In April, the long-awaited business rates revaluation comes into force. Commercial occupiers will be paying rates based on the true value of their premises on 1 April 2021, instead of values from 1 April 2015.
For retail overall, that equates to an average 10% drop in bills, brought into effect immediately because of the government’s welcome decision to abolish downwards phasing of rates bills for premises that have fallen in value.
This reform came after intensive lobbying by ratings advisers and industry bodies such as the British Property Federation, the British Retail Consortium and the Confederation of British Industry – as well as the Shopkeepers’ Campaign, which I chair. It is a very good example of how retail and real estate interests aligning with one voice can bring about policy change.
But let’s not kid ourselves that the measures announced in last autumn’s Budget have fixed the problems of the high street. The pace of shop closures in the UK accelerated in 2022 and the Centre for Retail Research found more than 17,000 shops closed last year, equivalent to 47 a day, the highest total in five years.
More than 5% of retail staff (150,000 people) lost their jobs last year through insolvencies and store closures arising from rationalisation. And while we hear of a Christmas bounce in many stores, much of this can be attributed to the uncertainty of ordering gifts online at a time of postal strikes, so it may have been a one-off bounce.
Radical thinking is needed to bring forward new investment into town centres and high streets – and the high level of business rates remains the biggest blocker to investment. A Uniform Business Rate (UBR) at 51p is easily one of the UK’s highest tax rates – still over 50% higher than the 34p rate of 1990, when the UBR was brought in. That was at a time without online retail, whose post-pandemic market share stands around 25%, but whose rates bills remain significantly lower than the high street.
“Radical thinking is needed to bring forward new investment into town centres and high streets.”
In the past two years, the government has demonstrated that it can choose to act to stop the UBR rising by inflation each year. It is now time to break the inflation link altogether and bring the UBR back on a path towards 30p in the pound: a tax that would be both fair and sustainable over the longer term and in keeping with the UK’s overall fiscal regime. In its 2019 manifesto, the government promised not just to freeze business rate levels but ‘cut’ rates. The Budget in March offers the opportunity to deliver just that – and to play its part in launching an investment-led recovery on the high street.
Not ambitious enough
There will be further opportunities to reform business rates later this year when the government introduces its Non-Domestic Rating Bill. Recognising how quickly property valuations change, the government intends to move from five- to three-yearly valuations. This is not ambitious enough. If they can operate a system of annual revaluations in the Netherlands and in Hong Kong, why is it so hard for the Valuation Office Agency to introduce these in the UK?
Similarly, if Scottish local authorities can send out rates bills based on a valuation that took place one year beforehand, why can’t this be achieved in England and Wales? An antecedent valuation date (AVD) of one year would make the system fairer for ratepayers – bringing bills more quickly into line with property values one year before, rather than two years before.
The Conservatives were elected promising a fundamental review of business rates. Covid-19 soon followed and they got distracted so that only piecemeal solutions have been offered, rather than tackling the root causes. No wonder shadow chancellor Rachel Reeves has felt emboldened to pledge to scrap the whole business rates system and start again.
Conservative ministers should be countering Labour’s criticism by working intently with officials in the Treasury and Valuation Office Agency to improve the system so that it provides more frequent, faster and fairer rating assessments, to outshine any proposal from the opposition.
All parties agree that the country is badly in need of policies to spur growth. Does this government still have the drive and the passion to make the necessary changes that will make our high streets sing, or are they just a bunch of bean-counters? This is the year in which we will find out.
Vivienne King is chair of the Shopkeepers’ Campaign
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