I have always addressed the position of business rates from one of fairness. A taxation policy must be fair and we all know rates for retail are not fair.
I have always addressed the position of business rates from one of fairness. A taxation policy must be fair and we all know rates for retail are not fair. A taxation policy must also ensure everyone bears their fair share and pays the correct amount. The postponement of the 2015 revaluations undermines those fundamental principles.
Yesterday’s Autumn Statement needs to be considered in the context of the postponement of the revaluations. The simple fact of the matter is that shops outside of London would pay £233m less in business rates taxation in 2015 and 2016 than they are doing today. That is the hidden cost from the announcement.
Superstores and hypermarkets would pay £1.26bn more. The Autumn Statement and the 2% cap means the same superstores and hypermarkets will save £15.5 million. Is that fair? Of course not.
The battle to reinstate the 2015 revaluations has been lost and is over. Whilst we have to move on, before we all get too carried away, it will remain to be seen what further damage may be done to retail and high streets across the country through this decision by pegging rateable values to artificially high rents which now bear no resemblance at all. Three years is a long time especially in retail.
The Conservatives announced a 2% cap and a further £1,000 discount for shops with a rateable value of up to £50,000. Some 454,000 out of 496,000 shops in England & Wales have a rateable value of less than £50,000. That means potentially 91.53% of all shops could receive the further discount or be entitled to extended small business rate relief.
That would in essence amount to a cut going way beyond the freeze called for by Retail Week and the Grimsey Review, that I worked on. A shop with a rateable value of £50,000.00 would pay £529 less in 2014/15 than they are doing this year and for a shop outside of London just over the small business rate relief threshold at £12,001 would pay £889 less in 2014/15 than they are doing this year.
That has to be good news.
The added surprise of the reoccupation relief naturally is going to be cheered from the rafters by me as it was a feature of The Grimsey review. This could really attract inward investment in some of the struggling towns.
Julian Dunkerton, chief executive of fashion brand Superdry said of business rates: “It is prohibitive in certain parts of the country where we would like to open and it means that our attentions will focus more on the international business,”. This new targeted relief lays down the gauntlet to Julian. Is it enough now to open more shops? The drawback for Julian is, of course, that the site has been empty for over one year but and that does raise the question, how will pro-active landlords be treated who have opened up their empty shops for social enterprises and pop ups on very short term lets. They should not be penalised. As with everything, the devil is in the detail.
The big carrot was the announcement for reform which everyone has called for and nobody was expecting. Labour shadow business secretary Chuka Umunna promised reform by Labour on the eve of their conference and now the Conservatives are similarly committed. But 2017 is a long way off and for the next three years we are still left with a system not fit for purpose. Further, after the General Election in 2015 will the political desire still be there?
A statutory obligation placed upon councils to spread the costs of rates from 10 to 12 months is good for very small shops because many local authorities turned a blind eye to the government’s requests. Whilst the commitment to clear 95% of appeals is also welcomed I cannot but help but feel nearly 2 years to do that with time freed up by the Valuation Office Agency through no revaluations is far too long still.
1990 was when the national business rates system was introduced and for the last consecutive 22 years business rates have been linked to RPI. George Osborne has to be commended for breaking with tradition.
The statement went further than expected. It covered most of what everyone wanted to see. That said having spent two long, hard years campaigning, living and breathing rates, my emotions are mixed - I’m delighted with the announcements but struggling still to accept that the battle to reinstate the revaluation is over and the principle of fairness still being undermined.
Paul Turner-Mitchell is a business rate expert and Rochdale retailer