HC Deb 15 March 1990 vol 169 cc786-92

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Patnick.]

12.7 am

Mr. Michael Carttiss (Great Yarmouth)

Before the House adjourns, I wish to put to my hon. Friend the Under-Secretary of State some of my concerns about the effects of the uniform business rate on seasonal guest houses and private hotels. Several of my hon. Friends who represent constituencies with seasonal tourist interests have discussed the problems with me, including my hon. Friends the Members for St. Ives (Mr. Harris) and for Waveney (Mr. Porter). The issues go beyond seaside resorts, of course.

I make four suggestions that could be of help to the tourist industry generally and to small guest houses and private hotels that are open for part of the year in particular. I ask my hon. Friend the Minister to take these back to the Department of the Environment for urgent consideration.

My first suggestion deals with raising the rateable value at which a small business may be assessed for the 15 per cent.-plus inflation limitation on the total increase for which the owners will be liable for 1990–91 from £10,000 to £15,000, as is the case for London. That would help small businesses generally.

Secondly, I should like the Minister to consider extending the transitional period from five years to eight years, to reach the new rateable value liability, as I believe that the Local Government Finance Act 1988 empowers the Secretary of State so to do.

Thirdly, I should like the Secretary of State to consider extending the 100-day rule for bed-and-breakfast accommodation, although I shall comment on the adverse effects of that rule, since an extension may help some guest houses, but be to the disadvantage of others.

Fourthly—this is my main point—I should like consideration to be given to permitting guest houses and private hotels in seasonal resorts that are normally closed for the greater part of any year to register, either with their district council or with the district valuer, for the period for which they will be open for business and to have their UBR liability assessed accordingly. If a guest house is open for three months, for example, the UBR liability would be 25 per cent. of the figure that had previously been suggested by the district valuer. If a guest house is open for six months, the UBR liability would be 50 per cent.

Mr. Barry Field (Isle of Wight)

I am very much obliged to my hon. Friend for giving way in such a precious and short Adjournment debate. My hon. Friend and I share many interests, one of which is Yarmouth. We both belong to the Yarmouth Association, which covers all the Yarmouths of the world. Does my hon. Friend agree that one difficulty facing the tourist trade is that proprietors have to publish their prices in advance? They have taken bookings and now find that their overheads are overtaking them.

Another difficulty that I am sure that we in the Isle of Wight share with Great Yarmouth is that we are trying to extend the season and its shoulder months, but fixing the relevant period at 100 days fixes the length of the season in the minds of the proprietors and operators. In addition, the shopkeepers are open for only a short period, and they are wondering why they have to pay the UBR throughout the year, whereas the guest house owners have not.

Mr. Carttiss

My hon. Friend puts exactly the points that I should like the Minister to take into account. I am grateful to him for intervening and for drawing attention to them.

I have had many letters from guest house proprietors, but should like to quote from just one which puts the points effectively. It is from Mrs. Johnson of North Denes road, which is a popular holiday area. She writes: it is only right that you should know how the majority of us feel re the new taxes that are about to descend upon us. No, this is not a moan about the Poll Tax. That is a bug we will all have to bear, even though ours is over £100, more then we were originally told. This is about the Business Tax that is going to put a lot of us out of business over the next couple of years … Not only do we have to find the extra money for the Poll Tax but … will be expected to find another £750 per year for the UBR.

The letter continues: On top of this, we have now been told that if we want to have more than one refuse bag a week collected it is going to cost us £4 per week for the privilege! … Because of this situation … A have had to limit my work at the guest house to bed and breakfast only and have found a full time job. … Please do all you can to get this message over". The message is that such proprietors will be put out of business if something is not done.

Mr. John Butterfill (Bournemouth, West)

Does my hon. Friend accept that many of the problems seem to arise from the level of valuations? I am going to see the Economic Secretary to the Treasury and the chief valuer at the Inland Revenue on this subject, because insufficient account seems to have been taken of the seasonality of the business. Many of the valuations seem to have been based on property values, which have been decapitalised at unrealistic rates.

There is a terrible problem in assessing the proportion of the premises that is occupied by the proprietor. That point does not seem to have been given sufficient weight. About 500 people involved in this business attended a meeting in my constituency, of whom only five had been visited by the valuation officers. A fundamental problem remains to be addressed before we start complaining about anything else.

Mr. Carttiss

I am grateful to my hon. Friend, whose concern I share 100 per cent. I should like to follow his point by giving some examples.

A 28-bedroom private hotel in Kent square, just off the Great Yarmouth sea front, had a rateable value last year of £900; this year its rateable value is £18,000. That gap is, of course, the result of there having been no valuation for 17 years. In Paget road, Great Yarmouth, a small guest house whose rateable value was previously £252 has had an increase to £4,000. A guest house in Prince's road—another area just off the sea front that is popular with visitors—which has 10 bedrooms for letting, has a rateable value of £6,775, while an identical guest house nearby in the same road has a valuation of £4,000. I know that the Minister is not responsible for valuation, but this highlights the tremendous problems of guest house owners.

I do not often agree with my hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd), but in The Independent of 6 March, he was reported as having said: The Government just does not seem to know what it is doing or what the impact of the uniform business rate would be. There is no rhyme or reason in assessing two identical guest houses at totally different valuations. In the case that I have mentioned, the difference is £2,000. As a result, people will have to pay a great deal more.

On the question of the 100-day rule, I have said that the Minister might consider an extension. This, however, is a matter on which there are mixed views. As a consequence of the 100-day rule, many proprietors may find it necessary to opt for restricted opening periods. This is particularly galling at a time when everybody in my borough and, I am sure, in other seaside resorts is making strenuous efforts to extend the holiday season into April, May and October.

Places such as Bournemouth and Blackpool have a good season already, and in Great Yarmouth the season is getting much closer to May to early September. The borough council, through its economic development unit and publicity department, the Great Yarmouth Holiday Association and the publicity association representing so many of the people in the holiday industry, has been doing its best to extend the season, but the 100-day rule could limit that.

Mr. Butterfill

On that point, will my hon. Friend give way?

Mr. Carttiss

Very briefly.

Mr. Butterfill

The 100-day rule is causing great concern in my constituency. I served on the Standing Committee that dealt with the legislation. At that time, the concession was intended to apply to small cottages that might be let for a few days during the season. We are now in danger of creating a two-tier market—some people having to comply with fire regulations and pay VAT and the business rate, but others moonlighting and not doing any of those things. It seems quite outrageous.

Mr. Carttiss

This is a problem that some of the guest house owners in my constituency have identified. Some people would like to see the 100-day rule extended to 140 days, as in the case of self-catering chalets. If self-catering chalets are in business for only 140 days, they will be exempt from the UBR. Other guest house proprietors point out, just as my hon. Friend has done, that, with private houses opening up for bed and breakfast, without having to comply with the stringent fire and public health regulations that apply to professional hoteliers, there could be unfair competition.

There is a real dilemma as to whether there should be a 100-day rule at all, or whether it should be extended to 140 days. Within the holiday industry overall, there is genuine disagreement about that. It is a matter that needs to be considered. As I have said, I am particularly concerned about the prospect of the holiday season being shortened as a result of the 100-day rule.

We in Great Yarmouth reckon that, on the basis of the lowest estimate, our holiday industry brings £122 million into the area. That is a very significant contribution to the economy of a town that currently has an unemployment level of 8 per cent. That is way above the regional average for East Anglia, which is 3.4 per cent. Last August we had a 5.5 per cent. unemployment rate in the Great Yarmouth travel-to-work area, which is slightly larger than my constituency. That highlights the importance of the holiday industry having a season which is not truncated by the operation of the rule, if it leads to guest houses and private hotels generally opting for a shorter season to escape the enormous increases to which the UBR could lead.

I want to emphasise the concern expressed by my constituents. Some of my hon. Friends have spoken to me about similar experiences in their constituencies. There should not be any insuperable reason why the rateable value, which is established on the basis of a business being open all year, should not produce a liability which relates to the period of three or four months, or whatever, for which the business is registered to be open. If that were done, it would help to ameliorate the considerable increases that many people in the holiday industry will experience.

I commend these suggestions to the Minister, and I look forward with considerable interest to his response. In my constituency and in other seaside resorts, the future of many people is dependent on the holiday industry. Their ears will be acutely tuned to hear from the Minister a solution to the horrendous problem that they will face from the increased UBR, plus the community charge, plus the charge for refuse collection which my borough council has imposed.

12.21 am
The Parliamentary Under-Secretary of State for the Environment (Mr. David Heathcoat-Amory)

I congratulate my hon. Friend the Member for Great Yarmouth (Mr. Carttiss) on securing the debate and on putting the concerns of his constituents clearly and cogently. I listened with great interest to what he had to say, because we are introducing a number of new rules and regulations, and we recognise that in some cases they have created uncertainty and difficulty. We are always anxious to hear how the system is operating on the ground, particularly in a holiday area such as the area my hon. Friend represents.

Let me deal first with the general points which my hon. Friend raised about the new uniform business rate and the way in which the transitional arrangements will operate. Some rate bills will rise substantially under the new system, but that is largely due not to the uniform business rate but to revaluation. I think all hon. Members concede that we cannot run a system based on rateable values which are 17 years out of date. If we are to have a rate-based system, we must have a revaluation. That by definition means that there will be changes in values and therefore in the rates which are payable. If that was not the case, there would be no point in a revaluation.

Mr. Butterfill

Can my hon. Friend give an assurance that, in future, revaluations will be done on a quinquennial basis and will not be allowed to slip behind again?

Mr. Heathcoat-Amory

My hon. Friend makes a good point. I think we did delay it too long. I assure him that we firmly intend to revalue every five years from now on. Indeed, it will require primary legislation not to have a revaluation every five years.

Businesses cannot, of course, be expected to cope with very large rises overnight; that is why we introduced transitional arrangements. Many of the businesses in my hon. Friends' constituencies will have a new rateable value below £10,000, which will qualify them for the more generous phasing limits of 15 per cent. in real terms on increases, and 15.5 per cent. in real terms on reductions. My hon. Friend the Member for Great Yarmouth argued for a higher threshold. We thought long and hard about that and consulted widely on it last year. As a result, we significantly improved the protection available for small businesses.

The arrangements were enacted in the autumn, in the Local Government and Housing Act 1989, and further primary legislation would be needed to change them. Apart from that practical constraint, I think that we have already gone a long way to ameliorate the impact of the new system; given the pressing need for a fairer distribution of the rates burden between businesses, I feel that we should not delay unnecessarily by imposing too long a transition period. The proposed threshold of £10,000 outside London already ensures that about 75 per cent. of all business properties will benefit, and I expect that the percentage in my hon. Friend's constituency is roughly the same.

My hon. Friend asked for an assurance that my right hon. Friend the Secretary of State would exercise the power available to him to extend the transitional arrangements beyond the initial five-year period. We have powers to extend it, and I appreciate that businesses would be reassured if we gave a commitment now to use them. It is, however, difficult to judge at this stage what kind of transitional scheme—if any—will be needed after the 1995 revaluation, because it is impossible to predict what will happen to rent levels over the next five years.

There is an inverse relationship between rent and rates. Businesses tend to look at their total occupancy costs; if rates rise in real terms—other things being equal—market rents will tend to fall relative to other costs. The next revaluation may throw up different rateable values, and businesses that have not reached their full new rate bills by 1995 may then find that their prospective rate liability is reduced. That is why we think it best to delay a decision on a further transitional period until nearer the time, when the facts become clearer. In other words, we must wait and see.

The transitional arrangements will, I believe, afford the maximum protection for businesses facing large increases, while at the same time being consistent with the need to bring in the new system as soon as possible. Once it is fully in place, businesses will benefit from the assurance—written into statute—that the rate poundage cannot rise each year by more than the rate of inflation, and may rise by less. They have not received that important protection hitherto.

My hon. Friend also mentioned local authority services, drawing attention to the charges made in his constituency for the collection of commercial waste. Refuse collection is currently carried out under the provisions of sections 12 to 14 of the Control of Pollution Act 1974, and the related Collection and Disposal of Waste Regulations 1988, which define and clarify local authorities' responsibilities for the collection and disposal of waste.

One of the key benefits of implementing sections 12 to 14 of the Act is that they provide much clearer definitions of waste, and the basis for a more commercially orientated and accountable collection service. The Act defines commercial waste as, among other things, waste from premises used wholly or mainly for the purposes of a trade or business". In our view, waste from properties with mixed business and domestic use falls within that definition. We were asked to make that clear in regulations, and we did so.

We think that, as a general rule, a reasonable charge should be levied on all waste collected from commercial premises, but the Act gives local authorities the power to waive commercial refuse collection charges in appropriate cases. We are aware that it has been the practice of many authorities to recognise that part of the waste from mixed-use properties is domestic by making a reduced charge, or allowing, say, for one bin to be collected every week. So the decision rests with local authorities.

Hon. Members' constituents who have small businesses, mixed hereditaments and mixed properties which are experiencing difficulty should take the matter up in the first instance with their local authorities, but I am aware that councils are taking quite widely varying approaches to the problem, and we are currently analysing responses to our inquiries to see what further direct advice is necessary to those waste collection authorities.

My hon. Friend also expressed the concerns of his constituents who run guest houses and so on, about the payment of business rates and the community charge. He particularly referred to the operation of the so-called 100 day rule.

As for the payment of business rates and community charge, as my hon. Friend will know, the valuation officer will assess only that part of the premises which is used for business purposes. So although a personal community charge will be payable by the owner and anyone who has his or her sole or main residence on the premises, the part of the property used for domestic purposes will not be subject to rates. Also, of course, those who must pay both business rates and the community charge will be eligible for transitional relief, if appropriate, in respect of either or both payments.

Mr. Carttiss

Who is responsible for ensuring that the transitional relief information is available? I understand that the district authority is responsible, but not much information about that is coming out of town halls.

Mr. Heathcoat-Amory

I am sorry to hear that. The district authorities are in possession of all the necessary information. It is disturbing if it is not getting through to the people who may benefit. It is important that people avail themselves of the relief, particularly transitional relief, that is available. If they contact my hon. Friend, who will pass on the information to me, I will ensure that full and proper information is supplied to the people affected.

My hon. Friend the Member for Bournemouth, West (Mr. Butterfill) referred to certain difficulties, which he identified, about various rateable values being allocated. I need not remind him that rateable values are not, and will not be, based on the capital value of the premises concerned but, rather, reflect market rents. But if startling differences and inconsistencies are showing up in his constituency, he will remind those concerned that there is an appeal mechanism which we hope will deal with the problem.

Mr. Butterfill

My hon. Friend will appreciate that it is rare in any part of the country, and certainly in my constituency, for market rents to be passing in respect of this type of property. Valuation officers are therefore forced to decapitalise capital values, and that is where the problem is arising.

Mr. Heathcoat-Amory

I appreciate the point that my hon. Friend makes. I am anxious to deal with his question about the so-called 100-day rule, because my hon. Friend the Member for Great Yarmouth fairly pointed out the pros and cons and is aware that too-generous treatment of supposedly casual bed-and-breakfast businesses would represent unfair competition for the hotel trade in general.

We must run a business rating system that tries to sweep in all those who are running commercial businesses from houses and premises. Not to do so would undermine the whole concept of business rating.

We decided to make a concession, if I may call it that, for those who are clearly running a bed-and-breakfast business on a purely incidental or casual basis from their own homes. I assure my hon. Friend that we are well aware of the conflicting views on this issue. We considered the matter carefully before deciding on the 100-day threshold.

I remind my hon. Friend that, when the premises are valued for rateable purposes, the valuation officer will have regard to the annual value of the relevant part. That will inevitably reflect the seasonal nature of any business use. I hope that my hon. Friend will appreciate that the system already works in much the same way as he advocated. Assuming that the season runs for less than 12 months, the rateable value of a guest house will be lower than it would be—all other things being equal—if the season ran all the year round.

We thought long and hard before we decided on the 100-day threshold. It represents a fair balance between the hotel trade and those who run a business in nothing more than a casual or occasional way but nevertheless provide an important service to seaside resorts, which need a higher capacity to cater for tourists and visitors during the height of the business season.

If members of the hotel and catering trade in the constituency of my hon. Friend the Member for Great Yarmouth are still unhappy about the operation of the rule, I or my hon. Friend the Under-Secretary of State, the hon. Member for Southampton, Itchen (Mr. Chope), will be only too pleased to meet a delegation and talk the matter through person to person.

That is all that I have time for in this Adjournment debate, but I am grateful to my hon. Friend the Member for Great Yarmouth for raising the issues that are of concern to him. I also thank my other hon. Friends, particularly my hon. Friend the Member for Isle of Wight (Mr. Field), who have spoken. He, too, is vigilant to represent those who provide such an important service to our domestic tourists and holidaymakers.

Question put and agreed to.

Adjourned accordingly at twenty-four minutes to One o'clock.