A view from the House: Tax levy is dragging businesses down a road to ruin

Apr 2 2009 By Ian Taylor, MP for Esher & Walton

The Government could push companies and small shops to the wall by hiking their business rates during the recession. As business rate demands are being sent out across Esher and Walton, many businesses are seeing startling rises in their bills this year,with the prospect of even bigger hikes next year.

After rent and staff,business rates are the next biggest cost to local firms.

This latest blow for business comes as a survey by the Local Government Association reveals that four out of five councils are reporting an increase in empty shops in town centres.

I am deeply concerned by the number of Government policies that are pushing up tax bills and have actively been trying to persuade ministers to back off.

There is an inflation-busting rise this April: business rates are to rise by 5% despite the fact that RPI inflation is fore-

cast to be negative, because of a statistical quirk in the way business rate rises are calculated.

This will increase the burden of rates by £1bn a year.The average business rate bill in the area is £14,954: this rise will will push it up to £15,702.

Tr ansitional relief from the 2005 business rates revaluation has now expired, further pushing up bills for many firms in April 2009 by two or three times, and raising another £100m for the Government.

The April 2010 rates revaluation will adversely hit the retail sector,because of the Government's decision to use April 2008 as the snapshot for the revaluation - when relative retail rents were artificially

high compared to industrial and office rents. The resulting rating hikes could push many small shops out of small business rate relief.

As the recession bites, firms are unable to rent out vacant property and have to pay rates in full without any income from rent. This has increased rates by £1bn in 2008-09 and by a further £715m from this April.

Small firms are not claiming small business rate relief because they have to fill out complex paperwork. Locally, only 45% of allowable claims have been made. By contrast, in Wales, small business rate relief has been automatic since 2007.

The Government is passing new laws to allow town halls to levy a supplementary business rate which may raise over £600m a year.Local authorities will be forced to levy this charge because of cuts to the Local Authority Business Growth Incentive Scheme,so there will be less revenue for councils.