Present - representatives of:
Present: Association of Chartered Certified Accountants (James Meyrick); British Chambers of Commerce (Charlotte Moore-Bick); British Council for Offices (Ian Selby); British Hospitality Association (Martin Couchman); British Beer and Pub Association (Pamela Bates); British Property Federation (David Melhuish); CBI (Emma Wild); Engineering Industries Association (Colin Mason); Federation of Small Businesses (Roger Culcheth); Forum of Private Business (Tim Kind); Institute of Directors (Richard Baron); Inter Bank Rating Forum (Roger Littlewood); Local Government Association (David Maddison); RICS (Charles Partridge) RSA (Denise Trollope); Small Business Service (Richard Thompson); Office of the Deputy Prime Minister (Gill Rendall); Valuation Tribunals Service (Laurence Barnes); Valuation Tribunals Service in Wales (Chris Owen) ; Valuation Office Agency (Andrew Hudson, David Tretton, Lynda Rawsthorne, Paul Sanderson, Peter Williamson, Tony Capp); Lyons Inquiry Team (Ben Day)
Apologies
Apologies were received from:
Action for Rural Communities in England (Deborah Clarke); Boots (Andrew Martin); British Hardware Federation (Maisie Slater); Country Land and Business Association (Oliver Harwood); Fuller Peiser (Mike Flecknoe); National Federation of Retail Newsagents (Catherine Tong); Petrol Retailers Association (Paul Yates); RICS (Jerry Schurder); Welsh Assembly Government (David Fletcher);
1 Minutes, action points and matters arising from the NRF meeting on 3 July 2006
1.1 The minutes of the meeting on 3 July were accepted as an accurate record.
1.2 Members agreed that three issues discussed during the July meeting should be included on the agenda for March 2007. These were:
(i) Customer service issues (paragraph 5.1 of the minutes). Members would be asked to give views on the VOA’s progress in meeting its objectives in improving customer satisfaction levels.
(ii) Prior agreement of rateable values for the 2010 revaluation (paragraph 6.3). To aid discussion, the VOA would circulate a short discussion paper in January 2007, inviting comments from business groups and rating professionals. The VOA would then take account of these comments in a further version of the paper which would be sent to members in advance of the meeting, along with any questions for discussion.
(iii) Small Business Rate Relief (SBRR) (paragraph 7.1.3). Tim Kind said that take up was higher in Scotland compared with the English scheme because there is an automatic entitlement to the minimum 5% relief in Scotland. Roger Culcheth agreed saying that it was unclear what the level of take up is above the 5% threshold. Tony Capp would pursue the issue further with both members and with the Scottish Executive and provide a further note to the NRF.
Concerns were raised that the scheme in England required promotion and for applications to be made simpler. Gill Rendall agreed that a discussion on take up and promotion of the scheme should be included in the March agenda. However, she made it clear that it was unlikely that any further changes to the scheme would be made. She added that billing authorities have a responsibility to provide information on rate reliefs with bills but had no statutory duty to promote the scheme in other ways.
2 Lyons Inquiry
2.1 Andrew Hudson introduced Ben Day, a member of the Lyons Inquiry into Local Government. Ben Day set out the current position on the Inquiry, its terms of reference and the issues raised with, and suggestions made to the team on the future of the business rates system.
2.2 Business rates - general
2.2.1 Richard Baron said that he hoped the report would refer to the total amount of local government spending that is desirable to help set the context for the amount to be collected from the rating system.
2.2.2 Roger Culcheth said that the FSB had suggested a moratorium on increases in the multiplier. Property taxes in the UK are phenomenally high compared to elsewhere and this affected the competitiveness of business here. The Inquiry would need to directly address the balance of funding issue.
2.2.3 Tim Kind said that one major issue with the current rating system was that there was no accountability (which was one advantage of the BIDS system). He suggested that businesses should have a vote in local elections to ensure it had an influence on local spending decisions.
2.2.4 Ben Day emphasised that the Inquiry was not about raising more taxes overall. There was though an important debate to be had about whether the current arrangements in every area were the right ones. For example, in the debate on the funding of the Crossrail project, there seemed to be an interest from business in making a contribution if that enabled the project to go ahead. Similar debates could probably take place about other major infrastructure projects around the country.
2.3 BIDS and supplements
2.3.1 Charles Partridge said he was a supporter of the BIDS concept, but the difficulty in applying it to major projects like Crossrail is that rates is a tax on occupiers, whilst the prime beneficiary of major infrastructure projects of that sort will be the property owner or long leaseholder who will be able to demand higher rents. Tenants will not be keen to pay towards a project that will increase rents over time, though he acknowledged that there would be benefits for longer-term tenants. A property ownership register was required to ensure that owners made an appropriate contribution. David Melhuish added that the landlords’ contribution is built into the BIDS legislation in Scotland – the British Property Federation had wanted the same provisions in England but this proved to be impossible at the time of legislation.
2.3.2 Roger Littlewood agreed saying that whilst HBOS were supporters of BIDS, the company had specific criteria that had to be met by each project, one of which is that the BID must encourage contributions from local authorities and landlords. The best BIDS already achieve this. BIDS are generally targeted at relatively minor aspects of trading environment but whilst the projects can lead to higher rents in due course, these can be offset by other savings. For example, CCTV schemes can reduce security costs and “Clean Teams” will ensure a clean and tidy trading environment in the area at no direct cost to HBOS.
2.3.3 Roger Culcheth added that most BIDS so far had appeared in relatively highly assessed areas (in RV terms) so the BID supplement had been a low proportion of the rent of the property. The position is different in other areas. For example in a BID area in Rugby, where assessments are broadly lower, the charge can amount to a supplement of 7.5% on the bill. Because the supplement is not eligible for small business rate relief, smaller businesses may be paying a levy of up to 15% on their normal bill. These levels will discourage participation.
2.3.4 Charlotte Moore-Bick was concerned that any powers for authorities to set more general supplements locally should be subject to full accountability.
2.3.5 Ben Day welcomed the helpful comments on BIDS and supplements. In response to questions about Local Authority Business Growth Incentives, he said that the Lyons Team were considering how incentives might be delivered looking at the scheme’s influence on decision making by local authorities.
2.3.6 Ben added that the Lyons Team had undertaken a series of discussions with businesses on questions about economic development and business rates over the summer and would publish a report of those discussions in due course.
2.4 Rate reliefs and exemptions
2.4.1 Roger Littlewood asked whether the Inquiry team had any proposals on the table for rate reliefs or other financial incentives for energy efficient/green buildings. Charles Partridge said that energy efficient buildings would attract higher rents, which would be exacerbated by the provision of rate relief, rendering such a policy self-defeating.
2.4.2 Charles Partridge suggested that the review should consider requiring all non-domestic property to be valued for rating purposes. This would mean the valuation of all the classes of property currently exempt from rating, which included places of public religious worship, swinging moorings, air raid protection works, public parks and other properties and agricultural property. Whilst not suggesting that any of these properties should become liable for the payment of rates, he suggested that unless those properties currently exempt were valued, Ministers would be unable to assess the true cost of the relief they were granting to any class of property. However, Charles acknowledged that any decisions on the exempt classes remain a matter to be determined by Ministers in the light of all the relevant circumstances. Chris Owen suggested that if the agricultural exemption was lifted, farmers might qualify for small business or rural rate relief.
2.4.3 Ben Day said that both these issues had been brought to the Inquiry Team’s attention and that nothing was yet ruled out.
2.5 Revaluation cycles and the multiplier
2.5.1 Martin Couchman said that it had been suggested previously that business rate revaluations should be conducted more frequently than the current five-year cycle. He was concerned that such a move could result in more “peaks and troughs” in assessments, particularly in the hotel and pub trades where assessments are based on turnover.
2.5.2 Tim Kind said that for most small businesses there was still little understanding of the rating system. The bill arrives and is paid. Valuation assessments are complex and are not readily understood by businesses. Having annual reviews would not aid certainty. Roger Culcheth agreed. The complexity of the valuation system is not understood by small businesses, especially shopkeepers.
2.5.3 Charles Partridge felt those concerns were unjustified. He added that in time, and as technology and resources allowed it, there was an argument for a move to annual revaluations, which would help increase understanding and acceptance of the rating and valuation system.
2.5.4 Ben Day said that the idea of having more frequent revaluations had been put to the Inquiry and was being considered.
2.5.5 Andrew Hudson said that the question of revaluation cycles was likely to be one for debate by the NRF at a later stage, once the recommendations of the Lyons Review were published. The debate would have to take place be in the context of overall Government policy on the rating system, and could cover what the VOA can deliver, and what changes business and the professions would welcome. There was a wider issue about how the different elements in the system could be brought together to give business greater certainty and transparency. Final decisions on all this would obviously be for Ministers.
2.6 Council Tax
2.6.1 Laurence Barnes asked about the Inquiry Team’s view on the timing of a council tax revaluation. Chris Owen said that the debate about more frequent revaluations for business rates could be equally applied to council tax; he also suggested that it could be argued that the removal of the relevant transaction provision in Council Tax, which currently allowed home improvements to be reflected in bandings only following a sale or a revaluation, would increase fairness and transparency in the council tax system
2.6.2 Ben Day said that the Inquiry’s final report would comment on issues around council tax and revaluation.
2.7 Close
2.7.1 In closing the debate, Andrew Hudson said that he was aware that local government was working hard to improve dialogue with the business community and he encouraged businesses to respond fully whenever the opportunity arose.
2.7.2 Members expressed their appreciation to Ben Day for attending the Forum and engaging with ratepayers directly.
3 Meeting dates
3.1 It was agreed that meetings of the NRF would take place on 13 March and 17 September 2007. Further meetings may be arranged if required.
Tony Capp
Valuation Office Agency
October 2006
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