§ The Minister for Local and Regional Government (Mr. Nick Raynsford)This statement provides initial information about the impact of the business rates 31WS revaluation that will take effect from 1 April 2005, gives details of the proposed transitional relief scheme and sets out the Government's proposals for the small business rate relief scheme which also takes effect from 1 April 2005.
Table 1 below shows the overall effect of revaluation as a percentage change in rateable values and on rate bills.
Table 1: Overall effect of Revaluation for England and by Region including Central List—2005 Economic Region Average % change in RV from the 2000 rating lists to the 2005 rating lists Average % change in liability as a result of revaluation before reliefs are applied East 20.5 1.1 East Midlands 15.9 –2.8 London 17.1 –0.8 North East 15.0 –3.4 North West 14.9 –3.5 South East 20.2 0.7 South West 19.9 0.4 West Midlands 13.6 –4.5 Table 2: Movement in Rateable Values—By Region and Property Types
Table 2: Movement in Rateable Values—By Region and Property Types Main Property Types Offices Shops Warehouses Factories Region RV Change Liability Average RV Change Liability Average RV Change Liability Average RV Change Liability Average East 16% –2.6% 27% 7.3% 23% 3.3% 19% 0.4% East Midlands 18% –1.4% 23% 3.6% 15% –3.2% 12% –6.0% London 11% –5.4% 26% 7.1% 23% 2.8% 22% 3.0% North East 24% 2.2% 24% 4.8% 13% –4.8% 13% –5.6% North West 18% –0.5% 22% 3.0% 11% –6.4% 10% –7.3% South East 8% –9.0% 29% 8.4% 29% 8.8% 23% 3.4% South West 21% 1.6% 27% 6.3% 16% –2.3% 14% –4.8% West Midlands 15% –3.8% 20% 0.7% 11% –6.6% 6% –11% Yorkshire and Humberside 14% –3.9% 26% 6.0% 12% –5.7% 9% –8.3% England 13% –4.7% 25% 5.7% 18% –0.5% 14% –4.2% Notes: 1. "RV change" reflect the average percentage increase in rateable value from the 2000 rating lists to the 2005 rating lists. 2. "Liability average" is the average change in liability as a result of revaluation before reliefs are applied. Although the tables show an overall national increase in rateable values, this does not mean an increase in the overall tax take, or that rate bills will necessarily rise by the same amount. The purpose of revaluations is to distribute tax in a more equitable way by updating the valuation of property, thereby making the tax base more current and relevant. The tables therefore also show the likely effect of revaluation on rates bills.
This information provides important indicators of national trends. However, it is not necessarily a good predictor of changes in an individual's rates bill since these will be affected by more local differences and by factors that are specific to the individual property. Nevertheless, in England as a whole, nearly 60 per cent. of properties will see a fall in their rateable values and therefore a fall in their rate liability.
The Valuation Office Agency is finalising the preparation of the draft rating lists that will be published on 1 October. These are being published three months earlier than usual and will contain more comprehensive information than ever before. This will enable ratepayers to plan ahead with much greater certainty and should also reduce the number of appeals. 32WS
Table 1: Overall effect of Revaluation for England and by Region including Central List—2005 Economic Region Average % change in RV from the 2000 rating lists to the 2005 rating lists Average % change in liability as a result of revaluation before reliefs are applied Yorkshire and Humberside 13.1 –5.3 Central list 32.9 10.5 Total 17.9 — Notes: 1. The regional figures are based on the data in local lists of properties for each relevant billing authority. The Central List includes various utilities and networks that are not specific to a billing authority area. Central List properties pay their rates direct to the Secretary of State and the revenue is added to the NNDR revenue pool. 2. The third column simply deals with the effect of revaluation. In addition to this the final liability will be uprated to take account of the annual inflation increase. Table 2 shows the movement in rateable values as a result of the 2005 revaluation by economic region and key property types—offices, shops, warehouses and factories.
The Local Government Act 2003 provides that the 2005 revaluation must be accompanied by a transition scheme to lessen the effects of sudden and significant rises in rates bills. The legislation provides that the scheme must be self-financing, so that the costs do not fall on other taxpayers. For revaluation 2005, we are proposing a four-year self-financing transitional scheme. The costs of phasing in increases will be met by phasing down the reductions in liability for others.
The scheme seeks to provide an appropriate balance between protecting those who experience larger increases in rates bills and allowing those who enjoy a fall in bills to experience the full benefit as quickly as possible. As a result we propose the caps for properties experiencing increases will be 12.5 per cent., 17.5 per cent., 20 per cent. and 25 per cent. for the four years and for small properties 5 per cent., 7.5 per cent., 10 per cent. and 20 per cent.
For large properties experiencing reductions in rate bills, these would be capped at the rates of 7 per cent., 10 per cent., 17.5 per cent. and 20 per cent. For small properties, the rates proposed are 17.5 per cent., 25 per cent, 45 per cent. and 50 per cent. These downward caps 33WS are significantly more generous than in any previous transitional scheme and mean that those liable to decreases in their rates bills will benefit more quickly than under earlier schemes. Also, the effect of the separate capping levels means that small businesses will only be required to make a very small contribution to the scheme.
Further details of the transitional scheme will be included in a consultation paper to be published shortly. The consultation will continue until October, by which time businesses will know their proposed rateable value from the valuation office agency draft rating lists. This will enable ratepayers to consider the effect of the proposed scheme alongside their proposed new rateable values before responding to the consultation.
I am also announcing our proposals for the new small business rate relief scheme. Government recognise that the current system of business rates places a disproportionate burden on small businesses. The small business rate relief scheme will address that.
Plans for a small business rate relief scheme were first announced in 2001 in the White Paper "Strong Local Leadership—Quality Public Services". The White Paper proposed that rate relief should be available at 50 per cent. for properties with a rateable value up to £3,000 with relief declining in percentage terms on a sliding scale until at £8,000 there would be no entitlement to relief. However, we undertook to review these thresholds before the scheme was implemented. The scheme that we will be consulting on next month is significantly more generous than the one originally envisaged, and proposes that the thresholds should be set at £5,000 and £10,000. We are also introducing a buffer zone so that business properties with rateable values between £10,000 and £15,000 will not have to contribute towards the relief.
The scheme will be funded through a supplement on the rates bills of larger businesses, in line with the requirement in the Local Government Act 2003, although we have made a commitment that this should not add more than 2.5 per cent. to bills. The proposed scheme would increase the overall supplement to no more than 0.67p. This equates to a 1.6 per cent. increase in rates bills.
We estimate that more than 400,000 small businesses stand to benefit from the proposed scheme.