Local Government: Business Rates — Question

– in the House of Lords at 11:21 am on 19th March 2009.

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Photo of Lord Naseby Lord Naseby Conservative 11:21 am, 19th March 2009

To ask Her Majesty's Government why the business rate payable from April 2009 has been increased by 5 per cent; and whether, in the light of the recession, it will be revised downwards.

Photo of Baroness Andrews Baroness Andrews Parliamentary Under-Secretary, Department for Communities and Local Government, Parliamentary Under-Secretary (Department for Communities and Local Government)

My Lords, business rates are adjusted each year to take account of RPI inflation in the previous September. This was established by the introduction of national business rates in 1990. If RPI inflation is lower in 2009, this will be reflected in next year's bills.

Photo of Lord Naseby Lord Naseby Conservative

My Lords, I view that Answer with some incredulity. Does the Minister not recognise that small businesses and retailers are facing falling sales? How on earth are they going to find the money to pay an extra 5 per cent on their rates bill? Does she not understand that there are well over 100,000 such small businesses and that, unless this rate is frozen, the net result will be yet more unemployment? Yesterday, the 2 million barrier was reached. Do we really want to see more unemployment? Will the noble Baroness make a plea to the Chancellor to freeze the business rate for just the current year?

Photo of Baroness Andrews Baroness Andrews Parliamentary Under-Secretary, Department for Communities and Local Government, Parliamentary Under-Secretary (Department for Communities and Local Government)

My Lords, I certainly understand the gravity of the situation that the noble Lord has addressed. On his first point, to freeze business rates at the 2008-09 multiplier would cost about £1 billion, but it would also raise issues of unfairness. The noble Lord talked specifically about small businesses. What he proposes would be untargeted and would benefit the larger, property-intensive industries. The 400,000 businesses that receive the 50 per cent small business rate relief get, on average, about £60. In 2005, we introduced the small business rate relief, whereby businesses with a rateable value of less than £5,000 pay 50 per cent of their rates. That is a huge help to those 400,000 small businesses. I am sure that the Chancellor is aware of the lobby addressing business rates issues.

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Conservative

My Lords, do the Government not recognise that we have just had the biggest increase in unemployment in any month since 1971 and that businesses out there are bleeding to death? Surely we need a co-ordinated strategy not only to freeze the business rate but to reverse the Government's plans to levy VAT next month on the salaries of agency workers and their proposals to increase national insurance costs, all of which is making it more expensive to employ people, who are therefore being fired.

Photo of Baroness Andrews Baroness Andrews Parliamentary Under-Secretary, Department for Communities and Local Government, Parliamentary Under-Secretary (Department for Communities and Local Government)

My Lords, this Government do not need to take lessons about the burdens of unemployment. We are deeply concerned about unemployment. We are facing an unprecedented economic situation. In the Pre-Budget Report, the Chancellor announced a massive programme of help, not least £20 billion in working capital to help businesses to access credit, which will help exactly the sort of businesses with which the noble Lord, Lord Naseby, is concerned: it will help with liquidity and credit and it will keep people in jobs. We have also put £100 million towards debt advice and free business health checks, which is a significant and helpful package to meet an unprecedented situation. All that will be real help for businesses.

Photo of Lord Barnett Lord Barnett Labour

My Lords, will my noble friend ignore the suggestion made by the noble Lords, Lord Naseby and Lord Forsyth, unless they are suggesting that the difference should be made up by the Exchequer and increased taxation? If that is the alternative that they are suggesting, it seems to me that it would be better if she ignored both of them.

Photo of Baroness Hamwee Baroness Hamwee Spokesperson for Communities and Local Government

My Lords, resisting the temptation to ask two of the three previous questioners whether they did not anticipate this situation when the arrangement was introduced in 1990, may I ask the Minister what she can say to local authorities that hear so much from those who are having to give up shop leases because of the level of rates? The vitality of shopping centres suffers very much in this situation.

Photo of Baroness Andrews Baroness Andrews Parliamentary Under-Secretary, Department for Communities and Local Government, Parliamentary Under-Secretary (Department for Communities and Local Government)

My Lords, the best thing that I can say to local authorities that are concerned, as we all are, about the loss of small shops—about 380,000 small shops fall into the category of below £15,000 rateable value—is that the package that was introduced in the Pre-Budget Report has raised the rateable value for exemptions on empty property rates from £2,200 to £15,000 and we want to make sure that small shops and offices know about that and are claiming that relief. I am grateful to the noble Baroness for pointing out that these changes were introduced in 1990.

Photo of Baroness Warsi Baroness Warsi Shadow Minister (Community Cohesion), Communities and Local Government

My Lords, I thank the Minister for referring to the small business rate relief, but is she aware that in the north-west, the south-east, the Midlands and even in London fewer than 50 per cent of small businesses that are entitled actually claim that relief? In some cases, it is 26 per cent. At a time when there is tremendous pressure on small businesses, does she accept that the Government should not be placing additional bureaucratic burdens on businesses and forcing them to claim? Will she therefore take our advice and the advice of the House as set out in the vote last night and introduce automatic small business rate relief, as is the case in Wales?

Photo of Baroness Andrews Baroness Andrews Parliamentary Under-Secretary, Department for Communities and Local Government, Parliamentary Under-Secretary (Department for Communities and Local Government)

My Lords, far from imposing additional burdens, we are making it easier for small businesses to apply for relief. Indeed, since April 2007, instead of having to apply for relief each year, small businesses can make applications that cover more than one year. More recent changes mean that they can apply for relief as soon as the property is there, rather than having to wait for the next financial year. I think that the noble Baroness is talking about the Private Member's Bill introduced by Peter Luff in another place. We supported the Bill in principle, but the timing is difficult. Automation might well be a help, but it brings implications and impacts that we need to understand and we would need to put aside a raft of other things that we would do to help small businesses.