Last week’s sudden abandonment by the BRC of calls for a rates freeze came as something of a surprise to most of us, especially those of us who saw a freeze as a compromise anyway.
With business rates increases over the past two years adding over half a billion quid to retailers overheads bills, it didn’t seem too much to ask for government to allow us a bit of breathing space. Even more so in the face of flatlining high street sales and the erosion of margins by other taxes such as VAT, which have already caused multiple failures this year.
A freeze was never going to be the final solution though. The growing clamour for a complete revision of local taxation must by now be reaching even the lofty heights of the ivory towers inhabited by the Chancellor and his advisers. Even so, it seems nothing is to be done to offer a helping hand to retailers. The closest we’ve come to any direct action on high streets in the last 2 years was planning minister Nick Boles recent proposal that they should effectively be sold off to residential developers and forgotten about.
Now the BRC, an organisation I’d have expected much better of, has not so much blown the idea of a rates freeze out of the water, it’s sent it into orbit!
The reasons for this about-turn, according to Director General Helen Dickinson, is government claims of a potential £1Bn hole in the country’s finances. This, she says, has led her to see the error of her ways and ally the BRC with the CBI who have been calling for a 2% cap on rates increases, rather than a freeze, for some time now, arguing that this is a more achievable goal in the short term.
Indeed Dickinson came out fighting very soon after the announcement of the BRC’s change of heart, with talk of a ‘step up’ in their campaign over rates reform with a pronouncement that this will be a long term goal. The obvious disconnect between those two statements didn’t seem to occur to her at the time, or as far as I know, since.
Yes it can be argued that in any negotiation there’s little point in holding out for an outcome or a deal that you’re unlikely to be able to achieve. Asking for the impossible does make you look unreasonable and in some cases faintly ridiculous. But a freeze was not an unrealistic ideal. Certainly not if it was applied to retailers only.
The figure of £1Bn loss to the treasury was, it appears, a little over-egged anyway. The true loss is predicted to be around £840M and that’s only if the freeze was applied across the board to all businesses. Taking into account rates relief, that figure could be as low as £700M. But I suppose a figure like £1Billion represents a powerful headline grabbing number, supporting a Treasury polemic that the BRC appears unwilling to challenge. After all what’s a few hundred million here or there? Not much it appears, unless you happen to be trying to get the government to reduce the rates burden by a similar amount.
In any event, I’d argue that retail is a special case, carrying as it does multiple burdens both in duplication of the charge over multiple locations, and with deference to the amount it contributes in other ways to GDP, not least in terms of employment. In those circumstances, if the government really wanted to help, retail could be singled out, thus significantly reducing the overall impact of a freeze.
In fact based on last years increase of £175M, if the reduction was applied to retailers only, it would take something like 5 years before we got close to £1Bn, unless inflation moves drastically northwards. That’s plenty of time to bring in a new and fairer form of local taxation.
Although I suppose with predictions of next year’s increase running at anything up to £300M it might not take quite so long. Even a cap at 2% would leave us facing an uplift of around £200M showing just how little would be gained, even if that could be achieved. Either way the point is an overhaul of the rates system should already be a government priority. A freeze for a year might sharpen the minds and pencils of those who talk about reform without ever actually doing anything about it, and with potential rates revenue likely to continue declining as many more stores close for good, the need is becoming more urgent every day.
[a freeze] “wouldn’t be enough to address the significant impact that business rates are having on local jobs, town centres and communities”
Yet somehow she seems to be arguing that a 2% increase would be a better option. Perhaps that makes sense in some quirky, mathematically challenged, parallel universe, but until the Large Hadron Collider breaks through to a dimension where a 2% increase is better than no increase at all, we may have to file that comment under ‘S’ for Slightly Silly.
Simple ideas like adding ring-fenced increases to VAT or corporation tax might even net a greater income for the exchequer. But perhaps there’s a hint at what lies behind the BRC’s change of heart. Would it be outrageously cynical of me to wonder if all those large scale retailers that have the ear of the organisation have just realised that a turnover or profit based taxation system might actually cost them more? Especially if effective action was taken to reduce tax avoidance schemes at the same time. Just a thought.
From the comments I’ve received on this move so far it’s done serious damage to the credibility of the BRC, certainly with small businesses. There’s always been a belief that as a trade body the BRC were rather more concerned with the fortunes of larger retailers, especially supermarkets, than with those of smaller independents. This wasn’t a view I supported, but this capitulation on one of the most pressing issues on the high street will do nothing to dispel that belief. The alignment with an institute like the CBI also pretty much puts the lid on any claims that could be made for the BRC being in touch with the grass roots retailers. That’s all very disappointing, to put it mildly.
Happily though the Federation for Small Businesses does seem to have remained on the side of the little guys and coincidently launched their own campaign for a rates freeze on almost the same day that the BRC backed away from theirs. I’d urge everyone to sign their petition and get involved with the campaign.
Not a negotiation
And there’s the difference that Helen Dickenson, the BRC and the CBI doesn’t seem to have noticed. This is a campaign, not a negotiation. We don’t need to achieve the best result we can by simply asking for what we think we’ll get. We should be stating a position that is defensible and then fighting for it. Yes, ridiculous expectations are a waste of energy and resources but we’re not expecting cash handouts to private businesses, jet packs or for Vince Cable to actually bother to research the difficulties that high street retailers face before he makes yet another dismissive speech.
This is a about taking a lobbying stance based on principles and fairness in the same way that campaigners have fought down the years to reform other unfair social inequalities. Small retailers and their staff depend on the high street for a living. In many ways reforming the inequities of an unfair taxation system is every bit as important as the fight against sex and race equality, or other socially corrosive political stances. You can’t negotiate those values and aspirations away just try to save face and score an easy win. Certainly not if you want to remain relevant to the people you claim to represent.