Non-Domestic Rating (Alteration of Lists and Appeals) (England) (Amendment) Regulations 2017 — House of Lords, 2017-09-11
Topic: Domestic Commerce
Kathryn Pinnock (Liberal Democrats, Centre to centre-left): My Lords, I draw the House’s attention to my interests as a councillor on Kirklees Council and a vice-president of the Local Government Association. I thank the noble Earl, Lord Lytton, for raising these important issues and for describing them in such great detail that we are able to have a good debate The regret Motion draws attention to the difficulties that businesses and local authorities have with the current appeal system against valuations. What is more regrettable, in my view, is that a root-and-branch reform of the business rates system is still awaited, despite widespread support for the necessity for a major change in the way in which business property is taxed. The business rating system, which started in Elizabethan England—under the first Elizabeth—was consolidated in 1988 but has failed to reflect the significant changes in the way in which businesses operate, the premises they use and their location, as described by the noble Lord, Lord Beecham. The consequences of a failed system are compounded by the inadequacies of the current appeals process The matter is made worse by the extended time between valuations, which has resulted in a significant impact on many businesses which saw their rates rise dramatically. It is difficult for many small businesses, particularly in the retail sector, to plan or readily absorb such increases. It is hardly surprising that more than 1 million businesses have challenged their business rates bills since 2010. The Government’s response has been to impose significant changes to the appeals system with the intention of reducing the number of appeals. They have made it more difficult and put restrictions in the way On the other side of the balancing act, local government increasingly relies on business rate income to fund services. The appeals system that existed prior to the April 2017 changes often resulted in many months passing before the appeal was decided. As we heard, this resulted in local government having to set aside £2.5 billion to cover the risks of appeals as local authorities are required to fund half the cost of backdated refunds. This is a very inefficient use of scarce public resources. That has been brought into sharp relief as government grants for local services continue to suffer very deep cuts. Setting aside desperately needed funds to cover the risks of appeals is, in the circumstances, totally unacceptable We have a dilemma: businesses need a fairer method of business property valuation and taxation, and local government, which is in receipt of the business rate income, desperately needs to avoid having to set aside significant funding to cover risks of successful appeals. Meanwhile, the appeal system that is devised is seen by many businesses to lack fairness and transparency. Something needs to, and should, change The difficulty for businesses, especially SMEs, is that there appears to them to be a lack of clarity as to how valuations are determined, and how these compare with similar businesses in the same location and with those in different parts of the country. Businesses have traditionally resorted to the appeal process in very large numbers, as we have heard. The Government’s decision to impose the new system has inevitably led to scrutiny highlighting the consequent inequities It is therefore not surprising that the Secondary Legislation Scrutiny Committee received evidence that, "the current proposal as to grounds of appeal is unlawful and inadequately drafted", and continues by pointing to the fact that the Government have abandoned the principle that the rating list be accurate, rather than have a reasonable valuation as the Government wish. With all due respect to the noble and learned Lord, Lord Hope, who knows much more about interpretation of those two words than I, it seems that the use of those words can lead only to legal challenge and more delay for all concerned—for the businesses appealing their valuations and for local government, which requires the income to provide services for local residents All this is the consequence of bolting a more restrictive appeal system on to the business rates framework, which is itself outmoded and broken. The way forward is for the Government to consider a fundamental reform of the business rates valuation system. Perhaps the Minister will be able to indicate whether there is any likelihood of that happening. Not to do so will lead only to increasing disquiet in the business sector and in local government. Both want and need a transparent and obviously fair system.