Budget: Hammond moves to quell business rates revolt

Philip Hammond said 90% of pubs will see their business rate bills discounted by £1,000 this year, while local authorities will get a £300 million fund to help small firms facing the sharpest rises as part of a plan to make the revaluation in April more fair.

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Faced with fury from small businesses and threatened revolt by Conservative MPs, Mr Hammond also said there is scope to reform the revaluation process to make it “smoother and more frequent”.

Mr Hammond added no business losing small business rate relief will see their bill increase by more than £50 a month next year and it will also be capped in future years.

He said: “Taken together, this is a further £435 million cut in business rates targeted at those small businesses facing the biggest increases, protecting our pubs and giving local authorities the resource to respond flexibly to local circumstances.”

Mr Hammond said the move to help pubs recognises the “valuable role that local pubs play in our communities”.

It will be open to all pubs with a rateable value of less than £100,000.

He added that the £300 million fund for local authorities will target “individual hard cases” in their areas and will be allocated by a formula, with details due to be set out soon.

The cap for those coming out of small business rates relief will address fears that many would miss out after the scheme, which was worth £1,500 to firms, ended in April last year.

The Government has maintained that three-quarters of companies will see their rates fall or remain unchanged under the controversial changes to business rates - the commercial equivalent of council tax.

But the Institute for Fiscal Studies (IFS) has estimated firms in London will see an average rise of 11% over the next five years due to soaring property valuations in the capital, while rates in the North will fall by 10%.

It is the first rates revaluation since 2010 and Communities Secretary Sajid Javid and Mr Hammond have come under pressure to help businesses facing large rises because they are in areas where rental values have increased dramatically.

The IFS claims the revaluation will mean an additional £800 million a year will be taken out of London to subsidise other parts of the country.

Small retailers and pubs are among those who are facing the steepest hikes.

Mr Hammond said: “The Communities Secretary and I have listened to the concerns raised by colleagues and businesses about the effects of the 2017 business rates revaluation.”

He said business rates cannot be “abolished”, given that they raise £25 billion a year, which will be going to fund local government within three years.

But he said the Government would set out a plan for reforming the revaluation process “to avoid the dramatic increases that the present system can deliver”.

“We will set out our preferred approach in due course and will consult on it before the next revaluation is due,” he said.

Mr Hammond admitted the Government needed to find a “better way of taxing the digital part of the economy - the part that does not use bricks and mortar” amid accusations that they are enjoying an unfair advantage.

Alex Marsh, managing director at Close Brothers Retail Finance, said the package of measures was a “step towards supporting small retailers”.

Robert Pullen, senior manager at accountants Blick Rothenberg, said it was “good news that the Chancellor is taking action to smooth some of the business rate impact, but many will argue he has not gone far enough”.

“It would have been more welcome to smooth all of the increases, rather than those businesses coming out of the small business rate relief,” he said.

Ewan Venters, boss of luxury London department store Fortnum & Mason, said the group was facing an increase of 49% under the business rate changes and called for a “fairer rateable charge to online only businesses”.

“I believe this to be an unfair commercial advantage within the digital space, and gives a company like Amazon, for instance, a benefit on top of their low tax bills,” he said.