The benefit of offering local authorities the opportunity to retain some locally-raised business rates risks being negated by the rates themselves rising in an unaffordable way.
So warns the British Retail Consortium, which yesterday published its response to the Local Government Resource Review.
The BRC supports the principle of incentivising councils to encourage business growth by allowing them to keep a share of the tax income, providing they do not simply turn it into an exercise in maximising revenue from existing premises. The BRC also welcomes the decision to maintain the Uniform Business Rate.
However, the organisation says it is concerned the proposed reforms will fail to benefit either retailers or councils as much as they should if the government goes ahead with a huge business rates increase in April 2012.
The rate is raised each year in line with the previous September’s Retail Price Index, which was revealed last week to be 5.6%. A rise on that scale would have a hugely detrimental effect on retailers’ ability to invest and grow, the BRC believes.
The BRC’s director of business, Tom Ironside, said: “The principles behind the proposed reforms to business rates are sound, providing a uniform central rate is maintained to provide much-needed business certainty.
“But this scheme’s potential to drive business growth and boost council coffers could be reduced because of the likelihood of a colossal 5.6% rise in business rates next April. Coming on top of a 4.6% rise this year, such an uplift would make it even harder for retailers to thrive at a time of low consumer confidence and poor spending.”
The new RPI figure is at its highest for 20 years and would result in a £350m business rates increase for retailers next year. This year’s increase was 4.6%, and the BRC is urging the government to consider the damage to jobs and investment that would be done by another increase on that scale.
Said BRC director general Stephen Robertson: “Basing business rates rises on the previous September’s RPI is a lottery and retailers have just seen a losing number come up.”