Shops high street

Business rates need urgent reform, the BIS committee of MPs has said

The business rates system is not fit for purpose and needs to be fundamentally reformed, according to a report by a cross-party committee of MPs today, which blasts the government for its handling of the high-street crisis.

The long-delayed report (PDF) by the Business, Innovation and Skills Committee - originally expected in October - calls for a wholesale review that goes beyond the administration of business rates to examine whether retail taxes should be based on sales rather than the rateable value of a property.

The report also accuses ministers of failing to address the need for fundamental reform of the “outdated” business rates issue, and criticises their handling of Mary Portas’ 2011 Review.

“Business rates are the single biggest threat to the survival of retail businesses on the high street”

Adrian Bailey MP

Despite spending £2.3m of taxpayers’ cash on 27 Portas Pilots, the report said the government “has not been able to provide evidence of how, or indeed whether that money has been spent by local authorities”.

“There is no readily available data on the allocation of the funds, and, as far as we are aware, no organisation is auditing the funds,” it adds.

When questioned by the committee in October, high-streets minister Brandon Lewis said he would “get a note” to the committee on how the money had been allocated. But the report says: “As of February 2014, we had not received a note from the minister.”

The report calls for retail to have its own system of business taxation and for outdated revaluations to be urgently addressed.

It says the government has not gone far enough with previous measures, calling for a six-month business rates amnesty for businesses occupying empty properties – much further than the 50% reduction announced in the Autumn Statement.

The committee also calls for the government to review whether business rates are more appropriately linked to CPI or RPI.

“Amongst the many challenges they face, business rates are the single biggest threat to the survival of retail businesses on the high street,” said committee chair Adrian Bailey MP.

“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.”

Commenting on the Portas Pilots’ spending, he added: “£2.3m was allocated to the Portas Pilots amidst much fanfare. Yet the Government now cannot provide evidence of how or even whether the money has been spent. This is not acceptable and must be rectified.”

Body of evidence

Former Iceland Boss, Bill Grimsey, who authored his own review into the high street last year and who gave evidence to the committee, said: “There is now a growing body of evidence showing that the current business rates system is unfair, outdated and holding business back. How many more reports like this do we need before ministers finally wake up to the problems they’re storing up by continuing with a system that’s simply not fit for purpose?”

The British Retail Consortium, which last month presented its own alternatives to the business rates system, welcomed the committee’s call for reform.

“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,” said BRC director general Helen Dickinson.

But the Association of Convenience Stores expressed its concern that the report failed to identify the need for more action to enforce a town centre-first planning policy.

“We are disappointed the committee missed this opportunity to hold government to account over the weaknesses in the planning system that are undermining retailer confidence to invest in town centres,” said ACS CEO James Lowman.