The retail and property industry expressed disappointment following the Spring Budget, after chancellor Philip Hammond failed to outline a detailed vision for a reformed, fairer business rates system.
Hammond acknowledged that the system was crying out for change, but said the government would set out its preferred approach for reforming the system before the next revaluation, which is due to take place in five years. In the meantime, he announced new measures to provide relief to those hardest hit by this year’s business rates revaluation.
A £300m fund will be made available to local authorities to allow them to provide discretional relief in individual cases. Hammond also revealed that any firms coming out of small business rates relief would benefit from an additional cap, so their rates will not increase by more than £50/month.
These measures, together with a £1,000 discount on business rate bills for all pubs with rateable value of less than £100,000, amount to a further £435m cut in business rates, Hammond said.
But the announcement did little to assuage the concerns of retail and property groups.
“We hope that the relief measures will help some of those businesses hardest hit by the revaluation,” said Helen Dickinson, chief executive of the British Retail Consortium. “However, more short-term relief measures continue to add complexity to an already impenetrable system – £435m is a drop in the ocean compared with the £25bn a year that the tax raises.
“This is yet another sticking plaster on a chronically ill patient – an unsustainable property tax higher here than anywhere in the developed world.”
New West End Company chairman Sir Peter Rogers added: “The short-term relief [Hammond] announced will have no impact on the majority of the companies in London and the West End, which will suffer massive tax increases on 1 April. This will mean closures and job losses.”
During his speech, Hammond recognised the need to make the business rates system fairer. In particular, he admitted that the “digital part of the economy” needs to be better taxed.
It comes after some critics pointed out that online retailers such as Amazon would enjoy a cut in rates for its warehouses as part of the upcoming revaluation. But Rogers said: “The review should look beyond digital businesses to ensure that all companies, particularly multinationals, make a fair contribution to Britain’s tax take.”
Others, including Sainsbury’s group chief executive Mike Coupe, joined the calls for a wholesale reform of business taxation.
Coupe said: “We would ask the government to carry out a root and branch review of business taxation to create a level playing field across all businesses.”
Views on the Spring Budget
Helen Dickinson, chief executive of the British Retail Consortium: ‘We need a business tax system that is fit for purpose in the 21st century’
“We hope that the relief measures will help some of those businesses hardest hit by the revaluation, albeit only temporarily. However, more short term relief measures continue to add complexity to an already impenetrable system. £435m is a drop in the ocean compared with the £25bn a year that the tax raises. This is yet another sticking plaster on a chronically ill patient – an unsustainable property tax higher here than anywhere in the developed world.”
Sir Peter Rogers, chairman of New West End Company: ‘A missed opportunity to deal with a major concern for London businesses’
“The short term relief [chancellor Philip Hammond] announced will have no impact on the majority of the companies in London and the West End which will suffer massive tax increases on 1 April. This will mean closures and job losses.
We will push for the chancellor’s review to take a more fundamental look at how the business tax system can more effectively respond to the government’s duty to finance local services with the need for all businesses to pay their fair share. The review should look beyond digital businesses to ensure that all companies, particularly multi-nationals, make a fair contribution to Britain’s tax take.”
Mike Coupe, group chief executive at Sainsbury’s: ‘Business rates are an analogue tax, not fit for the digital age’
“The UK needs wholesale reform of business taxation. We would ask the government to carry out a root and branch review of business taxation to create a level playing field across all businesses, rather than penalise property-based companies.”
James Roberts, chief economist at Knight Frank: ‘Limited action on business rates is a disappointment’
“From a property industry perspective, the limited action on business rates is a disappointment, although the chancellor probably did not have the money to do anything more. At least the debate on long overdue reform is underway.”
Mark Rigby, chief executive of business rent and rates specialist CVS: ‘We welcome today’s support for small firms but more meaningful discussions must be had around longer term relief’
“Our three requests…have been met in full and both the chancellor and secretary of state [for communities and local government, Sajid Javid] should be congratulated on listening to the concerns of small business but, more importantly, acting upon those concerns with meaningful financial help.
“Given the issues highlighted by my firm with the tax reductions for large, online giant distribution centres, and the dismay and deep concern that this has caused for shops and pubs, meaningful discussions must be had around the tax system to ensure that it is fit for purpose for the 21st century economy.”
Paul Martin, UK head of retail at KPMG: ‘It’s survival of the fittest’
“For smaller businesses who were facing the prospect of sizable business rate hikes, the Chancellor’s efforts to relieve at least some of the pressure will be welcome. For larger businesses however, the Budget won’t have softened the blow much at all.
“Business rates aside, for some time now retailers have been facing strong headwinds across the board- the significant devaluation of the pound post-Brexit; the increase in national living wage, and the apprenticeship levy. In order weather the storm, retailers big and small must remain agile in this changing and clearly touch political and economic environment. Whether Brexit or Budget, this has always been an industry geared towards survival of the fittest.”