My Lords, group 6 covers several amendments probing the Government’s support for high street businesses and the wider impact of the Bill. I am grateful for the useful discussions that I have had with noble Lords on what are, undoubtedly, significant issues.
Amendments 30 and 31, from the noble Baroness, Lady Pinnock, and the noble Lord, Lord Shipley, seek a review of the effect of business rates on the retail and hospitality sectors. I recognise that the conditions for businesses in town centres and high streets are concerning for many noble Lords. The Government take these concerns seriously and recognise the impact that increased competition from online businesses, changing consumer behaviour and Covid-19 has had on the fortunes of some high street businesses.
That is why the Government have taken decisive action to ensure that business rates are manageable for ratepayers on the high street. First, 720,000 properties, including many smaller retailers, pay no rates as a result of small business rates relief. Additional support has also been provided for those that do have rates bills: at the Autumn Statement, the Chancellor announced a package of business rates measures worth £13.6 billion. This included a general freeze of the multipliers for all properties, as well as increased support—from 50% to 75% relief—for retail, hospitality and leisure properties, which is worth over £2.1 billion. As we heard, the Government also scrapped downward caps and, as we move to more frequent revaluations through the Bill, we will see a business rates system that better reflects real market values, which was the leading ask of businesses in our review.
I understand that the noble Earl, Lord Lytton, and the noble and learned Lord, Lord Etherton, tabled Amendment 26 to encourage the Government to more actively intervene in how different types of property used in the retail sector are valued. Valuation is, of course, conducted independently by the VOA. All properties subject to business rates are assessed to the same standard of rateable value, which is, broadly speaking, the annual rental value. Properties are valued by reference to the evidence on the level of rents, which is agreed by landlords and tenants for that specific property class. If, at the most recent revaluation, the evidence shows that those open market rental values have increased, rateable values will change with them. Nevertheless, in all cases, the method must result in the common standard of rateable values.
In our review of business rates, the Government sought views on many different ways in which the valuation system could be changed. However, there was strong majority support for retaining the existing basis of rateable value. Therefore, we do not support significant changes to the industry-recognised valuation methodology, as was suggested.
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Amendment 29, tabled by the noble Baroness, Lady Hayman, seeks an assessment of the impact of reducing the threshold for small business rate relief. As I have set out, the Government’s small business rate relief scheme already sees more than one-third of properties pay no business rates at all, with an additional 76,000 benefiting from reduced bills. The eligibility criteria for small business rate relief ensures that it effectively targets the smallest businesses, where help is needed most, and provides a good balance between support and the cost to the Exchequer. Further increases in the threshold for small business rate relief would be a broad-based and indiscriminate way to provide support and would therefore be a poorly targeted form of relief, so we do not agree that this amendment is necessary. However, the Government keep all taxes under review, and any future decisions regarding the tax system will be taken in line with the normal Budget process.
Finally, Amendments 32 and 35, tabled by the noble Baroness, Lady Pinnock, would require an assessment of: the impact of three-yearly revaluations
on business rates revenue and the financial resilience of local government; the impact of the VOA duty on ratepayers; the impact of the Act on the VOA’s resources; and the impact of temporary rate reliefs in the Bill on the UK’s net-zero targets. I will begin with local government. Local authorities will receive new burdens funding for the additional costs they face as administrators of the system, and I assure noble Lords that we will undertake a new burdens assessment of the measures in the Bill. I also assure noble Lords that local authorities are protected from the effects of the revaluation.
Revaluations update the rateable value of all properties across the country, meaning that some will see increases and others reductions. Unmitigated, this would lead to changes in the amount of business rates income collected and retained by individual local authorities under the business rates retention system. The Government have adjusted the business rates retention system to strip out as far as practicable the impact of the revaluation on local authority income via the adjustment to local authority top-ups and tariffs. This is a mechanism that we have discussed and consulted upon with local government and it worked effectively in the 2017 and 2023 revaluations.
Regarding the VOA duty, the Government have already published their estimates of the impact of complying with the duty on ratepayers. We will continue to monitor this as we design the system and engage with ratepayers. I have already spoken about the VOA’s resources and the funding the Government have provided to ensure that these changes are delivered. The VOA is investing considerably in its resourcing, particularly around the recruitment of surveyors.
Finally, it is of course right that we review the effectiveness of the new improvement and heat network reliefs at a suitable juncture. We have said that we will do so ahead of their 2035 expiry date and have kept a power in the Bill to extend the reliefs based on that review.
Having only recently conducted a comprehensive review of the rates system, and having set out our plans for monitoring and reviewing the measures in the Bill and the protections for local government in our administration of the system, I trust that noble Lords will agree that these amendments are unnecessary.