Before the chancellor announced his new Budget, he warned he was kicking business rates reform yet again into the long grass, postponing his response to the consultation over reform until autumn – the fourth delay in a year.
We are in dire times; our economy has shrunk 10% from before the crisis and 700,000 jobs have been lost. Our borrowing is the highest ever outside wartime. Can we afford to wait?
The retail, hospitality and leisure sectors have been particularly hard hit. We hear of stores and pubs closing or companies facing administration. Of course, high business rates were an issue long before Covid reared its head; retail, hospitality and leisure businesses pay an unfair proportion of the tax – together around £12bn of the £26bn collected, a legacy of successive governments allowing the multiplier to rise to a 50% tax, the delayed seven-year revaluation and a total failure to introduce proper reform.
So, what is the chancellor doing about it? The extension of this year’s 100% business rates holiday for the retail, hospitality and leisure sectors for an extra three months and up to two-thirds business rates holiday for the following nine months is welcome. But is it enough?
We had called for at least a six-to-12-month full rates holiday, allocated on a needs basis, giving businesses proper time to recover from the impact of the pandemic. And the £2m cap per business will mean the relief after June will be very limited for many of the larger occupiers.
The chancellor also missed a trick in not extending reliefs to other hard-pressed companies that had not benefitted from business rates holidays. The government should accept that for many, Covid has been a material change of circumstance and agree to refund the 350,000-plus appeals now in the system – not brush them under the carpet.
And finally, the government must now gear up for proper business rates reform: to reduce the multiplier from outrageous levels of £0.51 to something manageable like £0.30, commit to frequent revaluations enabling rates to properly reflect rental levels and consider ways to plug the gap in local government finances. Considering a ring-fenced online sales tax or even council tax reform could be a good start.
John Webber is head of business rates at Colliers