NHS Hospital Business Rates

Meeting: 
MQT on 2017-09-14
Session date: 
September 14, 2017
Reference: 
2017/3718
Question By: 
Onkar Sahota
Organisation: 
Labour Group
Asked Of: 
The Mayor
Category: 

Question

What view does the Mayor take on recent reports that as many as a quarter of private hospitals in the UK are utilising charitable status to avoid business rate liabilities, given NHS property is subject to non-domestic rates, and will he outline what the financial impact is to the GLA's precept?

Answer

Answer for NHS Hospital Business Rates

Answer for NHS Hospital Business Rates

Answered By: 
The Mayor

Under section 43 of the 1988 Local Government Finance Act local authorities are required to grant 80 per cent relief to business ratepayers which are registered charities where the property they occupy in being used wholly or mainly for charitable purposes. This relief can be increased to 100% at the discretion of the local authority.

This means in practice that a number of private hospitals, independent schools and even certain private gym chains are only required to pay 20% of their business rates liability because the operator is a registered charity. As a condition of the relief the operator normally has to demonstrate they are making the facility available for a socially beneficial purpose such as accepting NHS referrals or offering free or subsidised health checks.

It has been estimated by a leading rating agent that more than one in four private hospitals in England are eligible for charitable relief - which will cost more than £50 million in lost business rates revenue over the next five years. Proportionately London would expect to lose more than £15 million in revenues by 2022 (£3 million per annum) from this relief of which the GLA's share would be nearly £6 million (or £1.2 million per annum). The lost revenue London wide equates to just over £1 per band D council tax payer per annum.

Local authority maintained state schools and NHS hospitals, by contrast, are required to pay 100 per cent of their business rates bills. Following the 2017 revaluation it is estimated that NHS hospitals in London, alone, have seen their collective rates bills rise by £16 million a year. The Royal London hospital in Whitechapel, for example, will pay nearly £14 million extra in business rates over the next five years as a direct result of the Government's revaluation.

While I agree with the general principle of providing charitable relief to genuine charities it really cannot be right that a number of private schools, hospitals and gym chains are receiving a huge public subsidy at the same time when many of London's primary and secondary schools and NHS hospitals are being hit by huge rises in their rates bills.

I would urge the Government to commit now to a fundamental review of the business rates system in England so that the fairness of elements of the tax - including this use of charitable relief - can be looked at as a matter of urgency. This would then allow any necessary changes required to primary legislation to be introduced in the next parliamentary session. The Scottish Government is already moving ahead with significant reforms to business rates in Scotland following the Barclay review while the future direction of business rates in England remains mired in confusion and uncertainty.