Taxation: Small and Medium-sized Enterprises

Debate between Gregory Stafford and Jim Shannon

Tuesday 3rd February 2026 Westminster Hall

[Gregory Stafford]

I hope the Minister is listening; this is a problem not just for constituencies in the south but across the country. It is not just Conservative or Lib Dem Members raising the issue—clearly Labour Members have the same problem. The Minister should look at all good ideas, but current Treasury orthodoxy is to carry on with what it is doing, and to tax anything that looks like enterprise, business or job creation, which will destroy our economy and harm our high streets.

[Jim Shannon (Strangford) (DUP)]

I commend the hon. Gentleman for bringing this matter forward, and he is absolutely right to outline this story. To reinforce the point, the Chancellor and the Finance Minister in Northern Ireland have rightly rolled back the proposed enhanced taxation because of its impact on tourism. However, that feels more like a stay of execution than a solution. This is happening everywhere, not just in England but in Wales, Scotland and Northern Ireland, to a great degree. Does the hon. Gentleman agree that the number of small uplifts—in rates, national insurance contributions, the price of goods and so on—can no longer be absorbed by knife-edge profit margins, and that unless we stop these tax rises, which is the Government’s responsibility, our local economy will pay a deadly price?

[Gregory Stafford]

I thank the hon. Member for, as always, bringing his experience from Northern Ireland. That emphasises the point that I was making: this is a whole-country problem. He is absolutely right that we are on a knife edge. We are at a tipping point for our small and medium-sized enterprises, and if they go under, the consequences will be dire. If one wants to speak Treasury speak, that means the Treasury will actually raise less money. The only way that the Treasury will raise more money is by freeing up businesses to expand, grow and employ more people. That is how we will get our economy going, not by taxing every single business until the pips squeak.

I turn now to hospitality, which has been a focus of mine since I was elected. It underpins community life and provides work for young people and for those who rely on flexible hours. Yet the Government slashed retail, hospitality and leisure relief from 75% to 40%—an ideological and damaging decision—which will be followed by eye-watering increases in rateable values from April this year.

UKHospitality data shows that the average pub will see its business rates rise by 15% in the first year, climbing to a 76% increase by year three. At the same time, online and out-of-town competitors are being protected. Distribution warehouses used by online giants will see increases of just 9% in year one and 16% by year three. This is not a level playing field; it is actively tilted against the high street.

The Government’s so-called emergency pubs relief, announced this year, does little to address the scale of the problem. It is a sticking plaster, not a solution. Just one in 20 retail, hospitality and leisure businesses will benefit, and even then the average pub will still be paying £5,700 more in business rates than before.

Business rates are simply not being reduced, and those pressures are compounded by the changes to employer national insurance contributions introduced at the 2024 Budget. For the hospitality sector alone, that amounts to £1 billion every single year. More than 774,000 hospitality workers have been dragged into employer national insurance for the first time, disproportionately affecting part-time staff such as bar workers and waiting staff. Flexible work is being punished. Young workers are being hit hardest, and employing people is becoming more expensive at precisely the wrong moment. That is not pro-growth and it is not pro-work.

VAT policy has also failed small businesses. The £90,000 VAT registration threshold actively discourages growth and creates perverse incentives for firms to cap expansion. The Government have ignored repeated calls for a reduced VAT rate of 12.5% for hospitality, a policy that would support growth, improve competitiveness and align the UK with many of our European neighbours. The refusal to act is holding back an entire sector.

The Parliamentary Private Secretary, the hon. Member for Hitchin (Alistair Strathern), is chuntering from his seat. I am sure he will be able to hold his own debate at some point to tell us all what is going on in his constituency. I suspect that, if he were honest, he would tell us about the impact that his Government’s policies have had on the sector, and how they are absolutely destroying his high street, as they are mine.

These pressures are not theoretical; they are being felt by real businesses across my constituency. For example, at Birdies café in Farnham Park, business rates have increased by 450%—from £290 to £1,600 a month—a change that has already cost the business a member of staff. Energy bills have risen from £300 to £400 a month to £3,500 a month, while rising wage costs and changes to employment law have forced the owner into rolling three-month contracts—a worse outcome for workers, driven entirely by the Government’s pressure and policies. At the Bat and Ball pub, business rates are doubling from £800 to £1,600 a month. Minimum wage changes have added £56,000 a year to its wage bill.

Across my constituency, community businesses such as the Antiques Warehouse, the Packhouse, the Bluebell pub, Serina, the Six Bells, the Healy Group, and Hamilton’s in Farnham; Acorns Coffee, the Dairy, Issaya and Smallworld IT in Bordon; Oliver’s café and wine bar and Davids menswear in Haslemere; Passfield Stores in Passfield; Little Latte in Tilford; the General Wine Company and Stedman Blower in Liphook; and the Greatham Inn in Greatham have all written or spoken to me and are facing the same relentless squeeze from Government tax and regulatory decisions. These are not failing businesses; they are community anchors being priced out by this Government’s policies.

These issues are not confined to hospitality. Yesterday I met representatives of Medicines UK to discuss the impact of Government policy on suppliers of generic medicines. They raised serious concerns about the extended producer responsibility packaging tax. Packaging is obviously mandated by the Medicines and Healthcare products Regulatory Agency for safety reasons, leaving companies with little ability to reduce their tax liability. As a result, costs are either absorbed or passed directly on to the NHS and therefore the taxpayer.

Project Gigabit

Debate between Gregory Stafford and Jim Shannon

Tuesday 26th November 2024 Westminster Hall

[Gregory Stafford]

The hon. Lady is absolutely right. The fact is that many of our rural constituencies are so far below the national average that it is a real problem. In my constituency, gigabit coverage lags well below the national average, with 65.5% of premises connected in the old constituency of South West Surrey and 64.4% in the old constituency of East Hampshire. Both are over 10% below the UK average despite being just an hour’s drive away from London. In the villages of Tilford, Dippenhall and Greatham, broadband speeds are shockingly poor. In one Dippenhall postcode, 100% of properties lack speeds above 10 megabits per second. Similarly, in parts of Greatham, constituents are stuck with outdated speeds that cannot support modern digital demands. To put this in perspective, Londoners with gigabit connections enjoy speeds of up to 1 gigabit per second, while my constituents struggle with speeds 100 times slower.

These numbers represent more than just technical deficiencies; they have a real and profound impact on people’s lives. Take, for example, a resident of Dippenhall who wrote to me to share their frustration. Their home is deemed inaccessible by Openreach, leaving them completely excluded from the benefits of gigabit broadband. Another example is Victoria, a magistrate in my constituency who commutes two hours each way to London. Victoria’s broadband speed—1.5 megabits per second download and 0.8 megabits per second upload—makes it impossible for her to work remotely or participate in virtual court hearings. During the covid-19 pandemic, while her colleagues in London worked from home with ease, Victoria was left unable to contribute. This digital inequality places an unnecessary strain on her family life, finances, and professional opportunities.

Even Moor Park, in the east of Farnham, suffers from poor speeds of just 20 megabits per second download and five megabits per second upload—far below what is needed for modern working or learning. These residents, along with those in Beacon Hill, Hindhead and Frensham, feel increasingly left behind in a world that is becoming ever more digital.

[Jim Shannon (Strangford) (DUP)]

Perhaps we should hear a bit of good news, as it is only right that we should do that. Whenever the DUP were in partnership with the Conservatives, part of that deal was a £200 million boost for Northern Ireland to ensure better connectivity. All of that has been spent. Some 96.42% of premises in Northern Ireland now have the most up-to-date connectivity. But connectivity for rural businesses is the issue—there are still some 60,000 businesses that need to be reached. When it comes to looking forward to the future, to see what we can do, does the Minister agree that small businesses need to be focused on?

[Gregory Stafford]

Absolutely; I agree. As Conservatives, I am very happy to work with the DUP on any matters that are in our interest together. It just goes to show that this is not just a regional issue—it covers the whole of the United Kingdom. We need to support small businesses.

That brings me to a number of those compound challenges that my right hon. Friend the Member for East Hampshire (Damian Hinds) also talked about. According to a Lloyds bank report, 11 million people—nearly 21% of the UK population—are digitally disadvantaged. In Surrey, an estimated 200,000 people face digital exclusion. It is the same in Hampshire, particularly in Headley Down, Grayshott and Liphook. Even in more populated areas, such as Farnham town, broadband speeds are far below the national average, affecting businesses, schools, and families. For many of my constituents, the lack of reliable broadband creates barriers to accessing healthcare, education and job opportunities. It also isolates people socially, particularly the elderly and the vulnerable. I pay tribute to two county councillors in my constituency, Debbie Curnow-Ford and David Harmer, who are working hard to help with that.

In hard-to-reach areas such as Dippenhall and Moor Park, alternative technologies offer some hope. Satellite-based internet, for example, could provide connectivity to rural areas where traditional infrastructure is not economically viable. Competitive bidding within Project Gigabit has already allowed smaller telecom providers to target these underserved regions, breaking Openreach’s historical monopoly.

Earlier this week I met representatives from CityFibre, which operates in parts of Hampshire, including Bramshott, Liphook and Headley Down. Their involvement shows how opening the market to competition fosters innovation and provides tailored, affordable broadband packages to meet local needs. That diversification is critical for ensuring fair and affordable access for all.

Diversifying the network also encourages local internet service providers, such as Grayshott Gigabit in my constituency. It is an award-winning full fibre broadband service and the winner of the Internet Service Providers’ Association UK award in 2024 for best rural provider. Those smaller-scale operatives can only continue to expand if they have continued Government support.

While I recognise that the new Labour Government have pledged to deliver nationwide gigabit broadband by 2030, I want to hold them to account. As my hon. Friend the Member for Arundel and South Downs (Andrew Griffith) pointed out when he was the shadow Secretary of State for Science, Innovation and Technology, we must avoid recreating the digital divide seen in Wales, as referenced earlier, where only 76% of premises have gigabit access, compared with nearly 90% in England.

The Labour Government must ensure that rural areas are not left behind. We cannot repeat past mistakes, in which funding and resources disproportionately favoured urban centres, leaving rural communities to fend for themselves. To address those challenges, I join colleagues in writing to the Secretary of State for Science, Innovation and Technology with the following requests: that the full £5 billion allocated to Project Gigabit is retained; that the funding is divided proportionately between urban and rural areas; and that rural areas where broadband is not commercially viable are prioritised for future investment.

As I have said, Project Gigabit has already transformed lives and communities, but there is much more to do. We owe it to constituents such as Victoria, the residents of Dippenhall and the families in Moor Park to deliver the connectivity that they deserve. Let us ensure that no community, urban or rural, is left behind in the digital age. It is time to close the digital divide once and for all.