Uniform Business Rate (Hansard, 23 January 1992)

§ The Minister of State, Department of the Environment (Baroness Blatch)
My Lords, rents in some sectors have fallen since the base date used for the 1990 revaluation. However, we have no plans to change the burden of non-domestic rates. Our 944 transitional arrangements are protecting many ratepayers from their final bills and giving them time to adjust to the new system. Once ratepayers have arrived at their final bills, their rates cannot increase by more than the rate of inflation. Changes in rents since the levels used in the 1990 revaluation will be taken fully into account when the next revaluation on non-domestic property is undertaken in 1995.

§ Lord Monson
My Lords, I am grateful to the noble Baroness for that full reply. However, does she agree that the valuations on which uniform business rates are payable were fixed during the somewhat artificial property boom of the spring of 1988 and are now totally unrealistic? Partly due to our ERM membership it may be years rather than months before property values regain their mid-1988 level, certainly in London and the South-East of England. Does the noble Baroness agree that while big businesses, with luck, may be able to pull through, for many small businesses the burden of the uniform business rate may literally be the last straw?

§ Baroness Blatch
My Lords, perhaps I can explain to the noble Lord that certainly there was a fixed point when valuations were made. Indeed, the valuations proved that some properties were a great deal more valuable at that point. However, it was deemed at the same time, which is important, that the yield from the business rate should remain the same, so there was no increase in the yield. Poundage was therefore adjusted to take account of that. The only anomaly that remains concerns those properties that were wrongly valued and for that there is an appeal system.

§ Lord Jenkins of Putney
My Lords, does the noble Baroness agree that an advantage of the uniform business rate is that it serves to dispel the illusion that the Conservative Party is the friend of the small businessman?

§ Baroness Blatch
My Lords, I wholly disagree with that. The enemy of the small businessman was the high spending council, from which he is now protected.

§ The Earl of Onslow
My Lords, if the small businessman was protected from the high spending councils, why was it that the low spending councils were forced to increase their uniform business rate by large amounts? Is my noble friend aware that Liverpool charged high business rates and Guildford charged low? Liverpool has been rewarded for its profligacy and Guildford penalised for its sensible policy.

§ Baroness Blatch
My Lords, my noble friend is somewhat distorting the case. The valuation of business across the whole country was on the same basis. It was known that, by and large, businesses in the South and South-East were more affluent than businesses in the North and North-West. It is true that Liverpool was overcharging businesses and also true that low spending councils were being fair to businesses. We now have the best of all worlds. We have a system in place that is fair and provides 945 protection against any kind of profligate council by the fact that no business can be charged an increase greater than the rate of inflation.

§ Lord Stoddart of Swindon
My Lords, does the Minister agree that the operation of the unified business rate has dispelled the myth that it was high spending local authorities which led to high business rates? Is she aware that business now understands that the unified business rate has worked against business and led to many bankruptcies of small businesses? Is it not time that the Government realised their mistakes and handed business rates back to the local authorities where they properly belong?

§ Baroness Blatch
My Lords, the noble Lord has a short memory.

§ Lord Stoddart of Swindon
My Lords, I do not.

Noble Lords
Order!

§ Baroness Blatch
My Lords, the noble Lord does indeed have a short memory. Perhaps I can remind him that increases of rates to all businesses—small, medium and large—by some local authorities were extremely extortionate. An increase of 63 per cent. was made by one council; my own authority put up business rates and took £20 million from business and commerce in one year by a rate increase of 33 per cent. In those days businesses were fleeing from the High Streets of many of our inner cities. That does not happen any more because in law they have a protection that no increase can be greater than the rate of inflation.

§ Lord Stoddart of Swindon
My Lords, the noble Baroness will find that I have a long memory and that memory tells me that the reason for high business rates—

Noble Lords
Question!

§ Lord Stoddart of Swindon
My Lords, will the noble Baroness take it from me, will she understand and will she agree that the reason for high business rates was the reduction in government grant to local authorities from 59 per cent. to 40 per cent?

§ Baroness Blatch
My Lords, the noble Lord and the Government will have to agree to differ about their interpretation of what happened. There was a direct correlation between the rate increases to business and commerce to high spending and profligacy in local authorities. That is now at an end and cannot happen again. The health and wealth of business and commerce as a whole are important to the Government nationally and I believe the present system is the best system to serve business and commerce well.

§ Lord Mackie of Benshie
My Lords, does not the indignation on both sides of the House indicate that perhaps the business rate or business taxes may be based with much greater equity on profit?

§ Baroness Blatch
My Lords, a number of factors are taken into account when the valuation is made. 946 Clearly the buoyancy of business in an area is one of those factors. If buoyancy is related to profit then at least there will be some account taken of it. That is why there was a difference between the affluence of the South, South East and South West as opposed to the rather less affluence of the North and North West.

§ Lord McIntosh of Haringey
My Lords, is it not the case that the problem to which the noble Lord, Lord Monson, was drawing attention was the fact that any valuation made at a specific time runs the risk of going out of date? Is not the problem of the Local Government Finance Bill which is before the House at the moment that the Government have drawn up bands for the valuation of residential property which will inevitably go out of date and be as meaningless and dangerous as the bands to which the noble Lord, Lord Monson, referred?

§ Baroness Blatch
My Lords, we have gone into this matter in some detail. No doubt for many hours today and for another five days in dealing with the Local Government Finance Bill, the second point will be gone into in great detail. As to the first, any fixed point in time will be fair so long as it is applicable across the country. For the uniform business rate it is important because each business is valued separately and uniquely. It is important that there should be regular valuation. The next valuation is due in 1995.

§ Lord Monson
My Lords, the noble Baroness argued that businesses which felt that their 1988 valuation was excessive had the right of appeal. Is she aware that the appeal process is stretching into years rather than months? Is she further aware that even if businesses eventually obtain a reduction in their valuation, as I understand it they have no right to reclaim the excessive rates paid in the interim period? Can something be done about that?

§ Baroness Blatch
My Lords, I have every sympathy with the point that the noble Lord makes. My department is putting some pressure on the valuation office to clear the backlog of appeals. If there is a modification downwards, any funds lost in the interim will be paid with interest.