Viewpoint - 09/05/2014

Minister’s decision comes back to haunt

When the government decided to delay the 2015 revaluation for a further two years, it cited evidence from its own Valuation Office Agency suggesting that the decision would offer certainty to businesses struggling through a deep recession.

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At the time, many commentators, including Rating in Brief, appealed to the Minister in charge, Brandon Lewis, to reconsider his decision, and protect thousands of ratepayers from paying business rates at inflated pre-recession level, but to no avail.

More than one year ago, we concluded that there was no likelihood of the government performing a U-turn, even though its supporting evidence was heavily assumption-based and did not stand up to scrutiny.

Folly has much to answer for

The British Retail Consortium has since reported that 40% of retail businesses now pay far more in business rates than they should be paying, and will continue to do so for a further three years. The devastating effect of financial pressure on the retail sector is a matter of public record. The revaluation delay has much to answer for.

To be fair to the government, it has drip-fed relief either directly or via local government to alleviate the extreme distress which many of those businesses affected have experienced. Initiatives such as Small Business Rate Relief, flood relief and local authority discretionary relief go some way towards alleviating the distress.

However, welcome as they are, they fail to meet one clear and long-standing tenet of business rates: predictability for the long-term. The delayed revaluation and the impact of government policy on new office development will likely create extreme variability in business rates.

Government will not listen to good advice

Brandon Lewis attempted to explain his decision to delay the revaluation beneath a veil of ‘certainty and predictability’ hyperbole. Yet the opposite has occurred. He had little time for the considered opinions of experts in the rating field who warned of the implications, or for those businesses which would inevitably go to the wall.

Only now, when it is too late for many, has the decision been questioned by MPs under the auspices of the ‘Business, Innovation and Skills Committee’. It recognises that not only was the report which the Minister based his decision upon ‘littered with caveats’ but much of the evidence received by the Committee made clear that unfair discrepancies had arisen as a result of the Minister’s decision.

MPs recommend annual revaluations

The Committee report concludes that the government should consider significant adjustments to the system of revaluation for rating purposes before the 2017 revaluation, with annual reviews being a key ambition. This echoes one part of the five point plan which Rating in Brief believes the government ought to be putting in place as the foundation of a rating system fit for the 21st century.

It is time for the Chancellor to grasp the business rates nettle and commit publicly to a root and branch review of business rates.


This article is part of the spring 2014 edition of Rating in Brief.

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