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The requirement that ratepayers have to apply for the relief is set out in primary legislation. That was introduced to ensure that the relief was concentrated on businesses most in need. By that, we mean that the relief should not be available for larger businesses that occupy a number of small premises. It is targeted at genuine small businesses that need the relief the most.
Peter Luff: The Minister is making a very helpful speech, but does he understand that the businesses not applying might be those that are actually in greatest need?
Mr. Khan: Of course I do; I am coming to some of the things that we are doing to ameliorate that concern, which the hon. Gentleman expressed well in his speech and the discussions that we have had.
There are a number of ways in which information about the relief scheme is brought to the attention of potential beneficiaries. The hon. Member for Mid-Worcestershire provided a number of good examples where local authorities were ensuring that local small businesses in their community, many of which need the relief, are being targeted to receive it. Some local authorities include with their rates bills information about the small business rate relief scheme and the availability of other reliefs. The point was made that when local authority officials go out with their clipboards to inspect, visit or meet local businesses for a variety of reasons, they could as a matter of course ensure that the relief scheme was explained and there and then get the businesses to sign the pro forma—not rocket science. Some authorities organise separate mailshots to ratepayers likely to benefit from relief and include information about reliefs on their own websites. The website businesslink.gov.uk contains information about various aspects of the non-domestic rating system, including the availability of rate reliefs.
I mentioned earlier that we have recently taken steps to amend legislation to allow more flexibility in the application for the small business rate relief. Arrangements for applying for the relief have been simplified; they came into effect in 2007-08. Instead of having to apply for the relief each year, applications can now cover the whole valuation period. For example, a ratepayer can make just one application for relief covering the last three years of the 2005 rating list—namely for 2007-08, 2008-09 and 2009-10. Eligible businesses have until 30 September 2010 to make their applications.
Although we are sympathetic to finding ways to help businesses, I shall explain why we are unable to support the Bill at this time. A number of wider issues relating to the mechanics of the support package may be offered to businesses via the rates system and there are also practical issues presented by the automation of the small business rate relief scheme. For example, granting relief automatically transfers the responsibility for ensuring that the properties meet the criteria for small business rate relief from the businesses, which know whether they meet the criteria, to local authorities, which might find it harder to determine, as in the case of new businesses, thus increasing the administrative burden on local authorities. We are not entirely comfortable with the idea of asking a local authority, at this time, to shoulder another responsibility that could easily lie
with business. We would have to consult authorities formally to gauge their reaction before adopting arrangements for automatic relief.
I said earlier that central Government were seeking ways in which to help businesses, but that is also true of local government. The hon. Member for Bromley and Chislehurst gave some examples of best practice among local authorities. The current state of the economy offers local government an opportunity to show true leadership—to respond rapidly to needs, and to provide real help in tough times—but it is the duty of central Government to support it, and we are concerned about the potential for an additional administrative burden to be imposed on local authorities.
It is difficult to be precise about costs, because there is no way of knowing whether all the businesses occupying properties that fall below the rateable-value threshold for small business rate relief meet the single-occupancy criterion and are therefore entitled to it. It is possible that only a small number of the businesses that the hon. Member for Mid-Worcestershire fears are eligible but not claiming the relief—or even none—are actually entitled to it.
Although it is difficult to be precise, there is the potential for a substantial increase in costs, which would in turn have a potentially significant impact on the multiplier or supplement that ineligible businesses pay to fund the small business rate relief scheme. We cannot consider imposing such a potentially big change on businesses without more detailed information on other options that would not pass the cost to them.
Mike Penning: I am listening intently to the Minister’s explanation of why the Government do not know how much it would cost to implement the scheme, but the Treasury must have given the Department a certain sum on the assumption that a certain number of businesses would take up their entitlement. He has already told us how much that sum was and how many businesses were expected to take advantage of it. The Treasury’s business plan must include a presumption of the amount that would be spent. What percentage of that amount remains to be spent?
Mr. Khan: I am sure that the hon. Gentleman was listening carefully, as I was, when the hon. Member for Mid-Worcestershire explained that the amount given to bigger businesses in preceding years had been reduced because fewer businesses than expected had applied for the relief. The precept, which had been 0.7p, fell to 0.4p.
Mike Penning: The Minister has spoken of an increased cost burden. Some of that extra cost will be administrative, and some will be in physical terms. If it is being offset by the percentages given to larger businesses, I cannot see where the increased cost will be. At present, those running businesses must sign a form declaring that they are not defrauding the Department. New forms with the same requirement are already in place.
Mr. Khan: A number of criteria must be met before the relief can be received. That is the point of the forms. Under the automatic system, all businesses occupying properties below the rateable-value threshold would receive the relief.
Peter Luff: It would be helpful to put on record the Minister’s confirmation of what I understand to be the case. I think we all agree that the highest possible figure for non-take-up is around half the number of small businesses. If the current precept is 0.4p, it would rise to roughly 0.8p. Although I accept that the precise cost is unknowable, the magnitude is known with an extraordinary degree of precision, and I consider it to be so tiny as to be of inconsequential significance to larger businesses such as the Tesco superstore in my constituency.
Mr. Khan: I shall be dealing with that point in about 30 seconds, but the point that I am making is that it is difficult to be precise about costs. There is a perception that not all eligible businesses are utilising small business rate relief. It is that belief that has led to the hon. Gentleman’s introducing the Bill. I understand that the main driver for his suggesting an automated scheme is that he believes that the major cause of businesses not claiming the relief is that they are unaware that they are entitled to it.
It is important to set out the Government’s understanding of that perception—and doing so will deal with the point that the hon. Gentleman has just raised. While it may be possible that not all eligible businesses are applying for and receiving the small business rate relief, it is impossible to know how many eligible businesses are not receiving it. I have heard figures such as 50 per cent., but it is not beyond the realms of possibility that all eligible properties are in receipt of the relief. I accept, however, that any Member who has spoken to local businesses in their constituencies will know— [Interruption.] Yes, I accept that that is a theoretical possibility.
Mr. Heath: I am listening intently to what the Minister is saying. Am I right in interpreting his comments as follows: when the Department formulated its rate relief plans only three years ago, it was 100 per cent. wrong in its estimate? [Interruption.] No, 100 per cent., in that it estimated twice as much as what the Minister is now saying is the likely effect of the rate relief. The estimate was 0.8p, but the Minister now believes the actual figure to be 0.4p. In that case, why was the estimate so wrong then, or can we reasonably assume that the estimate is right, but the take-up is, in fact, the problem?
Mr. Khan: As the hon. Gentleman knows, there are a variety of possible reasons why the number of businesses today is different from the number predicted three years ago. [Interruption.] Yes, there could be more, but, in the current climate, I think it is fair to say that there are probably fewer.
May I deal with the perception point? Figures such as 50 per cent. have been mentioned, and I have explained that there is a theoretical possibility that it could be higher. The reason why it is difficult to state categorically whether there are any—and, if so, how many—eligible properties not receiving the small business rate relief is because there are many unknown factors. For example, a number of these properties may be unoccupied and therefore ineligible for the relief. Another reason could be that they are occupied by charities or other such entities, such as community amateur sports clubs, and are therefore in receipt of other reliefs. They could also be occupied by the same rate payers, such as a chain store, and therefore be ineligible.
I said at the beginning of my speech that we are looking at the wider picture of support for businesses through the downturn. Members will be aware that the always eagerly anticipated—although more than usual this year—Budget report is scheduled for 22 April.
Mr. Chope: Will there be an announcement in the Budget about when the Government will give us information on the new thresholds for eligibility for small business rate relief consequent upon the 2008 revaluation? If the Minister is saying that that will be mentioned in the Budget, that is fine and I will not press him to mention it now, but will it be mentioned in the Budget?
Mr. Khan: A man of the hon. Gentleman’s experience will know that only a foolish Minister would respond to a question about the Budget six weeks before it, and a smart Minister would move on with his speech. I am not privy to what my right hon. Friend the Chancellor may put in the Budget report, but I do know that robust consideration is being given to what is the best method of support for businesses, and the private Member’s Bill of the hon. Member for Mid-Worcestershire has, no doubt, driven the matter even further up the agenda.
Mr. Chope: I accept what the Minister has said so far. Will he therefore guarantee to the House today that he will press the Chancellor to include in his Budget speech an announcement of the new arrangements following the revaluation?
Mr. Khan: Smart and intelligent Ministers have regular conversations with the Chancellor in the weeks preceding the Budget.
Mark Pritchard: The Minister will know that smart and highly intelligent Ministers, of whom he is one, are also aware that if something is worth saying, it is worth putting down in writing. I wonder whether, when he is pressing the Chancellor, he might press him in written form and lay a copy of that letter in the Library.
Mr. Khan: I found in my previous life as a lawyer that asking the same question 12 times often gets the same answer 12 times. Following the third attempt, I will try to move on.
Mr. Khan: We are going to get to 12, are we?
Peter Luff: I am very conscious of the fact, Mr. Deputy Speaker, that I am about to ask the Minister to break the rules of the House, but I would not mind if he repeated the few words that he said just before the intervention from my hon. Friend the Member for Christchurch (Mr. Chope), because I think that he was getting to the crucial part of his speech and I want to hear exactly what he was saying.
Mr. Khan: I will get to what I intend to say in a moment.
I am not privy to what the Chancellor is going to put in his Budget report, but until the package of options has been released—and after central Government have come together and found a way forward—we cannot at this stage support the Bill. The issue of the best ways to
support businesses, particularly regarding concerns over their rates liabilities, is a wider one that cannot be dealt with in the Bill, and is separate from broader considerations of what should be included in the Budget report on 22 April.
Before I end, I want to put a number of important things on the record. The hon. Gentleman’s Bill is full of good intent, but it is not a vehicle that we believe can be used at this time to deliver help to businesses. However, I must emphasise that we have not ruled this out as an option for the future, and we are most grateful to the hon. Gentleman for bringing it to the House and allowing the opportunity for a useful debate and discussion. Concern was expressed about things being in writing, and I am sure that the Treasury will read this debate in Hansard. I thank both the hon. Gentleman and the Federation of Small Businesses for their contributions.
The hon. Gentleman has raised an important subject in the House today. His position as Chairman of the influential Business and Enterprise Committee has obviously given him a valuable insight into the type of help that small businesses will need in this time of great economic upheaval and uncertainty, which is global in its origin but local in its impact on businesses and communities across Britain. I should point out that it is not only the hon. Gentleman’s substantial parliamentary experience that has given him an insight into the needs of small businesses. His valuable experience as a successful business man in the communications industry, as well as being the company secretary of his family’s retail stationery firm, has helped to form his views and to inform this excellent debate. I congratulate him. He has served well not only his constituents who own small businesses, but all small businesses across the country, including in my constituency, by highlighting to the Government the real issue that small businesses face regarding the impact of business rates.
As the biggest representative body for small business in the UK, the FSB’s valuable input should also be recognised. We know that it is excellent at promoting and protecting the interests of its 215,000 members, be they self-employed or owners of small firms. Its purpose is to promote the interests of members, to publicise the benefits of being self-employed and of business ownership, and to identify the continually changing needs of its members. I can honestly say that, with the help of the hon. Gentleman, the FSB has truly served its members’ objectives well in highlighting the impact of business rates.
The Government are pleased to enter into this debate, as the hon. Gentleman knows, with the help of the FSB, which has identified an area of economic help that might assist small businesses in the current climate. However, as I said at the outset, the Bill and what it is trying to achieve cannot be viewed in isolation and must be seen in the wider context. Clearly, Government should support the aims put forward today by the hon. Gentleman with the support of the FSB. Between them, they have come up with a proposal in which there may well be merit. However, until the Budget report, we are not in a position to be certain that this choice would deliver the highest and/or fastest benefit to small businesses from the package of wider options on the business rate. For all those reasons, regrettably, we cannot support the Bill, and I ask the hon. Gentleman to take on board the points that I have made and to withdraw the motion.
12.29 pm
Mr. Christopher Chope (Christchurch) (Con): It is a pleasure to follow the Minister, although his concluding remarks were disappointing; he had raised our expectations and they were slightly dashed by what he said. He said that it was important that we should put our concerns on the record and that they would be put to the Chancellor in preparation for his Budget. In a short contribution, I should like to spell out a bit more my concern, which I have tried to articulate in interventions, about the impact of the revaluation on small businesses. The threshold of entitlement to the rate relief is based on having a rateable value of less than £15,000, or less than £21,500 in London. Those rateable values are based on rental values in 2003.
Mike Penning: I wish to raise again the issue of properties in Buncefield, in my constituency, that are not lettable because of the inquiry and problems associated with the depot explosion, but in respect of which a charge of 100 per cent. of the rate is being made—the charge is likely to go up when the new tariffs come in. My constituents are suffering enormously, and although these places are not lettable they are going to be charged 100 per cent. of the new rate—it is not even 100 per cent. of the current rate.
Mr. Chope: I sympathise enormously with my hon. Friend and his constituents. This is an example of what happens when unintended consequences flow from ill-thought-out Government legislation, of which we have had a plethora during the past 10 or 11 years.
The 2003 rental values are far below what the 2008 ones will be. I do not have an exact percentage, but let us suppose that 2008’s rental values are twice those of 2003. That would mean that following the revaluation, all other things being equal, the eligibility threshold would need to be doubled in order for it to be of the same value in the future to small businesses as it is currently. The Minister has failed to address the questions that I have asked on behalf of small businesses and their concern on this issue. We cannot leave this until tomorrow, or until next week or next year, because people paying rent on premises under a lease will want to know what the future is for them when they consider whether they should renew the lease. A mass of business premises are vacant, and people will hold back from taking on leases on those if there is uncertainty about the future. Small businesses, above all, want to have certainty about what their overheads are likely to be in the future. Business rates are an unavoidable overhead and many small businesses have gone under because they have failed to appreciate the fact that they cannot avoid paying rates and that those are a first charge upon the business.
I wish to impress upon the Minister that this issue is very important. If we do not get an announcement in the Budget, at the latest, this continuing problem will hang over small businesses and the whole of the rental sector affecting relatively small leasehold premises into next year and beyond. I hope that the Chancellor will say in the Budget that because of the current economic crisis the revaluation based on 2008 rental values will be abandoned—that would be extremely welcome to small business. Again, such an announcement could be made instantaneously at the time of the Budget, and that may
justify a Budget headline saying that the Government are helping small businesses. If we do not get something like that, the Budget will not be one that helps small businesses. I am very concerned that the body language of, and what is coming from, the Chancellor at the moment—I base this on his adamant refusal to reduce the 5 per cent. increase in business rates that will come in from April—shows that he has not fully comprehended the gravity of the crisis facing our small business community.
I agree with the Minister about the work of the FSB, which has a strong branch in my constituency and in Dorset. I was one of the founding members of the National Association for the Self-Employed, from which the FSB grew, and it is a very important organisation that represents an important part of our economy. It also represents areas of potential growth in the economy, and I am disappointed that not enough advice is given to people who are being made redundant about the possibility of setting up their own business and becoming self-employed. However, that is a topic for another day.
I hope that I have succeeded in putting on record my concern about the revaluation and its impact on small businesses and their ability to meet their rate bills. I congratulate my hon. Friend the Member for Mid-Worcestershire (Peter Luff) on introducing this Bill. It is amazing that all the Back-Bench contributions have been from Conservatives—or perhaps it is not so amazing, because we have always been the party of small business. Other parties have tried to claim that they are the party of small business, but today we have seen the genuine Conservative party with the concerns of small businesses at its heart. I hope that we will be able to make some progress with this important Bill.
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