Reducing Costs for Businesses

Lee Rowley Excerpts

Tuesday 11th January 2022 Commons Chamber

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Lee Rowley)]

I am grateful for the opportunity to contribute to the debate.

I agree with the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) that this has been an extremely difficult time. He is right to highlight the impact on businesses across the country: it is difficult to overstate the stresses and strains that businesses face, and this has been one of the toughest periods for business and industry since the second world war. From restrictions to rising energy costs, from supply chain shortages to rising inflation, businesses have had to weather an especially turbulent storm. They have had to cope with the logistical and financial disruption brought about by the coronavirus, while keeping staff and customers safe against a disease that we did not initially know much about and that has frequently required rapid changes. We remain extremely grateful for their fortitude and resilience.

Throughout the pandemic, the Government have tried to do what we can, in the most extraordinary period of our lifetime, to support businesses through the tough times. The interventions that we have made are unprecedented, even for a politician like me who does not like talking about policy solely in terms of input. We have mobilised, necessarily, hundreds of billions of pounds in support from the taxpayer to provide one of the world’s most comprehensive and generous economic responses to the pandemic. Our plan backed business, because we know that only by supporting business can we enable it to create jobs, strengthen communities and support the whole economy. It came on top of other pro-business measures that have always been at the heart of how we, as a Conservative Government, run a strong economy.

In the Chancellor’s 2020 Budget, he announced a series of substantial interventions through a business rates relief package. The majority of businesses in the hospitality and leisure sectors will see a 75% reduction in their rates bill across this financial year and 50% capped business rates relief next year. We recognise that the hospitality and leisure sectors have been hit particularly hard, so there is a reduced 12.5% VAT rate to support cash flow and viability until the end of March, which has helped to keep 150,000 business afloat and has supported nearly 2.5 million jobs. On top of that, we had the £1.5 billion covid-19 additional relief fund for those who had not previously had business rates support.

[Dr Matthew Offord (Hendon) (Con)]

As the Minister will know, the threshold turnover for small businesses to register for VAT is £85,000. A constituent emailed me today to say that as a result of the pandemic, inflation has increased and he has had to increase his prices. Does the Minister agree with him that the Government could raise the VAT threshold to ensure that businesses can grow and the money can be used for investment?

[Lee Rowley]

My hon. Friend tempts me to get into policy, which is not the purpose of Opposition day debates—as much as the Opposition would like it to be—nor something that I have control over. He has made his point, however, for which I thank him.

We had all that support, and then when omicron came along, the Chancellor announced a further £1 billion of support for the most affected businesses, in particular, again, hospitality and leisure businesses, which had seen a steep drop in consumer demand. Taken together, that shows the Government acting in extraordinary times. I am pleased that the IMF praised our support measures as,

“one of the best examples of coordinated action globally”.

[Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)]

I thank the Minister for courteously taking my intervention. As the House knows, I represent the furthest away constituency of mainland UK. Does he agree that in such a constituency, where distance is a huge issue, businesses face special challenges owing to remoteness and the cost of transportation and every other service?

[Lee Rowley]

The hon. Gentleman makes an important point that demonstrates the different challenges for different businesses in different parts of the country, and why the half-baked plans that the Labour party has put forward today—almost—demonstrate that it does not have a coherent plan to face the challenges.

All those measures came on top of more than £79 billion of Government loan schemes, which have directly supported over 1.5 million businesses. On the specific point in the Labour motion about repayments, which the hon. Member for Stalybridge and Hyde did not discuss to any great extent in his opening speech, we have already changed the way that they work to provide greater flexibility for individual circumstances through things such as “Pay as you grow”.

At every twist and turn of the virus, the Government have acted decisively to protect businesses and livelihoods. I refute in the strongest possible terms the charge made by the motion that we have failed to support UK businesses through the pandemic.

[Emma Hardy (Kingston upon Hull West and Hessle) (Lab)]

Does the Minister recognise the anger and upset of excluded businesses that have been unable to get any support, such as those in the coach industry and many others, especially when they see the amount of fraud involved in some of the online loan schemes that the Government have introduced? Further to that, I raised the issue of fraud involved in loans coming from the Government in the Treasury Committee, but I did not feel that there was a fervour or desperation to deal with and tackle the issue. Will the Minister talk about how the Government will recoup some of the money that has been wasted on fraud and how they will ensure that excluded people get the support that they need to get through the pandemic too?

[Lee Rowley]

The hon. Lady makes an important intervention. When policy is made at speed, it is a huge challenge, as the House knows, to ensure that we understand where the lines are drawn correctly. All the way through this difficult time, with the changes that have been required, the Government have tried to target the interventions and the support in the best way to cover the most people who need it.

The hon. Lady’s point about fraud is hugely important. As we hopefully move from a direct intervention model to one of recovery, there will be a huge focus on fraud. The permanent secretary of my Department was before the Public Accounts Committee yesterday with some hon. Members present to talk about that subject, which demonstrates its importance in the future.

Let me turn now to another substantive part of the motion, business rates, which are a favourite topic for Labour party Opposition day motions. There are constant suggestions for changes. On some days the suggestion is to cut business rates, on others it is to reform them. Occasionally, when the Opposition are feeling very bold, they say that we should scrap business rates.

[Mr Perkins]

Will the Minister give way?

[Lee Rowley]

I will not give way now, but perhaps in a moment.

Months after those bold statements began to be made during last year’s Labour conference, we are still yet to hear the detail of how Labour will meaningfully reform business rates.

[Mr Perkins]

Will the Minister give way on that point?

[Lee Rowley]

I am happy to give way; perhaps the hon. Gentleman can explain it.

[Mr Perkins]

I have a better memory than the Minister, because I remember when George Osborne stood at that Dispatch Box in 2015 and said almost exactly the same thing, so we have been waiting six or seven years for business rates reform under the Government. We will wait another two years until my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) is on the Government Front Bench to actually get the change that our businesses need.

[Lee Rowley]

I hate to break it to my neighbour, but we came out last year with a reform of business rates, which is intended not just to save a substantial amount of money for businesses in his constituency and mine, but to ensure reform and recognition of the changes necessary. Labour ignores those kinds of changes, and what the Opposition did just a moment ago is a perfect example. The Chancellor’s 2021 Budget delivered a huge tax cut to business, freezing the multiplier for 2022-23, worth nearly £5 billion over the next five years, introducing a new temporary 50% relief for the retail, hospitality and leisure sectors, and moving to a yearly revaluation cycle from 2023.

[Kevin Hollinrake]

The only detail that we seem to know about in Labour’s plans to reform business rates is a sixfold increase in the digital services tax. One thing we know about the digital services tax is that Amazon, for example, passes it straight on to consumers, which is exactly what it did. The other thing we know is that it does not apply to Amazon’s direct sales, so those plans will hit small businesses and consumers. Is that not the wrong emphasis for reforming business rates?

[Lee Rowley]

I am grateful for my hon. Friend’s intervention, and that is exactly the level of detail that demonstrates why, when the Opposition come to this House and put forward half-baked schemes, they immediately fall apart when they come under scrutiny, away from the warm words.

We have just gone through a business rates review, which we have talked about, although it might have been useful, consistent or, indeed, even slightly coherent for those on the Labour Front Bench to actually say what they were going to do over and above that. Of course we acknowledge the burden that rates impose. That is why many of us on the Government Benches are here in the first place: because we recognise over the long term that a lower tax burden is the way to make society and communities healthier, happier and wealthier. I can tell the hon. Member for Stalybridge and Hyde how that is going, given that he sat on the Opposition Front Bench under the right hon. Member for Islington North (Jeremy Corbyn), who was going to raises taxes until the pips squeaked. As Conservatives, we know that a successful, dynamic, thriving private sector is the only way we get a strong economy in the long run. This is a Government that support business. We backed business robustly during this unprecedented crisis period, and we will continue to do so as we rebuild the economy following the pandemic.

This economic plan is working. The vaccine roll-out continues to play a key role in enabling us to lift restrictions, allowing sectors to remain open and businesses to recover. The UK was one of the fastest-growing G7 countries in 2021, and the same is likely in 2022. There are over 400,000 more people in employment than before the pandemic, and redundancies are below pre-pandemic levels. As we recover and move from the most unprecedented health situation of our lifetimes, we are moving towards the most unprecedented economics, whereby many economies are experiencing high inflation, primarily due to pressures from rising energy prices and disruptions to the global supply chain. My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) highlighted the equivalence of inflation elsewhere in the world. Those global pressures are the main drivers of higher inflation in the UK. Global production and supply chains are in the process of adapting and adjusting to that disruption, and the Chancellor is working with his G7 partners to monitor global supply chain pressures and build a strong and resilient recovery.

Before I conclude, I want to spend a short time on the third part of the motion, energy. On recent high energy prices, I want to acknowledge the concerns of industry and business and make it clear that the Government are committed to them both now and in the longer term, as we work through these immediate challenges and volatile times, and then look to opportunities and challenges over the long term. The Government are constantly engaging with stakeholders, including large energy users, businesses and energy retailers, to consider what action may be necessary. The recent rise in energy prices over the autumn and winter has been driven by the increase in the price of wholesale gas, the demand for which has grown, as we and other nations have recovered from the covid-19 pandemic. Consequently, higher wholesale gas prices have been observed in Europe and Asia in the last half of 2021.

However, it is vital to note that this has not impacted our energy security. The Government continue to work closely with Ofgem, National Grid Gas and other key industry organisations to monitor supply and demand. At the same time, the Government are determined to secure a competitive future for all businesses, including those that are energy-intensive.

[Alex Cunningham]

Will the Minister give way?

[Lee Rowley]

I apologise to hon. Gentleman; I need to make progress so that others can come in.

Many large energy users have already taken the sensible and responsible step of adopting hedging strategies to shield them from some of the exposure to gas and electricity prices. In recent years, although the Opposition never acknowledge it, we have provided extensive support, worth more than £2 billion since 2013, to help with the costs of electricity and to protect jobs.

Yet again, just as with business rates and just as with loan flexibility, we are left asking, “What would Labour actually do?” What is the detail behind the warm words? What are the changes that Labour will be proposing when the headline writers have moved on? How will the contingency fund work? Who will have access to it, and for how long? How will the moral hazard of those who have hedged be dealt with? What will be the definition of “energy-intensive”? How will the windfall tax work? How will Labour avoid reducing investor confidence or capital investment, ensuring that we have enough domestic energy to supply a transition to a greener future?

There are no answers, no detail, no nothing. This is Labour’s debate in Labour’s time with Labour’s choice of subject, but yet again we find ourselves without the detail, without the information, without the alternative—and why? Because Labour’s plan is no such thing. It seeks headlines rather than solutions, it offers soothing words rather than actual detail, and it plays politics when sober analysis and close working with industry are required.

I will end my speech by stating once again the Government’s belief in this country as a great place to do business. We have the lowest corporate tax rates in the G20, a regulatory framework that puts us in the global top 10 for ease of doing business, and a highly skilled workforce. It is easy to see why the UK is consistently home to one of the largest and most resilient economies in the world. That is why we are seeing so much excitement in the rest of the world about investing in the UK, not least when investors queued up to spend at the global investment summit last year. In the last 10 months, we have already seen a flurry of spending in the UK: a gigafactory in Sunderland, Ford and Stellantis churning out electric vehicles in the north-west, GE Renewable Energy and others creating an offshore wind hub in Teesside. That is a huge vote of confidence in the UK as a place to do business as we recover from the pandemic.

We will take no half-baked plans, no headline-grabbing stunts and no lessons from the Labour party. The Conservative party is the party for business, and we will continue to work with business and industry through difficult times to build the free-market, competitive and dynamic future that will make our country healthier, wealthier, greener and happier.