Chancellor 'listening' to business rate hike concerns
The Chancellor Philip Hammond has assured Conservative MPs that he is listening to their concerns about business rate rises.
But he stopped short of committing himself to action in next month's spring Budget to soften the blow on affected firms.
The government has overhauled business rates for the first time in seven years, and the hike, which comes into effect in April, highlights the discrepancy between physical businesses and those that are online.
Treasury sources indicated that the Chancellor was looking at a longer-term solution to level the playing field between the traditional high street shops and pubs hard-hit by the revaluation and the internet giants whose out-of-town warehouses benefit from low rates.
During a meeting of the Tory backbench 1922 Committee in Westminster, MPs confronted Mr Hammond with examples of businesses in their constituencies facing steep rises due to the first revaluation of business rates since 2008.
Business rates are tied to property valuations, so companies which own properties in the South East and in city centres will be disproportionately affected by the revaluation.
Businesses in London will be forced to pay an additional £9 billion in rates over the next five years, while those in the North will see bills reduced or remain the same.
One of the hardest-hit areas is the coastal town of Southwold in Suffolk where business owners could see their fees jump by as much as 300%, something they say could 'kill off' their High Street.
On average companies in the town will see their tax bill increase by 177% from April.
One local butcher said his rates are costing an extra £12,000 per year, which is he says is unsustainable and the level of increase will be "disastrous for many businesses".
To put the increases into context, if the rate increase was applied to food for example then a sourdough loaf could cost £9.00 and a homemade sausage roll could cost £8.00.
Consumer expert Harry Wallop says the rate rises are based on whether businesses have seen their rent increase.
"Boom towns like Southwold or Monmouth have seen rates hoot up but it doesn't mean the hops themselves are doing any better, it just means the rent has gone up."
He said places like Southwold are prime examples of why the way the rate increases are calculated does not work: "The problem is that yes it is a successful town but alot of those shops aren't making that much more money than they were five years ago but their business rates which pay for things like street cleaning, street lighting are going up by as much as 300%, if you are a small business finding that extra money is a huge blow".
With business rate bills for the coming year due to go out over a five-week period starting on Friday, there is little time left for concessions from the Chancellor.
A Treasury source said the Chancellor was "open to listening to the issues of the hardest-hit, but he didn't make any commitments either way".
Mr Hammond raised the point that the development of the digital economy, which has seen a growing amount of commerce shift online, has created "challenges" for a form of taxation based on property rental values, said one source.
However, the Chancellor made clear that a solution to this issue would not be found overnight, raising the possibility that a more fundamental overhaul for the business rate system may be in the pipeline further in the future.
The Government insists that almost three-quarters (73%) of businesses will see their rates reduced or stay the same after revaluation, with some 600,000 firms paying no business rates at all.
Mr Hammond stressed that the revaluation, which was set in motion under the previous administration of David Cameron, was the subject of a consultation exercise in which business organisations were involved.