I beg to move,
That this House
recognises the importance of British businesses to high streets and communities across the UK and the exceptional challenges they face due to the pandemic and rising costs;
regrets the Government’s current plan to end all temporary support for businesses from April 2022; calls on the Government to support businesses by freezing the business rates multiplier and extending the threshold for small business rates relief from £15,000 rateable value to £25,000 in 2022-23; and further calls on the Chancellor of the Exchequer to update the House in person before January 2022 on his Department’s assessment of the impact that removing the temporary business support will have on small businesses.
Our high streets are not simply units of economic activity or just a place to buy the things we need. They are an important part of the tapestry of where we live, work and share our everyday lives. It is where people meet, eat, catch up over a cup of tea, bump into old acquaintances, receive a smile or a kind word. My first Saturday job as a teenager was working at a chess shop called the Chess and Bridge Centre on the Euston Road. People would come from miles around not just to buy, but to ask the advice of the owner and those of us who worked there. I learnt a lot. Our shops are as much about people as they are about products, and that is why they must and they will endure. That has been so many people’s experience during the course of the pandemic. As businesses have done everything asked of them—despite advice from Government often chopping and changing—they have bent over backwards to find new ways to serve their customers and to keep their own businesses afloat. We should all be thankful.
Some 2.8 million people are employed in retail in our country. As the Union of Shop, Distributive and Allied Workers points out, retail is one of the few sectors that regularly offers flexible opportunities for workers to balance their work alongside caring commitments they might have. Yet, incredibly, there is no Government industrial strategy for the retail sector to work with business to increase wages, skills and productivity. We have allowed an imbalance to be formed where bricks and mortar businesses are at a significant disadvantage to online retailers—online retailers whose warehouses typically attract considerably less business rates and, indeed, may not even pay corporation tax in our country.
One in seven shops remain shuttered after the lifting of pandemic restrictions, with the north of England seeing a higher proportion of closures. A British Retail Consortium survey concluded that business rates were a factor behind two in three shop store closures in the last two years. That cannot be allowed to continue. It should alarm this House that the Office for National Statistics business impacts survey data suggest that 330,000 business, responsible for over 800,000 jobs, are at risk of closure in just the next three months. Even a fraction of those losses will be deeply felt in all our communities.
Some 99.8% of businesses in Lewisham are small and medium-sized enterprises. They are the lifeblood of our high streets and they support our local community, and many have suffered during the pandemic. Does my hon. Friend agree that the Government’s plans to remove temporary support are an unfair cliff edge that could see many viable small businesses go under?
I know my hon. Friend is a keen supporter of businesses, including the Kirkdale Bookshop on Sydenham’s high street and Billings butchers. She is a fine steward for the people of Lewisham West and Penge. I cannot offer expertise on the shopping behaviours of all hon. and right hon. Members—[Laughter.]—but some of our shopping behaviours changing does not mean that our high streets should not have a positive future. There is scope for fresh ideas and a renewed relationship with our high streets, but without easing the pressure of business rates for next year, many shops, including many carrying debts from the pandemic, just will not make it. That is why action is needed now.
Four hundred businesses in Brent are at risk. Our high streets have the most independent shops compared with any other high streets in the UK. Does my hon. Friend agree that it is so important that the Government reach out and help to support businesses?
My hon. Friend is absolutely right. She speaks about businesses in Brent, but that could go for so many other constituencies, high streets and town streets across our country. We want businesses to thrive and power our recovery and for every village, town and city across the UK to feel the benefits of a stronger and more resilient economy. Diluting ambition or postponing new thinking comes at a high price for businesses and jobs.
In Wales, the Welsh Labour Government have helped 70,000 businesses, which will not have to pay any rates until next year, whereas in England over the summer, the support was scaled back. Does my hon. Friend agree that there is a stark contrast between Labour in power supporting business and the Conservative party?
My hon. Friend is absolutely right. The Labour Government in Wales ensured that there would be no business rates at all for the retail and hospitality sectors in Wales for this financial year. That is in stark contrast to the Conservative Government in Westminster, who pushed ahead with restarting business rate bills in June this year.
What is decided in this place has huge implications for businesses, from the kitchen-table start-up to our high streets, industrial parks and commercial giants known across the world. That is one of the reasons it is so worrying that, at this crucial time, the Prime Minister and the Chancellor concocted a new jobs tax to arrive in the spring. Despite all their election promises to cut national insurance contributions, they are actually raising them against the strong advice of businesses and trade unions.
The Conservative Government’s actions will make each new recruit more expensive and increase the costs to business. The decision to saddle employers and workers with the jobs tax takes money out of people’s pockets when our economic recovery is not yet established or secure and only adds to the pressure on businesses after a testing year and a half. When all other costs are going up—the costs of energy and of supplies—these tax rises are only hitting them harder.
My hon. Friend is making an excellent speech. Does she agree that the tourism and hospitality industry has particularly suffered over this period and has had its support taken away? Many travel agents are land-based businesses that do not have the demand coming back because people are still unable to go on holiday. Do they not need additional support, such as a business rates cut and a reversal of the additional tax on them, because they cannot afford to employ people any more?
I thank my hon. Friend for that intervention and I know that he is a staunch supporter of businesses in Headingley, Otley and across his Leeds North West constituency. The Government should not break their promises to voters—that should be a given—and he is right to mention the tourism sector, which is so important to so many of our constituencies, whether we represent cities, towns or villages. That is why the decisions of the Labour Government in Wales to support the retail and hospitality sector during this difficult time were so welcomed by businesses in Wales.
One of the ways that the difference is being felt by people living here in England is through increased levels of debt, which is why I find it so remarkable that the Money and Pensions Service is looking to reduce the funding for face-to-face debt consultations at a time when, because of the lack of support in the economy, people find themselves going further and further into debt. Does my hon. Friend agree that the Money and Pensions Service should look at that again?
My hon. Friend is right to make that point. I have had constituents raise concerns about cuts to money advice, for example, through StepChange, the charity based in Leeds. This is linked to the fact that a lot of the funding comes from banks and, due to the formulas set by Government, the funding that goes into debt advice charities is falling at a time when inflation is going up and there is a risk that interest rates might go up, and all the rest of it. She is right, and I hope that Ministers have heard those concerns, which I expect will be echoed by Members across the House.
“to make sure that the businesses of this country can continue to flourish I am announcing today a package of measures cutting business rates further…particularly for SMEs to help…stimulate the high street.”
Labour welcomed the Government’s review of business rates, which was formally launched 15 months ago, four months into the pandemic. They were right to make the decision to start the review. Businesses, even during those difficult times, found the time to make submissions, and they did so in good faith. The Government promised
“final conclusions in Spring 2021”,
so they are already overdue, and now there is news that the review may be pushed even further into the long grass.
I am afraid I cannot, but I am interested in whether the hon. Lady will come on to her own proposals for reforming business rates, which she announced at her party conference. I welcome at least a first stab at some reform, but I have a question. She would use the digital services tax, but as I understand it, the multinational agreement on the issue means that that tax will no longer be allowed—it has to be scrapped as part of the corporation tax deal. How does she propose a sixfold increase to a tax that cannot exist?
I will come on to those points. It is great that Conservative Members are asking for advice, because we have plenty about how to level the playing field in taxes for businesses. I will come on to points about the global minimum rate of corporation tax, because that is how we can help to level the playing field.
The Chancellor must now complete the review and make the changes that the Government have promised. It would be quite astonishing if the Treasury had time to cost up the Prime Minister’s vanity yacht, yet no time to fulfil its pledge on something as important as reforming business rates.
The Minister may argue that everything has changed because of the pandemic. He would be right: everything has changed, including for businesses. The unfairness in the system has been enlarged, not narrowed, during the past year and a half. Almost 180,000 retail jobs were lost in 2020, according to the Centre for Retail Research, while some online retail profits have soared.
Fundamentally reforming business rates is more important now than ever before. I am sure that Members on both sides of the House would welcome confirmation from the Minister that the Government will take the radical action required, which is exactly what businesses are urging them to do in next week’s Budget.
Last week, 42 trade bodies wrote to the Chancellor making clear their view that
“in their current form, our business rates system is uncompetitive…and unfair.”
“Sky high business rates are closing stores up and down the country and preventing new ones from opening.”
Does my hon. Friend agree that our retail centres face a very serious situation? Even thriving retail centres in towns such as Reading, which has the major retail centre for central southern England, are being affected. In our borough, 1,200 small businesses are currently receiving business rates support, which is unheard of. I encourage my hon. Friend to address that point. Does she agree that it is a serious issue?
I thank my hon. Friend for speaking up for businesses in Reading that are struggling because of the unfair system of business rates. I expect that, like many other businesses up and down the country, they talk about the unlevel playing field and the unfair competition whereby some businesses pay their business rates—and corporation tax, if they make enough money—but their main competitors are paying a lower level of corporation tax because they have no shop fronts and might not even be registered for corporation tax in this country. That is not right for businesses in Reading, and it is not right for businesses in any of our constituencies.
As the Federation of Small Businesses points out, unlike other forms of business taxation, business rates are a tax that
“hits firms before they’ve even made a pound in turnover”,
let alone in profit. The CBI says that business rates have
“literally become a tax on investment.”
The Union of Shop, Distributive and Allied Workers explains that the crucial jobs and services provided to our local communities are under threat.
In each of the last four Conservative Party manifestos, there has been a promise of action on business rates. How many businesses and shops have needlessly closed as a result of the dither and delay in delivering on those promises? In 2011, the Conservative Government brought in Mary Portas to work on ideas to transform the fortunes of the great British high street. Her frustration with Ministers a decade on cannot be dismissed. She has said:
“It’s shameful that they have still not readjusted their thinking on how Amazon and the delivery giants should be paying equivalent rates of tax online…Their slowness in understanding, their tardiness, is ridiculous."
We agree. Labour is unapologetically pro-worker and unapologetically pro-business. We believe in helping businesses large and small, start-ups and the spin-offs from our universities, all of which can provide exciting new growth for the future. In the everyday economy, the fate of shops on our high street matters.
If the Conservative Government will not make these reforms, the next Labour Government will—and more. My core principles are to tax fairly, spend wisely, and grow the economy. That is why Labour will scrap business rates as we know them. We need a much fairer system. Labour will incentivise investment, promote entrepreneurship and efficiency, reward businesses that move into empty premises, and help our high streets to thrive again. We will ease the burden on the bricks-and-mortar businesses, and especially on the smaller businesses. Our party is on the side of entrepreneurs and the communities who want to do something different—who want to start a business and get on in life.
If Labour were in government today, we would freeze business rates next year and extend small business rate relief. We would pay for easing that burden on businesses by raising the UK digital services tax. We would ensure that online companies, including Amazon, which have thrived during this pandemic and made bigger profits than ever were paying their fair share too. But we know that more fundamental reform is needed beyond just one year, and so, in government, Labour would scrap business rates entirely and replace them with a fairer system fit for the 21st century.
We welcome the backing of the G20 and the OECD for a global minimum rate of corporation tax for multinationals. Labour supports its being set at the 21% originally proposed by President Biden and US Treasury Secretary Janet Yellen, which would have done more to level the playing field between online giants and retail stores and small businesses; but even at 15%, as watered down by the British Chancellor, the global minimum rate of corporation tax will bring in substantial amounts of money that could be used to ease the burden of property taxation on our high streets and for our small and start-up businesses. That is a model of fair business taxation, and that is what a Labour Government will do.
Today’s Opposition day debate on business rates is important for businesses and for our country’s economic recovery. It is about so much more than rates and multipliers: it is about business growth and opportunities in all the places that we are sent here to represent. It is about what we as a country buy, make and sell.
I thank the hon. Lady for giving way again. She is being very generous. If I heard her correctly, she is going to scrap business rates in the next Parliament. Business rates bring in about £30 billion a year. How will she make up that shortfall? What will be the replacement system to bring in that £30 billion a year?
The Chancellor would have a lot more money to play with if he had gone ahead with President Biden’s proposals for a 21% global minimum rate of corporation tax. There are choices in politics, and this Chancellor chose to water down the 21% proposals to 15%. As a result, he has lost £5 billion or £7 billion. We would have used that money to reduce—[Interruption.] We will use that money to reduce the burden of business taxation, and I hope that the Ministers will stand up today and say that they will use the global minimum rate of corporation tax to ease the burden on high streets and small businesses. That is the choice that a Labour Government will make, and we will hear shortly whether it is the choice that this Government will make. [Interruption.] You are not doing anything! The Minister says that we are still short of money, but this Government made the choice to water down proposals that would have brought in £15 billion a year. They made that choice because they are not interested in levelling the playing field on taxes.
In four manifestos now, the Conservatives have said that they would ease the burden of business rates. If the Government want advice ahead of the Budget, they can look at the speech that I wrote for our party conference in which I set out what Labour would do. Instead, they propose to kick this into the long grass and to do nothing to help our high streets and our small businesses. A Labour Government would ease the burden on our businesses and help to create a level playing field with a system of property taxation that asks the retail giants with warehouses and out-of-town centres to pay a bit more, to ease the burden on our small businesses and high streets. That is the right thing to do.
The Budget should be about recovery. The cost to businesses has been going up, supply chains have been disrupted and costs are spiralling as a result of the Government’s unwillingness to invest in gas storage and the skills of British workers or to take any meaningful action to deal with the chaos that has been created. What is the answer from Ministers? A jobs tax and an increase in business rates next spring. Our high streets have been paying a high price for Government inaction for too long. The case for fundamental reform has been made by businesses, by trade unions and by Labour. This is now about the Government’s priorities and their political will. Will they ask more of those online giants, or will they leave the burden of business taxation as it is today, falling on our high street businesses and small businesses? Those are the choices that the Government can and must make in the Budget. We have set out the choices that we would make. It is now time for the Government to act on business rates. Those choices will be available next week, and I hope that the Government will take them.
I am grateful to the Opposition for using today to raise such an important matter for Members on both sides of the House, and I welcome this opportunity to debate it. In that spirit, let us start with where we can agree.
We absolutely agree that British businesses are hugely important to our high streets and communities across the United Kingdom. I have seen this in my first few weeks as the Minister for industry, speaking to and visiting businesses and business representatives up and down the country. I have seen it over my four years as a Member of Parliament, as all other Members will have done, discussing how small businesses can thrive and how, although high streets are changing, they remain the linchpin of our local communities. More broadly, I have seen it as the son of a sole trader who spent 40 years in business in his local community. To take the shadow Chancellor’s point about first jobs, I have also seen it as somebody who had a job on the high street in Chesterfield with an estate agent and who spent his dinner hours stocking a newsagent’s so that they could continue to trade.
Secondly, we can agree that we have been through an exceptionally difficult time. The pandemic impacted every single one of us at an extraordinary time of our lives, necessitating changes in the way we live, work and play. None of us had anticipated any of this prior to March 2020.
If the hon. Gentleman does not mind, let us just work out where we agree before we start talking about where we might not do so.
We did all this together as a nation and as communities, because we knew how important it was to get our society through these dark times. We can also agree that businesses faced particularly acute challenges. The challenge of 2020 and early 2021 was unprecedented for businesses. They had to close for periods, they were unable to trade in some instances, they had to change the ways in which they did business very quickly and then they returned to work. I am sure that everyone in the House—I know that the shadow Chancellor shares this view—has been humbled, as I have been, by the resilience of workers and entrepreneurs to keep their businesses going. They are the ones who have been straining every sinew on construction sites, serving us in shops and delivering vital goods. They have demonstrated an incredible level of resolve that we have never seen in peacetime, ingenuity and flexibility that we have never dreamed of and resilience that should make us all proud.
More broadly, we can also agree that business taxation requires review. That is why the Chancellor announced a review of business rates; it is why we have consulted on numerous changes to the existing scheme, although this was not acknowledged by the Opposition; and it is why the Valuation Office Agency is undertaking the latest revaluation, which will take place in 2023.
I am sure it has not escaped the Minister’s attention that the Government have been in power for 11 years. This is not only about the coronavirus emergency. Businesses in my community, in Manor Park and Runcorn Shopping City, are desperate to move forward. Business rates are a broken system. Stop the dither and delay and get on with it—not another review but solid reform based on income going through the door. That is fair.
We have seen the Government make many changes over the past decade that have improved business conditions in this country and allowed businesses to continue to progress, and we will continue to do that. I know that ministerial colleagues will come forward with proposals in due course.
On the motion before us and the shadow Chancellor’s speech, it would be churlish not to recognise the extraordinary amount of support that the Government have already provided to business. Even as someone who prefers to focus on outputs and achievements in our country, I accept that the past 18 months were necessarily about inputs and keeping businesses going until they could properly trade again. To do that, we offered hundreds of billions of pounds of support from the taxpayer to provide one of the world’s most generous and comprehensive economic responses to the pandemic.
We enabled 1.3 million employers across the UK to furlough up to 11.5 million jobs. There were 1.6 million Government-backed loans, representing more than £79 billion of support. We paid out almost £14 billion in support to around 5 million self-employed people. We cut VAT for the hospitality and tourism sector. We waived billions of pounds of business rates for long periods at the height of the pandemic. And we brought in a range of regulatory easements to help businesses.
I ask for the Minister’s advice. One of the most frustrating things about business rates is when a business asks for some flexibility and it is difficult to speak to the right person. A number of businesses in my constituency want some flexibility on their business rates. They go to the council, but the council only collects the tax. They go to the valuation office, which only does the valuation. There is no system to appeal against business rates at the moment. Will the Minister address that in his speech?
I understand the hon. Gentleman’s concerns, and I acknowledge the challenge. There is always a balance to be struck. This level of detail is perhaps slightly away from the motion, but I would be happy to discuss it separately.
We should not forget all the support that we have provided over such a sustained period, and we should not strip this debate of that context. Now our task is to make sure that businesses, large and small, have the opportunity, the talent and the ability to unleash their full potential, which is where I am afraid I will have to diverge again from the Opposition and their remarks today.
The extraordinary circumstances of the pandemic required an extraordinary response from the Government, and we delivered that extraordinary response, but it did not come without cost. Whether we like it or not, providing such a comprehensive and decisive economic response has dramatically increased public borrowing. Government debt has exceeded the size of the UK economy for the first time in more than 50 years. It was an appropriate and proportionate strategy, when we were faced with a real and immediate crisis, to support businesses and allow them to ready themselves for when the recovery came, but over the medium term it is clearly not sustainable to continue borrowing at these levels.
I hope the hon. Lady will be able to answer that point.
The Money and Pensions Service is changing the system that it operates by moving towards having call centres rather than having as many face-to-face appointments for people who are struggling with debt. This has been an incredibly difficult year and people are finding themselves in higher levels of debt, so will the Minister comment on the support that is available to help people who are struggling right now? Will he be speaking to the Money and Pensions Service about its decision to move towards remote consultations rather than face-to-face consultations?
I am grateful to the hon. Lady for her contribution, and I know she has a clear interest in this. I fear it is going slightly away from the discussion we are having, but I am happy to have discussions with her separately. I know that my colleagues will continually communicate with and consult people in this important policy area.
As I was saying, whether we like it or not there has been a large change in public borrowing. When we were faced with the crisis, we took action. But as the pandemic starts to subside, it is vital that we make moves to return to a position of strong and sustainable finances. Ultimately—this is what the Labour party never wants to acknowledge, and it can state that it is unapologetically pro-business as much as it wishes—there can be no strength for businesses in a country where a Government have lost control of the public finances. The shadow Chancellor invited us to look at her speech at last week’s Labour party conference, which I did; she made much of the “everyday economy”. Businesses in the everyday economy will never be able to thrive long term on policies that have no regard to the macroeconomic situation or no clear way of being funded. Neither before nor in today’s debate has the Labour party provided any meaningful explanation of how it will pay for abolishing business rates.
I am sorry, but I am going to make progress.
Entrepreneurs who take difficult decisions and face challenges every day on how to make their businesses grow will never fully succeed in a country that refuses to acknowledge that similar national choices are ultimately required. Back during the pandemic, we were clear that support was necessary, but we were also clear that it would be temporary. Even so, we have helped and we continue to help businesses during this recovery period.
We have been open for business for months now but we continue to help businesses recover: business rates relief will continue well into 2022, which is even acknowledged in the motion, meaning that eligible businesses will not have paid rates at all for 15 months and will have had a significantly reduced rate for a further nine months; there has been more than £2 billion of discretionary business grant funding to local authorities, including a top-up of nearly half a billion pounds, which is open until March 2022; we have had the recovery loan scheme, which allows businesses in the UK to continue to benefit from Government-backed finance until the end of the year; we have our pay as you grow scheme, which gives bounce back loan borrowers the flexibility to tailor repayments; and we have the lower rate of VAT, the £600 million start-up loans fund, the super deduction and an extension of the commercial lease evictions moratorium.
Just as they do naturally, British businesses are getting back on their feet and doing what they do best. We know that this is a difficult time and has been an extraordinarily difficult time, but I pay tribute to businesses for being able to get going again. A strong growth story is being shown by the level of unemployment, which has fallen for six months in a row and is now below 5%— lower than the levels in France, America, Canada, Italy and Spain; one of the fastest recoveries of any major economy in the world; business confidence being up; and job vacancies growing for eight consecutive months and at a record high.
The Labour party will never admit this, but the UK is a great place to do business. We have some of the lowest corporation taxes in the G20, the kind of lean regulation that puts us in the global top 10 for the ease of doing business and a highly skilled workforce. Next year, my right hon. Friend the Secretary of State will publish an enterprise strategy, which will set out how we want to revive Britain’s spirit of enterprise and help more people start and scale a business.
The Minister mentions the reduced rate of VAT, which has been welcomed by a number of businesses in my constituency. May I invite him to comment on whether the Government have considered an extension to that? Many businesses in my constituency have informed me that that reduced rate has allowed them to invest in not only their businesses, but their employees’ wages—I am sure that is something we can agree on.
The hon. Gentleman is tempting me to make policy in an Opposition day debate, but I will step back from that, given that it is well above my pay scale.
Let me come back to the point about the UK being a good place to do business. It is easy to see why the UK is consistently home to one of the largest and most resilient economies in the world. All of this underlines precisely why the UK has long been a great place to do business and will continue to be so. That is why we are seeing so much excitement from the rest of the world, with investors here right now at the global investment summit. That shows just how attracted companies are to the business-friendly environment that we have.
The Government’s track record shows that we have been there for small and bigger businesses since the start of the pandemic; that we are now here to support them through the recovery; and that we will continue to create the conditions that will allow them to grow, thrive and innovate in future, as part of a dynamic, flexible market economy that supports private enterprise, backs entrepreneurs and recognises the importance of wealth creators in local communities.
The first building block for doing that—Labour Members should listen, given that they are all so keen to intervene—is to ensure that we have a strong and sustainable economy, built on strong and sustainable public finances and with policies that are funded. By working together, we can then continue to ensure that Britain is the best place in the world to do business, both now and in future.
It is a pleasure to contribute to this debate. I commend the Labour Front-Bench team for bringing it to the House and the shadow Chancellor, Rachel Reeves, for her well-informed and often thought-provoking speech. As a lot of Back Benchers wish to contribute to the debate and much of the substance of the motion concerns devolved matters, I shall not detain the House for too long.
It is important that we recognise the fundamental part played by small businesses in our economy—the economy of the United Kingdom and all its constituent nations. I am reminded that many years ago my good friend Alasdair Morgan, who served with distinction in this place and in the national Parliament of Scotland, addressed a meeting about economic regeneration and pointed out that there were twice as many small businesses in his constituency as there were unemployed people. This was in the days when the unemployment figures were not fiddled, so the numbers were a lot higher than they are just now. Alasdair pointed out that if every small business could be helped to take on less than half a full-time employee, we could abolish unemployment. Instead of helping small businesses to increase their workforce, though, we are far too often faced with a Government who take steps that seem deliberately designed to make it harder for small businesses to take on additional employees.
Small businesses face structural problems that bigger businesses do not. Although we hear a lot of rhetoric from the Government about supporting small businesses, a lot of the specific difficulties that they face seem to get ignored. I confess that I never appreciated one such difficulty until several businesses in my constituency contacted me independently of each other. What they all had in common was that they had been taken to the cleaners by dodgy suppliers, because the suppliers knew that even a small business that is not much bigger than a single-person operation is regarded as a business and so has no consumer protection. Tech companies and telephone supplies companies—which tended to be the worst, by the way—understood that they could fleece small businesses and get away with it, whereas if they tried the same tactics with individuals, the consumer protection laws, although not ideal, would protect those individuals from being too badly damaged. A couple of long-established small businesses in my constituency were brought very close to closure purely for that reason. The Government might want to look into that.
Business-to-business enterprise and business-to-business commerce tends to operate on the basis that it is between two equal partners, but when a two-person or three-person operation deals with a multinational corporation with a turnover of billions, that is not an equal contest or an equal deal. Perhaps, in the same way as we need to protect individual citizens from being taken advantage of by bigger suppliers or businesses, we need to do more to give smaller businesses some kind of consumer protection.
Smaller businesses are much worse affected when there is a recruitment crisis, as there is just now. The Government blame covid, but everybody knows that Brexit is as much to blame as covid. If a company has a workforce of 100 and loses two or three people, it still has 97% of its operation; if a company has a workforce of three and loses a person, that can make the entire business unsustainable and unviable. The clear message that we get from small businesses and organisations such as the Federation of Small Businesses is that the labour shortages we see in key sectors of the economy just now have not yet been adequately addressed. I am not convinced that the Government have even adequately recognised them.
It is all very well to say, “Isn’t it great to have all these vacancies?” but if the people who are looking for work do not have the skills that are needed for those vacancies, or if there are reasons why they cannot take on the work in those jobs, it is quite possible to have very high vacancy levels. Businesses are struggling because they cannot fill those vacancies, and, at the same time, a lot of people are struggling because they cannot get a job that fits with their commitments or responsibilities outside the workplace.
Much of the debate so far has focused on the retail sector, partly because the traditional picture of the high street is one where there is a lot of retail activity, most of it generated by small independent retailers. That is a great thing to have in a town, but how many of us could walk down any high street in our constituency today and see more than half of the existing businesses independently owned and run, never mind locally owned and run?
There has been a huge shift in ownership in the retail sector, as there has been elsewhere. The sad thing is that, when times get tough, a big business, which has no soul in the community, is likely to clear out, whereas the smaller business, locally grown and locally based, is much more likely to dig in and to hang on in there for as long as it possibly can. That is why we will often find that, when things get difficult in the retail sector, the small locally owned shops will try to stay open for as long as they can, whereas the big chains will sacrifice 100, 200 or even 300 properties and the jobs that go with them at the stroke of a pen without a thought to the devastation that they are leaving behind.
I have a particular situation in Glenrothes. To the best of my knowledge, it is the only town in the United Kingdom where the high street is shut at night. A stroke of genius by the then Conservative Government in the 1990s when the development corporation was being wound up was that they sold what the Americans would call a shopping mall to private owners, and it has been struggling ever since. We do not have a night-time economy because the high street is shut. People cannot get in. If they are in and the doors are locked, they cannot get back out.
In spite of that, there are still some remarkable success stories in the Kingdom shopping centre in Glenrothes. I was delighted to pay a visit to Jessop Jewellers to congratulate the owner on their 50th anniversary in the one premises in the town. I can highly recommend their products as well by the way, although I may have made a mistake by telling the owner that I am now only a few years away from my ruby wedding, so I think she may be going to contact Mrs Grant about that in the not too distant future.
A lot of the focus today has been on non-domestic rates. Clearly, because that is devolved, the specific way in which the rates system operates in England does not apply in Scotland. For a number of years, the Scottish Government have had the most generous and most supportive non-domestic rates scheme anywhere in the United Kingdom. We had small business support, whereby small businesses did not pay any rates at all for years, before it was introduced in other parts of the United Kingdom. We still have greater support for our small businesses than any other part of the United Kingdom.
My message to the Government, and indeed to the Opposition should they be in a position to move into government in the near future, is to continue to support small businesses in England, whether through supporting the domestic rates scheme or something else. That then generates additional funding through Barnett consequentials for the devolved Parliaments in Scotland, Wales and Northern Ireland and allows those Parliaments to support our small businesses at the same time.
We could quite easily have filled this Chamber with a debate that would have run for four or five days if we had invited every Member of Parliament to come in and describe the exact situation for businesses in their constituency. I know that there have been a number of contributions along those lines from Labour Back Benchers already today, but the simple fact is that the party that used to be the party of small business is not recognised as that any more, certainly not by small businesses themselves. I suspect that, in their heart of hearts, it is not recognised as a party of small business by its own members and its own voters. It has lost sight of the part that small businesses have played in creating the economy that we have just now. It has lost sight of the fact that, without small businesses, we cannot have a successful and sustainable economy. [Laughter.] I can hear the laughter from the Conservative Back Benchers—that sums up their attitude. It is the attitude that a lot of small businesses feel they have received from this Government over the past two or three years—[Interruption.]
As my hon. Friend Huw Merriman has just said, it was not laughter; it was astonishment. I have been in business for 30 years. Not every businessperson I meet votes Conservative, but the vast majority do, and I have not heard anybody say what Peter Grant has just said—that the Conservative party is no longer the party of small business. Not only that, but there is huge support for what this Government have done over the last 18 months in supporting those businesses through the worst crisis to hit business in the last 100 years.
If the hon. Member does not understand what the Federation of Small Businesses thinks about his Government tearing up their manifesto promise and increasing the burden of national insurance, if he does not understand what small businesses are saying about the impact that Brexit has had on them, if he does not understand that the energy crisis that the United Kingdom still faces, with massively increasing energy costs that then increase costs for every single business on these islands, and if Conservative Members do not understand that all those things are purely the result of their party’s policies, each and every one of which is devastating for the wellbeing of small business, then we have to wonder why on earth they are still in Government.
Perhaps we could mention one example of this Government helping small business: the requirement for outsourcing agencies, such as National Highways and Network Rail, to put a third of all their contracts into the hands of small businesses. Indeed, Network Rail is up to that third already. Is that not a tangible example of this Government doing something to support small businesses?
Well, it was not quite the way that things were done with all the personal protective equipment contracts and other covid contracts. Of course, there is a better way to do it than that. Rather than telling the health service that a fraction of all its privatised contracts have to go to small businesses, why not say to the health service, “Don’t privatise it. Do it yourself.”? The public would get a better, cheaper and more efficient service, which is exactly what we are seeing with the NHS in Scotland since the SNP banned the privatisation of our services all together.
If the Conservatives want to see an example of how to support small businesses, they do not need to look beyond these islands. They need to look beyond this Chamber, beyond this city and beyond this country to some of the other countries that are supposed to be equal partners in this Union. If they do, they will see examples of Governments—I commend also some of the Welsh Government initiatives mentioned earlier—who do not just talk the talk on supporting small business, but who walk the walk as well. That might be something to do with the fact that those Governments are not run by parties whose coffers are swollen to obscene degrees by people who have made their money running big businesses—very often, big businesses that ran small businesses into the ground.
The linkage between the impact of non-domestic rates and other taxes and Government policies on small businesses is clearly complex, so it is not possible to say that simply changing the non-domestic rates scheme on its own will fix the problem. I, for one, do not like the idea of using an imaginary property valuation as a significant feature in deciding somebody’s tax bill, whether it is an individual’s council tax or a business’s non-domestic rates burden. The tax base is far too narrow on far too many businesses. We are taxing things that might have been the right things to tax 500 years ago, but which are not the right things to tax now.
Most importantly, as was mentioned by the shadow Chancellor, Rachel Reeves, we have to move to a situation where the tax is due and is paid where the profits are made. We cannot have companies that make substantial profits on the hard work, diligence and expertise of people in the United Kingdom, but where all the profits are magicked away to some offshore tax haven so that no tax is ever paid. The Government have it in their hands to change that. They need to move a lot quicker to do that. Doing so would not only help to plug the gap in the public finances, but would give small businesses a chance to compete on fair and equal terms with the bigger competitors. I can say, for a lot of the small businesses in my constituency, let them compete on equal terms with the big boys; they will take them on and, as often as not, they will beat them, and they will make sure that profits from that success are reinvested in their local communities.
As with so many other things that we debate in this Chamber, I have indicated the successes that the Government of Scotland have had with the powers they have. Others have referred to some of the successful initiatives that the Government of Wales have introduced with the limited powers that they have. With increased powers for those devolved Parliaments will come increased success and increased wellbeing for the citizens of those nations. The only way that small businesses in Scotland will have a long-term, secure and profitable future is when the decisions that affect them are taken by a Government who are accountable to the people of Scotland and to no one else.
It is an absolute pleasure to contribute to this debate. I thank the shadow Chancellor for laying this motion, which gives us an opportunity to talk about business and the support that we have for business in our communities. I will certainly be doing so, as well as speaking to the reform of business rates, which I have had a long interest in since coming here in 2015.
Before I do so, let me respond to Peter Grant. I had the pleasure of being up in Edinburgh for a few days over the weekend, and it was very sad to see that not just Jenners on Princes Street but shop after shop had closed. In my view, that demonstrates that across the UK changing trends are causing people to shop differently, which is having a huge impact on our high streets. It is down to this Government, and indeed all Administrations, to support their high streets. That does not just mean expecting the shopping of the past to return, because it will not, but looking at how we can turn these units back into retail, which gives more footfall within the cities and towns and helps, not least, those who are perhaps older and do not wish to live as far out. Those boarded-up shops may be the responsibility of the changing trends or may actually have something to do with the hon. Gentleman’s own Administration as well.
I am very pleased that my hon. Friend enjoyed his trip to Scotland. Many businesses in my constituency are facing the challenges imposed by the Scottish Government because of their policy on business rates, but does he agree that the particular challenge they are facing is the continued uncertainty around another independence referendum, which is putting huge pressure on their plans and their economic prospects?
I do agree. Interestingly, the CBI has talked about the challenge on business rates because every three or five years there is a revaluation and business does not have the certainty it needs. I think in Hackney there was a change of about 46%. The CBI recognised that the uncertainty of this type of big-shock fiscal events can absolutely impact business’s ability to plan and invest in the future. A referendum on the whole future as to whether Scotland will be part of the UK, its biggest trading partner, must surely have some impact.
On the hon. Gentleman’s point about Princes Street, did he manage to make it along to the new, shiny, marvellous St James Quarter, where a number of the businesses he talked about relocated to? He is making a point in isolation about one street in the country, not the entire nation, and it is possibly unwise to draw too many conclusions from one street.
The hon. Member makes a fair point, because two out of four businesses have relocated to St James Quarter, with the interestingly shaped top that is called things that I would not repeat in this Chamber, but Jenners, a classic department store that is not relocating, is a good example of a casualty of changing trends.
It would be absolutely churlish not to recognise what this Government have done over the past 18 months. I represent a constituency in Sussex that is absolutely reliant in employment terms on small businesses in leisure, tourism and retail. The constituency I represent has businesses that were among the 750,000 that were given a business rate holiday. Furlough is not just keeping the employees going but making sure that they are returning back to the businesses. Some 15,300 workers in my constituency, about a third, were reliant on furlough to keep them going. When I went round to visit those businesses last summer—it had been very difficult for us to meet, but the changes in the summer allowed us to do that—they were absolutely of the view that had it not been for the Government’s support, their businesses would have shut down and their employees would have been made redundant. Everything that I am about to say has to be put in the context of the fact that this Government have absolutely supported business. I absolutely refute the point that the Conservative party is no longer the party of business; it absolutely is and it will always have the champions of business on these Benches.
In the six years since I have been a Member of this place, I have always championed the need to reform business rates. If we look across the G7, we see that the UK has the largest property taxes. They are a tax on jobs and a tax on business, and I would like to see them reformed. Over those years, we have had a number of reviews, and we are waiting on one at the moment. I would dearly like to see business rates replaced. The CBI is right when it says that business rates are a tax on business and jobs and lead to uncertainty. I see the shadow Chancellor, Rachel Reeves nodding her head.
What is also important is that I stand for fiscal responsibility. Something has to come in place of business rates that brings in the exact same yield. With respect to the shadow Chancellor, when she was pushed by my hon. Friend Kevin Hollinrake on how the £20 billion-plus that business rates bring in as revenue would be replaced, she was only able to give a figure of about £7 billion. That leads to a big deficit. That means there would either have to be public spending cuts to make up for the shortfall, or we would have to go into further debt, which is no good for business or the individual.
My hon. Friend makes the point about the shortfall if we get rid of business rates. Those on the Opposition Benches also talk about the national insurance rise, which is raising £36 billion to go into the health service and social care. Is he as unclear as I am on how they would replace that money, as well?
Yes, I am. I do not want to go too off-piste in terms of the subject of this debate, but I certainly recall that when the Labour party rightly injected funds into the NHS back in 2001, it also agreed that national insurance was the best way to fund it. I have heard it said that wages are not growing at the same rate now as they were then. Actually, if we take a look back, we find that they are growing faster now, which seems to refute that argument.
When it comes to the business of running Government, we have to take these serious decisions and make sure that we do not continue to see this country going ever further into debt. When it comes to business rate replacement, which I would advocate, we need to look at something that brings in the same revenue, and I am left with the view I had previously: we can look at a tax on turnover or sales, but ultimately the simplest way of dealing with it is looking at the VAT system. We all know full well that business rates end up getting channelled all the way through to the individual consumer in any event, but some consumers do not have to pay, particularly with the online side of things, because business rates are not levied there as much as they perhaps are on the high street.
We should level with the public and say, “At the moment, business rates are coming on to your bills, but they are a tax on jobs.” If we were to put the tax instead on VAT or other forms, it would be a lot more transparent, a lot fairer and, most of all, it would make it economically viable for businesses to expand their space and employ more people. If we did that, we would level with the British public and see further investment from business. I do not agree with the motion, although I agree with the Opposition for bringing it forward. It is great that we are debating the ideas, and I welcome that from those on the shadow Front Bench, but I gently prod that ultimately we have to see a payment of like for like.
Both the Minister and Huw Merriman have said that they really want to do something about business rates, and they have—[Interruption.] I know the hon. Member said he wanted to do it. They are challenging us to come up with a way of replacing the revenue, but they cannot come up with one themselves. I want to know what their plan is as an alternative. Perhaps the Minister or his colleague, depending on who is winding up the debate, will tell us the Government’s plan for doing so. As the shadow Chancellor, my hon. Friend Rachel Reeves said, this has been going on for a very long time. The Government have been talking about reviewing business rates for a very long time.
I ran a business for many years. Twenty years ago, I took a lease out on a commercial premises, and I was staggered by how much the business rates were. In fact, many in this Chamber pay business rates on their constituency premises. I had to pay for that, whether or not I had any income coming in the door. That fixed cost of doing business is the challenge. We face inequity in the system of business taxation, which is why it is so out of date and needs to be replaced when set against the competition from the online giants, as my hon. Friend the Member for Leeds West rightly said earlier.
More than 450 businesses in the borough of Sefton alone face going out of business as a result of problems that have been exacerbated during the covid crisis. They need action on business rates for the longer term, not just now. They need the kind of support that the Welsh Government are giving, as we have heard, to be extended by the Government now. They need longer-term reform and, in the end, the scrapping of the business rates system if they are to thrive.
The Minister made much of international comparisons. I wanted to intervene on him; it is a shame he did not let me. He named a number of countries that have significantly lower business property taxes than this country, so any business in this country that wants to compete with them faces an immediate competitive disadvantage. In Germany, business property taxes are four times lower than they are in this country. For our manufacturers to compete with that is very difficult, so they face a significant disadvantage.
On the question of how that would be paid for, I ask the Minister how other countries can raise business taxes with much lower property taxes. What can we learn from them? We are so far behind because we have the highest business taxes of any major country in the world, according to the OECD. That has to be addressed.
It is absolutely right that my hon. Friend the Member for Leeds West has brought this debate forward today, especially as businesses face huge debts as a result of covid. The last thing they need is a business rates bill dropping through their door and adding to that pressure. I will give a couple of constituency examples. MSP is in the events and creative sector and is owned by my constituent Lisa Richards, who makes the point that she now has huge debts. The problem is that the support during covid was simply not enough to avoid those debts going up—it is a story being told again and again. Businesses such as MSP need ongoing support. I hope that we will hear something next week to deal with that in the immediate term, but they need longer-term support too, which is why the overhaul of business rates is such an important part of the picture. Unless they get that support, they will struggle to play their part in the recovery.
There are high street businesses such as Coulson Flooring, which is run by another constituent who has to pay his business rates whether he is making any money or not. It is a thriving business that was hit hard by covid, just like everybody else on the high street. He needs that longer-term support too. That is the case for all those 450-plus businesses in my borough alone and for businesses in all our constituencies up and down the country, so I am delighted that we are taking the issue forward as a party.
Frankly, to those Conservative Members who say that their party still has the mantle of the party of business, I say that I think every business in the country knows the Prime Minister’s attitude, which was summed up by one short four-letter word. That is a topic he has returned to again and again. They collectively need to take a close look at themselves, the behaviour of the man who leads them and his attitude towards business and towards supporting our entrepreneurs, our wealth creators and those people who provide employment for so many of our constituents.
It is essential that an alternative system is found. My hon. Friend the Member for Leeds West has come forward with some credible alternatives for an interim approach that uses an increase in the digital services tax as a windfall and, in the long term, looks at the international approach to corporation tax and an overhaul of that. To answer the question of how we replace the £30 billion that Kevin Hollinrake mentioned, we have to work with the business community and the trade unions. We have to work in partnership to find alternatives that are workable in this country and internationally. That has to be the way forward.
At the moment, we have a curb on investment as a number of business groups have made clear. It is something that Mike Hawes of the Society of Motor Manufacturers and Traders has pointed out. He has said that the current arrangements are “overdue an overhaul” and that
“anyone wanting to invest in new equipment—especially green technologies”,
which are crucial to the car industry—
“sees their business rates rise” which
“is a perverse disincentive to investment and productivity improvement”.
He puts it so well. It is true in manufacturing, and it is true in retail and in our high streets, which face competition from the out-of-town and online giants.
It is essential, if we are to recover for those high streets, businesses and communities, that we see this turned around. Such an approach has the support of the trade unions. With the Union of Shop, Distributive and Allied Workers, as the union representing shop workers, in exactly the same place as the shop owners, we potentially have a partnership. The only part of that partnership missing at the moment is for the Government to step up.
“More than half of business investment is subject to business rates;
this unfair, uncompetitive system has become a tax on investment that simply isn’t fit for purpose.”
He has also said:
“The Labour Party should be applauded for grasping the nettle and putting forward a pro-growth, pro-investment package of reforms that will reflect our green ambitions, spur the economic recovery”.
That is the right way forward.
We have business looking at us and saying that we were the party that came out of the conference season—and this is the word of the Federation of Small Businesses, not mine—with a “pro-business” agenda and proposals that would help the economy, not the Conservatives. I want to see from the Chancellor next week some concrete details about the package the Minister talked about very nicely in his speech, otherwise it is our approach to which the business community is increasingly going to look. It is our approach that people will be voting on in the next general election, and unless this Government act, we will when we come in.
It is a pleasure to speak after Bill Esterson, and I agree with him that this conversation should be had with the engagement of business in order to find a solution. I have tried to do that over the last few years when we have debated this issue time and again. Of course, I have been in business for a number of years—three decades—and the No. 1 thing any business wants is a fair and level playing field on which to compete. That is not just good for businesses; it is also good for consumers. The best thing to drive down prices and drive up service is a healthy, competitive market—a free market. I draw the House’s attention to my entry in the Register of Members’ Financial Interests; our business did occupy a couple of hundred shops up and down the country.
There is no doubt that business rates were built for a completely different era. In this conversation, we talk about how business rates are actually making life difficult for some businesses, and that is true of course. They are additional costs that they could do without, but the No. 1 thing driving problems for businesses is consumer choice—the choice to shop online rather than to shop in the high street. Nevertheless, I think everyone in this Chamber wants to make sure the high street stays lively. Of course, it will change—its make-up will change—and we still want to see a high street at the end of it, but the problem is driven principally by consumer choices. As I say, the business rates system was built for a completely different era, when pretty much every part of commerce and trade was done from a premises.
The other thing to say is that in the whole discussion of business rates reform, we talk a lot about retail, and of course retail is particularly hard hit by some of the changes to consumer demand, but this is not just about retail. It is also about the competition of restaurants and takeaways—often with the dark kitchens of Deliveroo which, again, have a different business make-up—and a different proportion of turnover that is basically driven by business rates. It is the same in my own business, the estate agents and lettings business, where we increasingly have competition trading online, and in plenty of other sectors, not least the travel sector, so we cannot look at this issue purely in the context of retail.
I welcome the fact that the Opposition have brought forward this debate and have made some suggestions about how we reform, because we need to look at some suggestions. The Treasury has of course suggested in its consultation a couple of things we would look at—a land value tax, which it pretty much discounts, and VAT, which I will talk about shortly—but it seems to centre around an online sales tax. That would be problematic, further complicating what is an already very complex tax system. An online sales tax is also a crude measure, because on the face of it, it will not have input and output, which VAT does, dealing with different profitability margins that businesses operate on, so I am not sure it could even work. We already have a sales tax in this country, VAT, and it would be far simpler to use VAT as the mechanism.
The Opposition suggest lifting the threshold for paying business rates for a temporary period and then increasing digital services tax sixfold. That can only be a very temporary solution, because digital services tax has to be eradicated when we introduce the multinational agreement on corporation tax. Also, when this Government brought in the digital services tax to try to level the playing field, Amazon added it straight on to prices for consumers. Those on the shadow Front Bench might know that, because of the way the digital services tax had to be drafted, it does not even apply to Amazon’s direct sales; it applies only to marketplace activity, or third-party sellers. So the Opposition proposal does not even hit Amazon’s direct sales by using a digital services tax. For all those reasons I think that is therefore the wrong thing to do.
It is right to look at this issue completely freshly again, but I do not think property taxes are a solution for replacing the £30 billion of revenue. I thought my hon. Friend Huw Merriman was very clear in his comments, although others might not agree that he was clear. The simple way to deal with this issue is to add about 3p to VAT, increasing it from 20p to 23p. That would, on the face of it, increase the take from VAT to about £20 billion a year, which gets us quite a long way towards replacing business rates revenue; and it is also simple for retailers.
John Lewis has three sales channels: not just high street and online, but click and collect as well. With an online sales tax, John Lewis and everybody else would have to decide how a product is sold and apply online sales tax just to those sold online or by click and collect, depending on how we draft the legislation. That would be hugely complex, whereas VAT is brutally simple: everybody pays the same rates; everybody is on a fair and level playing field; it is simple and quick—although I accept that none of this conversation is easy, as simple and easy are two different things.
The final area we should look at in this conversation is far more controversial: the VAT threshold. Businesses currently do not have to register for VAT until their taxable turnover reaches £85,000. We should look at reducing that significantly. In Germany the threshold is £20,000. The £85,000 threshold is a real disincentive for businesses to grow. Lots of businesses stay under the threshold as they do not want to register for VAT because of the costs to the business. That distorts the marketplace. We should have a full review of how VAT operates in terms of its level and replacing business rates with it, and look at the threshold, because that would overnight take away one of the major blockages to productivity in our economy—it stops businesses recruiting extra people, taking on extra premises and opening longer. Indeed, many businesses close for a portion of the year to try to stay under the threshold.
This fair and level playing field needs to be in place right across the economy. Keep it simple, keep it stable; that is what businesses want. I hope the Minister on duty and Treasury Ministers look at this and take a broader view of how we get our businesses taxes right.
It is a pleasure, as always, to follow the thoughtful contribution by Kevin Hollinrake.
I start by congratulating HullBID on winning its recent ballot. It had an 87% turnout from businesses in the city centre, and it won the vote by 81%. I am sure that every Member of this House would be delighted to have those percentages. I congratulate Kathryn Shillito, the executive director of HullBID, on her amazing work throughout the pandemic, offering advice, grants and financial support for businesses right in the city centre.
That support and advice has been needed more than ever, because we see from the data that more than 197 businesses in Hull West and Hessle are at risk, despite the excellent work that is going on in the city. Our independent retail scene is thriving. As some of the bigger names are moving out, we are home-growing our own talent and our own businesses in our own city. Trinity market is full of exciting independent shops, as is Hepworth arcade, and we were shortlisted for the Great British High Street awards just last year—I am sure they will look on us favourably again next year.
Although there has been some disagreement during the debate, there has been so much consensus, and there seems to be a consensus that the business rates system that we have at the moment is simply not fit for purpose. In my city of Hull, the high street has moved from one location to another, but the rating system for business rates has not moved with it. One part of the city centre used to be the thriving area where everyone shopped. It is now completely different, yet businesses there still pay higher business rates, because those rates are set on an old-fashioned and outdated model. That must change.
I want to mention Ye Olde White Harte pub in Hull, which I highly recommend to everyone. It has been there since 1550, and it is famous for its “plotting room”, where the people of Hull apparently got together to decide that they would turn away Charles I when he came to try to enter the city, thus starting the English civil war. I have no reason to start a civil war right here, right now, but I do want to point out the unfairness of the business rates and taxation system that that pub is under. When I visited, its landlord told me that its rates are based on “fair maintainable trade”, which has been criticised for lacking transparency, being open to manipulation and being biased in favour of pub companies and against landlords. I wrote to the Minister about this issue, raising the case of the White Harte, and I hope that he will review my letter again.
However, if we waited for the Government to fix the problems in Hull, we would be waiting an awfully long time. As I proved with my story about Ye Olde White Harte, we have nothing in my city if not an independent and fighting spirit, so we are coming to our own solutions and solving our own problems. I have been working closely with businesses in Hull to champion the city as the capital of home working and remote working, so it was very disappointing to read on the front page of one newspaper that the Prime Minister and the Chancellor want everyone to go back to the offices where they worked before. That seems to me to be re-establishing the inequality that existed previously. Why?
Why do people have to go back to the cities and offices in which they worked before? Why not look elsewhere, at other parts of our beautiful country? Look at the city of Hull, where we have the fastest broadband and affordable standards of living. We are right by the ferry—if someone wants to pop off to Holland, they can do so for £40 return on P&O—and we can get a direct train down to London in only two and a half hours on Hull Trains’ bespoke open railway service. We have everything we need to offer remote workers. We have a much higher standard of living than they would have if they were living in a tiny little flat and commuting. No offence to my colleagues from London, but the prices in London are extraordinary. Living in a small flat in London and getting stuck on the underground, or living in the city of Hull, in a beautiful, much bigger house, with the Yorkshire countryside and the beautiful east coast on the doorstep—which would we rather?
Why are the Government insisting on sending everyone back to the office as they were before? No—send everyone instead to cities such as Hull, where they would be welcomed with open arms. They can give our high streets a boost by coming and living in our city centre, they can spend their money in our city, and they can truly achieve a bit more equality than the Government are offering. So I hope we are not going to return to business as normal. The first step in not returning to business as normal is to look at reforming the business rate system. It is outdated, it does not work and it is unfair to businesses in my constituency.
I hope that while we look at changing things for the better, we also change our attitude towards remote working, because it really can offer the skills revolution and the opportunities we need for cities like mine. For too long in cities such as Hull, if people wanted a good job, they had to leave. Remote working changes all that. People can have the job of their dreams in the city where they grew up, sitting behind a laptop.
I completely agree with the hon. Lady that we need jobs in other parts of the country, but does she agree with me that the big risk of remote working is that younger workers will not develop the skills, knowledge and connections that they do when they are in the workplace? They, at least, need to be able to go into the office to develop them.
I am so pleased the hon. Gentleman raises that point, because it brings me on to my second point. He is absolutely right and we are solving that problem here in the fine city of Hull by working with businesses to set up remote working hubs. We are looking at hotdesking situations and bringing together people who wish to have remote jobs, but who do not wish to be isolated forever in their bedrooms away from everybody else and not have those opportunities to network. We are looking at changing part of Princes Quay shopping centre into an area where we can have remote working desks based around particular industries, so that people can network, get to know each other and mix while still working remotely for different companies around the country or even around the world. This is happening right now. We have turned the old HSBC bank on Whitefriargate, owned by businessman Gerard Toplass, into the most stunning place to work. We will be setting up hotdesking opportunities right there in that old bank, utilising the assets we have in our high streets into new resources—resources for hotdesking and remote working, and bringing more residential living into the city, too.
To do all that, however—I could enthuse about this idea for hours, but I will stop now, Madam Deputy Speaker—we need to start with a fundamental reform of business rates. To give Hull a chance to help itself, we need fair taxation for everybody.
It is a pleasure to contribute to this debate. I think we can all agree on the immense importance of our small businesses and high streets that we represent in our constituencies, but I must also add shopping parades. We do not hear a lot about shopping parades. They are not necessarily as glamorous as town centres, but I must say that the small businesses that operate in the shopping parades in Ipswich have played an absolutely vital role, particularly when restrictions were in place and people could not go far from their home. They worked incredibly hard to support many of my constituents during that key phase and I would like to mention them here today.
The word “churlish” has been used a fair bit in this debate so far, by the Minister and other colleagues, and I think it is correct to use that word. Overall, £407 billion has been spent by the Government, much of which has been to support businesses through the furlough scheme, which we think has protected about 12 million jobs. In my constituency alone, £7.6 million has been given in restart grants to support local businesses in my town, so I think it is a slight difference to say, “Well, maybe it could have been slightly better in this way or that way,” and try to pretend that we have not done anything significant. I believe this Government have moved heaven and earth to support businesses in my constituency.
One hon. Member said earlier in the debate that the Conservatives are no longer the party of business and that every businessperson he talks to is disparaging about the Government’s support. That is simply not the case. Time and time again I talk to constituents and businesses in my constituency, some of whom have never actually supported the Conservatives before but are now open to doing so precisely because of the support that has been provided. That is not to say that there are not businesses and people out there who are not so happy with the support. That is true. These are conversations that I have had—[Interruption.] These are real conversations, so I do not know why you are laughing at me. [Interruption.] Sorry—I know I must refer to Members through the Chair. I got slightly animated there; I am very, very sorry. I have been getting better at that but sometimes standards slip.
I would like to talk about the town deal, which has been incredibly welcome for many hon. Friends and hon. Members. Ipswich, of course, has benefited from getting £25 million through a town deal. There are 11 different projects as part of that town deal that are making, and will make, I believe, an enormous difference to our town centre and to many businesses. As part of that—I mentioned shopping parades—there is a £2.5 million local shopping parade regeneration fund to support our shopping parades. We have buildings that have collected dust and have sat there empty that are being brought back into use. I cannot believe that about £100,000 had to be spent removing pigeon poo from one of those buildings, but that is the case. One of those projects will bring the Paul’s silo building in Ipswich back into use. The old post office building will be brought back into use because of the money supported through the town deal.
If the Labour party was this new pro-business party, despite the fact that it was not long ago that many of you were going into a general election supporting a Communist to be Prime Minister—[Interruption.] Of course, it was not long—[Interruption.] Was he not? [Interruption.] Was he not? But, of course, I forget—“under new management”. I do not believe that the Labour party can credibly claim to be the party of business, but why is it that you pour scorn on the town deal, which is providing over £3 billion—
Over £3 billion has been provided through the town deal programme—something that I believe all hon. Members should welcome. This is vital support, but time and time again, scorn has been poured on it and I think that is regrettable, because I would have thought that the town deal is something that we can all get behind and look at all the different ways that it supports local business.
I would like to talk about crime and antisocial behaviour, which is something that I think must be tackled if we are to support businesses on our high streets as they recover from the covid pandemic. I mention this with respect to both the night-time economy and the fact that, time and time again, I come across and am contacted by businesses in Ipswich who are victims of persistent crime, including shoplifting and everything else. This is a blight on their existence, so we need to have, in my view, a zero-tolerance approach to this kind of, as some people might call it, “low-level antisocial behaviour and crime”, but there is nothing “low-level” about something that happens week after week and seriously affects your ability to operate as a business. We need to have that zero-tolerance approach.
We are getting 20,000 extra police officers, but I would like to see a review of the national police funding formula. In Suffolk, we are getting between 50 and 60 new police officers, but, if we were funded fairly, it would probably be closer to 100. We need to look at that and at the night-time economy, because we do have a problem in Ipswich with crime. We also have a problem with drugs—drug-dealing and drug-taking—in the town centre, particularly on a Friday and Saturday night. The concern that I have is that you do not have that positive police presence and positivity, so negative influence can come into the town centre. Tackling crime and antisocial behaviour in our town centres must be part of supporting businesses as they recover from the covid pandemic.
I support the opportunity to debate this, and I agree with many hon. Friends that business rates should be looked at. We should strive for a level playing field, and we are so far away from having that level playing field. We see businesses that are rooted in our constituencies, and could not be more local and more important to the functioning of our local communities, unable to co-operate.
I think we should strive for a situation in which our town centres continue to be key retail centres. There may be some that are more residential, but we should not give up on a significant component of town centres and city centres being retail. For that to happen, we need a serious look at business rates. I was pleased to see that beer duty may also be looked at, which would be vital to the hospitality sector in Ipswich.
I do think that there needs to be less churlishness, because the Government have provided unprecedented support for businesses throughout the pandemic. Over £400 billion has been spent—£7.6 million in Ipswich alone has been spent on restart grants and furlough—so we need to have that debate. There needs to be an appreciation that at some point there will have to be a reckoning when it comes to public finances.
It is one thing to say, whenever there is a spending commitment or a debate about spending money, that we will always agree to it, but we cannot at the same time vote against the move to withdraw restrictions, which at least gave businesses in my constituency an opportunity over the summer to breathe and recover from the trauma that they have experienced throughout the pandemic. There are challenges ahead when it comes to covid, but I think it was right to allow businesses to recover in the summer period.
I am extremely glad that the shadow Chancellor moved the motion before the House, because the support of our small businesses has to be one of the principal priorities of the Government at this time. I know that enormous challenges are crowding in from every side as we continue to tackle the covid crisis while dealing with fuel price rises, supply chain shortages, NHS backlogs and the work to decarbonise our economy, but a thriving economy built on private enterprise will do more to help us to solve all those problems than anything else, so it is imperative that the Chancellor does all he can to support and promote small businesses over the next few months.
Given its well-publicised proximity to Heathrow airport, my constituency plays host to many companies in the travel sector. I am particularly concerned about the future of the sector. Despite announcements in recent weeks, there are still considerable restrictions on people’s ability to travel that continue to limit the opportunities for trading in the sector, not least with continued uncertainty about the sector’s prospects as covid cases continue to soar.
The travel sector underpins so many other aspects of the UK economy, both in attracting visitors to our cultural and hospitality sectors and in enabling us to seek out new markets elsewhere, so it must be a strategic priority for the Government to provide it with support. Travel industries will not thrive after the end of the pandemic if they do not receive assistance now.
I call on the Government to extend furlough to all the sectors that are still trying to operate under restrictions, but particularly to the travel sector. They also need to redesign the furlough scheme to enable companies to use it to part-pay their employees. When I spoke to travel companies at a surgery in my constituency recently, they highlighted that at the moment they have enough trade to pay their previously full-time employees to come in for two or three days a week to man the phones, take bookings and research options. They would love to have furlough to be able to pay them for the remainder of their time, just to keep going while there are still so many restrictions and so much uncertainty. Furlough was conceived as an all-or-nothing system, but it really needs to change in order to continue to support businesses that are still affected as we come out of the pandemic.
The retail and hospitality sectors were badly hit by the pandemic. Many are now struggling to reopen fully, thanks to supply chain and labour market issues. The Government need to look again at their immigration policies and think about how they can be better designed to support our key high street industries as we emerge from the pandemic. More than that, they need to complete their promised review of business rates and think again about how they are levied on town centre businesses.
There has been a lot of discussion this afternoon about what might take the place of business rates—I think that there was some freelancing from some hon. Gentlemen on the Tory Back Benches about what might replace them. They are no longer in their place, which is a shame; I was very interested to hear about their suggestions to increase VAT, although I think I am right in saying that the Conservatives committed in their 2019 manifesto to not doing so.
I fear that I may have anticipated the hon. Lady’s next line, but how much faith can we place in a Conservative manifesto promise not to increase tax these days?
The hon. Gentleman has indeed anticipated exactly what I was about to say, which is that, given that in their 2019 manifesto the Conservatives committed themselves to not raising VAT, we can surely expect it to be raised at some point before the end of this Parliament. Nevertheless, if the Government are not sure how to proceed on business rates, I can give the hon. Gentleman a fully fleshed-out policy from the Liberal Democrats. We believe that a commercial landowner levy would be a much fairer way of raising local revenue, by taxing landowners rather than business owners. We urge the Government to consider that option.
Small businesses provide about three fifths of the employment in the private sector, and it is vital that those jobs are supported. The Government’s recent announcement of a rise in national insurance payments will deter small businesses from creating the new jobs that are so badly needed and limit the expansion of companies seeking to offer new products and services, including those that offer the innovation we need for the green economy. The Government should limit the impact of this rise on the small business sector by quadrupling the employment allowance from £4,000 to £16,000. That would enable a small business to employ five full-time workers on the median UK salary without paying any national insurance contributions, and would incentivise and support new businesses as we make the transition towards a net zero carbon economy.
The UK faces a troubling few months. Covid is not over yet, and a return to normal patterns of life seems likely to be substantially delayed. However, problems create opportunities, and we need to help our entrepreneurs to find solutions and bring them to the people who need them. Small businesses support communities, provide employment and deliver a good society, and the Government need to support them for everyone’s benefit.
It is a pleasure to speak in the debate.
I am blessed in having a great many small businesses in Wantage and Didcot, from those that create medical devices and vaccines to those that clear debris from space. I have more pubs in my constituency than all but seven other Members. I have high-quality farms—and we must not forget that our farms are businesses too. In fact, I have a huge range of businesses, including the Great British Mead Company. I do not know how many superhero film fans there are in the House, but while there may not be many similarities between me and Chris Hemsworth’s Thor character, being able to drink mead—thanks to the Great British Mead Company —is my one claim to similarity.
I have just issued to my constituents a leaflet reporting on what I have been doing. I have visited more than 300 organisations since I was elected, many of them businesses and many of them on the high street. I have to say to Opposition Members that, time and again, when I visit business people on the high street, they say, “I think the Government have done a really good job in supporting us.” Sometimes they preface that by saying, “I am not a Conservative voter.” The gratitude is real, and I suspect that Opposition Members have heard it when they have gone around their own constituencies—although I do not expect them to acknowledge that here—because the support has been phenomenal. As has already been mentioned, it has amounted to more than £400 billion. People generally think of furlough and the grant scheme, but there is also the money that has gone into the towns fund, the increase in employment support, and the money invested in the start-up loan scheme.
It is true that businesses have had differing experiences of the pandemic, with some doing better than others. It has already been pointed out that businesses in the travel sector have had a particularly difficult time. There are pubs whose regulars have still not come back. However, there are signs of optimism and steps in the right direction for all these sectors.
It is an interesting feature of this debate that the one thing on which we all seem to agree is that the present business rates system is not what it should be and needs to be reformed. That is precisely why the Government are conducting a review of it. The interim report has already given us an indication of what people have been saying about business rates, which is sometimes that they are too high, sometimes that there is too much admin, and sometimes that the reliefs do not seem to be targeted exactly as they should be. There is also the issue of online competition. I am as keen as anybody to see the playing field levelled with companies such as Amazon, but it is not just Amazon that does online sales. There are often very small businesses that do not have the cost of buildings and that might be competing on a slightly unlevel playing field with businesses on our high streets, so we need a system that is not just about whacking Amazon.
As Labour’s motion says, we have six months left of the current review. We are not making a decision this month, and the Government will bring out their proposals. Thanks to the action they have taken in this period, unemployment is lower than expected and GDP is higher. I have every confidence that in the coming months the Government will take whatever action is needed, including on business rates, because they have shown in the past 18 months that people’s jobs and people’s businesses, as well as people’s health, are right at the centre of their decision making.
I am grateful for the opportunity to speak in this debate today on behalf of my small business owners in Pontypridd and Taff Ely. Seeing people returning to our high streets and seeing local shops, restaurants and pubs reopening over the summer to crowds of grateful customers was a blessed relief for business owners and consumers, and I know that it is not just high streets across Pontypridd and Taff Ely that have benefited from an economic boost over the summer. Despite the cautious return to normality taken by the Welsh Labour Government, it has been an extremely difficult few years for businesses across all our constituencies. Much of the hospitality sector had to close due to covid-19 restrictions and other businesses struggled to cope with staff illness, social distancing requirements and, particularly in recent months, the challenges posed by supply chain delays due to Brexit.
I recognise that the Treasury’s support packages such as furlough and the self-employed income support scheme offered significant support to businesses across the UK, but far too many businesses and individuals still did not get the support they needed from the UK Government. They were completely excluded. I would like to draw the House’s attention to the report out today by UK Music, which shows that 69,000 jobs in the music industry were lost as a result of the pandemic, which is almost a third of the workforce. Shame on this Government for failing to step up and support our creative industries.
In my own constituency, people have lost their jobs and livelihoods due to redundancies at GE Aviation and British Airways, and fantastic local businesses in the travel industry such as Ferris Coach Holidays and Edwards Coaches have struggled without any access to tailored support for their sectors. Thankfully, we are seeing brave new businesses in Pontypridd and across Taff Ely opening their doors, including the No. 12 bar, Storyville Books and the Gatto Lounge on our local high streets, but new businesses and those that are more established are still facing massive challenges, especially as they still struggle to recover from the impact of the pandemic. With more and more businesses being undercut by online giants such as Amazon, it is no wonder that small independent businesses are feeling the strain. Small businesses such as those really enrich our local communities, and without them, I fear that more and more high streets will look identical, regardless of where in the UK they are.
Many businesses are also facing the double challenge of increases in the cost of living, from rising energy bills and petrol costs, and increased shortages and supply chain issues. Reducing business rates would be an excellent way to support businesses large and small through what many are anticipating will be a difficult few years. As my hon. Friend Rachel Reeves mentioned, our Labour Government in Wales have led the way on support for businesses throughout the coronavirus pandemic. The relief package announced by the Welsh Labour Government in March 2021 extended the rates holiday for businesses with rateable values of up to £500,000 in the retail, leisure and hospitality sectors in Wales for the financial year 2021-22. In conjunction with the small business rate relief scheme, this has meant that more than 70,000 businesses across Wales have continued to pay no rates at all in 2021-22. But with the end to rates relief across the UK coming up in March, and without funding from the UK Government through the Barnett consequential formula, the Welsh Government simply will not be able to support local businesses in the way they want to next year.
I urge the Minister to think now about the steps he can take to support high streets across the UK, and not just in England. This Government talk a good game about the Union, but when it comes down to it, time and again the devolved Administrations in Wales, Scotland and Northern Ireland are nothing but a distant second thought. I would therefore be grateful if the Minister could update the House on his most recent discussions about support for our high streets with his counterparts in the Welsh Government. Ultimately, it is vital that businesses in Wales are supported through the challenges of the winter and throughout what is likely to be an extended period as we recover from the pandemic. They must not be left behind.
I am pleased that the Opposition have chosen to debate this vital topic, as it is obvious that there are real problems facing our high streets and real challenges facing our businesses across the country. These familiar problems have been greatly exacerbated by the lockdowns over the past year and a half and by competition from online sales, which was the dominant challenge before covid, and by the changes in the way we live, work, shop and socialise.
These changes are also a potential salvation for some of our places and towns. The shadow Chancellor talked about the need for fresh ideas, and she is absolutely right. There have been real innovations in the way our towns look and in the way our businesses work. New technology is making viable again places that were left behind by economic changes over hundreds of years.
The market town of Devizes is the jewel of Wiltshire and the gateway to the south-west, and one of medieval England’s premier places, but it has not been the same since about 1830 because of industrialisation and the flow of labour to the towns and economic centres. Devizes is becoming an economic hub and a viable financial centre once again, largely because of the internet. Largely thanks to digital, we also see an opportunity to prosper for places left behind by deindustrialisation over the past few generations.
I am sorry that Emma Hardy is no longer here, because she made a tremendous speech. She sounded like one of us, talking about the glory of her place and the opportunity that has been created for young people in Hull in recent years, not just because of the wonderful place it is but because of the opportunities of connectivity from new investment in broadband and transport. That is what we need to think about when we think about places. I believe, as I think she does—and as I hope we all believe on the Conservative Benches—that people should not have to leave the place they love to have the life they want, but that does not mean there should not be opportunities to come and go and for information, ideas, goods and services to travel.
Connectivity is vital for our places, so I applaud what the Government are doing to increase access to broadband and particularly to increase access to rural transport. I hope Devizes will benefit from one of the new stations under the restoring your railway fund.
We also need more support to adapt, and I welcome everything the Government are doing, particularly through the Help to Grow scheme, the start-up loans scheme and the super deduction on capital investment, which are tremendous initiatives. The more than £3.5 billion of structural help being provided through the towns fund will spruce up 100 places with tens of millions of pounds of funding.
The community ownership fund to which we committed in the manifesto is now being introduced, and it will support what the hon. Lady talked about: pride of place and allowing communities to take ownership and support local businesses.
It is great to hear my hon. Friend champion the idea of community, and he hits the nail on the head. For our high streets it is about creating a community of the future to which people come not only to shop and to do business but to socialise. That is how to make sure our high streets, like mine in Hinckley, are fit for the future.
My hon. Friend is absolutely right. Of course we want a more diverse and plural high street; it does not need to be all retail. Residential should be part of the high street of the future, too, bringing footfall. He is right to highlight these institutions of belonging, civil society and places of gathering that enable people to come together and work together.
I applaud everything that is being done on spending, but I will say a word on tax. Of course business rates need reform, and there have been many helpful observations and contributions on that this evening. It is right that the Government have effected a reduction in business rates in recent years by raising the employment allowance, which is a significant tax cut for small businesses that I applaud, and it is right that we are reviewing the whole business rates system. I recognise the force of the argument for a digital sales tax and a global corporation tax, which are the right things to explore in the context of the new world of online retail, but I sound a note of caution and echo the point made by the Institute for Fiscal Studies that there is a point at which reducing business rates can actually be harmful. For finite resources such as land or space on the high street, reduced business rates can simply lead to rent increases, as we have seen. So we need to think about a reform that will not simply lead to benefits to landlords, with these not feeding into benefits for those businesses and with increasing inequality, without benefiting the Exchequer. That is not to mention the obvious need to compensate for this reduction in or abolition of business rates, as proposed by the Labour party, which has not yet explained how it would plug that enormous fiscal hole.
Does my hon. Friend agree that there is the potential for a three-level look at this, as we have the high street, out-of-town shopping and online businesses? There are three different categories. My constituency has out-of-town shopping centres that are doing very well, thank you, but the high streets are in a very difficult place. To go back to his earlier point, may I remind him that the hope that railway stations—whether Devizes or Ferryhill—can give to local communities in developing—
Order. The hon. Gentleman has only just arrived and making a long intervention, having only just got here, is just taking up the time of others.
I thank my hon. Friend for the intervention and he is absolutely right in what he says. Of course, the challenge is to get a flexible system that recognises the diversity of our business system, which is why an overall review of business rates is better than some blanket abolition.
It is a pleasure to follow Danny Kruger. I am grateful for the opportunity to speak this afternoon and I want to start by paying tribute to our small businesses across this country, first and foremost those in my constituency, which encompasses the town of Reading, its suburbs of Caversham and Emmer Green, and the separate town of Woodley, all of which have a thriving small business community covering many sectors. People from across the country are probably familiar with the strength of the tech industry in our part of the south-east of England, but, as was mentioned by David Johnston, whose constituency includes Didcot, we share with colleagues in south Oxfordshire a number of other vibrant sectors. We have a strong local university, a strong record on entrepreneurship, the growth of many SMEs and a growing population, with many people relocating to the Reading area, which we welcome. We are a diverse and tolerant community that welcomes people coming in. That is a great strength and small businesses are a great strength of this country, and I want to pay tribute to the shadow Chancellor for her speech today on the importance of supporting small businesses in Labour policy and in that of any political party, just as it should be. I hope the Government listen today to the excellent points that have been made all round about the need to end the current business rates regime and to move on to something much more sensible and appropriate. Thoughtful comments have been made by Members from across the House on that point.
However, at this time, it is fair to say that, despite the thriving nature of many small businesses across this country and in my area, SMEs face some serious challenges. The pressures and difficulties of the current business rates regime are one part of that, but there are many others. It is fair to say, without being overly partisan, that the Government could learn a lot as they look back at the pandemic and at a series of other policy choices they have made in recent times. In my experience, SMEs have suffered enormously in the pandemic. Like many Members from across the House, I have worked hard to try to support them. That support needs to be continued at this time, as we come out of the great difficulties we have had recently.
There are many other problems, some of them self-inflicted, such as the current supply chain crisis, which is obviously linked to the Government’s Brexit deal, and the national insurance rise, which is a tax on jobs, which nobody in their right mind would recommend as an obvious choice. Other challenges include the sudden economic shock of the move away from physical retail, and I want to discuss that later in my brief remarks. There are many other pressures on SMEs, and we need to look at those and think about how we can address them.
There are great strengths to build on. I am not quite going to be able to rival my hon. Friend Emma Hardy in addressing the scale of the benefits of my town, but I will do my best in the few brief moments available. Reading is a booming medium-sized town, with a wonderful town centre and great history. It is an historic market town that goes back to Saxon times, as many people know. It has some wonderful buildings, more conservation areas than many towns of its size and many Georgian buildings. It was where Jane Austen went to school. It has the ruins of a wonderful abbey, which was once one of the biggest in the country. All of those are reasons to locate a small business in Reading, which has a pleasant working environment, history, culture, a fast train and excellent connections to London; the hon. Member for Devizes mentioned the importance of infrastructure to small businesses. We have a lot to build on; however, in my experience many small businesses in my constituency and, I believe, throughout the country are held back by issues such as the current business rates regime.
Let me mention a few other issues that hold back small businesses. There is a real need to look again at the national insurance increase. It is not the right time to do it. There must be other ways for those with the broadest shoulders to pay their fair share for necessary extra health and social care spending.
Education catch-up for young people who have been left behind because of the pandemic is a huge issue. There is a real economic link between that and the success of small businesses, as many young people are employed in SMEs in my area and, I am sure, throughout the country. I hope that the Government will do a lot more on the catch-up funding, which should be far more than something like £1 a day. The US and the Netherlands are spending more than £1,000 per pupil, with much more generous catch-up programmes, and Labour has pledged £14.7 billion for a much bigger scheme.
SMEs play a vital role in our economy and are contributing hugely in my area. There is great scope to build on and develop our historic town centres and to attract more replacement employment as retail contracts a bit. However, in my experience SMEs are held back by business rates. We need to scrap the current system and look at this issue again, and I urge the Government to do that.
I warmly welcome the opportunity to champion everything that small businesses are doing to build a better Birkenhead in the wake of covid-19—from the many cafés and restaurants that gave so generously during the height of the pandemic so that no one went hungry to the All About You beauty parlour, which I opened last summer and which provides dedicated support to people undergoing chemotherapy treatment and pamper days for dementia patients.
Just last week, I had the great privilege of visiting some of the small businesses that are putting Birkenhead back on the cultural map, including Future Yard, a brand-new music venue that gives anything in Liverpool a run for its money—apologies to my hon. Friend Kim Johnson—and Make Hamilton Square, a profit-for-purpose that provides accommodation to social enterprises and promising new artists.
For far too long, my constituents had become accustomed to the depressing sight of rundown high streets and shuttered shop fronts. Although much more work still needs to be done, things are at last beginning change. The small businesses I have mentioned are leading the charge, bringing jobs and investment back to our town and restoring a sense of pride in the place we call home. They are all totally committed to giving back to their community.
For left-behind towns like Birkenhead to truly thrive, the Government must first recognise the profound responsibility that they have in supporting our town centres as we slowly emerge from covid-19. Too many businesses in Birkenhead and across our country face an uncertain future as they grapple with soaring prices, stock shortages, the end to rates relief and the impending hike in national insurance contributions. In my constituency alone, nearly 150 small businesses are in danger of going under—a terrifying statistic for a town already suffering from some of the UK’s highest levels of poverty and joblessness.
Things do not have to be this way. As the shadow Chancellor has said, reforming an outdated and regressive business rates system is essential if the Government are serious about honouring their promise to level up and build back better. The current system is just not fit for purpose, placing an unbearable burden on small and independent businesses while tech giants and multinationals hide away billions in offshore bank accounts. By freezing business rates and increasing the threshold for small business rates relief, we can lay solid foundations for our economic recovery and get the economy firing on all cylinders once again. That is why I will support my party’s motion later.
I warmly commend the Labour party for bringing to the House for discussion the situation for high streets and small businesses, because it really is an issue that cuts across all our communities and all the places we represent. I am conscious that the situation in Scotland is different, as are many of the powers, which are reserved and devolved, so I shall focus more on the common issues that need resolution. I am also particularly supportive in general terms of the Labour motion. I think that we can all agree that business rates as they stand are not fit for purpose anywhere and that they need urgent reform. Worldwide, retail has experienced a disruptive event and an extreme transformation. Some of the points that were made earlier trying to draw distinctions and conclusions from local events miss the mark. This is a global phenomenon that we are seeing. The high street is undergoing a considerable evolution. I was struck by the shadow Chancellor saying that covid had changed everything. I slightly disagree; covid has accelerated trends that were already there. Although I do not think that it has changed quite everything, it has certainly accelerated the changes that we need to make as legislators to deal with the challenges that we are facing.
I commend the OECD for the research that it has done into the comparative analysis of different places and of how retail and consumer habits are changing worldwide. It is a very useful analysis. I was struck by the reference made by Danny Kruger to the 1830s and how this is long-term change. In the same way that we saw industrialisation change retail habits, automation is changing several industries right now. What we have seen during covid is a massive step shift in the automation of retail. The fact is that a number of high street chains do not have a business model that will stand the test of time, because consumers are moving faster than their economic models. Covid has sped that up. Likewise, during covid, many of us have realised that soulless out-of-town retail developments are not a necessity in our lives when there is online retail. That trend will not stop; it will accelerate and continue.
Traditional retailers in the high street and in city centre developments are facing massive change in consumer spending and consumer trends. Let me share, or perhaps over-share this: if my dad has learned how to buy his pants online during covid—I am sure the House is delighted that I have shared that fact—retailers will need massively to change the space, the footprint and how they operate. That will have massive knock-on effects for central Government and for local government revenues and finances, and all sorts of other issues besides.
I think that we would all agree that it is the small, unique, interesting local businesses that are rooted in the community and that pay their taxes locally that will be the most resilient, as they give us a sense of place and a sense of community. It is surely incumbent on us to examine what we are doing that is holding them back and what we are doing that is militating against them.
We are seeing changes locally in Stirling, as we are in all of our communities. We have vibrant high streets in Callander, Bridge of Allan, Dunblane and Stirling City. We have a great retail offering and a great night-time economy as well, but we also have too many empty shop units. That is a problem that we must address, because we are not where we need to be. It needs to be addressed urgently if we are to avoid a deteriorating situation and to create an improving one. Many of the answers are local. I would like to see much more muscular use of compulsory repair orders by local government and more intervention against poor landlords where poor landlords exist. Business rates, as I have said, need urgent reform. There are no easy answers and I would caution that, as much as we are supporting the Labour motion, I am not sure that it has all of the answers.
We also need to stop doing things that are holding the high street back. That cuts across planning policy and local government. It also cuts across planning policy nationally in Scotland and in England. Issues that we can address in this House include proper consideration of VAT and business taxation generally and the lack of a workable digital tax, on which, much as I would acknowledge the work that has been done, we still have not seen sufficient results in the real world. We have tax avoidance on an industrial scale on occasion and that militates against the interests of our public Exchequer, against the interests of small and local businesses and against the interests of our high street.
We also need to be honest about the problems facing small business, including labour shortages and supply-chain problems occasioned by Brexit. Some Members earlier pretended that those problems do not exist or minimised their impact, and that really does not help an intellectually honest discussion.
We also need to be far more strategic and not do silly things that have hurt our businesses rather than help them. We need to be more strategic about how the high street operates. We have stepped forward on that in Stirling with the Stirling City working group, of which I am very supportive, listening to local people and local businesses and giving more resources to co-ordination and a longer-term strategic framework. We have seen, on occasion, too many well-intentioned but stop-start, short-term efforts of support which have often focused just on prettification or easy answers—on more bins or clean-ups of the high street, rather than on the long-term, strategic, macro issues that we need to address.
We have great businesses in Stirling and great businesses in Scotland. There are great businesses across the high streets that we all represent. In fact, we have a common endeavour to try to boost them and to stop doing things that are harming them. That is in all our interests.
I thank the shadow Chancellor, my hon. Friend Rachel Reeves, for ensuring that we are having this debate on our Opposition day, as it is important to my constituents and certainly to the businesses in my constituency.
Supporting local businesses means supporting the workers, families and people in our communities. Local businesses are not just the backbone of our economy; they are also often the depictions and representations of many towns and cities across the country. In Bradford, we are incredibly fortunate to have a rich profusion of local businesses, especially in the hospitality industry, which not only caters for the locals in Bradford, but brings in so many others from afar. However, during the pandemic businesses have struggled, and those in Bradford West struggled extensively due to a longer period of local lockdowns. Their compassion, even in the toughest of times, did not wither away, and I witnessed that at first hand. While businesses were closing their doors, they were also opening their hearts by supporting those who were most in need, especially our NHS. I want to put on record my gratitude to them during those times.
But gratitude is not enough. Those businesses need the Government to support them during times of uncertainty. Although we are grateful for the support that has been forthcoming, it does not cut far enough for the businesses that are struggling now. The pandemic and the gradual effects of Brexit are signs of the pressures that local businesses are facing every day. We have heard about the queues of lorries that we expected at Dover following Brexit, but what this Government’s poor planning did not assess was the lorries without drivers that would have an impact on food and fuel shortages. This afternoon, I spoke to Regal Foods, a medium-sized business in my constituency, which really was affected by the situation.
Although a long-term strategy is needed to support local businesses to help to rebuild our economy, we can help sooner by freezing business rates. Labour plans to freeze business rates until the next revaluation. That will benefit sectors such as retail and hospitality that are hit the most by this tax. Hospitality businesses that are struggling to find workers and have only recently had to endure the increase in VAT to 12.5%, while barely being able to remain afloat, need such support. Labour also plans to cut business rates and increase the threshold for small business rates relief from the current threshold of £15,000 to £25,000.
During the last financial crash, the Labour Government actually cut VAT to reinvigorate the high street, by ensuring that people went there and that money started to flow through the shops again. We hear from this Government yet again about raising value-added tax, as the Conservatives have always done whenever they have been in power. Does my hon. Friend believe that a VAT cut, rather than an increase, would help the high streets?
I absolutely agree. The Government have gone back on their manifesto pledge not to raise taxes. Giving small businesses a discount on their business rates for 2022-23 would be a much-needed lifeline.
As I said at the start of my speech, supporting local businesses is about not just business, but the entire community. There are lots of wedding halls in my constituency. During the pandemic, I recall inviting the Prime Minister up to visit some of them. A wedding hall in my constituency is not just about the wedding hall itself and the people running it. It creates other jobs: the waiters, the florist, the photographer, the caterer—the list goes on. The pandemic really has had an impact on the local economies of these places. The Madisson, the Rio Grande and the Mirage in my constituency—those are the big ones, but there are lots of small ones too—have really borne the brunt of what happened during the pandemic. Those wedding halls are huge. Anybody who has been to an Asian wedding will know that we do weddings really well, with a large amount of people in attendance. Despite being able to put social distancing measures in place, the venues were not allowed to open and they really suffered.
In the same way, cutting business rates for SMEs will not only support the local economy, but counteract deprivation, poverty and regional inequality. I have the fastest growing rate of child poverty in the whole of Yorkshire and Humber. These measures go a long way in helping people to keep the bread on the table and keep their household going. We already know how much the universal tax credit cut will impact on my constituency.
A report from WPI Strategy in 2020 found that constituencies like mine are ranked third highest in the need for levelling up, as a direct result of a regional inequality impacting on business rates. The report found that it was even justified to refer to this regional inequality as a “northern shop tax”, as hard-working businesses in these areas, from SMEs to multinationals, were more likely to struggle with setting up shop because of business rates. More worryingly, analysis by Labour using the latest Office for National Statistics business impact survey reveals that 332,000 businesses are at risk of closure in the next three months, accounting for 828,000 jobs. In my constituency of Bradford West, 232 businesses are at risk, which will have a devastating impact on so many families who are already struggling.
I recognise the issues that you have raised in terms of the sectors that are likely to be impacted by the changes and because of the pandemic, but do you also agree that the brewing and pubs—
Order. Would the hon. Lady please address the hon. Lady as “she”?
I apologise. Does my hon. Friend agree that the brewing and pubs sector has been hard hit by the pandemic and is set to be hit again by the proposed rises in VAT, beer duty and business rates? In Liverpool, the greatest city in the world, the sector contributes over 6,000 jobs and £160 million to the local economy. Does she agree that supporting this sector is vital in securing jobs and boosting our local economies?
I thank my hon. Friend for her intervention. While I absolutely agree with all the points she made, I am afraid I will have to debate with her whether Liverpool or Bradford is the greatest city in this country.
The world is changing, and not just with Brexit and covid; we had 11 years of austerity that went beforehand. We were not ready for the pandemic and now we are seeing the brunt of that. Our high streets and local businesses need support based on these modern challenges. Many of us have mentioned the emergence of the gig economy and everything going online. All these things need a new system. An age-old tax system that excludes digital businesses and burdens those SMEs on the high street is threatening the prosperity of our economy.
Labour is the pro-worker, pro-business party. The Conservatives, having already broken key election promises by raising income tax on workers, are now failing to act to cut business rates to support local business. North Parade in my constituency was shortlisted for the British high street awards. Recently, IK Collection, an award-winning tailors in Westgate in my constituency, kitted out the late Sir Tom Moore in suits. These are the kinds of businesses that make up the fabric of Bradford West. There are many other such businesses. It was featured in a programme, because when it came to the pandemic these businesses stopped tailoring suits and started tailoring scrubs. These are the kinds of businesses that now need our support. When we needed them, they stepped up. I urge the Government: now it is our turn to return some of the love and support that they need not just to survive but to thrive. Only when they thrive will places such as Bradford West also thrive.
Having listened to the speeches from the Labour Benches, I have put Bradford, Liverpool and Hull at the top of the places that I would like to visit. I would caution Conservative Members about some of the things they have said about the constituencies that they represent. When they talk down their constituencies they are not giving a very good advertisement to visit these places. They may be beautiful and there may be fantastic people living there, but it is no good if the Member of Parliament is standing there talking about the night-time economy, antisocial behaviour and what a bad visit it would be to go to the high street.
To me, the high street is the lifeblood of the British community. I have childhood memories of my mother dragging me around the shops to get shoes from the local shoe shop when we had to go back to school. I remember, when I was older and got into music, buying my first vinyl from the local record shop. As I got older and wanted to go out, I went out and got the latest fashions from the menswear shop. I remember that high street thriving, full of people and bustling. When I went back there a couple of years ago—I took my wife there once—I could not believe the transformation of that small high street that I remember so well. The banks had closed down and the cashpoints were concreted up, as people did not use them anymore. It was full of derelict shops.
I was interested to hear from my hon. Friend Alex Davies-Jones. I remember venturing sometimes down to her constituency to go shopping. I remember the Woolworths being there, and I remember the Marks and Spencer at the top end of Taff Street as well. They have gone. I worry about those high streets, because I believe that the health of a constituency and a community can be judged by the high street.
In the constituency I represent, there are three major high streets: Risca, Newbridge and Blackwood. If anyone wants to visit Blackwood, it has a number of unique boutique shops. It has the Maxime cinema. If anyone wants to see the new James Bond film, “No Time to Die”, they will not find a cheaper ticket in town than at the Maxime cinema in the middle of Blackwood. We are not without our problems, however, and they come down simply to business rates. We have all heard from Members on both sides of the House that there must be some sort of reform. I have been in the House for 11 years. From the moment I came into this House, there have been campaigns on both sides of the House to save our high street. The former Chancellor George Osborne talked about tax simplification, yet here we are 11 years later, and still we face the problem of business rates, and they are still not being reformed.
I was interested in those contributions from the Government Benches that said that the Labour party in opposition must come up with an innovative solution to sort the business rates problem. I say to those Members: they are in government, so they have to come up with the solutions. I see some Government Members nodding to say that they have come up with solutions, and I will come to the points they raised. The simple fact is that we all know business rates need to be reformed.
I want to talk about a company in my constituency: Tidal’s Store, a fantastic family-run business that sells high-class, high-quality furniture. If any Member of the House wants to deck out their flats in London, or their houses—or, dare I say, for some Conservative Members, their mansions—they could not do better than going online and buying from Tidal’s Store. It is a fantastic shop in the middle of Blackwood. However, I went there three years ago, and the problem it had was business rates. At the top end of the town, it pays £330 a square foot for business rates. Go further down the town and businesses pay £300. At the bottom of the town, businesses pay £275 a square foot. They are all on the same high street. It does not make sense to me. To top it all off, there is a business park just below the high street where businesses pay just £50 a square foot. Those businesses taking advantage of those business rates are not the small, family-run, innovative companies, such as Tidal’s Store; they are the huge companies that can afford the business rates in town. It seems extremely unfair.
I touched on this issue with the Minister earlier. I went to the council. In fairness, I will give credit where credit is due to Caerphilly County Borough Council, its chief executive Christina Harry and their leader Philippa Marsden. They know this is a real problem for their high street and have been very supportive, but there is nothing they can do. All they do is collect the tax, yet if there is a complaint, it is Caerphilly Council that is taking the blame. I then went to the valuation office. It said to me, “Oh, we just set the rates, Mr Evans. We do not do anything about appeals. We cannot change the rate. The rate is set in stone.” Then I thought, “I will write to the Minister.” The Minister at the time, as a matter of coincidence, was the now Chancellor of the Exchequer. He wrote to me saying that there was nothing he could do. Is anything more frustrating than seeing a family-grown business, which I want to thrive, crippled by business rates that sometimes cost more than its rent? There is nothing I can do and no one we can go to. That is the frustration with business rates at the moment.
It is all very well for the valuation office to say that rates are set in stone, but in times of economic crisis or in a pandemic, we need flexibility. I say to the Minister, please, set up a system whereby businesses can appeal. They are crying out for help. We have already heard that there will be a review, but reviews take time. Many of these businesses are struggling and need help right now.
The other shopping centre in my constituency, Newbridge, is home to Newbridge rugby football club and world champion boxer Joe Calzaghe. Anybody who wants to visit an example of an art deco theatre would do well to come to Newbridge Memo and see for themselves how a working men’s institute has been taken over and become a thriving, beating heart of the community. But Newbridge faces the same problem: many shops are boarded up, which looks terrible when people walk down the street. Next Saturday, the Co-operative store in Newbridge will close its doors for the last time, which is very sad. We have campaigned to keep it in place. The next nearest Co-ops are in Oakdale, which is two miles away, and then further down in Machen in the constituency of my hon. Friend Wayne David. People will not be able to shop for their groceries locally in Newbridge.
I was pleased when a local businessman contacted me and said, “I want to take over the business.” He owns a number of businesses so it would be an excellent move, but the one thing that was holding him back was, yet again, the business rates. As many hon. Friends have said, business rates in Wales are frozen currently, and I hope, for my English counterparts, that the Government take on board that example. There will come a time, however, when business rates will be unfrozen and will have to be paid. What future do people have when they know that time bomb is ticking?
The Government need to look again at business rates. People need help now. Right hon. and hon. Members on the Government Benches have talked about increasing VAT. There was a very good speech earlier about increasing it by 3p in the pound, but that is wrong for two reasons. First, VAT is an inherently regressive tax, because people are taxed on what they spend, which means that the poorest people in society pay it. Secondly, the packet of measures that was put in place in 2008 after the financial crash by the then Chancellor, Alistair Darling, included a reduction in VAT to ensure that people got out there and started spending in shops so that money flowed through the economy. Increasing value added tax is asking the poorest people in society to bear the burden.
When I was a child, as I said at the start of my speech, going to the high street was an event. We need to make it easier for people to go there. I ask the Government to put in place measures for local councils to offer free parking and, when shops are boarded up, short-term lets and business rate holidays to ensure that there are thriving businesses in the high street. There is much to be done. The high street—that feature of British society—is on the critical list. We have to do something now.
I have been somewhat struck by much of the debate, which has rightly focused on non-domestic rates. In that regard, we know that non-domestic rates is a devolved matter in Scotland and that the Scottish Government have made the decision that the retail and hospitality sector will continue to have a full exemption from rates until the end of this financial year, in contrast to the supposed party of business on the Government Benches. However, there is one huge issue—a massive elephant in the room—that I was astonished that the shadow Chancellor did not talk about. Indeed, very few Members in this Chamber have spoken about the issue: the obvious difficulties caused by Brexit. We have businesses up and down Scotland, and up and down the entirety of the UK, that cannot recruit staff and cannot get their hands on the goods they need to sell to their customers to keep themselves going.
Small businesses that want to export are facing exponentially longer delays in comparison with what happened before. I spoke to those at a local business in Aberdeen recently. They exports their goods, which is what they want to do—they want to grow their business, which is everything we want to see in our local community—and it has gone from taking a couple of days to almost six weeks to export a good to the European Union. If we are talking about challenges for small businesses and the really big issues that face them, yes, non-domestic rates is undoubtedly one of those—it needs to be addressed, and I think all politicians of all parties agree on that—but we cannot ignore Brexit or simply pretend that it is not happening, although that is what it feels is taking place in this Chamber. It is quite astonishing.
Beyond Brexit and beyond non-domestic rates, we also see small businesses having to deal with the rise, or the proposed rise, in national insurance contributions. They cannot get hold of the staff and they cannot get hold of the goods, and when they try to export it takes much longer than it should—and their non-domestic rates are an issue, particularly it appears for those in English constituencies—but they also now have an additional tax burden for the staff they employ, yet this Government still try to keep up the guise of being one that supports small businesses.
There is one more issue that is extremely pertinent that I do not feel has necessarily been discussed or given the full attention of this House that it deserves, which is the energy price crisis. We know that households right across Scotland and the UK are facing exponential rises in their energy bills. However, it does not just stop at households; it affects businesses too, particularly small businesses. This is something they did not expect to happen, yet this Government have come forward with absolutely no support for them whatsoever. We have tax rises, we have Brexit and of course we have an energy price crisis. It is a perfect storm of challenges facing our high streets, and I would respectfully suggest that the Government should have done better on each and every one of those issues.
That takes me to my final point, which is on bricks and clicks. It is about how we get rid of the difficult situation of having online retailers not having a physical presence within the local community and the benefit they reap from doing so. How we solve that has been discussed in this Chamber at length throughout my time in this House, but what I really struggle with is the Government simply saying that the digital services tax was enough and that that was the way to resolve the problem. Quite clearly, that was not sufficient, and it was never going to be sufficient.
While we have a situation in which someone can sell their goods online cheaper than they can in a store, ultimately businesses will move online. As my hon. Friend Alyn Smith rightly put it, that is not just a challenge that faces Scotland or the UK, but a much bigger challenge, and all the pandemic has done is to accelerate the difficulties in that regard. We cannot sit here and moan about the challenges facing our high streets if we are unwilling to take that issue head-on.
The impact of the covid pandemic has been excruciating for many people in Ilford South and for the majority of people in this country, not least the many who run businesses and their workers, and this is now coupled with the steep rise in living costs and the supply chain crisis caused, to be honest, by Brexit and the Government’s indecisive action as well as the global pandemic. Too many businesses in this country are now at breaking point, so we are debating today not just business rates but how imperative it is for the Government to give greater support to all sectors of our economy to ensure we emerge stronger, and especially to the small and independent businesses that are the bedrock of economic success in Britain, certainly in my constituency.
We on this side of the House have set out clear plans for how a Labour Government would increase the small business rates relief threshold from £15,000 to £25,000, exactly the kind of welcome tax cut small businesses so desperately need, and a future Labour Government would go further, scrapping business rates and putting in place a fairer taxation system that supports small businesses and boosts local economies such as that of Ilford South. Sadly, however, this Government have demonstrated time and again that “build back better” is little more than hollow rhetoric from a tired Cabinet devoid of ideas that has repeatedly let down so many people through a catalogue of policy failures, whether the derisory 1% pay rise for NHS workers, slashing welfare support for the most vulnerable in our society, or hiking national insurance for everyone. The failure to address business rates is the latest kick in the teeth for millions across this country.
In my constituency there are now 7,975 unemployment benefit claimants—8.4% of the population aged under 64. The number of new claimants has increased by 4,795, more than doubling, since just a year ago in March 2020. People are really suffering, and getting businesses back on their feet is crucial to moving us forward.
This is not just rhetoric; there are cold, hard facts that the Government are increasingly choosing to ignore. The Office for National Statistics published data last week revealing that a staggering 332,000 businesses are at risk of closure in the next three months; in the capital alone, that figure stands at 62,000. In Ilford South, over the past year the number of medium-sized businesses fell by 11%, and although smaller businesses and microbusinesses are doing well they need the right support to become sustainable and provide stable longer-term employment.
Understandably, the business sector has been united in its alarm at the current direction of travel. The national chair of the Federation of Small Businesses yesterday said that the ONS figures demonstrated
“just how desperate the need for business rates reform is.”
To give some sense of just how desperate businesses are, the British Retail Consortium has claimed that four out of five retailers will have to close branches if business rates are not alleviated. That was compounded by the Confederation of British Industry, and almost 50 trade associations representing a quarter of all jobs in Britain, adding that up to 50% of business investment is being harmed by business rates under the present system. Cutting those rates would unlock billions of pounds of investment in our economy and keep millions of people in work. The CBI’s chief economist was also crystal clear:
“Any can-kicking—or further business tax rises—would be seen a lost opportunity by firms of all sizes given the desire from both business and government to really go for growth.”
This was echoed by the director general of the British Chamber of Commerce, who last month stated emphatically that the current arrangements are
“a barrier to investment and cause an unnecessarily large burden to be placed upon businesses regardless of their ability to pay.”
That is a resounding call to action now.
If this Government will not listen to the overwhelming concerns of British businesses, perhaps they will listen to those on their own Benches, including the right hon. Members for Rossendale and Darwen (Jake Berry) and for Tatton (Esther McVey) who, on behalf of the Northern Research Group and Blue Collar Conservativism respectively, have called on the Chancellor to slash business rates, saying that
“failure to act will risk the party losing a string of northern seats at the next election.”
“Build back better” is not really turning out that way for small businesses.
Small independent businesses, which are the backbone of our communities, should not be made to pay the price for the pandemic. They need support, and they need it now. That is why we brought this debate forward today. I will be interested to hear whether the Minister can tell the House how we can expect to recover if we have let thousands of the businesses that prop up our economy go to the wall, as they have in Ilford South, with that 11% drop.
Just this week, the manager of Ilford business improvement district told me that covid has taken
“a catastrophic toll on many of our stakeholder businesses,” adding that the majority are
“working their way back from the cliff edge of permanent closure in the midst of supply shortages, staff shortages, rising staff and operational costs”.
That comes on top of the withdrawal of support measures such as the furlough scheme, business rates relief and reductions in VAT.
One hotelier I spoke to expressed concerns about the impact of rising energy costs, the shortage of staff since Brexit and, again, supply chain shortages, which are leading to a never-ending situation of one problem after another. That hotelier, Ikram, and many others like him in Ilford South have requested breathing space in the form of a reduction in business rates, or at least a one- year exemption.
The Government must urgently initiate a full and fundamental review of business rates and look to permanently maintain the reduced 12.5% VAT rate for sectors such as the hospitality industry, as well as considering extending that offer to retail businesses. They must also look to offer further business rates relief and consider a similar phased approach in the next financial year, with a 60% threshold to support businesses.
The Government talk a lot about levelling up; they also need to level the playing field. Amazon and the like have made huge profits during the covid crisis while paying next to nothing in taxes as a proportion of their profit, often undercutting local high street shops and leaving so many high streets with boarded-up shops. We need to shift the burden of business taxation away from the high street and towards global online tech giants by adopting a higher global minimum rate of corporation tax to stop major tax dodging.
The pandemic has shown that taking an economic approach in which we are not afraid to intervene when necessary to protect our workers’ jobs and local businesses is surely better than taking one that sacrifices everything in the name of the market, with public sector commercialisation, communities destroyed by disappearing jobs, national identities distorted and, of course, environmental catastrophe. Pay increases and tax avoidance at the top warp any sense of social inclusion, and progressive and redistributive taxes seem to fall from the political agenda as so many workers face the perpetual slog of longer hours in ever more insecure work as white-collar jobs are outsourced and blue-collar jobs go abroad.
The power and unaccountability of global tech giants is now impacting our very democracy. We must use this moment to lay a different pathway for our economy, because there most definitely is an alternative.
It is an honour to follow my hon. Friend Sam Tarry, who raises so many valuable points about businesses up and down the country.
My hon. Friend Naz Shah mentioned weddings. I come from a Nigerian background, in which weddings are such a joyous occasion for families and an opportunity for many people to travel to the UK. They come not just for the wedding but to support our local businesses. That is the time when many of those family members have their annual holiday, and they shop, supporting so many businesses, and stay in our hotels. It is not just the wedding industry that benefits; so many other people benefit from having that tourism and trade coming into the UK.
Over the past 19 months, businesses in Vauxhall have really suffered. They have seen footfall through their doors reduce. If we are honest, the measures introduced to tackle coronavirus have led to many businesses having to shut their doors. Others have had to adapt to new ways of commerce, and those that needed to stay open found themselves having to change, in some cases overnight, as the Government guidelines changed.
Many of the businesses in Vauxhall that I have spoken to operate on tight margins for both cost and revenue, and they face another double whammy in the coming months. Not only do they face having to repay large debts that they have stored up because of covid and the Government failure to support some key businesses, but many of the businesses in my constituency have a higher rateable value, so they did not qualify for the business rates relief. They are still struggling now. They have lost a large chunk of the tourists who come through, and they are having to rely on local people to help support them. The Government may have lifted restrictions in the UK, but our high infection rates mean that many countries continue to place restrictions on travel from this country. I chair the South Bank Partnership Forum, which brings together many businesses in and around the south bank. The forum’s figures estimated that 100 million people passed through Waterloo station each year alone. We have not seen those figures come back, and they will probably not come back for a very long time.
We cannot pretend that the impact of this pandemic is over for businesses. The Government need to take real measures to support businesses not just in Vauxhall but right across the country. Saving our high streets is a vital part of that. It makes economic sense, because as many hon. Members have said, high streets provide an economic boost to so many of our communities. I started my working life on our high street in Clapham in Sainsbury’s, in that bright orange uniform many hon. Members may remember, but so many of our high streets and their shops are closing. Yesterday, I met members of Lambeth Pensioners Action Group. They highlighted issues around returning to the high street and getting to the high street.
I hope the Government will listen to all the issues Labour Members have raised and support the motion. We cannot just keep talking about reforming business rates; it is time for us to act and reform them once and for all.
It is a pleasure to respond to this debate, and I thank all hon. and right hon. Members for the contributions they have made. I may not be able to mention them all.
My hon. Friend Bill Esterson talked about the challenges small businesses face. My hon. Friend Emma Hardy talked with passion about her constituency and the importance of connectivity. She invited us all for a drink in Ye Olde White Harte, an offer I am very glad to take up.
From the Government Benches, the hon. Members for Bexhill and Battle (Huw Merriman) and for Thirsk and Malton (Kevin Hollinrake) took the St Augustine approach. They were all in favour of business rate reform, just not yet.
Sarah Olney spoke of the plight of the travel industry. My hon. Friend Alex Davies-Jones spoke of the thousands of jobs lost in the music and creative industries, and of the help given to business by the Welsh Labour Government.
My hon. Friends the Members for Bradford West (Naz Shah) and for Vauxhall (Florence Eshalomi) spoke about the crucial importance of the wedding industry and the spin-off industries it gives rise to. My hon. Friend Chris Evans spoke of his frustration, shared by many Members, of the baked-in variations in valuation, with no apparent process of redress or appeal. Every single Member who spoke in this debate spoke with passion about their high streets, their constituencies and the small businesses within them.
The point I would just gently make, on behalf of myself and my hon. Friend Kevin Hollinrake, is that we called for business rates to be reformed right now and indeed came up with a proposal that would cost it right now, too. I hope the right hon. Gentleman might reflect on that and come up with his own.
I am happy to talk about our proposals and the hint we got on what the eventual outcome might be.
We tabled this proposal because we want to support Britain’s businesses as they try to recover from the pandemic. Many physical retailers could not trade at all during the pandemic. Consumers changed their habits and went online. Our high streets were shuttered and closed. The problem of business rates is well known and has been for a long time: they are weighted against high streets; they are weighted on physical versus online businesses; and they create negative incentives for investment. If someone invests in their business, does the right thing and does their bit for the transition to a greener economy, their business rates actually go up. It is a 20th-century tax for a 21st-century economy.
Our calls for reform have met with widespread support from the business community. UKHospitality says that the biggest cost danger in sight for the hospitality sector is the reintroduction of business rates from 2022. The Federation of Small Businesses said that business rates
“hits firms before they’ve even made a pound in turnover.”
The CBI said that business rates are
“literally…a tax on investment”.
The British Retail Consortium found that without a reduction in rates next year, 83% of retailers said that it was “very likely” or “certain” that they might have to close stores. The Institute for Family Business has also backed this call.
In the short term, businesses need help. That is why our proposal, in the motion before the House, sets out positive steps that will help businesses right now: a freeze on business rates; an increase in the threshold for small business rate reliefs; and a proposal that is fully costed and fully funded.
The Government know that business rates need reform. That is why they launched a review 15 months ago, but where is it? Where are the conclusions? Where is the Chancellor’s plan on business rates? Has it not been published because he is fighting with No. 10 about it, as he is over climate change? Has he not published it because he is fighting with the Business Secretary, as he is on industrial support?
But we did get a clue as to what the preference of Government Members is, because many Members went for the Tory party’s three favourite initials: VAT. Time and again in Government, when they have needed to raise money, they have gone for VAT. We do not yet know what the conclusions of the business rate review will be, but the prospect of the VATman returning is certainly possible given the contributions that we have heard today.
I cannot; I have to watch the clock. We put forward a plan both for the short term and the long term, but this is not just about business rates, is it? This is about the broader relationship between politics and business. The Opposition want a partnership with business to help the country to recover from the covid pandemic. We will not blame businesses for every shortage of workers or every shortage of goods. We will not use business as a weapon in ideological battles, as we saw throughout every day of the recent Conservative party conference. And we certainly will not go down the absurd road of trying to retrofit a justification for shortages and problems by claiming that they were part of some plan all along. When there is chaos at the pumps, blame business. When there is chaos at the ports, blame business. When there are shortages on the shelves, blame business. We have heard far too much of that from the Conservative party in recent weeks and, because of that, it has forfeited its right to be called the party of business.
I will not. And the Conservative party willingly gave that up by putting ideology in its place. When the Prime Minister said “f*** business”, some of us thought it was a quip. We did not expect to see it followed through by briefings on and off the record that business is part of the problem and not part of the solution.
Any serious party of Government has to take wealth creation as seriously as it does wealth distribution. It has to celebrate entrepreneurs, not blame them. It has to champion creativity and innovation. It has to move its policies in line with economic change and the ceaseless process of technological change. That is what we on the Opposition side of the House are doing. Businesses will find, in today’s Labour party, a ready partner that wants to see them grow and see a fair deal for their employees; that wants to see both prosperity and security for the people who work in business; and that will work with business, not blame them for the failures and consequences of Government decisions. That is what this motion is about, that is what this argument is about, and that is the case we will continue to make.
I thank all hon. Members for their contributions. First, can we celebrate and commend the small businesses up and down the country that have been so hard-pressed during the pandemic, especially in the areas that we have heard about today—hospitality, retail, leisure, tourism and indeed travel?
Businesses have shown incredible resilience throughout the pandemic and it is right that we support them, as the Government have done with £352 billion-worth of immediate financial support through loans, grants, the furlough scheme and various reliefs. That leaves us, as free market Conservatives who do not believe in big interventions but who are the Government with probably the biggest intervention since the war, with 352 billion reasons to get the recovery right and build resilience into our economy.
All I have heard from Opposition Members for nearly three hours is re-diagnosis of the problems. We can all agree that business rates need reform: that is why the Chancellor launched the fundamental business rates review. It is not starting now; we are concluding it now. It is looking at the entire scope of the business rates system, from the multiplier and reliefs for plant and machinery to billing, the administration of the system and alternative taxes. All those matters are being looked at and the report will be coming in the autumn.
I have heard nothing from the Opposition as an actual response. One can say that everything is funded and costed, but saying that does not mean that it is actually there. We have heard pledges from the Opposition to scrap business rates; that is £26 billion, and we have heard nothing about how it will be paid for. We have heard about freezing business rates until the end of the financial year; that is another £6 billion. What are they going to do to pay for it?
We heard from my hon. Friend Huw Merriman, who talked about changing high streets, and from my hon. Friend Kevin Hollinrake, who proposed changes to VAT. He made a cogent argument, albeit a controversial one—at least he came up with a solution that he had costed and threw it into the mix. That is the difference between Government Members and the Opposition: we come up with solutions that businesses can understand and that we can debate and work through.
My hon. Friend Tom Hunt was accused of talking down his area. Actually, he was talking about the issues that he is tackling and that he is bringing together and convening people to tackle, such as antisocial behaviour. He is doing things like that through the town deal that he is championing. He raised the future high streets fund, which is already bringing empty properties back into use—there is a lot of infrastructure going on and it is already delivering upgrades. He also talked about shopping parades. It is really important that we talk about retail parks and shopping parades as well as high streets: they are part of the ecosystem of our local economy.
The shadow Chancellor did present a short-term solution: a sixfold increase in the digital services tax. Does my hon. Friend agree that when we implemented the digital services tax, Amazon added that 2% straight on to the prices of the merchants on its site? Does he accept that if there were an increase, it would be passed directly to consumers?
My hon. Friend raises a really important point. We also heard about business rates being scrapped and replaced with a property tax—on a property that would presumably be owned by a business, and I guess we could use our rating system to work it out. Essentially, that is just semantics, not a systematic and effective way of replacing business rates. That is why the fundamental review is so important.
My hon. Friend David Johnston made a comparison to Chris Hemsworth and talked about the Great British Mead Company, which reminds me of the importance of the hospitality sector as part of the ecosystem of our local and night-time economy and indeed the high street. My hon. Friend Danny Kruger talked about opportunity and connectivity, which are at the heart of what we are doing to allow high streets to bounce back further.
All I have heard is negativity from the Opposition with no answer, but we are making sure that the 352 billion reasons to allow the economy to bounce back are as effective as possible. Our plan is working. Our unemployment rate is at less than 5% and falling, which is lower than France, America, Canada, Italy and Spain. We have one of the fastest recoveries of any major economy in the world, and GDP is growing. That shows that the Government’s approach is a success and that we have fostered the right environment for the economy to grow.
The Labour party will never admit this, but the UK is a great place to do business. We have the lowest corporate tax rates in the G20, and the kind of lean regulation that puts us in the global top ten for ease of doing business. Next year, my right hon. Friend the Secretary of State for Business, Energy and Industrial Strategy will publish an enterprise strategy which will explain how we want to revive Britain’s spirit of enterprise and help more people to start and scale up a business.
It is easy to see why the UK is consistently home to one of the largest and most resilient economies in the world. All this underlies the reason why it has long been a great place to do business, and why we are seeing so much excitement in the rest of the world about investing in the UK. People are queuing up to spend at the global investment summit that is being held today. In the last 10 months, we have already seen a flurry of spending in the UK: there is to be a gigafactory in Sunderland, Ford and Stellantis are churning out electric vehicles in the north-west, and GE Renewable Energy and others are creating an offshore wind hub in Teesside. Those projects constitute a huge vote of confidence in the UK as a place to do business as we recover from the pandemic.
We have been there for small businesses since the start of the pandemic, we are there for them now, and we will be there for them for as long as they need us. I want to ensure that as we move forward into this area of recovery, we build resilience into our economy as well. We will do that through the fundamental review of business rates and through our enterprise strategy, and by making sure that we stand behind our businesses.