In the Queen’s Speech, Boris Johnson promised to “conduct a fundamental review” of business rates.
But this may not be enough to save Britain’s struggling high street retailers.
Although it would provide welcome relief, especially to independent stores, cutting rates alone does not address the market distortions rates create.
When it comes to the decline of Britain’s high streets, many like to point the finger at companies like Amazon but the way business rates are calculated favours any company with a sales and distribution model like the Amazon model.
A business based out of a cheap, large warehouse in the middle of nowhere will always have an unfair advantage over small, independent retailers on prime high streets in a system that arbitrarily taxes businesses on the value of their property.
Like council tax, rates are intended to pay for the local services businesses use, but unlike council tax, rates are set by the central government, collected by local governments, then distributed back to local councils from the Treasury.
This convoluted, non-means-tested property tax creates a democratic deficit between businesses and the council who provide their services.
Replacing business rates with a locally calculated and collected business council tax may be one solution to address this.
A business council tax could take a business’s means and the extent to which they use council services into account using tax bands rather than calculating taxes on property value.
With each council able to set their own business council tax councils would have an incentive to be as business-friendly as possible to attract new businesses and stop businesses moving away.
The price Johnson would pay for failing to act on business rates is a country filled with character-less mono-brand high streets with not a single independent retailer left.