Business Rates

Derek Thomas Excerpts

Wednesday 13th June 2018 Westminster Hall

[Derek Thomas (St Ives) (Con)]

I thank the hon. Member for York Central (Rachael Maskell) for securing this debate. It is one that I wanted to secure, but I was not successful, so I am glad to have the opportunity to contribute again on the subject. The Minister might just groan when he hears me speaking again—he has heard the issues several times before, and I was glad to raise them in last week’s Opposition day debate.

I agree with my right hon. Friend the Member for East Devon (Sir Hugo Swire) that the Minister is engaged and keen to resolve this issue, and I understand how complex and difficult it is, so I will not be unfriendly in my remarks, but I want to reiterate some points I have made before, as well as bring up an issue that Cornish colleagues have been concerned about, but which has not gained any traction here in Westminster.

Issues with business rates lead me to believe that the system must be scrapped. One reason for that is the significant housing issue in Cornwall. It is a real challenge to provide and retain houses for local families and for people who live and work locally and who want to work at the hospital or in public services perhaps, but who just cannot secure the housing they need.

Everyone who lives in a house, unless they are on some sort of benefit, pays council tax, but if someone has a property that they own and which they choose to use as a holiday let, it can be registered as a business and they can avoid paying council tax altogether and then claim small business rate relief. I live in a three-bedroom house and I pay £1,600 a year to live in that property; I contribute, as lots of families do. A property next door is paying no council tax whatever, so it is not contributing.

We have a cross-party campaign in Cornwall on this issue. The real tragedy is that it is possible for a second-home owner to advertise his property as available for rent and also claim small business rate relief. Other Cornish colleagues and I have been raising that issue since we were first elected in 2015. I do not think the Government are fully engaged and fully understand the challenge that that poses for a community such as Cornwall, which needs every penny it can get. There is an opportunity for the Government to close the loophole and collect more tax, completely fairly. I urge the Minister to look at that again and to give his Cornish colleagues some cheer when it comes to trying to address our housing problems.

On the high street, my constituency also has shops that have closed since Christmas. There are lots of reasons, which include ridiculous parking increases and an obvious change in customer behaviour, but there are also business rates. In the 2016 review, St Ives saw quite dramatic increases, along with London and the south-east and other areas. It was a significant shock to many businesses.

I have examples that show that the way business rates are calculated does not make any sense. It is not clear why one shop should pay one amount while the shop next door pays something completely different. If we could understand the business rates arrangement, and if it were equitable, perhaps it would not be such a problem, but some shops have no idea why they are being charged such sums, and the check and challenge process does not help them.

Behind the headlines about the big retailers and multiples, a number of small businesses are closing or threatening to close. I have said previously in this place that about 11 businesses have told me that they do not believe they will see it out to the end of this year. Their problem is that they own their building or have a stake in it, so they have to carry on paying business rates even if they can no longer function as a business. That is a depressing message to send to what we used to describe as hard-working families.

The issue of business rates is complex; it is not just about consumer behaviour and people choosing to shop online. I disagree with my right hon. Friend the Member for East Devon. I can barely work out how to enter my card details online, so I tend to go to a shop when I have a spare moment.

Let me give examples of what is happening in my constituency. In Penzance, No. 8 has 90 square metres and is paying £14,750 a year. No. 8A, a similar property right next door—I cannot tell the difference between them—has 88 square metres, so 2 square metres less, and is paying £18,250. The Valuation Office Agency has not been able to explain the difference between them. The Minister has been engaging and helpful, and has asked about that. My office is working up a few examples of that nature so they can be investigated and studied. In one sense, I am being fairly unhelpful, in that I am raising an issue about which the Minister has already invited me to give him details. We are doing that and will get them to him soon.

In Helston, Betfred has 132 square metres and pays £13,500 a year. Next door, an independent deli in a much smaller building of 123 square metres—I would love to show hon. Members the photos—is paying £16,250. We have done everything we can to support that shop with the Valuation Office Agency, check and challenge, and the local authority, and to try to get it some help. It has had a small reduction, but the bottom line is that the owners get out of bed in the morning and have to find that money before they do anything else. They cannot understand why Betfred—a multiple next door, with a much bigger shop front and, sadly, a busier shop—is paying £3,000 a year less.

In St Ives town itself, there is a fudge shop of just 20 square metres that pays £13,750. St Ives fudge is world renowned, so it is understandable that people want to shop there, but that does not justify the fact that the Government or the Valuation Office Agency have decided that for just 20 square metres it needs to pay nearly £14,000 a year. There are lots of examples in St Ives town of what seem to be arbitrary increases.

I recognise that the Government have introduced lots of measures to try to support such shops and have enabled local authorities to offer help, but we have not seen the benefit. One pub in St Ives has had real help from Cornwall Council, but those other shops have been left to find the money month in, month out. The problem with St Ives—this is the nature of the high street in a popular town—is that an entrepreneur who wants to make a go of running a shop in the town centre will have to pay whatever rent is required, because that is what the absent landlord asks for, and there are few other options. They last perhaps nine or 12 months. When they leave, the rent goes up, and a new aspirational person comes in and tries to set up a business there. Their short lifespan has an impact on the business rate valuation, and on all the other shops, which might have been there for 100 years. Since Christmas, we have lost the local fruit and veg shop and all sorts of other businesses that served the community for 100 years or more.

The real tragedy is that, previously, holiday makers would flood to St Ives and buy what they needed for the week. Now they arrive and the truck from the local supermarket, which might be travelling from Truro, will turn up and deliver all they need for the week, above the very grocery shop that would previously have sold to them.

That is about consumer behaviour, but the real challenge is that business rate charges are not equitable. More than a year ago, I got the Valuation Office Agency to come to St Ives to meet a room full of concerned business owners, and it refused to comment on any individual business. All it did was explain how we could do the check and challenge. Those businesses are in a busy part of town, so they might be expected to be financially successful. The owners work extremely hard day in, day out to make their businesses work—often, they do not have time to jump through the hoops, although many of them did—only to be told they are paying the right amount of money.

I want to ask for three things. First, we should review the review. I know we have another review, but we need to look at what happened 18 months to two years ago, and at why some shops and retailers saw ridiculous increases. We need to do something quickly to address that now, because those businesses are going out of business.

Secondly, the point about local authorities keeping the money from business rates is important, but town and parish councils also need support, because there is often a double devolution situation, with powers shunted down without money. In Helston, the town council—it would be great to have a pilot, along with York Central—would love to grapple with its town, make it vibrant and support the high street, but it has no money to do that.

If we are not going to get rid of business rates, it would be great to allow town councils to retain 1% or 2% of the business rates collected. For Helston, that would be about £200,000 a year, which would give the council the power to transform the shopping experience on the high street and support the very people who are spending that money. I know that 1% or 2% is a lot of money, but it is quite a small chunk of what is collected and would give the towns a fighting chance.

Finally, I recognise that the Government need to collect the 2.4%—

[The Financial Secretary to the Treasury (Mel Stride)]

It is 24%.

[Derek Thomas]

Is it 24%? Golly! I know the Government need to continue to collect that money, and I am absolutely in favour of the transaction tax. A high street business should pay the same rate on an individual item as an out-of-town store or an online store pays. There must be a way to make taxes fair. There must be a simple way to make tax digital that enables the Government to continue to collect the money they need while ensuring the system is fair for all those who seek to sell items to customers.

I am grateful for the opportunity to speak in the debate, and I appreciate that the Minister is listening and wants to resolve the difficulties that high streets face.