For the second time in three days, the Government has put a rates-shaped hole in retailers’ hopes that the business climate might be getting that little bit easier.

For the second time in three days, the Government has put a rates-shaped hole in retailers’ hopes that the business climate might be getting that little bit easier.

Firstly, on Tuesday, it was revealed that business rates are set to rise by 2.6% in April 2013, although the British Retail Consortium and Retail Week are still campaigning for a freeze.

And then, today, it was announced that the planned business rates revaluation in 2015 will now be delayed until 2017. These decisions are a real kick in the teeth for the retail sector and show a clear ‘two fingers’ to the signatories of Monday’s letter to the Financial Times calling for rates help for retailers.

The main effect of the cancellation of the revaluation is to condemn retailers to a further two years of excessive rates charges. Business rates are currently based on rental values in April 2008, a time which was pretty much the peak of the market. In today’s very different economic climate, with rental values in the majority of locations much lower than five years ago, retailers find themselves paying the business rates of a boom during the trading conditions of a bust.

The 2015 revaluation offered retailers the hope that business rates would come back down to levels more realistic and consistent with changed trading conditions. By postponing the revaluation for two years, the Government has moved that respite further away, a move that will undoubtedly contribute to retailer failures in the coming years.

The Government has, of course, dressed this move up as a positive for business across the country. Retailers will, apparently, benefit from the extra tax stability this postponement affords, removing uncertainty and allowing them to plan for the future and grow accordingly. In reality, businesses would far prefer the prospect of lower bills even if they could not predict the precise amount; to claim otherwise, as the Government has done, is a cynical attempt to spin a tax-protection scheme as one that benefits enterprise.

So what should the Government be doing instead if it wants to address the business rates issue being faced by retailers? Rather than postpone the valuation as it has done, it should in fact bring it forward to help lower the business rates burden sooner than initially planned. Rates, set at 2008 levels, are artificially high and are set to go even higher – rising to 47 pence in the pound after the 2.6% increase next April. This makes it the highest rate of corporate tax in the UK, patently unsustainable, and urgent action needs to be taken to reduce it to a manageable level.

Its second move should be to abandon the link between business rates and the Retail Price Index (RPI). For years, the RPI has been higher of the two inflation measures used, and it is notable that the Government has linked expenditure items such as benefits and state pensions to the lower Consumer Price Index (CPI).

Retail is a sector that, given the right conditions, can contribute greatly to the economic growth that the UK badly needs. It’s about time that the Government recognised this fact and gave the sector some support rather than pulling the mat from under its feet.

Jerry Schurder is head of rating at property consultancy Gerald Eve.

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