Local Government Finance

Part of the debate – in the House of Commons at 3:27 pm on 22nd February 2017.

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Photo of Sajid Javid Sajid Javid The Secretary of State for Communities and Local Government 3:27 pm, 22nd February 2017

I thank the hon. Gentleman for his warm words. The review is about making sure that all areas of England and all local authorities, whether rural or urban, have the right settlement for the long term. Given that the formula has not been looked at properly for years and years now—it is out of date and requires a fresh look—I hope he agrees this is exactly the approach that is required.

Local government funding has to be fair not just to the area itself, but to the people who provide the funds in the first place, including the millions of hard-working business owners who pay business rates. Growing up above the family shop, I saw the impact that an increase in rates can have on small businesses. A rise in the cost lowered the mood of the whole family. Even as a child, I knew that it was not good when I found a stack of bright red final reminders hidden away at the back of a drawer. My dad was never shy about sharing what he thought of out-of-town retail parks and how they took customers away from his shop on the high street in Bedminster. If he were alive today, I am sure that he would be the first to phone and lobby me about the business rates revaluation. In particular, I can just imagine him telling me about how the treatment of large online retailers compares with that of more traditional shops on the high street.

My background helps to explain why I have always been passionate about supporting businesses. It is why as Business Secretary I championed the £6.7 billion relief package that means that some 600,000 small businesses will never have to pay rates again. That is a third of all businesses and the biggest cut in business rates in history.

The current rate revaluation is fiscally neutral. It is not being used to raise a single extra penny for the Treasury. In fact, to do so would be illegal. The amount that most businesses—three quarters of them, in fact— pay will go down or stay the same. As I have said, 600,000 small businesses are being lifted out of business rates altogether, permanently.

Although those three quarters of businesses will benefit or see no change, I am also acutely aware of the impact on the quarter that will see increases. If someone’s rates are going up, it is no consolation to hear that others will be going down. I have long recognised the need to provide support, and that is why we have put in place a £3.6 billion package of transitional relief to help more than 140,000 smaller businesses. However, as colleagues and the media have highlighted in recent days, some individual businesses will face particular difficulties. For example, businesses that are coming off rate relief can face an alarming cliff edge. Independent retailers in some high-value areas are also struggling.

I have always listened to businesses and this situation is no exception. It is clear to me that more needs to be done to level the playing field and to make the system fairer. I am working closely with my right hon. Friend the Chancellor to determine how best to provide further support to businesses facing the steepest increases. We expect to be in a position to make an announcement in the Budget in just two weeks’ time.