Hammond admits high streets hit too hard by business rates
Pressure is mounting on Chancellor Philip Hammond who has finally admitted that business rates are hitting the high street too hard.
Despite the admission he has stopped short of making any immediate changes to business rates stating in a letter to fellow MPs that the system was the backbone of local government funding. Business rates generate an estimate of £25bn worth of revenue a year for the Treasury, a figure that Hammond can ill afford to downgrade with austerity cuts already watered down and the NHS being promised an extra £20bn over the next six years.
The Chancellor did however suggest that he had his sights set on online retailers who may find themselves subject to a separate tax system. That could help level the huge business rates’ discrepancy that is currently squeezing high street retailers compared their online counterparts.
Treasury select committee chair Nicky Morgan also agrees with the Chancellor’s admission that business rates are a high fixed cost for some businesses and said the committee was likely to be looking at the issue again this autumn.
Other pressure points on Hammond at the moment are coming from the British Retail Consortium calling for a three-year business rates freeze to allow retailers breathing space to regroup and revamp their business models. Respected retail expert Bill Grimsey went a step further by saying the Government should scrap business rates altogether. When Grimsey speaks the media certainly listens, but I’m not sure the Government will.
Other lobby and pressure group have entered the business rates fray with schemes of their own, including a revenue-based tax for online retailers that could subsidise retailers hit hardest by business rates.
All this focus comes at the same time as The Press Association estimated that 50,000 retail jobs have been lost in the first half of this year as workers bore the brunt of hundreds of store closures. In the past few weeks alone, House of Fraser has put more than 6,000 jobs at risk with its store closure plan, while Poundworld went into administration, endangering a further 5,100. Those two retail behemoths are just the more recent additions to a list that already has seen job losses announced at Mothercare, with Toys R Us and Maplin both collapsing earlier this year.
We will continue to watch and wait for any meaningful announcement over the coming months but as Brexit crawls towards the cliff edge (possibly speeded along by David Davis’ resignation yesterday) I fear business rates reform is as far away as ever.
Tory peer Lord Wolfson has said that business rates need to be updated to reflect major changes in retail.
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Now that I have written about Wales recently it’s only fair I switch to our more northerly neighbours.