Liam Halligan: Should the government finally reform business rates?
Business rates – levied on the rateable property value of any business premises – are the tax small and medium sized business owners hate the most
A couple of weeks ago, at the Labour party conference, Shadow Chancellor Rachel Reeves made a surprise announcement. If Labour came to power, she said from the conference platform in Brighton, the party would scrap business rates.
This announcement was largely ignored by the media – as the Westminster press pack focussed on the resignation of a Labour frontbencher very few people had previously heard of.
But “On the Money” homed in on Reeves conference announcement – calling it “important” and “highly significant”. “This puts pressure on the Tories,” we said on this show, “ahead of their budget later this month, to launch pro-enterprise policies too”. And so, it has come to pass.
Business rates – levied on the rateable property value of any business premises – are the tax small and medium sized business owners hate the most. Bricks and mortar retailers, for instance, now shell out well over £8 billion a year in business rates – payable before firms have taken a single penny in revenue, a tax bill that’s due whether you make a profit or not.
In towns and cities across Britain, soaring business rates – which aren’t paid by online retailers – have helped to accelerate the hollowing out of our High Streets.
And now, the government has stepped up its war on corporate Britain by snubbing a call from the Confederation of British Industry 41 other trade associations – who between them employ around 10 million people in this country – to announce a business rates overhaul in the budget on 27th October.
Government plans to reform business rates have been “thrown into the long grass”, we’re told – and while Rishi Sunak is committed to overhauling this highly controversial corporate tax, the signs are that wholesale reform won’t happen when the Chancellor stands up in the Commons in two weeks’ time.
It’s easy to criticise Labour’s business rates announcement. Opposition is easier than governing – and scrapping business rates would leave a £30 billion hole in our public finances, which Shadow Chancellor Rachel Reeves didn’t explain how she would fill.
But the present system sees rates slapped on up to 50 per cent of all business investments. On top of that, there are more business tax rises to come – higher national insurance contribution, plus a hike in corporation tax.
And by signalling this pro-enterprise, pro-business move – that would go down particularly well in red-wall seats, where High Streets are often struggling – I’d say Labour may have outflanked the Tories.
So that’s your On The Money question today. Should the government finally reform business rates?