Retail leaders have slammed the government for “bragging” about the record £23.5bn haul predicted to come from business rates next year, despite warnings that sky high bills could cause tens of thousands of stores to close.
Today the DCLG put out a statement saying the figure showed British businesses were “on a roll” and said the £0.4bn increase in rates showed its plans to let councils keep 100% of business rate income by 2020 would “incentivise growth”.
It comes as local authorities estimates for 2016-17 show a 1.7% increase in the figure compared with 2015-16 and the DCLG said, that had its devolution plans been up and running next year, councils would have kept all £23.5bn instead of the £11.75bn they will under existing rules.
It said the “historic” local government finance settlement paved the way for councils to have greater financial freedom from Whitehall.
“As part of our long-term economic plan British business is on a roll,” said local government minister Marcus Jones. “Councils already plan on handing out discounts of £3.2bn, which supports charitable work, fills vacant shops and encourages entrepreneurs, but we want to further incentivise councils to do even more.
“That’s why by 2020 councils will have greater financial autonomy and be handed the power to cut rates as much as they like to boost enterprise in their local areas. And those that do give business a helping hand will reap the rewards - keeping 100% of the additional growth they generate.”
However, the BRC this week warned more than 40,000 high street shops will close by 2020 unless George Osborne reduced the rates burden, which it claimed was “sucking the life out of town centres”.
“Whether you are a big business or a small business your chief problem with business rates is that they’re too high and the burden holds back investment for growth,” said a spokesman.
“What we need are plans to reduce the disproportionate burden on retailers for now. What we have are plans to localise rates - which could stimulate competition among authorities - that will kick in in four years’ time. That’s a long time away and it doesn’t exactly bode well that local authorities already have the powers to reduce bills but rarely use them.”
Another source added: “It seems incredibly insensitive for the government to be boasting about the income from rates, just weeks ahead of the Budget, when businesses have been crying out to the chancellor to have the burden reduced.”
The DCLG pointed out that local authorities estimated they would grant £1.1bn relief under the Small Business Rate relief scheme to ensure that small companies were not paying for the rise.
It said there were 900,000 more businesses now than in 2010 and 400,000 small businesses paid no rates, with councils also spending less on reliefs for vacant premises as entrepreneurs spring up and fill empty shop fronts.
However, business rates experts Paul Turner-Mitchell said: “When businesses in England pay the highest level of property taxes of any G7 nation, EU or OECD country and the levels of business rates are stifling investment, particularly from overseas, it beggars belief the government want to brag about record rates income.
“It is particularly insensitive to the 278,000 SME shops, pubs, restaurants and cafés who will lose £1,500 retail relief in April, adding an extra half a billion to their tax burden, raising their rates bill by on average 20% this year.”
Another source added: “This statement from the government is unreal given the noise from retailers, the CBI and the BRC in the run up to next month’s Budget, and looks like two fingers up to the retail sector.”
ACS chief executive James Lowman said: “We are disappointed that the Government has chosen to herald the increase in business rates income it receives. Sadly, this number is set to be even higher as Government scraps the £1500 retail rate relief scheme which gave businesses crucial help in what remains a difficult time for high streets. The Chancellor must reconsider this.”