Non-Domestic Rating (Chargeable Amounts) (England) Regulations 2009

My Lords, I am grateful for this opportunity to explain how these regulations are going to help 467,000 business properties with their rate bills over the next five years through the transitional relief scheme. First, I should begin by explaining a little about the rating system and revaluations as this provides important context for the regulations. The system of business rates is a stable and important part of how we pay for local government in England. Rates have existed in one form or another for more than 400 years but the current system of national non-domestic rating was introduced in 1990. Since then, central Government have set the multiplier which is used to calculate rate bills and, between revaluations, that multiplier has not increased by more than inflation. This has provided welcome and valuable certainty for business. The 1990 reforms also introduced a statutory requirement to have regular revaluations of rateable values every five years. Regular revaluations update rateable values, which are based on rental values, to ensure that everyone pays their fair contribution and no more. The process of revaluation is done independently of government by the Valuation Office Agency, which uses experienced and professional valuation staff. They have collected and analysed more than 300,000 rents nationally, which is more rents collected than ever before. From this rental evidence, they have prepared valuations for all 1.7 million properties and, six months ahead of when bills are sent out, they have published those draft rateable values on the internet. They have also sent out summary valuations so that ratepayers can check for any errors and ensure these are corrected in time for rate bills on 1 April 2010. To date, the Valuation Office has received 82,000 inquiries on those summary valuations, of which almost 60,000 have already been resolved. However, the rateable value is only one part of the rates bill. The amount payable also depends on the rating multiplier and any reliefs, including the transitional relief which we are discussing today. Despite what we may hear, it is not the case that the high property market at 1 April 2008, on which rateable values are based, will lead to higher rate bills. The rules we have in place ensure that not a penny extra is raised in revenue for the Government from the revaluation. To achieve this, the rating multiplier has been reduced for 2010-11 by 15 per cent, taking it to its lowest level for 17 years. We are aware that some ratepayers struggle with their rates bills. That is why we have introduced relief schemes such as the small business rate relief scheme, which provides up to 50 per cent relief, and this transitional relief scheme. But these schemes also add complexity to the rates bills. To ensure ratepayers understand how these different types of relief affect their rates bills, my department has worked with the Valuation Office and Business Link to produce a business rates calculator on the Business Link website. This business rates calculator is one of the most popular applications on the Business Link website and to date has received something like 100,000 visits. Measures such as this are ensuring that ratepayers have an accurate understanding of their rates bills for next year. As I said, revaluations do not raise a penny extra for the Government and more than 1 million business properties—60 per cent of all business properties—will see an average decrease next year due to the revaluation of £770 before inflation. The revaluation will provide a welcome and timely boost to sectors such as industry, which will see rates bills fall by 3 per cent, and regions such as the east Midlands where 84 per cent of business properties will see their rates bills fall as a result of the revaluation. The regulations we are discussing today provide a transitional relief scheme to help the minority of ratepayers who are facing increases. This £2 billion relief scheme will ensure that, after adjusting for negative inflation, no small property will face an increase due to the revaluation of more than 3.5 per cent in 2010-11, or 11 per cent for larger properties. This relief will help 467,000 business properties with their rates bills next year. We have adopted this relief scheme after a consultation exercise in the summer which provided more information than ever before about the revaluation. Our chosen scheme secured widespread support. Sixty per cent of respondents agreed that we should provide relief over the full five years of the rating list rather than the four years adopted for the previous revaluation in 2005. Sixty-eight per cent supported the proposed caps on increases for small properties, including the Federation of Small Businesses, and 55 per cent supported the caps on increases for large properties. Transitional relief works by placing annual caps on the changes in rate bills. Those caps are contained in Regulation 8 of the draft regulations. For instance, the caps on increases for small properties over the five years, before inflation, are 5 per cent, 7.5 per cent, 10 per cent and then 15 per cent in each of year 4 and year 5. So, if a small property is seeing a rise in its bill of 15 per cent before inflation due to revaluation, its bill would be capped at a 5 per cent increase in the first year and a further 7.5 per cent increase in the second year. By the third year, it will have reached its full bill. Other rate reliefs, such as small business rate relief or rural rate relief, are applied after the transitional relief is calculated. Transitional relief must be self-financing, which means that relief for some payers must be funded from other ratepayers. We considered this carefully at the consultation stage, and 66 per cent of respondents agreed that we should fund the transitional relief by also placing a cap on annual reductions in bills, rather than by levying a supplement on all other ratepayers. Therefore, the regulations also provide that those seeing reductions due to the revaluation should have them capped to help pay for the relief. For example, the caps on reductions for large properties are minus 4.6 per cent, minus 6.7 per cent, minus 7 per cent, then minus 13 per cent in each of year 4 and year 5. These regulations also have to cope with the various changes that can happen to a property during the five years of a rating list. For instance, the transitional relief scheme must have rules to decide what happens when a property splits or merges with another property, or where rateable value changes. These rules are sometimes complex, but they ensure that no ratepayer is treated unfairly. The rules are not new and both local authorities and other practitioners are well versed in their application. To ensure that these regulations can be implemented in time for new bills on 1 April 2010, my department has worked closely with the Institute of Revenues Rating and Valuation and the Local Government Association, and we have maintained good working relationships with the software companies that support local government. As a result, we are very confident that accurate bills will be sent out on time for 1 April 2010. For the majority of business properties, the 2010 revaluation will provide a welcome boost in the current economic climate. As I said, more than 1 million business properties will see an average decrease next year due to the revaluation of £770 before inflation. The revaluation will help important sectors such as industry in regions such as the Midlands, which are vital to economic recovery. The relief scheme before us will provide help for the minority facing increases. After allowing for the effect of negative inflation in September 2009, which will adjust bills for all of 2010-11, next year no large property will see an increase of more than 11 per cent due to the revaluation, while no small property will see an increase of more than 3.5 per cent due to it. The scheme has been widely supported at consultation and I therefore ask the Committee to join in that support today.