A vibrant retail sector is essential in order to ensure the success of the Government’s initiative to create regional powerhouses.
Whenever I speak with retailers it’s not long before the conversation turns to business rates.
Our unrivalled position as Britain’s largest shopping centre operator, with more than 400m annual customer visits and a retail spend of over £5.5bn, means people are keen to hear the Intu view.
For me, two issues really stand out in the business rates debate: the first is the relationship between rates and corporation tax; the second is their potential impact on the recently announced regional devolution.
While welcoming the Treasury review earlier this year, in our submission we highlighted what I refer to as ”the tale of two taxes”.
I compared the downward move in corporation tax with the contrasting story of business rates.
Since 1990, economic policy has successfully reduced corporation tax from 34% to an internationally competitive level of 20% with further reductions to 18% announced in July.
By contrast, the business rates multiplier – applied to a property’s rateable value – has risen over the same period from 35p in the pound to what we regard as an unsustainable 49p.
What’s more, unlike corporation tax, business rates don’t respond to changes in economic conditions.
Current levels are based on peak property values of 2008 and have merrily grown off that base indexed by inflation – and at the higher Retail Price Index, not the lower Consumer Price Index.
OECD data clearly shows that property taxes in the UK are materially higher than in other leading economies.
The regions outside London, where recovery from recession has taken longer, have particularly suffered. This is where the link with devolution comes in.
The Chancellor has announced the wholesale transfer of business rates receipts to local authorities in line with his desire to devolve decision-making to ‘regional powerhouses’.
“We are concerned that the Government appears to be rushing ahead with the devolution of business rates before the findings of its own consultation have been published”
David Fischel, Intu
We are in favour of regional devolution. However, we are concerned that the Government appears to be rushing ahead with the devolution of business rates before the findings of its own consultation have been published.
And the postponement in the business rates revaluation to 2017 means we don’t even know the multiplier or the transitional relief rules which will apply post-2017.
The creaky system that is the business rates regime is a poor foundation for the regional devolution initiative.
Retail is part of the fabric of our towns and cities. It is a major economic driver and our 18 major Intu centres are significant employers in many of the regions where we operate.
In my view, a vibrant retail sector is essential to make the regional powerhouses a success. However, there is a real danger that they are being set up to fail.
The 2017 revaluation seems destined to demonstrate that the business rates system is not fit for its proposed extended purpose.
And, if we’re not careful, it will be the regional powerhouses, not central Government, that could well be left picking up the pieces.
- David Fischel is chief executive of Intu