Business rates are becoming an attack on social mobility, says Simon Danczuk

Simon Danczuk MP

As an MP you spend a good deal of your time listening to people’s problems. Some of these relate purely to an individual’s circumstances. But there are others that point to a bigger problem and one of these concerns my constituent Ian and his battle with business rates.

Ian lives on the Falinge Estate in Rochdale, a place that’s achieved notoriety for having the highest number of benefit claimants in the country. Like others there, Ian was unemployed too. But he was determined not to stay that way, and he wasn’t keen on standing in the dole queue. Even if he couldn’t find a job he was going to make sure he got back into work. So he cashed in his pension and decided to set up his own fish and chip shop. He learned the ropes working for free in another fish and chip shop and then set up his business a stone’s throw away from my constituency office in the town centre.

I used to pop in now and again and was always struck by his cheerful attitude. He’d be whistling a tune and was always hard at work, but he’d stop and have a quick chat. Building a business is tough, but he was making a good fist of it and there were always plenty of customers in there. In his first year he won an award at the town’s annual business awards. He’d told me how he’d been unemployed before this venture and I was inspired by his determination to turn his situation around.

Then one day he came to see me to talk about business rates. They were crippling him. He was paying nearly £2,000 a month in rates and this was double his rent. The rateable value of his property no longer had any relationship with the passing rent. It was one of the worst cases I’d seen of how business rates had long ceased to be fair. It was clear he was being over-taxed and it was business rates that eventually forced him to close.

Since the shop closed, the landlord has knocked another £4,000 off the rent. He’s virtually giving it away. But it still stands empty because of the prohibitive and unfair business rates bill. Business rates experts who’ve viewed the property estimate that if the Government hadn’t postponed a business rates revaluation this year, then the rates bill would have been cut by at least £13,000. For a small business that’s a lot of money.

Unfortunately, Ian’s story is not an isolated case. There are plenty more hard working small businesses closing down every week. The fact that there are over 40,000 empty shops on our streets is proof of that. But, while the plight of small businesses in recent years has been well documented, the role that business rates played in their demise has not been told.

When businesses all over the country are shouting about the damage business rates are causing, it’s time ministers started listening. Unfortunately, their concerns continue to fall on deaf ears. Last year, the Government increased business rates by the biggest rise in 20-years. And during this Parliament, it is projected another £6.5billion will be added on to the business rates bill.

This will have consequences for business and it is holding the spirit of enterprise back.

At a time when politicians everywhere are wringing their hands about a decline in social mobility, we only need to look at the high street to see a great example where opportunities are being removed for would-be entrepreneurs to make something of themselves.

There are countless examples of working class people climbing a ladder of opportunity through high street businesses that have gone on to become international success stories. Roger Wade started out as a market trader before going on to found the Boxfresh fashion label and then launch Boxpark in the heart of East London.

He says business rates act as a barrier to enterprise and wants the Government to help small independent shops by giving them rate relief for three months to help encourage them to take on empty space.

Ministers should listen to him. He’s right to say measures like this are needed. When I speak to young people at our local college they’re full of great ideas and brimming with entrepreneurial flair. Would they consider setting up a business in our town centre, I ask? The cost base is too high, they respond. “Business rates are extortionate.”

The message is slowly getting through to entrepreneurs that business rates are making high street ventures no longer viable – and this ever-increasing overhead is preventing people from taking risks. Unfortunately, the message hasn’t yet got through to Government.

If they want to encourage the next generation of entrepreneurs, whether they be Ian the chip shop owner or the next William Morrison then they need a tax system that’s fair and has public confidence. At the moment this isn’t the case and social mobility will suffer as a result.

Simon Danczuk MP