MPs add to pressure for business rates system reform

The government should replace the “broken” business rates system with a new model that maintains income for local authorities, according to a report by Parliament’s Treasury Select Committee.

In a report published this week, the committee said that non-domestic rates place a far greater cost on physical businesses, such as those on the high street, than those that operate online.

It said that tweaking the current system through reliefs does little to address the negative aspects of the tax and “simply demonstrates how broken the system is.”

Alison McGovern, the committee’s lead member for the inquiry, said: “The Government must ensure that business rates align with its aim to boost productivity and do not disincentivise growth.

“Odd reliefs here and there are nothing more than sticking plasters to a system in urgent need of reform.”

She said that the committee was presented with numerous alternatives to the current system, but none had been modelled sufficiently to examine who would win and who would lose.

However, the report said that the government should examine different alternatives in time for the Spring Statement next year.

But it said: “Any reform of the system should have particular regard both to the need to maintain the total income for local authorities, and to keep the link between individual authorities and the current and potential new businesses in their areas.”

The report also criticised the number of outstanding appeals against business rates valuations currently in the system.

It said: “It is unacceptable that there are still appeals outstanding from the 2010 listing, years after the appeals were first raised. The Valuation Office Agency must resolve these appeals as a matter of urgency. \“Such long delays bring the work of the VOA into disrepute and undermine trust in the UK tax system.”

Responding to the report, Rachel Kelly, senior policy officer at the British Property Federation, said: “What is clear is that the total business rates burden is not sustainable and should be reduced, or it will continue to harm our economy and town centres and hold back investment that we need to make our workplaces more productive and energy efficient.

“It is vital that the next government puts business rates on a more sustainable trajectory.

“We strongly agree with the committee that the business rates system must be reactive to changes in the modern economy, and that is why we have argued for revaluations to take place more frequently, ideally annually.”