Baroness Neville-Rolfe (Con)

My Lords, I rise to speak to these two closely related sets of regulations, which together established the new tiered system of business rates for the 2026 financial year. One determines which hereditaments fall into each multiplier band, and the other fixes the resulting liabilities for larger premises. I thank the Minister for his clear and careful introduction to the new rules. Although I plan to focus elsewhere today, I am very grateful to the noble Lord, Lord Clement-Jones, and others for drawing our special attention, so eloquently, to the second instrument, to the anomalous position of the recording studios and to the hikes in rates that they face. This could lead to unwelcome closures and to the expected moves of some studios abroad. I have visited Abbey Road Studios as a private citizen. Those studios are an important part of our rich art and cultural heritage, which has been referenced so many times today—indeed, I have walked across the famous zebra crossing, made of worldwide importance by the Beatles. I am also grateful to the Secondary Legislation Scrutiny Committee for its, I have to say, critical report. It was disappointed that the Government had not seen fit to publish any of the wide range of evidence and analysis it considered on the effects of the new multipliers, other than high-level data. It also sought a proper explanation of why the Government consider it fair that, apparently without advancing evidence, a low multiplier should apply to smaller RHL premises compared to non-RHL properties. I look forward to a full response from the Minister on that report. Prior to the election, the now Prime Minister promised a regime of permanently lower business rates multipliers. Since then, the Chancellor has claimed that, on this basis, business rates are at their lowest level since 1991, yet many businesses now face substantial increases in their bills. That is why it is so profoundly misleading to characterise these changes as record low taxation by reference to multipliers. Multipliers are not the tax rate. Bills are, and it is bills that businesses have to pay and real people have to bear. Turning to the substance of the regulations, in their first Budget, this Government chose to cut back retail, hospitality and leisure relief, a tax rise worth £1.1 billion a year. At the same time, they have locked in automatic, inflation-linked increases every year. Can the Minister explain, in specific terms, what the Government believe the cumulative effect of these decisions will be by the end of this Parliament? What modelling has the Treasury done on business closures, employment losses and investment being deferred? For SMEs, the challenge is acute. Shops, hotels and restaurants face even steeper rises. Does the Minister seriously believe that this trajectory is sustainable? Under the new system set out in these regulations, combined with the revaluation, businesses across retail, leisure and hospitality will face higher bills and fewer businesses will benefit from relief than under the previous 40% scheme. As the Explanatory Memorandum makes clear, local authorities previously had greater discretion over which premises benefited. Can the Minister tell the Committee what estimate the Government have made—the Valuation Office Agency will undoubtedly have provided one—of how many businesses will lose out because that discretion has now been removed? I turn now to the Non-Domestic Rating (Definition of Qualifying Retail, Hospitality or Leisure Hereditament) Regulations, which I have looked at in combination with the draft Local Government Finance Act 1988 (Calculation of Non-Domestic Rating High-Value Multiplier) (England) Regulations. As confirmed in the letter sent by MHCLG to the chief finance officers of English billing authorities this very day, these set the new high-value multiplier at 50.8p, compared to a standard multiplier of 48p—an extra 2.8p in the pound. The Government’s intention is for these measures to be directed at large online warehouses with rateable values of around £500,000 or above. However, as the provision currently stands, a greater number of retail premises will in fact be captured by the higher rate, including many of the anchor stores that play a central role in sustaining footfall and economic activity in our high streets. I remember these so well from my time at Tesco, since they were at the heart of a regeneration strategy in poorer areas that provided jobs for the unemployed and fresh fruit and vegetables, which Southampton University found materially improved health locally. The study was actually paid for by Sainsbury’s, but the outcomes were very positive. It appears to be difficult to reconcile hitting such stores hard with the commitments made prior to the election, when it was said that business rates would be replaced with a fairer system intended to address disparities between large online operators and physical retailers. Will the Minister say why the Government are choosing to target anchor retail stores? What assessment has been made of the knock-on effects on surrounding businesses in the same development or high street when these anchors are weakened or lost? The higher rates are being introduced alongside rising employment costs, NICs, national minimum wages, especially for the young, increased alcohol duties, high energy costs and the proposed tourist levy on hotels and bed-and-breakfast accommodation. UK Hospitality has warned that should mayoral authorities choose to exercise these new powers, the additional cost to consumers could amount to £518 million. Layering new fiscal burdens, even where individually justified, can in aggregate undermine the very sector that the Government wish to support. At what point do the Government consider the cumulative impact of these measures, taken together, and reflect on whether the overall burden risks becoming counterproductive? Of course, I understand the challenges the Government face, but it is this cumulative effect that is such an acute problem. What consideration has been given to the impact on consumer prices and demand, especially at a time when households remain under significant financial pressure? We would take a different approach. We would provide permanent 100% business rates relief for retail, hospitality and leisure businesses with rateable values of up to £110,000, supporting around 250,000 small businesses across the country. That support would be funded through a more disciplined and focused approach to welfare spending, as set out clearly at our party conference last year. In these circumstances, I was pleased to hear from the Minister during his Statement on 29 January that the Government were looking at the adverse effect of the changes on hotels and that the wider review of business rates was ongoing. We heard that any changes to business rates would be considered at the Budget in the usual way. Can the Minister confirm that we are talking about the 2026 Budget and comment on the budgetary position? Is there new money for pubs and music venues—and, if need be, for hotels—or does everything have to come out of the £4.3 billion announced in the previous Budget? Can the Minister please confirm that the wider review of business rates, which currently has an ongoing call for evidence due to close in a few days’ time, as he mentioned, will address not only large infrastructure businesses and premises such as airports, but small and medium-sized businesses in the context of the current economic and tax environment? Will he take a good look at incentives and anomalies in the VOA rules and at the need to align Treasury and local government thinking, as mentioned by my noble friend Lord Fuller? Will he look in particular at the problem facing recording and artist studios, raised so eloquently by my noble friend Lord Parkinson of Whitley Bay, the noble Lord, Lord Clement-Jones, who has led with his Motion, the noble Earl, Lord Clancarty, the noble Lords, Lord Freyberg and Lord Watson of Wyre Forest—and UK Music? Discussions with DCMS could, it seems, also be helpful to the VOA. Noble Lords will know that we believe in backing those who take risks, create employment and invest in the productive economy. In our view, these regulations move in the opposite direction. For that reason, I urge the Government to reflect carefully on their approach and on the conclusions that they reach from the review that they are undertaking.