Disappointment over Osborne’s rates cap
THE Government has argued that 232,000 premises in the North West will benefit from Chancellor George Osborne’s tweaks to business rates in his Autumn Statement.
But the property sector was unimpressed and described the measures as tokenistic as well as lacking impact and substance.
It was seen as a wasted opportunity for significant change by those campaigning for the revaluation of rates to be reinstated to 2015, from 2017, which will link rates bills to current property prices. At present bills are still calculated based on 2008’s pre-recessionary values.
The Chancellor has introduced a 2% cap on next year’s rates increase, instead of the 3.2% inflationary increase; extended small business rates relief for another year; introduced a £1,000 rates discount for businesses with a rateable value of less than £50,000; and introduced a 50% relief for businesses that re-occupy retail premises that have been empty for more than a year.
Duncan Harkness, director and head of business rates in North West for GVA, said a more significant step was required from the Chancellor.
“The real problem remains, the government will not make a U-turn in their decision to delay a revaluation. This is despite clear evidence that their decision last year was poorly thought through, inequitable and has undermined the rating system as a tax base.”
He added: “GVA calls upon the government to reinstate the 2015 revaluation and in the meantime look for specific ways to target relief for hard pressed areas where business bankruptcy has increased vacancy levels to all-time highs.”
Robert Hayton, national head of empty rates at Altrincham surveyor Altus Edwin Hill said: “Whilst making token measures to the retail sector, the Chancellor has missed an opportunity to make a difference to the country’s other struggling businesses, in particular manufacturing.
“Rate payers would benefit most of all from the reinstatement of the 2015 revaluation. The postponement to 2017 means that businesses will continue to pay based on peak market rents in 2008. This is good news for prime parts of London and the south east but bad for much of the rest of the UK.
David Lathwood, lead director at Jones Lang LaSalle in the North West, said: “While this will be welcome news to many of the North West’s high streets, it stops well short of what’s really required – a full overhaul of an outdated system that currently values Rochdale town centre’s business rates more than those of Harrods’.
“The economy is performing well but many small retailers and struggling major chains are yet to feel the benefit. The current business rate system is a massive handicap.”
Ian Bingham, tax partner at BDO in the North West, said: “Life remains tough on the High Street, so any initiative designed to help retailers should be recognised as a step in the right direction.
“However, it is difficult to see the package of measures announced today as anything more than a very small step when the High Street actually needs a giant leap.”
Adam Burke, director of ratings at the North West office of Colliers, said: “The Autumn Statement is the coalition’s attempt to grab headlines without substance in the hope British business won’t value what the cap actually means.
“We have been lobbying to highlight the issue of compound interest and whilst we are grateful that Osborne has capped the increase in business rate costs, the underlying problems remain; empty rate charges, the postponement of the 2015 revaluation and uncertainty for small business as to whether or not they’ll receive on-going rate relief for anything longer than a 12 month window.”
Brian Green, head of retail at KPMG in the North West, said: “Today’s capping of business rates may seem welcome but it is not enough. Rates have become one of the retail industry’s biggest costs and biggest burdens, outpacing rents, revenue growth and curtailing the amount retailers are able to invest back into their business. A cap rather than a freeze still means a rise in costs.
“For five years the industry has been overtaken by technology advances and is rapidly moving online. To compete in a global retail environment, British retailers urgently need to make significant investment in IT systems and technology to drive multi-channel, international growth and offer personalisation across all channels. An increased property cost burden hardly helps to keep retailers on the high street.”
He added: “Whilst capping the rates may be coloured as saving retailers up to £91m a year what’s really needed, is an urgent re-think and overhaul of the business rates system, which is simply no longer fit for purpose. Only a full top to toe review will deliver a long term solution and allow the industry to move with the times. This should be done in 2014, not 2017.”
But David Ford, regional director at Manchester-based rating appeals business CVS, was encouraged.
He said: “The Chancellor’s package of measures today shows that business rates is at the top of the UK business community’s agenda and has got the Government’s close attention.
“What’s most encouraging in the Autumn Statement is that the Chancellor has committed to clearing almost the whole backlog of rates appeals by July 2015. This is a welcome and ambitious target which will return cash to businesses and help iron out regional disparities which followed the 2010 list and the onset of the economic crisis.
“It is positive news that the Chancellor has heeded the calls of the whole industry to review the business rates system. Between now and the review in 2017, we will continue to call for a commitment to regular valuations, a switch from increases based on the retail prices index (RPI) to the consumer prices index (CPI), an improved appeals process and other measures to help businesses stay competitive under an effective rates system.”
Liz Peace, chief executive of the British Property Federation, was also more positive.
She said: “We are delighted that the Chancellor appears to have heeded our calls – and those other business groups – of to commit to a review of business rates, as well as taking short-term action to mitigate the harm that continues to be caused by this archaic property tax.
“However, simply tinkering around the edges of the system will not be enough – the business rates regime remains one of the greatest barriers to investment in the built environment, and is fundamentally unfit for the 21st century.”
Manchester surveyor Michael Blank described the measures as “disappointing” and said the serious, and desperately needed, reform of the rating system had been “kicked into the long grass” until 2017.
He said: “The 2% cap is hardly a generous gesture, an insignificant restriction on what was going to be an insupportable (for many businesses) originally planned increase. Putting this in perspective: a business occupying a property with a rateable value of £50,000 and no longer subject to “transition,” will see its rates bill rise from £23,550 in 2013-14, to £24,021 in 2014-15, instead of the originally planned increase to £24,304, ie a “saving” of a mere £283 or 1.2%.”
