My Lords, I am grateful for the amendments in this group presented by the noble Baroness, Lady Hayman of Ullock, and tabled by the noble Lord, Lord Ravensdale. They give us the opportunity to discuss this important matter again.
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I assure noble Lords that we can and do keep under review the system of business rates reliefs and, in particular, how it impacts on matters such as energy efficiency. Where we see an opportunity to support energy efficiency and net zero through the business rates system, it is carefully considered.
The recent business rates review looked at this. As a result, eligible plant and machinery used at on-site renewable energy generation and storage, such as rooftop solar panels, wind turbines and battery storage, are now exempt from business rates until 31 March 2035. On-site storage used with electric vehicle charging points is also exempt. Low-carbon heat networks have also benefited from 100% relief from 1 April 2022, and this Bill will put that relief on a firm statutory footing.
Furthermore, any energy-efficiency improvements that meet the conditions for improvement relief will benefit from the measures in the Bill and not pay business rates for 12 months. Broadly speaking, these include energy-efficiency improvements added to the property by occupiers that improve the physical state or add rateable plant and machinery. In 2028, the Government will review the improvement relief scheme and I reassure the noble Earl, Lord Lytton, that the Bill includes a power to extend the relief beyond 2028. Additionally, energy-efficiency improvements that take the form of non-rateable items, which includes most process plant and machinery, will have no impact on the rates bill.
We understand the desire to go further and provide a more general relief for energy efficiency in buildings, but we do not consider this to be something that we can agree to, at this time, in this Bill. First, there are necessary practical questions about when and how energy-efficiency improvements impact rateable values and rates bills. Many energy-efficiency improvements are to the fabric of buildings, such as to the walls, windows and roofs, and how these improvements impact the rateable value of the property would be far from clear. We would need to be confident that the value of such energy-efficiency improvements could be accurately measured and captured in order to then provide a properly targeted relief.
As previously mentioned by my noble friend Lady Scott of Bybrook, and as was referred to by the noble Baroness, Lady Hayman, in her introduction, the Treasury also has to balance the desire for tax breaks against the need to fund local government and balance the books. These are difficult tax decisions, and it is correct that they should be considered by the Chancellor having regard to the full picture of the country’s revenue and spending.
However, given the interventions this afternoon, it seems appropriate to say a little more about the Government’s wider approach to energy efficiency in buildings. Last year, we announced a new long-term commitment to drive improvements in energy efficiency to bring down bills for households, businesses and the public sector. Our stated ambition is, by 2030, to reduce the UK’s final energy consumption from buildings and industry by 15% against 2021 levels.
For small and medium-sized enterprises, the Government have also sponsored an energy management standard publication to help businesses understand their energy usage and identify where they can make savings. We are also establishing a dedicated energy advice offering for smaller businesses to help them to reduce their energy costs.
Several capital allowances may also help businesses to make energy-efficient investments. For example, this year the Chancellor announced that we will allow
companies to write off the full cost of qualifying plant and machinery investment in the year of investment. This is in addition to the annual investment allowance, which has been set permanently at £1 million, and the structures and buildings allowance.
I hope it is helpful to have this wider context on the record, alongside our reasoning about why a new relief is not necessary. I thank noble Lords and hope that they will not press these amendments.