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Can Labour solve the business rates crisis?

27 09 22 Can Labour solve the business rates crisis hero

Rating Experts at Colliers Say Labour’s proposals remain “woolly” and that “reform not abolition” of the system is needed.


“Proposals sound good in theory but are naïve at best” comments John Webber, Head of Business Rates at Colliers.

Although the Shadow Chancellor, Rachel Reeves has commented at the party conference this week that Labour plans to “abolish business rates”.

“So, Labour will level the playing field. We will abolish business rates and replace them with a fairer system fit for the 21st century.”

It is not yet clear what it would replace the system with. Labour is unlikely to spell this out this side of an election but has hinted that a new system will be based on a valuation process, probably a mix of land and rental value.

It is also believed to be supporting:

  • Removal of downward transition following the next revaluation

  • An extension of the 50% relief from April 2023 up to £110,000

John Webber, Head of Business Rates commented, “Whilst we would support Labour if introduced significant reform to the current system, we would not support total abolition or any form of Land Value tax.”

Labour has been talking about more frequent revaluations, instant reductions in bills where property values fall, (so no phased downwards transition following a revaluation), rates to be more closely aligned to economic change, to reward businesses that move into empty premises, (thereby helping the high street) and to incentive green improvements to businesses.

Webber comments, “These are all good aspects of reform of the system that we in the industry have been calling for- for years- including a wider reform of reliefs and reforms to the appeals system. Labour does seem to be listening to businesses who have expressed their frustrations with the current system, cries that both the Conservative government (and Lib Dems when in coalition) have been ignoring.

“However, if Labour is looking at a tax based on a valuation process (probably a mix of land and rental value), we do not think this would work as the tax would probably be levied on landlords. Business rates were set up to pay for the amenities and services that businesses use in the community so there should surely be no dispute that such businesses should pay something for these services.

The additional tax could also backfire. Landlords would most probably recuperate the money by hiking up rents charged to occupiers. “We would therefore have a system whereby businesses would end up paying more to the landlord but unlike the present system would be unable to appeal against their combined rent and rate bills that the landlord would introduce. So how would they benefit?”

Labour’s plans could just complicate the system and lead to more appeals.

Webber continued, “Whilst we agree we need to look at other means of shoring up the tax take, we are not in any way in favour of a total abolition of business rates – a tax, which provides £26 billion net to the exchequer. Business rates as a tax has been around for 400 years- it’s only the last 20 that it has been tinkered with so disastrously.

Total abolition would be naïve. Business rates is the one “certain” tax. Given the economic situation in which the UK finds itself, with sterling in plummeting, no politician worth their salt would suddenly get rid of this the most certain of taxes. This would also be the last thing the IMF would want to hear.

Colliers’ view is that the current system must certainly be radically reformed, but not thrown out altogether."

Colliers Manifesto for Business Rates Reform includes:


  1. Limiting any business rate increases in the next revaluation- we believe no business should have to pay more than a 15% rise including inflation. For smaller and medium sized businesses, these increases should be limited to no more than 5/10% including inflation.

  2. Immediately remove downward phasing of business rates payments in the next revaluation enabling rate payers to pay their true rates liability now and not wait three years to do so. This could well impact on several decisions to either close or keep open stores in a number of regional high streets.

  3. Review and implement a policy to reduce the multiplier. (The UBR against which the rateable value of the property is multiplied to give the final rates bill.) This multiplier is currently around 50p in the £1- so is an effective 50% tax. If it could be reduced to say 34 p in the £1, as it was in 1990, many of the extremely high rating bills would be diminished into something businesses could meet.

  4. Look at the whole systems of reliefs. The current relief system is incredibly complex and has created business rate deserts in the country, where due to the system of small businesses reliefs, some businesses are paying no business rates at all for the services they receive.

  5. Reform the appeals system- providing more support to the VOA to deal with existing appeals’ backlog. The appeals system is over complicated which few can navigate.

View our Business Rates services


Related Experts

John Webber

Head of Rating

Rating

Birmingham

I have over 35 years’ experience in the rating industry and lead a 135 plus rating team at Colliers.  When I took over responsibility for the team in 2005, it consisted of only a dozen people and has now grown into one of the leading rating advisory teams in the country.  I am a member of Colliers' UK Management Executive as well as sitting on the company’s Balance in Business Committee. 

I am regularly called upon by the national media to give my views on a range of business rates issues and I am involved in lobbying MPs/ministers and senior civil servants on business rates matters.

I started my career in the Valuation Office Agency in Kidderminster.  I joined Gerald Eve in 2000 where I spent 10 years before moving to Gooch Webster (now Colliers). I sit on the National Retail Panel of Rating Surveyors Association which provides guidance on how the RSA town committees work with the VOA and valuation matters.  I have also held the postion as Chair of the RICS Rating Diploma Committee having passed the prestigious qualification in 2014. I currently sit on the Rating Surveyors Association National Committee .

Along with Philip Harrison we founded 'Accurates' in 2007, the Collier's Compliance and Audit team, which although forms an integral part of the Rating team is now a leading brand in its own right.

View expert

Suzy Simpson

Head of Content, Communications and PR

PR

London - West End

As Head of Content, Communications & PR for Colliers in the UK, I am responsible for driving the strategic direction of corporate communications, media relations, and the programming and production of multi-channel content to engage external and internal audiences across the UK.

Get in touch for help with: 

  • Content Communication Strategy 
  • Media Relations
  • Corporate & Internal Communications
  • Media Training & Personal Brand Training

 

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