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It’s widely known that business rates are impacting our High
Streets. The TaxPayers’ Alliance’s (TPA) dynamic tax model
shows that business rates stunts growth, chokes off
investment and holds down wages
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Were business rates to be abolished, GDP could be £34.5
billion higher by 2032. The modelling shows a range of other
scenarios also increase growth
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At Conservative Party Conference, the TPA’s chief executive
challenged the Chancellor to take action on business rates
At last week’s Conservative Party Conference, TPA chief executive
John O’Connell challenged the Chancellor to take action on
business rates during an ‘in conversation’
session. Referring to the review of the tax system
announced during the ‘mini-budget’, said to John “when I was
BEIS Secretary, business rates came up a lot.”
The previous government committed to shortening the business
rates revaluation cycle from five to three years from 2023. This
will ensure the rate is more closely aligned to current market
conditions, creating a fairer system for businesses. But
high rates continue to strangle businesses and hold back economic
growth.
Using a dynamic tax model that has been commissioned by the
TaxPayers’ Alliance, this note demonstrates the real-world impact
of business rates.
CLICK HERE TO READ THE BRIEFING
NOTE
Key findings from the TPA’s dynamic tax
model:
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If business rates were abolished (in England), by 2032 GDP
could be £34.5 billion higher, investment spending could be
£8.6 billion greater and average weekly earnings could
increase by £7.69.
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That is a more than one per cent boost to GDP and an almost 3
per cent increase for investment. Average weekly earnings
would also be more than one per cent higher.
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The greatest proportional effect was higher investment
spending: the impact across all four scenarios was almost
three times greater than either average weekly earnings or
GDP.
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With abolition of business rates in England, investment
spending could be 0.3 per cent higher each year.
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Even with a 50 per cent reduction in business rates, there
was a still noticeable increase in average weekly earnings.
For instance, on an annual basis a 50 per cent reduction
boosts earnings by enough to cover three weeks’ worth of
average weekly expenditure on food and non-alcoholic drinks,
which in 2021 was £69.20 per week.
John O’Connell, chief executive of the TaxPayers'
Alliance, said:
"Business rates are one of the most damaging taxes for small
firms, especially those on our high streets.
“After taking a hammering during the pandemic, many are still
struggling to get back on their feet as inflation bites and
economic headwinds make for a bumpy ride ahead.
“Tax cuts that help those who need it most - alongside more
responsible spending - will deliver a strong boost to growth
while giving a breather to small businesses under the cosh.”
The regional impact of business rates:
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If business rates grow by the trend rate of GDP growth out to
2032, total receipts could be £27.6 billion. Assuming that
regional proportions of contributions stay the same, London’s
contribution would be just below £9 billion. In the absence
of business rates, GDP in London alone could be £11.2 billion
higher, with investment spending up by £2.8 billion by
2032.
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There is wide variation in the business rates collected
across local authorities. In the four local authority areas
with the highest median price paid for a property in England
– Kensington & Chelsea, Westminster, City of London and
Hammersmith & Fulham – forecast net business rates ranged
from £196 million to £1.9 billion in 2022-23.
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Local authorities with the lowest forecast receipts from
business rates – less than £20 million – are invariably rural
and a smaller tier of local government: all but two below
that threshold are district councils.
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The forecast average business rate receipt is £399 per person
in 2022-23 (in England). In London, it is over twice the
national average for England, at £837 per person. Removing
London, the average is £319 nationally.
