Business rates: a missed opportunity for the Chancellor?

22nd March 2013

A number of business organisations have already slammed Chancellor George Osborne for failing to act on the UK’s business rates. The general consensus was that Osborne had missed an ideal opportunity to use business rates to help small and medium-sized businesses in the UK.
 
The deafening silence on business rates, which many small firms were hoping to see at the very least frozen, and the end of small business rate relief next March is no doubt a bitter blow to many of our nation’s business owners.

Until March 31 2014 small firms can take advantage of 100 per cent business rate relief for properties with a rateable value of £6,000 or less.
 
The rate relief gradually decreases on a sliding scale from 100 to zero per cent for properties with a rateable value between £6,001 and £12,000.

Small business rate relief

The Chancellor had been under increasing pressure from within the Cabinet to extend business rate relief beyond next year. Business secretary, Vince Cable urged the government to examine whether they can shake up the regime in order to give high street operators the best possible opportunity to survive in these difficult economic times.
 
Retail guru, Mary Portas’ own government-commissioned report on revitalising the nation’s high streets also encouraged the Chancellor to use business rate reform to help independent retailers, increasing the levy for out-of-town retailers.
 
However, it was felt that this increase would be passed on through higher grocery bills for families; an impossible scenario given that household budgets are already under enormous strain.
 
A spokesman for the Forum of Private Business revealed that a lack of concessions on business rates will have a knock-on effect:
 
“Ask any small businesses what they wanted to see from this Budget and many will have said ‘action on business rates’,” he said.
 
“We said that Government couldn’t keep clobbering businesses with hike after hike, and unfortunately we haven’t seen that sentiment acknowledged by Mr Osborne.”
 

Business rate increases

 
Mr Osborne confirmed during his Budget 2013 statement that next month’s anticipated 2.6 per cent business rate increase will go ahead as planned. This will add another £175 million on top of the £500 million of rates rises that retailers, in particular, have had to cope with over the last couple of years.
 
Industry trade body British Retail Consortium has long been lobbying for a freeze of business rates through the ‘Fair Rates for Retail’ campaign, launched last year.
 
The campaign also suggested the government alter the way its business rates are calculated to a fairer 12-month average, based on the consumer price index as opposed to the retail price index – a move which is believed could cut bills by one or two per cent.
 

Rate revaluation delay

 
Similarly, there was no change of heart on the government’s delay on a rates revaluation until 2017.
 
Industry figureheads have campaigned heavily to encourage a national review of rateable values to be brought forward, particularly as bills are currently reflected by values of April 2008.
 
Tom Johnson, real estate partner at Pinsent Masons, believes the Chancellor’s failure to accelerate the need for a rate revaluation “adds insult to injury to an already beleaguered sector”.
 
“It was only last Wednesday that Vince Cable was suggesting it was about time for a shake-up of this country’s ‘old fashioned’ business rates regime to help struggling retailers, although he did warn it wouldn’t happen overnight and wouldn’t be changed in the Budget, which has proved to be the case,” he said.
 

Summary

 
If the Government is genuinely seeking to revive British commerce and is keen to support successful brands on a national and global scale then this Budget certainly appears to be a missed opportunity.
 
The Chancellor had the chance to introduce a system that produces fairer and more affordable rate increases, as well as bringing into line a truer valuation of rates to reflect the rents being charged by landlords now.
 
Even if the government’s proposals of delaying any rate revaluation until 2017 is to provide some degree of certainty to companies in the next few years, the timeframe of reducing the overall deficit and the eventual prosperity of the economy remains unclear.

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