Business rates 'not fit for purpose', say MPs

Business rates 'not fit for purpose', say MPs

Business rates have been branded “one of the principal threats to the survival of retail businesses in the High Street” by a cross-party Business, Innovation and Skills select committee.

The committee's report into the current state of the UK retail sector, published today (4th March), has declared that business rates in their current form are “not fit for purpose”.

It is an accusation that the Booksellers Association and the British Retail Consortium have been levelling at the government for some time, and independent booksellers reported in The Bookseller’s Christmas Trading survey that the rise in business rates next month would have a “serious” impact, even though the rise is below inflation.

The BIS report said: “Business rates are a substantial cost to doing business in the United Kingdom, and are one of the highest forms of local property tax in the European Union. Our evidence overwhelmingly cited the issue of business rates as one of the principal threats to the survival of existing retail businesses in the High Street. It was also cited as the biggest obstacle to new retail businesses starting up, not only for 'bricks and mortar' shops.”

The report added: “We conclude that business rates, in their current form, are not fit for purpose. The government needs to carry out a wholesale review of the current business rate system.”

The BIS select committee found that any business rate review should consider whether retail taxes should be based on sales, rather than on property; whether the retail sector should have its own form of taxation, calculated in a different way from other businesses; and how frequently the revaluation of business rates should take place.

The BRC has welcomed the findings on the BIS Select Committee report.

BRC director general, Helen Dickinson, who gave evidence to the inquiry said: “This report must be the final nail in the coffin of the question: ‘do business rates need to be reformed?’ They do. Business thinks so. A committee of parliament thinks so. We very much hope the government will think so too.”

Dickinson reiterated that it had started work on identifying what a new business rates system “ fit for the 21st Century”, might look like. “We’ve been having wide, open conversations with retailers of all sizes, trying to identify what changes need to be made to encourage investment, promote job creation, support small business and support sustainable, long term growth,” she said.

Last month, the BRC published a Road to Reform document with accountancy firm EY which suggested ideas for long term change including charging businesses based on energy usage, rewarding employment by giving a discount on Business Rates based on a given value per employee, and supporting successful businesses by providing a discount based on a percentage of Corporation Tax payment.

Dickinson said: “These (suggestions) aren’t final. Our research partners, EY, are doing some economic modelling to help us understand what effect each of the ideas will have on the whole of the retail industry. But we wanted to make sure that as many people as possible were involved in the conversation about the future of business rates – everyone with an interest has had, and will continue to have, the opportunity to comment on the proposals as they are developed.We’ll be publishing the next stage of our research in May. Until then, the committee’s report brings very welcome renewed focus on the need for change. The whole retail industry will be waiting with baited breath to see how the government responds.”

Waterstones m.d James Daunt said he had been speaking out “for years and years” about the negative impact of business rates on the high street and while today’s BIS Select Committee report was welcomed he said he was “not holding his breath” for any imminent government change. “The longer that business rates continue in this form, the longer the high street will degrade. Reform is in everybody’s interests,” he said.  

The BA said it is waiting until a BA Council meeting later this month before commenting further on the issue.