One radical reform to help Corbyn or Smith rebuild Labour’s links to business

Both Jeremy Corbyn and Owen Smith claim to be radicals. They can prove this by overhauling the unfair business rates system.

In October, businesses across the country will learn their new rateable values. This will reflect changes in the property market, and forms the basis of what companies will have to pay in business rates from April 2017.

The revaluation is expected to bring the most significant change in business rates for high street retailers in a generation and, for businesses in London, this is a looming threat. The capital is home to 16 per cent of the nearly two million properties in England that are required to pay business rates, and contributes nearly a third of the total money raised nationally.

Rateable values are expected to see their most dramatic rises in London and, in this time of economic uncertainty, that could push thousands of small businesses to the wall.

London mayor Sadiq Khan has pledged to ensure that the rise “doesn’t whack London”, but until business rates are fully devolved there is only so much he can do. Labour’s leader after Saturday can support Khan at the national level by championing bold and radical new thinking on business rates.

Corbyn has previously called for a business rates freeze and Smith recently criticised Labour for being “too timid” on tax. One idea the leadership should explore is to change who pays business rates. Why not limit the charge to commercial landowners? Business rates are calculated based on an estimate of a commercial property’s open market rental value. The rates are then levied on property occupiers regardless of whether they own or lease the property.

For a small business renting a commercial property, this is hardly fair. The increased business rates they will have to pay next year reflect the increased value of their landlord’s property, not an increase in the value of their company. Given the volatile conditions that have followed the vote to leave the European Union, these businesses may well see their companies’ value decrease by April 2017. If business rates were only levied on property owners, regardless of whether they occupy the property, the tax regime would more fairly reflect the value that is being taxed.

This system would also give the owners of vacant commercial property a greater incentive to invest in, and rent out, their empty properties in order to generate income to balance the cost of business rates. This financial incentive would help to align the interests of landlords with those of local councils, business improvement districts and others working to drive regeneration and business growth in local communities. We could see less empty space on the high street as a result.

The change would also create a new dynamic between landlords and business tenants, which would help both groups. Landlords would have a direct interest in seeing the business occupiers succeed and grow their companies as this would ensure the tenants could afford to pay rent to help cover the costs of business rates.

This would certainly be a radical solution, but it could be just what Labour needs to move forward the debate on high streets. Without a change to the law, empty properties on our high streets will remain a problem. Reserving business rates to commercial property owners could be the change that’s needed to give high streets a shot in the arm.

So we welcome the promise of a “radical” Labour leader. For the sake of high street retailers and small businesses, let’s hope these words translate into actions.

Simon Pitkeathley is chief executive of Camden Town Unlimited and Euston Town