COMMENT When I addressed a select committee high streets inquiry last month, most people were questioning whether the pandemic would kill off high streets. What no one seemed to be asking was whether it would deal a fatal blow to Britain’s most outdated and unfair tax too.
Recent events prove, if any further evidence was needed, that business rates are simply no longer fit for purpose. Because the tax has no relation to the trading performance of a business, it had no relation to any concept of fairness when government decided to award a business rates holiday earlier this year.
So we had the grotesque spectacle of businesses that were allowed to trade during lockdown – that saw their sales surge at the fastest pace on record while paying out big dividends to shareholders – also being recipients of billions of pounds of state aid.
When I raised the unfairness of these egregious subsidies with MPs at the high streets inquiry, I had no idea that the big four supermarkets would pay back more than £1.5bn of tax relief a month later – and it is to their enormous credit that they were alert to the public mood and acted promptly.
As I write, there are still some notable examples that have yet to return their rate relief. They know who they are and their stores enjoyed a bonanza when others couldn’t trade, so they should do the right thing and pay their rate relief back.
No blunt instruments
But while various campaign groups and opposition party politicians now queue up to demand the money returned goes to a raft of good causes (my preference is a fund for small businesses and a buyout fund to help communities take over empty properties), we shouldn’t lose sight of the key lessons here.
The first is that government support can no longer be a blunt instrument. We have to ensure that taxpayers’ money gets to the right places and people. As the National Audit Office has shown with the Towns Fund unfairly awarding leafy suburbs like Cheadle millions in “levelling up” money, a combination of political skulduggery and ignorance is ensuring those in genuine need are not getting the help they deserve.
Secondly, government can no longer ignore business rates reform. It has once again delayed a revaluation until 2023, meaning business rates are currently set on 2015 property values and do not reflect the huge drop in shop values since.
If business rates are payable again in April after the “holiday” ends, it will not only be the final nail in the coffin for many high streets, forcing businesses to close, but it has been estimated that some retailers will have higher rates bills than rent.
A sense of fairness
The spectre of billions being handed back in rate relief by supermarket giants that didn’t need state support will return again next year if small, hard-working businesses are forced to the wall through exorbitant bills after getting too little support.
The challenge for government now is to introduce a sense of fairness. It should start by delivering support in a smarter, more targeted way and replacing a broken business rates system without delay.
Bill Grimsey is a former chief executive of Wickes and Iceland
