Business Rates

House of Commons

Peter Luff (Mid-Worcestershire) (Con): You can get a better class of metaphor in Grimsby than you can in Solihull, Mr. Deputy Speaker. It is a great pleasure to follow the hon. Member for Great Grimsby (Mr. Mitchell), but I am not sure that Ministers appreciated the metaphors that were directed at them. If I am right, they were not meant personally.

I had hoped to talk a little about the local situation in Evesham and Droitwich in my constituency in order to illustrate the broader national points, but time is against me and I approve of the reduced limit so that others can enter the debate. Let me just say, then, that business rates are surprisingly important to business. We must not lose sight of that.

The Forum of Private Business did a survey this month of 6,000 small firms. When asked what were the most important issues facing them, 65 per cent. of respondents said that it was restoring business confidence. The second most important issue, mentioned by 63 per cent., was restoring consumer confidence. The third, at 59 per cent., was business rates. What rather surprised me was that access to finance and the cost of finance came in 11th and 12th respectively at only 35 per cent. and 29 per cent. Clearly, we are not discussing a side issue in the economy; we are talking about a central issue for small and medium-sized businesses in particular.

This issue is particularly important for one simple reason of which we must not lose sight: business rates have to be paid in full and on time irrespective of the state of one’s business. They cannot be cut or negotiated; the rates are a given. It may be possible to negotiate over staff and rents, or perhaps with suppliers about long-term credit. There are all sorts of things that can be done—cutting electricity bills by using less electricity, for another example—but the rates bill is a given, and it was the third largest cost, as well as the third highest priority, after staff and rents for those businesses.

Three weeks ago at Prime Minister’s questions, the Leader of the House, standing in for the Prime Minister, said:

“Opposition Members have a choice: they can either say to their constituents that there is no help and that nothing can be done, and wring their hands, or they can work to support businesses and bring schemes forward.”—[ Official Report, 4 March 2009; Vol. 488, c. 845.]

I have to say that I was rather disappointed by the remarks that the Minister for Local Government made in his opening speech, as he seemed to echo the idea that Conservative Members are suggesting nothing. I was sorry, too, to hear the Liberal Democrat spokesman, the hon. Member for Solihull (Lorely Burt), say the same thing. It is just not true.

We have suggested a list of initiatives and the most powerful of those is the national loan guarantee scheme. If it had been embraced by the Government—we suggested it in November—business would be in a much better situation. The Government have brought forward partial schemes, one of which, the working capital scheme, is still not even in place, but we have suggested reform of the financial services sector, action on council tax and action on savers—a raft of specific, well-targeted measures that would make things better. I reject absolutely the suggestion made by the Minister, who has fallen below his usual high standards in repeating that old canard.

For my part, I have tried to do something on small business rate relief with my automatic payment Bill, which was debated in the House on 6 March. I have been in constructive discussions with the Minister and his colleague, the Under-Secretary of State for Communities and Local Government, the hon. Member for Tooting (Mr. Khan). I withdrew the Bill at their request because negotiations seemed to be going on elsewhere in the Government. I hope that we hear in the Budget that action will be taken on this measure, because it could make a big difference for many small businesses. I emphasise that the Bill involved only a 50 per cent. discount for companies with small rateable values and small numbers of properties, but it would give them what the law entitles them to. Half of eligible businesses are not claiming what they are entitled to, which I think is wrong.

My Select Committee, as part of its inquiry on post offices, recently went to Wales to see the work that the Welsh Assembly Government are doing. It sticks in my throat a little to say it, but the work that they are doing in this respect is excellent, not only in automatic rate relief for all small businesses within a slightly less generous scheme, but in 100 per cent. rate relief for all small post offices. That is an excellent idea, because those small post offices are some of the most vulnerable
and most important businesses in deprived urban and rural communities. That is another suggestion that we should consider embracing in England. Those small sums of money could make all the difference. So often in the House we talk about billions and trillions, but hundreds of pounds can be the difference between survival and failure for so many of the smallest businesses in our land.

My measure is supported by a bewildering array of organisations, including business organisations and, above all, the Local Government Association, which recognises the difficulty in getting all those small businesses to apply for the relief to which they are entitled. It wants them to get that relief, because it recognises that local authorities will have less work to do in picking up the pieces when companies go bust—doing the Government’s dirty work for them, chasing business rate bills that are going unpaid. Local authorities believe that it is in the interest of their communities for the Bill’s provisions to go into law and for rate relief to become automatic.

Ministerial objections have been raised. Ministers say that it would be difficult for local authorities to implement the measure, but the local authorities do not agree. The risk of payment being made to ineligible people has been raised, but I have proposed measures that would deal with that comprehensively and effectively. Increased costs for larger businesses have been mentioned. I understand that, but such costs would be nugatory and what they were paying anyhow a couple of years ago. Small businesses, which are the most vulnerable businesses in our society, have a right to expect that from the bigger suppliers, which often do not treat small suppliers with the dignity, respect and commercial sense that they ought to.

Bizarrely, the Minister offered the idea that not so many companies as we thought are not receiving the relief, but that is an argument for proceeding, because the cost would be cheaper. In the House of Lords last week, Baroness Andrews suggested that putting the measure in place would in some way prevent the Government from doing other things to help small businesses. I really do not understand the logic of that argument and would love to have a private chat with the Minister about what she meant.

The sum of all small things is a big thing. I am suggesting a small thing, but business rates are a big thing for businesses. The opportunity to deal more broadly with the issue was squandered with the VAT reduction. Forget the arguments about the merits of a fiscal stimulus. That £12.5 billion could have been used so much better to address this problem, protect jobs and protect businesses. We now know that 98 per cent. of Federation of Small Businesses members and 83 per cent. of Forum of Private Business members say that the VAT cut has had no beneficial impact whatever on them.

Anne Main (St. Albans) (Con): I thank my hon. Friend for giving way on the point about VAT, because every single one of my businesses that attended my small business summit, with help coming from the chamber of commerce, said that not only is the cut having no impact, but that in many cases it is costing them money. It is having a negative impact, if it is having any impact at all. It is not beneficial.

Peter Luff: I am glad that I gave way to my hon. Friend. She is absolutely right: small businesses are paying a very heavy price for the VAT reduction. It is doing them harm, not bringing them benefit. Even bigger members of the British Retail Consortium have complained about the bureaucracy and cost involved in its introduction, and are very worried about the timing of the return to a 17.5 per cent. rate during the winter sales period. They are pleading with the Government at least to delay it for an extra month. Today’s newspapers are full of stories about retailers quietly putting prices back up this month in order to put the VAT cut on their bottom line instead, thus restoring their margins. It is possible that 70 per cent. of the rate reduction was being passed through, as the Minister said in his opening speech, but I think he will find that that is changing quite fast.

The priority for the last fiscal stimulus should have been businesses, not consumers. There are many things that it would be good to do, but can we afford to do them now? The Governor of the Bank of England says that we cannot, and I have to say reluctantly that I agree with him, but when it comes to business rates, can we afford to stay where we are? The Government are in a mess that is entirely of their own making, but I plead with them to stop digging and at least to do the smaller, cheaper things that they can do irrespective of the wider fiscal situation in which they find themselves, such as providing automatic rate relief for small firms. Even now, they could cancel the VAT cut immediately and use the money saved to bring about real change that will save jobs and businesses.

Back to Speeches