The Financial Secretary to the Treasury (Lord Livermore) (Lab)

My Lords, this debate will also consider the take-note Motion tabled by the noble Lord, Lord Clement- Jones, on the Non-Domestic Rating (Definition of Qualifying Retail, Hospitality or Leisure Hereditament) Regulations 2025. These statutory instruments form part of a wider package of legislation that gives effect to the new business rates multipliers for qualifying retail, hospitality, leisure and high-value properties. I thank the Secondary Legislation Scrutiny Committee for the detailed and thoughtful consideration of these statutory instruments in its 40th and 48th reports. Business rates are based on a property’s rateable value and a multiplier for each tax year. In the Autumn Budget 2024, the Government announced a comprehensive set of reforms to the business rates system in England, including the introduction of three additional multipliers from April 2026. The three new multipliers are: a small business retail, hospitality and leisure multiplier for qualifying retail, hospitality and leisure properties with rateable values below £51,000; a standard retail, hospitality and leisure multiplier for qualifying retail, hospitality and leisure properties with rateable values of £51,000 to £499,999; and a high-value multiplier for properties with rateable values of £500,000 and above. In the Budget last November, the Government announced the rates for these new multipliers. These new rates will deliver permanently low multipliers for eligible retail, hospitality and leisure properties with rateable values below £500,000. The Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2026 prescribe the circumstances in which the new multipliers will apply. The new multipliers will replace the pandemic-era retail, leisure and hospitality reliefs that currently apply. These reliefs were introduced on a temporary basis in 2020, recognising the exceptional circumstances of the time. Continuing these reliefs would cost around £1.7 billion per year. The new multipliers will benefit over 750,000 retail, hospitality and leisure properties. However, unlike the existing relief, they are permanent, thereby providing businesses with greater certainty and support. They are also not subject to a cash cap, meaning that all qualifying properties in a retail, hospitality and leisure chain can benefit. Taking into account the upcoming business rates revaluation, the tax rate that retail, hospitality and leisure properties on the small business multiplier will pay next year will fall by nearly 12p overall. Similarly, the rate for retail, hospitality and leisure properties on the standard multiplier will fall by 12.5p compared with what they are paying now. To ensure that support for the high street is sustainable, the Government will fund these new multipliers through higher rates on the top 1% of properties, those with rateable values of £500,000 and above. From April, the most valuable properties, such as large distribution warehouses occupied by online giants, will pay a tax rate that is 33% higher than that paid by small high street properties. I turn to the Motion laid by the noble Lord, Lord Clement-Jones, which relates to the Non-Domestic Rating (Definition of Qualifying Retail, Hospitality or Leisure Hereditament) Regulations 2025. These regulations set out the eligibility for the new multipliers and passed into law last year. The Government’s objective in setting these regulations was to reflect the same definition for eligibility as the existing retail, hospitality and leisure relief. We want sectors that benefited under the previous relief to continue benefiting under this new relief. For example, under the existing relief, businesses benefit if they are wholly or mainly used for retail, hospitality or leisure purposes. That includes the sale of most goods, services, food and drink or entertainment as well as accommodation to the public. These requirements are the same under the new relief. Similarly, under the existing relief, businesses benefited only where they were used for in-person activity. The same principles apply under the statutory instrument that we passed last year. The Government have retained the same approach to ensure continuity in our support for the sector while making this support permanent and uncapped. The new multipliers are being introduced alongside a revaluation of non-domestic properties, which the Valuation Office Agency carries out independently every three years. Currently, property values are based on values from 2021, during the pandemic. Values were generally lower at this time due to the unusual economic situation that the pandemic created. Many properties are therefore seeing their rateable values increase at this revaluation, reflecting post-pandemic recovery. To support affected businesses, the Government announced in the Budget a significant support package worth £4.3 billion over the next three years. First, we are implementing transitional relief, which will cap increases next year by 5% for the smallest properties and up to 30% for the largest properties. Secondly, we are expanding the supporting small business scheme. Currently, the scheme caps the bill increases of those losing some or all their small business rates relief or rural rates relief. We are expanding it to those which are currently eligible for the 40% retail, hospitality and leisure relief. The supporting small business scheme will cap bill increases at the relevant transitional relief cap or £800 per year, whichever is higher. Together, these schemes will mean that the majority of properties facing increases will see them capped at 15% or less next year, or £800 for the smallest. Even after the revaluation, around a third of properties will pay no business rates at all as they receive 100% small business rate relief. A further 85,000 properties will benefit from reduced business rates as this relief tapers. We have also extended the small business rate relief second property grace period from one year to three years, to support small businesses as they grow. Following the Budget, concerns were raised about how the valuation methodology for pubs was applied. We have listened and responded to those concerns by launching a review into how pubs are valued for business rates. This review will also cover how hotels are valued and will include extensive engagement from valuation experts, businesses and their representatives. It will report in time for any decisions that follow to be implemented for the 2029 revaluation. In the meantime, we are taking steps to support pubs for not only next year but the next three years. From April, pubs and live music venues will receive 15% off their new business rates bill on top of the support announced in the Budget. Bills will then be frozen in real terms for a further two years. This support is worth around £1,650 to the average pub and will mean around three-quarters of pubs seeing their bills either falling or remaining the same next year. This decision will mean that the amount of business rates paid by the pub sector as a whole will be 8% lower in 2028-29 than it is today. The Government are also committed to going further to reform the business rates system to incentivise more investment. That is why we published a call for evidence on the next phase of business rates reform in November last year; that consultation will close later this month, and the Government will respond in due course. We recognise that transforming the business rates system is a multi-year process, and we are committed to working with stakeholders throughout this process to achieve meaningful change. The reforms being delivered through these statutory instruments will benefit over 750,000 properties across England while ensuring that the top 1% most expensive properties, including those used by online giants, pay their fair share. They will support investment and create a fairer business rates system. I beg to move.