In recent weeks the Chancellor has come under fire from all sides over the impact of the business rates revaluation, with many claiming the impact on their businesses could be catastrophic.
In the convenience sector, there will be both winners and losers when the new rates take effect in April. The government is right to say that thousands of businesses will be taken out of paying rates altogether due to the 100% relief given to businesses in England with a rateable value of under £12,000, and for many of our smaller members this is welcome relief. Additionally, the transitional rate reliefs put in place for those set to see significant increases in their bills will lessen the initial blow in April.
So while it would be wrong to depict the rates revaluation as universally bad for business, the current media frenzy is a result of longer-term problems with the business rates system. It may be tempting for the Chancellor to give some short-term tactical help to some of the affected businesses in the Budget next week, and we hope he does, but he must also address the fundamental issues that make the system unfair and perverse.
For me, the biggest problem with the current system is that it acts as a barrier to investment. Over the last year, the convenience sector alone has invested over £800m in improving stores and expanding the number and quality of features and services offered to customers, and other sectors will be investing in their businesses, too.
This investment is crucial in ensuring that businesses remain competitive, and it’s these thousands of small investments taking place in every community across the country that keep the economy ticking. Yet these investments, through the eyes of the VOA, increase the value of the property, which in turn puts up business rates bills for the retailer. We believe this needs to be flipped around, so the rates system actively incentivises investment rather than, in the case of some members contacting us, doubling the rates bills of progressive businesses.
We have heard a lot about the disparity in rates bills for certain business sectors. For example, many of Amazon’s giant distribution warehouses will benefit from a fall in their rateable values, while some high street bookshops see their rates rise. In our sector, petrol forecourts are seeing far bigger increases in their rates due to paying on the basis of turnover, not rental values. If we have separate schemes for forecourts, and indeed for pubs and free-to-use cash machines, then why not for internet distribution facilities?
This is why we need a full review of all the separate schemes used to calculate rates in different sectors. Are they fit for purpose, fair, and relevant?
The reinstatement of the retail rate relief scheme, more transitional relief for businesses seeing big rates rises, and retention of businesses’ rights to appeal their rates bills would all be welcome moves in the Budget. I hope the Chancellor has understood why the current system damages businesses, high streets, consumers and the economy.
James Lowman is chief executive of the Association of Convenience Stores