Rishi's budget 'missed a chance for real reform of business rates'

RUTH SUNDERLAND: A short-term reprieve, but a missed chance for real change… Firms desperately wanted Rishi Sunak to announce a wholesale reform of business rates

Middlesbrough town centre has never been the most glamorous place on the planet. 

London’s glitzy Bond Street or the chic Champs-Elysees in Paris hardly tremble at competition from Linthorpe Road.

For me though, it holds happy memories of the shop where I got my school sports kit, and the imposing department stores that dominated the prime sites.

When I took my parents out for tea there last weekend, all three of us felt a melancholic twinge at how it has declined.

Debenhams, which once stood in the middle of town, has shut down. 

The independently-owned designer clothes emporium I loved so much in the 1980s has been sold to Sports Direct tycoon Mike Ashley. 

At least some of the responsibility for the way the bustling streets and arcades of my childhood have changed so dramatically over the past two decades lies with the onerous business rates regime. 

And retailers, pubs and restaurants in my home town, like similar outlets all over the country, were hoping for relief from Rishi’s autumn budget.

They will certainly be pleased he is offering a 50 per cent discount on their bills next year. 

Firms desperately wanted Chancellor Rishi Sunak to announce a wholesale reform of business rates, the most despised of all corporate taxes in a highly competitive field, says RUTH SUNDERLAND

It adds up to a saving of £1.7billion for 400,000 outlets, which is not to be sniffed at.

Regretfully, it must be said that feelings of gratitude are tempered with disappointment.

Firms desperately wanted Rishi to announce a wholesale reform of business rates, the most despised of all corporate taxes in a highly competitive field. 

Traditional retailers are disproportionately hammered by business rates. 

They contribute a quarter of the total business rate revenue, yet only comprise 5 per cent of our GDP. That inequity will persist after the Budget.

Yes, Rishi has put right some obvious wrongs and absurdities.

He has stopped an automatic inflation increase that would have saddled companies with a £1billion tax hike next year.

He is getting rid of ludicrous rules which slapped retailers with bigger bills if they installed solar panels or amenities which increased a property’s value – and therefore ‘rateability’. 

And he is cutting the time between property revaluations to three years from five, a practice which had been producing wildly inaccurate results. 

Taken as a whole, his changes amount to savings for firms of £7billion over five years. 

To put that in perspective, at the current annual level of £26billion, firms would pay total business rates of around £130billion in that period.

It may seem churlish to quibble with his constructive approach. But while firms are indeed delighted that their bills have been halved for 2022, they are painfully aware it is only a short-term reprieve.

Once the year is up, the long-term challenges in places such as Middlesbrough will still be there – and unless Rishi takes further action fast, so will over-complex and burdensome business rates.

RUTH SUNDERLAND: Carrying on with a fundamentally broken system is a deterrent for a new generation of shops to flourish in their place

Carrying on with a fundamentally broken system is a deterrent for a new generation of shops to flourish in their place. 

And while the Budget measures look impressive on the surface, a closer examination reveals they fall well short of the overhaul required.

The Chancellor has offered some much-needed respite, but he has not tackled the fundamental injustice baked into the system.

There were hopes for a new online sales tax to help level the playing field between bricks-and-mortar stores and internet operators who pay relatively tiny sums in rates, but that idea has been kicked into the long grass.

High street retailers will still be paying far more than online operators such as Amazon and will therefore remain at a disadvantage.

This is creating grave disquiet. Food retailers are being plagued by staff shortages and bottlenecks in supply chains, leading to fears there will be higher prices and empty shelves at Christmas. 

One chief executive of a leading grocery chain I spoke to last week told me the unfairness in the business rates regime is making this situation worse.

How can he hire the employees he needs, he asked despairingly, when there is an Amazon warehouse down the road offering £3,000 signing-on bonuses?

RUTH SUNDERLAND: If he continues in the same direction, Rishi could be the one to breathe fresh life into our high streets (Pictured: A man walks past an empty shop which displays a ‘To Let’ sign in the window on May 12, 2021 in Newcastle-Under-Lyme)

While firms are indeed delighted that their bills have been halved for 2022, they are painfully aware it is only a short-term reprieve, says RUTH SUNDERLAND (Pictured: A Debenhams store on the day it closes for the last time on May 15, 2021 in Cardiff)

‘They can only afford to do it because their business rates are so low,’ he told me. ‘I’m not in a position to compete.’

His company will not even benefit much from the 50 per cent discount because relief is capped at £110,000 and his bill runs into hundreds of millions. 

Thankfully, back in Middlesbrough, it is not all gloom on the retail front.

Enterprising locals have set up quirky independent businesses in the heart of town with brightly coloured frontages that would not be out of place in London’s chi-chi Notting Hill.

Brave entrepreneurs like these will be the ones who benefit from the helping hand Rishi has extended to them in the Budget.

Let’s hope these are just the Chancellor’s first steps towards freeing firms from the shackles of this reviled tax.

Because if he continues in the same direction, Rishi could be the one to breathe fresh life into our high streets.

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