I will start with the new clause proposed by the noble Baroness, Lady Pinnock, and the noble Lord, Lord Fox. This would require the Government to carry out an assessment of whether the business rates measure in the Bill improves the wider system of business rates.
I remind noble Lords that Clause 1 is limited in scope. The Government are making a targeted intervention through the Bill to ensure that the law concerning material changes of circumstances operates as it should do as regards the impact of coronavirus on rateable values. The Government are not, by contrast, offering the Bill as a means of introducing significant reform to the business rates system. Indeed, it would be wrong to do so. The Bill is narrow in its focus precisely so that Parliament can deliver certainty on this issue, with minimal delay, to those that need it, particularly local authorities.
I appreciate that many noble Lords wish to see more substantial changes to the business rates system, as pointed out eloquently by the noble Baroness, Lady Pinnock, and I can provide good news in that regard. Noble Lords will have seen the Chancellor’s Budget Statement and may have read the final report of the Government’s business rates review, published alongside the Budget. The Government have committed to changes to improve the business rates system through delivering more frequent revaluations, starting from the next revaluation in 2023. This answers widespread calls from stakeholders and will help deliver a more timely, and hence fairer, distribution of business rates.
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We also want to ensure that the material change of circumstance provision remains fit for purpose and within its original intentions, so we have announced that we will legislate to clarify that factors arising from the legislation, licensing changes or guidance are not in scope for MCC claims. We think that this is a sensible, proportionate step to provide certainty and
clarity for ratepayers about the impact of legislative and regulatory changes. We will consult on the detail of this in due course and there will be an appropriate opportunity for Parliament to scrutinise the provisions.
The Government have also announced significant new measures to meet our commitment to reduce the burden of business rates on firms. We are freezing the multiplier for another year, saving ratepayers £4.6 billion over the next five years. There is also support for decarbonisation and the improvement of properties, and a relief worth almost £1.7 billion for eligible retail, hospitality and leisure businesses in England. This is all on top of the unprecedented £16 billion of relief over two years provided by the Government for ratepayers. As the Chancellor set out, this means that over 90% of retail, hospitality and leisure businesses will receive at least a 50% reduction in their business rates bills in 2022-23, when taken together with small business rate relief. I hope that it is helpful to set this out, given that these announcements came in the wake of the Bill’s Second Reading.
Of course, we can take opportunities such as this to debate the reform of business rates, and we welcome that, but we will bring forward further legislation to enact the changes to the system that we wish to make once we have gone through a further period of consultation. That will provide the right time to fully scrutinise the wider changes we are planning to the business rates system. Noble Lords can be assured both that the Government have committed significant investment and energy to reforming the rates system and supporting businesses, and that there will be further opportunity to debate the wider business rates system in the coming months. For now, it remains crucial that we give swift effect—to use that phrase again—to this narrow but important measure.
The noble Baroness, Lady Blake, wanted a comment on whether we should be more generous in expanding the small business rate relief scheme. I have pointed out that this is £1.7 billion of extra funding for eligible retail, hospitality and leisure businesses, in addition to the more than £16 billion for that sector already. That means that over one-third of properties—about 700,000— already pay no business rates at all, as a result of receiving 100% relief through that scheme, with an additional 121,000 in the taper. That is a considerable degree of support for our businesses affected by the pandemic.
The noble Baroness, Lady Pinnock, wanted to know how many Covid-19 MCC cases have been lodged to date with the VOA, and how much rateable value these cover. The amount of rateable value which would have been lost as a result of these appeals is a matter for the VOA and not our department or Ministers. However, although some of the legal principles and valuation framework for the MCC appeals have been agreed, many discussions on specific sectors have still to take place; very few discussions have been held on individual valuations. There is, admittedly, therefore limited data on which to base any estimate.
The noble Baroness, Lady Pinnock, also wanted to know about the impact on local government. The possible reductions of property values discussed between
the VOA and agents were all subject to further provision of evidence, ongoing discussion, VOA assurance processes and taxpayer confirmation, before an acceptable resolution could have been reached. However, given the volume of checks and challenges which have been made in very high-value locations, such as London offices, it is likely that the impact on local government income would have been very considerable without this intervention.
The big question from the noble Baronesses, Lady Blake of Leeds and Lady Pinnock, was: when will we see the money—when will the £1.5 billion come through? The funding will be available as soon as local authorities have established their own local release schemes; the Government will support them to do this as quickly as possible, including through new burdens funding.
I am grateful to be able to discuss the local government implications of the Bill as they are central to our thinking on Clause 1. The business rates retention scheme allows local authorities to share in the income from the tax. They have a vital role in the business rates system, and the income represents an important source of funding for local services. Business rates are a local tax. We have come a long way from the period before 2013 when most business rates collected by local authorities were merely paid into the Exchequer.
Local authorities now retain a share of their business rates income. That share varies from authority to authority, but some retain the full 100% of the growth in business rates in their area. However, it also follows that with increased retention of business rates income comes increased risk to local government from challenges. The prospect of the significant reductions that might have flowed from business rates challenges related to the pandemic could therefore have had a damaging impact on local government funding and local services. Clause 1 will ensure that the impacts of the pandemic will not be reflected in those challenges.
We have stepped in to protect local services—and not just through Clause 1 of the Bill. We have provided a local tax income guarantee scheme, in which central government will meet 75% of the costs of irrecoverable losses in business rates income for 2020-21. This helps protect local government from Covid-related losses and goes beyond the challenges to rateable values; it also helps to protect local government against, for example, non-collection and bad debts.
We know that the impact of the MCC challenges on local government finances would have been considerable. When making their estimate of business rates income for 2021-22, local authorities added £1.2 billion to the provisions they had made for challenges against rateable values; I believe I have mentioned that already. That is £1.2 billion locked away in local government accounts and unable to be used to support local services. Not all of that will be related to the pandemic, but we believe from our discussions with local government that a large part of it was related to uncertainty around the MCC challenges, which are the subject of Clause 1. The Bill will therefore resolve that uncertainty and allow local authorities to release that funding back to where it belongs: the delivery of vital local services.
The amendment also concerns the advice we are giving to local authorities regarding the implementation of the Bill. Fortunately, in fact, there will be very little for local government to do in order to implement the provisions of Clause 1. We are intervening to ensure that the law regarding valuation continues to operate correctly. Allowing rateable values to fall for economic matters such as the Covid-19 measures would be out of line with the principles of rating, where such matters are reflected at general revaluations. It is right that we ensure that the law continues to follow these principles. In turn, this means that no ratepayers have seen their rates bill fall as a result of the MCC challenges, so we will not be asking ratepayers to return money to local authorities.
Nevertheless, we are of course keeping local government up to date with the progress of the Bill. My officials meet regularly with local government representatives, including the LGA, and have strong working relationships with the LGA, the Chartered Institute of Public Finance and Accountancy, and the Institute of Revenues Rating and Valuation. My department also publishes its advice to local government, which is available in the series of business rates information letters.
I hope that that covers most of the points made by noble Lords.