Central London Businesses

I congratulate the hon. Member for Cities of London and Westminster (Mr. Field) on securing this timely debate. The issue exercises my Department and many businesses across the country. Like him, I love London, and I share his interest in and enthusiasm for its many and varied businesses, especially those in Cecil court where, like him, I spent a large chunk of my youth. Sadly, Foyles is no longer there, but I have good memories of it. The businesses in Cecil court, along with the myriad large and small businesses that make London one of the most important drivers of our economy, use community services such as transport, lighting, the police and education. As I am sure the hon. Gentleman will agree, it is only right and proper that, as they do so, they pay their rates. As the hon. Gentleman said, rateable values are reassessed every five years. The next revaluation will take effect from 1 April next year and will be based on the rateable values at 1 April 2008. As he explained extremely clearly, thanks to the current economic turbulence and changes, and because London has experienced the highest rise in property values in England over recent years, the city will almost certainly experience the highest rise in rateable values in the country. Unlike the hon. Gentleman, who puts the increases at around 35 per cent., we estimate that they are likely to be about 10 per cent. on average, before inflation and other reliefs are taken into account. However, before everyone, including me, takes a sharp breath, that does not mean that rateable values across London will all increase at that rate. We estimate that ratepayers occupying almost 45 per cent. of properties in London—about 124,500—will in fact see their rates liability fall as a result of revaluation. In fact, small shops in London such as those in Cecil court could see their rates liability fall by 3 per cent. on average in 2010-11. If the hon. Gentleman would care to look at some of the figures we have that detail that, I would be happy to share them with him. Overall, there would be a reduction of some £6.5 million. I am glad to say that 56 per cent. of properties in outer London—about 72,000 in total—will also benefit from the revaluation. We estimate that they should see an average decrease of £950 in their rates liability for 2010-11. Those liable for business rates in London, including me, can also take some comfort from the fact that looking at rateable values in isolation does not always give an accurate indication of the bills that businesses will be expected to pay. The multiplier that the hon. Gentleman mentioned, which is used to calculate bills, is adjusted at the same time that new rateable values take effect. If they go up across the country, the multiplier is adjusted downwards. For example, at the 2005 revaluation, the multiplier was reduced by 4p in the pound. Then there is transitional relief. There is more comfort here, even though the hon. Gentleman does not see it as a solution to the problems. The Government consulted on the 2010-11 transitional relief scheme over the summer. Under their proposal, rates on small properties will be capped at 5 per cent., and at 12.5 per cent. on larger properties. We estimate that that should reduce the average increase of 10 per cent. in rates in London to about 3 per cent.—in other words, a 7 per cent. drop—and that the businesses that see the biggest rise in their bill as a result of revaluation will gain the greatest amount of relief. In total, we expect that 112,000 properties in London—24 per cent.—will benefit from transitional relief. In fact, we estimate that 16 London boroughs will see the total rates liability fall due to the revaluation and transitional relief. As the hon. Gentleman knows, the Government do not share his view that business rates should be relocalised. Pooling the proceeds of business rates on a national basis and redistributing them between authorities ensures that the revenue that is raised is allocated fairly. If local areas kept all the business rates they collected, those with a firm business base would be over-resourced in comparison with those with a smaller base.