Government must examine alternatives to broken Business Rates system

31 Oct 2019 12:41 PM

The Treasury Committee yesterday published a unanimously-agreed report on the Impact of Business Rates on Business. The report was agreed when Catherine McKinnell MP was Interim Chair. Rt Hon. Mel Stride MP has since been elected as the Chair of the Treasury Committee. Alison McGovern MP has been the Committee’s lead member for this inquiry and has therefore provided a quote below. 

Report Summary

The Government must explain whether it is deliberate that, since Business Rates were introduced in their current form in 1990, the revenue they have generated has outpaced inflation. Throughout this inquiry, the Committee has been told that Business Rates do not fall upon all business equally, for example, they place a far greater cost on physical businesses, such as those on the high street, than those that rely more upon an online presence. Tweaking the current system of Business Rates through an increasingly complex web of reliefs does little to address the negative aspects of this tax and simply demonstrates how broken the system is. Business Rates are an important source of revenue but the Government must explore alternatives to address their negative impacts. The Committee considered alternative options to replace or reform the current system. However, further work is needed to fully model the proposals. The Government should take a deeper look at possible alternatives and prepare a consultation in time for Spring Statement 2020. In the meantime, improvements could be made, including improving reliefs, reducing statutory limits for responding to appeals, and ensuring that the Valuation Office Agency (VOA) is properly resourced.

Key Points

Member's comments

Commenting on the Report, Alison McGovern MP, the Treasury Committee’s lead member for this inquiry, yesterday said:

“It’s abundantly clear that the current Business Rates system is broken. The tax represents an increasing burden on businesses, particularly those with a physical high street presence struggling to remain competitive.

“The Government must ensure that business rates align with its aim to boost productivity and do not disincentivise growth. For example, many firms have moved away from being dependent on plants and machinery, which were last re-defined in the system in 1993.

“It’s unfair on the manufacturing sector, therefore, for their business rates valuation to be included in their essential operating equipment, where other businesses are not equally affected.

“Odd reliefs here and there are nothing more than sticking plasters to a system in urgent need of reform.

“The Committee was presented with numerous alternatives to the current system, but none of them had been sufficiently modelled to examine who would be the winners and losers of any change.

“The Government must examine such alternatives in time for Spring Statement 2020.”

Further information