Supporting Small Business

Huw Merriman Excerpts

Tuesday 19th October 2021 Commons Chamber

[Peter Grant]

If the hon. Member does not understand what the Federation of Small Businesses thinks about his Government tearing up their manifesto promise and increasing the burden of national insurance, if he does not understand what small businesses are saying about the impact that Brexit has had on them, if he does not understand that the energy crisis that the United Kingdom still faces, with massively increasing energy costs that then increase costs for every single business on these islands, and if Conservative Members do not understand that all those things are purely the result of their party’s policies, each and every one of which is devastating for the wellbeing of small business, then we have to wonder why on earth they are still in Government.

[Huw Merriman (Bexhill and Battle) (Con)]

Perhaps we could mention one example of this Government helping small business: the requirement for outsourcing agencies, such as National Highways and Network Rail, to put a third of all their contracts into the hands of small businesses. Indeed, Network Rail is up to that third already. Is that not a tangible example of this Government doing something to support small businesses?

[Peter Grant]

Well, it was not quite the way that things were done with all the personal protective equipment contracts and other covid contracts. Of course, there is a better way to do it than that. Rather than telling the health service that a fraction of all its privatised contracts have to go to small businesses, why not say to the health service, “Don’t privatise it. Do it yourself.”? The public would get a better, cheaper and more efficient service, which is exactly what we are seeing with the NHS in Scotland since the SNP banned the privatisation of our services all together.

If the Conservatives want to see an example of how to support small businesses, they do not need to look beyond these islands. They need to look beyond this Chamber, beyond this city and beyond this country to some of the other countries that are supposed to be equal partners in this Union. If they do, they will see examples of Governments—I commend also some of the Welsh Government initiatives mentioned earlier—who do not just talk the talk on supporting small business, but who walk the walk as well. That might be something to do with the fact that those Governments are not run by parties whose coffers are swollen to obscene degrees by people who have made their money running big businesses—very often, big businesses that ran small businesses into the ground.

The linkage between the impact of non-domestic rates and other taxes and Government policies on small businesses is clearly complex, so it is not possible to say that simply changing the non-domestic rates scheme on its own will fix the problem. I, for one, do not like the idea of using an imaginary property valuation as a significant feature in deciding somebody’s tax bill, whether it is an individual’s council tax or a business’s non-domestic rates burden. The tax base is far too narrow on far too many businesses. We are taxing things that might have been the right things to tax 500 years ago, but which are not the right things to tax now.

Most importantly, as was mentioned by the shadow Chancellor, the hon. Member for Leeds West (Rachel Reeves), we have to move to a situation where the tax is due and is paid where the profits are made. We cannot have companies that make substantial profits on the hard work, diligence and expertise of people in the United Kingdom, but where all the profits are magicked away to some offshore tax haven so that no tax is ever paid. The Government have it in their hands to change that. They need to move a lot quicker to do that. Doing so would not only help to plug the gap in the public finances, but would give small businesses a chance to compete on fair and equal terms with the bigger competitors. I can say, for a lot of the small businesses in my constituency, let them compete on equal terms with the big boys; they will take them on and, as often as not, they will beat them, and they will make sure that profits from that success are reinvested in their local communities.

As with so many other things that we debate in this Chamber, I have indicated the successes that the Government of Scotland have had with the powers they have. Others have referred to some of the successful initiatives that the Government of Wales have introduced with the limited powers that they have. With increased powers for those devolved Parliaments will come increased success and increased wellbeing for the citizens of those nations. The only way that small businesses in Scotland will have a long-term, secure and profitable future is when the decisions that affect them are taken by a Government who are accountable to the people of Scotland and to no one else.

[Huw Merriman (Bexhill and Battle) (Con)]

It is an absolute pleasure to contribute to this debate. I thank the shadow Chancellor for laying this motion, which gives us an opportunity to talk about business and the support that we have for business in our communities. I will certainly be doing so, as well as speaking to the reform of business rates, which I have had a long interest in since coming here in 2015.

Before I do so, let me respond to the hon. Member for Glenrothes (Peter Grant). I had the pleasure of being up in Edinburgh for a few days over the weekend, and it was very sad to see that not just Jenners on Princes Street but shop after shop had closed. In my view, that demonstrates that across the UK changing trends are causing people to shop differently, which is having a huge impact on our high streets. It is down to this Government, and indeed all Administrations, to support their high streets. That does not just mean expecting the shopping of the past to return, because it will not, but looking at how we can turn these units back into retail, which gives more footfall within the cities and towns and helps, not least, those who are perhaps older and do not wish to live as far out. Those boarded-up shops may be the responsibility of the changing trends or may actually have something to do with the hon. Gentleman’s own Administration as well.

[John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)]

I am very pleased that my hon. Friend enjoyed his trip to Scotland. Many businesses in my constituency are facing the challenges imposed by the Scottish Government because of their policy on business rates, but does he agree that the particular challenge they are facing is the continued uncertainty around another independence referendum, which is putting huge pressure on their plans and their economic prospects?

[Huw Merriman]

I do agree. Interestingly, the CBI has talked about the challenge on business rates because every three or five years there is a revaluation and business does not have the certainty it needs. I think in Hackney there was a change of about 46%. The CBI recognised that the uncertainty of this type of big-shock fiscal events can absolutely impact business’s ability to plan and invest in the future. A referendum on the whole future as to whether Scotland will be part of the UK, its biggest trading partner, must surely have some impact.

[Alyn Smith (Stirling) (SNP)]

On the hon. Gentleman’s point about Princes Street, did he manage to make it along to the new, shiny, marvellous St James Quarter, where a number of the businesses he talked about relocated to? He is making a point in isolation about one street in the country, not the entire nation, and it is possibly unwise to draw too many conclusions from one street.

[Huw Merriman]

The hon. Member makes a fair point, because two out of four businesses have relocated to St James Quarter, with the interestingly shaped top that is called things that I would not repeat in this Chamber, but Jenners, a classic department store that is not relocating, is a good example of a casualty of changing trends.

It would be absolutely churlish not to recognise what this Government have done over the past 18 months. I represent a constituency in Sussex that is absolutely reliant in employment terms on small businesses in leisure, tourism and retail. The constituency I represent has businesses that were among the 750,000 that were given a business rate holiday. Furlough is not just keeping the employees going but making sure that they are returning back to the businesses. Some 15,300 workers in my constituency, about a third, were reliant on furlough to keep them going. When I went round to visit those businesses last summer—it had been very difficult for us to meet, but the changes in the summer allowed us to do that—they were absolutely of the view that had it not been for the Government’s support, their businesses would have shut down and their employees would have been made redundant. Everything that I am about to say has to be put in the context of the fact that this Government have absolutely supported business. I absolutely refute the point that the Conservative party is no longer the party of business; it absolutely is and it will always have the champions of business on these Benches.

In the six years since I have been a Member of this place, I have always championed the need to reform business rates. If we look across the G7, we see that the UK has the largest property taxes. They are a tax on jobs and a tax on business, and I would like to see them reformed. Over those years, we have had a number of reviews, and we are waiting on one at the moment. I would dearly like to see business rates replaced. The CBI is right when it says that business rates are a tax on business and jobs and lead to uncertainty. I see the shadow Chancellor, the hon. Member for Leeds West (Rachel Reeves) nodding her head.

What is also important is that I stand for fiscal responsibility. Something has to come in place of business rates that brings in the exact same yield. With respect to the shadow Chancellor, when she was pushed by my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) on how the £20 billion-plus that business rates bring in as revenue would be replaced, she was only able to give a figure of about £7 billion. That leads to a big deficit. That means there would either have to be public spending cuts to make up for the shortfall, or we would have to go into further debt, which is no good for business or the individual.

[David Johnston (Wantage) (Con)]

My hon. Friend makes the point about the shortfall if we get rid of business rates. Those on the Opposition Benches also talk about the national insurance rise, which is raising £36 billion to go into the health service and social care. Is he as unclear as I am on how they would replace that money, as well?

[Huw Merriman]

Yes, I am. I do not want to go too off-piste in terms of the subject of this debate, but I certainly recall that when the Labour party rightly injected funds into the NHS back in 2001, it also agreed that national insurance was the best way to fund it. I have heard it said that wages are not growing at the same rate now as they were then. Actually, if we take a look back, we find that they are growing faster now, which seems to refute that argument.

When it comes to the business of running Government, we have to take these serious decisions and make sure that we do not continue to see this country going ever further into debt. When it comes to business rate replacement, which I would advocate, we need to look at something that brings in the same revenue, and I am left with the view I had previously: we can look at a tax on turnover or sales, but ultimately the simplest way of dealing with it is looking at the VAT system. We all know full well that business rates end up getting channelled all the way through to the individual consumer in any event, but some consumers do not have to pay, particularly with the online side of things, because business rates are not levied there as much as they perhaps are on the high street.

We should level with the public and say, “At the moment, business rates are coming on to your bills, but they are a tax on jobs.” If we were to put the tax instead on VAT or other forms, it would be a lot more transparent, a lot fairer and, most of all, it would make it economically viable for businesses to expand their space and employ more people. If we did that, we would level with the British public and see further investment from business. I do not agree with the motion, although I agree with the Opposition for bringing it forward. It is great that we are debating the ideas, and I welcome that from those on the shadow Front Bench, but I gently prod that ultimately we have to see a payment of like for like.

--- Later in debate ---

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

It is a pleasure to respond to this debate, and I thank all hon. and right hon. Members for the contributions they have made. I may not be able to mention them all.

My hon. Friend the Member for Sefton Central (Bill Esterson) talked about the challenges small businesses face. My hon. Friend the Member for Kingston upon Hull West and Hessle (Emma Hardy) talked with passion about her constituency and the importance of connectivity. She invited us all for a drink in Ye Olde White Harte, an offer I am very glad to take up.

From the Government Benches, the hon. Members for Bexhill and Battle (Huw Merriman) and for Thirsk and Malton (Kevin Hollinrake) took the St Augustine approach. They were all in favour of business rate reform, just not yet.

The hon. Member for Richmond Park (Sarah Olney) spoke of the plight of the travel industry. My hon. Friend the Member for Pontypridd (Alex Davies-Jones) spoke of the thousands of jobs lost in the music and creative industries, and of the help given to business by the Welsh Labour Government.

The hon. Member for Devizes (Danny Kruger) spoke thoughtfully about the importance of connectivity and the changing role of our high streets. The hon. Member for Stirling (Alyn Smith) spoke about how economic and consumer practices have changed through covid.

My hon. Friends the Members for Bradford West (Naz Shah) and for Vauxhall (Florence Eshalomi) spoke about the crucial importance of the wedding industry and the spin-off industries it gives rise to. My hon. Friend the Member for Islwyn (Chris Evans) spoke of his frustration, shared by many Members, of the baked-in variations in valuation, with no apparent process of redress or appeal. Every single Member who spoke in this debate spoke with passion about their high streets, their constituencies and the small businesses within them.

[Huw Merriman]

The point I would just gently make, on behalf of myself and my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), is that we called for business rates to be reformed right now and indeed came up with a proposal that would cost it right now, too. I hope the right hon. Gentleman might reflect on that and come up with his own.

[Mr McFadden]

I am happy to talk about our proposals and the hint we got on what the eventual outcome might be.

We tabled this proposal because we want to support Britain’s businesses as they try to recover from the pandemic. Many physical retailers could not trade at all during the pandemic. Consumers changed their habits and went online. Our high streets were shuttered and closed. The problem of business rates is well known and has been for a long time: they are weighted against high streets; they are weighted on physical versus online businesses; and they create negative incentives for investment. If someone invests in their business, does the right thing and does their bit for the transition to a greener economy, their business rates actually go up. It is a 20th-century tax for a 21st-century economy.

Our calls for reform have met with widespread support from the business community. UKHospitality says that the biggest cost danger in sight for the hospitality sector is the reintroduction of business rates from 2022. The Federation of Small Businesses said that business rates

“hits firms before they’ve even made a pound in turnover.”

The CBI said that business rates are

“literally…a tax on investment”.

The British Retail Consortium found that without a reduction in rates next year, 83% of retailers said that it was “very likely” or “certain” that they might have to close stores. The Institute for Family Business has also backed this call.

In the short term, businesses need help. That is why our proposal, in the motion before the House, sets out positive steps that will help businesses right now: a freeze on business rates; an increase in the threshold for small business rate reliefs; and a proposal that is fully costed and fully funded.

The Government know that business rates need reform. That is why they launched a review 15 months ago, but where is it? Where are the conclusions? Where is the Chancellor’s plan on business rates? Has it not been published because he is fighting with No. 10 about it, as he is over climate change? Has he not published it because he is fighting with the Business Secretary, as he is on industrial support?

But we did get a clue as to what the preference of Government Members is, because many Members went for the Tory party’s three favourite initials: VAT. Time and again in Government, when they have needed to raise money, they have gone for VAT. We do not yet know what the conclusions of the business rate review will be, but the prospect of the VATman returning is certainly possible given the contributions that we have heard today.