Why the Government must reform outdated business rates system - Beckie Hart

If the UK is to achieve its ambitions for post-Covid recovery, tackle the climate emergency and succeed in levelling up, it will require unity between business and Government.

There is a growing number of empty shops on Britain's high streets

For Government, the job is clear; unleash enterprise and let it thrive.

In turn, businesses will be expected to deliver the innovation and impetus which can propel the country beyond the economic ravages of the pandemic and towards a prosperous and sustainable future.

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Near the top of the Government’s to-do list should be a long-overdue reform of the country’s outdated and uncompetitive system of business rates.

In short, tax on business premises has been a long-standing problem in this country.

A succession of Governments have recognised as much and tinkered at the edges of change, but the root and branch reform we need has so far proved elusive.

The result is that we continue to stymie industry with a business rates tax three times higher than the OECD average alone.

That must change. Because while today’s economy is looking healthier than we might have feared last year, consumer spending is doing much of the heavy lifting right now.

If our recovery is to get on to a more even keel, we really must get businesses spending too. Yet one of the largest obstacles facing our region’s companies looking to invest is a business rates tax system stuck in the past – the costs on an individual business are far too high.

The strain not only helps to hollow out our struggling high streets, but also holds back those on the up.

Recent data suggests one in seven high street shops now lie empty. The list of our high street favourites – from department stores to small independents – that have gone for good, grows longer day by day. Even before the pandemic, our high streets were facing a real battle when up against online retailers – Covid-19 only made that tougher.

It is no exaggeration to describe England’s business rates as unfair, uncompetitive and unproductive. And the impact stretches well beyond shops; from factories and airports to offices – any business with a physical footprint, in fact.

While the Government seriously stepped up in its support for business at the height of the crisis – including relief on business rate taxes – long-term, systemic reform is long overdue.

The Government is working hard to turn the situation around, expecting to report in the autumn.

Don’t get me wrong; business rates are – and should remain – an integral part of our tax system. 

But businesses need it to change and change now. Fail to act and we also risk stalling much-needed investment in lowering carbon emissions.

The bleak assessment in the recent UN climate report only makes the need for action all the more urgent.

Perversely, the business rates system in England works against firms trying to make their buildings more energy efficient: if firms spend on upgrades, they are rewarded by paying higher tax rates! 

So what to do? For starters, the CBI wants to see a freezing of rate increases in England beyond the planned revaluation in 2023, and also move to a system of annual revaluations by 2026.

This means that rates adjust quickly to economic changes with no shock rises, and for rate payers where their bill comes down with property values, they must be able to benefit from reductions immediately after a revaluation.

Machinery and new technologies linked to the green agenda – solar panels, for example – should also be excused from the tax.

All this and more can help make our outdated business rates system into a tax more fit for the future.

By Beckie Hart, CBI Regional Director for Yorkshire

A system that unleashes the transformative power of business investment to help, rather than hinder, our shared ambitions to save our high streets, cut our carbon emissions, level up the country and make the Yorkshire & Humber economy far more competitive.

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