Business Rates and the Recession

I shall make sure that my hon. Friends at the Treasury take that as a Budget representation from my hon. Friend. I am glad he welcomes the change that we shall be making from April this year, which means that there will be a higher threshold and thus no new liability to pay on probably about 70 per cent. of empty properties. He urges us to review the operation of the scheme and we shall of course do so once it is in place. I turn again briefly to the questions about the business rate system as I think it would be useful for the House to understand how we have tried to design it so that it is fairer for businesses—I have mentioned the benefit of a nationally set rate in that regard. The system is based on the hypothetical rate that an occupant would pay to use a property. If a property is in a better location or provides better amenities, the rent that someone may be willing to pay will be greater and the rateable value and the rates that flow from that are, therefore, also greater. The hon. Member for Bromley and Chislehurst talked about the multiplier. He is right: the actual amount a business pays in business rates is calculated as a function of both the rateable value and the multiplier. Contrary to the assertion that through the business rate system, business is a cash cow for Government funding, or even local government funding, business rates rise only by the rate of inflation. Each year since 1990, and consistently since 1997, the rates have risen only in line with inflation. That has meant that since 1997 the proportion of local government funding from business rates has dropped from about 25 to 21 per cent. Before anyone from the Opposition jumps to their feet, it is not the case that the proportion of the council tax contribution to council funding has risen in a mirror image. Investment from central Government has increased above inflation every year since 1997, but the proportion of local government funding from council tax has been roughly the same over the past decade.