Non-Domestic Rating Bill (Hansard, 18 June 1992)

§ Lord Strathclyde
My Lords, I beg to move that this Bill be now read a second time.
The Bill honours the commitment made by my right honourable friend the Chancellor of the Exchequer in his Budget Statement in another place to make important changes to the transitional arrangements for those moving to higher and lower bills under the new non-domestic rating system. The Bill was well received in another place and I hope that noble Lords will also welcome it.
291 The transitional arrangements limit the year-on-year increases in bills following the 1990 revaluation and introduction of the uniform business rate. At present the arrangements are self-financing, with limits on annual reductions for those moving to lower bills matching the cost of protecting those facing increases.
In the current economic climate we have decided to make three important changes to the transitional arrangements. First, the bills of those in transition to higher rates liabilities will be frozen in real terms this year. This breathing space will benefit nearly half a million businesses throughout the country at a cost of more than £500 million in total. This will provide substantial benefits for individual businesses. For instance, a property with a rateable value of around £50,000 could save over £6,000. Smaller properties could save up to £1,500.
Secondly, those who have yet to reach their lower liabilities under the transitional arrangements will move to their final bills more quickly. Reductions this year will be increased by 3 per cent. in England and 13 per cent. in Wales bringing total reductions for this year to 21 per cent. for large businesses and 27 per cent. for small, in real terms. This will benefit approximately 150,000 business premises this year at a cost of some £75 million; and next year, all remaining gains will flow through in full, benefiting some 75,000 businesses to the tune of an additional £290 million.
Finally, the Bill will allow property moving to higher bills to retain transitional protection even if it changes hands. This will take effect from 11th March this year. The uniform business rate provides a very good deal for businesses who have reached their full liabilities after transition. For those still moving to their final bills, the Bill provides some further welcome relief. No business will face an increase beyond 4.1 per cent. this year, and 150,000 could see their bills reduced by more than a quarter. Over the next three years businesses will benefit to the tune of some £1.25 billion. I am sure that the whole House will agree that this is excellent news for businesses. I commend the Bill to the House.
Moved, That the Bill be now read a second time.—(Lord Strathclyde.)

§ Lord McIntosh of Haringey
My Lords, I apologise to those noble Lords who are in the Chamber in the hope of seeing and hearing my noble friend Lady Hollis who is not only more beautiful but a better speaker than I am. I must also declare an interest as a director of companies which pay the national non-domestic rate. However, I understand that this is such a general interest that it does not prohibit me from speaking on this Bill.
We must make it clear that we do not oppose the Bill. We agreed at the time of the Budget that this was a sensible reform. We shall not be opposing either Second Reading or continuation through the remaining stages today. At the same time we must make it clear that this is not a local government 292 finance Bill. It is a Bill about centrally-raised finance for local government purposes. The fundamental injustice of the national non-domestic rating system remains unchanged. It is our view, just as it is the view of the Institute of Directors and the Association of British Chambers of Commerce, that non-domestic business rating should be set by local authorities rather than by central Government. We would have preferred the opportunity of a non-domestic rating Bill used to remedy that evident injustice.
I was interested to hear the Minister say that the benefits to the business community would be in excess of £1.25 billion. His honourable friend Mr. Robin Squire, the Parliamentary Secretary in another place, described the package as being worth £1.25 billion. I rather suspect that if a package of this kind had been put forward by the Labour Party it would have been described as "costing" rather than being "worth" £1.25 billion. We have to be clear that the cost of this Bill is to come directly from the Exchequer. I also understand that Mr. Squire gave an undertaking, which is provided for in Clause 6 of the Bill, that the national non-domestic rate pool will be fully recompensed for the cost of these changes.
The anxiety which has been expressed to the Minister and partly assuaged is the question of rebilling costs to the local authorities. Mr. Squire gave an assurance that all reasonable costs would be reimbursed. However, it cannot be denied that there are very significant administrative costs. There has been negotiation between the local authority associations and the department about some of those costs. I believe that, as of today, any disagreement about the costs of computer programming have been resolved. I should also like the Minister to tell the House whether there is agreement about the postage costs. Many local authorities will be sending out too few notices to gain the benefit of discounted postage. I should also like to know about the cash flow element. Any rebilling tends to be accompanied—and I am sure it has been so this time—by late payment by businesses knowing that the amount is going to be changed.
I must ask whether the transitional schemes are to be a permanent feature of the national non-domestic rate. Ministers in another place were somewhat equivocal on that point. When they were asked whether the 1993 revaluation would result in transitional schemes in 1995 and thereafter, and how long those schemes would last, they could not answer. That must raise the question of whether we have found the right way of tackling this matter. After all, it was because of delays in revaluation that the valuation took place on 1st April 1990 at the height of the commercial property boom. Presumably, the situation will be very different on 1st April 1993. We must ask whether the Government feel that they have got it right now and whether they have a scheme with which they will not have to tinker in supplementary legislation.
Above all, although we do not oppose the passage of the Bill, it must be a matter of regret that the opportunity has not been taken to bring back the business rate to local government finance.

§ Baroness Hamwee
My Lords, we, too, welcome any amelioration in the burden of the business rate. We would not start from this position; unfortunately, however, we are here with a uniform business rate that has caused many problems. There has been something like a six-fold increase in the rates bills of some businesses, leading to insolvencies. Difficulties have been caused because the rate has not been set by local councils which represent their local communities and local businesses but by central government. Statutory consultation has therefore been less meaningful, given that the local authority meets its business ratepayers but has no discretion over the arrangements for the rates.
The problems of the uniform business rate have been exacerbated by the recession. The fact that the revaluation took place at the height of the boom has increased the problems now at a time of bust. The UBR has starkly pointed up differences in the effect of the recession on the South compared with the North, given that there was an endeavour to equalise the burden and to assist businesses in the North. The burden of the UBR has been greater for those in the South, and the effects of the recession have probably also been greater in the South.
The Bill proposes a standstill, not a reduction, in the rate. We on these Benches would have preferred to see a reduction. Although we admit that a cost would be attached, the benefit would have been to enable businesses to function more easily. Businesses would be assisted if the rateable value were to be reduced where it is higher than the present market rental value. A revaluation later in the life of this Parliament will not help businesses which are now struggling to stay alive.
We welcome assurances given by the Minister in another place. At col. 785 of Commons Hansard of 2nd June, the Minister said that the Government wanted a fair and sensible figure for the reimbursement of rebilling and cash flow costs. I look forward to the detailed assurances that I hope the noble Lord, Lord Strathclyde, will be able to give the House on both those points. As I said, we do not oppose the Bill. We welcome the measures as far as they go.

§ Lord Strathclyde
My Lords, it is always a pleasure to speak in a Second Reading debate on a Bill that is essentially welcomed by both opposition parties. I am delighted to be in that position today. I am also delighted that the noble Lord, Lord McIntosh of Haringey, is here although I should have been equally happy to hear the noble Baroness, Lady Hollis of Heigham. I note that the noble Lord declared his interests in property companies—

§ Lord McIntosh of Haringey
My Lords, no, —in companies paying the non-domestic rate, not at all the same as property companies.

§ Lord Strathclyde
My Lords, the noble Lord is quite right. He said that it was a general interest which did not affect his ability to speak on the matter. I entirely agree.
As I said, I welcome the general welcome that the Bill has received. However, I recognise that the noble Lord, Lord McIntosh, and the noble Baroness, Lady Hamwee, have some problems with the principle of the non-domestic rate and the UBR. As we have had that discussion many times in the past, I do not propose to reopen it today.
The noble Baroness and the noble Lord made some good points about the details of reimbursements for local authorities. On postage, we have not finally settled the costs, but we propose a reimbursement of 18p per property, which seems reasonable. Secondly, we shall look at the cash flow issue in the light of the first quarter data on the collection of the NNDR and will, of course, take into account any other evidence provided by the local authorities. We seek to be reasonable and fair in the distribution of costs and in the reimbursement.
The noble Lord, Lord McIntosh, asked whether transitional schemes would become a permanent feature of the legislation. After the 1995 revaluation, we shall need to consider whether further transitional schemes are necessary. As the noble Lord implied, particularly large charges in hills in 1990 followed 17 years without a revaluation. Now that we have introduced a system of five-year revaluations, the swings should be much smaller and perhaps in the longer term we shall be able to do without transitional schemes.
I am grateful to the noble Lord, Lord McIntosh, and to the noble Baroness, Lady Hamwee, for their contributions. I hope that the House will give the Bill a Second Reading.
On Question, Bill read a second time: Committee negatived.
Then, Standing Order No. 44 having been dispensed with (pursuant to Resolution of 9th June), Bill read a third time, and passed.