Contribution
Diolch, Madam Deputy Speaker. I begin by thanking the hon. Member for Newport West and Islwyn (Ruth Jones) for opening the debate, and indeed for her work as the chair of the Welsh Affairs Committee. As she mentioned in her speech, we work as a team for Wales on the Committee, and it is good that we have this opportunity today not only to speak about the work of the Committee, but to talk to the wider House about the wonders of Wales and how great St David’s day is.
St David is famous for having said that we should do the little things, and it is in that spirit that I will dedicate my speech to small businesses, which, as is the case across Wales, forms the backbone of our economy. In my constituency of Ceredigion Preseli, as much as 81% of businesses are classified as small, making it the small business capital of Wales—an accolade that we are very proud to hold. Thirty-five per cent of those businesses are in the agricultural, fisheries and forestry sectors, and some 15% are in hospitality and tourism.
Although the winter months are always quite difficult for those industries, in recent weeks I have had a chance to meet a number of small business groups from Aberystwyth in the north of my constituency to Fishguard and Goodwick in the south. Unfortunately, they have all told a tale of the difficulties and challenges they face as small employers. I want to draw the House’s attention to the cumulative pressures that are having a severe impact on their ability to trade and to continue in business.
Businesses cited the impact of rising energy costs, higher employment costs and the burden of increased business rates. That is not a problem that is unique to Ceredigion Preseli, with the Federation of Small Businesses having found that to be equally true across the whole UK. Indeed, according to recent FSB research, from April this year the typical high street business will face an estimated £25,000 in extra unemployment costs and £1,600 in higher energy standing charges. We all agree that that sort of incessant rise in costs for small businesses is simply unsustainable. Unfortunately, too many are now citing that the pressures have become so acute that 35% have said that they are planning to close or contract over the coming year. That would be devastating for economies across the United Kingdom, but specifically so in the small business capital of Wales that is Ceredigion Preseli.
In the spirit of doing the small things and in advance of the spring statement next week, I draw the attention of the House to some measures that those businesses have suggested the Government could take to help them build a firmer and more prosperous future. On energy costs, businesses with an annual electricity consumption of around 40,000 kWh, which is a typical small restaurant, gym or café, are currently looking at a potential rise in their standing charge of some 40%. One proposal that the Government could entertain is to mirror the support that they are offering on household bills—the 75% reduction in renewable obligation costs—to non-domestic bills. That would offer much-needed support to many of the businesses in Ceredigion Preseli.
Another point that they wanted me to raise was the rising pressure of employment costs. Between January of last year and April this year, an employer with nine people on the national living wage will see their annual employment costs increase by an equivalent of 12.9% and the employer national insurance bill over that two-year period would have increased by 46%. One proposal these businesses have suggested that the Government could entertain next week is to uprate the employment allowance, so that it continues to cover the employer national insurance contributions of four employees on the national living wage. That would offer great support to the businesses I have spoken to in Ceredigion Preseli.
The final thing is business rates, and colleagues from across the House will have had a lot of concerns on this appear in their postbags and inboxes in recent weeks. It is for the Welsh Senedd and Welsh Government to look at the reliefs and how they offer additional support to small businesses. The one thing it would be worth this House and Government considering is the way in which the valuation process operates. One common concern is that the process lacks transparency and clarity as to how valuations are calculated. Some businesses in hospitality and trade, for example, cite that their rates are primarily driven by turnover as opposed to profitability, whereas in retail it is primarily fixed on the square meterage of their shops. This inconsistency is troubling, and the lack of clarity of how the Valuation Office Agency, as it was, has come to make the calculation is causing a significant degree of concern.
I turn to the measures that could help businesses in the tourism and hospitality industries. The VAT rate, currently set at 20%, has long been a concern for these businesses. Again, they would be grateful if the Government could look again at the rate. Decreasing it to 15% would offer them much-needed breathing space to withstand some of these increased pressures and costs, but also the opportunity to invest in their businesses and their staff—something we all want to see if we are to bring about economic growth across the land. Indeed, other countries have shown that a reduction in the rate of VAT for tourism and hospitality can bring significant benefits.
I also want to raise the removal of the automatic 10% “wear and tear” tax allowance for childminders, which will come into force from April. Childminders in my constituency have long used this provision to meet the costs of the inevitable damage, and maintenance costs, that arise from hosting their businesses in their homes. They have told me that the move to this new system is forcing them to reconsider their ability to continue in this critical sector. If the Government could look again at that, I know that a lot of childminders in my constituency would be grateful.