Rishi Says Relax, But There's Not Much Relief As Business Rates Reviewed And Transport Plans Missed

Chancellor of the Exchequer Rishi Sunak has bowed to pressure from landlords and occupiers for relief of the controversial business rates system.

But the £7B changes, revealed in his autumn budget and spending review delivered to the House of Commons Wednesday, stopped short of the root-and-branch change that many had demanded.

Meanwhile, £6.9B of transport investment announced by the chancellor has been described as a “collection of existing announcements reheated for today” amidst disappointment that the Northern Powerhouse Rail initiative, intended to provide a high-speed link between northern cities, has once again failed to move forward.

The full HM Treasury documentation can be found here.

The business rates announcement got closest to popularity with the property business.

“We’re taking steps to ease the burden of business rates and boost our high streets,” Sunak said. “We will make the business rates system fairer and timelier with more frequent revaluations every three years. The new revaluation cycle will be delivered from 2023.”

Tweaks include a new relief to support green technologies. Until 2035, plant and machinery used on-site for renewable energy will be exempt from business rates altogether. There will also be "business rates improvement relief,” the result of lobbying by the British Retail Consortium and the CBI.

From 2023, every business will be able to make property improvements and, for 12 months, pay no extra rates. Together with the new green relief, these investment incentives total £750M, Sunak said.

The government is also taking action to prevent an unexpected surge in business rates bills due to rising inflation.

“Without action, millions of businesses would see their tax bills going up next year because of inflation,” Sunak said. "So I’ve decided that next year’s planned increase in the multiplier will be cancelled. That’s a tax cut for business worth £4.6B over the next five years."

There will also be a new, one-year 50% business rates discount for the retail, hospitality and leisure sectors.

A tax cut worth almost £1.7B, and with Small Business Rates Relief, over 90% of all these businesses will see a discount of at least 50%. Taken together, the effect is to cut business rates by £7B.

The chancellor announced the fundamental review of the business rates system in February. The result was delayed until the autumn in the hope that, by now, there would be more economic certainty.

The business rates announcement was welcomed amidst doubts that they would be sufficient to prevent the system penalising bricks-and-mortar retail.

“The package of measures the Chancellor has announced on business rates relief will bring some welcome temporary relief to our high streets but demonstrate how badly further, fundamental reform is needed," British Property Federation Chief Executive Melanie Leech said. “While a move to three-year revaluations is welcome, we continue to urgently call for annual revaluations. Businesses need to see long-term reductions in the rates they pay rather than short-term fixes."

Colliers Head of Business Rates John Webber said the chancellor has flunked the test.

“After delaying his response four times in the last year, the Chancellor has yet again missed a golden opportunity to reassure businesses and to instigate the fundamental reforms campaigned for and needed — particularly for the beleaguered retail sector," Webber said.

There were some positive announcements today, but overall, the Chancellor’s measures were “underwhelming,” Webb said. Many others opted for the word "disappointing."

“Replacing the business rates system and starting afresh, however, is not on the cards. Reforms are preferred to make the existing system fairer with the only hint of an Online Sales Tax in that government will consult on how this might be used to fund business rate reductions.  This will disappoint many who were looking for a system which levels the playing field between bricks-and-mortar and online operators," Cushman & Wakefield Yorkshire and North East head Keith Hardman said.

The Chancellor’s transport announcement met with even less enthusiasm.

“The £6.9B pot for regional transport infrastructure is mostly a collection of existing announcements reheated for today — just £1.5B of it is new money. But we welcome the certainty this five-year funding will give to regional cities,” Bruntwood Chief Executive Chris Oglesby said. “We know that levelling up is bigger than transport investment, but you could be forgiven for thinking the government sees it that way. In this light, such a meagre new sum is disappointing for its self-acclaimed ‘defining mission.'

“Worryingly, another Budget has passed with no mention of funding to support Northern Powerhouse Rail nor the Eastern leg of HS2. These two transformational projects would turbo-charge economic growth in the North and Midlands," Oglesby added. “Alongside our local transport networks we need to see investment in intercity links — connecting Liverpool, Manchester, Leeds, Bradford, Sheffield and Newcastle; the original agglomeration thesis that drove the whole Northern Powerhouse project. This combination is what will unlock the next generation of growth in the North and rebalance the economy.

“Not investing in an underground station at Manchester Piccadilly is a mistake we will come to regret and see as a major strategic error. Without this piece of the rail-jigsaw the opportunity to properly connect Manchester, Leeds and Liverpool — attracting investment and creating jobs — will never be fully realised.”