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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 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.
6.16 pm
Mr. David Kidney (Stafford) (Lab): It is a pleasure to follow the hon. Member for Mid-Worcestershire (Peter Luff). I am only sorry that I was not here on the Friday when his private Member’s Bill was debated. He put forward an excellent idea, about which I shall say more in a moment.
Today’s debate had not been proceeding for long before the first hon. Member mentioned that today was a quarter day. Businesses large and small in high streets up and down the country are being asked for three months’ rent, which for some is the last straw that will break the camel’s back. It was reassuring to hear the trade body for British property managers say today that it recommends its members do all that they can to help people to pay their rent, which includes accepting payments monthly even if they are legally entitled to payment for the full three months. I hope that we shall all watch property managers assiduously to ensure that they are being as reasonable as they can be to businesses that might otherwise be struggling. As the hon. Member for Bromley and Chislehurst (Robert Neill) pointed out, if that does not happen we shall see more and more gaps opening up in our high streets, which would be very damaging to local businesses as a whole.
Last Friday I met members of my local chamber of commerce for one of our regular discussions. The issues that they raised with me were the continuing difficulty of obtaining credit from banks and a reasonable performance by Her Majesty’s Customs and Excise, in most cases, in allowing time for taxes to be paid. They also made a point that has been made today about prompt payment of bills. They said, “If only people would adhere to the terms and conditions and pay
within 30 days as they are supposed to, that would benefit us greatly.” They drew attention to the huge purchasing power of the public sector in procurement contracts, and pointed out that much more could be done locally in terms of goods and services, food, and printing and advertising. Stafford contains the local council’s administrative headquarters, a prison, a university, a police headquarters and several hospitals. All those are huge players in their procurement power.
Of course, members of the chamber of commerce mentioned rates. They were still very annoyed about the business rates on empty properties. I was nervous, even in a rising market, about the implications of those. I saw the argument—in a rising market—in favour of trying to put pressure on people not to leave properties standing empty, but to reduce their rents if necessary in order to obtain tenants. It was a reasonable argument in a rising market, but the market in property prices has now collapsed. The least that the Government can do is provide what they have announced so far—a temporary relief that will benefit around 70 per cent. of properties—but my first Budget representation in this debate is that we need to go further. I think that we should preferably provide a complete temporary relaxation of the tax, but, if we cannot do that, we should certainly do something that will benefit more than 70 per cent.
I appreciate how difficult the Government’s finances will be when it comes to the Budget. If anyone was in any doubt about that, their doubts will have been dispelled by the Governor of the Bank of England yesterday. However, this is an important issue, which is why I have made my representation.
Mr. William Cash (Stone) (Con): I, too, have been having meetings with Stafford chamber of commerce, as I am sure the hon. Gentleman will be aware. We had a very good meeting today with the Under-Secretary of State for Business, Enterprise and Regulatory Reform, the hon. Member for Dudley, South (Ian Pearson), and with other Members of Parliament, regarding many of the questions that have been raised. Will the hon. Gentleman go so far as to endorse our motion, or will he vote with the Government?
Mr. Kidney: Well, the hon. Gentleman can see how I vote later on. As a Labour MP, I support the Labour Government, but I am making my views about what I think should be done in next month’s Budget very clear.
The small business rate relief is a benefit for many small businesses. Sadly, however, not enough of them even know that it exists, or how to apply for it. A lot has been done to notify people that they can claim and to make it easy to claim, but many still do not do so. That is why the Bill promoted by the hon. Member for Mid-Worcestershire was a good measure, and my second Budget representation today is that that relief should be automatic. Beyond that, local authorities have a discretion to grant business rate relief in any other circumstances where there is hardship or another statutory provision allows them to do so. Some of the cost of giving the relief falls on the local council, which makes it difficult for it to give that relief, and the rest falls on the business rates pool generally.
I think local authorities should by now have in place their strategies for responding to this crisis of the business recession and difficulties in keeping people’s jobs going, and
they ought to have a strategy for giving relief where they possibly can. In my area—Stafford and Staffordshire—we recently benefited from the release by the Government of the last of the LABGI money. I am grateful to the Government for releasing that money. In Stafford and Staffordshire together, it amounted to more than £1 million extra. I have made my representations to the two local authorities that there is a pot of money, which they had not been expecting when they set their budgets, that can be used as part of a strategy for helping businesses that are asking them for help. So there is a possibility that help can be given.
I know that we are under time pressure in this debate, but I just want to mention that the LABGI scheme in my constituency has been extremely beneficial for all three years. Every year Stafford has performed well in new businesses starting up and the council benefiting from LABGI. We are one of the best performers in the whole region in gaining that money. As the west midlands has a lower than national average gross value added—GVA—such an initiative to help councils to help businesses to start up is very beneficial. I know that my right hon. Friend the Minister for Local Government is aware of that, because he was in Stafford last week, but I wish to point out that the local county council froze the rents on its enterprise units this year, again to try to help small businesses through the recession.
A big procurement contract that is possible all over the country right now is Building Schools for the Future. It has come to Staffordshire, and anything that the Minister can do, along with his colleagues in the other Department that is responsible for that project, to make sure that contracts are let in ways that enable local businesses to benefit as much as possible from them, will be very beneficial. In Stafford town centre currently, the county council has a project at Tipping street for a complete new building for the council and local retail units. Given all the construction workers in my constituency who have come to see me because they are out of work, that is clearly very valuable.
My final point is that the number of people going through the door of the jobcentre in Stafford has doubled in a year. This is a time of great pressure on the staff who work there, and they are doing a tremendously good job. Whenever a job cannot be found for someone, there is always pressure for training, training, training. Any initiative to get people into training is very valuable. I noticed one this week from universities called “Enrol for free” for people in receipt of jobseeker’s allowance. That is a very useful tool, which I hope we will see more of in the coming weeks and months.
6.24 pm
Andrew Selous (South-West Bedfordshire) (Con): I shall be brief because I know that time is short. I represent an area where, sadly, the unemployment figure is considerably higher than it was when my party left office in 1997, there are many empty premises and, throughout the constituency, only 160 job vacancies are advertised through Jobcentre Plus. The issues that we are discussing are crucial because the one thing I do not want to see is that unemployment total going even higher, and I fear that unless we do something about business rates, among other issues, it will do so.
I make no apology for running through some specific concerns about business rates that have been raised with me directly by local businesses. One small business woman came to me not long ago concerned about how the valuation office had come to her shop and done a quick zap with a laser gun; although the people had been there for only a couple of minutes, a few days later she got a bill for an extra £900. She complained to me that no account had been taken of local conditions.
A business man whose business is close to that lady’s said—I raised this with the Minister earlier—that his business is paying the same amount as is being paid on a much larger building opposite. A firm has offered to challenge that situation, but it will take £800 to do so. The Minister has said that a procedure involving tribunals is available, but it is complicated and it costs money; it is a bit like saying that a judicial review is open to everyone—it is not if it costs money. There are thus some issues to address regarding fairness.
Someone from a small engineering business has complained that her business is not eligible for the small business rate relief because it was registered only in June or July, and was not on the register on 1 April. I would like some of the £12.4 billion that the Government have wasted on their VAT cut to be put towards helping businesses that just missed the deadline by a couple of days, because that would have been more helpful. I would also like some of that VAT money to have helped another business, which told me that its rateable value was £15,500. That is £500 over the limit and thus the business is not eligible for any small business rate relief. I would have used some of the £12.4 billion to introduce a taper and help businesses that find themselves just over that limit. The couple involved have worked hard setting up this business, they employ people locally and they fear that the business will not be around much longer.
The Government are always telling us about the initiatives that they have introduced for business, but I wish to read a quote from a local business person in my constituency, who said that she had contacted the valuation office. She stated:
“I am not going to hold my breath as we have had so many government leaflets, brochures and advertisements about how to save your livelihood during this credit crunch but to be truthful not a lot of practical help is available and the money spent on all that paper work and people”
could be better used. Those are not my words; they are the verdict of a local business woman on what the Government have done. Something on business rates would be practical, it would help cash flow and it would be much more use.
The central point I wish to make to the Minister is that I do not think he or the Government have grasped the fact that many of these small businesses will not be around to pay business rates in future unless we do something now. We all understand the arguments for a sustainable tax take to pay for decent public services in the years to come, but unless we do something now the base of businesses that there will be to pay business rates in the future will be severely diminished. Something needs to be done urgently—even if the relief is only for a year or two—and I would have used some of that £12.4 billion that the Government wasted on that VAT cut. They did that when we already had discounts of 70 per cent. or so in our shops and businesses, as my
hon. Friend the Member for St. Albans (Anne Main) pointed out to the Prime Minister and others very eloquently.
Of course, I back the automatic small business rate relief and, as an Englishman, I find it preposterous that it is available in Wales but not to businesses in my constituency or throughout the whole of the United Kingdom. Let us have a bit of equity. I would like to know how the Welsh got this without our getting it, as would some of my local small businesses.
My party has very practical proposals to ensure that local councils could keep any increase in business rates over and above what they were expecting to receive for a six-year period. That would give local councils an incentive to get more businesses into their area—there has not been enough incentive, and not enough of our local councils are hungry to attract extra businesses to their area. That proposal is a thoroughly good one, as is our proposal to allow councils to provide discounts on business rates, provided they could make up the income foregone or reduce costs in other areas. Those are practical measures; they are local solutions for local areas, and that is entirely sensible. Of course, these go alongside the proposals that we have made for a national loan guarantee scheme, cuts in corporation tax for small businesses, cutting the national insurance contributions for some of the smallest businesses, and deferring VAT bills.
I have to express my own reservations, echoed by a business man in my constituency to whom I talked last week, about the loading of taxes on empty premises. What is the point of destroying our stock of business premises? It is the seedcorn for future jobs and that has not been a good move.
6.30 pm
Mr. Richard Shepherd (Aldridge-Brownhills) (Con): Shortly after university I started a small retail company. It is still going, and I remain a director, so I declare that interest as recorded in the register.
The full title of this debate is “Implications of business rates and the recession for businesses”, and I am very pleased that the Economic Secretary will reply to the debate, because he and I both represent constituencies in the black country. In fact, Walsall is the centre of the Black Country chambers of commerce. Aldridge-Brownhills reflects many of the issues that are at the heart of this debate and will be so for many an industrial town.
The transition to the uniform business rate took money away from industrial areas and distributed it to other areas. I see that my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) is in his place, and he knows the Birmingham area well. Walsall lost £5 million from the change from the old business rate system while Worthing gained a great deal of money. I do not know the circumstances of Worthing, but the argument was always that the dereliction and the industrial illnesses that followed industry were compensated by the fact that the towns set an industrial rate for their area—localism, perhaps.
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