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

My Lords, I thank the noble Lord, Lord McKenzie, for introducing these regulations and declare an interest, being involved in companies which pay non-domestic rates. Despite much criticism in this place and elsewhere, Ministers are pushing ahead with their planned 2010 rates revaluation. New bills will be issued to businesses in March 2010 for payment in April. Although I of course support the transitional arrangements, I am concerned that the Government have adopted a flawed approach to this. Of particular concern is the methodology that has been adopted. April 2008, which was right at the peak of the property boom, has been the time selected on which to base this revaluation snapshot. Certain sectors which were artificially buoyant in April 2008 will now have boom values effectively baked in to their rates bills for the next five years before the next revaluation. Additionally, many small shops could no longer be eligible for small business rate relief as a result, further increasing their bills. Businesses find themselves being forced to pay boom taxes in bust economic circumstances. In 2007-08, the Government took in £17.4 billion. Next year, it will be £20.8 billion—a huge increase over the recession. Does the Minister really mean to tell us that all businesses will be able to pay and will not go bust in the mean time, and that those projections are accurate? I very much doubt that he can, as the Government have refused to conduct any impact assessment on the effect of the forthcoming 2010 revaluation to gauge its likely effect on businesses. That seems particularly irresponsible given the potentially destabilising economic impact of making changes to a £20.8 billion tax during a recession, changes which businesses could not reasonably have foreseen. The consultation on the transitional relief scheme closed before the draft rateable values were published, preventing a considered assessment of the implications by respondents. In the previous 2005 revaluation, all details were published a full month before the consultation closed, enabling informed responses. Even if the figure of £20.8 billion is to be believed, we are told that the Government expect to distribute £21.5 billion back to local authorities in the form of grant. Where will the extra £700 million come from? The Government’s figures are in a mess. There is already a £700 million black hole, which will increase as small businesses go bust. The Government claim that the revaluation should be revenue-neutral. Some firms in some parts of the country may see a fall in rateable values and business rates, although that may be because of a lack of regeneration in those areas, but a significant proportion of firms—40 per cent, or about 700,000 businesses—will face large and destabilising rises during the worst recession on record. It is those 700,000 businesses which will be financing the rest, regardless of their profitability and of whether they are a going concern. We could do worse than consider the decision by the Executive in Northern Ireland to defer the 2010 revaluation to allow the localised effect of the recession to be taken into account. Noble Lords may wonder if the middle of a severe recession is the time to be rocking the boat in this way. The background to this is worth considering. Without proper consultation, as Chancellor, Gordon Brown slashed empty property rate relief for commercial and industrial premises to raise £1 billion a year, which came into effect in April 2008. That tax rise is particularly harmful in a recession, as firms are often unable to pay rent out of vacant property due to the lack of economic demand, but they must still somehow find the cost of business rates. That is money that firms could otherwise have used to reinvest in premises or regeneration, to create new jobs and business opportunities. The Local Government Association has noted that four out of five councils have reported an increase in empty properties in town centres during the recession. Two-thirds of councils warned that these empty properties are having a significant impact on high streets. Yesterday, when these orders were being debated in another place, my honourable friend Justine Greening pointed out the costly effects of the revaluation that make these transitional arrangements necessary. Petrol stations, for example, are likely to be hit with a 33 per cent increase, while the Association of Convenience Stores has pointed out cases where the hike will be more than 200 per cent. Cricket grounds in England and Wales will owe an extra £62,000 each and rugby league grounds can expect a rise in their business rates of 60 per cent. London Zoo will see a rate rise of 155 per cent, up from £260,000 a year to £660,000—a £400,000 hike. The urban regeneration companies, established to promote regeneration, have warned Ministers that these tax rises have resulted in the prospect of a pre-emptive demolition to avoid the risk of payment and have a deterrent effect on the slow and painstaking business of assembling sites in multiple ownerships. They also talk of the detrimental effect on new speculative factory or office developments that are essential for securing new jobs in deprived areas. Such regeneration is already commercially risky; the prospect of rates payments on newly built but unlet spaces risks killing off private-sector interest altogether. The effects of the revaluation are therefore potentially disastrous for many businesses. I and my colleagues in the Opposition have urged the Government to postpone the revaluation, and I do so again. If the Minister does not agree to do so, I have no choice but to back the transitional scheme. However, that scheme is not, as I have pointed out, without its flaws. These regulations have been ill thought out.