Government business rate package dismissed as ‘a sticking plaster’ as pleas for full reform gather pace

January 29, 2014
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Calls for a full-scale shake-up of business rates have continued unabated despite the Government pledging a £415m package of relief for small firms.

The West of England’s largest business group Business West, which runs the Initiative in Swindon & Wiltshire, said while it welcomed the announcement, it amounted to little more than “a sticking plaster” and maintained its stance urging a fundamental reform of the system.

The measures announced by Communities Secretary Eric Pickles, pictured, includes a £1,000 business rates discount for 300,000 small retailers which was initially outlined in the Chancellor’s last Autumn Statement.

Business West director in Swindon and Wiltshire, Ian Larrard, said: “While the rate reliefs announced are welcome and will help many smaller companies, anything less than a fundamental reform of Britain’s broken business rate system is just a sticking plaster.

“Business rates are a very considerable and rising fixed cost for all businesses – and affect firms on industrial estates, offices as much as on the high street.

“The Prime Minister has recently committed to looking again at the business rates system. We believe that he and the Chancellor should set a clear timetable for this – and ensure that their colleagues in Government do not yet again hide behind the excuse that fundamental reform of business rates is ‘too difficult’ to achieve.”

A spokesman for the British Chambers of Commerce added: “Westminster and the media seem to think that business rates are only a problem for retailers. Yet they are a huge, and rising, fixed cost for all businesses – and hurt firms on industrial estates and in offices just as much or more than the high street.”

West-based accountancy firm Bishop Fleming has been spearheading a campaign in the region for a ‘root and branch' reform of what its managing partner Matthew Lee has described as an “iniquitous tax”.

The campaign by the firm, which has offices in Bath and Bristol, was reinforced earlier this week by results of a survey it held among the region’s firms on business rates.

The findings showed that 81% of businesses taking part have seen an increase in business rates over the past five years, making them one of their biggest costs.
While rates for just over half (50.5%) rose to almost match their rent, almost a fifth (18.1%) are now paying as much or more in business rates as they pay in rent.
Mr Lee said: “These findings are outrageous, and underline our campaign.

“Business rates were supposed to be less than half of rents, but that ratio is becoming overturned by the reduction of rents and the continued increase in Business Rates.”

Most businesses (89%) report that increased business rates have hampered their ability to invest in growth.

Most South West businesses (81%) have seen their Business Rates increase over the past five years, becoming one of their biggest costs.
While more than half (50.5%) have seen Business Rates rise to almost match their property rent, almost a fifth (18.1%) report that they're now paying as much or more in Business Rates as they pay in rent.
These are among the top-line findings of a survey of the region's business owners by South West based Bishop Fleming, Britain's fastest growing Top 40 firm of accountants.

“These findings are outrageous, and underline our campaign calling for a ‘root and branch' reform of what we consider to be an ‘iniquitous tax'", said Matthew Lee, Managing Partner at Bishop Fleming.

"Business rates were supposed to be less than half of rents, but that ratio is becoming overturned by the reduction of rents and the continued increase in Business Rates", said Mr Lee.

Mr Lee added: “This underlines why we are campaigning for this tax to be reformed.

“The Government is expecting the recovery to be driven by the small business sector, but that potential for recovery is stifled by the iniquities of business rates – the only tax that is index linked and guaranteed to rise, irrespective of how a business is performing.”

Business rates are geared to commercial property valuations. A scheduled revaluation was postponed, meaning that the tax remains based on 2008 valuations – the height of the property boom.

Some 63.3% of Bishop Fleming’s survey respondents said their property values had declined since 2008, while their business rates had increased.

“It’s obvious that the scheduled revaluation would have seen a reduction in business rates, because property values have declined in recent years,” said Mr Lee. “Our belief is that the Treasury took a cynical decision to postpone that revaluation to avoid a reduction in business rates revenues.”

Almost three-quarters (73%) of the survey respondents branded business rates as “unfair” while a further 21.6% questioned the fact that UK businesses pay more in business rates than their EU competitors.

Mr Lee added: “UK businesses pay more than Germany and France combined. How can that fit with the Government’s declared aim to make the UK more competitive than our EU rivals?”

More than half the survey respondents (58%) said that they would sign the e-petition, calling for a ‘root and branch’ reform. The e-petition is at http://epetitions.direct.gov.uk/petitions/57038

Bishop Fleming’s website www.bishopfleming.co.uk provides a link to the e-petition, and audio interviews with Mr Lee and Tessa Munt MP – who is drafting a reform Bill on business rates – and a recording of Chancellor George Osborne’s last announcement on rates.

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