Our Willy Wonka Chancellor Feeds Us More Fudge On Business Rates

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Six and a half years after promising to reform the UK’s arcane business rates system, Chancellor George Osborne announced some sweeping changes at the Conservative Party conference on Monday.

However, instead of a carefully thought out progressive revision of local business taxation, we had yet more fudge from a Willy Wonka chancellor, eager to impress the party faithful with a plan so fiendish even Blackadder would blush at its audacity.

Currently business rates are levied by central government and collected on its behalf by local authorities who then pass the money to the Treasury. A portion of this is subsequently returned to councils to fund local services. This is the process of the Uniform Business Rate system, or UBR, a scheme instigated by Margaret Thatcher, partly with the intention of evening out disparities between richer and poorer areas of the country and re-distributing that wealth more fairly. Yes, even Maggie was a little bit commie on the quiet.

The problem in recent years though has been that rates have sky-rocketed in line with the rental valuations to which they are inexorably tied. The retail boom in the early part of the new century drove landlords to expect more and more returns on property. With large, heavily-leveraged retail chains eager to stump up ridiculous amounts of rent to be in key locations, the market mushroomed.

red_toryConsequently business rates have generated massive piles of wonga for central government and successive chancellors of every hue haven’t exactly been itching to relinquish the embarrassment of riches they’ve had bestowed on them. Indeed in 2012 alone, £350M was added to the rates liabilities of businesses amidst one of the worst recessions on record. During the last parliament the business rates take ballooned by over £1bn and the situation has been further exacerbated by the arbitrary postponement of the regular 5 yearly rating revaluation which should have taken place this year.

Pressure has therefore been mounting on government from businesses and retail campaigners like myself to do something about the damage this system is wreaking on our local high streets. This reached something of a crescendo prior to the general election, when once again the Conservatives promised that improvements would be made, even though they’d singularly dodged the issue throughout the previous five years.

So it was surprising that there was scant mention of rates in the emergency budget cobbled together by Osborne just after The Conservatives shock victory in May. I think I now we see the reason why. He’s obviously confused his party conference with budget day.

Devolution Illusion

Rather than kick this thorny little ball into the long grass for a few more years, Gorgeous George included in his keynote speech the wizard wheeze of passing the problem back to local councils under the guise of localism. The plan is simply to abolish UBR – the one part of the current regime that actually has any merit – and allow councils to hang on to all the money they collect from local businesses, regardless of the disparity that will result.

Apparently eschewing any further rounds of tokenistic consultation with business leaders, he’s neatly avoided central government having to find a solution to the whole soggy mess. In a move that sounds like it was thought up after a particularly good session in the House of Commons bar, he’s dropped the problem into the lap of local councils and walked away. Bang! Sorted!

However, Osborne’s claims about the benefits of his grand idea show just how staggeringly little he understands about the way the system actually works. Something that’s probably a teeny bit worrying coming from our Chancellor, considering we’re talking about a major plank of our national fiscal structure.

Bold Claims

He claims that giving Local authorities the power to reduce rates will help them attract new businesses to the area. In this bold statement he seems to be lamentably ignorant of the fact that councils have had the power to reduce rates since the Localism Act was introduced by his government in 2011. But like so many of these devolution illusions, giving people the ability to do something doesn’t mean they can actually do it.


He’s dropped the problem into the lap of local councils and walked away. Bang! Sorted!


Most councils struggle on the budgets they have already, any decreases in rates payments have to be taken out of that already dwindling sum and so hardly any have availed themselves of their new powers. Sweeping away the last vestige of Thatcherite socialism will only serve to exacerbate these problems, not make things better.

The Chancellor also seems to be unaware of the fact that empty properties still attract a rates liability. Landlords continue to pay rates on voids with only a small amount of relief in the early stages of a vacancy, so there’s little incentive for councils to reduce rates on empty properties. A problem that I once tried to explain to our erstwhile minister for the high street, Grant Shapps, without much success. It appears that obliviousness to the principles of local taxation goes even higher than I thought. Which explains a lot.

SNN2252GXA-620_1791255aRates will therefore continue to be an unavoidable burden weighing particularly heavily on small retailers, especially as, under Osborne’s new scheme, it appears that central government will still be setting the national levy as it does now. I say ‘appears’ as the details seem to be thin on the ground right now. Perhaps George lost the fag packet he wrote them on somewhere between the conference podium and the bar.

There is some talk about a system of re-distributing funds between richer and poorer councils, but again there are not many specifics beyond the idea that city councils who agree to have an elected mayor will be allowed to impose small additional levies for infrastructure projects, again something they can already do now.

There may be some scope for individual councils to adjust liabilities between different types and levels of business, but without the ability to increase rates on others beyond government limits, that will only work in one direction.

Rich and Poor

Well heeled and over-subscribed areas like London’s West End will reap huge rewards from this new regime, hanging on to far more money than they ever received in government grants. But they’ll have little reason to reduce rates liabilities. They will simply, and sensibly, bank the extra cash for a rainy day.

Meanwhile poorer authorities will continue to languish in the doldrums. After all, why would anyone want to set up business in a depressed area that is destined to become even more dilapidated as council budgets are swept away in the dust of the government’s on-the-hoof policy making?

With the balancing principle of the UBR gone, richer areas will become even richer and the poorer even more impoverished. Most councils will probably just hope that the amount they receive in newly retained rates payments will at least offset the amount that will be missing from their government grant. But in the most desperate areas that’s likely to be a forlorn hope. It’s a quid pro quo where the quids will only be going one way.

If nothing else I suppose Osborne has at least affirmed early on in this parliament that we’ll see just as little meaningful progress on local taxation reform as we did during the last. And while he basks in the glory of grand gesture politics and party political back-slapping, it seems our high streets and local services will have to continue to cope with this government’s ignorance and avoidance of the real issues for at least another 5 years. A prospect I doubt many people will find particularly sweet.

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Oxford Finally Flips The Switch On The On/Off Shopping Centre

westgateoxfordOxford is an ancient city.  Even by medieval standards things move slowly here.  So after what seems like centuries of wrangling, planning applications, withdrawn projects, hand shaking and head banging, Oxford is finally set to join other cities with a giant shiny shopping centre nobody really needs any more.

Having experienced the damage that these behemoths can do to small local retailers, myself included, this is a moment I and many others have dreaded.

The council of course has applied a heavy spin on the whole project, whilst ushering the developers and large multi-nationals into the city with wide-eyed certainty that a new shopping centre will solve all the problems we now have.

We know at least one of those problems – that of affordable housing in the city centre – won’t even be dented by this grandiose project.  In a move that is frankly baffling from a socialist led council, planners have dashed all hopes that the accommodation element designed into the revamped centre would be for social housing or affordable homes.  Whilst Green councillors opposed this move, others apparently felt that poorer people won’t be able to keep the new apartments up to the standards they expect to be demanded.

So no comfortable inner-city pied-à-terres for the ordinary folk of Oxford then.  Which is a shame considering Oxford City Council provided virtually nothing for that sector last year, despite claims that this was a priority policy.

Jobs are not the only thing to consider

Judging by the analyses carried out over the past 10 years it looks highly likely that the new Westgate extension in Oxford will have a significant impact on other retail destinations both in the immediate vicinity and county wide.

The council has claimed that 3400 jobs will be created by the opening of the new centre, which seems like a rather optimistic number to me.  Even if one accepts that figure, previous analyses have suggested that the number of jobs created will be far outweighed by those that will be destroyed elsewhere in the city and the surrounding areas.

It’s very easy to focus just on the number of jobs created, but when similar centres have opened there have been many casualties in other areas. This doesn’t even take into account the damage that’s likely to be done to trade during the building and infrastructure works and the impact of additional competition for small retailers that attracting large multi-nationals into the area will provide.

Until the council addresses the systemic issues with people visiting the city, such as parking, local transport and city centre management, a revamped shopping centre isn’t going to add that much prosperity to a town encircled by much better alternatives.  There’s also some question over likely losses to the council in terms of business rates which could run in to hundreds of thousands.

The new shopping centre will likely have some novelty value for a few months, but once the realities of trading in Oxford begin to bite, I doubt it’ll be anything more than another usual-suspect clone-town brand zoo.

Years of disruption

According to a recent article in the Oxford Mail, a scrutinising committee of city centre councillors are due to meet to discuss ways of keeping businesses alive during the hugely disruptive infrastructure works needed for the new extension.

roadworksSo Oxford City Council wait until AFTER the works have begun to think about how to mitigate the problems that will inevitably be caused by the works?

Another great example of the forethought and careful planning we’ve come to expect from our wonderful city council!

I was at a meeting with both the city and county council leaders over a year ago where I highlighted the potential damage that will be done by the infrastructure works required for the Westgate extension. Having already experienced the same in Bristol a few years before, it was clear to me and many others that the likely upheaval required for the Westgate works were going to do more damage than they were likely to be worth in the current climate.

Seems like it all fell on deaf ears. As usual.

Empty shops

My business in Cornmarket Street closed it’s doors for the last time after 20 years last year. Despite numerous pronouncements in the press that the city council was eager to support local businesses, we got zip-all support, even after asking on several occasions.  Indeed, at one point their planning department were very close to scuppering the only deal we could achieve to sell the store. Had they not done a last minute U-turn there would have been one more empty and un-lettable shop in the city centre.

In an era where many retail chains are looking to reduce their portfolios, the time for this centre has been and gone.   At the end of this year, 40% of retail leases nationwide will come to an end, sparking speculation that many large and medium chains won’t renew them.  The costs of retail space in many towns, Oxford included, is now at odds with likely returns on investment.  A new mall plonked into the middle of that scenario risks hoovering up any viable city retailer, leaving the existing shopping areas a wasteland as companies let leases lapse and move on.

There’s already plenty of retail space in Oxford city centre, some of it lying vacant even now.  Not least the huge former HMV store, empty for most of last year in what should be a prime location on Cornmarket.  The new Westgate development will seriously shift the focus of the town away from the existing shopping areas with the main anchor store, John Lewis, being located well away from the current main shopping destinations.  Again this is a very similar scenario to Bristol’s Cabot Circus development, which saw most of the legacy retail locations abandoned en masse by any store that could afford the move.

Councillors are also now apparently worried about the growing number of empty shops in the city, despite previous claims that there were queues of businesses eager to take space.  Perhaps news has started to filter out that retailing in Oxford is not what it once was.

In that context one has to wonder who is going to populate the new cathedral of consumption when it is finally completed, and for those that do take up residence, what kind of trading environment will they find?  With one of the worst December trading periods on record just behind us and radical changes in consumer habits continuing apace, it really does beg the question about how much space will be required when the Westgate centre is completed in 2017.  Moreover what will the rest of the city look like once all the remaining viable stores have de-camped into the waiting warmth of a lovely new mall?

910484_23238014With council plans to push up the cost of parking YET AGAIN and the negative impact of roadworks, and the city centre looking like a building site, it’s likely most consumers will continue to go elsewhere to shop, surrounded as we are by much more attractive and easily reached locations around the city and the county.  And once again, experience tells me that once people find better alternatives, they’re unlikely to return, other than for a quick nose around the new development.

A committee composed of councillors with absolutely no idea how businesses in Oxford operate, setting out to ‘examine’ how to deal with these issues now, is tantamount to closing the door after the horse has bolted, lived out it’s natural life and ended up in a dog food tin.  This project as has been in the planning stages for so many years it’s truly staggering that the implications are only being discussed now.

Oxford is of course known as the city of ‘dreaming spires’.  It seems that in terms of strategic planning, many of our councillors have also been asleep on the job.