Lies, Damned Lies, and Statistics on Business Rates

I started my high street retail career in the fine city of Oxford, so it’s a place that’s close to my heart.  It’s also a place where I first experienced the damage that can be done to an area by a local authority who not only takes its eye off the ball, they take the ball away and refuse to play nice with the local small business community at all.

We closed our last store where we had opened our first 20 years earlier, almost to the day, in Oxford.  It was a sad time for us, made ever more sad by a final tussle with the City Council who had refused us a change of use on the property so that we could finally sell the lease to the only people that wanted it – A Bureau de Change.  They finally relented hours before we were about to call the administrators in.

Not a great end to our Oxford experience, but one that had been marred over the previous 20 years by repeated mismanagement and lack of consideration for the high street.

From a dreadfully thought out one way system, to road works that took over a year to complete and decimated trade for years afterwards, to increasingly hiked, eye-watering parking charges, the city council couldn’t have more effectively shown my business, and many others, the door if they’d tried.

Eventually, after years of depleted useful footfall, and with a new shopping centre that we all knew was going to decimate the traditional retail areas in the city on the horizon, we finally took the hint and left.

Many other small stores and restaurants have followed suit since, and one of the more recent ones – Combibos Coffee – in Gloucester Green made their feelings clear in a newspaper article in the local press, where the owners levied the criticism that the city had “lost it’s sparkle”.

Read the original Oxford Mail Article Here

This chimed with me, not only because, as a jeweller, I think we once provided some of that sparkle, but also because as it mirrored my experience in dealing with the council a few years earlier.  My business had also applied for rates relief before we ultimately gave up on the city where we’d begun our high street adventure.  We were knocked back unceremoniously for our troubles.

The response to this article from the city council seemed to me to support my view, and that of many others in the local community, that they had not grasped the severity of problems in Oxford, particularly for smaller businesses, and were instead trying to wave away such criticism by making bland comments about supporting local businesses.

Moreover the councillor most closely concerned – Mary Clarkson – seemed to be suggesting the council were offering direct support for smaller businesses in the form of targeted business rates relief.

Read the Council’s Response

Intrigued by this claim I made a FOI request asking how many micro-businesses – nationally defined as operations employing 9 people or less – had the council given rates relief to outside of the normal concessions applied on a national basis as part of the new powers granted to local councils in the 2011 Localism Act.

The answer was virtually none.  The only rates relief given as a result of local initiatives came to approximately £40k and this was only to a group of businesses very narrowly defined by the council as operating as if they were charities.

The council made a subsequent claim to the local media that they had in fact given £31m of relief to businesses.  Closer examination of this claim revealed that they had included all the statutory government mandated relief schemes in that figure.  These included such things as transitional relief and charity relief.  As most of us will know, these are simple bolt on measures brought in by the government over many years, intended to reduce the business rates burden, instead of carrying out the root and branch review that everyone, including central government, knows is required.

My concern was that Oxford City Council, in attempting to obfuscate the fact that they have not provided any additional support, were undermining the argument that business rates do need a fundamental rethink.

I know that councils are cash-strapped by government cuts, so expecting them to provide support unaided is probably a tall order.  But in not making that point, and instead relying on empty cut and paste phrases, the council are missing an opportunity to engage with both the government and the business community on the issue.  I have to say that, for a Labour led city council, I find that doubly surprising and disappointing.

As the old truism goes, you can’t deal with a problem if you deny that there is one in the first place.

Unfortunately much of the local media have slightly missed this point and instead focussed on my criticism of the city as a “scruffy clone town”.  I think it’s arguable that it is, and that the reason for that is connected to the council’s apparent lack of support for smaller businesses that provide the diversity and distinctiveness that avoids towns and cities being described as such.  Their recent comments are really only a further indication of this.

I tried to correct this shift of focus in a radio interview I gave on Friday about the local press articles.  Sadly the council didn’t put anyone up to discuss the issue more fully, they will apparently be issuing a fuller statement in due course and I’m waiting with baited breath for that!  In the meantime, as you can hear in the interview they are relying on their claim to support local businesses using the same ‘cut and paste’ answers I accused them of in my letter.

Listen to the interview here

For those who are interested I’ve added the full text of my open letter below. At the time of writing I’ve received no response from the council or Councillor Clarkson.

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Councillor Mary Clarkson
Oxford City Council

18 August 2018

Dear Councillor Clarkson

I read with interest your comments in the Oxford Mail some weeks ago in an article entitled ‘Council hits back at coffee shop claims Oxford has ‘lost its sparkle’ (Oxford Mail 14th June 2018).  This was in response to claims by a local coffee bar, Combibos Coffee, and some other small businesses in the city that Oxford had lost its appeal to consumers and that the council was not supportive towards smaller businesses, specifically those classed nationally as ‘micro businesses’ employing 9 people or less.

In the article you rebuffed claims that the council had not done enough to support such businesses in the city.  Amongst a number of rather glib statements focussing on broad indicators such as footfall and changes to the high street you made the following statement :

“Business rates are set by central government; the city council provides business rate relief to many small businesses”

Whilst I’d not dispute that business rates are indeed set by central government, the second part of your claim surprised me.  It suggested that the city council has provided specific relief to smaller businesses in Oxford over and above those it is mandated to provide by central government.  I assumed you were referring to powers available to local councils under Localism Act 2011 that gave them the discretion to apply rates relief where required.

As a former trader in the city of over 20 years standing, I’d applied myself to the council for help on business rates around 2013 when my store in Cornmarket was suffering as a result of many factors in the city that were arguably caused by the city council.  My business was refused support out of hand at the time, so I was intrigued to find out what help you may have provided to others in a similar situation as you appeared to be claiming in the Oxford Mail.

As well as being a retailer myself, I’m also a commentator and journalist on retail matters in the national and business press.  Many of the problems I highlighted to the council 5 years ago were repeated by Combibos Coffee in the Oxford Mail article you responded to. These included poor management of shared public spaces, high parking charges, lack of easy access to the city centre and a disproportionate focus on larger chain stores in the city centre.

The latter problem has now been massively compounded by the opening of the Westgate Centre which itself is only partially let and has largely cannibalised traders from elsewhere in the city, leaving large holes in the main trading streets.  There appear to have been no contingency plans laid to deal with the devastating effects of this development on other businesses in the city, especially smaller operators, not least in the Covered Market which is losing ground and tenants faster than even the most pessimistic observers predicted.

The response from the council has been one of apparent lack of concern and in many cases an evident lack of understanding of how the commercial property market operates.  Your colleague and former leader Bob Price was regularly heard to claim that more empty shops would lead to a reduction in rental values.  Sadly that is not the case for reasons too complicated to detail here.  It’s a shame that he, and it appears you, are not better informed on such matters.

As a result of your claims in The Oxford Mail, I made a FOI request asking for details of how the city council had provided business rates relief to “many small businesses”.  The response to that request and subsequent clarification you provided to the Oxford Mail demonstrates that little has changed in the council’s approach since my days as a city trader.

Although the city council apparently have no records of how many businesses apply for discretionary relief, you were able to confirm that none had been offered such relief in the preceding 2 years.  I was told that micro businesses “would not normally qualify for Discretionary Relief in the Oxford City Area”.  So the facts seem to run contrary to your claims.

You do apparently offer some relief, but only to a very narrowly defined group of businesses which “act like a charity, but do not have charitable status”.  Even then, you have only provided this to an average of 8 businesses a year and currently provide it to 6.  I doubt that would fit any reasonable definition of “many small businesses” as you have claimed.  The only other form of locally administered relief is hardship relief, for businesses in temporary difficulties.  According to your own figures you haven’t provided this to anyone.  Again, hardly a figure anyone would reasonably describe as “many”.

Your further response to the Oxford Mail did however provide a long list of other business rates rebates and discounts.  These included Mandatory (Charitable) Relief, Small Business Rate Relief, Transitional Relief, Empty Property Relief, Rural Relief, Public House Relief, Supporting Small Business, Local Discretionary Revaluation Relief and Local Newspaper Relief.

To the uninitiated this sounds like an impressive list, but as I assume you know, these are all government mandated schemes imposed and essentially funded by central government.  None of them are initiatives created or provided by Oxford City Council as you implied in the article on 14th June.  The council has no choice, no say, and does not directly contribute financially in the application of these rebates.  These are not optional or locally created schemes and so it’s misleading and disingenuous for the council to claim credit for them.

Contrary to your claims, essentially no direct support exists for small local businesses in Oxford similar to Combibos Coffee to offset the unique problems in the city centre, many of which have been created by your administration.  It follows then that your comments in the newspaper and the assertions your department have made since are at best confused and at worst factually incorrect and misleading.

I am aware from my own experience that the council takes the view that discretionary support should only be offered when it returns a direct benefit to the city and I can to some extent understand that.  I also understand that all local authorities are under immense financial pressure as a result of central government cuts, and very few if any have given rates relief on a purely discretionary basis.  But ignoring this fact and the associated pressures on local businesses and making misleading claims about local business rates concessions does not properly highlight this plight.  Neither does it help the national debate on the inequities of the business rates system.

The underuse of discretionary powers also overlooks the value of the amenity provided by such businesses, not to mention the employment and direct contributions they make in the form of local taxation prior to running into such difficulties.  I would also assert that there is a responsibility on you as a council, especially an allegedly socialist led council, to ensure that smaller businesses who are simply looking to make a reasonable living are able to do so, especially when they are providing valuable employment to people in the city.  Yes they are still private enterprises, but their continued success has many knock-on benefits for the city.

These are usually owner-operated outlets working hard against ever diminishing odds to simply stay afloat.  They are not in the same league as the large well-financed corporate operations your council seems to favour, particularly those likely to be attracted to the new shopping centre, itself a development instigated and operated by large wealthy conglomerates.

It’s also noteworthy that, unlike many other councils considering such developments within their purview, you did not impose any requirements on the developers to provide smaller, subsidised units for independent operators other than the usual ubiquitous RMUs.  But considering you didn’t deem it worthy of ensuring the housing element of the development would be affordable for key workers, I suppose this is hardly surprising.

I have to say that I agree with the original assertion by Combibos Coffee that Oxford has “lost its sparkle”.  Having traded in the city since the early 90s I’ve seen it go from a vibrant, destination location to a scruffy, poorly managed, clone town, trading on its past glories.  Over the past 10 years it’s essentially been allowed to go feral by a council who seems to have no concept of how an historic city should be nurtured, shaped and supported.

I was very sad to have to close both my stores in the Oxford after 20 years commitment to the city and it saddens me even more to see other small businesses being forced out in the same way.  It’s little wonder that so many of them are collapsing, if your response to such events is careless platitudes and specious claims.

It’s a truism that you have to recognise there is a problem before you can find the solution.  That solution is not issuing blanket media statements with claims that do not bear closer scrutiny.  So I would ask that you at least be honest with the business community and the wider public and admit that as a council you have no schemes in place that support small local enterprise and perhaps consider setting some up.

Oxford could be a special place again given the right local political will, but from your repeated cut and paste answers it seems that will is not there.  Neither is there any tangible support for struggling small businesses, despite your claims to the contrary.

I’m happy to discuss these matters in more detail if you think that would be useful.  In any event I look forward to hearing your thoughts and seeing an honest clarification of the position of the council on discretionary business rates relief in the near future.

Selling Democracy by the Pound

Some of my more regular readers will have noticed my absence from the these pages over the past coupe of months as I took some time out from retail cogitation to try my hand at politics.

My nomination came at a transitional point in my career as my company had just closed it’s last high street store after making the decision back in 2013 that we would move our business into other channels. I’m also looking at more ethical areas of retail so again the Green Party seemed a good fit.

I had actually intended to take a few months off to relax before launching a new business, and really accepted the candidacy as a paper exercise. But as with so many things I become involved in, I couldn’t just go through the motions.

Many people found it odd that I should have stood for the Green Party in one of the safest Conservative seats in the country. Firstly because The Greens aren’t generally known as great lovers of business, and secondly because I had about as much chance of winning as I had of joining The Spice Girls on their next reunion tour.

But I didn’t go into the campaign expecting to win. I did it for the experience and to make a point. The point being that business can be a force for good in society. I’m currently exploring a concept that I, and a few others, have come to call social capitalism. It’s a movement I believe small and medium businesses should be an integral part of, and a party like the Greens, being so far untainted by the guiding fist of big corporates, seemed like a good place to start.

Familiar Ground

Political campaigning felt strangely familiar to me as a retailer. And really that should have been less of a surprise. An election is essentially a marketing exercise with yourself as the product. So it soon became obvious that many of the skills I’d learnt at the helm of a multi-channel retail business could be easily applied to the more esoteric ideals of politics.

This was an election that many people predicted would be won online, with social media playing a big part in the campaigning process. It certainly seemed that way to me as Facebook, Twitter and Email accounts became integral to my political routine using software that was obviously based on CRM systems that would be familiar to any customer service manager. And I did indeed find these channels to be an essential element to getting the message out there, just as I do in my retail business.

I also saw many other candidates fall foul of not paying enough attention to these avenues, as well as some that used them entirely inappropriately. Branding has also become an important aspect of any political party and The Green Party really seemed to get it’s act together on standardising the look of logos and marketing material, which was encouraging.

Hustings were no different in my mind to a simple sales pitch and I even found myself back standing behind a market stall, although this time my stock in trade was leaflets, manifestos and my own personality, such as it is.

Too Big Data

The other familiar aspect to all this though was that frequently cited phenomenon – Big Data. This is a buzzphrase I’ve never been entirely comfortable with. To me it should really be called ‘Too Big Data’.

I’ve always been suspicious of the idea that the more analysis you do, the more data you have, the more accurate your forecasts will be. This is self evidently not the case. And the plethora of polls, super-polls and polls of polls during the election on served to underline this point by being so spectacularly wrong. Not a single published poll correctly predicted the correct result. Although there are reports that some pollsters did have results that reflected the actual outcome, but they were so far adrift from others that they were nervous of publishing them.

As many retailers will attest, analyses are all very well, but ultimately there’s nothing remotely predictable about the great British public, as voters or consumers. In that context I suppose it was a stroke of genius on behalf of the Conservatives to employ a former market analyst as their campaign manager. One who arguably used these inaccurate polls in a feat of misdirection worthy of any accomplished prestidigitator.

Or maybe it just goes to prove that it’s not how much data you have, it’s how you choose to interpret it that counts.

Money Back Guarantee!

So there you have it. My brief political career dashed on the rocks of our rather arcane electoral system and a bit of good old fashioned market manipulation.

With so many unexpected parallels with the worlds of marketing and retail, it has left me wondering even more about what really constitutes democracy.

If we’re increasingly going to be sold ideology and aspiration like packets of soap powder, maybe there should be the same sorts of checks and balances as there are in the world of consumer protection.

Perhaps if politicians were made to operate under the same stringent regulations that retailers have to abide by every day, we may see a few less un-kept promises and bit more attention paid to customer satisfaction.

In which case will we be entitled to a full refund if yet another government fails to perform as advertised?

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

Oxford 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.

So 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?

With 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.

Pressing The Reset Button On The Commercial Property Market

I have this annoying habit of confusing two recently formed organisations.

Firstly there’s the Future High Street Summit, set up by high street campaigner Clare Rayner to bring together experts and activists concerned about the state of the great British town centre. It currently takes the form of a conference, open to anyone, but especially grassroots imagineers looking to contribute to process of re-building communities around a social and commercial hub.

Then we have The Future High Street Forum, set up by the government, supposedly to build on the work of the 2012 Mary Portas review. They have a smattering of academics and some fringe involvement from trade bodies, but largely it’s composed of vested interests, property investors, large corporate retailers and politicians appointed by a government department with no readily apparent clue about what is actually needed to deal with the problems in our town centres.

As you may be able to tell, even though they have similar names, there is a big difference between the aims and achievements of both bodies. I was fortunate enough to be invited to the first Future High Street Summit earlier this year and found it a very interesting experience. Rather fittingly held in the futuristic environs of the National Space centre in Leicester, it comprised of two days of speakers, discussion groups and networking opportunities.

A number of knowledgeable speakers shared experiences and insights over the two days I was there. Some I agreed with, some I didn’t. But overall there was a good cross-section of exemplars and I’d imagine everyone found something to inform their own activities and responsibilities. I certainly enjoyed the networking sections, chatting with people I already knew and making a few new acquaintances, some of which I’m still in touch with.

Where’s Brandon?

One notable absence though was the then Minister for High Streets, Brandon Lewis. He’d been billed as a speaker for some months, and having missed my opportunity to fire a question or two at him at his whistle stop visit to Retail Week Live conference a few weeks earlier, I was looking forward to getting a second chance in Leicester.

Sadly though, at the last minute he discovered he had to somewhere else to be on that day. An important matter of state perhaps, or maybe it was just his turn to polish the Westminster cat. I remember checking his Twitter feed on the day to find out what could have been so important for him to break such a long standing engagement. I can’t remember it being anything earth shatteringly important. Certainly not as important as a conference bringing together people to discuss options for the very thing he was supposed to be responsible for at the time. Perhaps, like me, he got the two similarly named organisations mixed up and only realised his mistake at the last minute. That might have been an embarrassing admission for him, considering he was the chair of the government forum.

Whatever the reason the DCLG sent along a polished civil servant stand-in to read a prepared speech in impressive cut-glass tones. Rather more of a political treatise than an engaging presentation, it sounded like a lecture he’d already given a dozen times to the politically faithful. The questions piled up on my notepad, poised for moment when he would finally shut up. But, as his boss had done a few weeks before, he scuttled off with no time for in depth discussion of government policy. In the final analysis, perhaps the lack of engagement with attendees on both occasions speaks volumes about the government’s genuine attitude towards the issues.

We’re All Forum

Over the past year or so we’ve had a number of announcements from the Future High Streets Forum. Last year Government Minister Nick Boles suggested that hard to let stores could be re-tasked as residential properties, thus neatly erasing the problem of abandoned high streets and giving property developers free reign to make a lot of money out of the plight of inner cities.

No matter that the Forum was set up to help get these areas back into retail and other community uses. Let’s just solve the problem of over-rented, over-rated retail locations by turning them into luxury pied de terres. In one fell swoop this would provide hope to perfidious landlords who’ve backed themselves into a corner with fantasy loan to asset values and reduce the pool of available retail properties, thus inflating the market even more.

Their latest wheeze yet again involves the property hue of their spectrum of responsibility. A joint announcement from the Forum and the British Property Federation set out a plan for what Liz Peace of the BPF called a ‘collective ownership scheme’. The driving principle being that the disparate nature of property ownership on our high streets didn’t lend itself to the same sorts of controls available to the operators of shopping malls. Unusually for me, I agreed with Liz on this point. We do need curation on the high street. So many towns now are clogged up with the same usual suspect operators. from the ubiquitous mobile phone stores to the omnipresent coffee bars, many high streets are just plain boring.

Attack Of The Clones

The principle of the clone town is not new. It was identified some years ago and the phrase has long since slipped into the national lexicon, in many cases without much concern for what it actually means. Shopping centres have been quick to capitalise on this phenomenon and have applied fairly rigid tenant mix policies within their specific fiefdoms. I say ‘fairly’ rigid as it’s not unheard of for a big bucks offer to banish all concerns over duplicate use. You only have to look at Covent Garden and count the number of multinational perfume and body products brands selling virtually the same thing to see that.

But this more ordered approach to the shopping experience has paid dividends for mall operators and their tenants so it’s sensible that the idea should be applied to the high street. Of course the stumbling block is still the fractured nature of property ownership. Ultimately each landlord is more concerned with getting the best deal from a tenant, regardless of the type of use. What do they care if there’s already 6 other mobile phone store in town. If number 7 is prepared to a ludicrously speculative rent they’ll take their money.

The BPF’s solution to this is a system whereby landlords would pool resources and agree a common lettings policy. In one model being proposed they would each have shares in an overall property portfolio, shifting the focus away from individual lettings to a more holistic trading environment.

Curated High Streets

The idea of a curated high street is something I’ve long championed. But I’ve always proposed controls via more detailed planning laws. Instead of broad brush usage classes being factored into local plans, I’d have specific operator types defined by an elected team of high street managers, drawn from various parts of the property spheres. Town planners, local retail groups, landlords, property advisers and local consultants, maybe something like the town teams we already have, but with more accountability. There would be zoned areas within a well defined tenant mix policy which any new tenancy would have to comply with. This would prevent disconnected property interests simply chasing the money, regardless of duplicated use.

Of course this is something that could be handled by a self regulated body of property owners, but there would be a risk that vested interests could ultimately over-ride the what’s best for the local trading environment. Even if the income from these property groups was pooled by way of a shareholding collective, as suggested in one proposal from the BPF, There would always be potential for larger shareholders to dominate the group. And as I’ve described above, self regulation becomes rather malleable when there’s enough money on the table.

The other danger that I see from allowing such a collaboration between property managers is the possibility of terms fixing. Rents and other leasing policy issues could easily become entrenched, leaving tenants little room for negotiation in a target area. Instead of dealing with one landlord, they’d be dealing with a cabal. Lease negotiations are already skewed enough in favour of the landlords. We don’t want to be fomenting conditions for the construction of a cartel in all but name.

The Big Idea

Fellow town centre campaigner Dan Thompson and I have recently been kicking about a more radical solution to the problem of restrictive practices on the high street. We’ve posited the idea that empty properties could be purchased by a retail property trust and let to independent operators on a non-profit basis. That’s not to say the rents would be at giveaway levels – the idea would be to generate funds for other local projects as well as to expand the property portfolio – but rents would be kept sustainable with respect to other costs and the profitability of tenant’s businesses.

There would be some element of profit sharing involved along with principles of tenant mix, competition, and the curation of the overall trading environment. But small businesses and a variety of uses could be encouraged to keep an area varied and vibrant.

Rents would be pegged to factors other than the usual relentless pursuit of asset valuation. That way we could ensure some longevity for both the local trading environment and the businesses within it. Moreover pioneering entrepreneurs who move into the poorer trading zones, and then revitalise them through their own creativity, innovation and bloody hard work would get to reap the benefits when the locale becomes trendy and profitable. Rather than landlords immediately following the money and moving in yet more coffee bars, mobile phone shops and anyone else who dangles a big wad of cash in their general direction.

Ultimately the goal would be to press the reset button on the commercial property market, providing some alternative dimension to the rental tone and thus undermining the closed shop rent review stitch ups that usually lead to ratcheting rents and more literally closed shops.

I’m proposing a return to the days when landlords and property owners worked in conjunction with tenants to foster a long term relationship. Both were happy to receive realistic returns on their investments and were able to plan for the future, rather than constantly watching over their shoulder waiting for the next rent review or feverishly calculating the chances of your own survival when the shop next door is let at a blue sky rent that you know you’ll never be able to afford.

You can call me naive – indeed somebody did on Twitter shortly after I revealed this idea in my Retail Week column last week – but I really believe that if we’re to encourage future generations of high street pioneers, we need a cultural shift away from the idea that commercial property is the investment gift that keeps on giving.

In my view, the day landlords swapped the value of a solid reliable tenancy for beliefs in such fairytale concepts as upwards only rent reviews and ever increasing portfolio values was the day our high streets started to die.

So there you have it. A brief taster of my idea of a high street utopia. Somewhat different from that proposed by the future High Streets Forum and the BPF, but something that would be about long term, sustainable revitalization, not just a valuation on a balance sheet.

I believe that if the high street is to have a future, in whatever form, we need to be thinking these seemingly impossible thoughts. And if the government and their various advisers are serious about revitalisation they should be encouraging concepts that do more than prop up the property status quo. If anyone else wants to get step outside that box with me, please get in touch.

This blog was originally published as a guest article on the Future High Street Summit blog

Let’s Not Plan Any Retail Street Parties Just Yet

For many retail and economic pundits the term ‘anal-yst’ seems very apt.  So many of them seem to talk out of their backsides that it’s rare for me to find one that I agree with in broad terms.

Jon Copestake is one such individual, and I frequently find myself in agreement with the majority of his comments in Retail Week Magazine.  His comments today – Despite optimism, a UK retail recovery remains fragile – are no exception.

Along with many others, he’s quoted the LDC and Springboard figures that show a very tiny improvement in high street vacancy rates as part of the general consensus of optimism that seems to be building.  There were equally modest positive increments in retail sales figures which, whilst being better than expected, are still in the order of 1%.

Last week we saw breathless reports that the nebulous and somewhat metaphysical indicator known as ‘consumer confidence’ had finally recovered from the negative position it had been in for 10 years.  We were presumably expected to rejoice that this number had now reached a big fat zero, all of us clapping with one hand whilst frantically grasping handfuls of straws with the other.

Having spent a small portion of my academic career designing questionnaires, I’ve never been convinced by such a slippery concept.  Quite what real use a number based on asking a select sample of people if they’re likely to spend a few quid in the coming weeks is supposed to be eludes me.  I think it’s more something that retailers and investors cling on to as a comforter, intended to give the impression that we know the unknowable – the inside of a consumer’s head.

It’s hard to ignore the conclusion that the effort we all put it to predicting doom and gloom around the time of the collapse ultimately led to a self fulfilling conclusion.  But now we seem equally eager to ‘big up’ minuscule vacancy level movements in the order of 0.5% or a 0.4% – which in statistical significance terms are pretty much static – as evidence that good times are just around the corner.

The overall assessment from many retail analysts is that we’ll never see a return to the heady days of the early noughties.   ONS figures suggest that even though wage growth has edged ahead of inflation, most households are still around 10 years behind in real terms spending power.

Even if wages do rise in real terms there are just too many other ways for people to spend money now, assuming the average person ever really gets back to a point where they’ll feel they have the cash to splash around.  Factor in an ever imminent increase in mortgage rates, along with another housing price boom and the whole scenario starts to take on the familiar twists of the path that led us to disaster last time.

There are so many artificial factors driving the so-called recovery I think it’s far too early to be planning the next major roll-outs.  Low interest rates, the property bubble being inflated by government help to buy schemes, changes in weather patterns, even mis-sold PPI payouts are all shifting winds blowing across the sands of the retail landscape.  And we all know where building on sand gets us.

Whatever the numbers are based on there seems to be a mounting roar of expectation that the bunting will be out for a great big retail street party any day now.  Something of a turnaround from the interminable reports of the exact opposite a couple of years ago.  Personally I’m far from convinced that what we’re feeling are the positive winds of change and more worried that the rush of air could just be the prelude to another almighty slap right in our over-eager little faces.

When is a U-Turn not a U-Turn? The Parallel Universe of the BRC

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.

Realistic ideals

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.

Special Case

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.

Helen Dickinson herself has acknowledged that :

[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.

Incredibility

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.

High street decline – Re-task or re-think?

There’s been much talk  from various quarters about needing to come terms with the idea that the high street is dying.  Bill Grimesy has set this as the starting point in many discussions, and more recently the head of Ocado, Tim Steiner, expounded pretty similar views in a rather unhelpful gush of vitriol to the national press.

The rhetoric characteristically continues along the lines that we’d all better get used to it and deal with the reality.  ‘Dealing with it’ usually involves tacit agreement that shopping malls will be the main destination for consumers of the future and the rest of the slack will be taken up by the direct internet purchases, click and collect and m-commerce.

Ailing high streets, we’re told, will need to re-imagine themselves into areas that will attract people for a variety of reasons rather than just shopping.  Empty retail properties will be re-tasked into other uses, primarily residential.  There’s usually a raft of other ideas that come along in this mix.  Crèches, art galleries, community centres and various other esoteric uses are floated as essential ingredients in a new-age municipal Mecca that will sweep away the tumbleweeds and revitalise areas that people that are staying away from in droves right now.

It’s a view predicated on pragmatism that has some merit.  But I’d ask at what point does pragmatism slip into the realms of defeatism?  I think we’re a long way off from throwing in the towel on the high street, we just need the political will to deal with the underlying problems that have dogged it since investment landlords, property developers and city councillors first crawled out of the primordial slime.

Logical

I don’t argue with the logic of mixed uses in any retail environment, based as it is to a large extent on models already in existence in the shopping centres and mega-malls that are now a ubiquitous part of the UK consumer landscape.  It’s a truism that shoppers don’t just want to shop these days.  They want to drink coffee, browse the internet, have a free makeover or a life-changing experience on a climbing wall.  But with all this already available in the big  retail and recreational cathedrals, one has to wonder why exactly people would return to high streets, even after the proposed transformations are complete.  If all it’s going to take to bring these people back into their local areas is a few new service providers and a community centre, why hasn’t this already been done years ago?

The answer lies in the roots of all the problems currently besetting local high streets.  That of high rents, high rates, poor provision of expensive parking facilities, and the lack of a co-ordinated approach to tenant mix and shared space management.  Yes the same boring old issues I’ve been going on about for years, but they haven’t got any less injurious to retailers fortunes with age.

These shortcomings have already been trumpeted by various commentators and pundits, not to mention being detailed chapter and verse in the Portas Review.  It’s likely that Bill Grimesy will cover some or all of this same ground again when his own report is published in a few weeks.

None of this is news, certainly not to those retailers struggling in such areas, or to the landlords faced with empty properties as a result of previous failures.  The answer is to deal with these issues, not just talk about them.  The answer is not to give up on the high street model and dismantle it by stealth.

Small high streets are incubators for fresh retail ideas driven by entrepreneurs with a good idea and not much capital.  The fall in real terms value of commercial property should be a positive benefit in those circumstances, but by and large this is being undermined by landlords and developers who are desperately holding on, waiting for the boom times to return.

Add to this a government equally addicted to milking the high street cash cow through an iniquitous business rates system, and you don’t need to be an economic whizz kid to see why high street property has become toxic.

Re-model Re-task

By making a case for re-tasking or re-modelling empty shops we simply lay the groundwork for landlords and developers who would love to be able to turn empty shops into ‘luxury flats’ or demolish problem locations altogether and start again.  And who could blame them?

But in doing so we risk losing a valuable resource that we’ll probably never get back.  Stores that right now that could, and should, be let on viable rents to small retailers eager to get a foot on the commercial property ladder.  And I mean on proper long or medium term leases, not the fudgy panacea of the pop-up.

Once these units are gone those opportunities will disappear too.  The large malls aren’t interested in small retailers in the long term, no matter how much they might say they are, and once there’s no other alternative where will independents have left to go?

Yes some small retail units will likely be left in town centres, or included in redevelopments.  But then the reduction in availability will simply serve to support the high aspirations of landlords that have led us down the road we’re currently coming to the end of.  The fact that there are large numbers of empty units being left languishing by landlords and letting agents asking for frankly stupid rents should be seen as a potential resource, not a problem to be erased by sending in yet more deep pocketed developers.

Opportunity knocks

There is an opportunity right now to rescue the situation by forcing landlords back into the real world.  I’ve long advocated imposed rent control and local retail zoning, similar to the systems put in place to deal with down at heel areas in the USA in the 60s, 70s and 80s.  If a property is empty for a certain period of time, local authorities would be able to take over the administration and let the unit on a fair rent.  Landlords would be offered a return on investment at a set level above the current base rate and would of course lose liability for empty business rates.

This would go hand in hand with new planning powers to ensure a sensible tenant mix within given zones, thereby reducing the ‘usual suspect’ nature of small high streets, often populated with the same facades of betting shops, charity shops, coffee bars, mobile phone operators and the like.

I’m all for the free market economy but high street decline is a socio-economic issue that needs to be managed at a local and national government level.  It has knock on effects to the well-being and safety of local citizens and the monetary and social costs associated with those factors.

I’m not averse to seeing retail units turned into other service type uses, but I am very much concerned that once permanent changes are made to retail properties, especially into residential, we’ll see a decline in the small independent sector that will simply strengthen the dominance of  large malls and developments that are far less supportive of those types of operations.

Re-tasking retail into other uses is certainly going to be an interest grabber for politicians and developers keen to make a killing out of empty units in town centres.  But if they also kill off the high street in the process I think they rest of us will all be the poorer for it. As Joni Mitchell once sang, “you don’t know what you’ve got ‘til it’s gone”

Internet Purchase Tax ? Be Careful What You Wish For

Sometimes I’m baffled by the workings of the human mind.  For example, why would a retailer in the UK, already burdened with some of the most onerous and inequitable taxes imaginable, not least business rates, actually propose to the government that they introduce a new one, specifically aimed at retail?

Well it seems that’s exactly what Justin King, the Chief executive of Sainsburys has done.  He’s recently called for an internet purchase tax to be applied in the same way he thinks it’s being applied in the USA.  I say ‘he thinks’ because he seems to have misunderstood the reason this tax is being called for over there.

As I’m sure many of you will know, the US don’t have business rates like we have.  They have local purchase tax, which is often added only at the time of purchase.  Items are priced ‘plus taxes’ which are often variable from state to state and region to region.  Because websites can make sales across state and regional lines, many of them have been charging a different rate of tax to what should be paid in the areas where the purchase was made.  In some cases they haven’t charged the tax at all.

Is this right?  No of course it’s not.  But it has pretty much zip to do with the way retailers pay local taxes in the UK.  In the US they are probably quite right to be considering the Marketplace Fairness Act in order to ensure online retail is contributing to local coffers in the way it should.  Here we pay business rates at a flat rate based on the valuation of the property you occupy.  Internet retailers pay these too for distribution warehouses, offices and the like.

What gets up the nose of many retailers, me included to some extent, is that these companies can be based in locations where local rents and by association, local business rates are lower.  Whereas anyone in a high profile high street location would pay a lot more.  That’s because we pay rates based on notional valuations and not as a tax on revenue.  I’ve gone to some lengths to explain how batty I think this system is, but I don’t think introducing a completely new tax is going to make it any more sane.

Golden Goose

Yes it’s annoying and yes it seems unfair, but in essence it’s not.  Online retailers are still paying rates and taxes, but just not at the same level as a normal retailer.  I agree taxes and overhead costs for bricks an mortar retailers are too expensive, but I don’t agree that we should fix that by making online retail just as ridiculously costly.

That’s not levelling the playing field, that’s digging ourselves into a hole in the middle of the penalty box.

Many online retailers are also bricks and mortar operations who already pay a fair share of business rates.  Their online sales may to a large extent be supporting other parts of their business.  Taxing them more isn’t going to improve that situation.  Increased taxation would also have to be passed on to customers, hence neatly strangling the golden goose that may be keeping many parts of the retail industry aloft.

There also seems to be some sort of naïve belief by Justin that ministers will conflate this new tax with business rates and seek to reduce one at the cost of another.  Whereas I don’t have quite the same touching faith in any chancellors spirit of fair play.  Especially not one who’s faced with the biggest book balancing challenge since Margaret Thatcher left charm school.

I’ve been warning about the prospect of an internet purchase tax for the past couple of years.  It’s low hanging fruit that I’m surprised the chancellor hasn’t already started to salivate over.

Governments consistently support the mantra that taxing success should not be the way to go and I largely agree.  Why apply what amounts to a punitive tax on internet based operations rather than reduce the taxation being applied to bricks and mortar?

Yes, retailers in the UK pay far too much tax, well the ones who actually pay tax do,  and certainly far too much in business rates.  But adding to the tax burden elsewhere is not going to solve that problem.  Even if such a tax was sold on the basis of a reduction in business rates across the board, it’ll be a safe bet that pretty soon afterwards that whole relationship will slip into the same grey area that local taxation resides in now.

Leveling The Playing Field?

It’s more likely that an internet purchase tax would be applied in the same way as airport tax, or insurance premium tax.  Just slapped on at a nominal rate which will then be increased gradually in successive budgets.  Pretty soon we’ll just see it as another one life’s certainties, just like any other stealth tax.  We’ll moan but we’ll pay it and maybe a few more businesses will go to the wall.

Moreover any government that introduces such a tax is effectively agreeing with me and many others that applying a flat tax business rate to every other business premises in the country is wrong.  If online retail should pay an overhead tax based on revenue then why not the same for bricks and mortar retailers?

If the conclusion to this debate is a fairer system of local taxation based on ability to pay and it’s applied to ALL retail operations, then I’m all for it.  But I very much doubt there’ll be any change to business rates as they stand now if such a tax were introduced. Maybe I’m just not very trusting of government ministers.  Or maybe I’m less naïve than Justin King.

Either way, let’s stop putting such ideas out there shall we?  After all you have to be careful what you wish for in this life, as sometimes you might just get it.

Boiled Frogs and Business Rates

Amid all the recent furore over tax evasion or avoidance and the barely distinct line between them, I thought I’d throw my two penneth in, which of course I will fully declare to HMRC.

Let’s consider a new form of income tax.  One that simplifies all twists, turns and nuances of the current system.  A more straightforward tax that’s easier to assess, quicker to collect and almost completely unavoidable.

My proposal would be that everyone pays tax based their theoretical ability to earn.

HMRC could look at various parameters such as age and general health, but the most important of these would be your past employment history and your level of qualification.  Both of these would of course be indicators of the kinds of salary you could command on the open employment market.  We’d naturally have to assume the market was buoyant and that there would be an infinite number of suitable jobs available for every person able to take such a position.  But as we all know, assumption is the lingua franca of the taxman

I’d propose that specialised analysts would set a tariff for each person, based on what they could earn in these idealised set of circumstances.  This would effectively give a figure that each person should be paying, assuming they were working and in a job equivalent to their experience and education.  Then HMRC could simply issue demands based on these notional figures.  If, for example, you qualified as a teacher, you’d pay what a teacher should be earning.  If you’d qualified as a solicitor or a doctor, you’d pay based on that ability to earn a salary consummate with your potential.

Now the controversial bit : My system would mean you’d pay these taxes regardless of if you were actually doing the job you were qualified for or not.  If you trained as a brain surgeon, but decided that delving around in someone’s skull was no longer for you, no matter, you’d still pay the tax on a brain surgeon’s salary.  Even if you went off to work as a shelf stacker in your local caring, sharing supermarket, you’d still be expected to pay the brain surgeon’s tax.  Remember, your liability would be based on what you could be earning, rather than what you actually made.  Likewise, if your only qualification was  a silver swimming certificate but you somehow ended up as a city trader, you’d only pay tax based on your notional earnings potential, for example as a street cleaner or a career politician.  On second thoughts, scratch the latter example as that screws with my argument.

Fair’s fair

I know that all sounds terribly unfair, but  I’ve got that covered.  Returning to my city trading, swimming certificate holder, he would have his potential earnings re-assessed every 5 years or so, and if it was shown that he could now command a higher salary, due to a newly gained experience at pushing buttons and answering phones on the trading floor, he’d have his taxation level increased, usually to that of the highest paid city trader in operation.  He’d then pay tax at that level forever, even if he lost that fire in his belly and decided to pack it all in and wash cars for a living, he’d pay the tax of a top city boy.  Moreover all this income flowing to the chancellor’s eager grasp would be adjusted annually by the rate of inflation, just to make sure they kept up with current standards of living.  It’s only fair.

You see, under my system there’d be no need to fill out complicated tax forms, no necessity for tax allowances or adjustments based on your true circumstances.  Everyone would receive a tax demand calculated for them by HMRC and they’d have to pay it.  No arguments.  Even if you weren’t in work or you earned far less gross pay than the tax being demanded, you’d still have to find the money – Somehow.  After all, you’d have the ability to be able to earn the going rate for a particular job, so why should the tax inspector have take into account what you actually earn.  That demands far too much thought, effort and energy on behalf of busy government departments.  If you earn less than what you’re qualified for then that’s your decision. Your problem. You still pay the tax.

Sound equitable to you?  No, I thought not.

But then this, in case you haven’t already spotted my laboured attempt at a parallel,  is exactly the way the current system of business rates works for retailers, and other businesses.  It’s essentially a system of taxation based on a notional ability to earn money, regardless of the actual circumstances at the time or of our actual income.

The arguments for such a system as we were told last week on Radio 4 is that it’s easy to assess, easy to demand, and simple for businesses to pay.  Brandon Lewis went to some length in his interview on the BBC’s Face The Facts programme to stress just how important he thought certainty was for businesses, even if that certainty is that you’re being mercilessly ripped off by a complacent under-informed government.  To anyone outside the commercial property world, the idea that you’d pay a tax with no direct connection to actual revenue would seem ludicrous.  Yet it’s something retailers face every month when they have to find the money to pay this fixed, non-negotiable charge, regardless of how much money they’ve taken in the preceding weeks.  This ridiculous conceptual levy is now contributing to the fastest decline in the history of high street retail, yet it’s continuance is defended rigorously by ministers on a regular basis and apparently accepted as a reasonable proposition by the rest of us.

Our current system of business rates is a twisted perversion of what was originally a property tax intended to ensure local residents and businesses paid into local coffers for the provision of the local services they consume.  Refuse removal, emergency services, council officers and the like.  The simple idea being that the size of the property you occupied gave a rough guide to how much of these resources you’d call on in any given year.  It was a bit of a blunt instrument but it was broadly fair and of course we all accepted it as a civic responsibility.

Community Chest

That really went out of the window when the current system of Uniform Business Rate or UBR was introduced in 1990.  Under this system all businesses across the country paid into a central pot which was then shared out between local authorities across the country based on budget and need.  This took into account that some areas may have a lower potential to earn rates from business which meant that more central government subsidies were required.  Under UBR the richer areas would to some extent help support the poorer.  A fair and equitable system, in theory, except that under UBR the rates you paid were now assessed on the value of your property, rather than it’s area.  And there, hiding in the little detail of an adjustable annual multiplier linked to inflation, was the devil.

Now, instead of paying a proportion for your local facilities, you paid a property tax based on a deal you did with landlords on a commercial level, sometimes years in the past.  You were no longer paying into a community chest for your local hospitals and lollipop ladies, you were paying a tax to central government.  Not only that, it was a tax based on an assessment of the value of your property made by another, separate, government authority : The Valuation Office (VOA).  They assessed the rough value of your property based on an aggregation of the local rental ‘tone’ and set a tariff on each property to which the annual multiplier would be applied.  If this wasn’t complicated enough, the government then varied the annual multiplier based on a measure of inflation at an arbitrary point in the calendar, currently six months before any new charge would be due.

The principle of course was that deals agreed to acquire a property in any area would give a rough guide to the affluence of the local population and their likely spending, which in turn would give some indication of the potential turnover of the business paying the tax.  A tenuous correlation at the best of times, one largely based on expectations and aspirations at a given moment.  Even so this probably kept rough pace with reality during times of normal trading, although it was hardly the basis for a fair and equitable system of taxation.  In fact it had more in common with more notorious historical levies such as the window tax or feudal tributes paid to Norman lords.

So, as with my mischievous suggestion in the opening paragraphs above, we have a system of taxation based on a theoretical assessment of earnings potential with no direct connection to ability to pay.  The really odd thing is that we all seem to accept this as a fair arrangement.  The various campaigns launched over recent years don’t seem to focus on the one salient point that for any tax to be fair it has to be related to actual earnings, not the murky notional musings of various self regulated government agencies.

The dictionary definition of a tax is : “a compulsory contribution to state revenue, levied by the government on workers’ income and business profits, or added to the cost of some goods, services, and transactions”.  Perhaps this is why the government continues to call them business ‘rates’ ; Harking back to the original principles where your property was ‘rated’ in relation to it’s consumption of local resources.  That’s plainly no longer the case, even more so now after recent revisions to rules that allow central government to hold on to a proportion of the rates collected by local councils paid into the central government pool.

Business rates are self evidently a tax in all but name, something we’re expected to overlook as an artefact of historical inertia and semantic subterfuge.  After all, if it was correctly named, we’d all expect there to be some deference to the normal rules by which taxation operates.

Alternatives

Most proposed alternatives to business rates seem to be founded on tweaking what we have now.  Base the annual multiplier on CPI rather than RPI has been the most popular to date, whilst the proposal to change to a land tax rather than a property tax has been around for a good while too.   In fact Green Party MP, Caroline Lucas recently launched a Private Members Bill to that effect.  There have also been a plethora of rebates and deferral schemes down the years for various business types or uplifts for others, none of which really fixes the inherent problems, especially for those businesses that don’t fulfil the very limited criteria.

One partial solution mooted several years ago was to carry out annual re-assessments using the £10M computer system developed by the government at the time, based on the principle of Computer Assisted Mass Appraisal (CAMA).  Although, like something from the Hitchhiker’s Guide the the Galaxy, that apparently now lies unused, gathering dust in the corner of a VOA broom cupboard, probably in a locked filing cabinet beneath a sign saying ‘Beware of the Tiger” .

The most likely shift that anyone has remotely expected from successive governments has been the shift from RPI to CPI, a principle that’s lately been applied to other government measures where it works to their advantage, most notably things like pensions .  It’s also proposal was included as one of the recommendations in the Portas Review (recommendation 8) that the government has assured us all it’s  ‘accepted’ it still seems a long way off.  Yet more semantic tap dancing demonstrating that there’s a big difference between acceptance of an idea and actually doing anything about it.

Personally I think we’re well beyond the point where this would make any significant difference to the problem.  In what is an inherently unfair system we appear to be focussing on degrees of unfairness, rather than pressing for a complete overhaul.  To me that seems like playing into the governments hands.  The difference is marginal.  In January for example RPI stood at 3.3% while CPI was 2.7%.  When and if ministers do finally bend and shift to CPI, are we really all going to breathe a collective sigh of relief over a difference of 0.6% in our annual rates bills?

Keep On Squeezing

None of these, with the possible exception of the land tax idea would re-establish the link between local service provision and the payment that was originally designed to cover the costs for these.  Neither would any of them have any relationship with ability to pay, as with virtually every other fair system of regular taxation.

We all seem to have blithely accepted a liability that has been foisted upon us all by a process of stealthy evolution from a simple local levy to a full-scale income tax.  Collectively we hand over billions to the government on this basis, calmly and with little protest.  The only reason we’re all getting out of our prams about it now is that falling commercial property values are no longer being reflected in this thoroughly disconnected system.

While property values remained flat or were adjusted in line with gradual increases in yield, UBR just about kept pace with turnover.  But the commercial property boom of the past 15 years pushed retail rents beyond sensible sustainability, which in turn drove comparable increases in rateable values.  The property crash of 2008 and the decline in consumer spending has now exposed the high water mark of unsustainable process.  Yet ministers carry on sucking the reservoir dry, terrified of losing a guaranteed income and convinced that this creaky mechanism should lumber on regardless of imminent collapse.

But there are workable alternatives.  Dr Adam Marshal from the BRC has advocated a local taxation regime based on profits, whilst I’ve long argued for a form of local purchase tax, similar to that in the USA.  Perhaps, even more radically, we could combine it with VAT and add the charge at the till as they do over there.  Then, not only would the burden of taxation be transparent to customers, it would show where a large proportion of the cost of operating a retail business lies.  Something I’m sure many of us would welcome in the face of customer and landlord perceptions that we’re all amassing a personal fortune on a daily basis.  Not only that, a direct link between the success of a local business and the income generated by local authorities would provide a sharper focus for councillors over issues that directly affect their performance, such as parking, local road infrastructure, planning, town management and the like.  Given the fact that many retailers trade in areas where they don’t get a vote in local elections, a levy based on local performance would at least partly negate the frequently overlooked paradox of taxation without representation.

Boiling the Frog

Isn’t it about time we all called for a re-invention of the whole process of  local business taxation?  Rather than being complicit in the continuation of the status quo or accepting yet more bolt on revisions to a discredited process.  Rather like the business rates system itself, we arrived at the position we’re in now by a series of incremental assumptions and expectations.  It’s akin to the old adage of the boiled frog, and only now as we start to feel the heat are we beginning to sweat.

Personally I’m all for jumping out of the pot right now, rather than settling for a little more seasoning in the water I’m being cooked in.

The Pearly Queen of the High Street?

Whatever Mary Portas says in the various interviews she’s given about her new show ‘Mary Queen of the High Street’, Tuesday’s airing of the programme featuring Roman Road was little more than the same script we’ve seen played out in most of her recent series.  It may have been a fresh approach all those years ago when she first clattered on to our screens, but it’s now a tired, tawdry format that her production company have milked almost to death.  Indeed according to some of the local traders involved the experience was less than regal for many of them.

Amongst all the hype and hyperbole that’s surrounded the Mary’s involvement in the government’s high street revival plans, she’s always been right about one thing.  This is a serious issue, affecting the lives and livelihoods of thousands of people.  So it deserved rather more that what we saw on Tuesday.  This should have been a serious documentary.  Instead we got a barely watchable ‘show’ as in ‘show-biz’. 

As with most of her more recent programmes this was all about Mary, dressed up to the nines, posing for the cameras and promoting the Portas brand.  Mary sashaying about , Mary pointing and gesticulating and having staged encounters with traders and the general public.  Mary deep in discussion with the public about how well or otherwise she comes across on TV.

Timing is everything

Time that should have been spent dealing with serious structural problems facing the area was wasted on jaunts to Paris and interminable tracking shots of Mary walking up and down rows of stalls talking about rain covers.  Finally we had her usual trademark finale set piece : This time a good old East End knees-up.  Just in case she hadn’t already patronised the locals enough.

Yet we’re told there wasn’t enough time in all this to feature progress she claims to have made with the council over parking charges and restrictions.  Probably the one thing that most of the retailers in the area were most concerned about.  Certainly something that was in her report and something she suddenly seems to have accepted as key to regeneration, albeit maybe only in interviews in the run up to her new show.  It was also something that was raised in her early brief encounter with the hairdressers in the programme.  Oddly enough we never seemed to return to them to discover what they thought of her ‘improvements’ to the area.

No Makeover

She claimed at the outset that it wasn’t going to be a makeover show, yet that’s exactly what we got.  When it came to it she couldn’t resist calling on her old standby approach : Pick one hapless retailer, march into their shop and spend a few moments deriding their wares. 

“Who’d buy that?” is one of her stock phrases, usually followed by a plaintive reply from the retailer that it’s one of their best lines.  Pure dismissal of the experience of the person that’s been there for a fair bit longer than she has, but good camera fodder, as she knows so well.  Then she sets about turning them into something more appealing.  Or rather her ‘team’ does.  Usually an easy win given that she usually picks on a store that even the most inexperienced shopkeeper could improve with a good clear-out and a lick of paint.

Yes the bric-a-brac shop looked great after the refit, and I totally agree that the person running the store was missing a trick.  But what she produced was a fully formed, niche retail experience.  Only problem is the niche customers are mostly in Mary’s head.  True, she found one or two in the local area, but one or two aren’t going spend enough to pay the proprietors rent, the rates and subsidise the council’s parking charges, nor would their business foot the bill for the fabulous refit, which I suspect was actually paid for by the TV company.  Mary’s hunch that these few boho locals were going to turn this person’s business around certainly didn’t justify the ludicrous idea that this small shop could be converted into an ‘anchor store’, 

The anchor store concept, which she borrowed from larger retail developments, requires a huge, already established, store to burst on the scene bringing in it’s loyal band of customers.  It’s not something you can create simply by dint of location, as appears to be the case here.  Certainly something that’s difficult to achieve from a standing start.  Still I suppose it made it all Mary’s thrashing around for ideas seem terribly scientific and purposeful.  But in the end it was just tinkering, and tinkering with someone else’s business at that.  But then that’s always easier to do when you don’t have to face the consequences a few months down the line, as one or two other stores Mary has ‘made-over’ in the past have reportedly done.

Questions, questions

The end of the show left more questions than answers.  What indeed had been done about the parking?  How were the original stallholders doing after Mary’s changes?  How many of them were left?  Were any of them removed to make way for her newcomers?  How were the existing Food & Beverage uses doing in the face of the new competition she’s introduced?

I’ve never doubted Mary’s veracity or her enthusiasm for what she’s doing. At the outset I was optimistic that she had the public profile as well as the chutzpah to fight the corner for retail against an obviously blasé government. 

But since her report was published she’s been swept away with the razzmatazz that was introduced by the government officials behind it.  The Willy Wonka Golden Ticket claims from the then minister responsible Grant Shapps.  The audition videos to became a Portas Pilot.  The branding of the whole experience itself.  It’s like it was all designed to take the focus off the most important issues facing retailers today : Rent, Rates and Parking, all of which were highlighted in Mary’s report only to be subsequently ignored by Shapps and his successor Mark Prisk. 

Giving the benefit of the doubt, I’d say that government spin doctors, much more accomplished in the dark arts of misdirection than Portas, used her wide eyed naïveté and dangled such shiny things in front of her.  She could easily have eschewed such distractions and pushed home her very well pitched report.  Refused to be driven off the course that she has constantly claimed to be on : That of dealing with the structural issues that have destroyed the high street over the past several years.  But when the chips were down she instead took the government’s shilling and disappeared down her usual rabbit hole of self promotion, hoopla and car crash, reality TV sham.

Infamy! Infamy!  They’ve all got it in for me! 

In a final twist of the ridiculous, Mary is now starting to claim that criticism of her is based on a political motive.  Where this originates from is a mystery to most commentators, certainly to me.  She’s quite right that she was given the perfect opportunity to cut through the political divides with her appointment by David Cameron all those moons ago.  But she blew it when let herself be sucked into the party machinery that she’s now crying foul of.  That has a lot less to do with politics and more with personal interest and ego.  Something no one has ever accused her of lacking in abundance.

If this first show is what we can expect as the culmination of her grand masterwork, I really don’t think it was worth the wait.  At best it was boring and mildly entertaining.  At worst it was selling retailers up the river for some cheap voyeurism and an easy TV fee. 

With the air date having apparently put back several times, it showed all the hallmarks of something cobbled together to try to fulfil the hopes of her TV production company.  The same company that has been tagging along since the Portas Pilot winners were announced and the same company that allegedly lobbied government over the most TV friendly locations to award the pilot money to.

In the end the only ratings values these people care about are the ones for the show, not those forcing many of the faces they’re using on screen out of business. 

Ultimately what we saw achieved nothing, except to fill a Portas sized hole in the Channel 4 schedule.  I like to think the livelihoods of independent retailers up and down the country are worth more than that.  Up until last night I thought Mary Portas felt the same.