'Outmoded' business rates need radical reform, warn CBI

The CBI’s director general, John Cridland, today called for the Government to take a radical line on the issue

Critics of the business tax say it puts high-street retailers at a disadvantage to online rivals and sets the bar too high for small businesses hoping to set up shop ( Velela/ Wikimedia Commons )

The CBI today urged the Government to consider radical reforms of “outmoded, clunky and regressive” business rates, as a sweeping review of the tax began.

The business group, which represents 190,000 companies, wants root and branch reform of the tax, which is paid annually on 1.8 million properties in England. The levy has been heavily criticised in recent years, with businesses complaining that it puts high-street retailers at a disadvantage to online rivals and sets the bar too high for small businesses hoping to set up shop.

George Osborne announced a review of the system in the Autumn Statement, as well as a package of measures that will come into force next month to help alleviate the burden for small businesses. But there are concerns that the review may not go far enough, with the small print of the Autumn Statement revealing that any proposals considered will have to be “fiscally neutral”.

The CBI’s director general, John Cridland, today called for the Government to take a radical line on the issue, saying: “The current system of business rates is outmoded, clunky and regressive, and it’s holding back the high street. That’s why we’ve been calling for a wholesale review of the system.

“The package of measures already announced in the Autumn Statement that will come into force from April will help ease the pressure on hard-pressed retailers. But this review provides an opportunity to go much further, and we’ll be making the case for removing the smallest firms from paying business rates completely, linking rates to the consumer price index rather than retail price index, and introducing more frequent valuations. This would go a long way to achieving a more competitive business rates regime that incentivises business investment and supports the high street.”

His comments came as the Treasury Secretary, Danny Alexander, officially kicked off the review of business rates. It will consider whether to move away from a property-based levy towards a different measure and look at how to make the system more flexible to accommodate small businesses and a variety of different sectors.

Mr Alexander said: “Our system of business rates was created nearly 30 years ago. Since that time, the worlds of commerce and industry have changed beyond recognition. I’ve been impressed by the representations made by the business community and I know that business rates are a considerable cost.

“This government has taken measures to help businesses by capping rates and introducing reliefs for smaller businesses. But now the time has come for a radical review of this important tax. We want to ensure the business rates system is fair, efficient and effective.”

The results of the review will be published next year.