Business Rates

Ann Coffey Excerpts

Tuesday 30th October 2012 Westminster Hall

[Ann Coffey (Stockport) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Caton. I congratulate my hon. Friend the Member for Rochdale (Simon Danczuk) on securing this important debate on business rates and on his comprehensive analysis of the effect that increased business rates will have on our high street.

Like many towns, Stockport is being squeezed extremely hard at the moment. We have one of the highest numbers of empty shops in the country, with nearly a third lying empty. There are various reasons for this, which I will mention later, but continuing high business rates are a major contributor to a difficult trading environment. The trend is that business rates are too high as a proportion of rents, and consequently many retailers are struggling to stay afloat. Small and medium-sized businesses are suffering disproportionately.

I have been looking in my constituency at the balance between rents and rates of many empty shops, which we desperately need to reopen. The problem was articulated by the head of north-west high street chain, Timpson, at a business event in Manchester on 15 October. James Timpson said he had considered opening a new site in Stockport recently, but the rent of £10,000 was almost half the £18,000 business rates. He added:

“Business rates have got completely out of hand. It’s become a real stifler and is stopping businesses from taking more space and trying new things. The higher the business rates the harder the gamble is to pay off.”

The Minister will be aware that last year’s 5.6% rise in business rates was the biggest increase in 20 years. If a chain like Timpson’s is being put off by high business rates, what can it be like for other businesses? As banks are very risk-averse, the current level of business rates must deter them from lending to those wishing to start a new business or extend an existing business. It makes little sense to exhort banks to lend while loading additional costs on business.

Two examples of empty smaller shop units in two key areas of Stockport that we need to develop further —the Market Place and the Underbanks—show the disproportionate level of business rates to rent. In one empty shop in the Market Place, which the council has spent much money on refurbishing, the rent is £9,750, yet the business rate bill is more than half that, at £5,287. In another empty property in our unique Underbanks area, which we are looking to revitalise, the former Greggs bakery, the rent is £15,000 a year but the estimated rates bill is £6,862. Many bigger shops in Merseyway, which we need and which must stay in Stockport, are appealing against their high rateable values.

There is no doubt that business rates are a barrier to new entrants to the high streets and a drag on investment and growth for small business. A recent survey of small shops identified that business taxation was one of the top five barriers to growth. As co-chair of the all-party group on retail, I tabled an early-day motion earlier this month, calling for a freeze of business rates next year to save jobs and prevent more shops from becoming empty.

There is widespread concern that a 2.6% increase in business rates in April 2013 would impede retailers’ ability to invest and create jobs, particularly for young people. The retail industry, as hon. Members have mentioned, is the UK’s biggest private sector employer, providing crucial first jobs to a million 16 to 24-year-olds. In Stockport, 5,700 are people employed in the retail industry. Business rates have already risen dramatically in both 2011 and 2012, by 4.6% and 5.6% respectively, a cumulative increase of more than £500 million.

The early-day motion also calls for a review of the mechanism by which rates are increased, to ensure a fairer and more sustainable formula for the future, based on an annual average of the consumer price index, rather than the lottery of using only September’s RPI. The RPI is unpredictable and usually higher than the measure that the Government choose to use for pensions and benefits.

I, like many colleagues, am also unhappy that the Government are postponing the 2015 rates revaluation until 2017. That will punish northern businesses particularly, by keeping them locked into 2008 rates, set near the peak of the property boom. The rationale for this decision is that local firms and local shops will avoid unexpected hikes in their business rates bills over the next five years. I quote the Minister in a recent article in The Daily Telegraph:

“The best thing Government can do to help such businesses is to provide them with a stable economic environment. This is why we want to protect local firms from soaring tax bills.”

Which businesses is he trying to protect? From the Government’s own calculations there are 800,000 winners and 300,000 losers from the postponement of the revaluations. Those figures, as the hon. Member for Waveney (Peter Aldous) said, probably require closer analysis and examination.

[Simon Hart (Carmarthen West and South Pembrokeshire) (Con)]

I shall make a helpful comment. Does the hon. Lady agree that, in some instances, local authorities are taking enforcement action against premises that have gone to appeal against their revaluation? It is crazy that there is a risk of their going out of business because of overburdening action by the local authority, pending the outcome of the appeal. Surely, local authorities could at least wait till the appeal is heard before going after the money.

[Ann Coffey]

The hon. Gentleman makes a good point. We must have systems in place that support local businesses and do not create extra barriers and difficulties for them. He is right about that.

Colliers International research shows that prime rents in Stockport fell by 29% between 2008 and 2012, so Stockport will not be a winner in this postponement; we are going to be losers. The winners and beneficiaries of the revaluation’s postponement will be those shopping centres where rents have risen, such as premium centres, which are still doing well. Shopping centres that need to be protected from “soaring tax bills”—I quote the Minister—are going to get hammered.

Mary Portas identified high levels of business rates as both a deterrent to investment and a disincentive to occupy physical shops. This policy can only add to the demise of our high streets. This is unfair and has been called the retail equivalent of the poll tax. I urge the Government to think again.

In addition to the high level of business rates, there are other important reasons why many high streets, particularly those in medium-sized towns, are struggling. They include major changes in shopping trends and habits, which have been accelerated by the economic recession, including fewer shopping trips, increased internet shopping, lack of investment and forward planning over the decades, and the continuing trend towards premium shopping centres. We also see a polarisation of consumers: those on low incomes struggle and shop in Poundland, bargain basement shops and charity stores, whereas those on high incomes continue to spend on designer-style goods in premium centres. There is a classic squeeze of middle shops and middle-sized shopping centres with smaller units.

We have to recognise that some high streets might never go back to being the destination of choice for major purchases, as nearby regional centres act as magnets, drawing shoppers from an ever-wider catchment area. We can, however, rebuild new and unique styles of shopping and experience, and towns such as Stockport need to have a distinctive shopping offer. We are looking at doing that based on the town’s cultural and heritage sites. We are one of the Portas pilots and we are looking at a culture-led renovation of our Underbanks and the Market Place, building on exciting national screening events at the Plaza, teenage and vintage market events and the High Peak beer festivals. We are doing all we can to attract independent retailers to the Underbank area, and some new specialist shops have opened.

Too many shops open and close, however; the economic environment is tough and we need retailers starting a new business to be successful and to expand. I therefore urge the Minister to take heed of the exhortations of the hon. Member for Stockport and other Members in all parties who are passionate about and interested in retail and to think again about postponing the revaluation exercise, freezing the business rates for next year. Please will the Minister give our entrepreneurs the space to take a chance and to build for future jobs and prosperity?