Business Rates

Part of Opposition Day — [13th Allotted Day] – in the House of Commons at 8:53 pm on 15th June 2009.

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Photo of Julia Goldsworthy Julia Goldsworthy Shadow Secretary of State for Communities and Local Government 8:53 pm, 15th June 2009

No: I wish to make progress as I am aware that there is very little time for Back Benchers to speak.

The Government's response to the Opposition motion is equally inadequate. The exchange this evening echoes one outside the Chamber in which the Conservatives and Labour are trying to blow chunks out of each other's spending plans. Instead of having a debate about what the level of future funding should be and what difficult decisions need to be taken, we have two parties arguing at cross-purposes. While the Conservative motion is so narrowly drawn as to be highly limiting, the Government response is merely to produce as long a list as possible of all the things they have done or have said they might do at some point in the future. What we did not hear from the Minister is whether these measures and pronouncements have been effective. That is unsurprising as, to put it charitably, the results have been patchy. They praise themselves for righting wrongs that were their responsibility in the first place. They also praise themselves for extending the relief for empty properties, but fail to point out that they did so only in response to extreme pressure, and that at the end of the day that is only deferring pain for another year. Moreover, in terms of their proposals to defer payment for some of this year's inflation-busting 5 per cent. increases in business rates, they have not acknowledged that the whole process of trying to address this is still causing pain for businesses, which are having to make those payments as we speak. The Government motion says that their behaviour has provided "certainty" and "fairness", but it is very difficult to see how either has been delivered.

The Government praise themselves for policy proposals that have had a limited impact. They say that they

"aim to pay Government suppliers within 10 days".

I am not entirely sure what that has to do with business rates, but their performance in that regard is patchy even within Government Departments. Whereas the Department for Communities and Local Government has managed to hit 88 per cent. of payments, the Home Office figure is just 50 per cent. They therefore have a lot to do to improve their own record.

The amendment praises the regional development agencies for being at the cutting edge of supporting businesses. Again, that is nothing to do with business rates, and the reality is far from what is claimed.

The Minister will know from our discussions in the Committee considering the Local Democracy, Economic Development and Construction Bill, that the South West of England development agency has unilaterally decided to cut more than £50 million of projects, which are in place to support and create jobs in the region, including in my constituency. The RDA has done that without any consultation, yet the Government's amendment contains praise for some of the activities that are going on.

Many have reported that they think that the benefits of the enterprise finance guarantee scheme and the working capital scheme have been limited. Nine out of 10 of more than 2,000 entrepreneurs and business owners surveyed stated that the Government are not supporting small and medium-sized enterprises sufficiently, and the majority of respondents were not even aware of the schemes that were designed to support them. More than half of all SMEs have never heard of any of the schemes, and eligibility, red tape and issues relating to efficiency are creating an insurmountable barrier for many, yet the Government's amendment has the audacity to claim that the VAT cut has helped people. Once again, instead of permanent solutions to make the tax system fairer and to support businesses, we are seeing a deferral of more pain later and billions of pounds being wasted on something that most businesses say has not benefited them or has actually cost them money.

If the Conservatives' approach is to say as little as possible, the Labour approach is to produce as long a list as possible, irrespective of how effective any of the measures have been on the ground. I wonder whether there is a parallel with the First Secretary of State, Baron Mandelson of Foy in the County of Herefordshire and Hartlepool in the County of Durham, in that the longer and grander his title and the more Ministers serving beneath him, the more effective he thinks he is. Such an approach has also been taken in this Government amendment but it fools nobody.

This argument at cross-purposes has missed the fundamental point: local authorities are already doing a huge amount on the ground to support businesses, they understand what the problems are and they are best placed to tackle them. I could cite examples of how local authorities have been examining their procurement of services and instead of just setting an arbitrary figure of 10 days in which to pay their bills, which probably would not be hit, as is the case with the Departments, they are trying to create a level playing field for contracts that allows consortiums of local businesses to get together to make their bids. It is that kind of thing that will make the real difference, not press releases.

More should be done to push down the budgets of regional development agencies to make decisions on spending more accountable, and we should be freeing up councils to reinvest in housing. These are all things that would help not only to tackle this country's affordable housing crisis, but to support the economy and jobs. Both the Conservatives and Labour have failed to realise that what is needed is not tinkering around the edges or a long list of initiatives; but a fundamental change in the relationship between central and local government, which is essential if people's confidence in those institutions is to be restored.

Lots of politicians have been keen to jump on this particular bandwagon and to make the connection between MPs' expenses and the need for constitutional reform, but people have not realised that if businesses' and individuals' trust in all levels of government is to be restored, there needs to be a clear statement of the terms of the relationship and work at the grass-roots level to rebuild that relationship. At the national level that might mean constitutional reform, but change needs to take place at the bottom too. That is not only about ensuring that there is proper participation and that decisions about how public money is spent are accountable, but about making a much clearer link between the local taxes that people and businesses pay and the services that they receive in return.

That link does not exist at the moment. On average, council tax funds about 25 per cent. of the services that are provided locally, and although business rates are collected locally they remain centrally distributed despite the fact that most businesses think their taxes are directly paying for the services that they receive locally. Both aspects of taxation need to be fundamentally changed to make the relationship clearer and to ensure that there is a much stronger link between what is raised and spent locally. As I have said, that means moving away from a regressive council tax system to one based on the ability to pay. Alongside that, business rates must also be localised. Only if those changes are taken together will that stronger link be made clear and will people be able to see what they are getting and how they are paying for it.

The last thing that is needed are the temporary measures that the Government have announced—deferring corporation tax increases, deferring empty property rates, deferring business rate increases and introducing temporary VAT cuts—which provide no certainty and will do nothing to give people confidence. Instead we need permanent changes to make the system fairer and clearer to everyone, individuals and businesses alike. But neither Labour nor the Conservatives are prepared to face up to that fact, let alone engage in the debate. That is the biggest disappointment of all.

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