The Business Rates Debate: A Small Win for "the Reformers"


In our autumn newsletter, and in advance of the budget, we looked at various suggestions for helping the High Street through business rates: 

Commentators had made various suggestions for reform including:

  • Introducing more frequent revaluations.
  • Scrapping the relief for vacant property, which is leaving properties empty that would otherwise be in use and is costing nearly £1 billion a year.
  • Freezing any business rate increases next year.
  • Removing downward phasing of business rates payments, enabling rate-payers to meet their true rates liability now and not wait four years to do so.
  • Reducing the multiplier (the uniform business rate against which the rateable value of the property is multiplied to give the final rates bill) by asking small businesses to pay a minimum contribution or removing agricultural relief.
  • Simplifying the appeals system.
  • Abolishing "staircase tax" such that separate parts of a shared building are treated as a single unit for business rates if they are contiguous and in the same occupation.

How is the new Budget contributing to a positive future for the high street? 

None of these suggestions has been taken up.

Instead, limited help has been offered:

  1. "Virtually the only announcement in this Budget that hasn't leaked" Philip Hammond told the House of Commons on Monday was the introduction of a mandatory 100% business rates relief for public lavatories under public or private ownership. With mass closures to these public facilities over the last 20 years, this limited relief will be welcomed by many local authorities and lobby groups that have been putting pressure on their local authorities to save public lavatories to benefit the health and wellbeing of local residents.
  2. Reported as a £1.5bn boost to small High Street UK retailers, the new Budget introduces a relief for nearly 500,000 small businesses. For business premises with a rateable value of £51,000 and under, their business rates bill will be cut by a third. The BBC used the example of a pub in Sheffield with a rateable value of £37,750, which will save £6,178 in business rates next year.

As Phil Vernon of PwC has said, "many smaller and medium sized businesses have rateable values in excess of £51,000 and so this change will either not help them, or will present a barrier to expansion as they consider moving into larger premised if they want their business to grow". This announcement also overlooks larger businesses and is hardly going to stop another announcement like "Debenhams to close up to 50 stores" or "House of Fraser to close 31 stores".

However, to think that slashing business rates universally would have made a difference to the long term success of large high street retailers would be to underestimate the wider struggles and other expenses of these businesses.

With the new Budget also pledging £650m to rejuvenate high streets and their transport links and a promise to soften planning laws to allow empty retail sites to be converted into homes, the rationale behind these budget announcements seems to be the need to ensure the vitality of the nation's town centres rather than save struggling retailers. Many of the high streets doing particularly well in uncertain times are those with quirky small businesses, mixed use initiatives and unique identities.

The commitments are one thing but a flexible localised approach is needed to protect the future of the high street. It's now up to local governments to be innovative with how they apply the funds in order to help their town centres to thrive.

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