Editor’s comment: Statement of intent

Speaking at the Lord Mayor’s Banquet this week, Theresa May said she wanted to get Britain firing on all cylinders again. Next week’s Autumn Statement is an opportunity to back fine words with firm action. Reconsidering well-intentioned reform of business rates has to be a part of the ignition plan. Encouraged by healthier-than-expected economic growth in October, the CBI wants ministers to maintain UK plc’s momentum. “The government can help keep the economy firing by pressing ahead with infrastructure commitments across the whole of the UK and by promoting innovation in the Autumn Statement,” said chief economist Rain Newton-Smith. For her colleague, infrastructure director Rhian Kelly, a priority should be to use productivity-boosting exemptions to enable “business rates to drive investment”. They are both right. But the government has a tightrope to walk as it seeks to use the tax to stimulate the economy and deliver fairness. There are three things it can do in the Autumn Statement that would use business rates to help. Firstly, it is right in principle to revalue the system, but chancellor Philip Hammond needs to give more serious consideration to cushioning the impact of the change. Given that the tax is based on rental values that have risen sharply since the last valuation, the impact on many areas in the South East – and the businesses that operate there – will be considerable. For some, they will be simply unaffordable. For landlords, the impact would be considerable too. Green Street Advisors warned this week that London-focused landlords could be hardest hit. More tenants, faced with rising bills, could go bust, creating vacancies and downward pressure on rents. So greater transitional relief should be in the Autumn Statement. Limiting increases to 12.5% next year, as was the case with previous revaluations, would be an appropriate starting point. Secondly, a reaffirmation of the government’s commitment to allowing councils to retain receipts would also be welcome. Just how much acceleration of devolution could stimulate the economy was highlighted by Westminster Property Association chairman Neil Thompson this week. The London borough collects £1.8bn in business rates each year yet retains only 4%. The rest is redistributed by the Treasury nationally. Retaining an additional 2.5% of business rates and reinvesting the money in the West End’s public realm could mean up to half a billion pounds of new public investment over 15 years. “It would be a catalyst, unlocking a further estimated £12.3bn of economic benefit via businesses investment and the property industry,” Thompson told Thursday’s WPA annual lunch. That’s the sort of figure that should resonate in government. And thirdly, the appeal system also needs reform. The new “check, challenge, appeal” regime could restrict the right to appeal so much that it would allow the Valuation Office Agency to overvalue properties with impunity, an alliance of business and property trade bodies has warned. These plans, which would block appeals against incorrect business rates calculations, could cost small businesses in England almost £700m over the next five-year rating period, according to research from Daniel Watney. Removing spurious appeals from the system is right, but this must not be at the cost of the right to appeal itself. For the likes of REVO, the threat is such that the chancellor risked “killing the golden goose just weeks before Christmas”. For the British Property Federation, investment in towns and cities would suffer. Tax can be a stimulus as much as it is a receipt and cost. Business rates is too important not to view that way. As much as a rethink of the entire system would be the perfect upshot, modest reform in the Autumn Statement would ensure business rates help fire the economy and not cause its engine to splutter. • To send feedback, e-mail damian.wild@estatesgazette.com or tweet @DamianWild or @estatesgazette