Ministers in dark on business rate relief

Government admits not knowing how many independent high-street retailers have benefited from the system to date, says Simon Neville
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The Independent Online

The Government has admitted it has no idea how many small and independent retailers have benefited from business-rate relief, despite claiming changes to the system are saving the high street.

As a result of this poor information, critics argued this weekend that ministers are not taking the issue of rates reform seriously enough. Retailers have been calling on the Government to reform the business-rate system to regenerate the high-street, which is losing out to online retailers who do not pay the same levels of this levy, and claim the current tax system is not fit for purpose.

They are angry because ministers in their response to Mary Portas's high street review used a section of their official response to focus heavily on business rates. They said that 300,000 small businesses were taken out of business rates all together.

However, a Parliamentary question by shadow business secretary Chuka Umunna has found they do not know how many of those businesses are retailers.

"The Government continually cites small business rate relief as one of its key policies to help Britain's struggling high streets," he said. "Yet now ministers have revealed that they don't even know how many retailers, high-street businesses or independent shops the policy applies to."

Michael Sharp, chief executive of Debenhams, who this week called the current system archaic, agreed. He said: "What this shows is that the current business-rates system isn't fit for purpose, and isn't helping small businesses or large ones like ours.

"The retail environment is changing rapidly and because of the growth of online retailing, all retailers are finding that their stores are becoming less profitable.

"For the sake of the future health and vitality of the UK's high streets, it's essential the whole system is reviewed, and a new one relevant for today's new retail world put in place."

Business rates are charged based on the rental value of each set of premises, with properties up to a value of £6,000 given an exemption. A discount is granted to properties worth up to £12,000.

However, high-street stores usually command a premium and are unlikely to get an exemption.

Rates rose 3.2 per cent this year, adding an extra £242m to retailers' bills which means for every £1 paid in corporation tax, £3.44 is paid in business rates, compared with £2.48 in 2005.

Helen Dickinson, director general of the British Retail Consortium which is leading a campaign for the Government to cap business rates, said that while relief might seem like a good idea it may not work in practice.

She said: "The business rates system is no longer fit-for-purpose, and given its complexity, it is unsurprising that the Government is unable to determine how many retailers benefit from reliefs."