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Question put forthwith (Standing Order No. 31(2)), That the proposed words be there added.

Question agreed to.

The Deputy Speaker declared the main Question, as amended, to be agreed to (Standing Order No. 31(2)).


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Business Rates

Madam Deputy Speaker (Sylvia Heal): I must inform the House that Mr. Speaker has selected the amendment in the name of the Prime Minister.

7.45 pm

Justine Greening (Putney) (Con): I beg to move,

Today’s debate is of real importance to businesses across Britain, because the problem relating to business rates and business rate rises is so acute. This country has been in recession since last year, and the impact on businesses and employment has been dramatic. In fact, the most recent figures from the Federation of Small Businesses show that, every day 120 small businesses close down . Above all, in the credit crunch even firms with perfectly good business models are going bust, not because they are loss-making but just because they cannot get the liquidity that is needed. We recognise the problems with cash flow, which is why we have been pressing Ministers to go for our bigger and bolder national loan guarantee scheme to help provide certainty for businesses that are lending credit to one another.

Members would have thought that Ministers in the Department for Communities and Local Government who look after business rates would have taken particular care in their decisions that affect businesses, but they would have been wrong. In the past few months, when it comes to business rates, struggling businesses across Britain have seen Ministers press ahead with decision after decision that can only make their liquidity situation worse. First, at the end of last year, Ministers confirmed that all companies paying business rates would see a 5 per cent. inflation-busting rise. By the time it was due to hit businesses and our economy, economists were discussing whether deflation was a concern, and the Bank of England was embarking on its quantitative easing. However, Ministers refused to reconsider their decision. In fact, they even refused to prepare an impact statement that considered how such massive, inflation-busting rises would hurt businesses, employment and the economy.

Mr. Nick Raynsford (Greenwich and Woolwich) (Lab): Will the hon. Lady please tell the House how Ministers could have changed the formula, which her party introduced when in government, given that, on revaluation, it requires the yield to be maintained, with no discretion for the Government to take a different decision?

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Justine Greening: I am grateful for the right hon. Gentleman’s intervention. Much as I respect him, I think that people in businesses listening to that will find it a classic “computer says no” attitude to getting through this recession. We have heard about the do-nothing party; I think we have suddenly found which is the do-nothing party in this Chamber tonight.

Dr. Alan Whitehead (Southampton, Test) (Lab) rose—

Justine Greening: I will make a little more progress, but I will give way shortly.

Ministers are refusing to reconsider their decision, as we have heard. In fact, they soldiered on for months with their heads in the sand. That was bad enough for businesses that were trying to cope with the recession, but Ministers did not stop there: next down the track came the withdrawal of transitional relief. From what data there are, it is clear that some businesses were hit far more severely than people expected by the withdrawal of transitional relief, which had cushioned the impact of the 2005 rates revaluation for many businesses, but Ministers should have known about the impact that that would have. At a time when so many businesses were on their knees, Ministers again kicked away what could have been a final, extra year of transitional relief, and the impact has been huge. The FSB surveyed members in London and found that of those paying business rates nearly two thirds faced rises of 6 per cent. or more, and nearly one in 10 faced a rise of over 20 per cent. That masks the fact that a minority in that group faces much bigger rises. I shall come to that shortly.

Mr. Clive Betts (Sheffield, Attercliffe) (Lab): Can the hon. Lady explain her party’s policy on transitional relief? By definition, at some point that comes to an end. Is she saying that it should always last for five years, instead of four? Does she accept that, given the ability to defer part of the rate increase, 60 per cent. of the transitional relief, which ends in the fifth year, can be deferred to the next two years?

Justine Greening: It is interesting that the last time the revaluation took place, in 2000, the hon. Gentleman’s party chose to adopt a five-year transitional relief. The option to do that again was dismissed by his Government. I have asked the Government what they plan to do in the 2010 revaluation, and we still have no response from them. Part of the problem is bad information. I am happy to send to him parliamentary question after parliamentary question in which I have asked how many companies were affected by transitional relief, but received no answer.

The last time any assessment seems to have been done on the impact on businesses of the withdrawal of transitional relief was in 2004. At that time there was no recession. Now we have a recession, but Ministers have not been prepared to revisit any of their decisions. Again, we hear their defeatist attitude: “We cannot do anything to help small businesses. Let’s just push on with the plan that we already have.”

Dr. Whitehead: Is the hon. Lady saying, as her initial remarks suggested, that she would change the legislation on the basis on which the business rate is determined, with reference to the retail prices index; that contrary to
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everything that has happened since 1990, she would change the arrangements relating to transitional relief; and that she would change the arrangements relating to the raising of the business rate itself? Can she confirm that that is her party’s policy from now on?

Justine Greening: I am pleased that the hon. Gentleman is talking to me as though I am already the Minister looking after this brief. We should look at those aspects to see what we can do to help business. He seems already to have gone into Opposition MP mode.

There is no doubt that for smaller, more marginal companies business rates are one of the largest parts of their cost base, and they are levied whether or not those companies are making profits. We know that more than other businesses small businesses are prone to be hit proportionally hardest by Government decisions on business rates. One would have thought that that mattered to Ministers, but it did not. Given that they were deciding to put through massive business rate hikes in the teeth of a recession, one would have thought that Ministers might take the time to understand the impact of business rates on more marginal businesses, but they did not. They made no effort to understand how their decision to raise business rates would hurt communities, hurt businesses and cost jobs.

On the withdrawal of transitional relief, Ministers have known of the pressure of rates on many thousands of businesses since 2004. As I said earlier, in their own consultation paper they even identified the problem. The paper states that at the time, Ministers said that they had been warned that:

Ministers ignored those concerns.

Businesses are therefore concerned about business rates rising at the end of transitional relief. Those concerns were raised even before the recession, but even when the situation has got worse and we are in a recession, it does not seem to occur to Ministers to reassess their approach. Who is penalised for the Government’s incompetence? Small businesses, which are worst hit because of their size. That often means that they are far more vulnerable to a recession and, as I said, to Ministers raising business rates.

Many of those small businesses are local shops, and often parades of shops, which provide employment and support communities. They include the newsagent, the laundrette and the corner shop. They are all fighting to stay in business and they are put under more pressure by Government decisions to hike up business rates. Surely the harshest aspect of the withdrawal of transitional relief was its impact on businesses that had played their role in regenerating their communities. They were doing exactly what the Government asked of them. They took risks and set up their businesses in areas that desperately needed better facilities and shops.

Mr. Raynsford: The hon. Lady clearly believes that the root of the problem is the Government. Given that she and her party seem to be espousing localist principles, will she now declare whether or not she will return decision making on business rates to local authorities and give them the discretion to set the rate?

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Justine Greening: I am pleased that the right hon. Gentleman is giving me the opportunity to make sure that the House is aware of our policy of letting councils that can raise business rate take over the next few years keep that increase. That is how we can incentivise local communities and local authorities. [Interruption.] The right hon. Gentleman says that that is not the question. He asked me what we can do to make sure there is more local impact on business rates and more incentive for local councils. [Interruption.] If he would let me finish—

Madam Deputy Speaker: Order. The hon. Lady is responding to an intervention.

Justine Greening: Thank you, Madam Deputy Speaker. It is hard to explain to Government Members when they constantly shout. Had the right hon. Member for Greenwich and Woolwich (Mr. Raynsford) not shouted, I would already have been able to tell him that our other proposal is that we should give local authorities the chance to levy a business rate discount. I hope he will be happy with that, and perhaps intervene again to congratulate my party on what will no doubt be an excellent policy.

Christopher Fraser (South-West Norfolk) (Con): I am sure my hon. Friend agrees that small business and enterprise was the backbone of our economic success as a nation in the 1980s and 1990s, and will continue to be so in this new century. The fact remains that businesses, not Government, create jobs. It is the job of a Government to create the environment in which business can thrive. This Government have singularly failed to recognise the needs of businesses in the economy when the chips are down.

Justine Greening: My hon. Friend is right. The backbone of our economy has been our small businesses. We have been described as a nation of shopkeepers. There is a reason for that: our economy has been based on, and has thrived on, small businesses. Many of those businesses provide vital services to the community. A little anecdote, which Members may laugh at, says it all. I was at a meeting with some of my elderly constituents. One lady mentioned that a laundrette had shut down. She lived on the 14th floor of a tower block and did not have room for a washer in her flat. She would now have to take two buses to get to the laundrette.

Those are vital facilities for people. When I spoke to the owner of my laundrette on Danebury avenue in Roehampton, he told me his business rates would be more than his takings every month. That is what the Government are doing to businesses. It is untenable to say that we cannot reconsider business rates because the legislation and the regulations are already in place.

Rob Marris (Wolverhampton, South-West) (Lab): Will the hon. Lady give way?

Justine Greening: I shall make some more progress. I want to make sure that others have a chance to contribute to the debate.

I was speaking about a group of businesses that have been badly hit, a subject that I hope matters to all hon. Members. Those businesses have gone into areas and tried to help them regenerate by setting up there and encouraging other businesses to do the same. They have done exactly what we all want them to do, which is to get in and provide jobs and facilities in areas that do not
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have them. Many of those companies have been successful and other shops have opened. What has been their reward? Their rateable value has gone up so they have lost their reliefs, especially in London, as we have heard from the Federation of Small Businesses. What has then happened to them? They face eye-watering business rate hikes.

I am sure we can all quote examples. Here are a few from my London borough, Wandsworth. Shops on the Old York road in central Wandsworth have had massive hikes. The newsagent Masumin’s business rates last year were £260 a month. This year they have shot up to £1,006 a month. The motorcycle business just down the road saw bills rise from £280 a month to £914 a month. The florist’s business rate bills went up from £477 a month to £715 a month. The Northcote road, another well-known Wandsworth community built around its shopping areas, is full of independent stores such as the Bolingbroke bookshop. Its rates have gone up from £570 a month to £875 a month.

It is as if Ministers were looking for a way to hurt regenerating areas most. Surely these are the businesses creating jobs and providing facilities in areas that need them. We should be applauding and supporting them, but not this Government and not these Ministers.

Ministers seem to have had an awareness bypass when it comes to helping companies, especially the smallest and most vulnerable, to survive the recession. We have had the withdrawal of transitional relief, the lumping of inflation-busting rises on businesses and no assessment of how either will affect businesses and jobs throughout Britain. It took a chorus of voices, from the Opposition, the Federation of Small Businesses and local authorities, to puncture Ministers’ obliviousness to what was going on.

That is why my hon. Friend the Member for Mid-Worcestershire (Peter Luff) introduced his private Member’s Bill in March—to give the existing 50 per cent. rate relief for the smallest, most vulnerable companies automatically. Currently, they have to fill in a form to claim it, but only about half of eligible businesses do so and local authorities have to put resources into processing their request and doing outreach work to business communities to improve the take-up of the relief. We supported that Bill, along with the Federation of Small Businesses and many local authorities, which knew that they would save administration costs and be able to put them into helping businesses to develop. When it came to the debate, however, the Government opposed the Bill.

Rob Marris: I am grateful to the hon. Lady for her generosity in giving way, but her tone of wounded outrage lacks credibility, given that her party’s policy is to remove £3.7 billion a year of relief on capital allowances for business. That is a huge take, and it would adversely affect, for example, laundromats trying to replace their washing machines.

Justine Greening: We do not need to take any lectures on supporting small businesses from a Government who upped their corporation tax rate and had to be almost shamed into deferring—only deferring, mind you—the final 1 per cent. of a 3 per cent. rise on small businesses’ corporation tax. I am sorry if I do not sound very sympathetic to the hon. Gentleman’s point, but to make a party political point when I have just
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talked about the problems and the business rates rises facing small businesses throughout Britain is really beyond the pale.

Rob Marris: Will the hon. Lady give way?

Justine Greening: No, I am not going to give way. We have had enough from the hon. Gentleman tonight.

In the Chamber, we all had a chance to support the private Member’s Bill from my hon. Friend the Member for Mid-Worcestershire, but that chance was thrown away by the then Under-Secretary of State for Communities and Local Government, the right hon. Member for Tooting (Mr. Khan). In explaining why he would not support the Bill, he said that

the private Member’s Bill—

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