Maybe Government should look north for business rate answers

A New Year and a new inquiry into business rates thanks to the intervention of the Treasury Select Committee. The Committee will examine how business rates policy has changed, including business rates retention, alternatives to property-based taxes, such as the proposed digital services tax, and how changes to business rates could impact businesses.

It appears that the inquiry will focus on the High Street. Nicky Morgan MP, Chair of the Treasury Committee, said “Many high street businesses are struggling to remain competitive. It has been estimated that 10,000 shops will close this year. Unless action is taken, closures could continue and job losses may soar”. She went on to say that the Committee will examine how the current system is working and consider whether an alternative system, such as a land-value based tax, may help level the playing field between retailers.

The Committee has said that they will make a series of recommendations to Government on the fairness and effectiveness of the current system, and how it could be improved. They would do well to look at the results of the review undertaken in Scotland by Sir Ken Barclay.

Arguments against the current business rates regime have been going on for most of this decade, with the charge being led by the retail sector. But no-one has yet has come up with an alternative system that is as stable and reliable as the rating system.

Rates account for roughly £30bn of tax receipts which are used to fund local government. The Chancellor has made it very clear that any reforms will have to be tax neutral so this is a very difficult “nut to crack”.

The issues really arise from the structural changes to the retail sector. Given the real and vivid issues faced by the high street it is quite right that the level of this tax should be reviewed.

At roughly 50p in the £ the rate of the tax is substantial. Many useful reforms were advocated by Sir Ken Barclay and are being adopted in Scotland. We should certainly be reviewing the wide variety of exemptions and reliefs available making the rates burden fairer and more evenly distributed.