Business Rates – Act passes following clashes between MPs and Peers

[The original report (28/3/25) was updated 4/4/25 to reflect further stages of the bill]

Through this bill the government is introducing higher business rate multipliers for large properties, lower rates for retail, hospitality, and leisure properties, and remove charitable rate relief from private schools.

House of Lords third reading debate on 24 March saw three ‘tidying up’ amendments passed, following on from report stage on 18 March (see report here) when peers voted through six amendments (as well as 10 related, consequential amendments) seeking to:

• Retain the standard multiplier for hospitals, medical and dental schools, and other healthcare settings as determined by regulations;
• Set up an expert committee to make recommendations on recalibrating the share of rates paid by retailers not on the high street;
• Exempt anchor stores from the higher multiplier;
• Expand eligibility for the lower multiplier to include the manufacturing industry;
• Remove the clause (clause 5) removing charitable rate relief for private schools from the bill;
• Mandate a review to assess the impact of the legislation on businesses with a rateable value near the £500,000 threshold.

On 25 March the House of Commons rejected all the amendments proposed by the Lords. A day later peers passed four alternative amendments relating to the business rates paid by healthcare providers, flagship stores in shopping centres and retail parks, retail services based in warehouses (also known as fulfilment centres) and private schools. The bill returned to the Commons on 31 March, where the government rejected these further amendments and sent it back to the Lords. In a debate on 1 April the Lords did not pursue their amendments further.

You can find all the relevant publications, including lists of amendments here. Short summaries of the bill's 'ping pong' stages follow below.

House of Lords Third reading debate – 24 March 2025

Unlike the House of Commons, the Lords are allowed to amend bills at third reading stage, but only with ‘tidying up’ amendments.

Baroness Barran, shadow education minister, tabled three of these, seeking to remove any reference to private schools following the removal of clause 5 from the bill at report stage. Lord Khan of Burnley, the Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government, said that, as these simply refine amendments that have already been passed, the government were not opposing them.

Lord Khan then thanked Lords for dedicating their time to scrutinising the bill. Baroness Barran thanked her colleagues and hoped that the House of Commons would “consider the sensible amendments that retain the current standard multiplier for these crucial sectors”. Likewise, Baroness Pinnock (Lib Dem) expressed her gratitude to the minister and civil servants and said, “The one issue that still irks me is that [the bill] was debated without an impact assessment”.

House of Commons Consideration of Lords Amendments debate – 25 March 2025

This debate saw MPs rejecting all the Lords amendments, sending the bill back to the upper house as it was in January.

The Minister for Local Government and English Devolution, Jim McMahon, began the debate by explaining the Lords' various amendments to the bill and why the government was opposing them. He reminded peers that the government aims to introduce new lower multipliers for certain properties from April 2026 and emphasised that “it is vital that this permanent tax cut is funded sustainably”. Amendments removing qualifying healthcare sites and anchor stores from the higher multiplier would challenge this, he argued. Five out of six healthcare sites above the threshold are NHS hospitals, he added, assuring MPs that the spending review would take such matters into account. He suggested that many anchor stores are parts of large chains with smaller stores which would benefit from the lower multiplier.

On manufacturing he stressed “that this is not a wide-ranging offer, but targeted deliberately at supporting our communities, high streets and town centres. That is why the Bill focuses on RHL [retail, hospitality and leisure] support. The government are supporting the manufacturing sector through other means.”

Another Lords amendment would have required a review that examines the merits of creating a separate use class and associated multiplier for retail services provided by fulfilment warehouses in England that do not have a material presence on high streets. The minister referred to the challenge of identifying those warehouses – as distinct from warehouses used by, say, high street retailers – and said the government are already exploring that objective through the existing digitalising business rates project. This “will allow us to match property-level data with business-level data from His Majesty’s Revenue and Customs to improve the way in which we target business rates, and to identify property and businesses in the way that the Lords amendment envisages”.

The Shadow Secretary of State for Levelling Up, Housing and Communities, Kevin Hollinrake, criticised the government for ‘breaking’ its promise to “abolish business rates”, arguing that the bill doesn't level the playing field between online and high street retailers. He supported Lords' amendments calling for a review of introducing a higher multiplier for fulfilment warehouses. Emphasising the role of anchor stores, he said that, “for many anchor stores, being dragged into the higher multiplier by this bill could be the straw that breaks the camel’s back”.

Hollinrake urged the government to accept the Lords' amendments to prevent job losses and further harm businesses, claiming that “since the introduction of this bill, we have learned that the government will also levy business rates on nursery schools and sports facilities used by the general public if they are on the site of a private school”.

Liberal Democrat education spokesperson Munira Wilson welcomed the proposed business rates reduction for retail, hospitality and leisure but expressed concern over the impact of reduced rates relief on businesses, particularly pubs and cafes. She said rates reform was “long overdue” and supported Lords' amendments enabling manufacturers to pay lower rates. Manufacturing facilities “can be big and built on expensive land but sometimes produce relatively low-value goods” she said.

Criticising the government’s decision to ‘tax education’, she said: “We strongly support and champion parents’ right to choose, on which both those tax measures [removal of charitable rate relief and VAT on school fees] are an assault”.

Meanwhile, Mark Sewards (Lab) supported the bill in its “unamended form” and suggested that it will give ‘confidence’ to small businesses. He raised concerns over the definition of anchor stores, suggesting that it would be a difficult term to ‘define’, as “several shops in a high street can indeed lay claim to that title”.

There were six divisions following the debate, resulting in the reversal of all the amendments made by the Lords.

House of Lords Consideration of Commons reasons – 26 March 2025

The bill went back to the Lords the following day. Rather than seeking to reinstate their previous amendments – which might have caused the bill as a whole to fall if insisted upon – opposition peers proposed alternative amendments.

Baroness Pinnock (Lib Dem) proposed a motion which would amend the bill to provide the government with the option, by regulations, to exclude hospitals from the higher business rates banding. “At this late stage, I urge the minister to agree. None of us wants to see waiting lists not going down as fast as they could because of the Government’s reluctance to exclude hospitals—not from business rates, just from the higher multiplier.”

Baroness Scott of Bybrook (Conservative) explained that her motion seeks to give the Secretary of State the discretionary power to retain the higher standard multiplier for anchor stores: “This would allow the Secretary of State to remove the higher multiplier if it becomes apparent that there are a number of integral businesses leaving the high street or opening new stores outside town centres.”

Lord Thurlow (Crossbencher) spoke to his motion which proposes, “first, a review of the £500,000 threshold of rateable value… and the impact it will have on businesses. This is a vital review because at present, it will be untenable for organisations that just exceed the £500,000 rateable value and will be compelled to pay a higher band of rates.” His second review concerns “how to address the appropriate tax rateable value on the big warehouse retailers — the internet retailers such as, but not exclusively, Amazon… We want to establish a new use class, purely for the benefit of business rates and no other reason, but without insisting upon implementation, which was in the previous amendment and rejected in the other place.”

Baroness Barran (Conservative) proposed a motion which would make it easier for the Secretary of State to reverse the removal of charitable rate relief from private schools: “It does not require the Secretary of State to do anything but offers the flexibility and ability to change, if this policy—coupled with the introduction of VAT on independent school fees and the increase in employer national insurance—has wide-reaching and damaging impacts, not just on independent schools but on their neighbouring state-funded schools.”

She was backed by other speakers including Conservative peer and chartered tax adviser Lord Mackinlay of Richborough, who said it was “a sad day” that, “for the first time in the history of this nation, we are deciding to have a two-tier charitable system”. He added: “The amendments in Motion Q1 will at least give the Secretary of State pause for thought and an easy way out in the future.”

For the government, Lord Khan argued against all the attempts to amend the bill. He assured peers “that the powers already contained in Clause 3 would allow the Treasury to exclude from the higher multiplier classes of hereditament based upon their use. The amendments put forward to Clause 1 are therefore unnecessary.”

He added that the government have already committed to looking at the way that the multipliers in business rates currently operate and whether this may serve as a disincentive to invest, as well as the identification and treatment of fulfilment warehouses.

The minister also resisted Baroness Barran’s motion, saying that the rules in relation to the application of charitable relief “are set out in primary legislation and can be amended only through primary legislation. It is for Parliament to agree to pass primary legislation, as per normal parliamentary processes.”

Baroness Pinnock’s motion was passed 278-165. Baroness Scott’s motion was passed 277-172. Lord Thurlow’s motion was passed 277-162. Baroness Barran’s motion was passed 267-151.

The government’s motions were passed, subject to amendment by the four motions mentioned above.

House of Commons debate - 31 March 2025

Rejecting the Lords’ amendments, local government minister Jim McMahon said that the government face a significant challenge and must balance the books, “so we cannot and should not make tax cuts without ensuring that those tax cuts are funded”.

He said all the Lords amendments were unnecessary as the government already have powers to make further exclusions from the higher multiplier and the government are already looking at the issues around the £500,000 threshold and the status of fulfilment warehouses. 

Shadow minister Kevin Hollinrake said his Conservative colleagues had been right to decry “Labour’s neglect of retail”. He suggested that businesses face a ‘double whammy’ of higher taxes. He accused the government of ‘punishing’ aspiration rather than powering growth.

“We want to see a much more fundamental review of business rates”, said Vikki Slade (Lib Dem), who also criticised the government for ‘taxing’ education by putting business rates on private schools.

Motions rejecting the Lords amendments were all passed.

House of Lords debate - 1 April 2025

“The Bill not only fails to deliver on the government’s manifesto but is far from the reform of the business rates system that was promised and will be a damaging blow to our high streets”, said Baroness Scott of Bybrook (Con), who in particular expressed concern about the higher multiplier for anchor stores. Given the financial deadlines associated with this bill, she said that her party would not be pressing any further amendments but she hoped that in 12 months’ time “our high streets will not have been hollowed out any further”.

Baroness Pinnock (Lib Dem) also expressed disappointment that the government “felt unable to accept” the amendments, while acknowledging that they have ‘very challenging’ decisions to make. She said: “We recognise at this stage that we can take the bill no further and we will not press any further amendments”.

Lord Thurlow (Cross Bench) believed that the government had missed a ‘real’ opportunity to deal “once and for all with the injustices heaped on the small high-street retailers”.

The minister, Lord Khan of Burnley, claimed that through the bill, the government is beginning to deliver on its ambition to transform the business rates system. Furthermore, he continued that the government are delivering on their commitment to break down barriers to opportunity by removing the business rates charitable relief from private schools, to help raise revenue to support education and young people.

The government motions “That this House do not insist on…” its amendments were all passed without opposition. Royal Assent was granted two days later.