VAT Registration Threshold: SMEs

Lewis Cocking Excerpts

Tuesday 24th June 2025 Westminster Hall

[Lewis Cocking (Broxbourne) (Con)]

It is a pleasure to serve under your chairmanship, Mr Vickers. I congratulate my hon. Friend the Member for Mid Leicestershire (Mr Bedford) on securing this important debate. He is a passionate defender of small and medium-sized businesses in his constituency and across the country.

I meet small business owners in my constituency of Broxbourne almost every week, and every single one, from Carmela’s hairdressers in Cheshunt to the Smokeshed restaurant in Hoddesdon, has made it clear to me just how damaging Labour Government policies are towards small businesses. This Labour Government have put up the cost of growing a small business significantly, with the hike in employer’s national insurance making it more expensive for businesses to bring on and employ new people. Increasing the burden of regulation is also deterring employers from taking risks with who they employ. Both of those disastrous policies are leading to fewer people in work, taxes at the highest level on record and growth down. As I have said in this Chamber before, the drastic reduction in business rates relief is crippling for our retail, hospitality and leisure businesses, which are the anchor of so many of our town centres up and down our beautiful United Kingdom.

As we have heard this morning, what is also holding SMEs back is the current rules around VAT registration. When I go out and speak to businesses across my constituency of Broxbourne, whether I speak to them in business forums, through Love Hoddesdon, Love Cheshunt, Love Waltham Cross or the Stanstead Abbotts small business network group, they are all united in one thing and one single policy that they reckon is really holding them back: the VAT threshold. They all moan to me about it. They all say they need an easier solution. I have so many examples of businesses that I speak to that have said, “Lewis, it is not worth upscaling our business. It is not worth trying to do better, not worth taking on more business, not worth employing more people. It is not worth doing those things because, when we go just over the threshold, it takes our competitive edge away when we are trying to compete with people that are just below that threshold.” They have all come forward with a simple solution, which is that there should be a taper mechanism to build up to the 20%, rather than the cliff edge that we have now.

The situation is absolute nonsense. I have successful business owners in my constituency that go in day in, day out. As I have said in this Chamber before, I was told at the Dispatch box by a Government Minister that it is the Government that create economic growth. Well, it is not. They do not understand how business works in this country. Their whole philosophy around who creates economic growth is wrong. It is the millions of small business owners up and down the United Kingdom and all of the entrepreneurs that invest in their ideas that create economic growth. As I said, it cannot be right that I have examples in my constituency of people turning down work, not taking on more employees, and not creating the economic growth that we all want to see for this country because of measures like the VAT threshold.

We heard before the general election that this Government were going to be the most pro-business we had ever seen, but they have not come up with a single policy that has helped my business owners in Broxbourne. They all think that all this Government’s policies around businesses, including changing the threshold for business rates and not looking into the issue of VAT registration, are affecting how they do business across the country. That simply cannot be right—it is nonsense. We all want more jobs created and we all want our high streets to thrive.

Lots of business owners have lots of issues with what is going on in the economy right now, but this one single thing unites them. When I speak to them, they all raise this issue with me. They all want the Government to take it seriously and think up a solution. The Minister could go and speak to his officials at the Treasury and there could be a simple solution to this problem. That would create economic growth overnight. Businesses up and down the country would probably take on more employees and more business if this problem was solved. It is affecting lots of the people that I speak to in my constituency of Broxbourne.

Why on earth would someone come out of the education system, invest in their idea, take risks and set up a business in the United Kingdom right now? It is so heavily burdened with regulation. We need to unlock the aspiration of the next generation, and we can do that by solving simple things that business owners come to speak to us about. We need to make sure that the VAT threshold is no longer a cliff edge and bring in a taper mechanism.

I look forward to hearing what the Minister says in reply to this debate. I am hopeful that he will think long and hard about what he can do about this issue, because he has the tools at his disposal to solve it. I suspect that there will be lots of consensus among those of us speaking in this debate on the issue and on what we think the solution will be. I hope that the Minister is listening and will take note of all our comments when he winds up.

--- Later in debate ---

[James Murray]

I do not recall the hon. Gentleman ever opposing extra investment in the national health service during his interventions in the main Chamber, because, of course, the decisions that we took around employer’s national insurance contributions were taken to stabilise the public finances and put our public services back on their feet. We acknowledged at the Budget last year, when we took those difficult decisions, that they would have consequences. However, we also acknowledged that no responsible Government could have let things continue as they were, or taken what we inherited from the previous Government without putting public finances back on a firm footing.

That is exactly what we have done from our first day in office. Alongside that essential work to steady the public finances, we have been removing barriers to growth by overhauling the planning system, launching a new National Wealth Fund and reforming our pension system to unlock billions of pounds. At the spending review earlier this month, we saw the Chancellor marking a key step in our growth mission by allocating substantial new capital investment to ensure that growth is felt across the country.

That investment will be further bolstered in the coming months by other reforms, including the industrial strategy published yesterday, and the 10-year infrastructure strategy published last week. A rising economic tide lifts all boats, big and small, and this Government believe that that should be the most important priority for supporting small businesses.

[Lewis Cocking]

We have all mentioned a number of businesses that think this Labour Government are taking the wrong direction. Can the Minister list the businesses in his constituency that believe that this Labour Government are taking the right direction for business growth in this country? If he lists the businesses in his constituency, we will go and ask them.

[James Murray]

I would typically ask businesses’ permission before I named them in the House of Commons, but I can reassure hon. Members that in conversations with businesses in my constituency, or indeed across the country in my role as a Minister, they understand the difficult decisions we took to restore stability to the public finances and to the economy. That is not to pretend for a moment that those decisions were not difficult and do not come with consequences, but most businesses I speak to recognise our difficult inheritance from the previous Government, and the importance of restoring stability to the public finances as an essential prerequisite for investment and growth.

What is most important is working hand in hand with businesses—whether they are small businesses in our constituencies or large businesses that operate across the country—and putting through the reforms that we know are needed. That includes making sure that the planning system is reformed, that the National Wealth Fund supports their investment, and that we are investing across the country to ensure there are jobs and growth in every part of the UK. That is what we are focused on, working in partnership with businesses, because we know how important that is.