By Debbie Warwick, head of ratings at Daniel Watney
Sajid Javid’s promise of new measures falls short of desired solution
While most of the front pages for Hammond’s first Budget were reserved for his National Insurance nightmare, it’s worth recalling that this week’s Budget was supposed to bury the hatchet on another source of harrowing headlines for the government lately, the planned changes to business rates due to come in from April.
Sadly, the news isn’t much better for the Chancellor on the rates front either. Despite Sajid Javid dutifully promising at the despatch box last month that the Government would address the many problems raised with its proposed reforms in the Budget, the measures announced fall woefully short of actually resolving any of them.
As expected, the Budget came with a few welcome baubles. The announced support for firms losing small business rates relief capping their bill increases to £50 a month, is long overdue. However, there is still a sore lack of clarity around one of the biggest problems with the proposed changes to rates: the proposed “reasonable professional judgement” clause.
This clause means tribunals would be able to throw out appeals against confirmed incorrect valuations, as long as they were within a margin of error deemed within “reasonable professional judgement”. It’s the equivalent of being forced to pay an incorrect income tax bill on the basis that it was “close enough”, and could leave thousands of firms shortchanged on their rates bills. The proposals were seen as so objectionable that 13 trade bodies representing almost every sector of the British economy, came together to urge the government to drop the clause from its reforms, in an open letter last month.
The government’s response in the small print on Wednesday did little to allay concerns. It announced that instead of reasonable professional judgement, “on appeal the Valuations Tribunal of England will be required to decide whether they consider the extant valuation to be a reasonable definition” – in effect devolving the decision for what constitutes reasonable professional judgement to tribunal.
This does nothing to provide certainty for ratepayers, who still don’t know what a “reasonable” valuation is, or what tribunals may consider to be an appropriate margin of error for that. It could yet still be the difference between a firm being able to claim small business rates relief or paying nothing in rates at all.
Separately, though support was announced for firms losing small business rates relief, little was done to help another group that loses out under the current transitional system – firms seeing the biggest decreases in bills. Because of the way transitional relief works, larger properties seeing cuts in their bills of more than 25% will not see the entire cut in their bill by the time of the next revaluation in 2022.
This stings particularly badly as many have been paying over-inflated bills for seven years based on the valuation at the top of the market in 2008. The least the government can do is immediatley allow these firms to benefit from bill cuts they have been waiting years for, rather than forcing them to wait another five years.
Finally, the Chancellor repeated a pledge to have more regular revaluations in future, promising to hold another consultation on business rates, on the same day the results of the last consultation were released. Ultimately, the government cannot expect to be able to fob ratepayers off by repeating a promise it has failed to deliver in the past.
Businesses were looking for three things from the government this week: absolute clarity that firms who are successful in their appeals do not overpay on their rates bills; action to allow firms overdue cuts in their bills to benefit from them right away; and funding, not more empty words on regular revaluations. The government doesn’t need to hold another consultation, it just needs to listen to what it’s already been told.
