Business Rates (North-East)

Ian Mearns Excerpts

Tuesday 25th October 2011 Westminster Hall

[Phil Wilson (Sedgefield) (Lab)]

It is a pleasure to serve under your chairmanship today, Mr Amess.

I congratulate my hon. Friend the Member for Sunderland Central (Julie Elliott) on securing this debate, which is on a very important issue. We can tell that from the number of hon. Members who are here in Westminster Hall.

For me, the point about the proposal in the consultation is what it will actually do for economic growth in the north-east of England, where manufacturing, for example, is worth £7.5 billion. I think it is the only region in England that actually exports more manufacturing goods than it imports. We have Hitachi coming to Newton Aycliffe in my constituency, which will create 500 jobs in a train-building facility and thousands of jobs in the supply chain.

I am concerned that in the future local authorities will have to generate more money from business rates because of cuts in other rates. For example, County Durham will lose £125 million in grants over the next four years, including £64 million this year. That money must be made up from somewhere. Under this proposal, however, we also know that the county could lose up to £80 million, but its annual budget is only £300 million. At the moment, leisure centres are closing and in many areas we are now able to provide only statutory services to local communities; we are no longer able to provide discretionary services.

The big thing for me is that the Association of North East Councils has said:

“Business Rates are not a suitable measure of economic growth. Rewarding growth in Business Rates income gives disproportionate benefit to the encouragement of growth in retail space and large distribution centres, rather than encouraging growth in small businesses (whose Business Rates attract substantial levels of relief), technology businesses that do not require much physical space, and manufacturing.”

In the future, local authorities might not pursue major manufacturers to come to the area, as they have done in the case of Hitachi, but instead they might pursue major distribution centres and major retail providers, because they cover more space.

I have some figures for retail sites. They can generate more than £1 million per hectare in business rates, but manufacturers can only generate £250,000 per hectare. However, what we get with manufacturing is high-value jobs. With Hitachi, it is not just the 500 jobs that are being directly created but the thousands of jobs that will be created in the supply chain. In my area, I want young people to have high-value jobs, providing a future for our local communities, and I am not sure whether the Government’s proposals will achieve that aim.

I want to mention E.ON’s plans for my constituency. E.ON wants to build the largest wind farm in the country, with 45 wind turbines. It will cover 7.5 square miles, which is 5% of my Sedgefield constituency, but it will generate less than £1 million in business rates. There will be no jobs; there will be reindustrialisation of the landscape without any jobs and less than £1 million in business rates will be generated.

I am really worried, not because I do not think that Durham county council and other authorities in the region will not want manufacturing industry to come to the area, but given the cuts that they are already struggling with, the incentive for them will be to look for big retailers and distribution centres rather than the manufacturers of the future. If we want to rebalance the economy and bring in lots of private sector jobs, we have to look at the quality of the jobs that we are creating. I need more businesses on the science park at NETPark—the North East Technology Park—such as Kromek, which is creating major jobs for the area and actually saving jobs at Thorn Lighting, because of the quality of the people who work for Thorn Lighting.

[Ian Mearns (Gateshead) (Lab)]

The hon. Member for Redcar (Ian Swales) accused Labour MPs of being unduly pessimistic. However, from my constituency’s perspective, in an area such as Gateshead we have actually been very can-do and built things such as the Metro centre and the Team Valley trading estate, which employs more than 20,000 people. We also have a £150 million development in Gateshead town centre at the moment, but my council is still very pessimistic about what will come from this set of proposals. Why would that be?

[Phil Wilson]

My hon. Friend is absolutely right. As a person, I am optimistic. I know what we did with Hitachi, to attract it to the north-east of England. We brought the Government—struggling—to the table on that project. When the north-east of England stands together, we achieve great things.

We have to look at the location of the north-east of England. It is a long way from here. My constituency is 263 miles away, according to the sat-nav in the car. To the north, we have Scotland, which has its own regional development agency. The regional development agency for the north-east of England is being done away with. The regional growth fund is offering only a third of the money that we used to receive under the previous Government. To the south of us, there is a burgeoning economy. The number of distressed businesses has gone up by 20% in the north-east, but the number in the south-east has actually fallen by 6%. We ask the Government to look at these proposals and take into consideration the great concerns that we have about our area.

I keep mentioning Hitachi because I am proud of what we have achieved, but Hitachi has said that it came to England and the UK not only because it is a great place but because it is in Europe. We are part of Europe and should remain so.

Finally, I want to ask a few questions of the Minister. Will the readjustments be over five years, or is he thinking of reducing that time scale? What guarantees are being offered to manufacturing. Under the proposals, will incentives come to areas? Will any grants take inflation into consideration, as was mentioned? Will that be the consumer prices index, the retail prices index or another measure of inflation?