Following increasing concern from some businesses and Conservative MPs about the impact of the first business rate revaluation in seven years, Sajid Javid said the chancellor, Philip Hammond, would announce new measures in the budget on 8 March. This would form part of a wider and longer-term re-examination of the business rates system, he added.
The announcement follows a pledge from Theresa May at prime minister’s questions that small businesses left with the highest rate increases would be helped. Javid’s department said it would be revealed at the budget whether the current £3.6bn fund for transitional relief would be increased.
Speaking during a wider Commons debate on local government finance, Javid said the rates revaluation would see three-quarters of all businesses pay the same amount or less than before. “I am also acutely aware of the impact on the quarter that will see increases,” he continued. “If your rates are going up, it’s no consolation to hear that others’ will be going down. I’ve long recognised the need to provide support.”
The transitional relief fund would help more than 140,000 smaller businesses, Javid said, adding: “But as colleagues and the media have highlighted in recent days, there are clearly some individual businesses facing particular difficulties.”
Javid said a particular problem was faced by smaller shops in areas that have seen high increases in rent – the rates are based on rentable values – and by firms facing “an alarming cliff edge” after losing their entitlement to rate relief. “I have always listened to businesses, and this situation is no exception,” he said. “It’s clear to me that more needs to be done to level the playing field and to make the system fairer.
“I’m working closely with my right honourable friend the chancellor to determine how best to provide further support for businesses facing the biggest increases. We expect to be in a position to make an announcement at the time of the budget in just two weeks’ time.”
Asked whether there was scope for a more fundamental review, Javid said there was “clearly some room for improvement”, for example in helping smaller shops thrive in a world of online retail. “Nobody would argue that the current system is perfect, and it is right to ask whether the time has come for some kind of reform,” he said. “We’ll be looking closely at all possible steps for making it fairer and more sustainable in both the short term and the long term.”
The announcement follows a letter sent to Hammond by Andrew Tyrie, the Conservative chair of the Treasury committee, seeking clarification on some parts of the revaluation, particularly whether out-of-town businesses were benefiting at the expense of smaller, urban firms. The letter asks Hammond to give figures on the proportion of small, medium and large businesses facing rises or falls in business rates.
The delay since rates were last reassessed “was bound to store up trouble”, Tyrie said. “For businesses whose properties have increased disproportionately in value over the last seven years, the increases may be painful.” At prime minister’s questions, May said she had asked Hammond and Javid to make sure relief was targeted at those businesses most in need.
The overhaul of the business rates system will see the biggest rises in places such as London and other areas in the south-east, where rents have risen sharply in recent years.
Caroline Lucas, the Green MP for Brighton Pavilion, asked May whether she would review the rates upheaval, pointing out that some small businesses in her constituency would face increases of up to 400%.
May defended the overall aim of the process, adding: “I recognise that there has been particular concern that there will be some small businesses that are particularly adversely affected by the result of this revaluation … That’s why I’ve asked the chancellor and communities secretary to make sure there is appropriate relief in those hardest cases.”
May’s spokesman clarified that she had not been promising any extra money. In talking to Hammond and Javid, the prime minister was seeking “to make sure that once we go forward during this process that this transitional fund goes to the areas where it is most in need,” he said.
Asked later about a comment from Lucas that government policy on business rates was in confusion, the spokesman said: “I don’t think it is chaos. We have set out our plans to provide a fund, a transitional relief fund, to make sure that those who are affected by the rise in business rates have a smoother transition to the new system.”
When it emerged that Javid had announced the policy as the spokesman was briefing journalists, he said: “I wasn’t aware that he was going to make an announcement. I don’t know what he has said.”
Source: The Guardian