Uniform Business Rate (Hansard, 27 July 1989)

§ Mr. Chris Patten

My right hon. Friend the Secretary of State for Wales and I received some 150 initial responses to the consultation paper and further representations from all the major business organisations. We have considered them carefully, and have decided to make a number of modifications to the proposed transitional arrangements.

We believe that our proposals achieve a satisfactory balance in the transitional period, with long overdue reductions in rates being realised as quickly as is consistent with the need to provide adequate protection for businesses which must bear increases. We intend therefore to proceed with our proposals to limit the year-on-year changes resulting from the introduction of the uniform business rate and the non-domestic revaluation. For businesses which in 1990–91 will have larger bills in real terms than in 1989–90, the ceiling will be 20 per cent. in real terms for larger businesses and 15 per cent. for smaller ones as we proposed. But, in the light of representations received, we have concluded that the threshold of rateable value below which this lower ceiling will apply should be doubled to £15,000 in London and £10,000 elsewhere. For businesses which in 1990–91 will have smaller bills in real terms than in 1989–90, we estimate that the annual limits on reductions will be about 15 per cent. for businesses with rateable values below the revised threshold and about 10 per cent. for those with rateable values above the revised threshold. The precise figures for reductions will be calculated, once we have fuller information about the revaluation being undertaken by the Inland Revenue valuation office, so as to allow the limits to be set as high as possible consistent with the requirement that reductions must balance the cost of protection for those facing increases, so that the total yield of rates from the private sector and the nationalised industries remains broadly the same in real terms. Over 75 per cent. of all businesses will benefit from the more generous rateable value threshold. At the same time, we propose to raise the de minimis threshold, below which transitional arrangements will not apply, from a new rateable value of £200 to £500 for all properties, except for advertising hereditaments which will not be subject to any limit.

As proposed, properties first occupied after 1 April 1990 will not benefit from the transitional arrangements. Furthermore, for consistency with these proposals generally, we have decided that transitional protection for those facing increases should apply only to those who occupy property as at 31 March 1990 and continue to do so after that date. If a property changes hands on or after 1 April 1990, the new occupier will pay any increase due in full.

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Reduction in rate bills will continue to be subject to annual limits, however, whether or not there is a change of occupier.

We propose to give effect to the transitional arrangements by way of legislative amendments which will be introduced into the Local Government and Housing Bill after the recess.

I am also placing in the Library today a copy of the latest sample survey by the Inland Revenue of the combined effects of the 1990 revaluation and the introduction of a uniform business rate. This incorporates the results of a large number of actual revaluations. In general the survey confirms the results published with the consultation paper on 15 February. The new sample suggests that on average values after revaluation will be 7.7 times the current average rateable value for non-domestic properties in England, and 7.8 times in Wales; that the poundage, in 1989–90 prices, is expected to be in the range of 32 to 36p in England, compared with a locally set average poundage of some 258p in 1989–90, and in the range 34 to 38p in Wales compared with an average 1989–90 poundage of around 283p; and that the new arrangements, once the transition is complete, will reduce the rate burden or businesses in the north and midlands by about £1 billion.