Small Shops Regulation

Margot James Excerpts

Wednesday 2nd November 2016 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Mr Gray. I congratulate my hon. Friend the Member for South Thanet (Craig Mackinlay) on securing this debate on small shops regulation. He has brought his detailed knowledge of and passion for retailers in his constituency to the attention of the House, and they are fortunate to have such a champion.

As someone with a business background, I am acutely aware of the impact of regulation, which not only imposes costs on businesses but often diverts resources from more productive activity. As we heard from my hon. Friend, small shops play a unique role in the fabric of British social and economic life; he cited several statistics from the “Local Shop Report” organised by the Association of Convenience Stores that really explain the benefit shops bring to our high streets. Small shops are the lifeblood of any community.

I agree with my hon. Friend that it is easier to regulate than to deregulate. I am finding that in my new role, and I might add that I am constantly vigilant against that instinct. We are recognised as a world leader in deregulation. Over the last Parliament we delivered savings to business worth more than £10 billion through what was then the one in, two out initiative. That made a real practical difference for small shopkeepers through, for example, reduced audit requirements and the simplification of health and safety requirements.

We are committed to delivering a further £10 billion of savings in this Parliament through deregulation. For the first time, that target will include changes in national regulators’ policies, as well as laws. For instance, we are working with the Financial Conduct Authority to review the way we combat money laundering. I hope that that will deliver more effective controls on criminals and simpler financial services for small businesses, including retailers. We are making good progress against our new target, and have made almost £900 million-worth of net savings through the measures already implemented since the last election.

Deregulation is of course only one part of easing the burden on shopkeepers. We are trying to create one of the most internationally competitive tax systems, which is why we have complemented the national living wage with radical tax reforms to boost the take-home pay of the lowest-income workers. But, of course, we need to help employers to put all this into action, so we are cutting taxes and employer national insurance by increasing the employment allowance and reducing corporation tax. The increase in the employer allowance from £2,000 to £3,000 will benefit up to half a million employers and mean that a business, such as a small retailer, will be able to employ up to four people full time on the new national living wage without paying national insurance contributions.

As well as earning a proper wage now, it is vital that people save for their retirement. My hon. Friend mentioned the issues relating to auto-enrolment. So far, more than 6.7 million people have been automatically enrolled into a workplace pension by more than 250,000 employers. We understand that small employers may find complying with automatic enrolment challenging, which is why the Department for Work and Pensions and the Pensions Regulator are working to make automatic enrolment as straightforward as possible for them. For example, as part of that work, the Pensions Regulator has launched an interactive step by step guide on its website—I think my hon. Friend mentioned it.

[Mr Andrew Smith]

Will the Minister respond to the very sensible proposal made by the hon. Member for South Thanet (Craig Mackinlay) about software that will help small shops to cope with auto-enrolment?

[Margot James]

I thought that was a good idea. I am obviously not a DWP Minister, but I shall write to the Minister responsible, mentioning the idea proposed by my hon. Friend the Member for South Thanet. It seems like one of those simple steps that the Government could take to facilitate an improvement.

My hon. Friend spoke about insolvency. Of course, sometimes, no matter how hard people try, businesses unfortunately fail. That can be very difficult to live with, particularly when a small business fails as a result of the ripple effect from an insolvency further up the supply chain. The law already allows for retention clauses to be enforced in the event that a customer to whom goods have been supplied fails and those goods can be recovered. My hon. Friend suggested that any money subsequently recovered from the “head client” by an insolvency practitioner should be shared down the supply chain to particular suppliers. It is, though, a basic principle of insolvency law that unsecured creditors should be treated equally.

There is a narrow range of exceptions to that principle, but any extension to those exceptions could prejudice the interests of other creditors in an insolvency, who may also be small businesses. The regime has to balance the interests of many different stakeholders, including lenders, employees and suppliers. Returns to creditors can be improved by ensuring that the insolvency process is as efficient and cost-effective as possible. To that end, I am pleased to say that a new set of insolvency rules for England and Wales will come into force next April, which will further reduce the costs of insolvency by removing some of the unnecessary regulations and driving the increased use of technology.

On the business environment and tax, I reassure my hon. Friend that the Government are committed to creating one of the most internationally competitive tax systems for small businesses. Earlier this year, Her Majesty’s Treasury made the Office of Tax Simplification permanent. The OTS will advise the Treasury on how to further simplify the tax system. This year has seen the biggest ever cut in business rates in England, worth £6.7 billion. Some 600,000 of the smallest businesses, many of which are retailers, will not have to pay business rates again. Although there have been fluctuations in the annual investment allowance, it is now at its highest ever permanent level. We have announced that we will cut the rate of corporation tax to 17% by the end of the Parliament.

My hon. Friend said that there was a great deal of disquiet among small retailers in his constituency about the programme to make tax digital. I have heard such disquiet in my meetings with the Federation of Small Businesses and discussed it with the Financial Secretary to the Treasury. There are some signs of progress. There is no chance of the programme being rowed back or changed radically, but the Treasury is consulting on changing the threshold and removing unincorporated businesses entirely. It is also consulting on delaying its introduction for one year for businesses of a certain size, and there is even the possibility of some financial support for very small businesses. So the Treasury is listening. I think the consultation deadline is fast approaching, so I urge my hon. Friend to make haste in contributing his views on behalf of his local retailers.[Official Report, 3 November 2016, Vol. 616, c. 1-2MC.]

As we have heard, the trade in illicit tobacco robs small shops of the income they deserve, in addition to causing a tax loss for Government. In 2015-16 we lost £2.4 billion-worth of revenue because of that illicit trade, so I thank my hon. Friend for his work to counter it. In March last year, the Government published a refreshed strategy called “Tackling illicit tobacco: From leaf to light”, which outlines how we will continue to target, catch and punish those involved in the illicit tobacco trade. By joining up all interested parties throughout the Government and leading the way in the international fight against illicit tobacco, more than 3.5 billion illicit cigarettes and more than 599 tonnes of hand-rolling tobacco have been seized in the past two years alone.

In conclusion, I thank all the right hon. and hon. Members present for their excellent contributions to the debate. Small shops remain a crucial part of our local and regional economies, creating jobs and injecting billions of pounds into our economy. I am passionate about supporting the sector—indeed, I am chairing a round-table of retailers this afternoon—and want to see it flourish. I thank my hon. Friend the Member for South Thanet again for securing this important debate.

Question put and agreed to.