Darling defers rise in business rates at last minute

The Chancellor has performed a major 11th-hour U-turn by modifying plans to introduce a 5 per cent increase in business rates today which would have been particularly damaging for struggling retailers.

Alistair Darling said late yesterday afternoon that business rates will only increase by 2 per cent from today, with the remaining 3 per cent rise being spread over the next two years, under new legislation unveiled by the Government. The planned increase was based on last September's 5 per cent spike in inflation.

In the first week of March, the Chancellor refused to back down over the 5 per cent rise in business rates in a letter sent to Retail Week, the trade magazine.

Stephen Robertson, the director general of the British Retail Consortium, which waged a campaign against the planned 5 per cent rise, said: "We are delighted following our pressure that the Government has understood the damage that a record business rates rise this month would make. We put together a body of evidence that showed the effect on the retail sector but also on jobs."

Retailers, who pay a disproportionate amount of business rates, said the 5 per cent rise would have cost them about £300m.

Ian Cheshire, the chief executive of Kingfisher, the DIY retail group which owns B&Q, said: "Ideally we would have liked to see a reduction rather than a deferral, but this is still a welcome change which will ease the burden on retailers at a difficult time. For some smaller retailers, it could be the difference between survival and failure."

The Government said it had introduced the change to smooth the impact of the 5 per cent rise on the cash flow of businesses this year.

Mr Darling said: "The Government recognises that businesses need help now to ease their cash flow at a time when money is very tight. This measure will help businesses to smooth their rates payments over the next three years." Business ratepayers will be able to defer £600m across 1.6 million properties.