Call for review on business rates

The Government is being urged to give a six-month business rates amnesty for firms occupying empty properties as part of "fundamental reforms" to the system.

The Government is being urged to give a six-month business rates amnesty for firms occupying empty properties as part of "fundamental reforms" to the system.
The Government is being urged to give a six-month business rates amnesty for firms occupying empty properties as part of "fundamental reforms" to the system.

The Business Committee called for a "wholesale review" of business rates in a bid to help retailers and boost local economies.

The MPs said there should be an examination of whether retail taxes should be based on sales rather than the rateable value of a property.

They also suggested that retail needed its own system of business taxation, adding that a six month amnesty would encourage new businesses to the high street.

Concerns were raised that money allocated to a number of towns following a review headed by retail expert Mary Portas was not being spent.

Around £2.3 million was earmarked for so-called Portas Pilots, but committee chairman Adrian Bailey (Labour, West Bromwich East) said the Government could not provide evidence of how, or even whether, the money has been spent.

The Portas report, completed over two years ago, had stressed the need for a review o f business rates, the MPs noted.

Mr Bailey said: " British retail is a global success story. Employing around three million people, it is the largest private sector employer in the UK. But its traditional home - the high street - is struggling under a system of business rates that comprises one of the highest forms of local property tax in the European Union.

"Amongst the many challenges they face, business rates are the single biggest threat to the survival of retail businesses on the high street. Since the system was created the retail environment has changed beyond all recognition. A system of business taxation based on physical property is simply no longer appropriate in an increasingly online retail world.

"The Government's consultation on the administration of business rates at least acknowledges that change is needed. But this is a time for wholesale review and fundamental reform, not for tinkering around the edges. Business rates are not fit for purpose and minor administrative changes will not alter that.

"We are not advocating a return to a bygone age, but if high streets are to become thriving community hubs and start ups are to invigorate our town centres the significant barrier to innovation currently posed by business rates must be addressed.

"The Government's retail strategies are full of warm words that fail to address the most debilitating levy on existing businesses and the most crucial deterrent to new businesses appearing on the high street - business rates. Fewer strategies are required, simple, decisive action is needed."

Dr Adam Marshall, executive director of policy at the British Chambers of Commerce, commented: " It is good to see Parliament recognise that Britain's business rates system is broken and in need of fundamental reform. But politicians must remember that the business rates system is failing all of our businesses - not just the high street.

"Businesses are suffering from this pernicious tax, which gobbles up huge amounts of cash before a company even turns over a single penny, in city centres, industrial estates and office parks in all parts of the United Kingdom.

"We need thriving high streets, but business rates are also the reason many manufacturing and services companies put off investment and hiring decisions because their rates bills are just too high."

British Retail Confederation director general Helen Dickinson 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."

A Government spokesman said: "The Government's long-term economic plan is working, delivering economic security to hard-working people. A key part of this plan is supporting business which is why we have taken a series of steps to help local firms and shops with their business rates including announcing over £1billion of business rates support at Autumn Statement 2013.

"Half of this will go to supporting the retail sector through a £1,000 business rates discount for shops, pubs and restaurants and a temporary reoccupation relief to help bring empty shops back into use. We are also undertaking a review of business rates administration which will look at longer-term reforms to make the system more transparent, efficient and responsive to economic circumstances.

"Having benefited from multi-million pound Government support the 27 Portas Pilots and over 330 Town Teams continue doing great work promoting town centre innovation and community collaboration."

Toby Perkins, shadow minister for small business, said: "At a time when families are facing a cost-of-living crisis, businesses have been hit by rising costs too.

"Under David Cameron small firms have seen hikes in business rates of £1,500 on average and many will see further rises next month. In contrast, the next Labour government will cut and then freeze business rates to give firms a much-needed boost.

"More than 1.5 million business premises including shops as well as workshops and start-ups would benefit under Labour's plans."