High Streets: Autumn Budget 2024

Angus MacDonald Excerpts

Thursday 23rd January 2025 Commons Chamber

[Victoria Collins]

That is one of the main topics that came up. Businesses shared with me that after facing the impact of Brexit, closures during covid, cuts to local infrastructure following Conservative cuts to local government and the soaring costs from the cost of living crisis, the combination of measures in the autumn Budget, which includes the rise in national insurance contributions, the change in business rates that was just mentioned and the increase in the minimum wage, as well as proposed changes that could impact family businesses, means that they are now reaching crisis point.

Businesses that I speak to are largely supportive of an increase in the minimum wage. I want to highlight that because they want to support their staff. However, it is the combination of all those factors, after such a difficult time, that is devastating. The knock-on impact of that combination has also seen pre-emptive cost rises across supply chains and worries about consumer confidence, as consumers ultimately spend less on our high streets. Although the GfK consumer confidence index in the UK rose by one point last December, confidence levels remain subdued and retail sales in the UK unexpectedly declined 0.3% month-on-month last December, in a moment in the calendar that is often the most critical time for retail and hospitality on our high streets.

Coming back to national insurance contributions for employers, this is a pre-profit cost increase. Not only does that need to be managed, but for businesses that are just about breaking even or making a loss, it will tip them over the edge and drastically cut the cash flow that is often key to investment. The well-loved local Lussmans restaurants in Hertfordshire have been serving local people for 22 years and face around £250,000 off the bottom line, leading to reduced investment in our local area. Temptation Gifts will see similar, if not higher, costs and says that for the first time in 42 years, it will be shortening opening hours as part of its cost-saving measures. It is having to make difficult staffing decisions in a business that the family has built over decades.

My constituent, Charlotte, managing director of the oldest family-run jewellers in the UK, says that the mix of higher national insurance contributions and higher minimum wage costs means that they will not hire any more staff, and that anyone who leaves will not be replaced. Almar in Tring, where Carolyn and her husband already work long days, says that the national insurance contributions will be a big issue in their running costs and that they do not know how they will cope working even longer days.

Chiltern Opticians in Tring highlights the barriers that small businesses face in hiring staff. It says that it is very different for big corporations, which have large human resources teams to handle staffing issues, and that

“we just don’t have the budget for it”.

These are resilient businesses—or they have been—and they want to continue to build those businesses and to employ local people. Indeed, I see their pride in supporting local staff, often calling them “family”. Jordan from G. Grace & Son in Tring says:

“We are more like a community centre at times, providing essential services to the community.”

In that, I hear my mum’s voice who so often did the same. Our pubs, restaurants and cafés in Harpenden and Berkhamsted cover 197 hospitality venues that employ more than 6,000 people and generate nearly £143 million in revenue. These businesses are the backbone of our economy and community.

The Government say that they are protecting small businesses, but these are the small businesses of which they talk. Indeed, the official definition of a small or medium-sized enterprise is a company with fewer than 250 employees. They are growing, local, often family-run businesses that are nowhere close to being the international giants that have started to dominate retail or hospitality. These local businesses are happy to pay their way. Andrei says:

“I have no issue with tax rises, but these are positioned poorly. The vast majority of the high street are SMEs and they will be hit the hardest.”

Sadly, the desperation is clear. These small businesses are worried that the Budget will be the final straw. Participants in my local survey said:

“What is the point of a small business? The high street is dying.”

Therefore, when it comes to national insurance contributions, will the Government consider mitigations to support the local businesses on our high streets? These could include a lower rate of NICs for earnings of between £5,000 and the £9,100 threshold, or a lower rate for lower earning taxpayers who work part time—perhaps fewer than 20 hours per week. As we have heard from many local businesses, this would help get more people working and support our local economy. At the very least, will the Government consider delaying implementation to give businesses time to adjust and consider their own mitigation?

[Mr Angus MacDonald (Inverness, Skye and West Ross-shire) (LD)]

I wonder whether the Minister will consider what I am about to say. I have been asked to go to the Isle of Skye on Saturday for a crisis meeting. There is a group of hotels, which are family-run businesses, not big multinationals, and they face an awful combination of increases across the board, including heating price increases. Their No. 1 issue is national insurance contributions and minimum wage costs. They think that, on average, their costs will go up by between £40,000 and £70,000. They are in a very poor state indeed. Can the Minister give me any encouragement that I could pass on to them on her behalf?

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Mr MacDonald, your intervention was on the Member, so the question goes to her, and she can insist on the Minister responding.

--- Later in debate ---

[The Economic Secretary to the Treasury (Emma Reynolds)]

I congratulate the hon. Member for Harpenden and Berkhamsted (Victoria Collins) on securing the debate and thank her for sharing her story of working in her mum’s gift shop. It was very moving to hear that she has had direct experience of working in a shop on the high street. I also thank her for her survey of local small businesses on her seven high streets, which is an impressive number. She outlined very well the importance of the businesses there; I think she said that there are 197 retail, hospitality and leisure businesses, employing some 6,000 people. I thank her for sharing those statistics, and the feedback from those businesses.

I share the hon. Member’s passion for the regeneration of our high streets. I think it is a concern for Members across the House. High streets are focal points of economic activity, but most importantly—she said this in her speech—they are often a key part of the unique character of our communities. We know that high street businesses are contending with a range of challenges. She listed some of them, but I will list a couple: changing consumer shopping habits and the rise of online shopping, and a series of economic headwinds, including the pandemic, which we know was particularly difficult for small, independent businesses on the high street.

The Government are committed to reforming Britain’s economy to bring about a decade of national renewal. Creating an environment in which our high streets are able to flourish is critical to that commitment. In her speech, the hon. Member recognised the Government’s dire economic inheritance from the Conservatives, none of whom are in the Chamber. We had some very difficult decisions to make in the Budget, but it was necessary to wipe the slate clean to deliver the economic stability that high street businesses need.

[Mr MacDonald]

Will the Minister say why taxes were put on poor, struggling organisations, such as high-street shops and hotels, rather than the massive online businesses that are emptying our high streets? Why did she not consider imposing a higher rate of corporation tax or income tax, rather than hitting the poorest businesses in our society?

[Emma Reynolds]

The hon. Member pre-empts my next sentence, so I thank him for that. We have committed to reforming business rates, because we need a fairer system, fit for the 21st century. That important part of our reforms and plans will, I hope, benefit the businesses that the hon. Member for Harpenden and Berkhamsted spoke about.