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.

Lies, Damned Lies, and The Office For National Statistics

The ONS and I have an uneasy relationship.  When I say ‘relationship’ I probably mean something more akin to a divorcing couple waiting for a decree nisi.

Sometimes it really does feel like I’m being stalked by a disgruntled ex.  I’m sent a list of personal questions which pile up in my in-tray where I try to ignore them while getting on with my life.   Periodically I get a call to ask why we don’t talk any more.  Eventually I let out a resigned sigh and spend half an hour on the phone having a very one sided conversation with a robot voiced Welsh lady who asks me the same questions several times in a row and repeats back most of what I’ve said to her in an expressionless montone.  So pretty much like a conversation with an ex.  Apart from the fact that I never dated anyone from Wales.

I’ve been trying to get the ONS off my back for a few years now but they don’t seem to be taking the hint.  Around 10 years ago I made the mistake of religiously filing my returns as instructed like a good little citizen.  This seems to have given them the idea that I just love telling them every minute detail about my business life and, since then, with a few short breaks for good behaviour,  I’ve been on their hit list for surveys ranging from monthly takings, internet activity, employment statistics and the length of time I spend on the toilet after a particularly accomplished curry evening.  OK, I made one of those up.

Mind you, the temptation to make stuff up is almost as overwhelming as telling them to go fornicate with themselves, if it weren’t for the hollow threat of legal action if you don’t reply.  “Just bung any old numbers down” was the advice I received a few years back from someone who shall remain nameless.  But I don’t.  I actually take the time to do the calculations and give them the right figures.  Which makes it all the more irksome when I read the kinds of daft analyses that come out of the ONS on an all too regular basis.  But now it seems they’ve shown themselves to be even more irrelevant than I previously suspected.

Off the radar

This week we learnt that, after another set of Freedom of Information requests were made by fellow retail commentator Paul-Turner Mitchell, about the costs to the exchequer of the recent raft of retail failures in the UK, government officials claimed that they didn’t bother their pretty little heads with keeping up with such mundane statistics.  This admission became all the more staggering after Paul commissioned some research from Company Watch who calculated that the total cost to the UK economy since the beginning of 2012 has been in the region of £1Bn! (See Table Below).

These figures are based on the amount of unsecured debt to government that won’t be recovered.  We of course know that this isn’t the whole story.  We also need to consider the additional costs in social security payments and the knock on effects to other companies such as the loss of business to suppliers and service industries.  Although if the basic losses aren’t even being recorded, who knows if any of these implications are appearing on the exchequer’s radar.

One can only assume that the government is unconcerned about such amounts slipping down the back of the national sofa.  Although as it appears no one in the treasury or the ONS has bothered to do the sums, we can really only wonder at the basis for government rationale so far.

I’m fascinated to know what other threads of the economic tapestry they’ve allowed to be pulled apart without bothering to check the effect on the overall picture.  The effects of depressing the UK economy with successive cuts, warnings of cuts, warnings of warnings of cuts and promises of jam tomorrow seem not have been taken into account in the slightest.  Meanwhile we have government ministers such as Grant Shapps telling us that half a billion pounds being added to UK retailer’s overheads over the past two years by business rates alone is something that can’t be looked at until the deficit is dealt with.  A deficit we now know is being made worse to the tune of twice as much again by, amongst other things, these nonsensical rates increases.  Where’s the logic in saving half a billion in potential tax cuts, only to lose double than in revenue to the exchequer?

Lovable bumbler Vince Cable has more than once demonstrated his intellectual myopia over the crisis facing UK retail.  It appears now that his unshakable confidence that such a crisis doesn’t exist is based on similar logic to a five year old sticking his fingers in his ears and shouting “I CAN’T HEAR YOU!” or that old favourite adage “What you don’t know about can’t hurt you”.  Well it is hurting Vince, unless you think a billion here or there between friends isn’t worth you putting your specs on properly for.

Successive governments have been trapped in the paradox of not wanting to be seen to support private enterprise directly, yet not being able to successfully pilot the retail economy in a supportive way. But direct action is now the only option if they want to prevent the haemorrhaging of even more money from the economy.

Revolutionary

Ironic then that this news should come out in the week when everyone is discussing the bold revolutionary economic policies of Margaret Thatcher.  Right or wrong, it can’t be denied that she made drastic changes to the fabric of government in the UK.  She also wasn’t shy of making sweeping changes to policies and practices that were otherwise regarded as the way we always do things.  I’m not a Thatcherite, especially given that she was at least in part responsible for our current system of business rates, but I think now we see the folly of governments who seek to run the country using policy by proxy.  Especially when it appears that they’re almost intentionally deaf to the underlying problems within one of the principal sectors of the economy.

It’s also rather laughable that a Conservative led government is about to splash yet more millions of our hard earned tax pounds on a hoopla funereal spectacular in an attempt to ally their current lacklustre leader with the former stateswoman.  Yet more distraction and misdirection for an administration who seems only to pootle about in the outer reaches of real policy, whilst expending a great deal of energy trying very hard to look like they’re doing something stately.   We all see now that fluff initiatives like the Portas plan generated much more light than heat, and it’s likely that the new retail forum will be stymied by the same lack of political will to really tackle the problems facing retail today.

But we desperately need a bold set of initiatives to deal with the structural problems faced at all levels by the retail sector.  Not a government in denial about the impact of their own inaction.  A good start might be for them to take a few lessons in economics and try to see the macro and the micro effects that their actions and inactions are having on the overall ability of retailers to generate jobs and earnings for the country.  Perhaps cutting business rates and VAT might have little or no effect, by why don’t we find out?  What’s the worst that could happen?  Maybe another billion or so might slip through the net, but apparently the government isn’t concerned about such loose change.

So perhaps when I complete my next batch of ONS reports I may not bother working out the actual figures.  After all it seems that such information isn’t really taken that seriously by policy makers or government departments, so my going to the trouble of accurately reporting the harm their policies are doing to my business apparently isn’t informing government ministers anyway.  Maybe I’ll just add a few noughts here and there, for fun.  After all, what’s a few decimal places to a government that isn’t going to be looking anyway?

	HMRC LOSSES ON RETAIL FAILURES 2012 – 2013
					TOTAL
COMPANY	FAILURE DATE	STORES	JOBS	HMRC DEBT	UNSECURED DEBT
				£m	£m
PEACOCKS	Jan-12	550	9,600	19.1	321.0
CLINTON CARDS	May-12	767	8,500	6.7	88.3
COMET	Nov-12	243	6,500	26.2	66.0
GAME	Mar-12	600	6,000	27.3	109.6
HMV	Jan-13	238	4,350	20.7	88.8
BLOCKBUSTER	Jan-13	528	4,190	4.8	119.6
JJB SPORTS	Sep-12	180	4,000	3.0	94.9
BLACK’S LEISURE	Jan-12	306	3,885	2.9	10.8
LA SENZA	Jan-12	146	2,600	5.3	16.2
JESSOPS	Jan-13	193	2,000	1.3	45,2
DREAMS	Mar-13	171	1,675	4.6	44.0	(Note 1)
REPUBLIC	Feb-13	121	1,600	3.0	32.3	(Note 2)
PAST TIMES	Jan-12	100	1,000	2.1	10.2
MADHOUSE	Feb-12	38	700	1.6	3.4
RHYTHM & BOOZE	Apr-12	68	425	1.0	4.4	(Note 3)
ELLIE LOUISE	Apr-12	97	400	1.5	6.8
ETHEL AUSTIN	Jul-12	60	400	0.7	3.9
PUMPKIN PATCH	Jan-12	36	400	0.0	1.1
FENN WRIGHT MANSON	Mar-12	79	350	0.9	4.3
SHOON	Feb-12	23	280	1.0	2.3
TOTALS		4,544	58,855	133.7	1027.9
					(Note 4)
Note 1: Pending the Statement of Affairs, estimate based on December 2010 accounts
Note 2: Pending Statement of Affairs, estimate based on January 2012 accounts
Note 3: In absence of detailed analysis in Statement of Affairs, based on Administrators’ Proposals
Note 4: Excludes inter-group balances & bank debt

Talking Shop

Monday saw the first meeting of the The Future High Streets Forum.  Yet another talking shop put together by the government to talk about…shops.  This of course comes hot on the heels of the Portas review which pretty much identified all the problems and then set about trying to convince us that they could be dealt with by the judicious application of some showbiz fairy dust.

Of course when I say ‘hot on the heels’ I’m using an approved government timescale.  We’re now something like 18 months on since the Queen of Strops published her initial findings, and just over a year since the first audition tapes for her Pilot bandwagon were submitted and considered by an X-Factor panel comprised of herself and a certain Mr Green (AKA Grant Shapps).  Judging by the glacial speed of most government initiatives that’s probably Olympic standard.

After Shapp’s promotion to apologist-in-chief for the coalition, Mark Prisk was handed the delicately poisoned chalice of Minister for the High Street, a position created shortly after the Portas review was published in an attempt to show just how seriously the government regarded it.

Even though at first glance Prisk seemed like a much more able candidate for the position, his apparent lack of understanding about the problems we face seems to have eclipsed even his predecessors total ineptitude for effective policy making.  This has only been matched by his hitherto monumental lack of action, which may be why he’s letting a whole heap of ideas flood out now, like a backed up colon after a dodgy curry.

According to Mr Prisk, discussions at the first forum meeting focussed on speeding up the mentoring initiatives supposedly established during the set up of the Portas Pilots.  He also wants to offer Town Teams workshops, secondments and mentoring from over 30 organisations, including the British Council of Shopping Centres, the ACS and the British Parking Association to provide advice on aspects such as retail and tourism, the night time economy, public space design and age-accessibility.

So a veritable smorgasbord of limited options topped off  with a selection from the sweet trolley of the bleedin’ obvious!

Bedtime stories

As always this new improved super-forum is taking the approach that all the problems the high street faces are of it’s own making.  They start from the premise that none of us have the first idea why we ended up in this mess.  We’re all such terribly naive and inept businesspeople that we need a big brother or sister to hold our hands, read us a bedtime story and tell us where the monsters are hiding.  Apparently, reduced consumer demand and a failing economy can all be swept away with a few tired ideas, such as market days and pop-up shops.  Greedy intransigent landlords, hocked up to the eyeballs, and councils and governments ignoring economic imperitives can be dealt with by creating  a new logo and installing some extra street furniture.

That’s not to say that the people on the panel aren’t qualified to offer effective advice.  Far from it.  In fact I’ve got a lot of respect for most of them, even if they do seem to be predominately rooted in the property industry.  It’s just that there’s really nothing new to bring to the table now.  Most of the problems now being faced were identified and listed chapter and verse in the Portas review and most people, me included, agreed that the key areas for concern were in there.  If those in power chose to sideline the important issues with circus tricks and razzle-dazzle why should we think it’ll be any different this time around?

At the launch of the Portas Pilots both Mary and Grant Shapps were fond of saying how they’d accepted “nearly all” of the the points in her report.  Carefully  and disingenuously avoiding mention of the 3 main areas they ignored – high rents, high rates and high parking charges.  Without dealing with those points, the kinds of suggested improvements that are frequently trotted out by various experts are far removed from the key issues that have undermined the viability of the high street.  Superficial changes and local initiatives are all very well, but they’re cherries on the cake.  The problem is we don’t have much cake left after local and national government have finished taking their slices.

Why the government is so reluctant to take positive action on things like business rates really is beyond me now.  They seem to do nothing but thrash about looking for any option other than the most expedient solutions open to them as the people in charge.  The argument seems to be that they can’t be seen to be directly supporting private enterprise with public money.  Yet in the same breath they happily justify shovelling skip loads of cash in the direction of bankers who’ll just as blithely trouser huge wedges of the stuff in the guise of bonuses or just stack it up in the corner and gaze lovingly at it.  Not only is that direct support for one of the most unpopular and bloated sectors of private industry, it’s the very same sector that brought most of us to the door of ruin just a few years ago.  Yet we’re all supposed to be in dread of bankers moving their cash skimming operations to foreign climes, whereas Vince Cable seems to be pretty keen to see retailers head overseas as soon as humanly possible.

Do the math(s)!

Business rates are, along with rents, the two most corrosive factors eating away at the heart of the high street today.  In a few days the second of two massive hikes in business rates will kick in, leaving the retail economy shouldering the burden of over half a billion pounds worth of additional taxes imposed over the past two years in this single tax alone.  Yet Mark Prisk seems not to have noticed.

In a statement about the new forum he said “Over the last year this Government has worked hard to help boost the high street, including initiatives to simplify planning, revamp the public realm, cut the business rate burden and revive local markets”.

Now I don’t know if he’d normally describe an increase of £525M as a ‘cut’ but if so I think perhaps he needs to buy a new abacus or at the very least have a word with a professional about providing appropriate medication.  Self delusion is one thing, but trying to drag the rest of us into his fantasy world is probably a step too far, even for a government minister.

Although to be fair, this isn’t the first time this bit of spin has been thrown out there.  Whilst watching the Andrew Marr show a year or so ago I almost pebbledashed my TV with fruity granola after hearing  Call-Me-Dave Cameron announce to all the world that his government were “tackling business rates”.  Again a definition of ‘tackling’ that I don’t think would have got him very far on the rugby fields of Eton.

Peddling this kind of PR piffle serves to demonstrate just how little the government really wants to tackle the core structural issues that are undermining every high street retailer today.  In the past 2 years they talked a lot and walked very little.  To put this into sharper context we need to realise that the sum total of all the cash handouts given to towns under the various soundbite schemes dreamt up by Shapps and Prisk amounts to little more than 8% of the increases in business rates imposed since they were announced.  If there really was a will to fix the high street we all know what would be the first demonstration of intent – a freeze in business rates in the last budget.  That hasn’t happened so just like last time we’re expected to be satisfied with the sop of yet another inquiry.

And timing is everything.  The deadline for last years Portas Pilot audition video submissions was coincidentally the day before £350M worth of extra rates bills had to be paid by retailers.  This year we have a new talking shop that meets less than a week after the chancellor smacked us in the mouth with a further £175M hike and expected us to to smile about it through broken teeth.

Lies, damned lies and politics

We all know that no amount of pop-up talking shops and secondments are going to solve these structural issues.  Those in government know it too, and every time we swallow another piece of bullshit pseudo policy we’re letting them get away with the subterfuge.  There’s no substitute for proper action from a motivated and principled  government.  That’s something we need NOW, not in another year, not after yet another report or another raft of hair-brained ineffectual political stunts.

It’s going to take a lot more than just talk to get these problems solved.   Sadly though, it seems talk is still all we’re going to get.

Inquire Within

It’s just been announced that parliament are to hold an inquiry into the state of retail in the UK.  Be still my beating heart, another inquiry, we’re all SAVED!

This on the same day that Vince  – have you seen my glasses? – Cable put on his comfortable shoes and wandered on to the stage at Retail Week Live to tell us he’s looking into it all for us and will be “having a word” with the chancellor about business rates.   Meanwhile explaining that the best place for UK retail is apparently outside the UK.   Irony is obviously not a concept that Mr Cable is particularly familiar with.

Excuse me if I don’t wet myself with anticipation Uncle Vince, but didn’t you say that about the banks a couple of weeks ago when it was revealed that, rather than lending out cash to entrepreneurs under the new government scheme designed to encourage banks to do just that, you let at least one of them trouser another large wad of public cash and lend out even less?!  This after a threatening them all with regulation if they didn’t play nice a couple of years back.

After taking a stand on this issue that was about as aggressive as a 5 year old with a spud gun, he announced that he’d be “having conversations” with them too.   I’m sure they’re all cowering in their luxury riverside penthouses and waiting with mounting terror waiting for the gold plated phone to ring.

And now we have another inquiry.

But hang on, didn’t we have one of those carried out only a year or so ago, by someone famous?  Yes, that lady off the telly, the one with the pointy finger and the knickers.  Now what was her name?

What exactly they expect to find from another inquiry is anyone’s guess.  The problems have already been laid in front of them and the best they could come up with was a talent show and a TV programme.

These problems haven’t gone away just because they’ve ignored them.  They certainly haven’t been made all better by dint of them handing out some cash to a few selected towns, even if any of them had actually got around to spending it.  In fact they’ve got worse.   Perhaps those extra holes in the high street and the additional number retail employees on the dole might have been a tiny clue.

After a raft of major high street collapses over the past few months one would expect them to take the information that they already have and run with it.  Come up with some radical solutions.  Show some leadership.  Or at the very least perhaps not make the situation worse by whacking an extra £170M on to the retail business rates bill in a little under 3 weeks.

This really does beggar belief.  It’s ‘Yes Minister’ politics made flesh.  Just keep inquiring but never actually DO anything.   Meanwhile throw billions at the banks and penny pinch on an industry that contributes around 11% to GDP when we ask if we could perhaps forgo a paltry amount in taxation, just this once.

Why don’t they just show us some respect and be honest?  Admit that they don’t give a toss as long as the tax money keeps rolling in and the retail cash cow keeps mooing.  I know it’s not politically expedient to say that, but at least we’d all know where we stand.

Right now that seems to be far too close to Vince Cable in the gents toilets of the last chance saloon, while he pisses on our shoes and tells us it’s raining.