for SEND pupils, in particular for those schools with a majority of pupils in that category. We recognise that that is an important part of the school system overall. Many councils contract to such schools to ensure that children who need the support get that provision. What is your assessment of the impact of the measures in the Bill on that particular cohort of children? Do you need to separate—in my view, you do—the overall impact across the sector from that on the children who are most in need of specialist support? Under the proposed measures, we seek to give them protection.

Vikki Slade (Liberal Democrat, Mid Dorset and North Poole)

Q We heard earlier that 130,000 children with special educational needs are in independent schools, of whom 100,000 do not have an EHCP. If you assume that the majority of those are not in specialist EHCP/SEND schools, the potential is for 100,000 children possibly to make that switch. Do you have any thoughts on how many of those schools might be pushed towards specialising in special educational needs? Do you have any idea of whether we might see a shift in what private schools choose to specialise in going forward?

Adam Thompson (Labour, Erewash)

ThankQ you, Professor Green, for joining us this afternoon. You have noted a couple of times already that your assessment is that the impact of this measure will probably be negligible. I was wondering how you might compare that with the cash-terms doubling of private school fees over the last 20 years, from the perspective of families.

Patrick Spencer (Conservative, Central Suffolk and North Ipswich)

Q Sorry, Professor Green, can we just go back? You said that you would expect 10,000 to 20,000 students to transition out of independent schools and into the state system—

Patrick Spencer (Conservative, Central Suffolk and North Ipswich)

Okay, so we will go midway, which, at 20,000, would be a 3.5% reduction in the total independent school population.

Patrick Spencer (Conservative, Central Suffolk and North Ipswich)

Is that as a consequence of everything that is going on in this context, or just the business rate changes? Do the parameters of that analysis include VAT?

Patrick Spencer (Conservative, Central Suffolk and North Ipswich)

I just want to clarify that that analysis was based on the total changes that the sector is undergoing, not just specifically the context of the Bill.

Rupa Huq (Labour, Ealing Central and Acton)

Is that the end of all of our questions for this witness? Thank you, Professor Green.

Rupa Huq (Labour, Ealing Central and Acton)

We will move on to our next panel—the 11th panel—and hear oral evidence from Jim McMahon, Minister for Local Government and English Devolution in the Ministry of Housing, Communities and Local Government. We have until 4.40 pm, unless we are interrupted by the vote, but we will cross that bridge when we come to it. The Minister probably needs no introduction, and there are probably loads of Members who want to ask questions, but we will start with the shadow Minister.

David Simmonds (Conservative, Ruislip, Northwood and Pinner)

Q Thank you very much indeed, Dr Huq. I know that we are going to have ample opportunity to develop the debate about the relevant clause in the Bill tomorrow, but a lot of the amendments are about whether impact assessments will be carried out or not, and how that would inform our decision making. Could you set out the Department’s approach in general to the use of impact assessments in making determinations—for example, setting the particular level of multipliers—either that the Treasury would consider as an envelope, or that you would expect to see implemented by billing authorities?

Vikki Slade (Liberal Democrat, Mid Dorset and North Poole)

Q Can I ask about occupation? I am thinking about the hon. Member for East Thanet, and I also represent a coastal community. We had a slightly surprised response when we heard that everything will right itself, when we have whole high streets sitting empty. My understanding is that if you have a higher rate for empty properties, it is likely to force people to take a tenant. Do you think the Bill goes far enough on that, or are there more levers you need to pull to make those empty properties work? I know we already have the rental auction and that that is not in scope, but does the Bill go far enough or can the multipliers be levered even more?

Adam Thompson (Labour, Erewash)

Q Thank you, Minister, for your time. We have had really interesting sessions today. I represent two towns, as I said earlier, and I am really pleased to represent one where a lot of work has been put in by the community to rejuvenate the town centre. By working together, the occupancy rate has increased, and we have a huge focus on independent businesses, which is really positive.

I want to focus on pubs, because we had a little less focus on that than other areas earlier. I know that like many other colleagues, I would not be here, sitting in this room, if it were not for the emotional and social support of pubs during the election campaign—in my case, the White Lion and the Dew Drop Inn. What opportunities do you feel will be opened up for the pub sector by the Bill?

Patrick Spencer (Conservative, Central Suffolk and North Ipswich)

Q Forgive me, Minister, but is this not a bit of a missed opportunity? The Committee has heard a lot of evidence today that, yes, the measures introduced in the Bill, specifically the ones around supporting local shops and our high streets, are probably very fair and reasonable, and that it is about time, but at the end of the day, business rates are not a progressive way to tax individuals and businesses. Taxing capital always allows for businesses that may seem asset-rich or that have asset liabilities to be taxed unfairly.

Why did the Government not go further in looking at alternatives, whether it be a sales tax or a land value tax? I am not a fan of land value taxes—they are another form of capital tax—but why did the Government not look at being more ambitious, instead of retaining a system that may be better in the future but still not ideal?

Jayne Kirkham (Labour/Co-operative, Truro and Falmouth)

Q This is just a point of clarification for me. It is probably really simple. On the larger rate, over £500,000, and the lower multiplier, one witness said that it could still apply to hospitality, retail and so on, so it could still be applied to big hotels and grassroots music venues even if they are over the level. Is that right?

Harriet Cross (Conservative, Gordon and Buchan)

Q Going back to panel 7, we heard UKHospitality, the British Institute of Innkeeping and the night time economy adviser for Greater Manchester reflect on jobs and job losses due to changes. I appreciate that it is hard to establish at this stage whether those are because of national insurance or business rates, but either way business rates are a contributing factor. What analysis have the Government done as a background to the Bill to model the impact on jobs and job losses in the different sectors? What impact assessment has been done in relation to the different types of employment—full time, part time or seasonal? A lot of hospitality work helps people such as part-time working mothers because it comes at different times of day.

Harriet Cross (Conservative, Gordon and Buchan)

Ten minutes ago, you said that we have to look at those changes within the scope of all the other changes, so I think it is not unreasonable to look at it as a whole.

Harriet Cross (Conservative, Gordon and Buchan)

Yes.

Harriet Cross (Conservative, Gordon and Buchan)

Q Was a job analysis done in the scope of the Bill?

Harriet Cross (Conservative, Gordon and Buchan)

Q It could have a positive impact on jobs, but we do not know because we have not had an analysis.

Harriet Cross (Conservative, Gordon and Buchan)

Q I think my question is about the broader principle of whether it is also value for money. If you are giving tax relief somewhere, you would want to know what the impact of that is—for example, if the impact is on job growth, that is great. But would you not want to know what the impact of it is on a certain thing, compared with if you had spent that money elsewhere? Surely, whether it is positive or negative, an analysis is an important part of seeing whether money is being spent in the most efficient way possible.

Rupa Huq (Labour, Ealing Central and Acton)

We have eight minutes left, five people still to speak, and a vote is due any second now.

Deirdre Costigan (Labour, Ealing Southall)

Q Thank you, Minister. I know you are a former local government leader. I want to ask about local councils and what support there will be to ensure that they can administer the Bill and help to support rebalancing the high street in a way that I know all local authorities want.

Martin Wrigley (Liberal Democrat, Newton Abbot)

Q Reforming business rates is very welcome. We always like that—they are not a particularly good tax—but I fear the measure is making them more complicated.

Forgive me if it is a naive question, but I do not see anywhere in the Bill, other than it starting in April 2026, any commitment to forward notice of changes or the forward ability to see changes. One presumes they come once a year in the Budget, but I am not sure it is actually mandated that that is the case. Is there a mechanism in the Bill that prevents future Governments from changing these rates more frequently, or is there anything that we can put in it that gives local authorities sufficient time to implement such things?

You say that the provisional settlement is due next week. I say once again, as a former council leader, that that is very late. You are forgiven—it is the first year, so there are extenuating circumstances—but councils need time to set their budgets, set their systems and do all that. I am looking for lead times, implementation times and guarantees of multiple years’ rates for consistency.

Michelle Welsh (Labour, Sherwood Forest)

Q Can the Minister set out the scheme that the Government are proposing to ensure that schools that principally deliver education for pupils with special educational needs will not face any additional burdens?

Mark Sewards (Labour, Leeds South West and Morley)

Q Queen Street in Morley is a fantastic high street, but it has a number of empty shops. I tried to acquire one of them when I was setting up my constituency office, but I was told, “No, no, no—they are about to be occupied.” Six months later, they are still not occupied. I promise it is not just that they did not want me; other people have approached them and had no luck. Please can the Minister shed some light on how we might use multipliers to get these properties occupied?

Rupa Huq (Labour, Ealing Central and Acton)

Order. I am afraid that brings us to the end of the sitting. I thank all the witnesses for their evidence and all the members of the Committee for their patience.

Written evidence reported to the House