Cuts in business rates proposed by Boris Johnson to have no "meaningful" impact

With general elections just one day away, the Conservative party has proposed to cut business rates by 10 million pounds a year from 2021 to 2023, in its latest round of promises to lure voters.

At the annual CBI conference in November, Prime Minister Boris Johnson promised to “reduce the overall burden” of business rates as well as launch a review into the rates system. The reality, however, is retailers would see only a 0.03 reduction in rates, which will make little or no impact to the burden the Prime Minister promises to alleviate.

The British Retail Consortium (BRC) has long been lobbying for a reduction in business rates, which sees retailers struggling to keep a presence on the high street while the high cost of rates is exacerbating pressure on shops and small businesses.

Earlier this month data from the HMRC showed the number of businesses waiting for challenges over soaring business rates to be resolved has jumped by more than a third in just three months. According to the HMRC the number of outstanding challenges has risen by 35 per cent, fuelling concerns from experts over the rates appeal system.

BRC chief executive Helen Dickinson said businesses could be owed 1.4 billion pounds over the five years to 2022 through the appeals system, noted the Retail Gazette.

Currently one in 10 shops, pubs and other companies face legal action from a local authority over property taxes. This translates into approximately 750 businesses sued each working day, according to figures from real estate consultancy Altus Group.

The Independent in April wrote the data revealed “9.8 per cent of all non-domestic premises were issued summons by local councils over business rates arrears.”

The business rates system requires fundamental reform

According to the BRC, retailers alone are responsible for 7 billion pounds in business rates annually or a quarter of the overall total. The central problem with the rates system is that the national multiplier has grown out of proportion since its introduction in 1990, irrespective of the strength of the economy or success of businesses.

An over-dependence on input taxes harms retailers, which are people and property intensive businesses, and such taxes have grown disproportionately compared to other taxes such as corporation tax. For every 1 pound retailers pay in the latter, they pay 2.30 pounds in business rates.

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