(5 years ago)
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Sir Geoffrey Clifton-Brown (The Cotswolds) (Con)
I am very grateful to you, Madam Deputy Speaker, and Mr Speaker for affording me this opportunity to have a long dilation on the subject of business rates. I am under no illusion: I do not think my popularity is why so many people are present. It is all to do with the popularity of and the worry about business rates and their effect on our high streets up and down the country. I am sure Members will have an infinite number of examples of how their high streets have been disadvantaged by the impact of business rates.
Bill Wiggin (North Herefordshire) (Con)
My hon. Friend has misled the House, although unwittingly. He is very popular; it is his natural humbleness and modesty that prevails upon us today. In Ledbury, which has one of the finest high streets in Christendom, there are only two shops that are part of the chains that can be seen on ordinary high streets, yet the shops in my constituency, like those everywhere else, are under tremendous pressure. More and more of them are becoming charity shops. Although none of us has anything against that, it is surely a sign of a deep unhealthiness in our high streets.
Sir Geoffrey Clifton-Brown
Ledbury comes second in Christendom after Cirencester, which is beaten by no high street town in this country. My hon. Friend is right, of course. The 80% rate relief that charitable shops get encourages a large number of them. I have a substantial number in Cirencester, although they are in the secondary streets, rather than the main square. I can perhaps beat Ledbury, in that I had only one major chain in my constituency. It was the House of Fraser, and it has recently gone bust, so as far as I know, I have no major high street chain in my constituency.
Sir Peter Bottomley (Worthing West) (Con)
However modest we may be about each other, it is the popularity of both the subject and of my hon. Friend that has drawn the crowd. In addition to shops, will he talk a bit about the rating imposition on automatic cash machines? Cash machines are needed in many places where the banks have gone, and if the rates go up on them, we will start losing them as well.
Sir Geoffrey Clifton-Brown
My hon. Friend reads my mind. A long way further in my speech, I have a little section on ATMs. ATMs and public loos get a good allowance under the rating system, so I will be talking about that.
Ms Nadine Dorries (Mid Bedfordshire) (Con)
I am sure that my hon. Friend remembers well that a long time ago—1997—I used to live in his constituency. In fact, we worked on his election campaign together. At the time, the Cotswolds constituency was booming with pubs and businesses. The high streets in Chipping Campden and other villages were doing incredibly well, but what we now see as a result in his constituency, which I had the pleasure of visiting recently, is that there has been a churn in businesses, because many of the small and medium-sized businesses, due to the high rates and high rents on the properties in his beautiful constituency, find it incredibly difficult to sustain the costs of both high rent and high business rates. This problem is found not just in his constituency but across the UK, due to the high rateable value of properties. Does he agree that we need complete reform of the business rating system?
Sir Geoffrey Clifton-Brown
I well remember meeting my hon. Friend for the first time in the Eight Bells pub in 1997, when we were both a little younger—[Interruption.] She says, in parentheses from a sedentary position, “better looking”—I was not going to say that in case I came within the bounds of the code, which I think might well touch on the sort of remark that I might make. Nevertheless, I wholly concur with her sedentary remark.
Craig Mackinlay (South Thanet) (Con)
I put on record that I have been trying to take action for a number of years to exempt public conveniences from business rates. Especially in respect of the towns in my constituency—Ramsgate, Broadstairs and Cliftonville are tourist areas—I have always said that public loos are often the first thing that people use and the last thing that they remember, and they should be thus exempted.
Sir Geoffrey Clifton-Brown
I am sure that the tourists in my constituency will be greatly relieved to hear what my hon. Friend has to say. In my constituency, which is very dependent on tourism, I have been having a big battle with the local council to keep public conveniences open, because it is really important. If someone comes for a day’s outing to the Cotswolds or goes to my hon. Friend’s constituency, they cannot last all day. They need somewhere to go, and I was delighted when the Government gave that sort of relief.
Sir Geoffrey Clifton-Brown
Oh my God, I have got competition. I will give way to the hon. Lady first.
Rachael Maskell
I am very grateful to the hon. Gentleman. We have debated business rates on numerous occasions, because York, which is known for its retail offer, currently has about 50 empty properties. Does he agree that the business rates system is broken and that we need to move forward to a turnover tax or a profit-related tax, thereby enabling a much fairer system to be in place?
Sir Geoffrey Clifton-Brown
I am particularly pleased to see the hon. Lady in the Chamber today, because she was one of the very few people who were present when I held my Adjournment debate on this subject on 8 October last year. If memory serves me—I am sure that she will correct me if I am wrong—I think that on that occasion, she told the House that there were 24 empty shops in York. If it has gone up to over 50 now, that demonstrates a deteriorating situation. If I have the figures right— she is smiling so perhaps she would like to give the House correct figures for last year compared with now, if she knows them, but if not, I have them here and I will look them up at some time during the speech—clearly business rates are having a deleterious effect on the high street. I will come to that in my speech.
Mr Jim Cunningham
The hon. Gentleman and I came into the House together, so we know each other quite well. To be frank, we have had many debates about rates in general terms, whether they were about the poll tax or business tax and so on, and quite frankly, it is about time—I agree with the hon. Member for Mid Bedfordshire (Ms Dorries)—that there was an inquiry to have a good look at the whole system of funding local government in this country. What is happening now is that a lot of local government expenditure, because of the reduction in Government grants to local authorities, has been shoved under business rates. As I said about 18 months ago, we cannot go on like this. Something has to give and we have to look at that properly.
Sir Geoffrey Clifton-Brown
I agree with the hon. Gentleman. He is quite right: we have known each other and been friends for a long time, and he has had a long interest in this subject. I will certainly come on to the subject of wholesale reform of the business rating system. Indeed, the British Hospitality Association, which I will refer to later, is calling for a royal commission to look into wholesale reform of the rates. Indeed, it was a manifesto commitment of my party, but the party seems to have gone cold on wholesale reform of the business rates system, for reasons to do with protecting the £30 billion of revenue it raises, as I will refer to in a moment.
Steve Brine (Winchester) (Con)
As the manifesto seems to be very popular this week, I will read from it. We said:
“we will also conduct a full review of the business rates system to make sure it is up to date for a world in which people increasingly shop online”.
The pretty market town of Alresford in my constituency has a chocolate box row of shops that includes a beautiful bookshop, but people increasingly tell me they use it to look, view and try, and then go online to buy the books. It is totally untrue that the Government have not done anything to help with businesses rates—we have supported those affected by the revaluation, introduced the discretionary rates scheme and said we will introduce more regular revaluations—and the very good Minister, who is in his place, has done a lot. That said, it is probably time to consider a more structural change away from just property—I understand why the Treasury likes property taxes—to a more transaction-based tax, which might help bookstores such as the one I referred to in Alresford.
Sir Geoffrey Clifton-Brown
I am grateful to my hon. Friend for that thoughtful intervention, and I want to reassure him and the Minister that I have not called this debate to criticise the Government. I called it to come up with some helpful and positive suggestions for how we might reform system, wholesale or otherwise, while bearing it in mind that we need to raise that £30 billion. Clearly, the Treasury cannot afford any reduction in that amount.
Sir Desmond Swayne (New Forest West) (Con)
Is the fundamental problem one of the taxation system or the nature of retail and our changing tastes? In my view, the rating system does not help—it sets high streets at a disadvantage—but fundamentally people have changed the way they shop, and retail has to respond with a better offer and experience.
Sir Geoffrey Clifton-Brown
I agree with my right hon. Friend, and I have a section in my speech about the changing circumstances of big online companies vis-à-vis the rating system.
Several hon. Members rose—
Sir Geoffrey Clifton-Brown
I will get a little further in my speech and then accept a few more interventions. If I can make some progress, hon. Members might see where I am coming from.
The Red Book says that the amount collected by the business rates in 2019 is about £30.9 billion, but even this simple proposition is clouded by how much the Government have to provide for a loss on appeals, which alters the uniform business rates multiplier to allow rates under legislation to rise by at least RPI every year. Whatever happens to appeals, rates or reliefs, the Minister and his Department have to make up that £30.9 billion elsewhere.
I come now to the kernel of what I want to say today, and this in part addresses the interventions from hon. Friends. The OECD revenue statistics database makes it perfectly clear that the UK tops the league of taxation on immovable property both as a percentage of taxation and as a percentage of GDP by some margin. The UK paid 9% of rateable taxation in 2016. Our nearest rival, France, paid 7%; Germany just 1%; and Luxembourg barely a quarter. This must be a major reason why manufacturing business is not as competitive as in our nearest European rivals.
To shore up this £30.9 billion of revenue, the Treasury has had to increase the complex array of reliefs and allowances to compensate for some of the most damaging consequences of the tax, so in every Budget more or less, one sees a new allowance or relief to mitigate some of the worst effects of the tax. As the hon. Member for York Central (Rachael Maskell) has already done, I refer the House to my previous debate on this subject on 9 October 2018, when, as reported at column 117, my right hon. Friend the Minister listed some of these many reliefs.
We were all pleased when, in his Budget on 29 October last year, the Chancellor recognised that many small retail businesses were struggling to cope. I am sure that Members throughout the Chamber can give examples of businesses that are struggling to cope with the high fixed costs of business rates.
Alex Chalk
Nurseries in Cheltenham provide a vital public service for parents, enabling them to go to work, but they are marginal businesses, and it is very hard for them to make money. Circus Day Nursery has written to me saying that it is struggling with the impact of business rates, and that the Government’s great intentions to allow local dispensations to be provided by councils are not being pursued in practice. Has my hon. Friend any views on the impact of business rates on the viability of the local nurseries that are so vital to our communities?
Sir Geoffrey Clifton-Brown
I do have a view, as it happens. Later in my speech I shall be dealing with discretionary hardship relief from local authorities. Some of that could go towards my hon. Friend’s struggling nurseries, but the problem is that cash-strapped authorities are reluctant to give any discretionary reliefs at all. When we reach a point at which rates retention is one of the only sources of income for the small borough and district councils, they will be even less willing to provide hardship relief.
Several hon. Members rose—
Sir Geoffrey Clifton-Brown
My goodness! My golly! Actually, I think that my hon. Friend the Member for Faversham and Mid Kent (Helen Whately) was first.
Madam Deputy Speaker (Dame Rosie Winterton)
Order. Before the hon. Member for Faversham and Mid Kent intervenes, I must make two points. First, I think it important for the hon. Member for The Cotswolds (Sir Geoffrey Clifton-Brown) to be allowed to finish responding to one intervention before being interrupted by another. Secondly, I know that it is very tempting to look at the Member who has intervened, but it is a good idea to face in this direction because of the microphones. Obviously, no one would want to miss a word of the debate.
Helen Whately (Faversham and Mid Kent) (Con)
The reason for my enthusiasm about intervening at that particular juncture was my wish to raise a point that is remarkably similar to—if not the same as—the point raised by my hon. Friend the Member for Cheltenham (Alex Chalk). A couple of weeks ago I visited a nursery in my constituency whose staff told me about exactly the same problem. Business rates are a huge challenge to its success as a business, but it provides a very important service for local parents—especially mums, but also dads. Regulations require them to have a certain amount of floor space, so they are hit pretty hard by business rates. I am keen to hear the section of my hon. Friend’s speech that deals with possible cases for extra support, and I hope that nurseries will be considered in that regard.
Sir Geoffrey Clifton-Brown
I do apologise, Madam Deputy Speaker, for not facing you. Of course I should like to face you all the time, but my hon. Friends have been tempting me in the other direction. I will try not to be tempted again.
My hon. Friend is absolutely right. The problem for nurseries is partly a business rates problem, but it is also connected with the pledge in our manifesto to grant free nursery spaces for an extra number of hours. That means employing extra staff, which the nurseries are finding hard to do. Nurseries—and I visit some in my constituency—are facing difficulties of all sorts. We must help them where we can. I am sure that my right hon. Friend the Minister has heard my hon. Friend’s intervention; perhaps he will say that we can help in some way.
Mr Jones
I thank my hon. Friend. I now cannot remember what I was going to say. [Laughter.]
My hon. Friend has identified the high street as an important aspect of business rates. In the last few years, the saviours of many high streets have been casual dining and high-quality bars and restaurants, and in many places the rateable values are so high—above £100,000 in many cases—that none of those businesses has benefited from the generous allowances and discretionary reliefs provided by the Government. Does my hon. Friend agree that we need to ensure that we do not kill the goose that laid the golden egg?
Sir Geoffrey Clifton-Brown
My hon. Friend has touched on another subject with which I shall be dealing later. He will know that the British Beer and Pub Association has made specific recommendations on pubs. Suffice it to say that in all our constituencies, the hospitality industry is one of the few very bright lights on the high street. The numerous restaurants, bed and breakfasts and hotels are the one thing that is keeping most of our high streets going.
I welcome very much my right hon. Friend the Chancellor’s statement in his Budget that small retailers in England with a rateable value below £51,000 will get a third discount on their bills. I know that that will have been a great deal of help to a lot of small businesses in this country, and a lot of small businesses in my constituency have told me how grateful they are for that relief. I congratulate the Treasury on that.
Robert Courts (Witney) (Con)
My hon. Friend has been very generous in giving way. I entirely commend the Government for the package of business rates relief that has been given, although I recognise, as he does, the pressures that high streets are under with the business rates system. I also would be interested in a thorough reform of that system. Does he agree that, in the meantime, there are many things that local authorities can be doing to drive footfall and to help the high street? I am thinking particularly of West Oxfordshire District Council —his neighbouring authority, of course. The two adjoining local authorities work closely together. They have a flagship policy of free car parking, which has done a great deal to drive footfall and to help the high streets, particularly of Witney and Chipping Norton, where we have a plethora of great independent shops. In many ways, those high streets are thriving. Does my hon. Friend agree that local authorities such as West Oxfordshire should be commended for that, and that we could see that practice spread throughout the country, which would help the high street?
Sir Geoffrey Clifton-Brown
I totally agree with my neighbour’s intervention. His towns are much the same as mine; they are small market towns with a lot of independent retailers. He is right that anything that our local district councils can do to encourage those local independent retailers is helpful. In Cirencester, for example, they have a scheme whereby parking is free after 3 o’clock —just the sort of time when perhaps the high street was beginning to slow down—to encourage more people to come in later in the afternoon to do their shopping. That is precisely the sort of intervention that a local authority can make to help struggling retailers in our constituencies.
Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)
The hon. Gentleman is not without friends on the Opposition side of the House. He knows my constituency well because he pursues sporting interests in it, and his aunt and uncle—very nice people—are constituents of mine. He knows from his sporting interests that one must give the gillie a tip. If I may draw the hon. Gentleman’s attention to his future remarks about ATMs, the distance between ATMs militates against easy access. Where I come from, it is necessary to travel a very long way indeed to get to a cash machine. I would suggest that that is not at all good for the local businesses.
Sir Geoffrey Clifton-Brown
The hon. Gentleman has been a friend of mine for many years, and my family and his have been friends for even longer, so I do know his area very well indeed, especially his family town of Tain. It is a relatively recent phenomenon that the Valuation Office Agency has started rating ATMs. There is a particular quirk in the system: if an ATM is situated inside a bank or a post office, it is not rated, but if it is situated on the wall of the bank or post office, it is rated.
The hon. Gentleman and others—particularly in Scotland, because of the distances that they have to travel—have had numerous debates on bank closures, which may result in the removal of the one ATM in town. I am sure that a factor in the banks’ decision in closing those ATMs must be that they are now rated, whereas hitherto they were not. Perhaps my right hon. Friend the Chancellor might look at that, particularly for all market towns. Up and down my constituency, all my market towns have lost ATMs in the last few years, and in some of those market towns only the post office still has an ATM facility. Now even the post office in some of those market towns is coming under threat. That is becoming a real problem for my constituents—particularly constituents with businesses who need to withdraw cash.
Mr Marcus Jones
Many ATMs are in petrol station forecourts and convenience stores. Many of those places are situated in some of the most deprived communities, and as a result of the business rate levied on those machines, quite often they are put in those stores on the basis that people have to pay to withdraw their cash. People who withdraw £10 or £20 quite often end up paying £1.50 or £2.50 to get their money. Would it not be helpful if the business rates on ATMs could be looked at, so that, hopefully, more people could access their money without paying an exorbitant charge?
Sir Geoffrey Clifton-Brown
I entirely agree with my hon. Friend, and I am sure that my right hon. Friend the Minister will have heard the plea from those of us who represent rural areas, where the one or two ATMs in our market towns play a very significant part.
Bob Stewart (Beckenham) (Con)
Does my hon. Friend have any idea of the logic behind an ATM on the outside wall of a bank having to pay business rates when those that are inside do not? It beats me! Perhaps there is a reason, but I do not understand what it would be.
Sir Geoffrey Clifton-Brown
I understand that there are two reasons. The first is that the Valuation Office Agency can get away with saying that an ATM on the outside of the building is, in the jargon, a different hereditament from the main building on which it sits. The second argument that is given in the official explanation is that ATMs are often not run by the same company as the building on which they sit, and that as it is a different company, it can be rated as such. Those are the official explanations, but I am sure that my right hon. Friend the Minister, who is far more expert in these matters than I am, will be able to give us a better one.
Returning to the £51,000 and the question of discretionary relief as opposed to allowances, the Minister knows that this is the core of my speech. It was the core of my speech last October, and it is the core of my speech today. This £51,000 is still a discretionary relief. While the majority of local councils have now pledged to provide the resources for their local businesses to benefit from this change, there are some that, regrettably, have not been forthcoming with their support of this measure, either by delaying their decision to implement it or by putting systems in place that require businesses to apply for the relief, firmly putting the onus on businesses to take time out from their day job to claim back money that is rightfully theirs. That means that businesses in those areas are being disadvantaged.
Of course this still does not resolve the complexity, and I believe that simplicity is always the key. We all know that small businesses are under increasing and unfair pressure from out-of-town retail parks and online retailers, and I am sure that Members here tonight will have lots of examples of that. For example, for every £1 in business rates that our small high street operators are taxed, the big online and out-of-town retailers pay significantly less, averaging around 16p. We can immediately see the competitive disadvantage for high street retailers, compared with the large out-of-town retailers and big online organisations.
Rebecca Pow (Taunton Deane) (Con)
My hon. Friend is making a powerful case. There is an area that has been left out of the discretionary discount, and I wonder whether he agrees that the Government ought to look again at the guidance on this. I am talking about grass-roots music venues. We have lots of them on our high streets. This was raised with me by the Creative Innovation Centre in Taunton. These are places where many of our young musicians find their feet; it is how Ed Sheeran started, for example. They also generate money for the local economy, and I believe that they ought to be classed with pubs when it comes to the discount because they also serve food and drink. I believe that a special case should be made for them. It would cost only £1 million over two years in money “lost” to the Treasury, but it would generate so much more for the economy if they could be included in these discretionary rates.
Sir Geoffrey Clifton-Brown
My hon. Friend has made yet another good case for a completely different class of business to have this relief. We can see the complexity of the rates system, and it is probably a good idea that we should have a royal commission to look into business rates in their entirety, as the British Beer and Pub Association and the British Hospitality Association are calling for, to see how they can be made to work better.
Rebecca Pow
I forgot to say that a lot of information about this arose as a result of the inquiry by the Select Committee on Digital, Culture, Media and Sport into the UK live music industry, as it was one of the things that was highlighted. It is stifling our young talent coming through the chain.
Sir Geoffrey Clifton-Brown
I am all for anything that encourages our young talent to come through the chain, as my hon. Friend puts it. One of the great strengths of this country, as I meant to say when I opened this debate, is the 5.7 small and medium-sized businesses in this country, especially the 0.5 million new businesses that have been formed in the past five years or so. They are all capitalists risking their capital, many of them with a mortgage on their house to support their business. They work hard, and they succeed, and hopefully those small businesses will become medium-sized or large businesses.
All Governments of all colours have always been tempted to impose more taxation and bureaucracy on those small and medium-sized businesses, because they are easy targets and they do not move. What we should be doing is the reverse—making it easier for them to exist and make profits.
Sarah Newton (Truro and Falmouth) (Con)
I am pleased that my hon. Friend was able to secure this debate. He is making a really powerful case on the importance of small businesses in our communities. Is it not interesting that there are no Opposition Members here at all, while Government Members, even as the House is about to adjourn, are standing up for small businesses? As Conservatives, we are the party for small businesses. I very much commend my hon. Friend’s recommendation that we look in the round at what we can do to simplify taxation on small businesses. That is really important, but as we do so, I have noticed something positive about business rate retention. Local authorities are now working far more constructively with small businesses, so that that income raised in that community flows to them. Local authorities have to be concerned about small businesses, whereas in the past, when they got cheques from central Government they were not so focused on them. In the new scheme, let us think about the link between local authority funding and small businesses.
Sir Geoffrey Clifton-Brown
My hon. Friend, along with most of my hon. Friends, if not every single Member who is in the Chamber, is passionate about defending small businesses. I can see that she is shortly going to make a speech to support her small businesses—perhaps very shortly; I cannot possibly foretell.
Sir Geoffrey Clifton-Brown
Yes, because my hon. Friend has been very patient.
Bob Stewart
As a small factual correction, when my hon. Friend said “5.7 small and medium-sized businesses” he meant 5.7 million. That is a small point, and I know it was a slip of the lip.
Sir Geoffrey Clifton-Brown
Indeed it was a slip of a lip. The figure of 5.7 million small and medium-sized businesses is terrific, and shows the entrepreneurialism in this country, which is why our economy is doing so well and why we have such full employment at present.
Priti Patel (Witham) (Con)
I commend my hon. Friend on the debate, which is incredibly wide ranging. I should like to touch on wholesale reform of business rates. The Government have done an awful lot of good work to give discretionary rate relief and to support SMEs in constituencies and towns such as Witham. Does he not agree that wholesale rate reform could be the gateway or avenue to get local authorities in particular to invest in town centre development strategies that could help to grow the base of small business and achieve a much more sustainable local economy that meets local needs as well as helping entrepreneurs and small businesses in towns such as Witham and places across the Witham constituency, and the country, to continue to invest and develop?
Sir Geoffrey Clifton-Brown
I entirely agree with my right hon. Friend. We have to be far more innovative, as the world is changing. The digital world is foisting change on us, whether we like it or not, and our local councils and our local people have to be far more innovative and entrepreneurial. That is why I welcome the system that the Treasury has brought in, which will allow local authorities to keep a bigger proportion of the rates of new businesses, as opposed to existing businesses, to encourage them to do precisely the sort of scheme she mentions.
Ms Dorries
I am grateful to my hon. Friend for giving way to me a second time. He is incredibly generous.
On innovation, Flitwick high street in my constituency could not be more different from Chipping Campden high street in my hon. Friend’s constituency. Given the housing crisis and housing shortage, it may be that not all high streets can survive and that we need to do something innovative with them.
On a humorous note, my hon. Friend mentioned that we met in 1997 in the Eight Bells pub on Chipping Campden high street. For 21 years he laboured under the impression that I was trying to chat him up, and I had to disabuse him of that notion only recently.
Sir Geoffrey Clifton-Brown
I had better not comment on that publicly for fear it might lead me down the wrong business rates avenue.
Dr Caroline Johnson (Sleaford and North Hykeham) (Con)
My hon. Friend has spoken about the high street and perhaps, in some respects, the high street may need to change from being entirely retail to a place where people can meet and be entertained. One issue limiting such change is that many small business premises on our high streets are owned by self-invested personal pension schemes. As such, they need to remain commercial property to remain in those pension schemes. Will my hon. Friend or the Minister comment on whether properties that change from commercial to residential, in line with a slightly shrinking high street, may be able to stay within those pension schemes for a period so that such change is not hampered by the SIPP rules?
Sir Geoffrey Clifton-Brown
My hon. Friend makes a very good point, and I am sure it has been heard by the Minister. I am being urged to hurry up as I have taken an awfully long time, so I will not take too many more interventions.
The rates on Amazon’s nine distribution centres have fallen by an average of 1.3% and ASOS has seen its bill fall by 0.8% because, although Amazon owns 20 million square feet of warehousing from which to supply customers, it does not have to occupy premium premises on the high street to get the footfall that a high street retailer needs. This provides those large businesses with an automatic advantage, making it easier for them to slash prices while maintaining a profitable margin. I have already demonstrated how they pay much lower business rates per square foot.
Although the Government have introduced a diverted profits tax and a new digital services tax, which will raise £400 million, I do not believe some of these very large digital platforms are actually paying the just amount of tax on their turnover in this country that a British business would pay.
I have previously mentioned that the British Independent Retailers Association has long advocated changing the current threshold or discretionary relief to an allowance—the difference being that one is discretionary and an allowance is automatic—which would cut red tape for both local and national Government. It could be applied at source, as opposed to being dependent on the local council, reducing the need for the £3.7 billion spend on mandatory and discretionary allowances and reducing the Government’s current compliance cost for processing small business rate relief claims. I have already explained the difficulties with different councils applying different criteria.
Paradoxically, unknown to me at the time of my debate on 8 October 2018, the Minister had answered my written question, 176219, the day before, in which he said:
“The Government is committed to considering the feasibility of replacing small business rate relief with a business rates allowance”.
So the Government had actually conceded the point for small businesses, once the local authority and HMRC systems are linked in line with our planned digitisation of business rates. I would be grateful if my right hon. Friend the Financial Secretary updated the House on where we have got on the matter.
Sir Geoffrey Clifton-Brown
I want to make a little more progress.
The Government want to make tax digital, citing that they will be
“transforming tax administration so that it is more effective, more efficient”.
Would it not be worth investigating how tax could become truly joined up by ensuring that an allowance would be applied automatically, maybe at the point at which the Valuation Office Agency makes a valuation of a property? If it comes up to £51,000, that would automatically trigger the allowance that a business would be able to get, and it would simply be deducted from its bill. What a great simplification of government that would be.
There is a precedent for this, of course. Income tax has a personal allowance for all but the top 5% of earners, and that is automated. I am advocating the same principle for rates. I believe that this policy could get cross-party support. After all, the Housing, Communities and Local Government Committee’s report, “High streets and town centres in 2030”, recommended
“that the complexity surrounding rate reliefs and the administrative burden they create for retailers should be addressed”
and simplified. All this needs is joined-up thinking and a plan of action to allow the Treasury to adapt the current operational systems for the benefit of businesses up and down the country.
Madam Deputy Speaker, I am grateful to you for allowing me to speak about this important subject at length. I hope that, as a result of my speech, we will see some action from the Government to ensure that business rates are reformed.
The Financial Secretary to the Treasury (Mel Stride)
We have had a very good debate on the extremely important matter of business rates. I will reiterate right at the start that this Government want to see taxes as low as possible. We have made a number of advances in that respect, as the House will know, in areas such as income tax and corporation tax. Equally, we want the burden of rates on businesses up and down the country to be as low as possible. For that reason, as several right hon. and hon. Members have highlighted, we doubled the small business rates relief, from £6,000 to £12,000 as a rateable value threshold, taking 655,000 businesses out of business rates altogether.
We also switched from the retail prices index to the consumer prices index for the uprating of the multiplier, further reducing the burden by £5 billion over the next five years. In 2016 we introduced £300 million for hard cases, which is there for local authorities to use at their discretion. We doubled the level of rural rate relief, from 50% to 100%, to help small communities where perhaps there is just one pub, post office or petrol station. A number of right hon. and hon. Members mentioned the discount of one third brought in at the last Budget.
I congratulate my hon. and gallant Friend the Member for The Cotswolds (Sir Geoffrey Clifton-Brown) on securing the debate. He asked a number of sensible and relevant questions about the whole way we structure our business rates. He asked specifically about the allowance, which we have discussed previously. We are looking at that seriously, but it depends to a large degree on our getting in place the digital arrangements between local authorities so that we can transfer information on business premises owned by the same entity. That programme will be introduced by about 2024, but I am happy to have further discussions with him on the matter.
Sir Geoffrey Clifton-Brown
I truncated the last bit of my speech, but I was going to say that the existing IT platform is regarded by the professionals who have to work with it as being clunky and difficult to work. Does the re-design by 2024 that my right hon. Friend mentioned include an entirely new programme?
Mel Stride
I will have to come back to my hon. Friend with an answer to that specific technical question, but I will gladly do so.
Several Members rightly mentioned our high streets package. My right hon. Friend for New Forest West (Sir Desmond Swayne) made reference to the fact that it is not all about business rates; it is also about how we design and evolve our high streets to face the changing nature of retailing, which of course includes the rapid advance of online retailing.
Several Members mentioned the digital service tax that we are committed to bringing in by 2020, and we will do so unilaterally in the absence of a multilateral move on the behalf of other countries.
Sir Bernard Jenkin (Harwich and North Essex) (Con)
I congratulate my hon. Friend the Member for The Cotswolds (Sir Geoffrey Clifton-Brown) on securing this excellent debate. All these welcome measures that the Government introduce do not really address the fundamental flaw in this tax. Take the economically unlucky town of Harwich, which I represent. A capable family business in Harwich has developed the Pier hotel over the years to make it a real jewel in the crown of an otherwise rather economically depressed town, but what is that family’s reward? They get clobbered for extra business rates. The less successful hotel businesses carry on paying less rates but the most successful hotel and restaurant gets clobbered for a big increase in rates. If the tax operates in that way, how can that be rewarding success in depressed economic areas?
Mel Stride
Earlier in my speech, I went through at length the large number of reliefs that we have brought in to make sure that across the piece we are bearing down wherever we can, particularly in respect of those smaller businesses that might find expenses of this kind particularly arduous. Given that we have had a rather lengthy debate preceding my remarks—
Mel Stride
I will not give way at this moment.
We have listened carefully as a Government and will continue to bear down on business rates. I look forward to having further discussions about that with my hon. Friend the Member for The Cotswolds and welcome the full and comprehensive debate we have had.
Question put and agreed to.