A week is a long time in politics. But even as the Budget recedes further into the past, business rates remain a concern, and likely will for the foreseeable future.
What lies ahead is only more unpredictability, with the Budget having provided little of the certainty needed to abate worries over rates. There has been no significant structural change, but a comprehensive revision and reform is the necessary next step if we are to really lift the weight from the shoulders of businesses.
The problems businesses face now are those they have faced for some time. With due consideration to rates, a major fiscal event like this could have seen us brought back from the cliff-edge that we have come ever closer to over the last five years. But, as we now know, it did not entirely bring us to a safe distance. So, what did the Budget do for businesses?
You win some… and you lose some
It has long been argued that reducing the rate in the pound is a crucial component of relieving the pressure on businesses, and this did come down at the budget. But, as with any good thing, the effects of this simply will not last. Why? Other changes were introduced that offset any benefit of the reduction: an increase in both the value of the Rating List and of rateable values.
This will see only 23% of ratepayers actually paying less, not quite the systemic overhaul we so desperately want to see take shape. Looking closer at the fine print also reveals a more discreet but still important 1-year, 1p supplement to rate bills applicable to those not on the supporting small business scheme or receiving transitional relief.
Sticking with those losing, let’s go big – airports. Heathrow’s rateable value alone will be more than quadrupling, shooting up from £210m to £915m.
But interestingly, these massive swings are blanketed by an ‘other’ label on the Rating List. The 19.2% increase in value of this list details the smaller percentage increases as being from industrial properties at 5.7%, offices at 3.2% and retail at 1.9% - and then there is other, at 8.4%. Covered by this are hospitality properties, a large proportion of which seeing big increases.
With the previous valuation date back in April 2021, falling amidst the COVID pandemic, the 2023 values list included relatively low figures as a result of the hit businesses took in that period. Post-pandemic recovery for businesses also clearly means a gradual recovery of bills.
Every region has seen an increase in values, with London unsurprisingly the highest at 22.3%. The East Midlands takes the smallest blow, at 16%. Diving deeper by sector, the biggest increases for industry have been in the North East and for offices across a greater distance – from the North East and Yorkshire down to the South East and West.
And if we are talking about taking a hit, let’s not forget those receiving the Support Small Business Relief from the 2023 Rating List who have been bumped off the scheme due to their rateable value rising above the £12,000 threshold. Though the government has put in an extension on their relief for a year, if nothing progresses in that time, frustrations may well boil over come next Autumn.
Should rates really be like a Rubik’s?
Rate bills have become ever more complex, which makes very few lives easier. And then there is the issue of liability, which for most following this Budget is increasing. The most positive stats, such as the lowest multiplier for small retail, hospitality and leisure properties being similar to those of the initial 1990 system, hide these more troubling snags.
Businesses are still unable to forecast their rate liability for future years, which creates unhelpful uncertainty. With just four months to go until the 2026 revaluation, businesses have only just become able to calculate their rate liability from April. For chains, though, they are still dependent on an update from their software provider. It all seems, and to no surprise, is far from efficient.
Multipliers, unlike rateable values, cannot be estimated. So, what can we do to solve the puzzle? A possible solution would be to set a fixed figure for the multipliers, making rates payable according to rent. This would make transparent to businesses the direct relationship between the rent they agree and the rates they pay.
Reaching a resolve
Not enough has been done to help businesses; that much is clear. While any progress toward reducing inequalities is, of course, welcomed, we could go further – in fact, we need to. A full council tax revaluation and a reduction in the rate of the pound that is not undercut by other measures would see us on the way to bettering business for the long term.
