Business rate revaluation deferred
A circular issued last month announced the government’s intention to put off the 2015 UBR revalution for two years. The circular says
“The Government has announced its intention to postpone the next business rates revaluation in England to 2017. Primary legislation will be brought forward through the Growth and Infrastructure Bill which was laid before Parliament on 18 October 2012.
“Business rates are the third biggest outgoing for local firms after rent and staff costs. This decision will avoid local firms and local shops facing unexpected hikes in their business rate bills over the next five years. As business rates are linked to inflation, there will be no real terms increase in rates over this period. This reform will provide certainty for business to plan and invest, supporting local economic growth.
“Since the last revaluation (based on 2008 valuations), the economy and property market have faced exceptional changes. A revaluation at this point would be likely to result in sharp changes to business rate bills in many parts of the country and in many sectors. Tax stability is vital to businesses looking to grow and help improve the economy.
“The Government is committed to maintaining up to date rate bills through regular five yearly revaluations in England which will resume after 2017, once the economy has had a chance to recover fully from the financial and fiscal crisis this Government inherited from the last Administration.”
Nonsensical irrelevance
That this is a nonsensical irrelevance is well supported by the mass of evidence from the 1980s, when rates were set by local authorities, and the original rates-free Enterprise Zones were in operation.
Total occupation costs for similar properties on either side of the boundaries were the same, since the value of the concession was reflected in the rent, precisely as would be expected. So there was no benefit to anyone apart from landowners. However, the proposal does not even make sense in its own terms, because the 2008 valuations were at the height of the boom and a revaluation would have taken account both of the overall national trend and local circumstances. Deferral does nothing for people whose property values have gone down and would actually have benefitted from the revaluation. Holding to the timetable would have been more useful than a deferral, as well as being more honest. Worse still, the ad hoc nature of this tinkering has destroys the credibility of the tax. Despite the assurances, we wonder if, in two years’ time, a decision will be taken to defer the revaluation again? The Chancellor is also making a rod for himself or his successor’s back.
The real issues in relation to business are, first, that rents are way above their real market levels, which is why so much commercial property is standing idle. Compounding the problem of business accommodation costs is the universality of the onerous “upwards only” rent revision clause in commercial leases. Neither the previous Labour government nor the present Conservative/LibDem one has had the inclination or guts to do anything about “upwards only”. This latest nonsense only serves to confirm the suspicion that whoever is elected, the country is run primarily in the interests of its landowners.