Business rates system “not fit for purpose” say MPs

The business select committee’s retail report published this morning urges the Government to fundamentally reform the rates system and introduce a total amnesty on small retail businesses moving into empty property for six months. 

“Without a wholesale review, resulting in a new way of calculating Business Rates, the High Street—and with it community hubs attached to those centres—will fester,” the report said. 

Adrian Bailey MP, chair of the BIS Committee, said: “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.

“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.

“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 committee also recommended 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%.

Helen Dickinson, director-general of the British Retail Consortium (BRC), said: “This report must be the final nail in the coffin of the question: ‘do business rates need to be reformed?’ 

“They do. Business thinks so. A committee of Parliament thinks so. We very much hope the Government will think so too.”

The BRC is currently developing alternatives to the current system, including a recent controversial suggestion that rates could be replaced with a tax on energy.

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