Dear Chancellor –
I write to you on behalf of the nation’s small businesses. The heroes who make up 99% of all British businesses, and create 2/3 of new jobs. Without them, our economy would be a shadow of what it is today.
Small businesses are truly the hand that feeds the economy. And yet, here we are approaching another budget, continuing to bite that hand with an archaic tax that may have been fit for purpose when it was created in Shakespeare’s time 400 years ago, but makes no sense today.
I’m speaking, of course, of business rates – the tax that charges firms based on property rental value, with no respect for turnover or business success. If you started with a clean sheet of paper in the 21st century, it would be hard to create a worse commercial tax – I’ve spoken before about how little sense business rates make in the digital age. They create a warped hierarchy where an independent high-street bookshop ends up paying this tax at a far higher percentage of their annual turnover than the global online e-commerce giants, who minimise their own business rates as they have no physical shopfront.
Don’t take it from me – take it from the small businesses themselves. We must not forget the real, human stories at play here – stories of hard work and sacrifice, of beloved high street businesses working long hours to follow their dreams but struggling to stay afloat amidst climbing rents and rates.
We’ve seen compelling examples of what these figures mean in real terms – the Southwold newsagent who will have to sell 2,501 extra newspapers to make up their £2,551 rate hike. The London bookshop that must sell 2,150 more books to pay for an eye-watering £21,250 rate increase.
And this isn’t just about selling more books, Chancellor, but what’s behind that – more hours worked. More stress, more sleepless nights. Less time with loved ones.
Look at Sage customer The Richmond Arms, a well-loved rural pub and restaurant near Chichester. Owners William and Emma told us how they bought the then-failing pub in 2010, saving it from being turned into housing and restoring it as a local bedrock of social cohesion and community. They invested every penny they owned, working 70-80 hour weeks, and turned the venue into the award-winning gastropub it is today.
From April, their rates will rocket up to £32,750 a year, an increase of over 300%. If they applied this same percentage increase to what they charge for drinks, you’d be paying a cool £18.84 per pint.
“There has been no communication warning us of this large pending tax bill”, said owner William. “No time to prepare for what is a massive expense… We are more than happy to contribute fairly to the taxation system, but the current business rates system is obviously unjust.”
William and Emma worry about what these prohibitive taxes mean for the future of small restaurants and pubs like themselves. “A country public house is part of the culture, history and allure of the UK and will never perform as well financially as a city centre… If we want them to remain they must be assisted somewhat otherwise they will be gone, and that chapter will be over forever.”
It is good to see that some form of assistance is coming – I welcome the rates relief in the upcoming budget, and the promise that three-quarters of businesses will pay either the same as or less than existing rates from April 1st. But Chancellor, this isn’t enough. This system is rotten and outdated – it doesn’t need tinkering around the edges, it needs total overhaul.
Business rates have not been reassessed for seven years, and it’s worth looking back at that time, and at how far the British economy has come since. In 2010, when the country was staring into the abyss of mountainous deficit, austerity and public sector jobs cuts, it was the entrepreneurs and small business owners who led us out of recession – keeping calm and carrying on, with start-ups alone creating an incredible four million new jobs between 2008 and 2014.
Fast forward to today, and small businesses are telling us that they need our help now more than ever. A recent Sage study revealed that less than a third of UK small businesses felt fairly represented by their elected politicians. This is a chance to show that the government are committed to listening to them.
Meanwhile, we repay these heroes of the economy by favouring big companies instead – just look at the recently-announced £200m rates cut to come in the budget for major supermarkets, whilst small high street retailers face an average 3.7% rate increase.
We must think, too, of encouraging investment into the British economy from overseas. This is already a time of uncertainty, in which Brexit risks deterring international retailers from setting up shop here. We need to welcome these businesses in with open arms and show that the UK is a competitive place to work, invest and grow – not confront them with an ancient tax system.
Clearly, something must change. So what’s the way forward? There are viable solutions that need further exploring – like the British Retail Consortium’s proposal that businesses who pay corporation tax in the UK will have discounted rates, or a tax on sales. Such systems would redress the balance, forcing the multinational digital giants to pay their way.
So with only a few days to go until the budget, Chancellor, I urge you: let’s not continue with tradition for tradition’s sake. As the Bard himself said, ‘what’s past is prologue’: we can bury our heads in the sand on this Shakespearean tax no longer. Business rates need radical reform to reflect the revolution in the world of business, and to reward Britain’s small businesses – the true engine room of our economy.
Published in the Daily Telegraph.