Business Rates Relief: High-street Businesses

[Christine Jardine in the Chair]

I beg to move,

That this House has considered the impact of changes to business rates relief on high street businesses.

What a pleasure it is to serve under your chairmanship, Ms Jardine. I am deeply privileged to have secured this debate.

When we think about the communities that we represent, we so often think about the centre of those communities—the town, village or city centres that truly define the communities that are our constituencies. That is certainly no different in my constituency. Even in some of the very small villages such as Salt or Great Chatwell, the main centre is sometimes the pub, which is the hive of community interest—I would recommend any of the pubs in my constituency to the Minister, if ever he wanted to visit them. They bring the community together. The larger towns and villages, such as Stone, Great Wyrley, Cheslyn Hay or Penkridge, have thriving high streets and centres that are vital for the people who live there. Centres give towns density and, critically, create employment for so many people in my constituency and all our constituencies.

The Government’s changes to business rates relief have already had a significant impact on so many businesses, not just in my constituency but right across Staffordshire, the west midlands and England itself. The change in relief, which was 75% but has been reduced to 40%, has had a material impact on the way that people run their businesses.

We are all aware that the initial rates relief was introduced at the height of the pandemic to help businesses. However, businesses, especially on our high streets, have taken time to recover from the pandemic, which saw a shift in the way that many people buy their goods, in people’s shopping habits and in the way that we use our town, city and village centres. The rates relief was vital to so many businesses, shops, pubs, hotels and people in adjusting to the new reality that they found themselves living in.

In my constituency, the hospitality industry contributes £70 million in gross value added and employs just short of 3,000 people. If it was a single employer, we would be talking about it all the time, but of course it is not one employer—it is many small family businesses. They may be individuals employing two or three people. They may be limited companies, although often they will be sole traders or partnerships. They are the backbone of England and of our economy, and they are feeling the pain of the changes that the Government introduced.

Many people in my constituency and across the country listened when Labour said, in opposition, that relief would be coming and that there would be changes, but they were not expecting those changes to cost them more money. Let us look at the analysis of the impact on a typical shop in terms of business rates. A typical shop has seen its bill climb from £3,589 to £8,613. For a typical restaurant, the bill has climbed from an average of £5,051 to £12,122. I appreciate that, in the Treasury’s view, those are not even rounding errors—they are not something that it should be concerned about or even think about—but for a business or an individual trying to work out how they will pay their employees’ wages, order in more stock or pay themselves a wage that month, that really matters. It impacts those who are in business and dampens the aspirations of those who wish to start one.

April’s retail, hospitality and leisure relief reduction left Samantha, a shopkeeper from Langport in my constituency, with a £2,000 business rates bill, on top of a £5,000 bill, despite the fact that she was potentially eligible for exemption. She consequently faces losing her shop. When I spoke to her recently, she told me that the system has ended her livelihood. Does the right hon. Gentleman agree that we need to reform rates and exemptions to boost local high streets’ viability?

The hon. Lady is absolutely right that we need reform. Such closures affect her constituent and many others, but these are not just businesses; they are someone’s hopes, dreams and aspirations to create something better and build a better life for themselves and other people. According to the Campaign for Real Ale, 125 pubs have already closed since 1 April. That is 125 communities that have lost something that they may never get back. It is 125 families—and many more, if we take into account the families of the many people working in those pubs—who have seen their livelihoods disappear.

We cannot just dismiss this problem. I thank the Chamber engagement team, which, in preparation for this debate, did a number of surveys asking for the views of people from across the country about the impact of business rates on their businesses. It is interesting to hear those stories. Lorraine, who has a hospitality business, said:

“It is time our industry had some real help. We had nothing left to give. I predict even more closures in the next two years.”

Karen, who runs a salon and health club, said:

“The rates are more than my rent and with the wage increases and massive hike in rates, I can’t survive. I’m on borrowed time.”

This is about not just those people, but the many people they employ. Rachel, who has a beauty salon, said:

“I used to employ 18 people and now only employ four, so it’s effectively made me shrink the business.”

James, who runs a hospitality business, said:

“The reduction in relief has led me to reduce my workforce by 33%.”

There are business out there that last year were perhaps thinking about expanding—maybe taking on another pub or opening another shop—but that is no longer viable. Most business owners—who, like the people employed, are working people—are the last ones to get paid. They take the risk, and the Government do not seem to want to encourage them, let them grow or give them the opportunity to succeed. They just make it harder.

The right hon. Member is making a very important point. This issue is important across the whole socioeconomic spectrum. I had a relatively privileged upbringing, but my first job was washing dishes in a hotel. That job taught me what hard work is. The lessons that we learn in those types of jobs last throughout our lives.

The hon. Member makes a very valid point. This issue is about ensuring that there is as much opportunity as possible for all people, whatever their background. We should not be dismissive of such jobs—I am sure that the Minister is not—but they are the jobs that have been squeezed out by the changes to rate relief.

The Minister knows that I am one of his biggest fans; indeed, I am a great admirer of him. I see him as a rising star. While the Chancellor hides, he is wheeled out. He is truly an impressive figure at the Treasury. I am not sure whether it is due to the diminished status of the Chancellor that he is looking taller, but he is certainly one of the rising stars of the Labour Front Bench. I actually enjoy reading some of his many comments. He is a very thoughtful and accomplished Minister. I imagine that he is a joy to work with and that his civil servants value him greatly.

However, I will just read out some of the things that the Minister has said in the past:

“As the shadow Chancellor, my right hon. Friend the Member for Leeds West (Rachel Reeves), has set out, if Labour were in government, we would scrap and replace business rates, and shift the burden away from hospitality and retail businesses on the high street, which continue to shoulder a heavy burden compared with those that operate primarily in the digital economy.” —[Official Report, 31 January 2024; Vol. 744, c. 318WH.]

I do not think that there is a Member in this Chamber who would disagree with the Minister on that. I think everyone in the debate today would say, “All power to the Minister’s elbow, and we look forward to him announcing how that will be done.”

Most businesses I have spoken to have found that they are paying more today than they were just a year ago. When in opposition, the Minister was busy making many comments, including:

Order. I remind hon. Members that they should bob if they wish to be called in the debate, and ask them to keep their speeches to within four minutes so that everyone can get in.

It is a pleasure to serve under your chairmanship, Ms Jardine; I believe this is our first time together in this situation, and I hope it is the first of many. I congratulate the right hon. Member for Stone, Great Wyrley and Penkridge (Sir Gavin Williamson) on securing this important debate. All of us in the Chamber today agree that high street businesses are at the heart of our communities. They not only offer goods and services, but provide valuable jobs, as the right hon. Gentleman mentioned. They support local families and create vibrant and connected town centres, yet they are under unprecedented threat. Across the country, businesses are being quietly but relentlessly squeezed out of our once-thriving town centres.

My constituency of Surrey Heath is often perceived as affluent, but that perception has arguably bred a dangerous complacency. Recently, I hosted a meeting of local businesses—a cross-section of local business owners from the health sector to hospitality, retail and financial services. The message I received was absolutely clear: the current business rates system, and particularly the changes to business rates relief, is creating considerably anxiety and uncertainty. The scaling back of business rates relief is compounding the pressures that businesses already face: rising national insurance, increased wage costs and inflationary pressures. Removing or reducing relief schemes at this time risks an existential tipping point for many high street retailers, especially smaller, family-owned and not-for-profit businesses.

In market towns such as Camberley in my constituency —and I am sure this is shared across all the constituencies represented today—the strains on the high street are already visible, with boarded-up shopfronts, dwindling footfall and declining confidence among business owners. As these local businesses close their doors, the risk is that residents will lose further faith in town centres and high streets and turn increasingly to online alternatives, accelerating the decline that I think all of us here wish to stem. While some exceptional businesses continue to thrive despite those challenges and headwinds, and they deserve recognition for that, many more are struggling under the cumulative weight of financial burdens, with reduced business rates relief tipping the balance from viable to vulnerable.

It is a pleasure to serve under your chairmanship, Ms Jardine. I congratulate my right hon. Friend the Member for Stone, Great Wyrley and Penkridge (Sir Gavin Williamson) on securing this really important debate.

I have previously spoken in the House about my background as a small business owner—specifically, a furniture retailer—and I know that business rates represent a massive percentage of the cost of running a small business. For many years, I have thought that we should get rid of business rates. It is a very outdated model, preferred by the Treasury because it is an easy model for collection, but it is destroying our high streets. When I was a retailer, we had an online presence. Post pandemic, more and more people are used to buying online, which means the heart and soul of our communities is being hollowed out. What was once a vibrant high street where people came to do their weekly shop and interact with one another is now somewhere to make a quick trip for necessities.

I have spoken before about my views on parking charges, which differ from those of the Lib Dem-run councils in my constituency. Parking charges are part of the formula for a successful high street. I will continue to feed in my view that we need to incentivise the best behaviour possible, with free parking for an hour for the high street, so that people can have their coffee or tea, pick up their dry cleaning, speak to their friends and pop into the library to return books. Those are the intangible things that we risk losing from our communities.

Taxes have been discussed. I will be a little bit political, because I know the Minister is well versed in politics in support of high streets. When we are discouraging entrepreneurs from creating businesses, we are fundamentally damaging the structure of the tax base. It is all well and good supporting employees, but we are still waiting for the definition of an employee. As my right hon. Friend the Member for Stone, Great Wyrley and Penkridge said, business owners are employees as much as employers. We should support them by saying, “We want you to take the risk of setting up a business with your life savings,” to employ people and give someone that first job, and I fear this Government are failing in that. We all look forward to the spending review and future Budgets that will hopefully not U-turn but nudge policy positions in a way that supports wealth creation.

It is a pleasure to serve under your chairship, Ms Jardine. I thank the right hon. Member for Stone, Great Wyrley and Penkridge (Sir Gavin Williamson) for securing what is probably the most important debate we could have to rejuvenate our town centres. As some hon. and right hon. Members have touched on, town centres are not just a series of business transactions but the centres of our community, where people go to meet friends or to be part of a place where they can do familiar things. It is the social glue that is created by town centres that is so important; once that is lost it does not come back.

In every town centre there is a mix of retail, leisure and hospitality. We have to get the balance right between those three things, because often someone will come in for one of the legs of the stool, as it were, but stay to do something else—thus they stay longer and have more touchpoints with their community. Business rates are the foundational tax rate that affects those three things. If business rates are not right, we are not incentivising the right mix in the community—because business rates affect those three things slightly differently—and we are undermining the support that those three things give to the idea of the town centre being a social glue. I am not going to talk about all three things, but I will talk about hospitality.

I start with Fuggles bar, which is around the corner from my house in Tunbridge Wells. Fuggles is great; it is run by Alex and has an extraordinary selection of craft beers, including local ones brewed in the constituency, and a number of gins, so I occasionally visit. Alex employs about 18 people. A number of Members have spoken about business rates relief being cut from 75% to 40%. That single change, announced at the Budget, has pushed up the cost of Alex’s business rates by 50%. To that we must add a number of other costs that have risen at the same time, such as national insurance, and before that, energy costs.

It is a pleasure to serve under your chairmanship, Ms Jardine. I congratulate my right hon. Friend the Member for Stone, Great Wyrley and Penkridge (Sir Gavin Williamson) on securing the debate.

There are 1,400 small businesses with a rateable value of less than £50,000 across my constituency. Today, we are discussing only the changes in business rates, but a lot of other Government decisions—particularly on employers’ national insurance and on energy costs not coming down—will affect our high streets as well. The cumulative impact of all that is devastating for our high streets.

Lots of businesses I speak to in my constituency are horrified that rates relief dropped from 75% to 40%. When I go out and about across Broxbourne and speak to business owners, a lot of them now say, “What’s the point? What’s the point in me coming to work, trying to run a small business in the town centre, creating growth and employing people?” A Minister told me from the Dispatch Box that it is the Government that create growth. Well, let me tell the Government that it is not the Government that create growth; the Government’s job is to create the right environment for entrepreneurs and businesses to create growth.

Business owners go to work day in, day out, and work incredibly long hours. The Government should try to derisk that process. If we want people to open shops on our high streets, the Government should cushion them from some of the risks. When someone starts their own business at home—from a desk, garage or whatever—upscaling that business is incredibly difficult, and lots of risks are involved. Given that the Government are changing business rates relief and slapping more taxes on businesses, particularly in our town centres, why would someone do that?

A couple of weeks ago, I went to a secondary school in my constituency to speak to A-level students who are doing a business T-level. They all want to become entrepreneurs and create businesses, but we are not creating the right environment for people to become entrepreneurs. In the general election campaign, we heard a lot about how Labour would be the most pro-business Government ever to take power in the United Kingdom, but every decision the Government have made since being in office has slammed down growth and made it harder for businesses.

I suggest that England is in an extraordinarily lucky position, because in Scotland we are not getting business rates relief. There is none for retail or leisure; there is some for hospitality, but only up to a point. The hon. Member should thank the Lord he lives in England.

The SNP needs to come up with some relief, because things are hard enough in England, even without what the hon. Gentleman has just outlined in Scotland.

The OECD has today downgraded its growth predictions for the United Kingdom. The Government need to start acting on their rhetoric from before the general election. They said they would be pro-growth, but no policies have come forward to support our high streets or promote growth. The Government really should stop trying to kill our high streets.