The renewed focus on the inequities of the business rates system in recent days brings mixed emotions to those of us who have long called for reform.
Eye-wateringly high rates bills are the last things businesses need when they are already facing difficult economic circumstances.
Looking back over the past two weeks, what we have is a perfect storm created by businesses waking up to the impact of the April revaluation, visibility of some worrying changes to the appeals process, and local businesses lobbying their MPs.
‘‘Merely highlighting the ‘winners’ and ‘losers’ from the forthcoming revaluation misses the real point – there are no winners from a system that is fundamentally broken”
It has brought the spotlight firmly onto the problems of the business rates system.
Much of the recent narrative has taken a ‘divide and conquer’ approach to the need for reform.
Merely highlighting the ‘winners’ and ‘losers’ from the forthcoming revaluation misses the real point – there are no winners from a system that is fundamentally broken.
The debate has to transcend the isolated specifics of individual companies and address the system in its entirety, where online isn’t pitted against physical, and large isn’t pitted against small.
Only then can we aim to achieve fundamental reform that benefits the country as a whole.
The pushback from Government that nearly three-quarters of businesses will actually see no change, or even a fall, in their business rates overlooks the significance and real-world impact of the increase.
The other quarter of businesses face an increase of up to 42%, and that is after taking account of the upward cap available under the transitional relief scheme.
Disappointingly, the divisive framing of the debate where a spotlight is placed on limited targeted relief that benefits some but not all deflects the real need for reform.
Indeed, it only adds further complexity to an already wickedly complicated system and ultimately fails to deal with the underlying problem.
The fact remains that the burden of property taxation is simply too high. A system under which rates are the highest in the G7 and have risen from a third of rental value in 1990 to half today is not financially sustainable.
It is one from which no-one can emerge a ‘winner’.
Rich and poor divide
Interestingly, one of the pillars of the Government’s recently published Industrial Strategy Green Paper centres around driving growth across the whole of the UK.
Yet the divide between the most prosperous and more economically deprived areas continues to grow.
‘‘We face a system that is no longer fit for purpose and is at odds with Government’s commitment to a low-tax economy and one which works for everyone”
More businesses will decide to close in those less successful communities.
Put simply, we face a system that is no longer fit for purpose and is at odds with Government’s commitment to a low-tax economy and one which works for everyone.
There may be potential to develop a retail sector deal in co-ordination with the industrial strategy that helps to address this disconnect. It is certainly one to play for. But that will not have an impact in April when the revaluation kicks in.
So in the short term, the Government should commit to easing the burden across the board by bringing forward the switch from RPI indexation to CPI to allow rates to flex with the economic conditions and deliver on the commitment to increase the frequency of revaluations from five to every three years.
In addition, the Chancellor in his Budget should seize the opportunity to go further with the transitional relief scheme and implement the same protections for all those facing increases that were in place during the last revaluation in 2010.
Most significantly, now is the time to bite the bullet and for the Government to lay a path to a truly sustainable system.
In doing so it will give retailers the flexibility needed to invest and support the Government’s ambition for driving growth across the whole country.