Business rates reform

By Christine Quigley

The Labour Party has launched a new independent commission tasked with advising them on how to rebuild Britain’s high streets. The commission will be advising Labour’s shadow chancellor Anneliese Dodds over the next six months and will be looking at a variety of hot-button post-pandemic issues, including how to level the playing field between bricks-and-mortar and online businesses, how to bring empty commercial properties back into use, and how to promote innovation and entrepreneurship on high streets across the country. Businesses may be pleased to hear that, as part of this work, Labour will be putting pressure on Government to “reform Britain’s broken business rates system”. 

Plans to support and improve local high streets, including business rates reform, have come and gone over the past ten years. In 2011, the Coalition government commissioned Mary Portas to conduct an independent review into the future of high streets. Alongside some of its more eye-catching recommendations, like a new “National Market Day” for budding shopkeepers to try their hand at operating market stalls or encouraging large retailers to support and mentor local smaller retail businesses, the review specifically addressed business rates reform. Portas made three separate recommendations relating to business rates, including calling for the Government to consider whether business rates can better support small businesses and independent retailers, reviewing whether the business rates calculation should be based on CPI rather than RPI and enabling local authorities to give business rate concessions to new local businesses. So why, ten years on, are businesses still saying that business rates don’t work? 

The CBI has identified several reasons why the current business rates system is no longer fit for purpose, including digitisation, advancements in technology and changing business models. While these were referenced as issues ten years ago in the Portas Review, business groups are arguing that the patchwork of smaller reforms and reliefs announced since then are a “sticking-plaster”, and the whole system needs fundamental reform. 

The pandemic may well provide irresistible pressure on Government to finally reform business rates, as high street closures have devastated the retail, leisure and hospitality sectors. Last summer, HM Treasury announced a call for evidence on how best to reform business rates and published an interim report alongside the Budget in March. This report outlined several key challenges raised by stakeholders, including targeting and effectiveness of relief, frequency of revaluation and administrative burdens, but it focused particularly on some of the short-term support offered to various sectors, including the British high street, during the pandemic. 

We are not expecting HM Treasury’s final recommendations until autumn 2021, by which point Government is hoping the economic conditions will be more certain. Businesses across the country will be waiting to see whether this will be the fundamental systemic reform that they have been calling for for over a decade, or whether this will be another short-term fix.