‘Labour have promised to save the high street – now let’s hear how’

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As Chair of the Shopkeepers Campaign, hearing Labour frontbenchers talk of their commitment to revitalise the high street is music to my ears.

It is clearly a genuine focus given their commitment to crack down on late payments and antisocial behaviour. These steps are encouraging, but they must not sideline business rates as a priority.  

The party recognises that our burdensome business rates system is part of the problem and has boldly pledged to abolish them. 

The question then is, what form the commercial property tax that replaces it will take, and will it be designed in a way which encourages business growth and investment rather than deterring it. 

Our current system of business rates –whereby property is taxed based on its rateable value –forces retailers or retail property investors into paying tax before they have made any money at all.

It is not based on performance like many other taxes and multiple reliefs have been developed to compensate for its inadequacies, leaving all retailers confused and frustrated with a system that is no longer fit for purpose. 

The Chancellor offered an example of what not to do in his Autumn Statement. Instead of the root-and-branch reform needed, he pushed the problem to the edge of his desk, extending existing reliefs for one more year and leaving shopkeepers on a cliff edge worrying about what they will face in a year’s time.

One thing businesses do not need is more uncertainty.  He was planning just one year ahead, when he should have been looking ahead five, or even ten years.

Freezing the small business rate multiplier and extending the retail, hospitality and leisure relief takes away some of the pain for some businesses for one year only.

There is no question that this will help stave off disaster for many in the short-term, but we must keep front of mind that these reliefs would not be necessary if we had a property tax set at a fair rate. 

 The first principle applied to the replacement of business rates should be that the new tax is set at a fair rate for retail. Next April, 220,000 businesses will see their rates increase to 54p in the pound.

That is a 54% tax that is charged regardless of performance. 30p in the pound should be the ceiling for any property tax. If it is too high as it is now, it becomes unsustainable for too many, forcing the Government to step in with reliefs, or worse, closure.  

The tax should also be simple and easy to understand for those that pay it. A small business owner should not have to rely on professional help to understand their tax bill.

A tax without complicated reliefs is not only easier to understand but will contain fewer penalties and barriers in the form of high marginal rates as businesses grow. 

Simplification of the tax is easily achievable; by reducing the tax rate to an affordable level, Labour would have no need for reliefs as everyone would pay a lower, fairer rate.  

These are common sense reforms that would have positive outcomes. Not only would they help retailers who are struggling with the tax burden, but they would provide certainty for those currently relying on year-by-year extensions of reliefs. 

These reforms would announce to the world that the UK is the right place to go for long term investment in town centre retail and would future-proof the local government revenues which fund vital public services.

Most importantly, a modest property tax which every commercial occupier pays would breathe life back into our high streets as businesses are encouraged to invest and expand.

It would give retailers the certainty that they can grow. It would promote ‘Levelling Up’ by encouraging more investment into our high streets and town centres. 

I have been encouraged by Labour’s recognition of the need for change. Diagnosing the problems is the easy part; now is the time to offer some credible solutions.

Labour must tell us what their plans involve and how they will encourage investment.

The Conservatives pledged to reduce business rates in their 2019 manifesto, before raising them to their highest ever rate. Decisive and sensible reform is needed, and I look forward to hearing more about Labour’s plans as we approach the election.