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Business rates revaluation – or making Team Trump look like a ‘fine-tuned machine’

Business rates revaluation – or making Team Trump look like a ‘fine-tuned machine’

🕔23.Feb 2017

As a former Secretary of State for Culture, Media & Sport, the now Communities Secretary Sajid Javid, will be well aware that when a football club boss expresses “full confidence” in an “embattled” manager – or a US President in, say, his national security adviser – it’s not good news, writes Chris Game. 

And when the boss is the Conservative Prime Minister and the unfortunate embattled soul is pictured grinning sheepishly on the front page of the party’s house journal, the Daily Mail, well, it’s still not good news.

But then again, when the PM herself makes a complete pig’s ear of bailing you out by indicating – and within hours having it denied – that there’d be additional cash available for business rates relief, I guess that ministerial car seems just a fraction more secure than it did a couple of days earlier.

Possibly Javid wasn’t paying attention last week when Tony Blair popped up to give us a timely reminder of what desperate ‘dodgy dossiers’ could do for political reputations – because over the weekend he produced one of his own.

We’re talking about the recently announced business rates changes, following the first property revaluation in seven years – postponed, to add a certain piquancy, by ministers’ own predecessors to avoid a General Election impact. The more substantial of these increases, if unchanged, will hit some areas and types of business particularly hard.

Overall, as with any such revaluation, the fiscal impact is supposed to be neutral, but there’s necessarily a distributional effect – gainers where business rents have fallen, and losers where they’ve risen or completely taken off; otherwise there’d be no point in the whole exercise.

In this case, the loudest early loser noise came from London and small/micro businesses, and, although any annual increase is capped at 42%, there were reports of individual companies facing increases over five years of up to 400%.

Large out-of-town superstores and hypermarkets will apparently see their rates cut, while smaller high street shops and, of all places, hospitals face big increases. Very big indeed, in the case of our own Queen Elizabeth Hospital, facing reportedly a doubling of its rates bill to £6.9m a year. Regionally, and in the broadest possible terms, the West Midlands comes off rather better than the East Midlands.

The official government line is that “nearly three-quarters of businesses will see no change or a fall in their bills from April 2017 thanks to the business rates revaluation, with 600,000 small businesses [following a doubling of Small Business Rate Relief] set to pay no rates at all.

These kinds of assertions always amuse me. If the great majority are going to benefit, then pretty obviously the minority are going to be even more miffed than they would have been anyway.

In this case, it didn’t matter a lot, because ALL the figures, and the Government’s whole presentation were swiftly being undermined by an ‘expert’, Gerald Eve.  Not Gerald himself, you understand, who, as it happened, died very shortly after I was born, but the chartered surveying and property consultancy firm he founded.

GE produced a report arguing that the Government’s figures are systematic underestimates by around 5 to 7%, because they don’t take into account either of the 2% inflation rate or ‘appeals adjustments’.

It’s true that the DCLG doesn’t conceal these ‘adjustments’, but, as GE’s head of business rates put it: “The Department for Communities is living in a parallel universe, one where there is no inflation and an automated appeals system that gives 5% rates rebates across the board.”

This appeals bit is complicated to a non-expert like me, but it seems like HMRC telling me not to worry if my initial tax demand is wrong and I initially pay more tax than is actually due, because I can always appeal, and it’s what I eventually pay that really counts, not what I overpaid them months previously.

Except it’s worse than that. The Government has built in an assumption that its appeals process will give 5% rebates to all firms, which seems weird enough, but they’re now doing their best/worst to tighten the process up.

Not, though, by doing their sums better, but by giving ministers the power to dismiss without consideration any business rates appeal that’s within a 15% margin of error – which, over the past six years, would have deprived more than 82,000 businesses of their successful appeals for reductions of under 15%.

In addition, new charges are being introduced for small firms to appeal their rate to a tribunal, with fines planned for mistakes made on the appeal forms.

My table illustrates the discrepancies between the Government’s and Gerald Eve’s figures, primarily for WM metropolitan boroughs, but also, for comparison or contrast, the very different kinds of areas represented by some key ministers.

 

 

 

 

 

 

 

The figures, hopefully, are self-explanatory, and I draw attention only to Walsall, which is in the group of authorities whose business rates the Government claims will fall overall, but that GE claims will actually see an increase. As for the big picture, while the Government’s figures have rates falling in 250 of the 329 local billing authority areas, GE has them falling in 135 and increasing in 191.

Even on the Government’s figures, though, there were large numbers of particularly Conservative MPs threatening rebellion on behalf of their local businesses. So, it being his turn for weekend ministerial duty, it fell to Javid to write a private email to Conservative MPs describing all figures but the Government’s own as fake news – though he called them “distortions and half-truths”.  OK, less a dodgy dossier, more just an eccentric email.

Either way, it failed – failed to placate Conservative MPs, and pretty well everyone else as well. Which explains Wednesday afternoon’s ministerial circus on the floor of the Commons.

First, Theresa May stated at PM’s Questions that she had “asked the Chancellor and the Communities Secretary to make sure there is appropriate relief in these hardest cases” (of small businesses with the highest rate increases), which sounded to most English speakers like extra money.

But no, or not necessarily. For in a wider Commons debate on local government finance Mr Javid suggested that the Government’s policy was about ensuring that the transitional fund already pledged would go to those who most needed it. And then added, later on, that additional support measures would be announced in next month’s budget, the nature of which have not yet been decided. I bet they haven’t.

Asked for clarification, a spokesperson for the PM opined that “I don’t think it’s chaos”; on the contrary, really quite Presidential (sorry, that last bit was me).

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