Amendment of the Law

Guto Bebb Excerpts

Monday 28th March 2011 Commons Chamber

[Guto Bebb (Aberconwy) (Con)]

It is a privilege to speak in this Budget debate. First, I should like to touch on some of the comments that have been made so far, especially the opening comments of the Secretary of State for Communities and Local Government, who stated categorically that English council tax payers were enjoying a council tax freeze. Unfortunately, that is not the position in Wales where the Labour-Plaid Cymru Assembly Government have decided not to ask the local authorities in Wales to play a part in the sacrifices being asked of the population of Wales, and as a result people in constituencies such as mine are facing council tax increases this year.

It has been said that the council tax saving is nothing compared with the cost to individuals of the increase in VAT. I was in a public meeting in Penrhyn bay in my constituency on Friday night where a large proportion of the population are pensioners. Often, pensioners’ biggest expenditure will be on food, heating and council tax, and there has been no effect on their food budget from the VAT rise because food is zero-rated. In the same way, there has been no increase in the cost of heating, because VAT on household fuel is remaining at 5%. But, under a council that is operated in Wales by the Labour party, we have had an increase in council tax, and it is fair to make that point.

We hear a lot from the Assembly Government about the fact that Wales is treated very badly by the coalition Government in Westminster. That is not the case. In a fiscally neutral Budget, the consequentials through the Barnett formula for the Welsh Assembly was £65 million. Over the weekend I took part in a number of television and radio programmes. Not once did I hear a single member of the Labour party or Plaid Cymru say a word of thanks for the fact that Wales is benefiting to the tune of £65 million as a result of the changes announced in the Budget.

The main feature of the Budget is that it is a Budget for growth. The proof of the pudding is in the attitude of small businesses to the Budget. I was delighted—elated even—on Friday morning to go into my office and receive an e-mail from a business in my constituency in the town of Llanrwst. That business man had been communicating with me regularly since Christmas, asking, “When will this Government show their commitment to small businesses?” He wrote to me on Friday morning, stating that he now felt confident that the Government would stick to their promises to support enterprise. As a result of the Budget, he had undertaken to invest £160,000 in his business and to give his staff a pay increase for the first time in three years, because he felt confident enough to make such a decision.

In a constituency such as mine, where 70% of employment is in the public sector—a statistic that would have embarrassed the East German Government in 1989—and there remains such dependence on the public sector, it is imperative that we get the private sector moving. In a Welsh context, the private sector means small businesses. I welcome the fact that we are reducing the corporation tax rate in the Budget. I also welcome the fact that the small companies corporation tax is going down from 21% to 20%, but in my constituency the vast majority of small businesses are owned and operated by sole traders and in partnerships. The fact that we are increasing the personal allowances makes a real difference to such businesses. It means that they can retain and reinvest more of their profits.

I am delighted with the announcements made in the Budget, but we can go further. By that I mean that we need to look at the burden of regulation on small businesses. For example, the Food Standards Agency is looking to increase dramatically the costs on small abattoirs throughout the United Kingdom in relation to food hygiene rules. It is moving towards full cost recovery from abattoirs. That sounds technical, but in a Welsh context that means an increase in cost to small abattoirs in the region of £4.3 million at a time when they are struggling to survive. These regulations cost money for small businesses. Although the fact that we are getting to grips with regulation is welcome, we must go further and faster. I see no reason why profitable businesses in my constituency should be under threat as a result of regulations and the cost of regulation.

We want small businesses to grow in constituencies such as mine. By “small” I mean micro-businesses. One of the issues that we still need to deal with is VAT. I notice from the Red Book that we are increasing the threshold for registration from £70,000 to £73,000, and again, I am delighted that that change is happening, but we need to get to grips with the fact that VAT can be such a throttle on the growth of small businesses. Small start-up businesses reach a turnover threshold of about £68,000 or £70,000, and then those business people have to ask themselves, “Do I grow and, as a result, probably see my profits reduced, or do I decide to stay put?”

When one goes into Llandudno in my constituency and sees cafés and bed-and-breakfast businesses closed for winter, that is not because those people are lazy. They work extremely hard, but because of the VAT threshold, they make a conscious decision to close their businesses over winter, not to grow their businesses. Surely any tax threshold which has that impact on entrepreneurship and on the need to grow must be changed.