Shop vacancy rates have increased for the first time in almost two years, but Government must stop treating the high street as a cash cow.

Shop vacancy rates have increased for the first time in almost two years.

Moira Stewart told us on behalf of HM Revenue Customs that “tax doesn’t have to be taxing”. Well business rates are just that.

This year’s Annual Report of the Valuation Office Agency stated that only 38% of business rate payers found the way the values of properties easy to understand and, further, only 45% of business rate payers found the appeals process easy to understand. Therein lies a major problem.

We could look at abolishing the current rating system and replacing it by other forms of taxation.

But what would be the point in replacing one system with another with the end result being exactly the same? It would be like rearranging deckchairs on the Titanic.

“Rates can be 40% of your turnover, it can be crazy the amount you have to pay”

Stephen Marks, French Connection

The issue here is the £27bn raised from business rates and the fact that the figure is heading to the dizzy heights of £30bn by April 2017.

Stephen Marks of French Connection has lambasted the business rates system as “absurd” arguing that shop rent rates are damaging Britain’s high streets.

Marks argues “Rates can be 40% of your turnover, it can be crazy the amount you have to pay.”

Julian Dunkerton, founder of fashion retailer Supergroup, echoes those sentiments adding “where a town has struggled, the rents have come down but the rates have not”.

More worryingly, the SuperGroup boss has warned that business rates mean opening stores in certain parts of the county had become unviable. Both are, of course, right.

Cash cow

The high street and our town centres have been treated as a cash cow for far too long by successive governments.

Bricks-and-mortar retailers account for approximately 23.34% of the total business rate yield. But it is clear that any taxation system has to be both fair and transparent with the burden equally borne irrespective of sector.

Tata Steel, one of the largest companies investing in the UK, has similarly called for reform of Britain’s business rates saying they are deterring investment and undermining efforts to rebalance the economy towards manufacturing.

General Motors’ British chairman Tim Tozer reaffirms Tata’s position: “The current business rates system is fundamentally flawed and works against manufacturing.”

The crux of the argument by Marks, Dunkerton, Tozer et al stems not only from the five-year cycle of revaluations of business premises but the subsequent effects of extending that period from five to seven years with the next revaluation not coming into force until April 2017.

The cries of for business rate reform are loud and clear from retail to manufacturing from business right through to the organisations that represent their interests. Those cries are certainly being heard at the doors of Westminster.

State of disrepair

Whilst the current system is not broken, undoubtedly, it is in a state of disrepair.

It has fallen into disrepair through, in the main, by political interference over the years – from the 20% cut to the budget of the Valuation Office Agency as a result of the 2010 spending review to the postponement of the revaluation in 2015 to the introduction of transitional relief.

The list goes on and on. However, I am confident that the system can be repaired to make it far more responsive, fairer and fit for purpose once again.

But that is just the first component – the system.

The second component is the amount the actual systems collects for local authorities and the Treasury.

With budget constraints and deficits, we need to be more creative at the way we look at taxation. I am left in no doubt that business rates need to be looked at more holistically within the overall context of the economy and other taxes but not simply as a guaranteed revenue stream.

We need to fully understand the impact of business rates on the business decision-making processes not just for retail but as a whole.

Could lower business rates act as a catalyst to drive economic growth and create additional employment? Would those additional taxes compensate for any loss in revenue for business rates?

They are the conversations that must now be had with the likes of Marks, Dunkerton and Tozer.

  • Paul Turner Mitchell, business rates campaigner