James Murray – 2022 Speech on Business Rates and Levelling Up
The speech made by James Murray, the Labour MP for Ealing North, in Westminster Hall, the House of Commons, on 13 December 2022.
It is a pleasure to serve under your chairmanship, Mr Mundell. I begin by congratulating the hon. Member for Waveney (Peter Aldous) on securing this important debate on business rates. I am pleased to respond on behalf of the Opposition.
We know that there are around 5.6 million small businesses in the UK, creating millions of jobs and opportunities. They provide essential services to local people, and make a significant contribution to the Exchequer. Businesses on high streets across our country are not just places to buy things we need. They are also an important part of where we live, work and share our daily lives.
While business rates affect businesses of all sizes, smaller businesses often struggle the most to meet those costs. They face the burden of an outdated system of business rates, while struggling with rising energy costs, rents or mortgages, and inflation, as well as the ongoing impacts of the pandemic and the September mini-Budget. Data released by the Office for National Statistics shows that the number of business closures in the UK in the first quarter of 2022 was a shocking 137,210 which is 23% higher than the equivalent figure in the first quarter of 2021.
As the shopkeepers campaign has highlighted, the existing business rates system in England has become disconnected from the realities of modern retail and retail real estate. As the campaign explains, business rates in England were 87% higher in March 2020 than they were in 2001, whereas retail rents rose by only 17% over the same period. As it also points out, business rates have not responded effectively to evolving consumer and economic trends, not least the rapid growth of online retailing, and equitable business rates liabilities are the result of infrequent and delayed revaluations under a system that acts as a barrier to investment. Such views are echoed by the 2018 Confederation of British Industry report, “A Tax System that Enables Businesses to Invest and Grow”, which states:
“In an increasingly digitalised word, it has never been a more crucial time for the Government to act and set out a path for reform to the broken business rates system.”
I am sure the Minister will recall the 2019 Conservative manifesto, on which the party stood for election. Specifically, page 32 promised:
“We will cut the burden of tax on business by reducing business rates. This will be done via a fundamental review of the system.”
We recognise that any help for businesses that are struggling is welcome, and we recognise that the UBR has been frozen, relief extended into 2023-24, and downward phasing abolished. However, it seems that the promise of fundamental reform has now been abandoned. It seems that the Government have abandoned their promise fundamentally to address the imbalance that affects bricks-and-mortar businesses, which find themselves at a significant disadvantage compared with their online counterparts, whose warehouses typically attract considerably lower business rates.
My colleagues and I believe that the current system of business rates should be replaced to meet the needs of a modern economy. Last year, my right hon. Friend the Member for Leeds West (Rachel Reeves) announced that a future Labour Government would replace the current system of rates with a new system of business taxation that is fit for the 21st century. We will set out our plans before the next general election, and such a system will involve more frequent revaluations—a move that many people have been urging for years. It will be a fairer system that asks online giants to pay a fairer share, so that small, local and high-street businesses in all parts of the country can thrive. Ahead of fundamental reform, we also believe that the same principle of rebalancing the burden of tax in the system should apply, which is why we have set out our plans for an increase in the threshold for small business rates relief, funded by an increase in the rate of the digital services tax.
We know that partnership between the Government and businesses is critical to economic growth, but it has been lacking in our economy for so long. We also know that small businesses have been held back, particularly by an outdated system of business rates, for many years. To increase growth in all parts of the UK, the Government should support small businesses to invest, grow and create jobs.
As the shadow Chancellor has set out, Labour will carry out the biggest overhaul of business taxation in a generation so that our businesses can thrive. Our replacement system will shift the burden of business taxation so that online firms take a fairer share, while freeing those that rely on bricks-and-mortar premises. Our new system will incentivise investment and include more frequent revaluations and instant reductions in bills where property values fall. It will reward businesses that move into empty premises and encourage, rather than penalise, green improvements to businesses. It will also make sure that no public services or local authorities will lose out from the changes.
Labour’s approach will be based on working together, with businesses, workers and public bodies all pulling together to rebuild Britain and to seize the opportunities of the future. A Labour Government will help to breathe new life into our high streets by calling time on the outdated model of business rates, so that British businesses in all parts of the country can play their part in creating economic growth and the jobs of the future.
