Labour pledge to abolish business rates questioned by property specialist

By

Nigel TAYLOR

Published
Sep 28, 2022

As Labour surges in the UK polls, it’s clearly scenting opportunity in areas the Conservatives haven’t fully addresses and the party has pledged to abolish business rates, along with news of a number of initiatives to ‘save the high street’.

Shadow chancellor Rachel Reeves delivered the reforms plan to the party’s conference this week saying: “Labour will level the playing field. We will abolish business rates and replace them with a fairer system fit for the 21st century.”

However, rating experts at commercial property giant Colliers believe her proposals are “woolly” and that “reform not abolition” of the system is needed.

“It is not yet clear what it would replace the system with. Labour is unlikely to spell this out this side of an election but has hinted that a new system will be based on a valuation process, probably a mix of land and rental value” Colliers said.

Labour is also believed to be supporting small business rates relief being extended to those whose premises have rateable values up to £25,000, rather than £15,000 at present (possibly paid for by increasing the rate of digital services tax), and an extension of the 50% relief from April 2023 up to £110,000 

John Webber, Head of Business Rates at Colliers commented, “Whilst we would support Labour if introduced significant reform to the current system, we would not support total abolition or any form of Land Value tax.” 

Meanwhile, Labour has been talking about more frequent revaluations, instant reductions in bills where property values fall, rates to be more closely aligned to economic change, rewarding businesses that move into empty premises, and incentives for green improvements to businesses.

Webber added: “These are all good aspects of reform of the system that we in the industry have been calling for- for years- and we would include a wider reform of reliefs and reforms to the appeals system. Labour does seem to be listening to businesses who have expressed their frustrations with the current system, cries that both the Conservative government (and Lib Dems when in coalition) have been ignoring.

However, he worries that some aspects of Labour’s thinking could shift tax responsibility to landlords rather than to the businesses who use the amenities and services funded by business rates.

And he’s concerned that a new system could be as complicated as the old one, just in a different way.

Business rates provide £26 billion net to the exchequer and have existed for centuries. But physical retailers have complained in recent decades that they’re penalised unfairly compared to other businesses — and especially compared to e-tailers — and that any tweaking of the system in recent years hasn’t achieved the goal of making their lives easier.