Hello Labour – goodbye business rates?

Thirty billion pounds. That’s a lot of money, and it’s what the Guardian reckons Liz Truss’s mini budget cost. It’s also the amount that’s collected from business rates, year on year, from 2.3m rating assessments.

The collection rate is 98%. There have been some ‘fundamental reviews’ over the years, but we still have a tax paid by occupiers (or owners of vacant space) that’s based on the hypothetical rental value of their property. The Non-Domestic Rating Act 2023 creates a mechanism for a tax return-like submission system to make sure that the rateable value accurately reflects the physical facts on the ground, plus some recent changes to the rates mitigation pantomime.

All in all though, it works and is cheap to collect. Labour have a manifesto pledge to scrap it. Why?

Well I delved into the Mr Starmer Plan for Change to find out and it just says:

The current business rates system disincentivises investment, creates uncertainty and places an undue burden on our high streets. In England, Labour will replace the business rates system, so we can raise the same revenue but in a fairer way. This new system will level the playing field between the high street and online giants, better incentivise investment, tackle empty properties and support entrepreneurship.

So there you go: £30bn replaced in two sentences. Awesome.

There have been numerous suggestions and background noise amongst us rating surveyors but nobody that I can see has actually committed to anything in writing.

So I’m going to stick my neck out and make a prediction – I think business rates will be around for a while yet but there will be some reform.

Taking small properties out of business rates altogether removes their liability but also removes the burden of issuing bills and the need to administer Small Business Rates Relief. The Retail Hospitality and Leisure sector needs to be protected from the loss of their 75% rates relief, but the £110,000 cap does nothing to help the larger chains who are also struggling in our town centres. Empty rates needs reform to help redevelopment but there also needs to be something that covers ‘zombie properties’ that have no real potential for being let as the market has moved on around them and they’re unlettable, but still rateable. I could go on.

The thing is that there are a raft of things the government could do to reform business rates and get it right, without the monstrous cost of creating a new system. The new Duty To Notify (DTN) will keep assessments up to date, but I do wonder whether this will now see the light of day.

Bangor University’s study on Land Value Tax in 2020 was mentioned at a conference recently as being on Labour’s radar. The principle is that the assessment is based on the price of undeveloped land – I was going to explain further but the report summary admits there isn’t enough data available to actually do this. Anyone who has ever tried to match the postal address with land registry or business rates address knows how unreliable our addressing and mapping is and without this, LVT is impossible.

So, Mr Starmer – don’t get sucked into change for the sake of it.