Committee calls for fundamental reform of business rates


The current system of business rates is not fit for purpose and needs to be fundamentally reformed, says the Business, Innovation and Skills Committee in a Report published today. The Committee calls for a wholesale review that goes beyond the administration of business rates to examine whether retail taxes should be based on sales rather than the rateable value of a property; whether retail needs its own system of business taxation; and how frequently revaluations should take place.

In the interim, the Committee calls for a six months business rates amnesty for businesses occupying empty properties.  This would go further than the 50% reduction announced in the Autumn Statement and would encourage new businesses to the High Street. 

The Committee also recommends that in the interim the Government review whether business rates are more appropriately linked to CPI or RPI and calls for annual increases to be linked to a 12 month average of either RPI or CPI, with a cap at 2%.  This would replace the current link to a monthly snapshot of RPI.

Commenting on the Report, Adrian Bailey MP, Chair of the Business, Innovation and Skills Committee, said: “British retail is a global success story. Employing around 3m people, it is the largest private sector employer in the UK.  But its traditional home – the High Street – is struggling under a system of business rates that comprises one of the highest forms of local property tax in the European Union. 

“Amongst the many challenges they face, business rates are the single biggest threat to the survival of retail businesses on the High Street. Since the system was created the retail environment has changed beyond all recognition. A system of business taxation based on physical property is simply no longer appropriate in an increasingly online retail world.

“The Government’s consultation on the administration of business rates at least acknowledges that change is needed. But this is a time for wholesale review and fundamental reform, not for tinkering around the edges.  Business rates are not fit for purpose and minor administrative changes will not alter that. 

“We are not advocating a return to a bygone age. But if High Streets are to become thriving community hubs and Start Ups are to invigorate our town centres the significant barrier to innovation currently posed by business rates must be addressed.

“The Government’s retail strategies are full of warm words that fail to address the most debilitating levy on existing businesses and the most crucial deterrent to new businesses appearing on the high street – business rates. Fewer strategies are required, simple, decisive action is needed.”

The Report’s other recommendations include:

  • Calling on the Government to provide information on how and how much of the money allocated to the Portas Pilots is being spent. This follows concerns that much of the money allocated to the pilots has not been spent [paragraph 14]
  • Urging the Government to outline the results of its latest STEM skills analysis and outline the action it will take to tackle any skills shortages. The Report also calls on the retail sector to encourage more staff to be trained at Apprenticeship Level 3 and above, and consider developing language skills to enhance the international consumers’ experience [paragraphs 58 & 54]

Bailey said: “£2.3m was allocated to the Portas Pilots amidst much fanfare. Yet the Government now cannot provide evidence of how or even whether the money has been spent. This is not acceptable and must be rectified. 

“The skills needed by those working in the retail sector are changing rapidly as shoppers operate in an increasingly digital world and shopping becomes an increasingly multi-channel experience. The Government must outline the action it will take to tackle any skills shortages and the sector itself must be more ambitious in the level of training it offers to its staff.”