MP calls for review of business rates system

Peter Aldous broadly supports a Bill which will speed up the planning process which is discouraging business investment and new infrastructure, but calls for a review of the business rates system and more scrutiny of the proposal to postpone the revaluation until 2017 in particular.

Peter Aldous (Waveney) (Con): It is a pleasure to follow my hon. Friend the Member for Cleethorpes (Martin Vickers).

I welcome the direction of travel under this Bill. I support its objectives of boosting investment in infrastructure, cutting the red tape that delays and discourages business investment, and helping support local growth and local jobs. It is important that the red tape that has hampered the roll-out of superfast broadband is removed, that we kick-start building on school sites, and that we have a swifter planning system for local residents and local businesses.

I believe, however, that one aspect of the Bill needs further scrutiny and consideration, namely the proposal to postpone the business rates revaluation until 2017. I urge the Government to consider this proposal carefully in Committee and, if the evidence supports the case for amending it, I urge them to do so. I reached that conclusion wearing two hats: the first as an MP representing a constituency where I fear many businesses may be disadvantaged by the postponement of the review, and the second as a chartered surveyor. Having practised for 27 years, I would not say that I am an expert on business rates, which is a specialist field, but I have carried out business rates valuations and done appeals.

I am concerned for a variety of reasons. First, I question whether the proposal is actually based on up-to-date research. The Valuation Office Agency’s research shows that, if the review goes ahead, 800,000 premises will see a real-terms rise in rates, while only 300,000 will see their bills fall. However, I am mindful of the views of Gerald Eve, one of the leading private practice firms in the specialist field of rates, which disputes the VOA’s findings and has carried out its own research, which reaches a different conclusion. Other surveyors are also concerned that the reasons for the delay are based on draft and incomplete data.

Secondly, I question the merit of keeping a rating list based on the rental values that prevailed in April 2008, when the property market was at an artificial and unsustainable peak. There is a concern that postponing the review will lead to the rates of retailers in particular being based on incorrect and historical values for far longer than they should be. The postponement may cause short-term injustices and store up bigger problems for when the next review eventually takes place.

Ben Gummer (Ipswich) (Con): My hon. Friend is making an interesting point. Is it not also true that since 2008 there have been rapid changes in the retail market? For instance, Tesco has reduced the size of its stores, there are larger warehouses and there has been a change in the rateable value of buildings across the scale. That has nothing to do with the recession and is an argument for a change to the way in which we value business properties, which is surely something for another term and another Parliament.

Peter Aldous: My hon. Friend and fellow Suffolk MP makes an extremely useful point. I was not going to cover it tonight, but the whole business rates approach to how we value business properties needs review. It is a dynamic, ever-changing world and, with the rise of the internet, property is less important in business generally. We need a fundamental review.

Mr Robin Walker: I support my hon. Friend’s contention that we need a fundamental review of the business rates revaluation system. Does he agree that the long backlog of outstanding cases with the VOA and the long delays in answering a number of appeals is another reason to look at this whole area?

Peter Aldous: I thank my hon. Friend for that intervention, with which I agree entirely. I will come on to that issue later and believe that it is placing a major burden on businesses. We need action not at another time and another place, but now. If we delay until 2017, changes in values will be far greater and create bigger swings in liabilities, which will be far more difficult for businesses to cope with.

This leads me on to the fact that any property tax requires frequent and regular revaluations to ensure its acceptability and fairness. The five-yearly reviews that have been in place for more than 20 years are well understood and provide a degree of certainty. A break in that precedent creates uncertainty. In future, people and businesses will not know for sure when or whether a review will take place. The reason for having regular reviews of the rating list is that property values, in relative terms, change over time. Rents in some sectors and in some locations will rise, while those in others will fall. It is important that the rating system has an in-built review structure that reflects the dynamic and ever-changing nature of the property marketplace. In this way we can be sure that the tax burden is spread fairly so that those with the broadest shoulders pay the most and those in more challenging locations and properties pay less. Liz Peace, chief executive of the British Property Federation, sums up the position well:

“A revaluation should shift the burden from those who are suffering to those who are prospering.”

There is a worry that the proposed freeze means that those in more lucrative locations will benefit and those in hard-hit areas will suffer.

I am particularly concerned about the possible effect of the postponement on the retail sector and on town centres. The Government have done a lot of good work in highlighting the problems faced by the high street and, working with Mary Portas, they are putting in place measures to tackle these challenges. Lowestoft in my constituency is a Portas pilot town, and the town team are setting about their work with relish and enthusiasm. It is important that those of us in this place provide the framework through which such work in towns across the country can come to fruition. I fear that the proposed postponement might undo this good work. In Lowestoft, prime rents fell by 40% between 2008 and 2012. It is important that rates are realistic and up to date so as to attract investment back into the town centre.

The retail sector pays a significant proportion of all business rates—more than a quarter, at 28%. On average, 14.6% of retail units across the country are vacant. This is due to a variety of reasons, one of which is high rates. Mary Portas has said that high rates are a deterrent to investment in town centres. It needs to be remembered that the retail sector is the UK’s biggest private sector employer, providing crucial jobs to 1 million people in the 16-to-24 age group. There is great concern that another hike in rates will lead to fewer chances of jobs, result in less investment in the fabric of our town centres, and create a more troubled high street.

Finally, I turn to the backlog of rates appeals, which are placing a brake on private sector investment and are a significant strain on the finances of businesses. It is estimated that there are 241,710 appeals outstanding against the 2010 list, and this equates to £1.8 billion owed to business. The number of appeals being carried out at the end of the second year of the 2010 list is 74% higher compared with the same point in the 2005 list. Improved systems and processes must be put in place to clear the backlog and to ensure that the problem does not recur. An uncalled-for and significant burden is being placed on businesses in difficult times, and it must be removed with full haste. Businesses must not shoulder unnecessary burdens as a result of these bureaucratic hold-ups within public bodies.

I support the direction of travel of the Bill and I shall vote for it this evening. However, the proposal to postpone the rates review requires further scrutiny to ensure that it does not have unintended consequences for, and a negative impact on, many businesses across the country. The evidence on which the proposal has been made should be published and scrutinised as soon as possible, and it needs to be very carefully considered in Committee.

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Peter holds regular surgeries at various locations in the constituency. Please call 01502 586568 to make an appointment.

Next Surgeries - 2018:
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Beccles, Saturday 3rd February

 

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