Business Rates

Robin Walker Excerpts

Wednesday 4th December 2013 Commons Chamber

[Mr Robin Walker (Worcester) (Con)]

I congratulate the hon. Member for Stretford and Urmston (Kate Green) on her speech. She drew attention to some important issues about the Valuation Office Agency that I have spoken about before and do not intend to touch on now, so I am grateful that she covered them. Like my hon. Friends the Members for Enfield North (Nick de Bois), for Newton Abbot (Anne Marie Morris) and for Northampton South (Mr Binley), I believe that business rates need fundamental reform, and I hope we can start that process tomorrow.

The Labour party’s motion does not just propose to rob Peter to pay Paul; it goes directly against its record in government, when it charged higher rates of tax on smaller businesses than on large ones and resisted the many attempts of my hon. Friend the Member for Mid Worcestershire (Peter Luff), through his chairmanship of the cross-party Business, Innovation and Skills Committee and his private Member’s Bill, to extend small business rate relief to many more small businesses. One of the best things that could be done to help small businesses was done when my hon. Friend’s suggestion of making the small business rate relief automatic for thousands of businesses was accepted, not by Labour but by this coalition Government.

Another was the doubling of the threshold for small business rate relief, but I regret that that was done only on a temporary basis with a deadline to expire in 2014. I hope that that can be addressed in tomorrow’s statement. I have had representations to that effect from the excellent Wise Owl Toys in Worcester and from Greenway Landscape Architects, who say that if they were asked to pay business rates on their office they would have to close it down and work from home instead. Both businesses point out that there would be no net gain to the Treasury or to local government from allowing the relief to expire in March 2014, as they simply could not afford to pay the rates that would be due.

We should do more to help small businesses, but helping the smallest businesses should not be the limit of our ambition. We should also be seeking to help businesses as they grow and create more jobs. One of the perverse consequences of the generous system of relief that the coalition has offered is that it creates a shelf that affects businesses when they wish to move to new premises or expand. In an ideal world, we should seek a more tiered system of business rate relief that works on a banded basis so that no business would be hit with a huge increase to its business rates bill as it grows. I accept that that might be difficult to achieve in the current fiscal climate, but we should consider whether we can delay businesses having to pay higher rates when they are creating new jobs or taking on large numbers of trainees and apprentices. That would be consistent with other Government initiatives, such as the employment allowance designed to encourage job creation. We should also consider the case that has been made for targeted rate relief for pop-up shops and malls, which can act as retail incubators and support entrepreneurs.

Those steps would be a start, but they do not touch on some of the greatest problems with the current system of rates, including the valuation system, which many hon. Members have already touched on. Put simply, our system of property taxation on business was designed for the 1980s, but we are trying to apply it to a 21st century world. Nowhere is that more apparent than in the retail sector.

Rumours of the death of retail have been greatly exaggerated. The Business, Innovation and Skills Committee’s inquiry has heard evidence of a thriving sector that is creating many more jobs and opportunities, even as it undergoes radical change. However, the rise of the internet and competition from online-only retailers creates additional pressure on the high street and the so-called bricks and mortar sector. Such competitors are unburdened by business rates and there is a risk, if we leave business rates unreformed, of creating a vicious cycle whereby business rates contribute to the declining retail footprint by putting shops at a competitive disadvantage and adding to their cost base and then, in order to generate the same revenue, rates have to be steadily increased on that declining base, which could end up killing valuable businesses. I hope the Government will consider the strong case being made for a freeze or a cap on business rates and to break the cycle of inflationary increases.

Of course, we should be looking to protect the high street and not just hand a big cheque to the biggest retailer, but, as my hon. Friend the Member for Bedford (Richard Fuller) has pointed out, we also need to be careful in business rate reform not to remove a burden from retail and put it on other areas, such as manufacturing.

I hope that tomorrow the Chancellor will be able to announce serious steps to reduce the burden and begin reforms to move away from our antiquated system to one better suited to the 21st century. I strongly support the Government’s amendment.