Date: 2023-04-24
Helen Morgan: I have been looking forward to this legislation, partly because I am passionate about any measures that will revive the fortunes of the high street in North Shropshire's historic and beautiful market towns, and partly because, from my previous role as an accountant and financial controller, I have first-hand experience of dealing with the business rates system. Businesses are facing tough conditions. Every ingredient, nut and bolt and widget purchased is more expensive. Many businesses are finding it impossible to pass on those additional costs to consumers. On top of that, energy costs have been historically high. Many businesses were forced to sign up to fixed-price energy contracts when prices were stratospheric. The Government left those businesses facing a cliff edge when support was withdrawn at the beginning of this month. Many pubs, cafes and restaurants have seen a 90% cut in Government  help. In my constituency, they are reporting to me that they are looking at closure. Businesses have it really tough right now and they need a break. They need a Government who will "cut the burden of tax on business by reducing business rates...via a fundamental review of the system." Those are not my words but the commitment that the Conservatives made in their 2019 manifesto. The Bill before us today is a disappointment. It tinkers around the edge of an outdated tax that does not work for the modern economy. Our high street shops are competing with online retailers that do not have the same overheads as the physical shops that form the backbone of our communities' common spaces. Business rates increase those costs further, making it even harder to compete. The Treasury Committee's 2019 report, "Impact of business rates on business" confirmed that view. In market towns such as Oswestry in my constituency, the smaller independent stores benefit from small business rates relief. They are not paying anything, so more frequent revaluations will not help them because they pay nothing in the first place. The opportunity was to make the difference for the larger retailers--the anchor tenants and the drivers of footfall that are needed to bring people back to town centres in person. I think that opportunity has been missed. Turning to the detail of the Bill, there are some steps in the right direction. The increase in the frequency of revaluations, from every five years to every three years, is clearly welcome. It is also right to enable businesses to use business rates improvement relief to encourage businesses to improve and upgrade their properties. We would hope that the relief might encourage businesses to look towards ways in which they can embrace decarbonisation. It also seems sensible to link business rates to a unique taxpayer reference. The provisions around notification of completion of works look to be a welcome measure to reduce the possibility of fraud in relation to buildings being removed from the rating list while being refurbished. From experience, that struck me as a potential weak spot for fraud, so that measure is welcome. However, I want to expand on the onerous nature of placing a responsibility on businesses to keep the Valuation Office Agency informed about market value and changes to the lease or ownership. Businesses already receive a notification to inform the Valuation Office Agency when something material changes at a premises--primarily, ownership or the registration of a lease--and they must provide detailed information to confirm that the rating value is still appropriate. Moving to an annual notification, even in the event of no change, would mean yet another form to fill in for the beleaguered financial controller, with whom I have huge sympathy, who is already bogged down in seemingly endless monthly and quarterly ONS returns, on top of their monthly and quarterly financial reporting requirements. It is estimated that around 700,000 small businesses that currently do not pay rates at all will be included in this annual form-filling exercise, with significant penalties in place if they get it wrong. Speaking from my own experience, the VOA is not quick to decide and respond when changes are notified. I spent a year persuading the VOA to put a new office  building on the rating register and to record other alternations to a mixed-use site, including inviting the officers on a personal visit to assess the site at first hand. This was after the pandemic restrictions had been removed. Changes in case manager, records lost, confusion, and lack of interaction between the valuation for business rates and council tax meant that it was an administrative nightmare, as well as a business planning nightmare. Businesses need to know what their rates liability is going to be. Cash-flow planning is critical to staying afloat, particularly at a time when businesses are struggling with soaring energy costs and rocketing inflation. Businesses cannot do that if they do not know what their rates bill will be; we should remember that the rates bill is backdated to the point circumstances change, not to the point that the Valuation Office Agency makes its decision. I am extremely nervous about imposing a further administrative burden on small and medium-sized businesses, complete with harsh fines and penalties, when there is no acknowledgement of the importance of a swift response from the VOA. Surely some timetable could be put in place, at least for interim assessments, to help businesses to plan. I would be grateful if the Minister could consider corresponding reliefs or an appeals system, with remedies provided, when the VOA has taken an unreasonable amount of time to reach a decision, or got its decision wrong or in a state that requires challenge. The current business rates system is broken. The Federation of Small Businesses said: "these changes do not amount to the fundamental overhaul the system needs, to reduce the chilling impact of a regressive tax that you pay before even earning a penny in turnover, let alone profit." Fundamentally, Liberal Democrats disagree with business rates. They are harmful to high streets and our wider economy, and the current framework is a huge burden for small businesses. They tax productive business investment in structures and equipment, rather than taxing profits and land value. The Liberal Democrats would abolish the broken business rates system and replace it with a commercial landowner levy. That levy would be paid initially by the landlords of commercial properties, not the businesses occupying them, and it would feature annual revaluations, which Netherlands has proved are possible administratively. It would tax only the land value of commercial sites, not productive investment. Removing buildings, utilities and other physical capital from taxation would boost business investment, in turn increasing productivity and wages. Liberal Democrat plans would improve our high streets by boosting investment and helping shops that struggle. None of that will be achieved by today's Bill.