Is business rates reform on the cards?

The government is under pressure to do more for small businesses and high street shopping despite the Budget’s relief for small retailers and £13bn of business rates support since 2016.

In a widely publicised address, CBI President John Allan said further changes can’t come soon enough.

“The business rates system has – over time – become uneconomical, unsustainable and frankly unintelligible,” he told a conference on the subject. “In short, it’s a system in need of reform.”

He even pointed out that stores that try to improve their eco-footprint face an increase in business rates.

“If you’re a climate-conscious business owner [you may] want to improve your office, or your energy supply with solar panels – or new energy-efficient lightbulbs. Whether it’s a large capital investment, or several smaller upgrades to existing property, any real efforts to invest will see your business rates rise.”

He argued the case for serious reform on two fronts. Firstly, the long gaps between revaluations mean rates don’t reflect property values – punishing areas of the country that are already struggling, but also eventually undermining those that are on the way up.

“It’s the way that business rates currently work against the economic cycle that makes the tax uniquely damaging,” he explained. “Just compare this approach with other types of tax. Fuel duty, or corporation tax, for example. They increase when business is booming in proportion to the amount of fuel you buy, or profit you make. It’s a much fairer system. One that doesn’t reinforce economic disparities – like the current business rates system does.”

Secondly, he argued the system makes businesses less likely to invest in growth.

With business rates playing a role in Debenhams’ collapse – and the high number of firms that try to appeal their business rates each year – Allan highlighted just how little confidence there is in the system.

And referring to government’s “warm words and small solutions”, he said tweaks over the years have only served to reinforce the idea that business rates are a high street issue rather than a problem for our whole economy.

Instead he urged both the Conservatives and Labour to make good on their manifesto promises to undertake a comprehensive and independent review.

Meanwhile, the Federation of Small Businesses says slapping a tax on online shopping in an attempt to make the system fairer would also be damaging to small businesses – such as health food shops that are adding an online shop to their physical stores.

And what about town centre parking?

While unfair business rates are crippling the high street, parking charges are compounding the problem.

As part of the important issue of reducing debilitating chemicals, and improving air quality, local councils have reduced free on-street parking and closed car parks.

NAHS chair Gary Trickett cites The Lanes area in his home city of Leicester where more than 120 short-term parking spaces have been lost in the last three years.

At the same time the growth of ‘free-to-park’ out-of-town shopping centres draws potential customers away from traditional retail centres.

Although councils are creating transport infrastructures such as new tram links, these take time and require a huge amount of taxpayers’ money, Trickett said. Out-of-town park and ride links are a short-term answer but are still too slow to come on line.

This leaves town centre health food stores with limited opportunities to beat the system. For example, Julie Goodwin of Natural Health in Welwyn Garden City and Hertford recently offered a parking refund to anyone spending £20 or more.

“We’d like to help you with that pesky car parking charge,” she told customers. But even that didn’t curry favour with some visitors.

“I’ve had complaints that it’s not encouraging people to walk or cycle to town,” she sighed. “I’ve said to show me their bicycle clips and I’ll give them £1 back.”