Has the Chancellor gone far enough in his autumn budgeting for business rates? Here we summarise the details and gauge some of the leading opinions.
Calls for wider reform
The growing consensus in the ‘High Street’ lobby and among retailers is a need to counter competition from online firms that employ fewer staff and pay far lower business rates. Recent proposals promoted by the New West End Company, for example called for a re-design of business taxation to properly reflect the comparative value of online
sales and high street sales, alongside moves to localise taxes to fund local government.
Two options to consider
As the BBC report, there are effectively there are ways to begin this reform and level the playing field: cut charges for the traditional retailers or increase them for online traders. In his autumn budgeting for business rates, the Chancellor has done a bit of both.
Firstly, he has spent £900m to reduce the business rates bill of 500,000 small retailers by an average of a third. Very welcome to those who have premises with a rateable value below £51,000.
Second, he unveiled a potential new £400m digital services tax to be levied on the money tech giants such as Facebook and Google make on digital services like advertising and streaming entertainment. This though does not include but not online sales.
Tinkering around the edges
While good for news for small retailers and landlords, others are critical that it will not reduce the pressures on big name retailers who are competing with (and in some instances switching to) online sales. The British Retail Consortium was, for example, is reported as being underwhelmed by the move. Chief executive Helen Dickinson said: “Rather than tinkering around the edges, struggling high streets require wholesale reform of business rates in order to thrive. The issue remains that the business rates burden is simply too high.”
Phil Vernon, head of rating at PwC, commented, “The Chancellor’s decision to focus his attention on small business will be welcomed by many…by announcing a cut in business rates by a third for all retailers in England with a rateable value of £51,000 or less, the Chancellor has again tinkered around the edges of the system without addressing the need for a reform of the system to make it a suitable local tax for modern business. Many smaller and medium sized businesses have rateable values in excess of £51,000 and so this change will either not help them, or will present a barrier to expansion as they consider moving into larger premises if they want their business to grow.”
Digital delayed
While the tax on digital services is a bold step that puts the UK ahead of other leading economies, it is probable that it will never come in to force. Its introduction is delayed until 2020 – by which time the OECD group of countries has promised to come up with its own plans to tax the digital economy.
High Street Fund
The Institute of Place Management welcomed the business rate relief alongside the announcement of other measures including consultations on potential changes to planning policy and a £675 million Future High Street Fund and a new High Street Taskforce.
In a joint statement, Institute Co-Chairs Cathy Parker and Simon Quin said, “The Budget announcements are positive for High Streets. Many retailers will benefit from the immediate support, but we are particularly delighted to see the establishment of the High Street Fund and the proposed Taskforce that will help town centres to make the changes necessary to be sustainable in the future.”
The £675m Future High Streets Fund was announced to support local areas in England to prepare long-term strategies for their high streets and town centres and then co-fund investment in town centre infrastructure, including to increase access to high streets and support redevelopment. The Fund will also support the regeneration of heritage high streets (up to £55m of the overall Fund). The Fund is for High Street change not for adding additional retail space. Full details of the Fund will be announced by the year end.
More information
Further information about the business rates and High Street Fund announcements is available in a Government fact sheet on “Budget 2018; Our Plan for the High Street”, here.
Read our blog on business rates winners and losers giving the context for calls for reform.
Take a look at the Grimsey Review 2 and its continued call for business rate reform.
