The Chancellor George Osborne seems to have ignored calls for a temporary freeze on business rates in this year’s Budget.
Ratepayers are therefore faced with a further rise of 2.6% in their business rates bills this March – which is an additional £150m cost for the retail sector alone – on top of the 5.6% increase last year.
Retailers have a right to feel disappointed as the rates system is out of sync with the fall in rental values since the introduction of the 2010 Ratings List and the appeals system is cumbersome and bureaucratic.
However as business rates generate approximately £25bn of dependable, secure income for the Treasury it would take a very generous Chancellor to give anything away – especially in light of the recent changes to empty property rates legislation and the extension of small business rates relief in last year’s Budget.
Yet it is ironic for a Government so committed to creating new jobs that more was not done to support the retail sector which is responsible for creating thousands of new jobs, and has the potential to create many more by attracting new international retail businesses to invest here. Action on business rates would have supported retailers in our beleaguered high streets and helped attract more international investment.
With no significant announcements in the Budget, thoughts naturally turn to how to improve the existing rating system.
More than any sector, retailers appreciate the need for real-time pricing. Retail businesses struggle to understand why business rates are based on estimated rental values in 2008 when rents have fallen by over 20%, according to the latest EGi research, and retailers will continue to pay on this basis until 2017 given the deferral of the 2015 Revaluation.
CVS has long campaigned for improvements to the rates appeals process as a way of helping firms pay the right amount in rates bills and ensure any overpayment is refunded quickly.
In the short term, tackling the 240,000-plus backlogged rates appeals by increasing the resources available at the Valuation Office Agency (VOA) would be a positive step. Proactively streamlining the negotiation process and reducing the bureaucracy and paperwork in the system would also help both the applicant and the VOA. Significantly these initiatives would not require any changes in policy.
Last week, the industry was tempted with a possible review of business rates by Vince Cable. With no helpful announcements in today’s Budget, retailers should apply pressure to ensure the Business Secretary follows up. Large and small retail firms deserve it.
- Don Baker is Chairman of Rating at CVS, the business rates specialist.