Rates Relief?

On a couple of occasions during the so far three year life of this blog I have almost written something about rates. I have obliquely skirted the issue and then pulled away, sometimes saying I’ll do it properly some day. Yet here we still are and I’ve not really addressed the topic.

A couple of things have changed recently though. First, I do get the feeling there is a consensus that the system is broken. What precisely ‘the system’ is, I will return to. Secondly, the British Retail Consortium two months ago produced some initial thinking on what might replace rates and are extending this work. This opens up some space for debate.

Allied to this is a little lurking question in the back of my mind about the costs of our current rates amelioration systems. In Scotland the Small Business Bonus Scheme system is much vaunted by the government as being really beneficial to small businesses – and it is. But at what cost, given the need for valuation, application, decision and relief? There must be a better way.

That the rates system is broken is now pretty universally accepted (except for the odd UK government minister perhaps). As the recent report on the Retail Sector by the House of Commons BIS Committee put it:

The message has to be clear……or is it?

What precisely is broken? Is it the lack of recent revaluation (timeliness) or the valuations themselves (fairness – and there are many appeals)? Is it the balance of the burden on retailers and places (in-town versus out-of-town vs online), or on retail as a sector (paying far more proportionately)? Or is it, as I believe, the whole system of local government finance and the much reduced link of locality, activity and taxation?

In terms of suggestions to fix the issue the report by the British Retail Consortium has some interest. It claims to have ‘ground-breaking’ ideas for business rates reform and lays out four of them:

Now it is easy to be cynical about these, coming from what is too often lazily portrayed as a large retailers ‘club’ (supported here by a major tax/accountancy firm; Ernst & Young as advisors/co-authors). Yes, the measures seem to reward larger firms, corporation tax payers and large energy users, and they are put forward as only illustrations of possibilities. But the thinking behind the options is surely right: let’s use a new or revised system to reward priorities for British retailing and British town centres.

And perhaps this is where my comment about the cost of rebates etc. comes in. Could we devise a system based on no rates for retailers in specific places or of specific scales? Can we perhaps replace the rates component with a more locally focused revenue generation, suitably incentivised for growing the footfall and quality of places? And, as we do this, force local authorities to ring fence revenue for spending on town centres/local businesses, getting rid of the valuation, appeal and rebate culture by removing/releasing the need for bureaucratic systems? We have to find ways to tie local places (businesses, communities, governance) together and to face up to the work that needs to be done locally.

If we can devise our priorities around places and towns then let’s harness the tools to allow us to get the outcomes we desire and the community and economy needs, both economically and socially. Rates relief is not about tinkering any more – it is more fundamental than that.