Call to cap annual business rates rise in bid to aid recovery

In its submission to the Chancellor ahead of his Autumn Statement, it argues the system is outmoded and acts as a barrier to much-needed investment.

Business rates normally rise in line with Retail Prices Index inflation from the previous September. This year it was recorded at 3.2 per cent, but the CBI wants the rise to be capped for next year pending a full reform of the tax. It has calculated this cap will cost the Treasury £327m for 2014/15.

The call comes as official figures show retail sales down, the construction sector stuttering and a record goods trade deficit with the EU – despite signs of burgeoning growth in the wider economy.

CBI director general John Cridland said business investment was needed to create jobs, raise living standards and drive the recovery.

He said: “At the heart of our realistic package is an overhaul of the business rates system, which will boost the high street, manufacturers and factories. We want to ensure windows are opened up, not boarded up.”

The CBI argues the business rates system is uncompetitive – raising higher revenue as a proportion of gross domestic product than other developed countries – as well as “distortive” as it hits bricks and mortar rather than web-based firms, and too complex.

It says a short-term rates cap would help firms that have been struggling with high rates and should serve as a commitment that the Government is willing to take steps to reform the “damaging” system.

In its submission, the CBI adds: “Government should also consider introducing an incentive to move into vacant property, such as a one-year rates holiday, until full reform of the system is possible. This would help to break the cycle of decline that empty shops can create.”

The CBI is also urging the Government to stick to its deficit reduction strategy, saying the job is only half done.