COMMENT The Shopkeepers’ Campaign wants Britain’s high streets, towns and cities to become thriving commercial hubs. That cannot happen without fixing the business rates system.
Rates are too high: a medium-term plan for their reduction should be laid out. Rates are higher than corporation tax and top-rate income tax and yet, unlike those taxes, they bear no relation to performance.
Compensation comes in the form of reliefs to vulnerable sectors. But reliefs obscure the underlying problem and create their own distortions; lost revenues from reliefs push up the uniform rate (UBR) to make up the loss and myriad reliefs create an incomprehensible mess of a system.
Labour says it has become so distorted it will simply sweep the system away and replace it with something different. Do we really want to take the risk of starting anew with an untested tax? Or do we want to take the learnings and fix the failings?
Who do we blame?
When the UBR was introduced in 1990, it was 34p in the pound. Today it is at 51p. This cost disincentivises a bricks-and-mortar presence and since investment pushes up values, it disincentivises investment too, just when we should be encouraging both. Add in the shift to online for one quarter of sales and the result is shuttered shops, empty high streets and communities stripped of their centre.
Who is to blame? Not owners, when traders are being offered zero rent deals to incentivise occupation – but that’s still insufficient to overcome the rates hurdle at 51p in every pound of rateable value.
Do we blame the Conservative government? Yes. Its 2019 manifesto promised to cut business rates for retail and it hasn’t. The consolation prize has been a two-year UBR freeze. And while the Conservatives make a big deal out of retail, hospitality and leisure relief, it only helps the smallest businesses.
Anyone entrepreneurial enough to have branched out is likely to be excluded and the big brands don’t get a look-in. However, the loss of chains such as M&S and John Lewis is keenly felt in the towns they have departed from.
Lower the UBR to a manageable rate and simplify the reliefs and we encourage investment back to our high streets.
How does anyone make sense of a high street investment that pays a vastly different level of rates to its neighbour just because of the size and sector to the business? Business rates provide income to local authorities, the organisations providing the local services we all benefit from – from street lighting and roads to refuse collection and public realm. Every business should contribute something and expect decent local services in return.
Industry and government need to come together to find a fair system that serves economic growth for both. But in my recent experience, the civil service advising ministers on business rates is totally detached from the stress being experienced on the high street. The government recently tried, wrongly, to frame property owners as tax evaders and avoiders, when, in fact, too many are being forced to let their properties at any price, just to avoid paying business rates on an empty property.
Awaiting concrete plans
The Shopkeepers’ Campaign has shared its concerns with both the Labour and Conservative front benches and I am encouraged by their willingness to listen. They all see that something needs to be done on business rates but I am waiting for concrete plans.
We don’t actually need the whole system swept away, only to be replaced by an untried tax which could provide yet more uncertainty for investors.
We just need hard-headed, sensible reforms to reduce the complexity of the system, broaden the tax base so that everybody contributes something to local services, and a UBR set at a level so that nobody gets taxed out of business.
If politicians are serious about attracting sustainable investment into town centres, they should aim for a UBR at 30p in the pound.
Vivienne King is chair of the Shopkeepers’ Campaign
