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There are real issues with the business rate, and I have concerns about port rates and empty property rates, too. I am very concerned about help for businesses in the recession, but an Opposition party that wishes to form the Government at some stage is misleading businesses and is not being straight with them if it purports to help businesses in the recession, but does not provide them with basic information about what it will do to stabilise their arrangements.
Tonight has been a shocking missed opportunity to discuss the real issues. Instead, some Members have discussed a number of peripheral issues that, although important, not only do not constitute the whole issue of how we help businesses but serve to obscure the true lack of substance in Conservative policies on local government.
9.37 pm
Mr. Brooks Newmark (Braintree) (Con): We have heard much about the challenges that many of us have seen in our surgeries when representatives of small business have chatted to us. I had a meeting with people from the Essex branch of the Federation of Small Businesses who told me about the challenges that their members face, with margins being squeezed, banks not supporting them and so on. They raised the issue of rates: rates seem to be rising above inflation, which brings challenges, and the organisation has expectations of how local councils can help its members.
There are three issues to do with local business rates. One that has been highlighted for me was the difficulty that small businesses have in paying them. The Local Government Association has warned that, as it is,
“More than half of all councils (56 per cent.) are reporting that firms in their areas are having difficulty paying business rates to local authorities”.
“Eight out of ten councils are reporting an increase, or anticipated increase, in businesses requiring support.”
Businesses are being driven away. A business in Witham in my constituency is being charged £200,000. It can move its whole operation to China, and is doing so—with the loss of 100 jobs. With that £200,000, it can have the whole businesses run elsewhere. That is a great shame; our towns are being gutted and businesses are being driven to close down. Councillor Margaret Eaton, the chair of the Local Government Association, said:
“The recession is claiming around 85 small businesses every day and many need every single last bit of help and support to get through tough times. There are examples where businesses are going to see their rates bills double or even triple—this just isn’t acceptable.”
What are the solutions? We heard one today from my hon. Friend the Member for Mid-Worcestershire (Peter Luff), who proposed his own private Member’s Bill, the Small Business Rate Relief (Automatic Payment) Bill, which would have rendered the relief automatically payable to eligible businesses, as it is in Wales. In another example, Braintree district council has proposed spreading rate payments over 10 points in a 12-month period, and breaking it up into 10 per cent. pieces over 12 months is a good solution. There is also the flexible rates solution, whereby local councils have discretionary powers. That idea does not mean that they have to make up the money from elsewhere, and allowing for some flexibility on rates will help draw in new businesses.
As the hon. Members for Sheffield, Attercliffe (Mr. Betts) and for Falmouth and Camborne (Julia Goldsworthy) said, we want local businesses to have a say. I chaired a meeting in Braintree to make sure that local businesses there had a say; local business people met local council representatives to say what they wanted to be done, and that was important. I also want to mention the Essex bank, which will support local businesses. It is a creative solution from Essex county council, whose work I applaud.
In the last 10 seconds, I should like to make one final plea, which echoes the words of my hon. Friend the Member for Hemel Hempstead (Mike Penning) and the hon. Member for Sunderland, South (Mr. Mullin). I ask the Government to review the pernicious charging of rates on empty properties, which has led to properties being destroyed.
9.40 pm
Mr. Stewart Jackson (Peterborough) (Con): The fact that this subject has been chosen by Her Majesty’s Opposition for our allotted half day demonstrates how important to our economy we consider the business sector, particularly small businesses which can provide a path out of recession. No Labour Member has mentioned that business rates are a fixed cost, the pain of which has a bigger impact in a recession. We Conservatives believe that the Government’s policies—especially those on business rates—are inflicting significant damage on the business sector. The strength of feeling across the House reflects the fact that many of the 4.7 million small businesses in our constituencies are experiencing unprecedented grim times.
We began with an excellent speech from my hon. Friend the Member for Putney (Justine Greening); it was a polished and forensic demolition of the Government’s lamentable record. I am sorry that the right hon. Member for Greenwich and Woolwich (Mr. Raynsford) was not able to make a speech. However, he made an intervention that showed a “computer says no” and a “It’s not me, guv, it’s the formula” approach to the policy. We heard about the impact of above-inflation rate rises. The ending of transitional relief was also mentioned; Ministers disregard the impact of that on local small businesses. My hon. Friend talked about the impact on sustainability and on small businesses such as the launderette, post offices and small shops in her constituency.
We heard an intervention about uniform business rates, but although the Government have been in power for 12 years they have not altered the system that obtained when they were elected. Mention was made about the failure of the Government to honour their clear objectives and undertakings to my hon. Friend the Member for Mid-Worcestershire (Peter Luff) on the automatic payment of small business rate relief; I hope that the Minister will touch on that issue in her response.
We also heard about Government incompetence and the over-complex and bureaucratic system of business rate deferral schemes, particularly for marginal businesses. The Government’s complete inability to come up with a clear answer about the estimated cost was also discussed. There was an interesting discussion on the rate revaluation in April 2010. My hon. Friend the Member for Meriden
(Mrs. Spelman) put forward empirical evidence about the impact of the relevant legislation in respect of the Valuation Office Agency, particularly in Wales.
A game effort was made by the Minister for Regional Economic Development and Co-ordination, new to the team. She did well in trying to persuade us that this zombie Government are still alive and making a difference. Many of her remarks, however, were clichéd platitudes based on discredited dividing lines—the facile, do nothing schtick that we expect from the Labour party. There was no recognition of the gravity of the recession, which is the worst since the second world war. In particular, and in stark contrast to the hon. Members for Liverpool, Riverside (Mrs. Ellman) and for Great Grimsby (Mr. Mitchell), the Minister showed a complacent attitude to the ports tax. We knew that she was in trouble, because she was citing the predictions of the Chancellor of the Exchequer, and people are always struggling when they have recourse to that resource.
We heard a number of key points from hon. Members from across the Chamber. The Minister failed to convince the hon. Member for Sunderland, South (Mr. Mullin) about empty property rates and failed to persuade the House about the business rates deferral scheme. Furthermore, she failed to persuade my hon. Friend the Member for South-West Norfolk (Christopher Fraser) that she can provide any meaningful, demonstrable data about the help that the Government schemes have given to individual businesses. I would be interested if the Under-Secretary could shed some light on that.
My hon. Friend the Member for Mid-Worcestershire prayed in aid John Cleese and “Clockwise”, but this Government are clearly more akin to Monty Python’s dead parrot, as we are well aware as each month goes on.
The speech by the hon. Member for Falmouth and Camborne (Julia Goldsworthy) was proof positive, if it were needed, that the Liberals remain at best a wholly owned subsidiary of the Labour party, and at worst a complete irrelevance. She avoided a straightforward commitment to local income tax, and effectively spent 17 minutes saying not very much.
The hon. Member for Sheffield, Attercliffe (Mr. Betts) gently chided the timidity of his Front Benchers, but himself took a rather nonchalant approach to how local businesses across the country are struggling in this recession. We heard an excellent and knowledgeable contribution by my hon. Friend the Member for Northampton, South (Mr. Binley), and a rather esoteric discussion of business improvement districts by the hon. Member for Coventry, North-West (Mr. Robinson).
That doughty champion of his constituents, my hon. Friend the Member for Hemel Hempstead (Mike Penning), raised a vital point about the impact of empty property rates on involuntarily empty properties, at Buncefield in particular. We had a rather, if I may say so, tedious parody of a party political speech from the hon. Member for Southampton, Test (Dr. Whitehead); I am glad that I never had to suffer in his university lectures. Finally, we heard an interesting speech by my hon. Friend the Member for Braintree (Mr. Newmark), who talked about businesses’ practical experience in his constituency and the fact that this Government’s policies are losing businesses to overseas locations.
My party has responded intelligently and sympathetically to the plight of businesses struggling through the recession. Less than three months ago, we initiated a debate that focused on the key issues affecting entrepreneurs and small and medium-sized enterprises: the poor take-up of small business rates relief; empty property rates; the failure of the local authority business growth incentives scheme effectively to promote business growth; the need to allow local authorities devolved autonomy to apply local business rate discounts; and, most importantly, the rise of 5 per cent. in business rates and the end of the transitional rate relief scheme. My party has outlined detailed and fully costed proposals designed to assist businesses in the current climate, not least a national loan guarantee scheme, a cut in corporation tax and payroll taxes for small companies, and deferred VAT for small businesses.
Given the time, I probably will not be able to discuss those matters in detail, so it might be appropriate to deal with the desperate spin of this Government in claiming that the Conservatives have no policies to deal with the recession. That comes from a party that secured the support of 15.7 per cent. of the electorate less than two weeks ago. Indeed, the conceit that the Labour party was pro-business was never supported by any demonstrable evidence. For Labour, business has always been a milch cow to fund its hare-brained schemes, fiscal mismanagement, bureaucracy and debt boom. Last week, the Prime Minister appointed Sir Alan Sugar, the born-again Labour supporter, as the enterprise tsar, but a poll in The Independent found that 81 per cent. of business leaders believed that that was
“a desperate attempt by Gordon Brown to boost his public popularity”.
As we know, the words “Gordon Brown” and “public popularity” are oxymoronic.
It is no wonder that the Labour party cannot even give away tickets for its business fundraisers. The business community has lost what little faith and trust it had in this tired, discredited, washed-up Government, who have always governed in their own interests, not those of the people of this country. They cannot even get their spin right, as we saw today in the spat between the Chief Secretary and the surrogate Chancellor of the Exchequer, the Secretary of State for Children, Schools and Families. The Government’s public expenditure and taxation plans are incoherent and incredible, just at a time when business desires clarity and leadership.
This Government have never understood that without a thriving business sector based on sound Government finances, lower taxes and falling public debt we cannot deliver real long-term improvements in our public services. They have had 12 years to harness the talent, flair and genius of our wealth creators, but they have comprehensively failed, leaving the ambitions of thousands in tatters. Once again, as in 1979, it will fall to a Conservative Government to rescue our economy, restore our mercantile spirit and repair the calamity of Labour’s dozen wasted years.
9.50 pm
The Parliamentary Under-Secretary of State for Communities and Local Government (Sarah McCarthy-Fry):
It is with enormous pleasure that I wind up the debate. In response to the hon. Member for Peterborough (Mr. Jackson), let me say that it is only too clear that
only this Government have been helping businesses through the current economic recession, and only this Government are prepared to take action now. In her opening remarks, my right hon. Friend the Minister for Regional Economic Development and Co-ordination eloquently made the point that we fully recognise the impact of the current economic climate on businesses across the country. That is why we have taken real action now to help business through this economic downturn.
The hon. Member for Falmouth and Camborne (Julia Goldsworthy) took us through her contribution at breakneck speed. I appreciate why she did that, but it was sometimes difficult to keep up. I agreed with her critique of the Opposition motion, and I, too, noticed the striking similarity with the motion tabled on 25 March. I am sure that we all accept the importance of business rates, but I agree that the motion is narrow and ignores other issues about help for businesses.
I am afraid that that is as far as I can go in agreeing with the hon. Lady. I do not accept that our actions are tinkering at the edges, because I believe that they are giving real help to businesses now. I was disappointed that she mentioned our VAT cut, because despite the complaints from both Opposition parties, which did not believe that it would be effective, Office for National Statistics data show that the cut has been passed on to consumers in around two thirds of prices and has contributed to recent falls in inflation. In January, the Institute for Fiscal Studies said that the VAT cut had had the same effect as a 1 per cent. cut in interest rates, and in February Goldman Sachs said:
“The VAT cut appears to have had a clear positive impact.”
My hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts) made a thoughtful and knowledgeable contribution, and I particularly welcome his comments about revaluation, which put the record straight after the opening contribution by the hon. Member for Putney (Justine Greening).
The hon. Member for Northampton, South (Mr. Binley) made his contribution in his inimitable way, and he confined his remarks to small business rate relief. This Government introduced the scheme in the Local Government Act 2003, because we recognised the disproportionate burden that rates can have on small businesses. I am disappointed that the Opposition did not support that Bill on either Second or Third Reading.
The hon. Gentleman made a point about making small business rate relief automatic, which was suggested in a private Member’s Bill introduced by the hon. Member for Mid-Worcestershire (Peter Luff). Such a scheme would present considerable challenges for local authorities, as they would themselves need to establish whether a ratepayer occupied more than one property. I cannot see how local authorities could do that if the ratepayer’s property crossed local authority boundaries. There are difficulties with transferring that responsibility from businesses to local authorities, and we must consider whether it would be an administrative burden.
The hon. Member for Northampton, South also mentioned Wales, but the system is not totally automatic there. It is only partly automatic, and the scheme is different from ours. However, we are sympathetic to the aim of finding ways to support small businesses through the economic downturn, and we have been considering
what more we can do to improve the take-up of small business rate relief. We have already taken steps to amend legislation for 2009-10, so that all eligible businesses in new properties can receive rate relief from their first date of occupation. We are discussing with the Local Government Association the practical concerns—they are genuine practical concerns—to avoid an automatic scheme, which would award relief to businesses that are ineligible because they occupy multiple properties. I am happy to meet the hon. Member for Mid-Worcestershire to explain the position further. I believe that there is an outstanding meeting, at which he was due to meet my predecessor, and I am more than happy to take that up.
My hon. Friend the Member for Coventry, North-West (Mr. Robinson) spoke about a business improvement district project in his constituency. I do not have the details, but I am happy to discuss it with him further outside the debate.
I assure the hon. Member for Hemel Hempstead (Mike Penning) that his concerns were certainly not ignored. There was a concern that not all Back Benchers would have the opportunity to speak, and I am glad that the hon. Gentleman had the opportunity to make his point. To respond to it, it is generally the case that property must be capable of beneficial occupation before it can be brought into the rating list and be liable for empty property rates. The issue is obviously so important that the hon. Gentleman is not even listening. There are some exceptions to what I outlined. When the property is close to being complete and building work has stopped, the general rule is that property not capable of beneficial occupation is not rateable. I am more than happy to meet the hon. Gentleman and discuss his concerns further. However, I repeat that the general principle is that, if the property is not capable of beneficial occupation, it is not rateable.
I am grateful for the considerable knowledge and expertise of my hon. Friend the Member for Southampton, Test (Dr. Whitehead) on local government finance. I was heartened by his exposing the holes in the highly selective Opposition argument.
The hon. Member for Braintree (Mr. Newmark) raised concerns about businesses’ ability to pay their business rates. That is precisely why we have introduced the help with cash flow.
Many hon. Members mentioned the deferral scheme. We recognise that businesses need help now to ease their cash flow when money is tight. That is why we introduced the deferral scheme for business rates. It is designed to smooth the effects of the inflation spike of 5 per cent. in September 2008, which would have meant an impact on businesses’ cash flow this year. In the Budget, the Chancellor forecast that RPI inflation would fall to minus 3 per cent. by September 2009. The impact of uprating if RPI is negative would be to reduce total business rates in cash terms in 2010-11.
The hon. Member for Putney asked how the full deferral of 60 per cent. could be delivered if the scheme is introduced halfway through the year. The deferral scheme will come into force at the end of July—that was made clear when it was announced. The scheme will offer the full deferral of 60 per cent. of the increase due to inflation and transitional relief by adjusting the instalments of business rates that remain outstanding.
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