PARLIAMENTARY DEBATE
Local Government Finance Act 1988 (Non-Domestic Rating Multipliers) (England) Order 2022 - 17 January 2023 (Commons/General Committees)
Debate Detail
Contributions from James Murray, are highlighted with a yellow border.
The Committee consisted of the following Members:
Chair(s) †Sir Robert Syms
Members† Atkins, Victoria (Financial Secretary to the Treasury)
† Colburn, Elliot (Carshalton and Wallington) (Con)
Duffield, Rosie (Canterbury) (Lab)
† Garnier, Mark (Wyre Forest) (Con)
† Hamilton, Mrs Paulette (Birmingham, Erdington) (Lab)
† Howell, Paul (Sedgefield) (Con)
McDonnell, John (Hayes and Harlington) (Lab)
† Mahmood, Mr Khalid (Birmingham, Perry Barr) (Lab)
† Maynard, Paul (Blackpool North and Cleveleys) (Con)
† Morris, David (Morecambe and Lunesdale) (Con)
† Murray, James (Ealing North) (Lab/Co-op)
† Poulter, Dr Dan (Central Suffolk and North Ipswich) (Con)
† Shelbrooke, Alec (Elmet and Rothwell) (Con)
† Stephenson, Andrew (Lord Commissioner of His Majesty's Treasury)
† Tomlinson, Justin (North Swindon) (Con)
† Twist, Liz (Blaydon) (Lab)
† Yasin, Mohammad (Bedford) (Lab)
ClerksChristopher Watson, Bethan Harding, Committee Clerks
† attended the Committee
Third Delegated Legislation CommitteeTuesday 17 January 2023
[Sir Robert Syms in the Chair]
Local Government Finance Act 1988 (Non-Domestic Rating Multipliers) (England) Order 2022
Chair(s) †Sir Robert Syms
Members† Atkins, Victoria (Financial Secretary to the Treasury)
† Colburn, Elliot (Carshalton and Wallington) (Con)
Duffield, Rosie (Canterbury) (Lab)
† Garnier, Mark (Wyre Forest) (Con)
† Hamilton, Mrs Paulette (Birmingham, Erdington) (Lab)
† Howell, Paul (Sedgefield) (Con)
McDonnell, John (Hayes and Harlington) (Lab)
† Mahmood, Mr Khalid (Birmingham, Perry Barr) (Lab)
† Maynard, Paul (Blackpool North and Cleveleys) (Con)
† Morris, David (Morecambe and Lunesdale) (Con)
† Murray, James (Ealing North) (Lab/Co-op)
† Poulter, Dr Dan (Central Suffolk and North Ipswich) (Con)
† Shelbrooke, Alec (Elmet and Rothwell) (Con)
† Stephenson, Andrew (Lord Commissioner of His Majesty's Treasury)
† Tomlinson, Justin (North Swindon) (Con)
† Twist, Liz (Blaydon) (Lab)
† Yasin, Mohammad (Bedford) (Lab)
ClerksChristopher Watson, Bethan Harding, Committee Clerks
† attended the Committee
Third Delegated Legislation CommitteeTuesday 17 January 2023
[Sir Robert Syms in the Chair]
Local Government Finance Act 1988 (Non-Domestic Rating Multipliers) (England) Order 2022
14:30:54
Victoria Atkins
The Financial Secretary to the Treasury
I beg to move,
That the Committee has considered the Local Government Finance Act 1988 (Non-Domestic Rating Multipliers) (England) Order 2022.
It is a pleasure to serve under your chairmanship, Sir Robert.
This legislation will deliver a tax cut of £9.3 billion over the next five years for businesses. We are protecting businesses, small and large, from inflation by freezing the business rates multiplier for the upcoming year. That means that all businesses will pay 6% less than they would have done had the Government not intervened. We have a duty to our businesses as a Government to ensure a fair and responsive business rates system, while of course raising sufficient revenue to support this country’s vital public services. We have sought to strike that balance each year, and this year will be no different.
From April this year, rateable values will be updated for all non-domestic properties using evidence from April 2021. That means that initial bills will reflect changes in market conditions since 2015. That in turn will ensure a fairer distribution of the tax burden between online and physical retail, something I know that colleagues are particularly concerned about. Large distribution warehouses will see an increase in bills and retail, hospitality and leisure businesses will see decreases. At the same time, we recognise that business rate payers may feel uncertain about the upcoming revaluation, given other pressures driven by the global challenges that the country is facing, including of course rising prices around the world and their impact on our businesses.
At the autumn statement, we announced the steps that we will take next year to provide support through these difficult times, with a package worth £13.6 billion over the next five years.
That the Committee has considered the Local Government Finance Act 1988 (Non-Domestic Rating Multipliers) (England) Order 2022.
It is a pleasure to serve under your chairmanship, Sir Robert.
This legislation will deliver a tax cut of £9.3 billion over the next five years for businesses. We are protecting businesses, small and large, from inflation by freezing the business rates multiplier for the upcoming year. That means that all businesses will pay 6% less than they would have done had the Government not intervened. We have a duty to our businesses as a Government to ensure a fair and responsive business rates system, while of course raising sufficient revenue to support this country’s vital public services. We have sought to strike that balance each year, and this year will be no different.
From April this year, rateable values will be updated for all non-domestic properties using evidence from April 2021. That means that initial bills will reflect changes in market conditions since 2015. That in turn will ensure a fairer distribution of the tax burden between online and physical retail, something I know that colleagues are particularly concerned about. Large distribution warehouses will see an increase in bills and retail, hospitality and leisure businesses will see decreases. At the same time, we recognise that business rate payers may feel uncertain about the upcoming revaluation, given other pressures driven by the global challenges that the country is facing, including of course rising prices around the world and their impact on our businesses.
At the autumn statement, we announced the steps that we will take next year to provide support through these difficult times, with a package worth £13.6 billion over the next five years.
Mark Garnier
Wyre Forest
My hon. Friend has announced very welcome proposals. One of the big arguments about the economy at the moment is that giveways will be inflationary, so creating more liquidity in the economy could create an inflationary pressure. Is my hon. Friend convinced that the money she has announced, rather than going into the wider economy, will be used to invest in businesses to make them more productive?
14:33:58
Victoria Atkins
We are, and what is more, because of how we have increased the multiplier and also the package we announced at the autumn statement, we have been focusing our efforts on those small businesses and the retail, hospitality and leisure industries, because we know that they are finding it very difficult at the moment. That also means that larger distribution warehouses will see an increase in bills, which is a fair response to the massive increase that we have seen in online trading in recent years.
I will not go into detail on the range of measures we intend, but, as I said, we have measures to help the retail, leisure and hospitality sector, which will extend and increase their relief scheme up to a cash cap of £110,000 per business. That means that the typical pub, for example, will see a fall in their rateable value, receiving more than £10,000-worth of support from the business rates package. We have also announced transitional relief in response to many trade representatives, which will help businesses with a fall in their bills next year. And we are providing more than £500 million of support over the next three years through a new “supporting small business” scheme.
The order marks an important step in the Government’s efforts to support businesses, particularly those on our high streets and our retail, hospitality and leisure sector as well. It is an important step in the package of help to ensure that we are supporting those businesses over the next five years with the £9.3 billion tax cut.
I will not go into detail on the range of measures we intend, but, as I said, we have measures to help the retail, leisure and hospitality sector, which will extend and increase their relief scheme up to a cash cap of £110,000 per business. That means that the typical pub, for example, will see a fall in their rateable value, receiving more than £10,000-worth of support from the business rates package. We have also announced transitional relief in response to many trade representatives, which will help businesses with a fall in their bills next year. And we are providing more than £500 million of support over the next three years through a new “supporting small business” scheme.
The order marks an important step in the Government’s efforts to support businesses, particularly those on our high streets and our retail, hospitality and leisure sector as well. It is an important step in the package of help to ensure that we are supporting those businesses over the next five years with the £9.3 billion tax cut.
14:34:41
James Murray
Ealing North
It is a pleasure to serve in the Committee with you as Chair, Sir Robert.
As we all know, and as we heard from the Minister, national and non-domestic rates are calculated as the product of a hereditament's rateable value, as determined by the independent Valuation Office Agency, and the relevant multiplier. The national non-domestic rating multiplier applies in relation to hereditaments of £51,000 or more, while for hereditaments with rateable values of less than £51,000, the small business non- domestic rating multiplier applies.
As we have heard, the regulations before us effectively maintain the non-domestic rating multiplier rates in the financial year 2023-24 at the same level as they were in 2022-23 in relation to the payment of business rates. We will not oppose these regulations, as they seek to implement the commitment in the autumn statement to freeze the business rates multipliers in 2023-24 at 49.9p and 51.2p, preventing them from increasing to 52.9p and 54.2p. However, I would like to check with the Minister my understanding of the calculations that sit behind those values and which are affected by the content of the order.
The explanatory note at the end of this order explains that the small business non-domestic rating multiplier is calculated using a formula in the Local Government Finance Act 1988. Within those calculations, variable 'B' will be the retail prices index for September of the preceding financial year, unless the Treasury by order specify a lower amount.
This order specifies that for 2023-24 the amount for item B will be 320.2. That is of course an increase from its value in 2022-23 of 294.3, as specified by the Local Government Finance Act 1988 (Non-Domestic Rating Multipliers) (England) (No. 2) Order 2021. I understand that the value of B has to increase to achieve a freeze in the multiplier rates, as a result of the separate formula that is used in revaluation years. I would be grateful if, when the Minister responds, she could confirm how the formula achieves a freeze by way an increase in the value of B.
We in the Opposition have already set out our broader position in relation to business rates. We would scrap the current outdated system and replace it with a fairer, more sustainable system that is fit for the future. As we know, however, the Government have abandoned their 2019 promise to do a fundamental review of the system review business rates. That represents another broken promise by a Government who is out of energy and out of ideas.
In conclusion, the Opposition will not oppose this statutory instrument as any benefit for businesses at this difficult time is welcome, and I look forward to the Minister confirming how the formula to which this order relates achieves the freeze as promised.
As we all know, and as we heard from the Minister, national and non-domestic rates are calculated as the product of a hereditament's rateable value, as determined by the independent Valuation Office Agency, and the relevant multiplier. The national non-domestic rating multiplier applies in relation to hereditaments of £51,000 or more, while for hereditaments with rateable values of less than £51,000, the small business non- domestic rating multiplier applies.
As we have heard, the regulations before us effectively maintain the non-domestic rating multiplier rates in the financial year 2023-24 at the same level as they were in 2022-23 in relation to the payment of business rates. We will not oppose these regulations, as they seek to implement the commitment in the autumn statement to freeze the business rates multipliers in 2023-24 at 49.9p and 51.2p, preventing them from increasing to 52.9p and 54.2p. However, I would like to check with the Minister my understanding of the calculations that sit behind those values and which are affected by the content of the order.
The explanatory note at the end of this order explains that the small business non-domestic rating multiplier is calculated using a formula in the Local Government Finance Act 1988. Within those calculations, variable 'B' will be the retail prices index for September of the preceding financial year, unless the Treasury by order specify a lower amount.
This order specifies that for 2023-24 the amount for item B will be 320.2. That is of course an increase from its value in 2022-23 of 294.3, as specified by the Local Government Finance Act 1988 (Non-Domestic Rating Multipliers) (England) (No. 2) Order 2021. I understand that the value of B has to increase to achieve a freeze in the multiplier rates, as a result of the separate formula that is used in revaluation years. I would be grateful if, when the Minister responds, she could confirm how the formula achieves a freeze by way an increase in the value of B.
We in the Opposition have already set out our broader position in relation to business rates. We would scrap the current outdated system and replace it with a fairer, more sustainable system that is fit for the future. As we know, however, the Government have abandoned their 2019 promise to do a fundamental review of the system review business rates. That represents another broken promise by a Government who is out of energy and out of ideas.
In conclusion, the Opposition will not oppose this statutory instrument as any benefit for businesses at this difficult time is welcome, and I look forward to the Minister confirming how the formula to which this order relates achieves the freeze as promised.
14:37:57
Victoria Atkins
I thank the hon. Member for Ealing North for his efforts in describing the origins of the SI. It is always very interesting, because when I take a SI, I take the view that of course hon. Members will have read and considered carefully the document. I like to try to bring those SIs to life, but the hon. Gentleman can always be relied upon to go through the minutiae of a SI. We are extremely grateful to him for that.
I must pick the hon. Gentleman up on a point that he also mentioned in a Westminster Hall debate, namely that we have somehow reneged on a promise about a review. We have reviewed, and we have been able to make the package under consideration today precisely because we worked with businesses and the Valuation Office Agency—an independent, arm’s length body though it is—to make sure that when we drew up that package, we were responding to the needs of the retail, hospitality and leisure sector. We were drawn to help the needs of that sector in particular, even though he knows that at the autumn statement we had very, very difficult circumstances with which we had to deal. I for one am very, very pleased that in what was a very difficult period for the economy—and it remains so—we were able to find the headroom to bring about the £9.3 billion tax cut for local businesses up and down our high streets.
I know from my own constituency the help that businesses rely on, particularly those on the high streets in some of my more rural market towns. Very often the properties there get small business rate relief and that can mean the difference between their being able to stay in business and sadly being unable to do so.
In relation to the hon. Gentleman’s specific question, I am assured that no increase is involved and that it is an aggregate RV change and there is an adjustment in the appeals package.
I must pick the hon. Gentleman up on a point that he also mentioned in a Westminster Hall debate, namely that we have somehow reneged on a promise about a review. We have reviewed, and we have been able to make the package under consideration today precisely because we worked with businesses and the Valuation Office Agency—an independent, arm’s length body though it is—to make sure that when we drew up that package, we were responding to the needs of the retail, hospitality and leisure sector. We were drawn to help the needs of that sector in particular, even though he knows that at the autumn statement we had very, very difficult circumstances with which we had to deal. I for one am very, very pleased that in what was a very difficult period for the economy—and it remains so—we were able to find the headroom to bring about the £9.3 billion tax cut for local businesses up and down our high streets.
I know from my own constituency the help that businesses rely on, particularly those on the high streets in some of my more rural market towns. Very often the properties there get small business rate relief and that can mean the difference between their being able to stay in business and sadly being unable to do so.
In relation to the hon. Gentleman’s specific question, I am assured that no increase is involved and that it is an aggregate RV change and there is an adjustment in the appeals package.
James Murray
The Minister may have misunderstood my question. I was asking her to clarify how the formula works. I think I understand it, having read the minutiae on which she commented that I pay great attention to, but I just wanted to check that my understanding is correct, because variable B obviously increases in comparison to last year, although business rates are frozen. Could she just explain how that formula works, just so I have clarity that I have understood it correctly?
14:40:55
Victoria Atkins
As I said, we are freezing the multiplier. The Valuation Office Agency conducts the valuations of properties independently, as he will know. We have gone to great trouble since the pandemic to support the VOA in its assessment of properties. In relation to the formula, it is precisely because we are freezing the multiplier that we have the SI.
It is very good of the Opposition to support the SI, and I am confident—
It is very good of the Opposition to support the SI, and I am confident—
James Murray
I understand the Minister’s point about the freezing of business rates, which is the commitment made by the Chancellor in the autumn statement. My question is about variable B increasing as a result of the order. How does the formula work to maintain a freeze in business rates in that context?
Victoria Atkins
Again, I am very happy to help the hon. Gentleman. The formula reduces the multiplier to affect the increase in rateable value at the revaluation, and then adjusts by about 4% to account for appeals before protecting from inflation. I hope that that level of detail is reassuring to the hon. Gentleman, and that he understands that the full might of the Treasury has worked this out, with the help of the Valuation Office Agency.
Question put and agreed to.
Question put and agreed to.
Committee rose.
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