Published:

59 comments

PATEL Priti headshot

The voice of small business looks set to be at the centre of the policy agenda as we edge closer to the general election. Having grown up in a family small business environment and experienced the long hours, the bureaucracy, the cash flow problems and the impact of small business crime as well as ever-rising rents and rates, I welcome this long overdue attention being given to the country’s small and medium-sized enterprises (SMEs), and to the impact of business rates.

The only political leader ever to have understood small business was Margaret Thatcher, and she led the revolution that transformed the UK small business environment. She understood the value of small businesses both to our wider economy, and also for the empowerment that running a small business brought to those who took the risk to start one up.

Around 99 per cent of the country’s five million firms are SMEs employing less than 250 people, and 96 per cent are micro-businesses with fewer than ten employees. Throughout our high streets, villages and industrial estates, these firms form the backbone of our economy. Their total turnover is around £1.5 trillion, which almost matches the turnover of large enterprises with more than 250 employees. Small businesses that employ fewer than 50 people provide the Treasury with an estimated £45 billion through PAYE (income tax and employee and employer national insurance contributions), and more than £11 billion in corporation tax.

The employment and wealth they create are often the lifeblood for many communities. Two-in-three jobs are based in SMEs, and in some places the numbers are much higher. SMEs in my own constituency account for over 80 per cent of local jobs, and at a Jobs and Apprenticeship Fair I held this Friday in Witham I was heartened to see so many local firms looking to recruit. They were committed to giving unemployed people a chance to gain skills and employment, and should be applauded for their willingness to do so.

SMEs matter to our economy, and as Conservatives we should be proud of our strong record in Government supporting them. We scrapped Labour’s plans to increase the small profit rate of corporation tax to 22 per cent and instead lowered it to 20 per cent in the June 2010 Emergency Budget. Cuts to National Insurance were brought in. Labour’s plans to tax phone lines were abolished. Exemptions from new regulations were granted and red tape is being rolled back. Fuel duty has gone down, in contrast to Labour’s plans to steeply increase it. SMEs are also being supported in their efforts to increase exports and reforms have been made to help SMEs win more public contracts.

All these measures are helping SMEs and private sector growth. But barriers to business remain in place that prevent job and wealth creation.

Business rates continue to hit SMEs hard and need reforming. According to research from the Local Data Company, around one in seven commercial premises are vacant on our high streets. With the costs of rates being higher than rents in some areas, entrepreneurs are reluctant to take the risk of setting up a shop in these premises. Other established firms are feeling the squeeze from this tax while not enough local authorities are using the new powers they have to lower these rates.

Labour’s offer of a limited freeze on rates, paid for by higher taxes on larger firms, is fundamentally flawed and little more than a gimmick. Taxing larger firms more will have a detrimental impact further down the supply chain, which will harm SMEs. Their proposed temporary freeze also fails to address underlying problems with the current business rate system. The Conservative Party should be prepared to take on Labour’s flawed thinking, and outline and alternative and more sustainable vision for business rates.

Primarily, as Conservatives, we should consider proposals to lower the burden of this tax. The British Property Federation has reported that the UK raises far more in business rates than our European competitors. In the UK business rates raise the equivalent of around two per cent of GDP, compared to taxes on non-domestic properties in France raising the equivalent of 0.5% GDP and in Germany 0.3% of GDP. Just as we are lowering corporation tax rates to be among the lowest in the G20, we should strive to have the most competitive property taxes too.

A number of suggestions have been put forward to reform business rates to reduce their burden, and particular consideration should be given to the recommendations produced by Bill Grimsey, the former Iceland and Wickes Chief Executive, in his recent independent Review into the High Street. This review has proposed bringing forward the next revaluation to 2015 to align rates with property values along with annual revaluations from 2017. The review also proposed that future increases should be based on an annualised inflation measure of CPI, that property taxation be reduced as the fiscal situation allows, and for businesses utilising a commercial property vacant in a town centre for more than a year to receive 50 per cent rate relief. A petition has been launched to encourage public support for these proposals.

In my capacity as Chair of the All Party Parliamentary Small Shops’ Group I am also seeking to hold a cross-party debate in the House of Common to discuss in more detail the options for business rates reform and to press the Government for action.

Nevertheless, business rates are just one aspect of business policy where the Conservatives must be on the side of the hard-working majority. There are other components to business policy which require addressing, including, the need to make further cuts to the costs of red tape and reforms to the planning system. But as a strong starting point, I know that a new wave of policies to liberate the businesses from the burdens of business rates can only be good for Britain, the economy and for the Conservative Party.

The 30 years my family spent as small businesses owners running a range of businesses from newsagents and Post Offices to convenience stores were only possible because of the policies set out by successive Conservative Governments. British SMEs have already shown how they can boost jobs and growth in economy and by reducing the burden of business rates another Conservative Government will help these and the next generation of firms unleash their full economic potential.

59 comments for: Priti Patel MP: We must rediscover Thatcher’s understanding of small business

Leave a Reply

You must be logged in to post a comment.