Rachael Maskell MP: Save our high streets by axing the failed business rates regime

Posted On: 
13th June 2018

A change from the outdated business rate regime system to a turnover tax would not only be far “simpler, fairer and popular”, argues Labour MP Rachael Maskell, it would also bring our high streets back to life.

Businesses across our communities are facing increasing pressures which threaten their viability. Outdated systems that have no relation to the competition and challenges confronting our high streets today, are causing businesses to struggle or close.

The retail sector, is just one area of the economy which has been adversely effected. Property owners, frequently off-shore investors, have sought to exploit the market in places like York, through charging businesses extortionate rents for the privilege of running a business from their premises.

When the Valuation Office Agency then conduct their own valuations for business rates, it is working with a skewed market, resulting in excessively high business rates for all properties in the surrounding area.

So businesses are faced with inflation busting rents and steep rises in business rates, on top of all the other challenges that have been laid before them in recent years resultant from central Government policy decisions.

Many businesses either move on-line where no such overheads exist, or close.  Where valuations are high, businesses move to cheaper locations, often sucking jobs out of the area with them.

But where the failed business rate regime is really showing its legacy is on the high streets of our towns and cities. While large supermarkets saw their rateable value drop by 5.9%, small shops have seen a sharp rise, and are clearly far less resilient.

Many unique independent shops have moved on-line to save themselves from such overheads. Pubs have had to call time as many have been caught up in extortionate rate rises, like some in York subject to a 600% increase.  Even schemes designed to support retailers with business rate changes have caused detriment, impacting 28 of the 31 House of Fraser stores earmarked for closure.  

So when the Chancellor announced his review of business rates in his March 2017 budget following extensive pressure from MPs, there was a sigh of relief. But these relief schemes are only acting as sticking plasters, when major surgery is urgently needed. Since then there has been obfuscation by Government, and no progress made, while more ‘closed’ signs appear on shop doorways.

I have been working with local businesses in York, who have a solution. York Traders Forum, chaired by entrepreneur Phil Pinder, has fully costed a new approach, which is fair, and creates a level playing field across all businesses, whether on-line or on the street corner – a turnover tax.

A turnover tax would not look at the size of a building, which furniture stores have consistently explained need for far more space than say a jewellers despite having far lower returns per square metre. It would not matter where the business was located or how much the landlord was charging, it would simply take the company’s turnover and place a levy on this.

Simple to collect through HMRC through a tick in a box, all businesses would be subject to the same rate.  When calculated, if a 1% levy is taken across the board, this would equate to the total take on business rates.

In addition, social determinations could be applied to incentivise businesses, who, for instance, cut their carbon footprint, or made an extraordinary contribution to their community. Government would be able to distribute the levy back into communities in a fair way.

Such a change would not only be far simpler, fairer and popular, it would also result in our high streets coming to life again. We just need a Government with the creativity and desire to champion business and support our entrepreneurs. A Labour Government would not waste time in creating a fair system for businesses.