Budget Resolutions and Economic Situation

Mark Pawsey Excerpts

Monday 21st March 2016 Commons Chamber

[Mark Pawsey (Rugby) (Con)]

It is a pleasure to follow the hon. Member for Glasgow Central (Alison Thewliss) to speak in this important Budget debate. The Budget carries on the Government’s good work of the last five and a half years and helps to secure our country’s future—a future that is rosier than it would otherwise have been, thanks to the action that the Government have taken.

Let us look back to 2010 and the very serious financial position that the country faced before the election. Had the people not voted as they did, we would now face more borrowing, much more debt and higher borrowing costs. The welfare budget would have been out of control, public spending would have continued to spiral and the economy would have been wrecked.

It is a fact of life that Labour Governments always wreck the economy and that Conservatives have to come back in, clean up the mess and get our country back on track. The Budget carries on that work. The people understood that difficult decisions had to be made in 2010. They understood that at the election in 2015, and they understand it now. There have been significant achievements. In my constituency, unemployment is down by 90% over the past year and by 62% since the Government took office in 2010. The economy is moving in the right direction.

I will focus my remarks on the way in which the Budget affects local authorities through the devolution of business rates. Before first arriving in this place, I was a small businessman, and I used to receive a bill from my local authority for what I thought was quite a substantial chunk of money. That was not for services directly received—commercial waste collection, for example, is a commercial service, and we paid extra for it—but my bill arrived with the Rugby Borough Council logo on, so I consoled myself with the thought that the money was being spent in my community. That, of course, was not the case, because for a long time local government simply acted as a collection agent on behalf of central Government, and the money went back to central Government. I think it is ideal for local authorities to retain the business rate, and that is the right thing to do. I used to ask myself, “If the local authority does not retain the business rate, what incentive is there for the local authority to grant consent for new development and new businesses and to encourage the growth of the local economy?” Of course, there was none, but there is now.

I am very pleased that the Government will carry out a business rate revaluation. I support that, because I believe that any tax that is based on the value of property should be based on the current value, and that there should be regular revaluations. I note that the Government will publish a discussion paper with options for achieving that. I am pleased that the maximum threshold for relief will go up from £12,000 to £15,000. Some 600,000 small businesses will therefore never pay business rates again, which will save them almost £6,000 a year.

There are some issues in respect of the effect on local authorities. For Rugby Borough Council, the cost of doubling the relief for businesses with rateable values of up to £12,000 will be around £570,000. I hope that the Secretary of State or the Minister who responds to the debate will set out how the effect on local government will be dealt with. Analysis by Rugby Borough Council shows that there are 134 businesses in the borough with a rateable value of up to £15,000, from which it collects almost £900,000 in business rates. It is uncertain at this stage how many of those 134 businesses will qualify for relief, or what level of relief they will be entitled to. There is some uncertainty among local authorities.

I am further concerned that business rate relief will act as an incentive for local authorities to consent to larger, rather than smaller, business units. In my constituency, a big unit is relatively easy to provide, but there are fewer units available for smaller businesses that wish to grow and develop. If a local authority is faced with an application for a smaller unit from which it will generate no income and an application for a larger unit from which it will retain the business rate, it is not hard to see which route the local authority will take. I also fear that by creating a cliff edge as the rateable value increases, the relief might disincentivise small businesses from growing and developing.