Business Rates

Geraint Davies Excerpts

Wednesday 4th December 2013 Commons Chamber

[Toby Perkins]

My hon. Friend is absolutely right: there is a real disincentive for many small businesses to grow. His local authority has taken innovative action to ensure that procurement goes to local small businesses, and that is an example to councils everywhere.

As much as anything, the Government’s failure on living standards has hit the pound in consumers’ pockets and pushed many of our stores to the brink. Three wasted years of wages falling behind bills every month means more hardship for Britain’s firms. Confronted by a stubborn opinion poll deficit, the Chancellor is simply flailing around in the dark for Labour policies that he can ape. He is convincing no one. We led on energy prices, but under this Government, bills still go up. We led on payday lending, on which he now thinks we were right. We told him that his funding for lending scheme was overheating the southern property market and failing to get finance to small firms, and now it appears that he agrees; and on business rates, we said things had gone too far, and now he says, “Okay, but just a little bit further.” We know that he does not have the answers. In fact, he does not even understand the questions.

[Geraint Davies (Swansea West) (Lab/Co-op)]

I am sure that my hon. Friend is aware that the growth now is driven completely by a combination of mortgages and consumer debt. That sort of bank lending is at its 2008 level, whereas business lending is 32% down, and in fact the share of small business has gone from 40% to 33%. That enormous collapse in funding for business is why productivity is down and wages are so low. We would change that, would we not?

[Toby Perkins]

Absolutely, and that brings me nicely to my next point. It is not all doom and gloom, because we are only 18 months away from a Labour Government. There is a better way under Labour. We are not just proposing a symbolic change to the role of business rates, but confirming real help for firms that, as the British Chambers of Commerce rightly said today, still face a hike in business rates.

On energy prices, we will save the average business £5,000 a year. On access to finance, we propose real action with the introduction of a proper business bank and a network of regional banks, alongside support for challenger banks and peer-to-peer lending. On business support, we are working on a proposal that recognises the support that is needed to make the most of great British business ideas. On late payments, which take more than 2,000 firms to the wall each year, we will take robust action to expose firms that pay late and end the scourge of late payments; and we will use the huge power of Government spending to point the way towards a future in which small firms finally pick up their fair share of Government contracts.

As we head towards small business Saturday, small firms can rejoice: at last there is a party ready to form a Government who understand why small firms think that business rates are so important. We have a party that gets that we will not solve the access to finance issue by expecting the banks to do differently with the next pound we give them from what they did with the last. We have a party that realises that business support matters and knows that shops will close if the people in their communities have no money in their pockets. The party that gets it is Labour. That is why we are calling for real action on business rates; that is why we will take action on the cost of living crisis facing businesses; and that is why all Members should back our motion. I commend it to the House.

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[Brandon Lewis]

I thank the Chairman of the Select Committee on Communities and Local Government for his question; I am sure he will be here tomorrow to learn what the Chancellor has to say in the autumn statement.

Let us remember the context of this debate. Corporation tax was 28% under Labour; this Government are cutting it to 20%, the lowest rate in the G20. Labour’s plans for higher corporation tax would put jobs and investment at risk, but I appreciate that the Labour party has form on that.

[Geraint Davies]

rose—

[Brandon Lewis]

I will make a little progress and give way in a moment.

Let us look at Labour’s record and let us take, for example, the ports tax. The Labour Government imposed retrospective business rates on ports across England—unexpected bills that threatened to sink England’s export trade and destroy the country’s car industry. In an astonishing break from Cabinet collective responsibility, the then Home Secretary, the right hon. Member for Kingston upon Hull West and Hessle (Alan Johnson), wrote to the Secretary of State for Communities and Local Government in 2009 slamming the policy. He said, “These businesses are” being

“damaged by a government that on the one hand is looking for ways to help small businesses through the recession, whilst at the same time is imposing a completely unfair retrospective system that will destroy jobs and put these companies out of business”.

He had a point. If the hon. Member for Swansea West (Geraint Davies) still wants to intervene, I am sure he will want to agree.

[Geraint Davies]

Further to the point I made earlier, the cuts in funding to business are particularly acute among small businesses. Given that, should not the priority be not to cut corporation tax across the piece, but to focus our fire where it is most needed, among small businesses, rather than giving the cut to all the big giants, who have more strength to weather the storm?

[Brandon Lewis]

I am not quite sure what cuts to business the hon. Gentleman is talking about, but he is absolutely right about targeting. I agree with him about that, which is why I am so proud of what this Government have done with small business rate relief, to which I shall turn in a few moments.

No impact assessment was made of the ports tax, no consultation was undertaken and no concern was shown about the effect on the wider economy.

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[Brandon Lewis]

As I explained to Bill Grimsey when I met him a couple of weeks ago, I do not accept his premise or the way in which he has carried out his calculations. He has simply not allowed for the way in which the multiplier works.

The postponement of the revaluation will provide tax stability and certainty for businesses, as there will be no real-terms increase in business rates over the next five years. Labour Members often speak, as they have today, as though business rates never existed under Labour. Well, I ask Labour critics to bear in mind that the Labour-led Welsh Government have copied us and postponed the rates revaluation in Wales. In the words of Welsh Labour Ministers, this will ensure a more “stable business environment”. The Scottish Government have done the same.

The postponement of the 2015 rates revaluation has allowed the Valuation Office Agency to allocate more resources to clearing appeals. More than 641,000 appeals have been resolved since 1 April 2010, and the number of outstanding appeals has fallen in eight successive quarters. I recognise, however, that more needs to be done to speed up the rating appeals system that we inherited from the Labour Government. We also need to make it more transparent than it was under Labour. I can announce today that my Department will publish detailed proposals for consultation on that shortly.

[Geraint Davies]

The Minister mentioned Wales. Is he aware that properties there that have been empty for 12 months will now get 50% rate relief, and that new-build business properties will pay no business rates for 18 months? Will he look at that in a positive light when considering regeneration?

[Brandon Lewis]

I am sure that people in Wales looked at the powers we gave local authorities here and thought that it is something they want to do in Wales. I say again that we are talking about something that local authorities already, under this Government, have the power to do.

This Government absolutely recognise that the wrecked economy we inherited means that businesses are facing challenging times. It has been our job, where possible, to ease pressure on businesses of all sizes, and to use their skills and expertise to drive our recovery and ensure an economy that is ripe for growth. Some 1 million private sector jobs have been created and the deficit is down by a third. Those are not just happy coincidences; they are achievements of this Government’s economic plan.

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[Geraint Davies (Swansea West) (Lab/Co-op)]

It is a great pleasure to follow the hon. Member for Northampton South (Mr Binley). Like him, I have started and owned a number of small businesses. I know that a number of Government Members have not, and some could barely run a tap based on what they have been saying.

I am a great supporter of small businesses in Swansea—people like Joe’s Ice Cream and Tomos Watkin’s. I have had them up here and I will be visiting them later this week. We should remember when we have these history lessons that the last time we saw mass bankruptcies was under the Tories, and that is happening again. Why? We have heard about growth—the fastest growth in Europe, I think they said—but when we analyse that growth, we can see that it is a combination of mortgage lending and consumer debt lending, which is now at its 2008 level. Bank lending for investment is down 32% and the share of small businesses in business lending is down from 42% to 27%. That is appalling for small business. Royal Bank of Scotland is the Government-owned bank, in essence, and its share of small business lending has fallen from 40% to 33%. It has double dealt and all the rest of it.

This is a big issue. I made some of these points last week and Mark Carney, the Governor of the Bank of England, has switched the focus of the direction of business away from mortgages. Productivity is still 5% in Britain whereas it is up 8% in the USA. That is why people are poor and cannot afford to deal with the cost of living crisis, which is why Labour is talking about energy and business rates. Labour is in touch with the reality for small businesses.

There is a clear choice. Do we want a corporation tax cut, when we have the most competitive rates in the world already and when companies need profit to pay that tax? Or do we cut costs, so that the businesses that are not making any profit can survive? My choice is small business. People talk about Peter and Paul and we are talking about small versus big, rich versus poor. We know what side the Tories are on with the millionaires’ tax cut and the rest of it.

Look at procurement. In Wales, 65% of procurement goes to small business, which generates local jobs and corporation tax paid to the Exchequer. In England, 6% goes to small business so the rest goes to big business—international businesses that do not pay corporation tax and employ people in Germany or wherever else. There is no evaluation of the overall economic impact on small business and what the country is doing.

We have talked about infrastructure again today and 80% of funding goes to London and the south-east. How much of that goes to small business? Very little. What about HS2? We are giving it away to the Chinese. What are the Government doing? They are hopeless at protecting our interests. There needs to be a big conversation among Government, big and small business and trade unions.

I am glad that there will be a cross-party debate next week about Ford, which is not funding pensioners—people who worked all their lives for Ford and were sent away because they were with Visteon. I am having my own dialogue with Amazon, a local company that I think is not paying fair tax. “Panorama” also showed that there is not fair treatment in Amazon and there is some suggestion that it might be in cahoots with the DVLA and Royal Mail on local wage setting. I will be asking the Office of Fair Trading to look into that.

I have worked for multinational companies in charge of global brands and we need fair treatment, fair tax and fair play. Incidentally, I did not vote for the EU-Colombia free trade agreement because of what is happening in Colombia to trade unionists and the like. It is important that we support initiatives such as Labour’s proposal on council tax and what we are doing in Wales. The bottom line is that on lending, procurement, infrastructure, business rates and energy costs, Labour means business—a strong business community moving forward to a future that cares, a future that works and a society that is united and strong rather than divided and weak.

I shall give up the rest of my time for future speakers, but let me just say that we must focus on small business and stop letting people such as Vodafone get off with £50 billion of income from their latest share deal while paying no corporation tax. Let’s get real, let’s get fair and let’s make Britain strong again.