Save our Shops Campaign

Business rates and the 2010 revaluation

As you know the Government has pushed ahead with the planned 2010 rates revaluation. New bills will be issued in April 2010 but draft Rateable Values have already been published which give details of the impact on your business.

These can be found at: www.voa.gov.uk/2010. Many businesses face significant rates rises.The local Council have NO responsibility for setting business rate levels but merely acts as a collecting agent.

The problem with the Government's approach has several aspects:

• A flawed methodology using April 2008, at the height of the property boom, on which to base the revaluation snapshot. Certain sectors, artificially buoyant in April 2008 in spite of seeing values fall back since, effectively will now have boom values “baked in” to their rates bills for the next 5 years before the next revaluation. Additionally, many small shops could no longer be eligible for small business rate relief as a result, further increasing their bills.
• The Government has refused to conduct any Impact Assessment on the effect of the forthcoming 2010 revaluation to gauge its likely effect on businesses. This is grossly irresponsible given the potentially destabilising economic impact of making changes to a £21 billion tax during a recession.
• The consultation on the transitional relief scheme closed before the draft Rateable Values were published, preventing a considered assessment of the implications by respondents. In the previous 2005 revaluation, all details were published a full month before the consultation closed enabling informed responses.

A significant proportion of businesses will face large and destabilising rises during the worst recession on record. In Northern Ireland, the Executive has resolved to defer the 2010 revaluation to allow the localised effects of the recession to be taken into account.

Empty property business rates

Without proper consultation, in the 2007 Budget, Gordon Brown slashed back empty property rate relief for commercial and industrial premises to raise £1 billion a year. This tax rise is particularly harmful in a recession, since firms are often unable to rent out vacant property due to lack of economic demand but they must still fork out the cost of business rates. Firms now have an incentive to demolish buildings as a result and many are doing so. The Government temporarily increased the threshold for empty property relief for 2009-10, but this ends in April. Struggling small and medium firms will face a further big hike on their empty property, aggravated by the 2010 revaluation increase in Rateable Values. Initial Government figures suggest relief claimed has already fallen by £700 million, money that businesses could otherwise have used to reinvest in premises and create new jobs and business opportunities.

Deferral of increases from last year

Emergency Deferral Scheme

In April 2009, businesses faced a 5 per cent rise due to RPI inflation (based on the previous September level of RPI) and further hikes due to the end of a botched transitional relief scheme. In a last minute panic, the Government allowed firms to defer the increases over 3 years. However, it still means even more rises for April 2010 and though deferred, the 5% rates hike still has to be paid. The Labour Party are also planning further hikes after the general election, recommending the end of the RPI link and above-inflation rises.

Supplementary business rates in London

In London, a supplementary rate is being levied on businesses from April 2010, adding 2p to the rating multiplier to help fund Crossrail. When this policy was announced, the Rateable Value threshold was set at £50,000 to exempt small and medium firms. However, Ministers have refused to increase the threshold in line with the 2010 revaluation – which saw values rise more in London than in any other part of the country. As a result, an additional 10,000 small and medium businesses in London will end up paying the extra tax on their new, inflated Rateable Values. There is no transitional relief available for supplementary business rates.

Conservative stance

Conservatives have led the battle against these business rate increases during a recession, but our arguments have fallen on deaf Ministerial ears. Conservatives have already held Opposition Day Debates specifically on business rates on 25 March and 15 July to highlight our concerns

We have pledged to:

• Make small business rate relief automatic
• Give councils the power to level local business rate discounts
• Allow councils to keep the proceeds of business rate growth from new development for six years, to create a new incentive to help local firms and promote economic growth.

At the beginning of Summer 2009 I launched a Save Our Shops campaign recognising the importance of the high street to my constituency. The campaign involved supporting the different business associations across Enfield Southgate and working with the Council and TfL to secure improvements in areas like parking and crime. We now need to extend the campaign to the wider issue of business rates.

I will be making collective representations to the local valuation office and nationally to the Chancellor of Exchequer, Alistair Darling. We need urgent action to at least defer the rates increases. With my Conservative colleagues on the Council and in Parliament we will continue to look for further ways to support local communities and local businesses. I hope this has been useful but please do contact me if you have any further queries.