Supporting Small Business — House of Commons, 2021-10-19
Topic: Domestic Commerce
Kevin Paul Hollinrake (Conservative, Centre-right): It is a pleasure to speak after the hon. Member for Sefton Central (Bill Esterson), and I agree with him that this conversation should be had with the engagement of business in order to find a solution. I have tried to do that over the last few years when we have debated this issue time and again. Of course, I have been in business for a number of years—three decades—and the No. 1 thing any business wants is a fair and level playing field on which to compete. That is not just good for businesses; it is also good for consumers. The best thing to drive down prices and drive up service is a healthy, competitive market—a free market. I draw the House’s attention to my entry in the Register of Members’ Financial Interests; our business did occupy a couple of hundred shops up and down the country There is no doubt that business rates were built for a completely different era. In this conversation, we talk about how business rates are actually making life difficult for some businesses, and that is true of course. They are additional costs that they could do without, but the No. 1 thing driving problems for businesses is consumer choice—the choice to shop online rather than to shop in the high street. Nevertheless, I think everyone in this Chamber wants to make sure the high street stays lively. Of course, it will change—its make-up will change—and we still want to see a high street at the end of it, but the problem is driven principally by consumer choices. As I say, the business rates system was built for a completely different era, when pretty much every part of commerce and trade was done from a premises The other thing to say is that in the whole discussion of business rates reform, we talk a lot about retail, and of course retail is particularly hard hit by some of the changes to consumer demand, but this is not just about retail. It is also about the competition of restaurants and takeaways—often with the dark kitchens of Deliveroo which, again, have a different business make-up—and a different proportion of turnover that is basically driven by business rates. It is the same in my own business, the estate agents and lettings business, where we increasingly have competition trading online, and in plenty of other sectors, not least the travel sector, so we cannot look at this issue purely in the context of retail I welcome the fact that the Opposition have brought forward this debate and have made some suggestions about how we reform, because we need to look at some suggestions. The Treasury has of course suggested in its consultation a couple of things we would look at—a land value tax, which it pretty much discounts, and VAT, which I will talk about shortly—but it seems to centre around an online sales tax. That would be problematic, further complicating what is an already very complex tax system. An online sales tax is also a crude measure, because on the face of it, it will not have input and output, which VAT does, dealing with different profitability margins that businesses operate on, so I am not sure it could even work. We already have a sales tax in this country, VAT, and it would be far simpler to use VAT as the mechanism The Opposition suggest lifting the threshold for paying business rates for a temporary period and then increasing digital services tax sixfold. That can only be a very temporary solution, because digital services tax has to be eradicated when we introduce the multinational agreement on corporation tax. Also, when this Government brought in the digital services tax to try to level the playing field, Amazon added it straight on to prices for consumers. Those on the shadow Front Bench might know that, because of the way the digital services tax had to be drafted, it does not even apply to Amazon’s direct sales; it applies only to marketplace activity, or third-party sellers. So the Opposition proposal does not even hit Amazon’s direct sales by using a digital services tax. For all those reasons I think that is therefore the wrong thing to do It is right to look at this issue completely freshly again, but I do not think property taxes are a solution for replacing the £30 billion of revenue. I thought my hon. Friend the Member for Bexhill and Battle (Huw Merriman) was very clear in his comments, although others might not agree that he was clear. The simple way to deal with this issue is to add about 3p to VAT, increasing it from 20p to 23p. That would, on the face of it, increase the take from VAT to about £20 billion a year, which gets us quite a long way towards replacing business rates revenue; and it is also simple for retailers. John Lewis has three sales channels: not just high street and online, but click and collect as well. With an online sales tax, John Lewis and everybody else would have to decide how a product is sold and apply online sales tax just to those sold online or by click and collect, depending on how we draft the legislation. That would be hugely complex, whereas VAT is brutally simple: everybody pays the same rates; everybody is on a fair and level playing field; it is simple and quick—although I accept that none of this conversation is easy, as simple and easy are two different things The final area we should look at in this conversation is far more controversial: the VAT threshold. Businesses currently do not have to register for VAT until their taxable turnover reaches £85,000. We should look at reducing that significantly. In Germany the threshold is £20,000. The £85,000 threshold is a real disincentive for businesses to grow. Lots of businesses stay under the threshold as they do not want to register for VAT because of the costs to the business. That distorts the marketplace. We should have a full review of how VAT operates in terms of its level and replacing business rates with it, and look at the threshold, because that would overnight take away one of the major blockages to productivity in our economy—it stops businesses recruiting extra people, taking on extra premises and opening longer. Indeed, many businesses close for a portion of the year to try to stay under the threshold This fair and level playing field needs to be in place right across the economy. Keep it simple, keep it stable; that is what businesses want. I hope the Minister on duty and Treasury Ministers look at this and take a broader view of how we get our businesses taxes right.