Business Rates and the Recession

Shortly after university I started a small retail company. It is still going, and I remain a director, so I declare that interest as recorded in the register. The full title of this debate is "Implications of business rates and the recession for businesses", and I am very pleased that the Economic Secretary will reply to the debate, because he and I both represent constituencies in the black country. In fact, Walsall is the centre of the Black Country chambers of commerce. Aldridge-Brownhills reflects many of the issues that are at the heart of this debate and will be so for many an industrial town. The transition to the uniform business rate took money away from industrial areas and distributed it to other areas. I see that my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) is in his place, and he knows the Birmingham area well. Walsall lost £5 million from the change from the old business rate system while Worthing gained a great deal of money. I do not know the circumstances of Worthing, but the argument was always that the dereliction and the industrial illnesses that followed industry were compensated by the fact that the towns set an industrial rate for their area—localism, perhaps. The UBR went through the House easily, and the property industry was slow to pick up on what it actually meant. The costs lie at the heart of the unemployment issue, and that is a serious charge. The Economic Secretary will remember the early 1980s, which saw almost the collapse of large-scale manufacturing industry in the west midlands—it was not the only part of Britain in which that happened, and there were reasons for it. So severe was that collapse that the Government of the time created rate-free industrial areas, which meant that factories could be built there without having the burden of rates. That is how serious it was. Some people are now predicting that unemployment will rise to 3 million, and possibly more. That would be worse than the unemployment of the early 1980s, but the Economic Secretary will remember the vast areas of dereliction that followed when companies were forced, before the scheme came in, to demolish buildings. The pious and the wise said that they were old buildings anyway and it was just as well to get rid of them, but they were the source of much employment. I think it was Lord Heseltine who came up with the idea of designated business-rate free areas. There was one in London and one in Liverpool, and the west midlands definitely had one. That shows the severity of that recession. Now we face a different problem. Many areas are hurting, such as recently built shopping malls, where properties are rated at the highest end of the rentable market, invariably with clauses that say the rents can only go up. No one should think that employment in retail is negligible in this economy; it is in fact significant and substantial. These shopkeepers include some large companies. We saw Woolworths go—we can wave that goodbye—but a lot of people were employed by that company and it provided employers' national insurance at 12.8 per cent. while the employees paid nearly 10 per cent. too. Those revenues to the Government sustain employment, and so the increases are very worrying. I shall give an example of a building that is designated new build, although it was a very elegant refurbishment, in central London. I can talk about this from personal experience, so it is not a vague or illusory illustration. The rent for a less than 5,000 sq ft shop in a central London borough is £270,000, set in 2004. The uniform business rate for the same shop, last year, was £124,740. That is what is confronting many a small business. This business employs about 60 people, some of them part-timers and all of them paying national insurance contributions while the employer pays the employers' national insurance contribution. That is a huge sum for that business to pay, yet it is providing employment in these dire times. Today, I walked from Tottenham Court road to see what has happened there. At one time, the area was the centre of London's book trade, but now there are empty shops and fast food outlets. That is where we are getting to. I urge the Government to take seriously the employment side of all their equations and to think about what is happening. The uniform business rate and the nearly 50 per cent. multiplier of whatever the rent is are what kills the prospects for many companies and thus the employment of many people.