My hon. Friend is right. I am glad that she has put on record the interplay between the Consumer Rights Bill and small businesses. That was a missed opportunity. The Government should have taken the opportunities available to them during the passage of that Bill to offer a further boost to these struggling businesses—all 5.1 million of them. The vast majority of businesses in our country could have been supported.
Small businesses struggle not only with high energy costs, late payments and charges, but with access to finance. Every time we discuss these issues, the problem of access to finance comes up. I am afraid that the Government have failed to get a grip on this. Since 2010, lending has fallen by a colossal £56 billion. Even in the most recent quarter, net lending to small business fell by a further £1 billion. Research has shown that some 85% of small businesses are locked into the big five banks alone. It has also shown that most SMEs will approach only the larger banks when looking for finance, and that even then the rejection rate is about 50%.
Then there is the pressing issue of business rates. Business rates are levied on the estimated market rental cost of most non-residential properties, and currently based on 2008 rental values. In 2012-13, they raised £26.1 billion. Relief on business rates exists for low-value properties—those with a rateable value of below £6,000—which are subject to a 100% discount. Since April 2013, local authorities in England have been able to retain between a quarter and a half of the rates raised from new developments.
For many small businesses, business rates are a significant overhead that they need to factor in. More than one in 10 small businesses say that they spend more on business rates than on their rent. The only choice for many of those shops, workshops, start-ups and others that pay business rates is to pass the costs of the rates on to their customers.
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I come from a tradition of small business. My first job—I have to say that it was unpaid—was helping my parents to serve customers in the corner shop that was also our home. After school, at the weekend and in the holidays, I did the stocktake with my dad, went to the cash and carry and sorted out the VAT. I have a clear idea of the stresses and strains that people who run small businesses go through on a day-to-day basis, and what their families and young children go through as they help to try to keep things afloat.
My constituency covers Birmingham city centre, so hon. Members can imagine the number of retailers—both big and small—I hear from regularly. Many constituents often express the fear that the exponential growth of business rates might put them out of business. It is a concern for the people I meet. I sometimes hear those stories from people who set up businesses in the ’60s and ’70s. They have successfully survived the economic ups and downs since that time, only now to believe that they might finally be done in by the growth of the burden of business rates on small and medium-sized businesses.
We should remember that the 2008 revaluation rate reflected an entirely different time of property prices. Small businesses are stuck paying rates at 2008 levels, which do not reflect the lower property values caused by the financial crisis. Research suggests that, in my west midlands region, the rateable value for retail units is 13% too high, for offices it is 19% too high, and for industrial units it is 16% too high. The latest research shows that the average business rate increase since 2010 has been £1,500.
We have had a lot of debate this afternoon about the relative value of such sums of money to different people and businesses, but I can say with complete confidence that that is a lot of money for a small business. It is easy to see why the word “critical” has been used in relation to the current business rates regime. When people are struggling to make ends meet in their business, when they are struggling to ensure that all their bills are paid, and when their status as a going concern is in doubt, £1,500 is a significant sum of money. It is a big overhead. It has made a huge difference to the ability of small and medium-sized businesses in our country to continue to grow, employ more people and succeed.
Business rates are central to the success of small businesses. That leads us to ask the Chancellor to assess and review alternative tax measures such as a change to
“non-domestic rates, which would have a greater benefit for businesses with fewer than 50 employees”.
Specifically, we believe that a cut in businesses rates for 1.5 million small businesses and then a freeze the following year would be enormously helpful, and would make a difference to the ability of businesses of that size to keep their heads above water and keep their businesses moving forward. The measure would be worth an average of £450 over two years to 1.5 million businesses, including shops, pubs and small start-ups. Some firms would benefit by up to £2,000.
As I have said, an initial cut and then a freeze in business rates in the first two years of the next Parliament would be paid for—it is another fully funded proposal for the Labour party manifesto on which we will seek election from the British people in a few weeks’ time. It will be paid for by not going ahead with the Government’s cut in corporation tax—it will happen in April; it is just a few days away—from 21% to 20% for the 80,000 largest firms in our country. We would spend all the money raised from not going ahead with that additional 1% cut in corporation tax on those 1.5 million small firms instead.
As I said in response to an earlier intervention, Government Members have mischaracterised our corporation tax proposals as anti-business. The Minister and I sometimes agree to a score draw when we debate, but his mischaracterisation of our proposal is just plain wrong. It is also unlike him to be uncharitable and unwilling to engage with the issue at hand. I hope he will pick up on that when he responds.
During a media appearance on “Daily Politics”, I put it to the Conservative party chairman that his party’s contention that our corporation tax proposals are anti-business only holds true if the Conservatives believe that 1.5 million small firms are not really businesses. He evaded that point and no Conservative Member has ever stood up to justify their characterisation of our corporation tax proposals as anti-business by saying that they believe that 1.5 million small businesses are
not actually businesses. The Minister does not look like he is about to jump up and say, “Oh no, you’ve got us wrong.” That tells me pretty much all I need to know, which is that the Conservatives are happy to whip up anti-business fervour, but it is misguided and incorrect.
If we are elected in a few weeks’ time, every single penny of the money we raise by not going ahead with a corporation tax cut from 21% to 20% will be spent on small and medium-sized businesses. They need that help and they should be prioritised to receive it. That is the choice we will make to help small and medium-sized businesses.
We already have the lowest rate of corporation tax in Europe, but we also have the most expensive property tax. That is why it makes no sense for the Government to make it a priority to cut a tax that is already among the most competitive, but not help smaller firms with very large costs.