York Central MP, Rachael Maskell lead a debate in Westminster today calling for urgent reform of the business rates system which is harming York’s businesses and high streets, and putting jobs at risk.
The independent research by the Central Retail Research has projected that 10,000 stores across the UK will close this year, and has forecast that 384,000 retail jobs will be lost in the next 4-years unless the Government takes urgent action.
Ms Maskell has been working with local businesses and traders associations across the city who have been hit by inflation busting business rates due to the over inflated non-domiciliary property market across the city, leaving our once thriving retail streets marked by empty units.
Many York retailers are also facing stiff competition from internet-based companies who by trading online are not subject to these rates, meaning local shopkeepers are not competing on a level playing field and some shopkeepers are being forced to move their businesses online or close down completely.
Traders groups are concerned this situation is exacerbated by empty property tax loopholes which are being exploited by property owners, meaning units are being left dormant for long periods, further blighting York high streets but letting property owners off the hook.
The 2015 valuation took a particular toll on businesses in York where some businesses saw increases as high as 600% – in contrast many large supermarket chains and online retailers saw their business rates fall. This contributed to the growing number of empty units in York, made worse by the collapse of some major national chains.
Last year the government introduced measures to soften the impact of these changes on businesses, but these temporary and tapered discounts do not tackle the fundamental problems of this antiquated system. The main government relief fund was delivered by Local Authorities, and local businesses have also told Ms. Maskell that the way this money was used was exceedingly poor by the City of York Council.
Ms Maskell has been in discussion with York Retail Forum who have been looking at alternatives to Business Rates system, and along with other groups in the sector, have concluded that a new type of turnover tax would be the best way forward, supplemented by specific support for some small businesses.
Rachael Maskell MP said:
“This is an extremely important issue that requires urgent action. As I held business meetings across York, all felt failed by the business rates system. The retail sector is struggling, and now our city centres is marked out by empty units. The Council, simply sticks window stickers over the shop windows to try and conceal this market failure.”
“Retailers in high value retail areas like York pay the highest level of rates, whereas companies selling goods on the internet from warehouses in lower value areas pay the least. Amazon, the largest retail business in the UK pay just £1.4m in business rates. If they were to pay the same as small businesses in York, Amazon would be paying £61m in rates.”
“In York retail accounts for 13% of jobs in the city – the failed business rates system is having a significant detrimental impact and urgent action is needed to rebuild the retail sector which is in crisis. The Government has been throwing out sticking plasters to help cushion the pain of the 2015 valuation. We need to see urgent reform in place by this coming autumn Budget.”
“Pubs are also being put at risk. They currently pay 2.8% of the UK’s Business Rates Bill in England yet only generate 0.5% of business turnover, an overpayment relative to turnover of £500m and is set to increase by 17% by 2022”.
“Business Rates are extremely antiquated and not fit for purpose in our globalised, digital age. A huge inequality has grown and the business rates system simply does not work in this modern age. It is essential that our tax system catches up with this reality. Phil Pinder, chair of York Retail Forum, as looked at the figures and a flat levy places on all businesses, would see the revenue raised exceed the amount currently raised by business rates. The new levy could be easy to collect. Tax dodging multinationals would barely notice, but it would benefit the Government, our businesses and our communities”.
Phil Pinder, Chair of York Retail Forum said;
“The current business rates system has been played by every large business to the detriment of smaller independent business owners. A much fairer system would be a tax based on business turnover. It would be very easy to collect, every business (charities and voluntary organisations do this too), has to declare turnover for corporation tax. A simple 1% levy would raise slightly more than the current business rates system. This would also have the equivalent of handing thousands to small business, who are the most likely to create new jobs and invest in their business”.
“Those that have lawyers and surveyors at their disposal can play this system. A simple tax based on turnover, could not be played. The government would have more cash, small business would have more cash. Large businesses and tax avoiders like Amazon, eBay and others would pay more”.