HOUSE OF COMMONS
First Standing Committee on Delegated Legislation
DRAFT NON-DOMESTIC RATING (CHARGEABLE AMOUNTS FOR SMALL HEREDITAMENTS) REGULATIONS 1996
Monday 16 December 1996
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The Committee consisted of the following Members:
Chairman: Sir David Knox
Alison, Mr. Michael (Selby)
Armstrong, Ms Hilary (North-West Durham)
Atkinson, Mr. David (Bournemouth, East)
Banks, Mr. Matthew (Southport)
Beresford, Sir Paul (Parliamentary Under-Secretary of State for the Environment)
Davies, Mr. Chris (Littleborough and Saddleworth) Greenway, Mr. John (Ryedale)
Jackson, Mrs. Helen (Sheffield, Hillsborough)
Lait, Mrs. Jacqui (Hastings and Rye)
Lester, Sir Jim (Broxtowe)
Pike, Mr. Peter L. (Burnley)
Prentice, Mr. Gordon (Pendle)
Riddick, Mr. Graham (Colne Valley)
Smith, Sir Dudley (Warwick and Leamington)
Sutcliffe, Mr. Gerry (Bradford, South)
Sweeney, Mr. Walter (Vale of Glamorgan)
Tipping, Mr. Paddy (Sherwood)
Trickett, Mr. Jon (Hemsworth)
Walley, Ms Joan (Stoke-on-Trent, North)
Mr. E. P. Silk, Committee Clerk2 3 First Standing Committee on Delegated Legislation Monday 16 December 1996
[SIR DAVID KNOX in the Chair]
The Parliamentary Under-Secretary of State for the Environment (Sir Paul Beresford): I beg to move, That the Committee has considered the draft Non-Domestic Rating (Chargeable Amounts for Small Hereditaments) Regulations 1996. The regulations give effect to the Budget announcement by my right hon. and learned Friend the Chancellor of the Exchequer of a freeze for 1997–98 on the rates bills of small properties—a freeze that will have a knock-on effect on bills up to the next general revaluation in 2000. The measures announced by my right hon. and learned Friend are confined to small properties because the burden of rates falls most heavily on small businesses which, by and large, occupy such properties. Research published by my Department has shown that rates as a proportion of turnover or profits are greater for small businesses than for large ones. For that reason, earlier this year my right hon. Friend the Prime Minister told the national small firms conference that we would seek ways of reducing the rates burden on small businesses. These measures represent the first step on that road. The Committee may find it helpful if I spell out the precise effect of the regulations. Given their complexity, their meaning might not otherwise be immediately obvious. The regulations will have their greatest beneficial impact on small properties which saw significant increases in their rateable values as a result of the 1995 revaluation. Such properties already receive some help from the transition scheme under the Non-Domestic Rating (Chargeable Amounts) Regulations 1994, which is phasing in by annual increments the increases in rates bills resulting from the revaluations. Under the transition scheme a property which had a rateable value of less than £10,000—or £15,000 in Greater London—on 1st April 1995 might have expected an increase in its bill next year of up to 9.5 per cent., after taking 2 per cent. inflation into account. The new regulations ensure that such a property will see no increase whatever. Its bill will in effect fall by 2 per cent. in real terms. The transition scheme applies not only to properties whose rateable values rose significantly at the 1995 revaluation, but to those whose values fell significantly. Such falls would have produced immediate correspondingly large reductions in rates bills. However, as a contribution to offsetting the cost 4 of the transitional help to those whose values rose, the reductions in the bills of those whose values fell are also being phased in. As a result of the regulations that we are considering, ratepayers whose rateable values fell will see larger reductions in their bills in 1997–98 than would otherwise have been the case. Under the transition scheme, the reduction for 1997–98 for a property which had a rateable value of less than £10,000—£15,000 in Greater London—on 1 April 1995 would have been 20 per cent. in real terms. However that reduction would have worked out at only 18 per cent. reduction in cash terms, given inflation of 2 per cent. The regulations provide for a full 20 per cent. reduction in cash terms. The regulations also give help for small properties not in transition—that is, small properties whose rateable values were not significantly affected by the revaluation. Under the regulations a property with a rateable value of less than £10,000—£15,000 in Greater London—will be exempt from the 2 per cent. inflation-linked increase in rates for 1997–98, an increase which larger properties will have to face. The regulations will in total benefit 1.2 million businesses in England and Wales. The cost of that extra help to ratepayers will be more than 100 million 1997–98. That will be met entirely by the Exchequer, which will make good the loss of revenue to the non-domestic rating pool. There will, therefore, be no reduction in the amount of money available for distribution from the pool to local authorities.
Ms Hilary Armstrong (North-West Durham): We welcome the proposals in the statutory instrument and did so at the time of the Budget. We welcome them as a recognition of the important role that small businesses play in the economy. We believe that they will play an even greater part in the economy in future and it is important to do whatever is possible to encourage them now. The Government should have had a more comprehensive approach to small businesses. They will eventually recognise that continuing along the present path will simply result in more and more transitional relief which will need to be extended for ever and ever.
Mr. Peter L. Pike (Burnley): Is not one of the problems the fact that we have had so many transitional arrangements and so many deferments of revaluation? Although the regulations will deal with the problem in the short term, they will not deal with it in the long term. We really need to consider a longer term or permanent solution to the problem for small businesses.
Ms Armstrong: My hon. Friend is absolutely right; we need a long-term solution. Recent work shows that small businesses support the idea of the business rate being returned to local government so that they can have a real relationship with local government and play a part in local government regeneration strategy. 5 Most extensive, tied-in relationships are necessary to get the best out of small businesses. But that is not a debate for today. I want to ask the Minister a couple of questions—questions that I know he has been asked by the authority associations but to which, none the less, we should have an answer on the record. Authority associations are concerned that they are being given only a short period of time to prepare, which will cause them problems in relation to software and billing. At present, as the Government know, it is all done through agreed computer programmes so that a standard method is used throughout the country. But the billing and software will have to be changed and there has been no estimate of the additional costs that local government will incur. Authorities will need to test such software by mid-February. Have the Government made any contingency plans to assist software companies to ensure that the information and programmes are robust? On billing, will the proposals require changes to the demand notice or to the accompanying explanatory note? What does local government have to do to fulfil the order, because this is a central Government issue and a central Government rate, although local government is responsible for collecting the rate. Local government needs assurance on those issues to enable it to do its job efficiently. We all want to ensure that small businesses get the relevant help from April 1997, but there are technical difficulties in making sure that local government is ready by then. Having asked those questions, I support the general thrust of the order.
Sir Paul Beresford: I recognise the hon. Lady's concerns. I am extremely tempted to bite at the comments made by the hon. Member for Burnley (Mr. Pike) but I shall resist—although the hon. Gentleman will probably think that I am ill, because I am sure that every time he stands up, he does so more to goad me than anything else. However, I shall resist because it is nearly Christmas.6
Mr. Pike: I assure the Minister that I was not trying to goad him. I agree that rates are a pressure on small businesses. The Local Government Finance Act 1988, which introduced the poll tax, was intended to solve that problem but it did not. I am certainly not oppposed to the regulations, but I seek the Minister's assurance that the Government are considering a more permanent solution that will give long-term help to small businesses so that we do not keep having to make transitional arrangements, and deferring revaluations.
Sir Paul Beresford: The hon. Gentleman is such a nice man that I am happy to reply positively to his points. As my right hon. and learned Friend the Chancellor of the Exchequer said, we are examining ways of easing the burdens on small businesses, and we are looking to make an announcement on that matter in the near future. I recognise the hon. Gentleman's point, but he must recognise the effect of the spacing of the revaluations and the fact that there were unusual lengths of time between revaluations. As the hon. Member for North-West Durham (Ms Armstrong) said, the Government and the relevant associations and software companies are examining ways of ensuring that the facts are right and that the process runs smoothly. We are also considering the financial benefits—and, from billing authorities' point of view, the financial liabilities—that may be involved, and we have been discussing the possibility of covering at least some of those costs. In the next few days, the Department will send a letter to all billing authorities about the demand notice. That letter will set out the changes to the demand notice that will be required in the explanatory notes. Those changes will be introduced in an amendment to the demand notice regulations. I am not sure whether that means that the Committee will have to sit again, but I am sure that, if we do, we shall have an equally brief sitting.
Question put and agreed to.
Resolved, That the Committee has considered the draft Non-Domestic Rating (Chargeable Amounts for Small Hereditaments) Regulations 1996.
Committee rose at nineteen minutes to Five o'clock.7
THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE:
Knox, Sir David (Chairman)
Atkinson, Mr. David
Banks, Mr. Matthew
Beresford, Sir Paul
Davies, Mr. Chris
Greenway, Mr. John
Lester, Sir Jim