The Hidden Business Inequality Time Bomb

One of the more baffling recent decisions of Government has been an almost entirely overlooked decision to postpone the revaluation of business rates.

Politicians seem determined to further blur what is an already abstruse issue. But the results will be crystal clear: a widening of geographical inequality and the crippling of the hardest-hit high streets for years to come.

Business rates are meant to raise funds for the public purse, but do so proportionally with what’s going on in the real world. This is done through a revaluation every five years to increase or decrease rates as rents rise or fall.

This flexibility helps the system cope when, say, the financial meltdown of a generation comes along, the economy grinds into depression with the loss of thousands of small, medium and even large business, leaving alarming void levels on increasingly desolated high streets. Sound familiar?

When rents inevitably fall in this kind of market, a revaluation lets rates fall with them, and businesses staring into the abyss can save a little precious cash by not paying a tax based on boom-time rents. That’s the theory, anyway.

Had it happened last year as planned, a revaluation would have found that rents in some towns have fallen by up to 50% since 2008. Commercial landlords, working in real time in the real world, understand that to carry on doing business they have to make concessions; a tenant paying 50% is better than no tenant at all.

But rather than letting the revaluation go ahead and letting rates line up with rents, the Government has taken the unfathomable decision to postpone it, and carry on charging businesses – the ones that are left – on pre-downturn levels as if nothing had ever happened.

For the wealthiest locations rates would actually have gone up because in a few elite, mainly London high streets, or out of town locations, the territory of the big four grocers, rents have increased since 2008.

Inversely, postponing the revaluation means that a retailer on a half-empty high street in an unemployment-ridden town will be paying relatively more in business rates compared to rent than a giant sparkling flagship on a heaving Regent Street or glitzy Mayfair arcade.

As a level of injustice, it’s almost impossible to believe. There is absolutely no question that the extra two years of unnaturally high rates will be the death of thousands of businesses in the ‘danger zone’, and prevent who-knows-how-many from ever getting off the ground.

So why the Government reticence? If the revaluation had gone ahead this year, it would have taken effect in 2015 sending rates up in the South East of England and down in much of the Midlands and the North. Given the respective support for the Coalition partners in these areas, some have suggested the move may have more cynical roots. There’s nothing to suggest this was an explicit concern of Government, but in a tightly fought election year, upsetting your grassroots is ill-advised. 

Benedict Cooper – Freelance Journalist and Blogger 

The views expressed above are those of the author and not necessarily those of The Equality Trust.