It is a pleasure to serve under your chairmanship, Mr Caton. I congratulate my hon. Friend the Member for Rochdale (Simon Danczuk) on securing this important debate on business rates and on his comprehensive analysis of the effect that increased business rates will have on our high street.
Like many towns, Stockport is being squeezed extremely hard at the moment. We have one of the highest numbers of empty shops in the country, with nearly a third lying empty. There are various reasons for this, which I will mention later, but continuing high business rates are a major contributor to a difficult trading environment. The trend is that business rates are too high as a proportion of rents, and consequently many retailers are struggling to stay afloat. Small and medium-sized businesses are suffering disproportionately.
I have been looking in my constituency at the balance between rents and rates of many empty shops, which we desperately need to reopen. The problem was articulated by the head of north-west high street chain, Timpson, at a business event in Manchester on 15 October. James Timpson said he had considered opening a new site in Stockport recently, but the rent of £10,000 was almost half the £18,000 business rates. He added:
“Business rates have got completely out of hand. It’s become a real stifler and is stopping businesses from taking more space and trying new things. The higher the business rates the harder the gamble is to pay off.”
The Minister will be aware that last year’s 5.6% rise in business rates was the biggest increase in 20 years. If a
chain like Timpson’s is being put off by high business rates, what can it be like for other businesses? As banks are very risk-averse, the current level of business rates must deter them from lending to those wishing to start a new business or extend an existing business. It makes little sense to exhort banks to lend while loading additional costs on business.
Two examples of empty smaller shop units in two key areas of Stockport that we need to develop further —the Market Place and the Underbanks—show the disproportionate level of business rates to rent. In one empty shop in the Market Place, which the council has spent much money on refurbishing, the rent is £9,750, yet the business rate bill is more than half that, at £5,287. In another empty property in our unique Underbanks area, which we are looking to revitalise, the former Greggs bakery, the rent is £15,000 a year but the estimated rates bill is £6,862. Many bigger shops in Merseyway, which we need and which must stay in Stockport, are appealing against their high rateable values.
There is no doubt that business rates are a barrier to new entrants to the high streets and a drag on investment and growth for small business. A recent survey of small shops identified that business taxation was one of the top five barriers to growth. As co-chair of the all-party group on retail, I tabled an early-day motion earlier this month, calling for a freeze of business rates next year to save jobs and prevent more shops becoming empty.
There is widespread concern that a 2.6% increase in business rates in April 2013 would impede retailers’ ability to invest and create jobs, particularly for young people. The retail industry, as hon. Members have mentioned, is the UK’s biggest private sector employer, providing crucial first jobs to a million 16 to 24-year-olds. In Stockport, 5,700 are people employed in the retail industry. Business rates have already risen dramatically in both 2011 and 2012, by 4.6% and 5.6% respectively, a cumulative increase of more than £500 million.
The early-day motion also calls for a review of the mechanism by which rates are increased, to ensure a fairer and more sustainable formula for the future, based on an annual average of the consumer price index, rather than the lottery of using only September’s RPI. The RPI is unpredictable and usually higher than the measure that the Government choose to use for pensions and benefits.
I, like many colleagues, am also unhappy that the Government are postponing the 2015 rates revaluation until 2017. That will punish northern businesses particularly, by keeping them locked into 2008 rates, set near the peak of the property boom. The rationale for this decision is that local firms and local shops will avoid unexpected hikes in their business rates bills over the next five years. I quote the Minister in a recent article in The Daily Telegraph:
“The best thing Government can do to help such businesses is to provide them with a stable economic environment. This is why we want to protect local firms from soaring tax bills.”
Which businesses is he trying to protect? From the Government’s own calculations there are 800,000 winners and 300,000 losers from the postponement of the revaluations. Those figures, as the hon. Member for Waveney (Peter Aldous) said, probably require closer analysis and examination.