STATEMENT

BY

THE WELSH GOVERNMENT

I want to update you on developments and progress being made on business rates policy in Wales, as we address the recommendations of the independent Business Rates Policy Review. 

The UK Government has taken the decision to defer the next non-domestic rate revaluation in England from 2015 until 2017.  This was not an announcement that we welcomed.  Last month the National Assembly for Wales agreed the Legislative Consent Motion on the subject of allowing Welsh Ministers to decide on the date of the next revaluation here.

To inform this decision, I sought the advice of Professor Brian Morgan and his colleagues on the Task and Finish Group who have engaged with a number of stakeholders on this issue including the Council for Economic Renewal Members. 

The Task and Finish Group has considered the issues and has concluded that there are technical, economic and practical reasons for Wales to implement the same revaluation date as England.  The same decision has recently been taken in Scotland. 

First, and of particular relevance to Professor Morgan’s conclusion, are the significant economic issues and close inter-relationship of businesses on both sides of the border.  Businesses have consistently told the Task and Finish Group that they value certainty and Professor Morgan has concluded that instituting a different revaluation date in Wales would not assist a stable business environment. 

Secondly, if Wales was to set a different date, then it is possible that the rates multiplier would need to be significantly increased to balance against reductions in rateable values.    In addition, a higher multiplier in Wales than that just across our border may create a perception of a less competitive and less business-friendly environment for new investors. 

Finally, whilst cost issues are not the determining factor in the decision, it is clear that operating a different five-year cycle to England may result in increased administrative costs. For example, valuation evidence is drawn from both England and Wales and certain classes of property are subject to schemes of value drawn up by professional bodies.  These bodies may not be prepared to bear the cost of administering two distinct revaluation cycles.

In taking this decision to defer the next revaluation to 2017 in line with England and Scotland, I am aware that there are concerns. For this reason, I am proposing to take two steps.

First, there may be some sections of the business community who are particularly affected by the deferral.  I am therefore prepared to consider the potential for a fund to cover the period April 2015 until April 2017.  This would not be for all businesses affected.  That would be unaffordable.  I would however consider a targeted approach but this will require more in-depth analysis and costing.  I have asked officials to consider this in more detail going forward.

Second, a number of Members and businesses have raised concerns about rateable values and this process with me. I want to use this period to explore and consider these. I have asked the Business Rates Policy Task and Finish Group to examine the issues and anomalies that business and others perceive.  I will consider their findings and use their evidence to press the UK Government to improve the system prior to any future revaluation.  In addition, the Minister for Local Government and Communities and I recently announced some research into the classification of holiday lettings for local taxation purposes, this is an issue that businesses have raised with me.

I would also like to take the opportunity today to update Members on Professor Morgan’s work on charity shops and rates. Over recent months I have received significant correspondence from charities, Members and others who fear that a change in the rates regime may affect some of the most vulnerable and have a negative impact on the work of smaller charities. 

I want to allay some fears today as there seems to have been some inaccurate coverage of this issue.  

In particular, unnecessary alarm seems to have been caused from a suggestion that a 50% rate relief limit would apply to all charity shops.  Professor Morgan’s recommendation actually focussed upon larger Charity shops. 

I would ask everyone to look at the principal recommendation of the Business Rates Policy Review, which was for the Welsh Government and the UK Government to consult with charitable and retail sectors to discuss these issues.  I have previously made it clear that there was no suggestion that the Welsh Government was going to take immediate or unilateral action.

Professor Morgan has received over a hundred responses to his Call for Evidence.  He also held a workshop last week attended by a range of representatives from charities, businesses and social enterprises.  

Professor Morgan is now finalising his advice and I will provide an update for Members when I have had a chance to consider his report.

Finally, I would like to update Members briefly on some other developments.

The fundamental recommendation of the Business Rates Policy Review – to fully devolve rates - was shared by the Silk Commission.  The UK Government has committed to publishing a response to the Silk Commission’s proposals on financial reform in the Spring. I look forward to developments in this area.

I am pleased to say that the UK Government has already acted on some our policy proposals in their Autumn Statement following the Welsh Government response to the Business Rates Policy Review in October.

On Small Business Rate Relief, we successfully pressed for an extension of the Scheme and in January I announced the extension of the Welsh Small Business Rate Relief Scheme from 2012-13 into 2013-14.

The Review had important recommendations about empty property rates exemption for new developments. 

The UK Government announced a longer period of relief - 18 months - from empty property rates for certain new non-domestic buildings completed between 1 October 2013 and 30 September 2016.  I welcome this and have asked my officials to consider the costs and other issues associated with improving this further by implementing the recommendation of the Review for a two year exemption, with three years in Assisted Areas.

In addition, I asked Professor Morgan to look at the schemes in Northern Ireland and Scotland to bring empty properties into use by offering 50% relief.  I have received some initial advice from Professor Morgan which suggests that we should explore the opportunity for a similar scheme in Wales.  I have asked officials to consider costs and implementation issues.  Finally, we are on the point of setting out the detail of the £200k start-up funding for Business Improvement Districts to support town centres in Wales.

We have launched a £20m business rate scheme across all of our Welsh Enterprise Zones.  We also launched a Welsh renewable energy business rate scheme to provide further support for this sector.  Applications for both schemes are currently being assessed.

A good degree of progress has been made, but this is a fast paced policy agenda and there is more to do. I will ensure that Members are kept informed of developments.