What Should Retailers Expect from the Chancellor on Business Rates?

There’s plenty of discussion in the media about business rates policy, with most retail and wider business groups agreeing there needs to be a change to the way rates are calculated and collected (see businesses organisations agreed position here). But what specifics should we expect, or hope for, when the Chancellor stands up on Wednesday?

We can expect George Osborne to give a bit more detail on plans to localise business rates, as heavily trailed in his Conservative conference speech and the Autumn Financial Statement. This has been spun as “the end of the uniform business rate” but so far it looks like nothing of the sort, as we have seen no proposals for councils to set business rates from scratch, just to adjust national-determined rates bills.

Of course councils already have the power to reduce business rates, used to great effect in Rochdale, through discretionary rate relief half of which is funded by central government, so will the new responsibilities being given to councils include cutting off this support?  What the Chancellor may characterise as setting councils free to run their business rates policy may actually amount to depriving them of existing financial support to help businesses by reducing their rates bills.  This is one of the key points of detail we’ll be looking for in the budget, and I very much hope I’m wrong in forecasting the demise of central support for discretionary rate relief.

I also hope we’re wrong to forecast the end of the retail rate relief scheme that gave high street businesses a £1,000 rates discount in the 2014-15 financial year and £1,500 off their bills in 2015-16.  Sadly this vital and much-welcomed support for high streets wasn’t mentioned in the Autumn Statement, and we fear the Chancellor will quietly end this important scheme.  We believe the reasons the Government introduced the retail rate relief scheme are still relevant and the scheme should be increased not scrapped.

Hopefully the Chancellor has better news on incentivising investment through the business rates system.  There has been speculation that the current system, where businesses that invest and increase the value of their property and see their rates bills rise accordingly, may be altered so that businesses aren’t penalised for investment, or are even incentivised through rates reductions.  This is a big deal for businesses; in the convenience store sector alone we have seen over £500 million invested over the last year, and the government should be looking to promote more of this not just for retailers and high streets, but also for the companies that produce shop equipment – particularly energy efficient fridges, lighting and heating – the tradesmen who install this equipment, and the manufacturers who rely on local shops to get their products to consumers.

All these individual policy decisions should be part of the bigger picture: the fundamental review of business rates announced at the end of 2014 with provisional findings due at this budget.  There are simple yet radical options for the Chancellor.  For example, we argued for more small properties to be exempted from being rated altogether, while currently under-charged sectors like internet distribution facilities could get their own rating scheme like many other businesses including pubs, petrol forecourts already have.  By making the likes of Amazon pay a fairer share, the burden on smaller high street shops could be reduced.

There is no magic answer on business rates, no rabbit for the Chancellor to pull out of his hat, and indeed no need for any of the standard budget cliches.  Instead, we need decisive action aimed at making the business rates system fairer and less costly.

This entry was posted by Chris on Tue, 15/03/2016 - 10:14