BRIEFING PAPER Number 08595, 1 July 2019

Non-Domestic Rating By Mark Sandford

(Lists) Bill 2017-19

Contents: 1. Business rates and revaluations 2. Business rates: policy on revaluations 3. The Bill 4. Progress of the Bill

www.parliament.uk/commons-library | intranet.parliament.uk/commons-library | [email protected] | @commonslibrary 2 Non-Domestic Rating (Lists) Bill 2017-19

Contents

Summary 3 1. Business rates and revaluations 4 1.1 Introduction 4 1.2 Business rates: the system 4 1.3 Revaluations 5 1.4 Business rates in Wales 5 1.5 Revaluation in Scotland and Northern Ireland 6 2. Business rates: policy on revaluations 7 2.1 Government policy review 7 2.2 Why revaluation frequency matters 9 2.3 Rateable values and the multiplier 9 2.4 Transitional relief 10 3. The Bill 11 3.1 Revaluation frequency 11 3.2 Transitional schemes 11 3.3 Extent and commencement 12 4. Progress of the Bill 13 4.1 Principle of the Bill 13 4.2 Capacity of the Valuation Office Agency 14 Appeals 15 4.3 Draft rating lists 16

Cover page image copyright: geograph 193316 by Philip Halling, Worcester High Street , the high street in front of the Guildhall

3 Commons Library Briefing, 1 July 2019

Summary

The Non-Domestic Rating (Lists) Bill 2017-19 was introduced into the House of Commons on Wednesday 12 June 2019. Second Reading took place on Monday 17 June. Committee Stage, consisting of a single evidence session and a single scrutiny session, took place on Tuesday 25 June. No amendments to the Bill were tabled. The Bill, and associated documents, can be found on the Parliamentary website. The Bill would implement the Government’s commitment to alter the length of time between revaluations of rateable values in the non-domestic rating (business rates) system. The Bill would bring forward the date of the next revaluation to 2021 (from 2022) in both England and Wales; and, in England, it would replace the existing five-year cycle with a three-year cycle (with subsequent revaluations in 2024, 2027 and so on). This gives effect to commitments originating in the 2017 Budget and 2018 Spring Statement. Business rates are devolved to Scotland, Wales and Northern Ireland. This Bill extends to, and has effect in, both England and Wales.

4 Non-Domestic Rating (Lists) Bill 2017-19

1. Business rates and revaluations 1.1 Introduction The Non-Domestic Rating (Lists) Bill 2017-19 was introduced into the House of Commons on Wednesday 12 June 2019. Second Reading took place on Monday 17 June. Committee Stage, consisting of a single evidence session and a single scrutiny session, took place on Tuesday 25 June. No amendments to the Bill were tabled. The Bill, and associated documents, can be found on the Parliamentary website. The Bill would implement the Government’s commitment to alter the length of time between revaluations of rateable values in the non- domestic rating (business rates) system. The Bill would bring forward the date of the next revaluation to 2021 (from 2022) in both England and Wales; and, in England, it would replace the existing five-year cycle with a three-year cycle (with subsequent revaluations in 2024, 2027 and so on). Business rates are devolved to Scotland, Wales and Northern Ireland. The Bill extends to, and has effect in, both England and Wales. The Government’s Explanatory Notes take the view that all of the clauses of the Bill extend to England and Wales, and not Scotland or Northern Ireland. The Speaker took the view that the Bill did not meet the criteria for certification for English Votes for English Laws, in accordance with Standing Orders 83J-83O.1 A Money Resolution and a Ways and Means Resolution were approved after Second Reading in the House of Commons.2 A Money Resolution is required because the Bill may lead to increased expenditure by the Valuation Office Agency when it carries out more frequent revaluations. A Ways and Means Resolution is required because the Bill will lead to changes in the pattern of taxation.

1.2 Business rates: the system All non-domestic properties in England, Scotland and Wales pay non- domestic rates or ‘business rates’. Each non-domestic property is assigned a ‘rateable value’, which represents the open market rental value of a property on a specified ‘valuation date’. The rateable value is then multiplied by a ‘multiplier’ (set separately in each territory) to produce the annual business rates bill. Hence a property with a rateable value of £20,000, alongside a multiplier of 49.3p, will pay £9,860 per year (i.e. £20,000 x 0.493). More details are available in the Library briefing paper Business rates. Most properties’ rateable value is based on their ‘annual rental value’, i.e. the amount for which they would let on the open market in good condition. Where it is difficult to obtain sufficient evidence to assign an

1 HCDeb 17 Jun 2019 c62 2 Ibid., c80 5 Commons Library Briefing, 1 July 2019

annual rental value, other methods may be used (see the Library briefing paper Business rates).

1.3 Revaluations Rateable values are subject to regular updating via revaluation. This is done to ensure that they stay broadly in line with properties’ annual rental value. Revaluations are carried out by the Valuation Office Agency (VOA) in England and Wales. From 1990 onwards, business rates revaluations took effect on 1 April every fifth year (1995, 2000 etc.). The revaluation that would have taken effect from 1 April 2015 was postponed by two years to 1 April 2017: In 2012, the government postponed the 2015 revaluation until 1 April 2017 in order to provide greater stability for businesses during a period of economic downturn. That avoided local firms and local shops being faced with unexpected hikes in their business rate bills. As business rates are linked to inflation, there will be no real-terms increase in rates up to 2017. The decision will provide certainty for business to plan and invest, supporting local economic growth.3 Properties’ rateable values are assessed as at a specific date (the ‘antecedent valuation date’ or AVD). In England and Wales, the most recent revaluation took effect on 1 April 2017. This was based on rental values at 1 April 2015. Details of the 2017 revaluation can be found in the Library briefing paper Business rates: the 2017 revaluation. Before 2017, the most recent revaluation came into effect on 1 April 2010.4 The 2021 revaluation will be based on rental values as at 1 April 2019.

1.4 Business rates in Wales Business rates are devolved to Scotland, Wales and Northern Ireland. Decisions on business rates in England are made by the UK Government. Recent debates on the frequency of revaluations (see section 2.1 below) have been led by the Treasury and have concerned decisions for England. The current Bill includes a provision to alter the date of the next revaluation in Wales from 2022 to 2021, mirroring the decision that the UK Government has made for England. The Welsh Government announced its decision to make this change in July 2018. The National Assembly for Wales does have power to legislate in this area: therefore, this part of the Bill will require a Legislative Consent Motion to pass through the National Assembly. The Welsh Government has not yet taken a decision on whether to move to a three-yearly cycle in the long term. The provisions of this Bill

3 HM Treasury, Administration of business rates in England: discussion paper, April 2014, p12 4 Sections 29-30 of the Growth and Infrastructure Act 2013 delayed the 2015 revaluation until 2017 in England. Both the Scottish and Welsh governments subsequently also chose to delay revaluation to 2017. 6 Non-Domestic Rating (Lists) Bill 2017-19

would leave the Welsh revaluation cycle at five years, following the next revaluation in 2021. The National Assembly for Wales has the power to legislate to change this in due course.

1.5 Revaluation in Scotland and Northern Ireland In Scotland, the 2017 Barclay Review of non-domestic rating contained a recommendation on revaluation frequency: There should be three yearly revaluations from 2022 with valuations based on market conditions on a date one year prior (the ‘Tone date’).5 The Scottish Government’s response to the Review proposed a move to a three-year revaluation cycle, but in different years for that envisaged for England and Wales: 13. We intend to bring forward primary legislation to deliver this following the next scheduled revaluation in April 2022 (which as per current legislation will have a valuation ‘tone date’ two years prior). 14. The subsequent revaluation will therefore take effect in April 2025 with a valuation ‘tone date’ of April 2024.6 Northern Ireland’s next business rate revaluation will come into effect on 1 April 2020, based on a valuation date of 1 April 2018.7

5 Scottish Government, Report of the Barclay Review of non-domestic rates, August 2017, p41. The ‘tone date’ is the same concept as the ‘antecedent valuation date’, referred to above. 6 Scottish Government, Non-domestic rates: implementation plan in response to the Barclay Review, December 2017, p.3 7 See the Department of Finance’s Reval2020 website. 7 Commons Library Briefing, 1 July 2019

2. Business rates: policy on revaluations

2.1 Government policy review In 2014 the Government instituted a review of business rates administration. It published a consultation entitled Administration of business rates in England: discussion paper. This included an invitation for views on the following questions: 6 Some ratepayers have suggested establishing annual, 2-yearly, or 3-yearly revaluations instead of the normal 5 yearly cycle. How frequently do you think the rateable value of a property should be re-assessed at a revaluation, bearing in mind possible impacts on the predictability and volatility of bills? Why? 7 Would your views change if more frequent revaluations meant: a. rates bills changed more often i.e. were less stable and less predictable than currently? b. it were necessary to use a less individualised approach to valuing property than currently which would mean that ratepayers with different rents, who at the moment pay significantly different bills, might pay the same amount? 8 Do you think ratepayers would be more, less or just as likely to appeal the rateable value of their property if revaluations were more frequent? 9 Reducing the time allowed to prepare a revaluation from the current 2 years would also reduce the time available for ratepayers to check their rateable values and prepare for changes to their rates bills. It would also mean the Valuation Office Agency would have less time to collect and analyse rental evidence to prepare valuations. How do you think this would impact ratepayers and local authorities? 10 What is your understanding of how a revaluation affects final business rates bills? Would you like to receive more information from the government on how this works?8 The Government then published a document entitled Administration of business rates in England: interim findings in December 2014. This review indicated some stakeholder enthusiasm for introducing more frequent revaluations: The government has heard a wide range of views on how often property should be valued. Some groups wish to retain the current 5 year cycle whereas others have called for more frequent revaluations on the basis that it could make rateable values more responsive to changes in market conditions. There is no consensus on what the best length of the cycle might be. Although 3 yearly revaluation was the most popular option, others favoured annual revaluation. The reasons given for increasing the frequency of revaluations also vary.9

8 HM Treasury, Administration of business rates in England: discussion paper, April 2014, p14 9 HM Treasury, Administration of business rates in England: interim findings, December 2014, p13 8 Non-Domestic Rating (Lists) Bill 2017-19

The Government stated that it: ….received over two hundred written responses to the review and officials held over thirty workshops throughout England. The interim findings were published in December 2014. A key theme of the responses was for the business rates system to be made more responsive to economic conditions.10 The Government published a consultation document in March 2016 entitled Business rates: delivering more frequent revaluations. This consultation noted a number of challenges that would be faced by moving from a five-year to a three-year valuation cycle: - More regular calls upon ratepayers to provide ‘rental evidence’ – that is, information about their properties that allow the VOA to generate a rateable value for each property; - Greater pressure of work on the VOA, which would “require significantly more skilled staff”;11 - The possibility that more revaluations would generate more appeals (by ratepayers against their property’s new rateable value), putting further pressure on the VOA. A new appeal system was introduced in England in April 2017.12 The consultation paper also invited views on a ‘self-assessment option’ – allowing taxpayers to identify their own rateable value – and a ‘formula option’ – essentially assigning rateable values using a formula based on size, layout, location (for example). In the Autumn Budget 2017, the Chancellor, Philip Hammond, committed to altering the frequency of valuations from five years to three years: …[the Government will]…increase the frequency with which the VOA revalues non-domestic properties by moving to revaluations every three years following the next revaluation, currently due in 2022. To enable this, ratepayers will be required to provide regular information to the VOA on who is responsible for business rates and property characteristics including use and rent.13 The then upcoming revaluation scheduled to take effect in 1 April 2017 would remain in place. The 2018 Spring Statement announced that the next revaluation would take effect from 1 April 2021 (a four-year gap), followed by a regular three-year cycle (2024, 2027 etc.). This commitment requires legislative change, leading to the current Bill. The Government also committed the VOA to continuing to assess rateable values and did not pursue self-assessment or formula-based options for valuation.14

10 Explanatory Notes, p.2 11 HM Treasury, Business rates: delivering more frequent revaluations, 2016, p7 12 See the Library briefing paper Business rates for an account of the new appeal system Check, Challenge, Appeal: see also statistics on appeals since 2017 on the VOA web pages. 13 HM Treasury, Budget 2017, p34 14 HM Treasury, Business rates: delivering more frequent revaluations – summary of responses, 2016, p9 9 Commons Library Briefing, 1 July 2019

2.2 Why revaluation frequency matters The purpose of business rate revaluations is to ensure that a link is maintained between economic conditions and the amounts paid by business rate-payers. In principle, the rateable value of a property functions as a measure of economic conditions. Where a local economy is successful, this will translate into higher rents and thus higher rateable values. Regular revaluations are the means by which the business rates system takes account of these changes. Large changes in rateable values at a revaluation can translate into large or very large sudden increases, or decreases, in business rate bills. Large increases cause unhappiness, and potentially economic difficulties, for rate-payers. In principle, the more frequently revaluations take place, the fewer large changes of this kind should result. For instance, where there is a gap of many years between revaluations, it is possible for economic conditions (and therefore rental values) to diverge considerably over this time, leading to a very sharp change at revaluation. In contrast, if a revaluation were to take place every one or two years (for example), there would not be time for substantial changes of this kind to accumulate. This would lead to fewer sharp changes in business rate bills.

2.3 Rateable values and the multiplier In England and Wales, increases in rateable values do not automatically translate into increases in rate bills. The Local Government Finance Act 1988 requires the multiplier to be adjusted at a revaluation to offset changes in rateable value. The objective of this adjustment is to ensure the revaluation is revenue neutral after allowing for inflation and future appeals. In making the adjustments the Government must also have regard to inflation and estimated future changes to those rateable values (for instance, adjustments arising from appeals).15 This principle applies separately in England, Scotland and Wales. Most recent revaluations have seen a rise in the overall quantity of rateable value in each territory, which has triggered a fall in the multiplier.16 This legal requirement interacts with the effects of more frequent revaluations to impact on business rate bills. It could have unexpected impacts, as explained by the Government: 2.9 The Valuation Office Agency’s analysis in the Annex shows that more frequent revaluations would make rates bills more responsive to relative changes in the property market. So if rents in one location were falling in comparison to the national average for all properties, then more frequent revaluations would ensure this was reflected in bills. This is why many stakeholders feel that more frequent revaluations would make the rating system fairer.

15 See schedule 7 paragraph 5 of the Local Government Finance Act 1988 16 The 2017 revaluation in Wales was an exception: this saw a fall in total rateable value in Wales, which triggered a small rise in the Welsh multiplier in 2017-18. 10 Non-Domestic Rating (Lists) Bill 2017-19

2.10 However, the analysis also shows that if rents are falling over England as a whole, then some properties whose rents have fallen by less than the average could see their rates bill increase. If those ratepayers had expected their rates bill to fall then they are unlikely to consider such an outcome as fair or reasonable.17

2.4 Transitional relief To protect businesses from the effects of substantial changes in rateable values, transitional arrangements (also known as ‘transitional relief’) can be used to dampen the effects of revaluations on business rate bills. There is a legal requirement for England to use a transitional scheme to phase in substantial increases or decreases in a ratepayer’s bill following a revaluation.18 Regulations to enact a transitional scheme must come into force in advance of 1 January before the financial year to which they apply.19 There is no legal requirement to institute a transitional scheme in Wales. The Welsh Government did use a transitional scheme following the 2017 revaluation, but it did not do so following the 2010 revaluation.

17 HM Treasury, Administration of business rates in England: interim findings, December 2014, p15 18 See section 57A of the Local Government Finance Act 1988, inserted by section 65 of the Local Government Act 2003. 19 See section 57A (9) of the Local Government Finance Act 1988 11 Commons Library Briefing, 1 July 2019

3. The Bill 3.1 Revaluation frequency Clause 1 (2) of the Bill would amend the core legislation in the Local Government Finance Act 1988, concerning the compilation of rating lists by local ‘valuation officers’. It provides that this must next take place in 2021 and every third year thereafter. The legislation that this sub-clause would amend has effect only in England, and thus this sub- clause too has effect only in England. Clause 1 (5) of the Bill makes the same provision for the ‘central list’ in England. The ‘central list’ is a list of very large and geographically- dispersed properties, such as railways and power distribution networks. It is maintained by the Secretary of State, and the Government retains the business rate revenue deriving from it (see the Library briefing paper Business rates for more information). Clauses 1 (3) and 1 (6) would provide that draft new rating lists will now be sent to billing authorities (district and unitary councils) three months before they come into effect, instead of the six months that is currently the case. The Explanatory Notes say: As a consequence of shortening the length of the rating lists to three years, this Bill will also shorten the period of the draft rating list to no less than three months in England and Wales. Therefore, the VOA will be required to published draft rateable values no later than 31 December preceding the revaluation. This will ensure the period of the draft rating list remains proportionate to the shorter revaluation cycle.20 Clause 1 (7) makes the same provisions for both the local and central rating lists in Wales. The original legislation for Wales is found in a different section of the 1988 Act.

3.2 Transitional schemes Clause 2 makes provision around transitional schemes in England and Wales. The power to make transitional schemes is found in section 57A of the Local Government Finance Act 1988. As mentioned above, this section provides that, for England, the Secretary of State must make regulations introducing a transitional scheme following a revaluation. The section gives wide powers to adjust ‘chargeable amounts’ (in essence, bills), for different financial years, for properties of particular rateable values. However, section 57A (13) currently provides that a transitional scheme must cover a period of five years following a revaluation. In the previous five-year cycle, this meant that a transitional scheme would apply for the whole of the five-year period.

20 Explanatory Notes, p.2 12 Non-Domestic Rating (Lists) Bill 2017-19

Clause 2 (1) would adjust this provision to bring it in line with the move to three-yearly revaluations, and the four-year period that will run up to the next revaluation in 2021. Clause 2 (2) would make equivalent provision for Wales in respect of the 2017-21 period. However, this sub-clause does not introduce any provision for Wales following 2021. This is because the Welsh Government has not yet taken a decision on its future valuation cycle following 2021. Clause 2 sub-sections (4) and (5) amend the Non-Domestic Rating (Chargeable Amounts) (England) Regulations 2016. These are the regulations that introduced the currently existing transitional scheme in England. They introduced transitional arrangements running from 2017 to 2022 (when the next revaluation was originally due to take place). Clause 2 (4) changes the end of the ‘relevant period’ – the period to which the 2016 regulations apply – from 2022 to 2021. Clause 2 (5) removes from the regulations six references to provisions for transitional arrangements in the 2021-22 financial year. Under this Bill, that would be the first financial year following the next revaluation and the 2017 transitional scheme would therefore need to be disapplied for 2021-22.

3.3 Extent and commencement Clause 3 states that references to ‘LGFA 1988’ in the Bill refer to the Local Government Finance Act 1988. Clause 4 provides that the Bill extends to England and Wales; and that it would come into effect two months after it receives Royal Assent.

13 Commons Library Briefing, 1 July 2019

4. Progress of the Bill

Second Reading of the Bill took place on 17 June 2019, and Committee Stage on 25 June 2019. At Committee Stage, one session was held to take evidence from witnesses, and one session was held to scrutinise the Bill. No amendments to the Bill were tabled. This section notes the main points of debate that arose during these stages of the Bill.

4.1 Principle of the Bill Debates indicated that the Opposition, and witnesses, supported the fundamental principle of the Bill. For the Opposition, Roberta Blackman- Woods stated that “Labour supports this reform…Labour pledged in February 2017 to introduce more regular revaluations, coupled with simplifications in the business rate system”.21 Committee witnesses agreed that a three-year revaluation period represented a midway point between the current standard five-year cycle and calls from some quarters for annual revaluations. Dominic Curran, from the British Retail Consortium, said: …we also fully support a move to three-year valuations. Five years was too long; I know many call for annual revaluations. There is a spectrum of views among our membership, but we have settled on three years as the right balance, taking into account two factors. First is the balance of stability: for every three years, you know exactly what your rates bill is….Second is the capacity of the Valuation Office Agency… we are not convinced that it would necessarily have the resource or capacity to undertake yearly or two-yearly valuations.22 Written evidence from Jerry Schurder, of the surveyors Gerald Eve, suggested that the ‘antecedent valuation date’ should be altered, to become a year before a revaluation takes effect instead of the current two years. This type of change, like more frequent revaluations, would lead to valuations reflecting current market values more accurately. Witnesses also called, in the longer run, for a fundamental review of the business rate system. At Second Reading, Clive Betts MP proposed: ….a complete comprehensive review, moving to a completely different system of raising money from businesses. That is one way. I still think it is hard to avoid taxation on physical buildings and that they are probably a good basis for a system, but there has be some reform and some addition. The Select Committee’s inquiry into the high street recommended that we look at a number of alternatives, including the potential for an online sales tax.23 Similarly, Dominic Curran, from the British Retail Consortium, said: Our overarching call is for a wide-ranging, fundamental reform of the entire suite of business taxation. The problem is that, in the past, there have been reviews just of the business rate system in isolation. Given its links to local government finance, and the

21 HCDeb 17 Jun 2019 c77 22 PBC Deb 25 Jun 2019 c6 23 HCDeb 17 Jun 2019 c76-77 14 Non-Domestic Rating (Lists) Bill 2017-19

wider impact of how different taxes affect the ways in which businesses operate—online and offline—we need a much more wide-ranging review.24 Mr Curran was opposed to the idea of an ‘online tax’ based on online sales, on the grounds that this would fall almost entirely on the retail sector. The issue of a review was touched on by the Minister, Rishi Sunak, at Second Reading: [Regarding] the broader structure of business rates taxation, it is worth saying that when the Treasury last looked at the issue a few years ago, there was no consensus among the business community about what might replace it.25 This is a reference to the Administration of business rates review that took place from 2014 to 2016 (see section 2.1 above). In a similar vein, the issue of the impact of business rates on high streets and the retail sector was raised on a number of occasions. Dr Blackman- Woods supported a wholesale review and addressing the issue of online competition for retailers, noting that “every type of retail premises— high streets, retail parks and shopping centres—saw the number of occupied units decline at a faster rate in 2018 than in 2017”.26 The Housing, Communities and Local Government Committee published a report in February 2019 entitled High streets and town centres in 2030. Amongst the recommendations of this report was the following: We recommend that the Government urgently assesses the main proposals that we received in evidence, including a sales tax, an increase in VAT, an online sales tax and ‘green taxes’ on deliveries and packaging, and make recommendations for change to provide fast relief to high street retailers. The revenue raised should be used to support the high streets in the following ways: A reduction in business rates for retailers in high streets and town centres; A 12-month holiday for high street retailers from rates increases which result from investments to improvements in property; and An increase in the funding available to local areas through the Future High Streets Fund.27

4.2 Capacity of the Valuation Office Agency A number of Members and witnesses expressed concern that the Valuation Office Agency (VOA) was not sufficiently resourced to carry out three-yearly revaluations. The VOA has already begun preparations for the next revaluation, which will come into effect in 2021. At Second Reading, Roberta Blackman-Woods said:

24 PBC Deb 25 Jun 2019 c3 25 HCDeb 17 Jun 2019 c73 26 HCDeb 17 Jun 2019 c77 27 Housing, Communities and Local Government Committee, High streets and town centres in 2030, HC-1010 2017-19, 2019, 11 February 2019, p4 15 Commons Library Briefing, 1 July 2019

The Government’s consultation on the introduction of more frequent revaluations noted some challenges that are yet to be addressed, including: the increased workload resulting from this reform and the need for significantly skilled staff to undertake this work; and the possibility that the move will result in more appeals by ratepayers, placing additional pressure on the Valuation Office Agency.28 Similarly, Edward Woodall, of the Association of Convenience Stores, said at Committee Stage that “The feedback I get from my members is that there is a lack of capacity at the VOA to allow them to engage meaningfully in the process and talk to individuals”.29 Similarly, Cllr Richard Watts, leader of Islington Council, said: We have significant worries about the VOA’s capacity. Clearly, if we are going to give it more work, which this Bill does, it will need to be properly resourced. It is worth adding, even at this early stage, that this is not just about the VOA’s capacity to do extra work in the future. There is a very significant backlog of work stored up at the VOA and the appeals tribunal.30 The Explanatory Notes to the current Bill state that “the Bill contains provisions that may lead to HM Treasury providing additional funding to the VOA to undertake more frequent revaluations”.31 Appeals Concerns expressed by witnesses about the VOA’s capacity centred around the handling of appeals against rateable values and business rate bills. A new appeal system known as Check, Challenge, Appeal was introduced in England in 2017. This was intended to drive down the total numbers of appeals. At the same time, as of 1 April 2019, the VOA is still handling 66,430 appeals relating to the 2010-17 valuation list. This is down from a high of 294,980 three years earlier.32 These appeals are not subject to the Check, Challenge, Appeal system. The Minister, Rishi Sunak, suggested during the evidence session at Committee Stage that more frequent revaluations might reduce the number of appeals, and hence the VOA’s appeal workload. In response, Dominic Curran, of the Association of Convenience Stores, broadly agreed: With an annual revaluation, it almost would not be worth appealing a valuation that you thought was wrong, because it would change in a year’s time anyway. The other effect would be that the valuation probably would not be so wrong, because your annual changes would be on a much smoother line…33 The level of unresolved appeals has a direct effect on the revenue available to local authorities. When an appeal is under way, local authorities must put a proportion of their business rate revenue aside

28 HCDeb 17 Jun 2019 c77 29 PBC Deb 25 Jun 2019 c7 30 PBC Deb 25 Jun 2019 c8-9 31 Explanatory Notes, p.4 32 See VOA, Challenges and changes against the 2010 local rating list, England and Wales [spreadsheet, table 1.3], 16 May 2019 33 PBC Deb 25 Jun 2019 c7 16 Non-Domestic Rating (Lists) Bill 2017-19

(‘appeal provision’). In effect this is to insure against the risk that the appeal will lead to a reduction in rateable value, leading to the authority having to pay a refund – potentially backdated – to the ratepayer who brought the appeal. The latest statistics indicate that local authorities in England have £2.8 billion of business rate revenue set aside for appeals as at April 2018.34 As a means of reducing the number of appeals, Cllr Richard Watts raised the possibility of a ‘six-month cap’.35 No details of this policy were provided at Committee Stage, but a parallel exists in Scotland. In the Scottish business rate system, appeals may only be made within six months of a new valuation list taking effect, within six months of a new rateable value being set for the property, or within six months of the property gaining a new owner, tenant or occupier. Guidance is available on the website of the Scottish Assessors. A ‘six-month cap’ is supported by the LGA, but opposed by other stakeholders. For instance, Martin McTague, from the Federation of Small Businesses, said: It is bizarre that the solution seems to be that you impose a six- month cap on appeals. That is effectively saying, “It’s so difficult to get these appeals through the process that we are going to cap the time required to do it.” Yet the information is not available to the business rate payer to be able to challenge things easily.36

4.3 Draft rating lists Witnesses expressed concern at the provisions of clauses 1(3) and 1(6). These would move the deadline for the VOA to provide draft rating lists to billing authorities, from 30 September to 31 December before the financial year in which they take effect. This could have significant impacts on local authorities, which would have made significant progress with their budget process for the following financial year by 31 December. It also has the potential to cut across the recommendation of the 2018 Hudson Review that the provisional local government finance settlement should be published by 5 December each year.37 This would be challenging in the absence of draft new rating lists, as local authorities would not be able to estimate their rate income for the following financial year. At Committee Stage, Cllr Richard Watts said: We have a big concern that, if we are going to move the last date of the draft rating to 31 December from 30 September, once every three years, there are profound implications for the way in which local authorities set budgets for one year out of three. Local government was not consulted on that before it was announced, which is regrettable. Settlement timing has previously been based on the new rateable list and, if that is now not available until 31 December, that either pushes the state of the settlement into

34 MHCLG, National non-domestic rates collected by local authorities: England 2017- 18 – revised, 2018, p5 35 PBC Deb 25 Jun 2019 c12 36 PBC Deb 25 Jun 2019 c7 37 See Andrew Hudson, Local government finance: review of governance and processes, 24 October 2018, p13-15 17 Commons Library Briefing, 1 July 2019

January, which would be incredibly problematic for local government, or the settlement is based on information not yet published, which is also less than ideal.38 This point is addressed in detail in written evidence from the Greater London Authority.39 The Minister, Rishi Sunak, stated that the Government is already in discussion with the Local Government Association and CIPFA on this point.40 He reiterated that the 31 December date was a deadline, not a fixed date on which draft rateable values had to be supplied.

38 PBC Deb 25 Jun 2019 c11 39 Written evidence 002, Rating Surveyors’ Association, 26 June 2019; Written evidence 003, Greater London Authority, 26 June 2019 40 PBC Deb 25 Jun 2019 c20

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