VAT Registration Threshold: SMEs

Mike Martin Excerpts

Tuesday 24th June 2025 Westminster Hall

[Jim Shannon (Strangford) (DUP)]

It is a real pleasure to serve under your chairship, Mr Vickers. I thank the hon. Member for Mid Leicestershire (Mr Bedford) for setting the scene and giving us all an opportunity to engage with the Minister on this issue, as the hon. Member for Keighley and Ilkley (Robbie Moore) just did. The Minister is always a very pleasant gentleman—we all know that—and he always seems to be incredibly calm. I am not sure how he does it; maybe all the worries are somebody else’s worries—I do not know what they are. But I do wish him well with his answers to the questions that we pose today.

I read a very interesting article that outlined the pros and cons of raising the VAT threshold above the £90,000 that we are sitting at. What was most notable was the fact that these arguments were all made around an unalterable fact: we in Northern Ireland are hampered from truly having a full discussion by the Windsor framework, which does not allow Northern Ireland VAT to rise above the £90,000 threshold. Even if this debate today could make a change, and even if the Minister agreed with the change, it could not happen. Why? Because of the Windsor framework. I look to my right-hand side: maybe one of the Conservative Members there might have been in the previous Government who left us in Northern Ireland in that limbo land. They can answer for themselves—it is not for me to answer for them—but I do make the point that we were let down badly by the Conservatives in relation to this.

The reality is that, unless we can have regional VAT rates, the UK is prevented from acting in our best interests economically by the EU. It is a fact of life for us, unfortunately, nine years after the vote. I voted—and my hon. Friend the Member for East Londonderry (Mr Campbell) beside me voted—to leave under the same terms as the rest of the United Kingdom; but the EU is still dictating our economic policy in Northern Ireland. That is the reason that the DUP has consistently stood against this European interference. Perhaps, now that some businesses in other Members’ constituencies are being affected, in different regions—

[Mike Martin (Tunbridge Wells) (LD)]

I thank the hon. Gentleman for giving way, but does he not now regret his vote to leave, seeing as it created all of these problems for his constituents?

[Jim Shannon]

No. I thank the hon. Member—he is a friend—but look, honestly, I am a Brexiteer; it is no secret. I want the same Brexit as the rest of the United Kingdom got. I did not get that. We were let down by a Government who did us over, so we did not get what we wanted, but if I had got the same as everybody else in England, Scotland and Wales—and my hon. Friend had—then I would not be having this conversation, and I would not be doing this spiel. I am still a Brexiteer and always will be a Brexiteer, and incidentally, the majority of people in my constituency voted to have the same Brexit as the rest of the United Kingdom, and my constituents did not get it either. When the Minister thinks about today’s debate, if he does not mind me saying, I would ask that he would petition the Cabinet, if it is not too much to ask for, to withdraw from this inherently flawed agreement for us in Northern Ireland.

The article that I read discussed the benefit of raising the threshold, highlighting that Government should want to encourage small businesses to grow. It would be much more effective to raise the threshold to £250,000, I would have thought. It is probably a better figure to work with. That is, of course, supported by the Government’s own statistics, which showed that, in 2022-23, £117 billion —75% of the total net VAT collected in the UK—was paid by traders with an annual turnover of more than £10 million. So, what does that mean exactly? Raising the threshold to £250,000 may not, therefore, have a significant impact on VAT’s total receipts, but it would allow His Majesty’s Revenue and Customs to save costs and to focus its time on ensuring that the largest VAT payers paid the right amount of tax.

The Government have a big, difficult task before them; they have got to balance the books—whatever the figure might be for the black hole, or whatever it may have been. They have set themselves that target to balance those books, and I understand that. Maybe there is another way of saving money, perhaps within HMRC, that could be better. The Minister is a very wise man; he will understand the point I am making, and the civil servants, who are the brains of the Department—I hope the Minister does not mind me saying that—will be able to respond, and maybe pass the message on about whether that can be done.

Raising the threshold would allow a large number of traders in my area, and others, to focus on growth and not question whether they could grow a business enough to cover the additional accountancy costs when VAT is involved. When most businesses register for VAT, they are faced with a choice: either increase their prices by up to 20% or lose 20% of their existing prices as VAT. That is a difficult scenario for a business. The former makes the business less competitive and likely to see a drop in sales, and the latter eats into the profits and ultimately reduces the amount of money the business can use to expand. Neither option advocates for small business growth. As I have said, this is a moot point, as the EU will not allow us in Northern Ireland even to consider raising the threshold. I cannot tell businesses in Strangford or across Northern Ireland that it could be an option.

Some argue that there are benefits to retaining the VAT thresholds. Research undertaken for HMRC in 2016 found that 20% of unregistered businesses that were trading close to the VAT threshold had taken action to remain below it. Of those businesses, almost half said they had closed their businesses for part of the year to avoid having to register for VAT. One in five said they had turned down work, which was an indication that they could not grow as they wanted to because of the restriction. That strongly suggests that a significant number of businesses actively manage their turnover in order to stay below the VAT registration threshold. Lowering the threshold would prevent businesses from suppressing their trade in that way, which would in turn encourage economic growth.

--- Later in debate ---

[Gareth Davies]

I think the hon. Gentleman is accusing you, Mr Vickers, rather than me. I simply say to him that increasing the threshold made a big difference to the 28,000 businesses that were taken out of registration. I encourage him to speak to businesses in his constituency that benefited from what is essentially a tax cut, in addition to all the other measures that I mentioned that we introduced.

The contrast between what the Conservatives did in office and the approach of the Labour Government in their first year is quite stark, and the consequences are even starker. Insolvency rates are at a 15-year high, new registrations have fallen at the fastest rate since the financial crisis, payroll employment is falling, and inflation is well above target and will be higher for longer. It is no wonder that only 14% of companies with fewer than 10 employees have confidence in the Chancellor’s growth plans. According to one survey, just 29% of UK small businesses are now predicting growth this year. Meanwhile, the Federation of Small Businesses reported that its members now view the tax burden as their second biggest barrier to growth.

Here we see very clearly the vicious cycle that Labour has fallen into, just as it did in the 1970s: higher taxes and higher inflation, leading to lower growth and lower revenues, leading to still higher taxation. That is why, even though the Chancellor promised British businesses that she would not be back for more, she is now refusing to rule out even more taxes and tax rises in the autumn Budget. That is no wonder, because the National Institute of Economic and Social Research forecasts a £60 billion shortfall in the public finances—and that was before we had Labour MPs in open revolt about the slightly tiny welfare reforms and an unfunded commitment to increase defence spending by £40 billion.

In that worrying context, I hope the Minister can stand up and provide some certainty to SMEs by giving his assurance that the next Budget will not see a reduction in the registration threshold, or indeed an increase in the rate of VAT. I would like him to stand up and rule those out right now, for all of us to hear. I know that these assurances will fall short of the increase in the registration threshold that my hon. Friend the Member for Mid Leicestershire and other Members are looking for today, but it will provide more certainty if the Minister rules those things out.

I would also be grateful for an update on the so-called new business growth service, which the Government promised would be a “one-stop shop” for advice and support. That was supposed to launch in the first half of this year, but the Government’s industrial strategy has apparently now had to push that back to later this summer. Perhaps one reason for the delay is that the best advice a business growth service could possibly give anybody is “Do not vote Labour”. That is clear for us all to see.

SMEs probably have quite a lot of advice of their own for the Government, but unfortunately the going rate for speaking to a Labour Minister is apparently £55,000, and one has to endure the inevitable gloom of the Labour party conference. In the spirit of this debate, perhaps the Minister could confirm whether the price tag for meeting him is before or after VAT. Either way, like most Labour policies, I expect it will bring in less revenue than was first hoped.

[Mike Martin]

What is the going rate for meeting with a shadow Minister?

[Gareth Davies]

I am delighted that the Liberal Democrats are keen to meet us and are willing to pay for it. Perhaps we can speak afterwards, but his constituents can speak to me any time. We are always available, across the country.

This has been an excellent debate, with many views. It has highlighted the great importance of business to all our constituents, and I mean that seriously. The comments from colleagues on my side have illuminated the many different businesses that we have, whether it is Bloom Weddings, Chris and Annie’s business in the constituency of my hon. Friend the Member for Mid Leicestershire; the fish and chip shops Old Time Fisheries and Kirkgate Fisheries in Keighley and Ilkley, which no doubt provide fantastic fish and chips but are unfortunately reducing their hours, as my hon. Friend the Member for Keighley and Ilkley pointed out; or Carmela’s in the great constituency of my hon. Friend the Member for Broxbourne. All are having a hard time of it, but they remain excellent businesses. Some are, no doubt, places where we can all eat out.

The Liberal Democrats have made some important points. The hon. Member for Inverness, Skye and West Ross-shire (Mr MacDonald) spoke about plumbers, and the hon. Member for Mid Dunbartonshire (Susan Murray) about the hair and beauty salons and high streets in Mid Dunbartonshire.

This is an important debate to have. I am reminded of the last election when one party had a key policy in their manifesto around VAT thresholds, and that was Reform. However, I am afraid that when it comes to the hard graft of making the case in this place, the party is, yet again, nowhere to be seen.

I hope we can all agree that our country is stronger because of the men and women who get up every morning, go to work and drive our economy forward, as the hon. Member for St Albans (Daisy Cooper) said. At the heart of every successful economy is the simple fact that prosperity begins small. It begins with the family-run café on the high street, the corner shop, the book shop and the local butchers, and the single parent who is just launching their dream from their spare room or their garage. These are not just businesses. These are stories of people who had an idea, stuck it out and made it happen. When we pile on more and more burdens, when taxes climb too high and regulation tangles dreams in red tape, we do not just make it harder to do business; the hope of what might be possible completely dims. A free society depends on free enterprise. When we get out of the way and support small businesses, we are not just fuelling the economy but lifting communities. My hon. Friend the Member for Mid Leicestershire believes that lifting the VAT threshold will help achieve that, and I look forward to the Minister’s response.

[The Exchequer Secretary to the Treasury (James Murray)]

It is a pleasure to speak with you as Chair, Mr Vickers. I congratulate the hon. Member for Mid Leicestershire for securing this debate. I feel that I am letting the side down by not having a quote from Napoleon to open my remarks, but I listened carefully to the hon. Member’s contribution to the debate, and to the contributions of all hon. Members, including the shadow Minister—the hon. Member for Grantham and Bourne (Gareth Davies) —and the Liberal Democrat spokesperson, the hon. Member for St Albans (Daisy Cooper). I hope that my remarks will address most of the points that they raised.

It is clear from all hon. Members’ contributions to this debate that, across the House, we agree on how valuable small businesses and entrepreneurs are to the local economies and communities in the areas we represent. As a Government, we recognise that contribution. Before I turn to the VAT threshold, the focus of this debate, I will briefly set out the wider support that the Government are providing to the small businesses that are so important in our constituencies across the country. That support includes measures set out only yesterday in the industrial strategy. A new business growth service will streamline small businesses’ access to Government support, advice and funding, providing the access that the Liberal Democrat spokesperson asked about. Reforms to public procurement will help small businesses to secure Government contracts. We will help small businesses to adopt new technologies. We will continue to tackle the challenge of late payments to SMEs. The Government are also planning to publish an SME strategy later this year, giving more detail on the Government’s wider offer for small businesses.

Hon. Members will also be aware that the Chancellor recently announced the 2025 spending review, which contained measures to support small businesses. In particular, the Chancellor increased the financial capacity of the British Business Bank to £25.6 billion, which will enable a two-thirds increase in support for small businesses across the UK. That support in the spending review sits alongside the Government’s support for small businesses through the tax system. We have more than doubled the employment allowance to £10,500 and expanded it to all eligible employers. We have frozen the small business rates multiplier to protect small properties from inflationary bill increases to business rates. We are introducing permanently lower business rates for smaller retail hospitality and leisure businesses from 2026, and we have committed in the corporate tax road map to maintaining the small profits rate and marginal relief at their current rates and thresholds, as well as maintaining the £1 million annual investment allowance.

I will now turn to the VAT threshold, which is the focus of this debate. As several hon. Members have said, a number of businesses have raised concerns about that threshold. In particular, they are concerned that the cliff edge of the £90,000 threshold, as it is, may disincentivise businesses that are close to the threshold from growing and surpassing it, and they have connected concerns about the level at which the threshold is set.

Let me first address the argument that the threshold disincentivises small businesses from growth as they approach it. I acknowledge that some businesses will take legitimate action to avoid reaching the VAT threshold, and will bunch just below that threshold. However, those businesses are a minority, accounting for around 0.5% of all businesses that are not VAT-registered. Some businesses, and indeed some hon. Members in this debate, have suggested that the Government should introduce a taper mechanism, in which the amount of VAT that businesses must charge is phased in. However, there is little evidence to suggest that a taper would tackle the bunching of businesses just below the threshold, although it would add additional complexity to the tax system. At £90,000, the UK has a higher VAT registration threshold than any EU member, and the joint highest in the OECD. That threshold keeps most UK businesses out of VAT altogether.

[Mike Martin]

I am sure that the Minister is aware that the UK is one of only three countries in Europe that does not offer a lower rate of VAT for hospitality and tourism. For example, France, Italy and Spain charge only 10% on those sectors. Will he consider lowering the rate for those sectors as part of the UK’s VAT regime to give our high streets the boost they need?

[James Murray]

I will turn to the questions that the hon. Gentleman and other hon. Members have raised about VAT reliefs in a moment, but I will first finish the point about where the VAT registration threshold is set, because that is an important part of the debate.

It is worth reflecting on the fact that views on the threshold are divided. The case for change has been regularly reviewed over the years, because some businesses argue that a higher threshold would reduce their administrative and financial burdens. However, other businesses contend that a lower threshold would provide a fairer competitive environment, for instance in the hair and beauty sector.

The Government’s approach to the VAT threshold and applicable rates aims to balance the potential impacts on small businesses, including their growth and financial sustainability, with the economy as a whole and, of course tax, revenues. Although the Government always welcome hearing businesses’ views about how the tax system operates, we are not currently planning to change the design of the VAT threshold.

More broadly on VAT, the Government often receive calls from businesses, and indeed from hon. Members, to examine the rate of VAT for specific industries. VAT is a broad-based tax on consumption and the 20% standard rate applies to most goods and services. VAT is the UK’s third largest tax and is forecast to raise £180 billion in 2025-26. Of course, tax breaks have an impact on the public finances and they must represent value for money for the taxpayer, so exceptions to the standard rate have always been limited and balanced against affordability considerations. The assessment of any new VAT relief should consider whether the cost saving is likely to be passed on to consumers.

Fundamentally, the best support that we can provide to small businesses is economic growth. Delivering secure, strong and sustainable growth to boost prosperity and living standards across the UK is the Government’s No. 1 mission, as set out in our plan for change. That is why, when we took office, we took the necessary decisions to provide the stability that is so important for investment and growth by tackling the £22 billion hole in the public finances that we inherited from the previous Government.

Regional Growth

Mike Martin Excerpts

Wednesday 4th June 2025 Commons Chamber

[Darren Jones]

I thank my hon. Friend for welcoming the historic level of funding in transport infrastructure. As she will know, this is a devolved pot of money and regional mayors will decide how to spend it, so I cannot answer her question. I encourage her to talk to the mayor about the opportunities in her constituency.

[Mike Martin (Tunbridge Wells) (LD)]

I thank the Chief Secretary for the statement. Giving money out to mayors to fix transport—there is nothing to disagree with in that. Kent, which as he knows is the UK’s strategic corridor to Europe, recently asked for a mayor and was rebuffed. Without a mayor, when will Kent get its money?

[Darren Jones]

The Government will be investing in every nation and region across the country. Further details will be published at the spending review next week. The announcements today are about particular investment in city regions with mayors, because we think that is an important driver for growth in those areas as well as for the wider regions in which they sit. I recognise the importance of the hon. Member’s region to the country, and there will be further announcements in due course.

Business Rates Relief: High-street Businesses

Mike Martin Excerpts

Wednesday 4th June 2025 Westminster Hall

[Sir Gavin Williamson]

The hon. Lady is absolutely right that we need reform. Such closures affect her constituent and many others, but these are not just businesses; they are someone’s hopes, dreams and aspirations to create something better and build a better life for themselves and other people. According to the Campaign for Real Ale, 125 pubs have already closed since 1 April. That is 125 communities that have lost something that they may never get back. It is 125 families—and many more, if we take into account the families of the many people working in those pubs—who have seen their livelihoods disappear.

We cannot just dismiss this problem. I thank the Chamber engagement team, which, in preparation for this debate, did a number of surveys asking for the views of people from across the country about the impact of business rates on their businesses. It is interesting to hear those stories. Lorraine, who has a hospitality business, said:

“It is time our industry had some real help. We had nothing left to give. I predict even more closures in the next two years.”

Karen, who runs a salon and health club, said:

“The rates are more than my rent and with the wage increases and massive hike in rates, I can’t survive. I’m on borrowed time.”

This is about not just those people, but the many people they employ. Rachel, who has a beauty salon, said:

“I used to employ 18 people and now only employ four, so it’s effectively made me shrink the business.”

James, who runs a hospitality business, said:

“The reduction in relief has led me to reduce my workforce by 33%.”

There are business out there that last year were perhaps thinking about expanding—maybe taking on another pub or opening another shop—but that is no longer viable. Most business owners—who, like the people employed, are working people—are the last ones to get paid. They take the risk, and the Government do not seem to want to encourage them, let them grow or give them the opportunity to succeed. They just make it harder.

This issue is not just about businesses; it is also about communities. Although there can be no finer high streets than the ones in my constituency—[Interruption.] Now we are getting into a real debate, but I will stand firm. However, there is nothing sadder than seeing an empty shop that was previously occupied. That is not just about the demise of a particular business; it brings down the whole high street.

We see so many businesses being impacted in multiple ways. We see the impact of the changes in business rate relief; we see the impact of the changes in national insurance, and not just in terms of the rate but in terms of when it starts to get paid; and we see the cumulative impact of changes to employment law. We want businesses to take on people and to make it as easy as possible for them to take on new starters. Sadly, it is becoming harder and harder for them to do so.

The reality is that young people are some of the most impacted. Almost half of those working in hospitality in my constituency are aged between 16 and 24. I appreciate that the Government may take the view that their jobs are not important ones and that they will go on to something else, but I think that it is vital that we provide opportunities for young people at the start of their careers. Hospitality and retail are vital for that, whether the jobs are full time or part time. The impact of the changes to rate relief means that fewer young people are in a position where they can get the jobs they need to get on in life.

[Mike Martin (Tunbridge Wells) (LD)]

The right hon. Member is making a very important point. This issue is important across the whole socioeconomic spectrum. I had a relatively privileged upbringing, but my first job was washing dishes in a hotel. That job taught me what hard work is. The lessons that we learn in those types of jobs last throughout our lives.

[Sir Gavin Williamson]

The hon. Member makes a very valid point. This issue is about ensuring that there is as much opportunity as possible for all people, whatever their background. We should not be dismissive of such jobs—I am sure that the Minister is not—but they are the jobs that have been squeezed out by the changes to rate relief.

The Minister knows that I am one of his biggest fans; indeed, I am a great admirer of him. I see him as a rising star. While the Chancellor hides, he is wheeled out. He is truly an impressive figure at the Treasury. I am not sure whether it is due to the diminished status of the Chancellor that he is looking taller, but he is certainly one of the rising stars of the Labour Front Bench. I actually enjoy reading some of his many comments. He is a very thoughtful and accomplished Minister. I imagine that he is a joy to work with and that his civil servants value him greatly.

However, I will just read out some of the things that the Minister has said in the past:

“As the shadow Chancellor, my right hon. Friend the Member for Leeds West (Rachel Reeves), has set out, if Labour were in government, we would scrap and replace business rates, and shift the burden away from hospitality and retail businesses on the high street, which continue to shoulder a heavy burden compared with those that operate primarily in the digital economy.” —[Official Report, 31 January 2024; Vol. 744, c. 318WH.]

I do not think that there is a Member in this Chamber who would disagree with the Minister on that. I think everyone in the debate today would say, “All power to the Minister’s elbow, and we look forward to him announcing how that will be done.”

Most businesses I have spoken to have found that they are paying more today than they were just a year ago. When in opposition, the Minister was busy making many comments, including:

“A Labour Government will help to breathe new life into our high streets by calling time on the outdated model of business rates, so that British businesses in all parts of the country can play their part in creating economic growth and the jobs of the future.” —[Official Report, 13 December 2022; Vol. 724, c. 262WH.]

Sadly, at the moment, the Government are doing quite the reverse. Every small business in my constituency has been impacted by higher rates, not lower ones.

There is concern about what this will look like in the future. There is nervousness that even the reduced reliefs that have been put in place will have gone altogether. I very much hope that when the Minister responds, he will be able to give us every assurance that efforts are being made to deal with the impact of the change in business rates relief on businesses not just in Stone, Great Wyrley and Penkridge, but across England. I hope he will give them some comfort that the Government do not just say things in opposition, but do them in government.

We have a sorely outdated model of billing businesses. I know the Treasury loves nothing more than the rates system, because it is one of the easiest ways to collect tax, but there are concerns that, whether or not under pressure from President Trump, when it comes to changing how digital services taxes will be done, the Treasury might come for more money from small businesses, the high street and family companies. I hope the Minister can clearly set out that that will not be the case. I appreciate that he will not wish to steal the Chancellor’s sandwiches for any future statements, but I hope he can say clearly that there will be help coming for so many businesses right across the country, and that we will support those job creators.

--- Later in debate ---

[Mike Martin (Tunbridge Wells) (LD)]

It is a pleasure to serve under your chairship, Ms Jardine. I thank the right hon. Member for Stone, Great Wyrley and Penkridge (Sir Gavin Williamson) for securing what is probably the most important debate we could have to rejuvenate our town centres. As some hon. and right hon. Members have touched on, town centres are not just a series of business transactions but the centres of our community, where people go to meet friends or to be part of a place where they can do familiar things. It is the social glue that is created by town centres that is so important; once that is lost it does not come back.

In every town centre there is a mix of retail, leisure and hospitality. We have to get the balance right between those three things, because often someone will come in for one of the legs of the stool, as it were, but stay to do something else—thus they stay longer and have more touchpoints with their community. Business rates are the foundational tax rate that affects those three things. If business rates are not right, we are not incentivising the right mix in the community—because business rates affect those three things slightly differently—and we are undermining the support that those three things give to the idea of the town centre being a social glue. I am not going to talk about all three things, but I will talk about hospitality.

I start with Fuggles bar, which is around the corner from my house in Tunbridge Wells. Fuggles is great; it is run by Alex and has an extraordinary selection of craft beers, including local ones brewed in the constituency, and a number of gins, so I occasionally visit. Alex employs about 18 people. A number of Members have spoken about business rates relief being cut from 75% to 40%. That single change, announced at the Budget, has pushed up the cost of Alex’s business rates by 50%. To that we must add a number of other costs that have risen at the same time, such as national insurance, and before that, energy costs.

An independent bar that employs 18 people, many of them part time—as we know, the NI increase hit many businesses that were employing part-time people in particular—finds it really hard to stay afloat. Alex is a member of the Tunbridge Wells hospitality leaders forum, which I meet regularly. His story is the same as the rest of the members of the forum’s. We were so concerned that together we submitted a submission to the Treasury’s consultation on business rates, and I implore the Minister to look that up and read it.

I will not go through everything in the consultation, but there are two things I will focus on. The first is investment. The current business rates formula penalises investment. If someone invests in their premises, the rateable value goes up and their taxes go up—it is a tax on investment. The other is online. Amazon pays about 0.37% of its retail sales in business rates. Fuggles pays 3%. That is the exact opposite of what a tax system should do. I implore the Minister to look up the Tunbridge Wells hospitality leaders’ submission to the Treasury’s consultation. There are a lot of good ideas in there, and I hope that he takes them on board.

--- Later in debate ---

[Sir Ashley Fox (Bridgwater) (Con)]

It is a pleasure to serve under your chairmanship, Ms Jardine. I thank my right hon. Friend the Member for Stone, Great Wyrley and Penkridge (Sir Gavin Williamson) for securing this important debate.

Our high street shops and pubs are at the heart of our communities, yet many are threatened by big increases in business rates. Our high street businesses are already contending with Labour’s new tax on jobs. The hike in national insurance makes it more expensive to employ someone who works in a shop or a pub on our high street. The Employment Rights Bill will further increase costs, hitting small businesses with new regulations that make it harder and more expensive to operate. In that context, the decision to cut the retail, hospitality and leisure business rates relief from 75% to 40% is wrong.

I met recently with Mr Paul Davis of Styles Menswear in Bridgwater. His business rates have gone up from £3,000 a year to £9,000 a year. That new cost, before we can even consider Labour’s new jobs tax, puts his livelihood at risk. He will not be alone. Paul’s business has the double misfortune of being based in Eastover, where he has had to contend with extensive and lengthy roadworks. In Liberal Democrat-controlled Somerset, we have had a particular problem with various roadworks being scheduled at the same time and harming local businesses. It seems that the Liberal Democrats know little and care less about the damage that they are causing.

The roadworks in Eastover started in October with a partial road closure. As if that were not bad enough, the council then decided to impose a full road closure in January, which is now set to continue until at least September. Ironically, it is on the council’s “celebration mile” project, although to date there has been very little for local businesses to celebrate. The project has proved a hammer blow to many local businesses, which have seen footfall collapse: footfall in Bridgwater is down 400,000 in the past 12 months, mostly caused by the incompetent way in which Somerset council has handled the project.

I believe that those businesses deserve our support. Businesses disproportionately affected by council actions should have the right to claim rates relief. Will the Minister consider that proposal? The situation in Eastover is now desperate, and I fear that in the coming months we will see more shops and businesses closing their doors for good.

It seems that this Labour Government, with the able assistance of Liberal Democrat councillors in Somerset, are set on destroying those businesses. The truth is that, despite the Government’s claim to be going for growth, everything that they are doing appears designed to achieve the opposite. I say to the Minister, “Businesses in Bridgwater are suffering. They need your help now.”

[Mike Martin]

On a point of order, Ms Jardine. It seems that the hon. Gentleman is confused and in the wrong debate. This is a debate about business rates, but he spent his entire time talking about local government sequencing of traffic works.

[Christine Jardine (in the Chair)]

That is not a matter for me at the moment.

Defence Sector Financing

Mike Martin Excerpts

Wednesday 7th May 2025 Westminster Hall

[Mr Charters]

As always, my hon. Friend is absolutely right. To secure lasting peace, we need greater co-operation in defence procurement and financing with the EU and allies across the world.

Last month, my hon. Friend the Member for Aldershot and I warned that Russia plans to produce 4,500 tanks and armoured vehicles this year, plus 250,000 shells per month. That would lead to stockpiles three times larger than those of the US and Europe combined. Let that sink in. This is not a temporary surge; it is a long-term shift. We must match military strategy with financial and industrial muscle through a multilateral defence bank.

[Mike Martin (Tunbridge Wells) (LD)]

The hon. Member is speaking eloquently about the need for joined-up financing and fundraising for defence, but the other side of that issue is clarity about what the Government want. A key example is space: the UK has significantly underperformed and punches well below its weight in defence space, which is spread across two Ministries. There is no clarity. The sector says, “We want just one person in Government to tell us what they want.” Does he agree that, as well as sorting out the funding, the Government’s key role is to be clear about what they want? I think that that is the strategy of which he speaks.

[Mr Charters]

Growth in the defence sector, and allied sectors such as space, will deliver prosperity across the UK. If we can get commercial lending working for defence, it will support growth in those allied sectors too.

My hon. Friend the Economic Secretary to the Treasury is one of the most erudite Members, and understands the City of London better than anyone else, so I am sure she agrees with me that there is no better home for the bank than the Square Mile, not least because of our relationships across the Atlantic and our proximity to Europe. My simple ask today is that the Government invite officials from finance Departments around the world to meet in London to discuss and explore the concept of a multilateral defence bank.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Mike Martin Excerpts

Consideration of Lords amendments
Wednesday 19th March 2025 Commons Chamber

[Gareth Davies]

I will make some progress, if the hon. Gentleman will allow me, and then give way.

This tax, purely and simply, is a financial penalty on 940,000 businesses—that is how I look at it. The analysis shows that it is going to cost businesses an average of £26,000 per year per employer. Not content with ruining farmers’ futures through the immoral family farm tax, the Chancellor wants to hammer them with this Bill, too. She is going to make pubs, cafés and restaurants stump up more to cover her jobs tax, without regard for the impact on our high streets or the communities they serve. She is going to squeeze the creative industries, from theatres to film producers, in a desperate attempt to keep this circus on the road. It is crucial that we understand the impact that the Bill will have. That is why Lords amendment 21 requires the Chancellor to carry out a review within six months of the Bill’s impact on the sectors I have described as well as on farming, creative industries, hospitality, retail and universities.

[Mike Martin (Tunbridge Wells) (LD)]

The shadow Minister has mentioned cafés, and when we have been debating this point previously in the House, I have mentioned Basil’s café in Tunbridge Wells. It now informs me that it is having to put its prices up because of the NIC rises. Does the shadow Minister think that we are going to see a bump in the inflation figures as a result of this tax?

[Gareth Davies]

I remind the House that inflation has already gone from 2% to 3% under this Labour Government, and in fact, the OBR scored the Hallowe’en Budget as inflationary. The hon. Gentleman is right that when these tax rises hit, they will be passed on through higher prices. I hope that that will not put pressure on inflation, but it will inevitably do so.

The combination of factors and how they are affecting businesses, including cafés, is not always appreciated either. The national living wage is going up. Conservative Members have welcomed that—we implemented the national living wage—but it is about the context in which it is going up: national insurance is on the rise and business rates relief for hospitality businesses and high street businesses is being reduced from 70% to 40%. All those things are compounding the impact on cafés, such as the one in the constituency of the hon. Member for Tunbridge Wells (Mike Martin). They will be devastated, inevitably leading to job freezes or job losses, which I will come to.

From healthcare to charities and small and medium-sized enterprises, I have made the consequences of this Bill clear since it began its stages in the House. Today, the Government have one more chance to change course, because what many people across the country want to know is this. What is this Bill for? We were told that it was a one-off tax rise to fix the foundations of the economy. We were told that there would be no more tax rises after this, yet we find ourselves just a week away from an emergency Budget, with speculation rife that other taxes may have to rise because the Chancellor will not meet her own new fiscal rules. Some are suggesting that Labour will break another pre-election promise and not unfreeze the income tax thresholds in 2028, but will rather extend the freeze to pay down their new debts. That surely cannot be true—the Minister himself gave me his personal assurance in this House that income tax thresholds would be unfrozen from 2028. I would like him to reconfirm that promise to me today, in order to end the speculation.

This is vital context for Members as we consider the amendments before us today. If more tax rises will be needed—if the original justification for this Bill is now void—why should we stomach the Bill’s terrible consequences? Why should Labour MPs have to go out and defend this to their constituents? Why should we allow the Government to punish the sectors that the amendments before us seek to protect? In fact, why must we stand here and see this entire Bill implemented at all?

One impact that hits every sector of our economy is the impact on jobs. Just yesterday, we heard Labour talk about the importance of lifting people out of welfare and getting them back into work, and it is right to do that. As Conservatives, we know that the dignity of work and the security of a regular pay cheque is what lifts us up as a country and lifts families out of poverty. The tragedy is that this Bill has caused so much concern and so much uncertainty that employment is already declining in anticipation of its passing. The Office for Budget Responsibility tells us that the Bill will depress workforce participation for years to come.

Put simply, this Government are cutting welfare to boost employment, while at the same time boosting taxes, which will cut jobs. No wonder business confidence has completely and utterly nose-dived. It is inexplicable and entirely avoidable.

Family Businesses

Mike Martin Excerpts

Wednesday 26th February 2025 Commons Chamber

[Mel Stride]

Madam Deputy Speaker, I think that I should put it on the record that you have always been very pro-farmer, and that should never ever be brought into question by anybody in this Chamber.

I have always been extremely proud of our record of supporting farmers up and down the country. That has been the case ever since I first came into the House in 2010, representing a highly rural constituency right in the middle of beautiful Devon. This party should be very proud of the many schemes, financial support packages and so on that it introduced while in government.

[Mike Martin (Tunbridge Wells) (LD)]

I thought that I would let the shadow Chancellor make a little progress in his speech before intervening on him. It seems odd to hear a speech about the economy from the Conservative party without any mention of Liz Truss. Now we hear mention of trade deals. Let me ask him this very directly: does he think that the policies of Liz Truss—[Interruption.] The shadow Chancellor cannot hear what I am saying, because the Members behind him are shouting.

[Madam Deputy Speaker]

Interventions should be very short. Come to a conclusion quickly.

[Mike Martin]

Does the shadow Chancellor think that the policies of Liz Truss were good for business investment and confidence in the economy?

[Mel Stride]

The hon. Gentleman may or may not be aware of this, but, at the time of the mini-Budget, I was the Chair of the Treasury Committee. I had a lot to say about what was being proposed before it happened, I had a lot to say at the time that it happened and I have had a lot to say since then. All of that is a matter of public record. [Interruption.] If the hon. Lady wants to intervene on me, I am very happy to give way.

--- Later in debate ---

[Mike Martin (Tunbridge Wells) (LD)]

Thank you, Madam Deputy Speaker. [Hon. Members: “How do you follow that?] It will be hard—probably with a lower level of energy.

I recently met with Peter, Kate and Edward, who run the two Basil cafés in Tunbridge Wells; there are four across Kent. They are a family business—the subject of today’s motion. [Interruption.] After the damage Conservative Members did to the economy when they were in government, they need to pipe down. The family told me that the combination of the minimum wage and national insurance rises and business rates has them on their knees. The only thing they can do and the only option they have, bearing in mind that they are a family business—their staff are also their friends, and these are hubs in our community—is to lay off staff or, in some cases, not to grow their employment in the way that they had planned.

Zooming out a little, about a month ago I met with the Tunbridge Wells hospitality reps. They are the owners of pubs, restaurants, hotels and bars in Tunbridge Wells, which are all small businesses—most of them are family businesses. As we went around the table, it was the same story from them. The combination of all three measures, coming at the same time, means that they are either looking at laying off staff now or delaying plans for future employment.

[Alison Bennett (Mid Sussex) (LD)]

I thank my hon. Friend for giving way, and for the excellent way in which he is setting out the problems faced by many family businesses in Tunbridge Wells. In Mid Sussex, I recently spoke to the owners of Frank’s Diner on Church Road in Burgess Hill, who said exactly what my hon. Friend has said: they are finding this combination of different moves punishingly hard, and are worried that they are going to have to close their business if things do not improve soon and the Government do not think again. Does he agree that the Government really do need to think again, and think harder, about the impact that their decisions are having on small family businesses?

[Mike Martin]

I thank my hon. Friend for her intervention. This is not hyperbole; these are real stories from real businesses, from people who stay up at night trying to juggle profit and loss, or looking at how they are going to pay their national insurance contributions or their business rates at the end of the month.

We do not have much time, so I want to zoom out a little bit and make a couple of points, followed by an ask of the Minister. For many of us, our first jobs were in hospitality. My first job was as a dishwasher in a hotel when I was 16, and the question is whether a business would employ me now with these laws, or whether they would invest in equipment that could automate that dishwashing to a point at which they do not need to employ so many 16-year-olds. I came from a relatively privileged background, but working in a hotel as a dishwasher, or working as a gardener or a labourer—all the other things that I did when I was young—were incredibly important experiences in forming me into the person I am now. We want businesses to be able to employ people in their first jobs, because we only ever have one first boss.

My second societal point is that hospitality, in particular, sits in the ecosystem of our town centres. It is hospitality, retail and leisure—one of those things will bring people into a town centre, and then they will often go and visit another business from one of the other three corners of that triangle. As has been mentioned by Members on both sides of the House, hospitality in particular acts as a glue in our society, and one of the things I have noticed since being elected last July is how atomised our society is and how many people struggle with a sense of belonging, particularly after the pandemic. We are looking for communities to belong to, and hospitality provides some of the glue that holds us together, whether that is having a pint, meeting your mates for some chips, or whatever else. If our societies are glued together better, all sorts of other things, such as antisocial behaviour, crime and health—social connection improves our health—get better, which of course costs the Government less money on other budgetary lines.

As such, I would like to ask the Minister just one thing. The Budget increased business rates, and I know that the Chancellor is not going to go back on the national insurance rises or the minimum wage. On business rates, though, the Government have indicated that a consultation is currently ongoing, and they are asking people to contribute to it. I ask that we do not just look at this issue in the context of a spreadsheet, as the Treasury often does. That is important—we must support those businesses financially—but we also have to understand that retail, hospitality and leisure in our town centres contribute to the glue that holds our society together. When we reform business rates, we must consider that as well.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Mike Martin Excerpts

Committee of the whole House & 3rd reading
Tuesday 17th December 2024 Commons Chamber

[Gareth Snell]

I absolutely agree. If the hon. Lady will bear with me, I will come to exactly that point later on.

My constituency is often in the top 50 for social and economic deprivation, and we are often wholly dependent on the charitable sector picking up people when they are at their lowest and most in need. Charities often do the really hard work in getting those individuals back to a place where they can even begin to access statutory support services, such are the demands placed on them by the services with which they are seeking to engage.

Let me take the example of supported housing. We talk quite rightly about giving people homes, but many of the people in Stoke-on-Trent who access the services that will be impacted by the national insurance contribution increases would not be able to live independently on their own in the months to come if it were not for supported housing. As the hon. Member for St Albans (Daisy Cooper) points out, that has a huge bearing on the acute cost at the presentation of final service.

Last Friday, Voluntary Action Stoke on Trent, an excellent organisation run by Lisa Healings and her team, convened a meeting of local charities and the three Members of Parliament for Stoke-on-Trent. Lisa helped me by compiling some of the specific impacts that the national insurance increase will have on charities and organisations in my community, and with the indulgence of the Committee, I will refer to some of them so that Members can hear the scale of the challenges that we face.

The first relates to the citizens advice bureau in Stoke-on-Trent, which does a phenomenal amount of work. It will see an increase of £150,000 to its national insurance contributions. Although it will be able to mitigate some of that impact, the change will just mean that people wait longer for help, or, perversely, that more people will enter MPs’ caseloads and visit our surgeries because the CAB often signposts to other agencies when it cannot meet demand.

The second largest impact I was told about is to the YMCA North Staffordshire, which will see its NI contributions rise by £101,000. That organisation routinely provides homes for young people who would ordinarily find themselves on the street, works with families to ensure that family units can stay together, supports community meal initiatives to bring together different Stoke-on-Trent communities, and does a lot of work on community cohesion, which is a particularly contentious issue in my city.

A smaller organisation, Savana, which I must declare is run by my ex-wife, although we are still on favourable terms—

[Mike Martin (Tunbridge Wells) (LD)]

rose—

[Gareth Snell]

No—I will give way in a second. Savana is the provider of the rape and sexual advice service in Stoke-on-Trent. It gets all its money from the Ministry of Justice; it is essentially running a Government service by virtue of contracts, yet it will now see an increase in its national insurance contributions of something between £16,500 and £17,000, which will reduce the number of people it can support with independent domestic violence advisers and independent sexual violence advocates. The other half of its money comes from the Home Office via the police and crime commissioner. Again, that is essentially public money providing a public service that just happens to be provided by a charity that is not covered by the rebate provided to other organisations.

Disability Solutions helps those who are entitled to additional support to access it. That charity brings millions of pounds a year into the city, which has a cumulative economic benefit, because the money brought in is spent on our high streets and in our local economy. The people it helps are not the wealthiest in my city; they quite often have very little in their pockets, and every penny that is given to them is spent in the local economy. They do not hoard it in a savings account, put it into the Cayman Islands or use it as a downpayment on a new car or furniture; they go out and buy food, shoes and school uniforms for their children, or they use it in one of the local entertainment venues.

North Staffs Mind faces an impact of £55,000. That organisation is specifically designed to help people with their mental health, which the Government have rightly identified as a huge inhibitor to economic growth, because if people cannot get their mental health sorted, they cannot get back into work. Another mental health organisation, Changes, wrote to me to say that these changes to national insurance would be unsustainable for them. Finally, the Dove Service is a bereavement counselling service that faces a cost of £2,000. All those organisations are filling a void in state provision in my city.

--- Later in debate ---

The Government put so much political capital into making everyone on the Government Benches, however naturally honest they are, say fibs about the £22 billion. They could at least have used that fig leaf to come up with a more sensible tax strategy. Instead, having pursued that untruth, they none the less came up with an idiotic and backward stance. It is deeply damaging and regrettable.

[Mike Martin]

The right hon. Gentleman talks about a more sensible tax strategy, and we all agree that the change to NICs is an extraordinarily bad idea, particularly given the hit to growth. Where would he raise that amount of tax from?

Financial Assistance to Ukraine Bill

Mike Martin Excerpts

2nd reading
Wednesday 20th November 2024 Commons Chamber

[Mike Martin (Tunbridge Wells) (LD)]

I, too, start by congratulating the hon. Member for Amber Valley (Linsey Farnsworth). Every time I hear someone give a maiden speech in this Chamber, I am really heartened by the passion and expertise of the new intake. As I said in my maiden speech, it is clear that we are going to have not just a good Parliament, but a great Parliament. I look forward to it very much. I welcome the Minister’s speech and the Bill. As is usual on Ukraine, there is agreement across the House. I was not quite expecting this degree of agreement on going further—on not just seizing interest or making loans, but going after assets.

This Bill fulfils the UK’s part of an agreement that the G7 made in June, and we of course want to fulfil our commitments. However, the commitment in that agreement was made before the recent election in the US. As many Members across the House have said, including most recently the hon. Member for Macclesfield (Tim Roca), the security calculus that Europe has applied for the last 80 years has now changed. We can no longer rely on an American security umbrella. NATO is the cornerstone of our defence—there is no disagreement about that in the House. The Government talks of NATO first, but NATO does not work without an American security guarantee, American logistics, or the American backbone that runs through it. It is the same with Ukraine. Since the outbreak of the war in February 2022, the United States has provided approximately 50% of the support for Ukraine. The UK led; that is something that the previous right hon. Member for Uxbridge and South Ruislip got absolutely right. However, we now face a world in which that support may be withdrawn, and that is not just a supposition. President-elect Trump has said that the Russians can

“do whatever the hell they want”

in Europe. This is a huge problem. We should have woken up to this five or 10 years ago. The fact that we are dealing with it now—well, I hope we are—should arouse the interest of Members in the Chamber today.

I want to outline what the consequences may be of a withdrawal of US support from Ukraine. We may end up with a grubby little deal that would involve taking a marker pen and drawing through Ukraine on a map. The problem with that is that this war is not about territory; those who understand it to be about territory misunderstand it. It is about identity. Russia sees Ukraine as part of its imperial identity. If Ukraine exists as an independent country, then Russia does not exist as an imperial country. It is that simple. We are trying to define the conflict by way of territory, but that it is not how Vladimir Putin sees it.

We may end up with a grubby deal; in effect, the US will withdraw support, and Ukraine will be forced to come to the negotiating table. A line will be drawn on the map through Kharkiv, Donbas and Kherson. However, Vladimir Putin will not stop there. Latvia, Lithuania and Estonia are all allies of ours that the United Kingdom has pledged to defend through NATO, under article 5. If Putin took a bite from Lithuania, and Britain and France stepped forward to defend it, as we are pledged to do under article 5, we would have a huge problem if we then heard from Washington that the US would not follow us.

Even if we do not get a grubby deal that empowers Vladimir Putin, we could end up with the collapse of the Ukrainian frontlines, if the Americans withdraw their support and the Ukrainians decide to fight on. If I was Ukrainian, I would fight on, because of what the Russians did in Bucha and their kidnapping of Ukrainian children. The Ukrainians may fight on, but the frontlines may collapse.

The hon. Member for Arbroath and Broughty Ferry (Stephen Gethins) spoke about a refugee crisis. The UN in Kyiv recently carried out a study of the crisis that could follow a collapse of the Ukrainian domestic power system. As we know, the Russians are targeting it at the moment. The UN estimated that between 5 million and 10 million Ukrainians would leave and move into western Europe—and that is just on the collapse of the power system. What would occur if the frontlines collapsed and the murderous, genocidal Russian army started to rampage through western Ukraine?

If we step outside Europe and look at possible consequences of a Ukrainian defeat, we can see that the idea of nuclear proliferation being kept under wraps, which we have cherished for the past 50, 60 or 70 years, would be under threat. The lesson we learn from the conflict is that if a state has nuclear weapons, it can bully its way into invading other states. Iran and other countries will see this and think, “That is something we need to get.” Colleagues have mentioned other autocratic states. China is watching what is happening in Ukraine carefully, as well as the western, European and American response. If we lose in Ukraine, we can kiss goodbye to Taiwan.

This is an existential conflict for Ukraine, in which it must succeed. The Bill goes some way to helping with that, but not far enough. The west collectively has $300 billion of Russian assets. Some $200 billion of those are in Belgium in Euroclear. To put that in context, the US has to date donated or pledged to donate approximately $180 billion to Ukraine, so the total amount of Russian assets we hold is 50% more than the total spend so far from the United States on the war. Given that we may well be losing US support for Ukraine, with all the second-order effects that has for our security, why are we not considering much more carefully sequestering and using those assets for the defence of Ukraine? If not now, when?