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The UBR went through the House easily, and the property industry was slow to pick up on what it actually meant. The costs lie at the heart of the unemployment issue, and that is a serious charge. The Economic Secretary will remember the early 1980s, which saw almost the collapse of large-scale manufacturing industry in the
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west midlands—it was not the only part of Britain in which that happened, and there were reasons for it. So severe was that collapse that the Government of the time created rate-free industrial areas, which meant that factories could be built there without having the burden of rates. That is how serious it was.

Some people are now predicting that unemployment will rise to 3 million, and possibly more. That would be worse than the unemployment of the early 1980s, but the Economic Secretary will remember the vast areas of dereliction that followed when companies were forced, before the scheme came in, to demolish buildings. The pious and the wise said that they were old buildings anyway and it was just as well to get rid of them, but they were the source of much employment. I think it was Lord Heseltine who came up with the idea of designated business-rate free areas. There was one in London and one in Liverpool, and the west midlands definitely had one. That shows the severity of that recession.

Now we face a different problem. Many areas are hurting, such as recently built shopping malls, where properties are rated at the highest end of the rentable market, invariably with clauses that say the rents can only go up. No one should think that employment in retail is negligible in this economy; it is in fact significant and substantial. These shopkeepers include some large companies. We saw Woolworths go—we can wave that goodbye—but a lot of people were employed by that company and it provided employers’ national insurance at 12.8 per cent. while the employees paid nearly 10 per cent. too. Those revenues to the Government sustain employment, and so the increases are very worrying.

I shall give an example of a building that is designated new build, although it was a very elegant refurbishment, in central London. I can talk about this from personal experience, so it is not a vague or illusory illustration. The rent for a less than 5,000 sq ft shop in a central London borough is £270,000, set in 2004. The uniform business rate for the same shop, last year, was £124,740. That is what is confronting many a small business. This business employs about 60 people, some of them part-timers and all of them paying national insurance contributions while the employer pays the employers’ national insurance contribution. That is a huge sum for that business to pay, yet it is providing employment in these dire times.

Today, I walked from Tottenham Court road to see what has happened there. At one time, the area was the centre of London’s book trade, but now there are empty shops and fast food outlets. That is where we are getting to. I urge the Government to take seriously the employment side of all their equations and to think about what is happening. The uniform business rate and the nearly 50 per cent. multiplier of whatever the rent is are what kills the prospects for many companies and thus the employment of many people.

6.37 pm

Mr. Brian Binley (Northampton, South) (Con): I have a quick and simple message for those on the Government Front Bench. I want to concentrate on the plight of small business and to make the point that it is in serious trouble, much of which is due to this Government. The Government are doing lots of things not very successfully because they did not take into account the
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fact that they had to administer and manage their projects. Also, I want to say that they could have seen rates as a real way of putting capital into local business, but they failed to understand that. The difference is that loans must be paid out, but rates, if the Government wish to offer relief, do not have to be taken. That was the major point that I wanted to make.

There are a number of Government schemes—I have all the figures here—but they are not working. It is very simple. Business rates in the UK are three times higher than those in any other European country and higher than those in the USA—what a millstone to put around the necks of our businesses. The Government could have helped by ensuring that there was real relief for small business, but that has not happened. My hon. Friend the Member for Mid-Worcestershire (Peter Luff) has proposed an action that I hope the Government will take up, but we have not yet heard that that will happen. Perhaps we will tonight.

Finally, the Government have decided that they will go ahead with a 5 per cent. increase in business rates. At this time, that is sheer madness, and I hope that even at this late stage they will rethink and will give small business some hope by saying that they have decided to use the present rate of inflation, at the very least, rather than the rate that was relevant when they decided to levy a 5 per cent. increase on business rates. I hope that they will change their minds.

6.39 pm

Mr. Mark Prisk (Hertford and Stortford) (Con): This debate has been short, but timely. It has shown that the Government’s policies on business rates are causing real harm.

We began with an excellent contribution, as one would expect, from my hon. Friend the Member for Bromley and Chislehurst (Robert Neill), who brought to bear his characteristic charm and tremendous experience in the field. I thought that he exposed very neatly the weaknesses in the arguments over ports, and in the other issues raised by hon. Members on both sides of the Chamber.

We then had a characteristically generous contribution from the Minister for Local Government. I confess that I have soft spot for him, as we spent more hours than I care to remember in Committee Room 10 debating the Finance Bill. He has always been what he was today—the defender of the indefensible—and he was on particularly good form this afternoon. I noticed that he struggled a bit when the googly came from his own side, in this case from the hon. Member for South Derbyshire (Mr. Todd), but he did do one very important thing: he put it on the record, I believe for the first time, that the Government are committed to reducing the poundage and therefore the burden of business rates if the retail prices index is negative in September. We look forward to holding the Government to that commitment.

We then had a contribution from the hon. Member for Solihull (Lorely Burt) that was literally from another planet. It was a fascinating run through “Star Trek” and, I think, “Titanic”. I suspect that the ending was nearer that of the latter movie than the former and, being a gentleman of a certain age, I thought that the
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metaphor was perhaps a little stretched. However, the hon. Lady is often right about these matters, and she made a good point about there being a genuine cost to small businesses.

The hon. Member for Great Grimsby (Mr. Mitchell) made a contribution, and then we had an excellent speech, as one would expect, from my hon. Friend the Member for Mid-Worcestershire (Peter Luff). He was concise but thoughtful, and he set out the key arguments about why we need to look at making small business rate relief automatic.

The hon. Member for Stafford (Mr. Kidney) made an excellent contribution, and his remarks were intelligent and balanced. I was pleased to see that, like the Minister for Local Government, the hon. Gentleman indicated his support for making small business rate relief automatic. We look forward to them joining us in the Division Lobby, should the opportunity arise.

My hon. Friend the Member for South-West Bedfordshire (Andrew Selous) made an excellent contribution and, as he often does, he highlighted the human cost of failed Government policies. He did that in an extremely powerful manner, and he quoted a constituent of his who said that the problem with the Government is that there is not a lot of “practical help”, and who wondered why the money could not be used better.

Finally, my hon. Friends the Members for Aldridge-Brownhills (Mr. Shepherd) and for Northampton, South (Mr. Binley) both made strong and excellent contributions. Both have always fought the corner of small firms and, although my hon. Friend the Member for Northampton, South made a short speech, it was as effective as ever. I hope that the Economic Secretary to the Treasury was listening to what my hon. Friends said, and that he will answer the points that were raised when he replies to the debate.

As you know, Mr. Speaker, Ministers’ press releases regularly claim that they are providing real help for businesses, yet the view of business is that it is all talk and no action. For example, the Government’s amendment talks proudly of their flagship working capital scheme. It was announced eight weeks ago as the centrepiece of Government proposals, and it was meant to provide £20 billion of loan guarantees from 1 March. However, it is nearly 1 April now, and not a single company has benefited financially from the scheme.

Or what about the automotive assistance package? Promised in November and launched in January, it was valued at £2.3 billion and we were told that it would provide “real help” to the car industry. What has happened? How much of that money has reached businesses? Well, according to the answer from the Minister and despite all the talk, not a single loan guarantee has been issued yet.

Since the fall of Lehman Brothers last September, it has been clear to everyone that urgent action is needed, both in the banking system and to deliver working capital to the rest of the economy. That is why Conservatives set out a plan last November for a single, national loan guarantee scheme that would help viable businesses of all sizes and in all sectors. It would be simple, easy to access and of course easy to understand. As several Members pointed out, had Ministers taken our advice then the scheme would now be up and running, helping businesses through the recession.

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Despite Ministers’ protestations that somehow the Opposition have nothing else to offer, the truth is that we have proposed a number of schemes, as my hon. Friend the Member for Mid-Worcestershire rightly pointed out. Payroll taxes for the smallest employers should be cut by 1 per cent. Small company corporation tax rates should return to 20p in the pound.

As we have heard from many Members, rising business rates are causing real problems. When I meet businesses, as I am sure other Members do, one of the critical questions that is always raised, especially in small businesses, is about rates. The reasons are simple. First, firms pay out thousands of pounds in bills but they receive nothing directly in return. The hon. Member for Solihull was right to make that point.

Secondly, business rates are a fixed overhead. They remain the same in the good years and the bad, so when the economy shrinks business rates hurt all the more. That is why we believe that the Government’s rates policies cause serious damage. After all, what is the sense of imposing £1 billion of extra business rates on empty property just as we head into a recession? Why compound the problem with up to £600 million in supplementary rates? It just adds insult to injury.

We heard a powerful contribution from the hon. Member for Great Grimsby about how the Government’s policies on ports damage those enterprises. Without consultation or proper economic assessment—as the Minister admitted—the Valuation Office Agency issued new bills to each separate occupier. Those bills are retrospective and reach right back to 2005. As we have heard, the result could be ruinous for port businesses across the country; from London to Liverpool, from the Humber—it was nice that one of its representatives, the former Deputy Prime Minister, could join us, albeit momentarily—to other ports such as Falmouth in Cornwall.

Mr. John Gummer (Suffolk, Coastal) (Con): I represent Felixstowe, which is a major port. Is not the problem that the tax is retrospective, so no one could have taken it into account? No business can operate in that way. Is it not another example of the fact that nobody in the Government seems ever to have run a business, so they do not understand that such measures damage businesses irretrievably?

Mr. Prisk: My right hon. Friend is absolutely right. He shows his business experience. If people are not advised in advance, they cannot plan. Despite all the Minister’s protestations at the Dispatch Box earlier, the simple truth is that time and again the Government have shown themselves economically illiterate. I am afraid many businesses feel that is representative of all Ministers in whatever Department they happen to sit—although it is nice to see the Economic Secretary on day release from the Treasury. We look forward to his contribution. I hope that he will be able to improve the standard of economic literacy.

I shall be honest. The Chancellor has made a concession on the issue, but his decision to let firms pay in instalments completely fails to tackle the problem in company law. It was touched on by the Minister, but the result is that the huge tax bills will still count as liabilities and could thus in some cases make firms insolvent. I conclude on that topic with the questions the hon. Member for Great Grimsby asked of his own Government—I am sorry he is not in the Chamber at the moment. Do we
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really want to cripple ports? Do we really want to put people out of work? I hope that the Economic Secretary will answer his colleague’s questions.

It is not just the ports that are suffering. As we heard from my hon. Friend the Member for Bromley and Chislehurst, the majority of councils have already reported that firms are struggling to pay their business rates, with small firms most at risk. Worse is to come. Over the next few weeks, thousands of firms will face a double whammy when rate bills rise by 5 per cent. and transitional relief ends. As several Members mentioned, the annual uplift of 5 per cent. is based on last September’s retail prices index, yet, as we have also heard, that month’s figure was a 17-year peak and is in sharp contrast to RPI today, which stands at zero. The cost? For business, it will be £1 billion. The cost in jobs will be equally grim.

The uplift comes just as transitional relief from the last revaluation ends. That unhappy combination means that for some firms, the increase in their rates bill will be enormous. We have today heard of increases of 30 per cent., 100 per cent. and, in some cases, perhaps over 500 per cent. Retailers alone face paying an extra £250 million—a sum that they can ill afford, given the difficult state of our high streets. As my hon. Friend the Member for South-West Bedfordshire pointed out, it is often the smallest firms that hurt the most. In London council areas, the typical local newsagent faces a rise of £400 to £500; many of us can relate to that situation in our constituencies. For some small firms, that is £500 that they simply do not have. Of course, the arrangements for transitional relief and for the annual uplift have been in place for some time, but that makes it all the more puzzling why Ministers who profess their wish to help have stood idly by and, in the Prime Minister’s phrase, done nothing.

The same question hangs over small business rate relief, which was introduced in 2005. It provides up to 50 per cent. relief from business rates on premises worth up to £15,000 outside London. As such, it rightly seeks to help the smallest firms, yet last year it became increasingly clear that many firms were not claiming the relief. The Federation of Small Businesses estimated that up to half of eligible businesses were missing out, and many Members mentioned that we are talking about a potential saving of £1,100 each year. Although there were wide variations in take-up, it is clear that many businesses were either unaware of the relief or deterred by all the red tape and bureaucracy.

For that reason, last year we put on our party website a very simple ready reckoner that would make the system simple and easy. That is the crucial reason why we want to make sure that the rate relief continues. Since then, of course, my hon. Friend the Member for Mid-Worcestershire has introduced his excellent Bill. He is right to raise points on the subject, and to question the Minister. I hope that the Minister will reply to those questions in his speech.

To conclude, I have no doubt that Ministers wish to help, but when it comes to business rates, their policies are causing harm, not helping. Instead of helping retailers, they are taxing them another £250 million. Instead of promoting trade, they are retrospectively taxing our ports. Instead of keeping costs down, they are adding another £1 billion to rates bills, just as the recession bites. To cap it all, those poor souls who see their business fold will find that there is another £1 billion in
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tax on the properties where they once worked. There is a growing gap between ministerial rhetoric and the reality for businesses on the ground. My fear is that as a result of the gap between Ministers’ words and deeds, hundreds of firms and thousands of jobs could yet be lost.

6.52 pm

The Economic Secretary to the Treasury (Ian Pearson): Today’s debate demonstrates the strength of feeling among all Members of the House about the importance of small businesses to the UK economy. We know that small businesses employ more people than any other kind of businesses in the private sector, and that there are a record 4.7 million small businesses in the country today. The UK business environment is recognised as being among the best in the world.

Given the limited time that I have to respond to the debate, it is clear that I must focus on some of the major issues. My hon. Friend the Member for Great Grimsby (Mr. Mitchell) spoke exclusively about rates in ports. Rather than responding in detail now, I refer him to the fact that there will be a debate on the Floor of the House next Wednesday on the regulations that the Government propose to introduce, so he will have the opportunity to debate them.

My hon. Friend the Member for Stafford (Mr. Kidney) made an important speech. I very much take his point about the need for property managers to act reasonably at this time. He is also right to emphasise the procurement powers of local authorities. As my hon. Friend knows, the Minister for Local Government visited Staffordshire recently. We certainly welcome the freezing of rates for business centres across the county, to which he referred. That is a great example of a Labour-led county council taking effective action. I note the Budget representations that he made to me on empty property relief and on small business rate relief. Obviously, the Budget will be announced next month.

The hon. Member for South-West Bedfordshire (Andrew Selous) raised a number of local examples of businesses in his constituency and variations in valuation practices, which I am sure he will take up through other channels.

The hon. Member for Aldridge-Brownhills (Mr. Shepherd), a black country neighbour of mine, will no doubt welcome the fact that 7,340 companies in the west midlands have so far deferred taxes, to the tune of £134 million. I agree with him about the importance of retail to the economy of the west midlands and of the UK as a whole, and in many cases I do not think the importance of retail to regeneration has been properly emphasised. He talked about the recession of the early 1980s, which I remember well. I also remember the extremely limited policy response at that time, by contrast with the active measures that the present Government have introduced.

The hon. Member for Northampton, South (Mr. Binley) did not have the opportunity to do much more than clear his throat, but I am sure we will benefit from his wisdom on another occasion.

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