30 March 2009

Higher business rates will drive local firms and small shops to the wall.

The Government was accused this week of pushing local firms and small shops to the wall by hiking their business rates during the recession. As business rate demands are being sent to local firms across Reading , many firms are seeing startling rises in their bills this year, with the prospect of even bigger hikes next year. After rent and staff, business rates are the next biggest cost to local firms.

This comes as a survey by the Local Government Association has found that 4 out of 5 councils are reporting an increase in empty shops in town centres. Reading East MP, Rob Wilson, and Reading West Candidate, Alok Sharma, criticised a number of Government policies that are pushing up tax bills:

    Inflation-busting rise this April: Business rates are to rise by 5.0 per cent this April, despite RPI inflation forecast to be negative, due to a statistical quirk in the way business rate rises are calculated. This will increase the burden of rates by £1 billion a year. The average business rate bill in Reading is currently £19,380; this rise will push it up to £20,349.
    • End of transitional relief from the 2005 revaluation: Transitional relief from the 2005 business rates revaluation has now expired, further pushing up bills for many firms in April 2009 by two or three times, and raising another £100 million for the Government.
    • Small shops to be hammered by the 2010 revaluation: The April 2010 rates revaluation will adversely hit the retail sector, because of the Government’s decision to use April 2008 as the snapshot for the revaluation – when relative retail rents were artificially high compared to industrial and office rents. The resulting rating hikes could push many small shops out of small business rate relief, meaning rocketing bills.
    • New empty property hike: When Chancellor, Gordon Brown slashed back rate relief on empty properties. As the recession bites, firms are unable to rent out vacant property, and have to pay rates in full without any income from rent. This has increased rates by £1 billion in 2008-09 and by a further £715 million from this April.
    • Retrospective ports tax: Firms located within ports across the country face a further blow, as the Government is imposing retrospective hikes on ports firms’ bills, backdated to 2005. The car industry is particularly badly hit, making a mockery of Lord Mandelson’s claims to be helping it.
    • Poor take-up of small business relief: Small firms are not claiming small business rate relief because they have to fill out complex paperwork. By contrast, in Wales , small business rate relief has been automatic since 2007.
    • New supplementary business rate: The Government is currently passing new laws to allow town halls to levy a supplementary business rate which may raise over £600 million a year. Local authorities will be forced to levy this charge because of cuts to the Local Authority Business Growth Incentive Scheme meaning less revenue for councils.




      • Alok Sharma said: "With support from the Federation of Small Businesses we have been running a campaign to encourage local businesses to apply for Small Business Rate Relief but it would be so much easier if this relief was automatic. The Government really needs to start listening to the needs of local businesses and helping them otherwise we are going to witness more and more job losses which will be a disaster for the local area.



      “In addition to this the Government needs to start taking practical steps to get credit flowing right now to help businesses which are in a credit squeeze - I am being told by local businesses that despite the Government's fine words, timely help is just not available as they face a credit crunch. We cannot allow perfectly good businesses to go to the wall because the Government has still not managed to get its act together."


      Rob said, “Gordon Brown is dragging local firms down the road to ruin. It is the height of economic madness to be increasing taxes on local firms in the depths of a recession. I fear that local shops in Reading will be hardest hit by these rises, leading to boarded up shops on our high street and yet more job losses.”