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CBI calls for urgent action on business rates

The current system of business rates is outdated and is undermining British high streets and manufacturers, according to the Confederation of British Industry (CBI).

The CBI is calling on the Government to put reform of business rates at the top of its business agenda at Budget 2016. Business rates, it says, are based on "a decades-old model, unresponsive to changes in economic conditions and an increasing tax burden on firms".

In the past seven years, tax revenue growth from business rates has far outpaced other taxes (up 28%).

The current system is also making investment in commercial property unattractive says the CBI, which results in "sub-standard premises and a drag on productivity". It means there are strong incentives to convert commercial property into residential - up 80% in 2014/15 alone.

The CBI is calling on the Government to make the system:

  • Simpler, by removing businesses with a "rateable" property value of less than £12,000 from the system altogether;
  • Fairer, by carrying out more frequent valuations of "rateable" property values; and
  • More competitive, by changing the index for annual increases in business rates from the Retail Price Index to the Consumer Price Index.

Rain Newton-Smith, CBI Economics Director, said: 

"The current business rates system is from another era and proving an ever-increasing problem for firms, hitting our high streets and manufacturers across the country. And devolving business rates does not tackle the significant problems that this distortive tax is causing for businesses."

In October 2015, George Osborne introduced plans to devolve the setting, collection and spending of business rates to local authorities. The proposals were welcomed by the Institute of Directors (IoD) however a survey of IoD members found that more than half were concerned that devolution would lead to higher taxes.

Newton-Smith said he wants to see the Government taking action at the forthcoming Budget on 16 March. He said: 

"Business wants to see the smallest firms completely removed from the system, more frequent valuations and ensure the system is tied to the Consumer Price Index to make it fairer and more competitive."

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