With the appointment of Rishi Sunak as Prime Minister at the beginning of this week, our head of Rating John Webber, who has been lobbying MPs on business rates reform, shares his opinion on the new Government.
This time last year, as Chancellor Rishi Sunak let me down, he let himself down and he let the country down. It was Budget Day 2021 and what he announced didn’t even scratch the surface for ratepayers.
I have made it my mission over the past year to explain business rates to the political establishment, to explain why high business rates are responsible for so many boarded-up shops on our high streets, why they are holding back the regeneration of our town centres and how the reform of business rates is critical to delivering levelling up.
The first thing I discovered is just how few politicians know anything about business rates at all. Unless you have run a business that pays business rates, you have no experience of the eye-watering sums of money that have to be found, regardless of whether the business is generating a profit or even revenues. You have no notion whatsoever of the bureaucratic obstacles that you have to overcome if a valuation goes against you. And you will never have experienced the unfairness of a system which makes you to pay a higher level of rates despite the fact you work in a more depressed economic region.
I have tried to concentrate on meeting politicians who profess to take an interest in matters of tax and public finance, on the basis that their eyes are least likely to glaze over when you come to explain the complexities of the system. Still, you have to watch out, in case you find them nodding sagely while your words are gently bouncing off their ears away from their brains.
The messages have to be kept simple. When you tell them that the Uniform Business Rate has risen from 34p in the pound to 51p, that there are now over a dozen different reliefs because there is always another unfairness in the system that needs to be dealt with, that shops pay business rates at levels 10 times higher than online retailers, that it is the number one fixed cost that shops, pubs and cinemas have to shoulder, then the penny starts to drop.
High business rates kill local economies
We have reached the point where politicians are waking up to the impact of high business rates on their communities: boarded up shops, retail job losses, loss of footfall in town centres. But if you talk to Treasury officials, you soon realise that we are a long way from the point where the government might try some radical solutions, such as broadening the tax base, abolishing the complex system of reliefs and lowering the Uniform Business Rate to a more sustainable level. There is an increasing tide of Conservative backbenchers who recognise the need for reform, but you need a tsunami to overturn years of Treasury orthodoxy.
The government’s failure to reform business rates has provided a political stick for opposition politicians to beat the government with. Labour has called for the outright abolition of business rates, but it will not forgo the £26 billion of revenue that they bring in, so we can expect a similar system of commercial property taxation to replace them.
Importantly, Labour’s Shadow Chancellor Rachel Reeves has listened to the representations that I and others have made to scrap downwards transition – the punitive scheme which stops businesses from paying lower bills when the value of their property falls. They recognise that abolishing downward transition could help deliver levelling up after the revaluation comes in next April, by lowering business rates bills in areas which are struggling economically.
On the evidence of the scores of meetings with MPs and civil servants on the subject over the past 12 months, I am happy to report that there is a gradual recognition taking root in Westminster that something must be done. In October, the influential centre-right think tank, the Centre for Policy Studies held a seminar at the Conservative Party Conference (at which I spoke) about the need for reform.
In my business life, I have been privileged to work with great visionaries who have turned around businesses in short order. Turning round the ship of state to a new direction takes so much longer: there are more vested interests, more bureaucratic intransigence, more coalitions to build and more politics to play out. You need patience and determination. But in the end, economic reality will catch up with the governments which take so much from business that they kill enterprise itself. We have to hope that Rishi gets the message – and hope he gets it soon!
About the author
John Webber leads the 130-strong Rating team at Colliers. The team works with clients across all property sectors who pay business rates, advising on managing and reducing their liabilities.
To contact John email, John.Webber@colliers.com