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If the Minister were scraping around for a reason to oppose my BillI am sure that he is not; he is a decent manhe might think that this could be it, but he would be wrong. The Local Government Association certainly thinks it wrong to be too concerned about this issue. It is blindingly obvious, for example, that firms such as Vodafone, with its plethora of telephone masts, should be excluded, and it would be easy to exclude them from
the provisions of the Bill; and any rating authority can identify a branch of McDonalds as being more than a one-off small business, so there is a crude filter that is easy to apply.
When that filtering has been done, it is possibleprobable, eventhat a number of businesses with premises in more than one authority billing area will not be identified readily, and they might get relief on more than one property. But all my estimates suggest that the numbers would be modest. Such considerations of overpayment should not be an obstacle to ensuring that rate relief gets to all the small businesses that are entitled to it. A small unfairness in one direction should not prevent us from sorting out a much bigger one in the other direction.
There is always an element of rough justice in payment schemes such as these. Defenders of the tax credit system do not see overpayments as an argument for the systems abolition; they just seek repayment when they come to light, and my Bill makes that possible in relation to small business rate relief. I accept, however, that it is important to minimise the potential for over-relief, and to make preparations to prevent it. Indeed, there is already a sample audit every year to ensure that payments are being made properly under the existing scheme, and I would expect that audit to continue in the future, offering a real level of protection for the larger businesses who pay for it.
As well as the common-sense protection offered in the real world, and by the audit, two further levels of protection could be added. The first is the sole occupancy test, which would mean limiting automatic rate relief to sole occupiersbusinesses that occupy just one premise in a billing authority area. I am not talking about properties occupied by just one person. This is about people who own just one property. That information is available and readily accessible to local authorities, and I understand that most of them have already begun a weeding-out process to identify which small businesses occupy more than one premise. That is easily done, and it would mean that businesses with two or more premises in an area would still have to apply for the relief, even though they might still qualify for it on application.
Most small businessesmany more than at presentwould get the relief automatically, but not all. What the Bill would do is introduce the very high degree of automaticity that the Minister has indicated, in a private meeting and in the House on Tuesday, he is looking for. This provision could be incorporated in the Bill, if the Government would like that, but I understand that local authorities could do this themselves without such an explicit provision. That is a matter for the Minister to decide, and it is an issue that we could look at in Committee. I repeat the assurance that I gave the Minister in the House on Tuesday that I will accept any helpful suggestions from the Government that will improve the workings of this small but important Bill.
The second protection against overpayment would be a requirement to inform a local authority of ones ineligibility. For example, the issue of sole occupancy does not address the question of a small business with properties in different areas of the countrya small shop in Devon, say, and a workshop in Yorkshire. Local authorities would not be able to weed out such
casesexcept where an obviously national or regional company was involvedwithout engaging in massive data sharing, which would be inappropriate.
I therefore suggest a simple device that would place on small business owners a requirement to inform the billing authority if they were being awarded relief despite owning more than one property. This could consist of a simple but prominent tick-box form on the rates billall businesses will still receive rates billconfirming that the property being awarded relief was the businesss only one. This document would be returned when the business returned the cheques for the rest of the rates bill to the billing authority, or returned electronically if paying online. It would be a simple, unbureaucratic device, and knowingly making a false declaration could easily be made an offence. Whether this provision should go on the face of the Bill is again something that I am happy to discuss with the Minister in Committee.
I do not think that these issues about ineligibility are serious; they can be addressed. I had a constructive discussion about them with the Royal Institution of Chartered Surveyors, which supports the aims of the Bill. It believes that, if every small business is supposed to get rate relief, every small business should get it.
We also need to consider the impact on bigger businesses, because they pay for the scheme. Some concern has been expressed to me by the CBI in this regard, but it has also assured me that it does not oppose the Bill. However, the impact of the provisions on bigger businesses means that it has not yet decided to support it either. I hope that I can persuade it to do so, because I think that it should.
Let us put these matters in context. The rate relief scheme is self-financing. Larger businesses have their rates calculated at 48.5p in the pound, whereas small businesses rates are calculated at 48.lp. This difference of 0.4p pays for the small business rate relief in its entirety, at the current level of take-up. I believe that only half of all small businesses receive the relief. In fact, the proportion is probably less than that. Under my Bill, the relief will be largely or entirely automatic and, with the safeguards that I have described, the take-up of the relief will roughly double. That order of magnitude is clearly not wrong. That will mean a corresponding doubling of the extra precept to about 0.8p.
I can understand bigger businesses opposition to any significant rate increase, particularly when they face a 5 per cent. increase this year, but what big business deserving of respect would begrudge struggling small businesses such a small sum? To name a namenot quite at random, as we shall see in a momentwhy should not the Tescos of this world pay just a fraction more, if that means that we can protect smaller, independent businesses? The big businesses of todayTesco in particularwere once small, and todays small businesses could one day be big, but only if they are given all the help that we can give them.
I am not making a partisan speech, but I will divert briefly into party politics of a kind. Writing in the February edition of Prospect, Phillip Blond of Demos reminded me of the words of Edmund Burke. That great Conservative philosopher spoke famously of Conservative radicalism being founded on the little platoons of family and civic association. He wrote:
To love the little platoon we belong to in society is the first principle of public affections. It is the first link in the series by which we proceed towards a love to our country and to mankind.
I want to stand up for the little platoons against the Tescos of this world. As it happensthis is why I named Tesco a moment agoI believe that the two biggest business rate payers in my constituency are a supplier to Tesco and the Evesham Tesco store, in one of the market towns to which my hon. Friend the Member for The Wrekin (Mark Pritchard) referred earlier. Under my proposal, Tesco would pay just a little more, and, to coin a phrase, for small businesses, every little helps.
To put this in context, the suppliers bill would rise from £436,500 to £440,100, an increase of £3,600. The bill for Tesco in EveshamI hope my maths are rightwould rise from £583,940 to £588,756, an increase of £4,816. That is a very small sum for the damage supermarkets have done to small businessessuppliers and retailersand to town centres. As Phillip Blond put it so well in the Prospect piece I mentioned earlier:
Our fishmongers, butchers and bakers are driven outconverting a whole class of owner occupiers into low wage earners, employed by supermarkets.
Many rural businesses may be unaware of their eligibility for rate relief. Putting the onus on the billing authority is a good way to ensure those who are entitled to this relief are paid straight away.
The NFSP has long campaigned for improvements in the way in which business rate relief is paid.
For too long, small businesses have paid more than their fair share of tax, so in these challenging times, politicians of all political persuasions should support the automatic system of rate relief proposed by this Bill.
We have recommended this measure as part of a package of measures to improve the local cash flow situation for businesses in the current recession in our recent report with the Local Government Association.
Government should increase the take-up of these funds by changing the regulations to ensure that the relief becomes automatic
This Private Members Bill to automatically give qualifying businesses rate relief will be extremely welcome,
Any legislation that will potentially benefit the cash flow of businesses, without a long and laboured process, can only be of value and would have our support.
Approximately 80 per cent. of the ECAs members are classed as small or medium-sized enterprises, who would really benefit (particularly given current economic circumstances) if the Small Business Rate Relief were to be made automatic.
Automatic payment of small business rate relief would help avoid the unnecessary closure of well-run community pubs and we urge the Government to support this much needed Bill.
I would like to tell the Minister that the all-party beer group had an excellent meeting on Wednesday this week, at which I found, to my joy, that the Society of Independent Brewers had added its voice to the campaign. We have the brewers on our side; it is a brave man who takes them on.
Furthermore, the coalition Local Works, which campaigned to implement the Sustainable Communities Act 2007it is a huge coalition of a bewildering array of organisationsenthusiastically supports the Bill, saying:
Making automatic the rate relief to which they are entitled would not only help small businesses stay afloat, it would also be a step towards keeping communities together.
I add that one of the members of that coalition is the Womens Instituteanother group that Labour Members know that they take on at their peril, as it has so many members. These are not groups that the Minister should alienate lightly.
Finally, let us consider how small business rate relief has already helped real people out there in the real world. I am not talking about generalities; I could quote case after case to show how the relief has been used for good purpose. Ray Johnson of Canine Care says:
We receive this, a saving of 50 per cent. on our business rates; we now pay £1,200 per annum. The money saved has been used for staff training, very good.
The saving has simply eased our cash flow during these difficult times in the property business. The £1200 or so could otherwise equate roughly to our telephone line rentals!
The £1141.02 received was spent on our annual advertising campaign with Yell.com, Yellow Pages and National Pen. The last item where we give away hundreds of promotional pens each year has been very successful for us.
I save £55 per month as a result of small business rate relief. The money I save contributes to extra staff, staff training, and new equipment.
There we are, Mr. Deputy Speaker. I think I have made an overwhelming case for the Bill[Hon. Members: Hear, Hear.]and I am grateful for the roars of encouragement from the troops behind me. I have one or two final thoughts before I finish.
Business rates are to be revalued next April and it is likely that they will rise as a result. Small businesses not receiving rate relief at that stage will be hit even harder
by that increase in the rates bill and all small businesses currently receiving the relief will have to reapply for it at that stageafter the revaluation. Surely it would be better to get this automatic payment scheme in place now and get it running smoothly before any changes are made so that even more damage is not done to small businesses by rising rates bills.
I said that I was not going to be partisan, but I cannot resist just one small comment at the endif it is partisan, I offer it in a non-partisan spirit. I hope that the Minister follows the advice given by the Leader of the House at Prime Ministers questions this week when she 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.]
There is just one final reason the Government might be less than inclined to support the Billand it would be a good reason. The only good reason I can think of would be if the Minister wanted to go further than the scope allowed to my private Members Bill. I would welcome any such indication. I commend the Bill to the House.
Mr. David Heath (Somerton and Frome) (LD): It is a great pleasure to follow the hon. Member for Mid-Worcestershire (Peter Luff) and to congratulate him not only on securing the opportunity to introduce a private Members Bill, but on proposing this particular Bill. I hope I betray no confidences in suggesting that I seriously considered introducing a similar Bill. I had talks with the Federation of Small Businesses, but during the period of my discussions about introducing such a Bill, I became aware that the hon. Gentleman was also interested in doing so. I felt that he, as Chairman of the Select Committee on Business and Enterprise, would do an admirable job of introducing such a Bill, so I looked elsewhere. I am fully supportive of his Bill, of which I am a sponsor. I very much hope that it will achieve its Second Reading.
The hon. Member for Mid-Worcestershire made crucial points about the circumstances of small businesses. I have not been in business for nearly 20 years, so I cannot say that I have current experience, but I know from my experience as a professional optician running a high street practice that running small businesses on the high street is no easy matter. It is sad that nowadays so few in the House have direct experience of business, because if they did, they would take a very different view of the pressures that business people face.
At a time of recession, when all the cards are stacked against people who are trying to keep their businesses functioning, one of the worst pressures is cash flow; indeed, cash flow is the perennial issue for anyone trying to run a small business. The problem for them is finding the money at the right time to pay the bills so as to enable them to make money the next day. Many factors are involved. Obviously, they include the profitability
of the business. Without footfall or without people buying the products, things will always be difficult, as they are at the moment.
The ability to acquire credit is another key factor. If a business cannot keep credit lines open, difficulties can arise. Some of the bizarre decisions taken by banks over recent months are a matter of great concern. Credit lines have been suddenly reduced and credit has been made either unavailable or so expensive as to be unusable. Those are real issues for many people. Another critical issue is fixed overheads that cannot be avoided. Some staffing costs cannot be avoided, unless the business is single-handed. There is a degree of flexibility, but it is harsh and not easy to implement. Yes, it is possible to sack staff, but that is not loyal to staffand it is very hard to make a business work when people are not there to do the job. Other fixed overheads include rent, which is often inflexible, at least in the short term; utility bills, which have increased massively, so people find it hard to pay them; and the rates, which is the topic addressed by the hon. Gentleman in his Bill today.
I agree with the hon. Gentleman about the role of small businesses, as they are the dynamo of our economy. They are what makes this nation of shopkeepers tick. They may be in the manufacturing and service industries, where they often grow to become the large and medium-sized businesses of the futurecompanies have to start somewhere, and they often start in the small business sectoror they may be in the retail industry, which is the most visible sector in the present downturn.
I am very concerned about the prospects of retail businesses over the next six months or so. We are already seeing the scars in our high streets. We have seen many scars as a result of the depredations of big business, when large retail companies have taken business from the high streets, but now we are seeing empty, boarded-up shops which only a few months ago were prosperous places of business.
Mr. Nigel Evans (Ribble Valley) (Con): The hon. Gentleman has made a number of points about the fixed costs to businesses, but he has not mentioned bank charges and interest on the loans that companies may be taking out, and the need for banks to assist small business. Given all the support that the statethe taxpayeris now giving the banks, is it not about time that the banks did their bit to support small businesses in their time of need?
Mr. Heath: The hon. Gentleman is absolutely right, although I think that I did mention the relationship with the banks. They are being extraordinarily unhelpful to small businesses in particular, despite the much-trumpeted schemes that the Government are trying to introduce. I do not criticise the Government for trying to introduce those schemes; I just wish that they would get a move on.
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