Taxation: Small and Medium-sized Enterprises

Debate between Peter Fortune and Gregory Stafford

Tuesday 3rd February 2026 Westminster Hall

[Gregory Stafford (Farnham and Bordon) (Con)]

I beg to move,

That this House has considered the impact of taxation on small and medium-sized enterprises.

It is a pleasure as always to serve under your chairmanship, Mr Dowd, and I am grateful to colleagues for attending this debate. Small and medium sized-enterprises are the backbone of our economy. They create jobs, sustain local communities and keep our high streets alive. However, since the autumn Budget 2024, they have been met with higher taxes, higher costs and a Government who appear indifferent to whether they survive at all.

It is almost impossible to know where to start with this debate, given the Government’s complete failure on the economy and sustained neglect of business and enterprise. The Prime Minister speaks the language of growth, but lacks the backbone to take the decisions needed to achieve it. If the debate were simply an exercise in cataloguing failure, we would be here all day. Instead, I will focus on the real-world consequences of that incompetence for the small and medium-sized businesses that keep our economy moving.

In my constituency, I repeatedly hear the same message from business owners about staffing pressures, soaring energy bills and rising financial costs, which in many cases have more than trebled as a direct result of decisions taken by this Government. That is not anecdote; it is reflected clearly in the data. Research from Xero shows just how precarious the situation has become: two in five SMEs do not even know whether they were profitable last month. That is not confidence; that is business flying blind.

Since the 2024 Budget, Labour has made a deliberate political choice to increase the burden on retail, hospitality and leisure. Those are not marginal sectors—they are the lifeblood of our town centres, as major employers and key drivers of local economic activity.

[Peter Fortune (Bromley and Biggin Hill) (Con)]

Last week I was lucky enough to host a roundtable with some SMEs from Bromley, including the excellent Martin from the Crown and Anchor. They said to me that this Government’s policies, including the jobs tax, are restricting their ability to grow and to hire young people. Would my hon. Friend agree that abolishing business rates would give small businesses the boost that they need to thrive?

[Gregory Stafford]

I entirely agree with my hon. Friend. Like him, I have held roundtables with hospitality businesses, which are saying the same thing as others: they want to see a cut in business rates. The Conservative pledge to entirely scrap business rates for businesses with bills under £110,000 is the right step and would be welcomed by business. I hope the Minister will take up that idea; good ideas should be taken up by the Government, but they seem to have a problem with doing that.

In mentioning business rates, my hon. Friend reminds me that the Labour party manifesto—which I am sure you read, Mr Dowd—pledged that

“Labour will replace the business rates system, so we can raise the same revenue but in a fairer way.”

That clearly has not happened, because businesses are being hammered.

--- Later in debate ---

[Gregory Stafford]

I thank the hon. Member for, as always, bringing his experience from Northern Ireland. That emphasises the point that I was making: this is a whole-country problem. He is absolutely right that we are on a knife edge. We are at a tipping point for our small and medium-sized enterprises, and if they go under, the consequences will be dire. If one wants to speak Treasury speak, that means the Treasury will actually raise less money. The only way that the Treasury will raise more money is by freeing up businesses to expand, grow and employ more people. That is how we will get our economy going, not by taxing every single business until the pips squeak.

I turn now to hospitality, which has been a focus of mine since I was elected. It underpins community life and provides work for young people and for those who rely on flexible hours. Yet the Government slashed retail, hospitality and leisure relief from 75% to 40%—an ideological and damaging decision—which will be followed by eye-watering increases in rateable values from April this year.

UKHospitality data shows that the average pub will see its business rates rise by 15% in the first year, climbing to a 76% increase by year three. At the same time, online and out-of-town competitors are being protected. Distribution warehouses used by online giants will see increases of just 9% in year one and 16% by year three. This is not a level playing field; it is actively tilted against the high street.

The Government’s so-called emergency pubs relief, announced this year, does little to address the scale of the problem. It is a sticking plaster, not a solution. Just one in 20 retail, hospitality and leisure businesses will benefit, and even then the average pub will still be paying £5,700 more in business rates than before.

Business rates are simply not being reduced, and those pressures are compounded by the changes to employer national insurance contributions introduced at the 2024 Budget. For the hospitality sector alone, that amounts to £1 billion every single year. More than 774,000 hospitality workers have been dragged into employer national insurance for the first time, disproportionately affecting part-time staff such as bar workers and waiting staff. Flexible work is being punished. Young workers are being hit hardest, and employing people is becoming more expensive at precisely the wrong moment. That is not pro-growth and it is not pro-work.

VAT policy has also failed small businesses. The £90,000 VAT registration threshold actively discourages growth and creates perverse incentives for firms to cap expansion. The Government have ignored repeated calls for a reduced VAT rate of 12.5% for hospitality, a policy that would support growth, improve competitiveness and align the UK with many of our European neighbours. The refusal to act is holding back an entire sector.

The Parliamentary Private Secretary, the hon. Member for Hitchin (Alistair Strathern), is chuntering from his seat. I am sure he will be able to hold his own debate at some point to tell us all what is going on in his constituency. I suspect that, if he were honest, he would tell us about the impact that his Government’s policies have had on the sector, and how they are absolutely destroying his high street, as they are mine.

These pressures are not theoretical; they are being felt by real businesses across my constituency. For example, at Birdies café in Farnham Park, business rates have increased by 450%—from £290 to £1,600 a month—a change that has already cost the business a member of staff. Energy bills have risen from £300 to £400 a month to £3,500 a month, while rising wage costs and changes to employment law have forced the owner into rolling three-month contracts—a worse outcome for workers, driven entirely by the Government’s pressure and policies. At the Bat and Ball pub, business rates are doubling from £800 to £1,600 a month. Minimum wage changes have added £56,000 a year to its wage bill.

Across my constituency, community businesses such as the Antiques Warehouse, the Packhouse, the Bluebell pub, Serina, the Six Bells, the Healy Group, and Hamilton’s in Farnham; Acorns Coffee, the Dairy, Issaya and Smallworld IT in Bordon; Oliver’s café and wine bar and Davids menswear in Haslemere; Passfield Stores in Passfield; Little Latte in Tilford; the General Wine Company and Stedman Blower in Liphook; and the Greatham Inn in Greatham have all written or spoken to me and are facing the same relentless squeeze from Government tax and regulatory decisions. These are not failing businesses; they are community anchors being priced out by this Government’s policies.

These issues are not confined to hospitality. Yesterday I met representatives of Medicines UK to discuss the impact of Government policy on suppliers of generic medicines. They raised serious concerns about the extended producer responsibility packaging tax. Packaging is obviously mandated by the Medicines and Healthcare products Regulatory Agency for safety reasons, leaving companies with little ability to reduce their tax liability. As a result, costs are either absorbed or passed directly on to the NHS and therefore the taxpayer.

[Peter Fortune]

I know that my hon. Friend is talking specifically about businesses and enterprises, but on that last point, the decisions taken by the Government are also impacting charitable institutions. Indeed, I have met some in my constituency of Bromley and Biggin Hill that are having to let charitable staff go, which is having a further impact on the NHS.

[Gregory Stafford]

My hon. Friend is absolutely right. One perverse outcome of the many taxes that the Government have put on is that although the NHS is, rightly, exempt from some of these tax rises, those who operate around the NHS—for example, care homes, hospices and other charitable institutions—are being hit. Even GP surgeries are being hit. This is the nonsense that we are seeing from this Government: people taking policy off the shelf from Treasury civil servants without understanding the real-world impact that it will have on businesses, the charitable sector and, in general, our constituents.

As my hon. Friend suggests, these are taxes on the NHS by another name. Extended producer responsibility sits alongside the VPAG—voluntary scheme for branded medicines pricing, access and growth—levy, which takes 10% to 35% of NHS sales from manufacturers. If the measures are taken together, the Government are heavily taxing lifesaving medicine, often at higher rates than in comparable systems overseas, with clear implications for supply and sustainability.

In my November debate on alcohol duty—which I am sure you read in detail in Hansard, Mr Dowd—I was disappointed by the Exchequer Secretary’s dismissal of the impact of tax rises on hospitality. Since October 2024, 90,000 hospitality jobs have disappeared. If that many jobs had gone from a car plant or an oil refinery, the House would be in uproar, but because it is pubs and cafés, Ministers look the other way. That is a scandal.

Local Media

Debate between Peter Fortune and Gregory Stafford

Wednesday 3rd December 2025 Westminster Hall

[Peter Fortune]

Well played! That was very good, and of course I agree. I used to work with Toby Granville, so I know him well. I think that sets the tone for a lot of the interventions that will come during this speech.

Where was I? Line two: I fully expect this to be one of the most intervened on speeches that I have ever given. Why? Because all hon. Members present will wish to pop up to record their love for their local newspaper, be it the Watford Observer, The Oxford Times, the Farnham Herald—

[Gregory Stafford (Farnham and Bordon) (Con)]

I am grateful to my hon. Friend for mentioning the Farnham Herald. The Tindle group also includes the Haslemere Herald, the Liphook Herald and the Bordon Herald. Does he agree that local papers keep politicians honest, weigh behind the key issues that matter to our local communities and deliver real journalism, whether that be sport or news. Week after week, quality journalists, who live and breathe their own towns and know their areas, are working for the people in those areas.

[Peter Fortune]

I of course agree with my hon. Friend. The role that local media plays at the centre of the community is what I will develop during my speech, if I get to the second page. I mentioned the Farnham Herald, which he intervened on, and go on to the Isle of Wight County Press and the Stranraer and Wigtownshire Free Press—all of us have examples of great local newspapers, which are at the heart of our community. We know that what they report matters, because it reflects our communities. While national and regional news have expanded, and the offering has widened, local, trusted news is still the go-to place for residents across our communities.

Supporting High Streets

Debate between Peter Fortune and Gregory Stafford

Tuesday 4th November 2025 Commons Chamber

[Gregory Stafford (Farnham and Bordon) (Con)]

Picture this: Downing Street, a hub of activity, alive with purpose, people moving with intent, heated debate and entrepreneurship at every turn. You look confused, Madam Deputy Speaker. I am not talking about the Downing Street here in SW1, but Downing Street in Farnham, where the high street starts and where the most heated debate is over whether the Farnham infrastructure project will ever end and the concerns about the local Lib Dems whacking up car parking charges at the same time.

The other big debate is about how high streets will survive the headwinds of tax rises that this Government have thrown against them time and again. From hospitality to leisure and retail, the high streets of Farnham, Haslemere, Liphook and the new town centre in Bordon are hives of business activity. Some 98% of the businesses across my constituency are small or medium-sized enterprises, providing the backbone of our local economy and the foundation of community life.

[Peter Fortune (Bromley and Biggin Hill) (Con)]

My wonderful constituency of Bromley and Biggin Hill is also home to many SMEs, and they tell me that they are being punished because of the irresponsible decisions taken by this Labour Government. Does my hon. Friend agree?

[Gregory Stafford]

I entirely agree. The truth is that Labour does not have the backing of small and medium-sized businesses because it is stifling growth with its costly net zero commitments, layers of red tape, changes to the living wage, cuts to business rate relief, the Employment Rights Bill and higher national insurance contributions. That is a toxic cocktail designed to choke off enterprise and ambition.

The Conservatives have a very good record on supporting local businesses. Just think back to the pandemic, when we delivered 100% business rates relief for many businesses. Indeed, when we left office last year, business rates relief was at 75%. Yet what did Labour do? As soon as it came in, it slashed that relief to just 40%, which is absolutely crippling for small businesses in my constituency. That is why I am proud and pleased that we have announced the abolition of business rates altogether, meaning that nearly a quarter of a million businesses will benefit. Financed by the golden rule, that is responsible, sustainable and, most importantly, pro-growth.

An hon. Member on the Government Benches argued that removing the rates will let landlords raise rents, but that assumes a balanced market. The reality is oversupply, with retail space outstripping demand. Abolishing business rates will therefore not drive up rents, but will make high streets more sustainable. The Brightwells development in Farnham, in my constituency, proves the point.

When my right hon. Friend the Leader of the Opposition visited my constituency last week, we met Steve at Hamilton’s, Mario at Serina, and Julian at The Castle pub. All three said the same thing: business rates are crippling, HMRC’s red tape is growing and energy bills are too high. That is why I am delighted that we have a plan to scrap business rates and cut energy bills for those small businesses.

In Bordon, in my constituency, we are working intensely to ensure that the new high street and town centre can thrive. We are making progress, but that progress will be undermined by this Government’s attack on business. These are not just businesses; they are the heartbeat of our community. They train young people, they create jobs and they invest in the place they call home. I am also afraid that the disconnect that Labour shows nationally is echoed by the Liberal Democrats in my area. They simply do not understand the struggles that our high streets face under this Government and therefore have no empathy for our local businesses.

High streets are not just the commercial zones; they are social, and the social and economic soul of our towns. Supporting them requires a Government willing to protect essential services, invest in rural areas and cut through the bureaucracy that holds small businesses back. Conservatives understand that if we back ambition, we build prosperity. If we bury it in bureaucracy, we destroy it. Our high streets and the communities that they serve deserve better than that.

Property Taxes

Debate between Peter Fortune and Gregory Stafford

Wednesday 3rd September 2025 Commons Chamber

[Peter Fortune]

My hon. Friend talks of pensioners. Does he agree that this is an extra pressure on them, following all the concern that was caused to them by the cut in winter fuel payments?

[Gregory Stafford]

My hon. Friend is entirely right. Once again, the Government are showing that they do not understand and do not value pensioners and the sacrifice that they have made. Everyone—pensioners, farmers and business owners—is seen as a cash cow for this Government.

Use of Drones in Defence

Debate between Peter Fortune and Gregory Stafford

Wednesday 3rd September 2025 Westminster Hall

[Peter Fortune]

It is right that we continue to support Ukraine. Our support of Ukraine is keeping us safe in the west, and we need to redouble our efforts to make sure the brave soldiers and people of Ukraine are well defended.

Drones are now an important part of supply chains and logistics, with Ukraine using ground drones to move ammunition and other supplies to the frontline. Operation Spiderweb saw Ukraine smuggle 117 cheap first-person-view drones to successfully strike a Russian airfield, disabling a third of Russia’s strategic bombers. That is drones worth a couple of hundred dollars inflicting an estimated $7 billion of damage.

Sea drones have changed the balance of power in the Black sea. A third of Russia’s fleet was damaged or destroyed by relatively low-cost sea drones packed with explosives ramming ships. While Russia’s navy has adapted to make these attacks harder, sea drones carrying missiles or other drones are still causing immense damage—a $300,000 sea drone can destroy fighter jets worth $50 billion.

Drones are transforming warfare and levelling the playing field in asymmetric fights, but the change can be seen beyond Ukraine. Israel weakened Iran’s attacks on its territory by covertly transporting drones in suitcases and trucks to destroy Iranian air defences and missiles. Houthi rebels used drones to target HMS Diamond, requiring the ship to use its expensive missiles to stop a relatively cheap attack. Even drug cartels in Mexico are using cheap drones to launch targeted strikes against security services. Terrorist groups are also adapting commercially available drones for reconnaissance and filming propaganda, and they will undoubtedly be used in future attacks.

The pace of change is unbelievably fast, but the direction is clear: drone warfare is the future, and Britian must be the leader in the development, testing and mass deployment of drones. That means three things. First, we must develop an ecosystem of private enterprises that can innovate, test and build drone models—big and small, sophisticated and simple—at a larger scale. Ukraine is armed with many UK-made drones. We have supplied some 70,000 already and have a target of 100,000 by the end of the year, but that pales in comparison with the numbers required for drone warfare. Ukraine aims to produce 4.5 million this year.

It would take relatively little money to kick-start a collection of competing companies, capable of innovating to keep up with battlefield changes, to build inexpensive or sophisticated drones. We must also help commercial drone enterprises to thrive. Although they were not initially intended to, those machines can have military purposes and can provide the industrial-scale drone warfare that we require. It is disappointing and frankly unacceptable that, since the general election, the Government have purchased only three drones for the UK armed forces.

Secondly, if the UK procures many new drones, we will be able to start training our forces and learning the lessons from Ukraine. Although our brave service personnel use drones for many tasks, they are not as widely utilised as modern warfare demands.

[Gregory Stafford (Farnham and Bordon) (Con)]

My hon. Friend is making a powerful speech, with which I agree. Like him, I have been part of the armed forces parliamentary scheme with the Royal Marines. Over the past year, he and I have seen drones deployed—I will not say where. More importantly, there is innovation in the Royal Navy and the Royal Marines, but it is compartmentalised and bitty, and it is not at the scale that he is talking about. Is it not time for the Government to use the innovation in the armed forces to expand out into the private sector?

[Peter Fortune]

This is a good point at which to mention the armed forces parliamentary scheme, of which colleagues from across the House are part. That great enterprise enables us to better understand the pressures and the reality that our armed forces personnel face. My hon. Friend is right that we have visited sites where we have seen how drones can be used and how effective they can be for deployment on the battlefield. That drives my request to the Minister to look at how we can procure more drones.

We are steadfast in our support for Ukraine, where we have made the military links we need to learn how drones can make our British forces even more lethal. They can carry out unmanned assaults and provide the support that our personnel need.

Finally, and in equal measure, we need to look at how the armed forces can counter drones—what we can do to fight them off. HMS Diamond is a particular case in point, as it successfully destroyed nine Houthi drones, but at huge expense. We have seen the damage that drones have inflicted on prestigious targets—Russian jets, ships and bombers—so we clearly need to defend ourselves from them. As a nation, we cannot afford to let cheaply purchased drones with a grenade attached wreck a multimillion-pound piece of equipment. We are already developing solutions such as radio frequency directed energy weapons, capable of neutralising swarms of drones, but as we look to ramp up defence spending in a more dangerous world, the threat posed by cheap drones must be answered.

Drones will not make infantry, artillery, ships or aircraft obsolete; they are a new tool that will help to transform warfare. They must be an integral part of our efforts to strengthen the UK’s armed forces and face down the threats our country now faces.