Business Rates (North-East)

Debate between Angela Smith and Julie Elliott

Tuesday 25th October 2011 Westminster Hall

[Julie Elliott]

Other parts of the country are in similar situations; the issue for the north-east is that the entire region is struggling.

The system the Government propose favours the growth of retail space and distribution centres, rather than small and medium-sized businesses and, most crucially in the north-east, manufacturing. Practically, that means that a hectare of land used for retail in the north-east will yield £1 million, compared with £200,000 for manufacturing. It feels as if my region is being punished for manufacturing things. We must remember that manufacturing needs to be at the heart of any national strategy for long-term economic growth. The sector contributes £7.5 billion to the north-east economy per year. We export more than we import, which is helping to rebalance the economy in these difficult financial times. Business rates may value retail and commercial sites the most, but they just do not reflect the way our region’s economy is made up, and with so many people out of work, increasing the number of shops is not the answer and would not be sustainable.

I would be interested to hear more from the Minister about the proposals for introducing mechanisms to overcome economic shocks, which are particularly relevant to the north-east, as we have already suffered from them.

[Angela Smith (Penistone and Stocksbridge) (Lab)]

Yorkshire, particularly South Yorkshire, will also suffer quite badly under these proposals. Is it not important that any Government legislation makes clear the need for rebalancing by means of top-ups and tariffs, as areas such as ours diverge from richer, more prosperous areas? It should also give a clear indication of when that rebalancing would take place.

[Julie Elliott]

Absolutely. Again, that is why it is important to have this debate and to give the Government the opportunity to hear concerns from formerly heavily industrialised areas as we move forward and try to grow.

In the north-east, councils rely on a small number of larger businesses to generate business rates, but that arrangement can be volatile and vulnerable to shocks, as we have seen in shipbuilding, coal mining, textiles and, more recently, steel making. We need an effective mechanism to manage economic risks and provide protection for areas of poor growth. I support the Government’s view that some of the proceeds of the levy and the set-aside should be used to protect against volatilities.

The Government must recognise that some places have greater economic potential than others. A council’s ability to generate business rates is mainly the result of location, location, location, combined with some effort and a lot of luck. The Government must therefore take account of the issues I have outlined. In particular, they must take longer to consider the wider and unforeseen consequences of their proposals, put in place a regular review of the new system, create a mechanism to protect against volatilities and, most important of all, make sure the system is fair, equitable and based on need.