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7.29 pm
Mr. David Ruffley (Bury St. Edmunds): In a changing world, one is sometimes reassured to see things not changing. The Gracious Speech and the Chancellor's pre-Budget statement show that two things have not changed. The first is the Treasury's refusal to admit that it has increased taxes, or to say that it will undo the damaging effects caused by its tax increases. The second is the omission in the Gracious Speech of a proposal to deal with the problems experienced by small businesses, particularly by small businesses in market towns, such as Stowmarket and Bury St. Edmunds in my constituency.
A change has occurred in the way in which the public and the press perceive the Chancellor's economic management, particularly his taxation policy. Most recently, that changing perception was demonstrated in an Office for National Statistics publication--it was subsequently endorsed by the Library--which said that, in the financial year 1996-97, the national tax burden was 35.7 per cent. of gross domestic product, and that, for the current year, the burden is forecast to be 37.7 per cent. Those figures are pretty much incontrovertible--unless, of course, one is a Treasury Minister.
There has been a spate of criticism of the Chancellor's twisting of the facts on the tax burden and tax increases. It is interesting that, on the Government's presentation of economic statistics, Bob Worcester of MORI--who is by no means a Conservative-leaning commentator--recently said:
Those are the facts on taxation. I do not expect the Treasury to reverse any of its taxation policies, but I have some modest hope that Ministers will listen to what small retailers in small market towns, such as Bury St. Edmunds and Stowmarket, are pleading and demanding. They are being hit by the small business rate burden more than by anything else.
I should like to share some statistics that the Department of the Environment provided in its document, "The Impact of Rates on Businesses", which was produced near the end of the previous Government's time in office. The statistics show that a small business--typically, a small retail shop in a small market town--with a turnover of up to £50,000 will have to pay a business rate equivalent to 7.7 per cent. of turnover; to 13.7 per cent. of overheads; and to a staggering 35.9 per cent. of profits. It is an extremely heavy burden on small businesses.
The burden for businesses with a turnover of £500,000 to just under £2 million--typical of big superstores on the edge of large market towns--is much less. As a share of turnover for those businesses, business rates amount to 4.1 per cent. of turnover; to 3.7 per cent. of overheads; and to a relatively trifling 15.9 per cent. of profits.
Even Labour Members will agree that the statistics show that there is a disproportionately heavy burden on small retail traders and that the time has come for the Government to consider practical measures to alleviate that burden. The Government talk about fairness--but let us have some fairness, and let the small businesses in my constituency see some of it.
I should like briefly to outline an idea that Treasury Ministers should consider, which first appeared in the much-maligned 1997 Conservative party manifesto. Although Conservative Members are accustomed to having many of our better ideas swiped by Labour Members, I shall not object if they swipe this one: that the poundage should be increased for all businesses subject to the uniform business rate regime. The Treasury can do that, as it sets the poundage. Implementing the idea would raise extra revenue, which could then be used by the Treasury to grant a tax-free exemption for all businesses in the low rateable value bands--which would automatically receive a tax-free slice similar to the personal allowance in the personal income tax regime. Implementing the idea would provide a windfall gain for the small retailers in my constituency who are going to the wall.
In Bury St. Edmunds, we have a distinguished retail street--Abbeygate street--that, for many years, but less so today, was known as the Bond street of Suffolk. Now, shops on Abbeygate are closing specifically because of high business rates, and cheap and cheerful shops are
moving into premises vacated by very well-established retailers who had to close. In Churchgate street, an old established bakery had to close because of business rates.
The situation simply cannot continue. Truthfully, honestly and genuinely, I urge Ministers to reconsider creating a regime to provide tax-free slices, free from the uniform business rate, to lower rateable value properties. It would not be difficult to create such an exemption--which would also ensure that the big, out-of-town supermarkets paid their fair whack.
The Queen's Speech is disappointing in its failure to address those issues. My disappointment is shared by Mr. Stan Mendham, chief executive of the Forum of Private Business, who is respected on both sides of the House. He said:
The better capital allowances for small and medium- sized enterprises, which over the past two years have amounted to about £175 million, are small potatoes compared with the problems facing British industry. The IFS concludes:
Ms Sally Keeble (Northampton, North):
I am grateful for the chance to speak in this debate, because the economy is of central importance to my constituents. I, too, represent middle England. The right hon. Member for Horsham (Mr. Maude) said that those whom Labour persuaded to vote for us last time would be the worst affected by the economic measures in the Queen's Speech. There are many of them in my constituency. I recognise in the Queen's Speech a continuation of the economic policies that have greatly benefited my constituents. I find it difficult to recognise in the
Of all the areas in which my constituents have benefited under this Government, the economic improvements have been the most marked and the ones that have given me the most pleasure. My constituents do not have the salary levels that the hon. Member for Bury St. Edmunds (Mr. Ruffley) mentioned.
Mr. Ruffley:
I was merely observing that those earning £27,000 a year are by no stretch of the imagination rich, but they are hit by the increase in national insurance contributions levied by the Chancellor.
Ms Keeble:
The hon. Gentleman was talking about average earnings of that amount. My constituents are on about £10,000 less than that. For people on such wages, the Government's control of inflation and prices has been of great benefit. The high levels of employment that the Government have brought about have also been very important. Northampton now has about 2.5 per cent. unemployment.
Many households in my constituency need one and a half incomes, because pay levels are not high. The fact that we have such a thriving economy that households can have one and a half stable jobs has meant that they are able to keep up their mortgage repayments and are benefiting from more secure home ownership. The Government have also recognised that, to deal with the economy properly, they have to deal with certain supply side factors, including tackling the skills gap. School achievement levels have not been good in my constituency. The Government's measures to deal with that problem will be of profound benefit to local industry.
I am firmly convinced that the main reason why the Conservatives lost my seat at the election was their mismanagement of the economy. Conservative Members have spoken frequently about the golden legacy, but it was not evident in my constituency. As mortgage rates soared, people lost their jobs. That unemployment may not have been permanent--Northampton, North is not one of the great inner-city areas--but it was bad enough for a lot of people to default on their mortgages and lose their homes. There was a profound lack of confidence in the record of the previous Government. Some of the alleged failures of this Government, such as the decline in the savings rate in our first year, are signs of the feel-good factor that was created when Labour came to power.
The Conservatives also pour scorn on the regulation of financial services, but for my constituents, who rely mainly on private provision or self-provision, that regulation will be very important and welcome. When I started running advice surgeries after I was elected, I was shocked by the number of people who complained about the mis-selling of a range of financial services. I look forward to the regulations being tightened.
The measures to support enterprise are also important. We have heard a lot about big business. The changes for small businesses that have already been put in place and those that are to come, particularly the new small business services, will be important for a significant section of my constituency and will be welcomed by them.
Perhaps the most important changes are those to support families. We have heard the Conservatives talk about what hard-working families want. For the most part,
they have got what they want in my constituency because the Government have provided many benefits and made many tax changes to support them. There are many working women with children in my constituency. I carried out a family survey that showed that combining work and home was one of the key pressures on the families of middle England. The changes in the Queen's Speech continue the Government's existing policies. Those changes are important and will be telling at the next election.
The measures on the state second pension and the carers pension will be particularly important, because they will ensure that the vast number of women in my constituency who work part-time will be able to make provision for their retirement independently of their husbands or partners. They will be able to have a more secure retirement than many women currently have. The carers pension will be crucial and will be of enormous help in underpinning family life, because it will make it possible for women who give up work to look after children or disabled relatives to have their contributions for their state second pension paid. That is one of the Government's many measures to benefit families.
The changes to the Child Support Agency will also have an enormous impact on the quality of many families' lives, because they will ensure that children get more money and that bureaucracy is removed. That will also help to end some of the friction that we all know that the CSA currently produces in many homes throughout the country. In addition, the changes to holiday rights and parental leave will help to ease many day-to-day pressures.
The new deal for lone parents--allied to the working families tax credit--is often associated with inner-city areas with high unemployment, but it is of profound benefit also to middle England. There has been much emphasis on how the new deal has benefited young people. However, my constituency is not packed with unemployed young people. It does have a large number of lone parents who, through the Tory years, were forced to stay at home and live on benefits. They bitterly resented that. The introduction of the working families tax credit and the child care tax credit has been a liberation for them.
In my constituency, I have talked to women who are £60 and £65 a week better off and who are able to go out to work for the first time in many years. It is not just that they are financially better off, but that their children will grow up in a home where someone goes out to work. That is important in terms of what happens to those children.
When my constituents contemplate the prospect of another Conservative Government, the choices for them are stark, and a number of themes have been summed up in the Gracious Speech and the pre-Budget statement. Those women who are now £60 and £65 a week better off would lose that money. They would lose their jobs also, because they would lose their ability to pay for child care. They would have to go home and live on benefits again. My constituents and I do not think that that is good management of the economy.
The Conservative party is not in favour of the independent setting of interest rates so, presumably, my constituents would see interest rates again tied to political convenience. There would be a repetition of the jiggery-pokery with interest rates. We saw what happened last time--people ended up losing their homes because
they defaulted on their mortgages. Before the election, the then shadow Housing Minister came to my constituency, and we looked at rows of boarded-up houses. This was not empty council housing, but private housing where people had had to lock the door and walk away because they were no longer able to pay for it.
"It is not being clear, it is not being precise . . . They are putting spin on the statistics and that spin is an affront to the British public . . . These things ought to be crisp and clear and absolutely straightforward".
My hon. Friends, like me, represent many hard-working couples who want only to keep more of what they earn, to spend or save as they wish. Average hard-working couples in my constituency know that, annually, they are £223 worse off because the Chancellor abolished mortgage interest relief at source, and £285 worse off
because he abolished the married couple's allowance. My constituents also know that, on Automobile Association figures, if they drive the average annual mileage of 8,000 miles in an average-size car, they are likely to pay a minimum of £165 more each year because of the Chancellor's unnecessary fuel tax increases. Those tax duties are all the more punishing for motorists in rural constituencies, such as mine, for whom a car is a necessity and not a luxury. Under this Government, middle-income earners on just over £27,000 a year will pay more direct tax in national insurance contributions.
"Those business owners looking forward to the future have little to cheer, as business rates . . . have not been tackled".
The Gracious Speech contains some measures attempting to play to the small business lobby, but they offer only warm words. On that matter, I agree with the Institute for Fiscal Studies, which helpfully drew attention to what it believes are gimmicky measures, such as the proposed R and D tax credit. We do not yet know much about the credit, but it will probably carry a £150 million cost and will certainly not assist small businesses in my constituency.
"it was very unclear whether the plethora of measures targeted at small companies will have any significant impact on the aggregate investment and productivity gaps that the government has highlighted."
I am also disappointed by the all-employee share scheme, which builds on the approved profit-sharing and save-as-you-earn schemes. We all know, as the IFS has emphasised, that the new scheme is built for listed companies. For those who work in a corner shop, the public sector, a small partnership or a small business or family firm, the hype about employee share ownership is irrelevant.
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