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High Street Businesses: Government Support

I agree that such a VAT cut would help, because it is not just business rates that small businesses on high streets are facing. On top of business rate increases and the burden of value-added tax, they are also paying for increased labour and payroll costs, including the higher national living wage and increased employer national insurance contributions. Some of those measures are understandable, and they will of course be welcomed by some, but the story I hear from my high street businesses is that the cumulative impact of all these things in a small space of time is creating challenges. Many businesses are also still servicing debts from the covid-19 pandemic, such as repaying bounce back loans, which further restricts their finances to ride out the current challenges or invest in the future.

Electricity, wage costs, business rates and general taxation are adding up to a perfect storm when combined with ongoing cost of living pressures for consumers, which affect demand. Constrained finances in high street businesses have a knock-on effect on their capacity, meaning that owners are particularly reluctant to hire entry-level or younger workers. That is exacerbated by the recent compression of the wage floor with changes to national insurance contributions and the national living wage.

While recognising the benefits of such changes for workers, businesses raised concerns in Alan Milburn’s interim report, “Young people and work”, saying that these pressures make them consider reducing staffing altogether, or hiring fewer, more experienced workers. This affects the flexibility of the businesses to staff correctly against fluctuating footfall, and reduces opportunities for entry-level workers. Labour is effectively one of the few remaining adjustable cost bases within owners’ control, and it is suffering accordingly.

High street retailers continue to adjust to the changing nature of consumer behaviour, such as online competition and destination shopping. There is a lack of consistent support available to high street businesses at a local level to support retailers through these challenges, and I will come on to say a little bit more about that.

The second key theme is transport and access, which is a key challenge as a result of population growth and central Government housing targets. A growing amount of car traffic, competing for a constrained amount of car parking in town centres, creates real challenges, particularly in older towns such as Wallingford. That is why the reality is that more must be done to help those who can, and would like to, walk and cycle by providing them with safer and better options for doing so. For example, cycle parking can reassure them that their bicycle will be safe.

At this point, I should say that when we get into a debate about transport, it is often presented as an either/or between cars and public transport, walking and cycling. However, those things are not mutually exclusive. The Netherlands does not just have a globally leading cycling infrastructure and culture; it has the most comprehensive motorway in Europe, as well as a fully electrified mainline railway network. Public transport, walking and cycling are complementary to cars—we need both. Even small increases in the use rates of public transport, walking and cycling can help to ease congestion and free up parking spaces for those who need them.

Investment in roads, pavements and general town centre infrastructure is also a concern. Poorly maintained pavements can be a barrier for older residents and those with mobility issues, increasing the risk of falls and discouraging visits to the town centre. Improving accessibility would help to attract more visitors and support local businesses.

The third theme is local government funding pressures. Of course, many small businesses in my constituency, entirely understandably, look to local councils to help them with their high street and business challenges. I want to explain why local councils are too affected by central Government policy and face reduced budgets amidst growing costs.

With their origins in European Union funding streams, South Oxfordshire and Vale of White Horse district councils have, until now, benefited from allocations from two funds: the UK shared prosperity fund and the rural England prosperity fund. Between them, those funding streams have supported more than 130 local projects across the councils so far. Projects were hugely varied, but they included grants to support businesses and community groups with a transition to more efficient and affordable energy use—pubs and cafés, for example. They also included providing capital investment into equipment that supports productivity gains, funding a huge range of business and skills support programmes, often targeting those most at need; developing a visitor economy support programme to support our market towns; and making several small-scale improvements to the public realm across the two districts.

Unfortunately, this Labour Government have decided to scrap those funds, and their replacements, Pride in Place and the local growth fund, are principally targeted at city regions and areas of high deprivation. The impact of the abolition of the two funds is not trivial. In 2025-26, the allocations from the two funds across the Vale of White Horse and South Oxfordshire districts were £1 million; in 2024-25, the total was £2.4 million. At the same time, changes to local government funding formulae mean that Oxfordshire county council will lose £24 million in funding over the next three years.

Those changes affect all three councils’ abilities to invest in high streets and support local businesses. They also make it harder for them to explore new ideas, such the ones requested by the town councils of the three towns I mentioned: grants to town and parish councils to invest in civic pride, such as floral planting, hanging baskets, more street cleaning and more ways to promote local shopping; or funding to employ town centre managers to link the town council with retail centres and independent traders.

I want to set out my key asks of central Government. Once again, the Government need to go much further in reforming business rates—a form of taxation that bears little resemblance to a business’s earnings. Does the Minister recognise that evidence submitted to Alan Milburn’s interim report into young people not in education, employment or training identified labour costs as a key concern? The Government, to their credit, have announced serious intentions in relation to energy prices, but what should be done in the meantime, particularly with no sign—very sadly—of war in the middle east abating?

Once again, will the Minister heed Liberal Democrat calls for a 5% cut to VAT for hospitality? Does he agree that taxation arrangements need modernisation, given the rising threat to physical businesses posed by online retail? Given rising demand and the same amount of space for car parking, do the Government agree that greater investment in public transport and walking and cycling infrastructure is needed to make it easier for people who need to drive to have the road space and car parking to do so?

What fresh, new ideas do the Government have to help our high streets? I have a few examples to consider. National “buy local” schemes would incentivise and reward people for spending their money locally. A “high streets back home” scheme would give people a clear route to invest in their own community, whether by restoring heritage building, supporting local enterprise or helping to secure community assets. The Government could give councils the power to designate independent shop zones, protecting and championing small locally owned businesses against the tide of chains and empty units.

Does the Minister accept that, for councils not benefiting from Pride in Place funding, including in Oxfordshire, the end of the UK shared prosperity and rural England prosperity funds constitute a cut to local government funding? That undermines their ability to invest in staff and initiatives to help small businesses improve town centres, and to award grants to businesses and community organisations to help them reduce their energy bills or upgrade their equipment. Our high streets and local businesses are critical to the successes of our towns and surrounding communities, and I call on the Government to give them the support that they deserve.

3.13 pm