Government Support for Business

Duncan Baker Excerpts

Wednesday 26th February 2020 Westminster Hall

[Duncan Baker (North Norfolk) (Con)]

The high street is a passion of mine, given that I worked in retail in my home of North Norfolk before becoming an MP, and the high street is dying at an alarming rate. That is not new, but the decline is continuing year after year, and I see little in the way of a long-term strategy to deal with it. Although I welcome the changes to business rates and the Government’s £3.6 billion towns fund, I do not feel, sadly, that that is the finished answer. It is a temporary sticking plaster, when major structural change and reform is urgently required.

What we are seeing is a fundamental technological shift that has enabled shopping habits to alter through technology. I am not one to stand in the way, but I feel that the Government need to intervene to level up what has now become a completely unfair playing field. Bricks-and-mortar stores are seeing costs rising at an exponentially high rate, through wages, rent, pensions and energy, while their frontline sales growth continues to contract. By contrast, the internet giants buy in enormous bulk, lowering costs, and they do not have the same cost base as companies in what we term A1 retail space.

The high street not only employs millions of people; it also contributes major social and economic value to the country. Boarded up, vacant towns will have a major impact on our health and wellbeing. We should think of the isolation and loneliness that people suffer if they cannot go out to the shops and add that social value to their lives.

Internet sales over the years have rocketed, from around 5% when the data was first collected to around 20% of all retail sales now. That is an alarming rate of growth. Last July the proportion of all shops on the high street that were empty reached 10.3%, the highest level since January 2015, also relatively recent.

Every year we see major chains being lost. House of Fraser, for instance, was narrowly saved. Many go bust, and if they do not, the restructuring deals mean that hundreds of shops are closed instead. We witness thousands of job losses each year, particularly after Christmas, which is a crucial period for many retailers, which either sink or swim after that.

When an industry leader such as John Lewis, which is seen as the bellwether for the high street, is struggling and announcing further potential job losses, we have to recognise that structural change is required. John Lewis has the luxury of Waitrose, and cash from the supermarket division enables it to reinvest in the department stores. Most businesses on the high street do not have that. When John Lewis is struggling, we have to recognise how hard it must be.

All the indications are that footfall is continuing to decline on the high street, potentially at around 2% every single year. That is pretty depressing news. There is a declining customer base and shifting consumer habits; we have all witnessed that managed decline in our lifetimes. We must act now with some kind of intervention to change the playing field before we see communities and high streets really lost, and enormous unemployment off the back of that loss.

What are the suggestions for change? For starters, we need to consider some kind of internet sales tax, specifically on online shopping. Great Britain is renowned for its backbone of small shopkeepers. Some kind of online tax would give high street retailers, whose overheads are high and who employ local people, a better chance of being able to survive. Similarly, some kind of higher rate VAT-style tax should be considered. If we do nothing, the trends that are already happening in front of our eyes will continue. In a time when the Treasury is looking for ways to generate income, why not consider such changes? They are staring us in the face.

We absolutely must tax the internet giants that are contributing to the demise of our towns and cities by not paying their fair share of tax. Only when we do that, as my hon. Friend the Member for Arundel and South Downs (Andrew Griffith) has said, can we start to support the business rates reductions that we hugely welcome.

People say to me, “Why should the Government intervene? It is not their job to interfere in industry change; it is an evolution that we are seeing led by technology.” There is a reasonably simple answer to that: we have done it before. For instance, we have subsidised agriculture for many years, even though the payments system is now being altered. We now have a chance to put some kind of support mechanism in place while retail adjusts.

We are partly to blame for the situation, because we have not sorted out some of the hopelessly lax planning decisions and policies that we have had over the years. Unfair competition from out-of-town stores has created a further threat to our beleaguered traditional town centres. Had previous Governments applied a policy for every supermarket to be restricted to the sale of food items, our high streets would have had a remaining viable use. Furthermore, the modern practice of supermarkets developing instore bakeries, fish counters, butchery departments and so on has led, through that competition, to many smaller businesses on the high street disappearing, almost on a weekly basis—particularly greengrocers. Stringent planning policies must be put in place to curtail some of the supermarket growth that has led to the demise.

The decline of our high streets is a complex problem with a vast array of contributory factors, but the rise of the internet is at the very crux of it. We have to start tackling the problem now. To use our favourite term of the moment, we need to do some levelling-up of our beleaguered high streets.