Business Rates and the Recession

My hon. Friend makes a good point. The Government's amendment, which I shall come to later, makes a passing and broad-brush reference to certain proposals, but I do not think that they are adequate, as I hope I shall explain. His other extremely important point is the significant impact of business rates on the viability of businesses as a whole. Local firms in particular cite rates, after rent and staff, as their highest overhead. A significant hike in business rates, therefore, can be the difference between survival and prosperity or a business going down the tubes with jobs and prosperity being lost. That is why the effect of the proposed increase in business rates, compounded with the difficulties that many businesses in the small and medium-sized sectors are already suffering, makes the debate so timely. The situation for those people is particularly grave. Against that background, it is not surprising that troubling figures are already emerging on the impact of business rate increases on top of other costs of the economic downturn. So far, the Local Government Association reports that four out of five councils have found an increase in empty properties in their town centres. That was before this rate increase happened; 80 per cent. of councils found that businesses are being driven out of our high streets, thanks clearly and firmly to the economic failures of this Government. The LGA also pointed out a significant increase—of 56 per cent.—in the number of firms having difficulty paying business rates. That is an enormous increase, and if firms are having difficulty paying their business rates, they may well have difficulty in meeting their other obligations. Their viability is in danger. Why? It is because of the failure of the Government to do anything about proper liquidity for genuine and otherwise viable businesses—reflected in their failure to adopt the proposals advanced by my party for a proper loan guarantee scheme to get credit flowing—and because of the compounding of costs and regulations for those businesses. As a result, businesses are caught in a deadly pincer movement. Some eight out of 10 councils also found an increase in the number of small firms seeking business support. Those three sets of statistics from across the country are grim figures that are a serious indictment of this Government's handling of matters. I turn to the impacts of the business rate which we seek to address in our motion, to some of the points where we take issue with the Government, and to areas where we believe that more can be done. The first issue is the increase of 5 per cent. that is due this year. That is especially hard for businesses to bear, because the methodology that the Government have adopted is difficult for many people to understand. It is based on rental values in April 2008, when the inflation index was higher than it is now. Businesses are facing an increase of 5 per cent. in rates when international price index—IPI—inflation is down to 0.1 per cent. and we are likely to experience deflation in the coming year. Businesses still have to meet the inflationary increase, which is based on thoroughly out-of-date figures. That will make it hard for many small businesses to survive, yet, to revert to the point that my hon. Friend the Member for Salisbury (Robert Key) made, the Government have made no suggestions about the methodology, which could be changed and improved. Indeed, we hear the contrary from the Secretary of State, who has not graced us with her presence today. I am sorry that she is not here, because it is always a pleasure to see her and look her straight in the eye, as perhaps I can—[Laughter.] If one has a unique selling point, one should not be afraid to flaunt it. When taxed with the difficulties that businesses would experience, the Secretary of State's response was,""it is essential to try to maximise the take from non-domestic rates".—[Official Report, 20 January 2009; Vol. 486, c.608.]" That gives it all away. The survival of businesses and the viability of local services are not the Government's concern, but using businesses as a cash cow is. Businesses are being clobbered by the increase in non-domestic rates to bail out the Government's waste. Among other things, business rates are being used to subsidise the pointless VAT cut. On what would most people prefer public money to be spent? The Secretary of State's comment gives away the Government's position. Businesses are suffering from the further complication this year of the end of transitional relief from the previous 2005 revaluation. It is likely that that will raise another £100 million, taken away from businesses that are already in difficulty. People therefore face a genuine double whammy. Again the Government have done nothing—not even expressed a hint of concern—about the impact of the cliff edge on which many businesses are perched.