Government’s Inflation-Busting

Mark prepared the following notes for the Opposition Day debate on the government’s plans to increase business rates from April. Unfortunately he was called to the Procedure Committee so was unable to participate in the debate. Instead he has sent constituents’ concerns to the relevant government minister.

Business Rates Debate, Wednesday 25 March

  • Government plans to increase business rates by 5.02% in England from April 2009. The tax will add an extra burden of over £1 billion nationally for businesses.
  • There are 48 000 businesses in Westminster. 33 000 of them are small businesses who are particularly vulnerable in the economic downturn. Businesses employing four or fewer people make up 70 per cent of all premises in Westminster. These entrepreneurs form the life-blood of the economy, and to penalise them due to a statistical quirk based on figures half a year out of date is unfair.
  • Announcement of above inflation increase, based on record high of the September 2008 RPI rate, suggests that government rhetoric on business support has yet to transform itself into action.
  • In January 2009 Westminster City Council Leader, Colin Barrow CBE, wrote to the Prime Minister, Chancellor, Secretary of State for Business and Communities Minister John Healey outlining how businesses could be assisted by the government at this time. One such suggestion was a freeze in business rates.
  • The Council has initiated a City Recovery programme, supporting small businesses through a series of actions – extra advice services and the freezing of the council tax through to infrastructure improvements. They are therefore extremely concerned and frustrated that the government’s plans on business rates so patently flies in the face of the notion that government at both local and national level are determined to support small businesses through the recession.
  • The consequences of the government’s action are very real. I have had several cases brought to my attention in recent weeks, small businesses saying that this rate rise could push them over the edge: 
  • Elizabeth Gage Ltd – small company in the West End, just received a rate demand with an increase of 4.97%. Zoe Simpson, who works for the company, said ‘in the current economic climate, an increase above inflation [currently zero] has a damaging effect on small businesses who are trying to cut their costs. The government needs to trim costs rather than looking to business to provide an ever increasing pot of money.
  • Nigel Williams Rare Books – Horrified to receive a bill from £5828.16 to £9379.50. This despite the fact that the rating valuation has not changed. Mr Williams says “all the other shops in Cecil Court (a small thoroughfare filled mainly with antiquarian booksellers) have had similar percentage rises. Already since the beginning of the year two of the twenty one shops have had to close for financial reasons. Our turnovers are hardly huge and that amount of extra expense is not easily swallowed.’
  • Albannach – Daniel Sullam. ‘Every SME in the Cities of London and Westminster is paying business rates. In our case, we are paying more than £70 000 just to have a site our size. And therein lies another example of how our sector has been strangled over the years – ground floor sites, preferred by most retailers, suffer much higher business rates.
  • SFP International (financial market consultants) – Jacob Schmidt. ‘We have a five year lease on a small office of 550 square feet. We have been paying business rates of £4851 in 07/08 and £5082 in 08/09. this is a lot of money for a small company with no employees, one person using the office for work and meetings. From the government I hear again and again that it wants to help and support small businesses.