It’s not just Amazon killing the high street: it’s business rates, too

Boarded up shops in Bath, 2011. Image: Getty.

BHS, Carpetright, Homebase, House of Fraser, HMV, Maplin, Marks & Spencer, Mothercare, New Look, Toys R Us, Woolworths: a decade ago this list wouldn’t have looked out of place in the store guide of a well-appointed shopping centre. Today, it reads more like a wall of remembrance commemorating casualties suffered in the ongoing battle between the internet and the high street.

These victims have either folded completely, been taken over or closed a substantial number of stores in attempts to save cash. And while the growth in online shopping with sites such as Amazon is undoubtedly a big factor in the decline of the high street, it’s by no means the only one.

At the moment, the law on business rates means large and small retailers have to pay sums of money in local taxation, which are disproportionate to their earnings, or even the value of their premises. This is having a significant effect on the financial strength of high street chains. Indeed, it’s been reported that House of Fraser’s £4.6m business rates bill for its store on Oxford Street in London is the same as Amazon’s total corporation tax bill in the UK for 2017.

The current system dates back to 1990, when a tax burden was imposed on all non-residential properties in England. The rate was set by central government on a yearly basis, based on the rental value of a business property with relief available to smaller businesses.

But central government recently began increasing business rates – and bills don’t always reflect a property’s current value. Even where there have been cuts to the business rates, these weren’t always in proportion to drops in a property’s rental value.

As a result, some businesses are finding it harder and harder to make ends meet. In 2017-18, councils reportedly sent bailiffs to 222 business premises every day, to recover unpaid business rates.

Time for change

Things need to change, for local retailers to stay in business and absorb losses caused by competition from online shopping and increases in the minimum wage. Business rates must be reformed: a new system should give local councils more power to change the amount due – to better reflect a business’ annual profits (or losses) – while at the same time limiting central government’s ability to adjust the rates.


But even this won’t be enough to revive high streets in towns and cities across the UK. For the past decade, councils have themselves suffered severe cuts to their budgets, as part of the UK government’s programme of austerity. To combat this, councils are being allowed to retain a greater proportion of the business rates collected in their areas. This policy aims to encourage councils to do more to help local businesses prosper, potentially so that they, in turn, can contribute more to council coffers.

But as businesses find it more and more difficult to pay these increasing bills, this policy is unlikely to be effective. More fundamental reform is needed, and the UK government must find alternative methods to improve the financial situation of local councils. This could mean giving local authorities other ways to raise their own revenue, or strengthening partnerships between private companies and councils, so that they can share the costs of providing basic services.

A new arrangement

But there may be a simpler option still: rather than charging businesses higher rates to make up the shortfall in central government funding, local authorities could place the burden on their wealthiest residents. The current system of council tax sees residents paying an amount to their local authority, based on their property’s value.

One of the biggest problems with the current system is that the council tax bands are based on property values from 1991, and are therefore hopelessly out of date. According to the Guardian’s economics editor, Larry Elliott, this could mean that someone living in a home worth £100,000 in 2015-16 faces an effective tax rate five times as high as someone living in a £1m property, with residents in very valuable properties enjoying lower rates, at the expense of the council.

When you factor in rising house prices over the last 30 years, it’s clear that in practice the current system of council tax does not tax wealth. But there are several possible alternatives, including a land value tax – which is based on the value of the land only, rather than the property that stands on it – or a local income tax, factoring in a household’s yearly earnings.

The prominent Oxford economist John Muellbauer advocates a system which imposes a standard per-square-metre charge on land. This system would ensure a more proportionate charge on wealth, since those who can afford bigger houses would pay a higher level of tax than those in smaller properties.

Of course, property size is not always an indicator of wealth: homeowners who bought decent sized houses 30 years ago would have done so at a much more affordable rate. In such circumstances, property taxes could be deferred until the sale of the house. There’s also the case of luxury apartments to consider – which might take up little space but still be worth a great deal – but further measures could be incorporated to ensure that this new system is fair and proportionate.

Alongside other benefits, this new system would at least allow councils to draw revenue from those who can afford it – such as more wealthy homeowners – and ease the stranglehold on struggling businesses and retailers, by lowering business rates.

The Conversation

John Stanton, Senior Lecturer in Law, City, University of London.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 
 
 
 

In South Africa's cities, evictions are happening despite a national ban

An aerial view shows a destroyed house in Lawley, south of Johannesburg, on April 20, 2020. The city has been demolishing informal structures on vacant land despite a moratorium on evictions. (Marco Longari/AFP via Getty Images)

On the morning of 15 July, a South African High Court judge ruled that the city of Cape Town’s Anti-Land Invasion Unit had illegally evicted a man when it destroyed the shack where he was living.

That afternoon, the Anti-Land Invasion Unit was out again, removing shacks in another informal settlement.

Evictions were banned in South Africa for nine weeks, after the national government placed the country under a strict Covid-19 lockdown in late March. At present, eviction orders are automatically suspended until the country moves to a lower “alert level” and can only be carried out with a special order from a judge.

Yet major cities including Cape Town, Johannesburg and eThekwini (created through the merger of Durban with several surrounding communities), have continued to use municipal law enforcement agencies and private security companies to remove people from informal housing. In many cases those operations have been conducted without a court order – something required under regular South African law.

Around 900 people were evicted from three informal settlements in eThekwini during the eviction ban, according to the Church Land Programme, a local NGO. Its director, Graham Philpott, says it’s also aware of evictions in other informal settlements.

While evictions aren’t a “new experience” in these communities, the NGO released a report on lockdown evictions because they were “so explicitly illegal”. “There was a moratorium in place,” Philpott says, “and the local municipality acted quite flagrantly against it. There’s no confusion, there’s no doubt whatsoever, it is illegal. But it is part of a trend where the eThekwini municipality has acted illegally in evicting the poor from informal settlements.”

Evictions also took place in Cape Town and Johannesburg during so-called “hard lockdown” according to local activists. In eThekwini and other municipalities, the evictions have continued despite restrictions. In Cape Town, authorities pulled a naked man, Bulelani Qholani, from his shack. That incident, which was captured on video, drew condemnation from the national government and four members of the Anti-Land Invasion unit were suspended. 


The cities say they’re fighting “land invasions” – illegal occupations without permission from the land owner.

“Land invasions derail housing and service projects, lead to the pollution of waterways, severely prejudice deserving housing beneficiaries and cause property owners to lose their investments over night,” Cape Town’s executive mayor, Dan Plato said in a statement. (Plato has also claimed that Qholani did not live in the shack he was pulled from and that he disrobed when municipal authorities arrived.)

South African municipalities often claim that the shacks they destroy are unoccupied. 

If they were occupied, says Msawakhe Mayisela, a spokesman for the eThekwini municipality, the city would get a court order before conducting an eviction. “Everything we’re doing is within the ambit of the law,” Mayisela says. But “rogue elements” are taking advantage of Covid-19, he added.

“We fully understand that people are desperately in need of land, but the number of people that are flocking to the cities is too much, the city won’t be able to provide housing or accommodation for everyone overnight,” he says. 

While eThekwini claims to be a caring city, local activists say the evictions show otherwise.

In one case, 29 women were evicted from shacks during the hard lockdown. With nowhere to go, they slept in an open field and were arrested by the South African Police Service for violating the lockdown, Philpott says.

“These evictions are dehumanizing people whose dignity is already compromised in many ways,” says S’bu Zikode, the president of Abahlali baseMjondolo, a community organization whose Zulu name translates to “the people of the shacks”. 

“It has reminded us that we are the people that do not count in our society.”

Municipal law enforcement and private security contractors hired by cities regularly fire rubber bullets, or even live ammunition, at residents during evictions. Some 18 Abahlali baseMjondolo activists have been killed since the organization was founded in 2005, Zikode says, most by the eThekwini Land Invasion Unit and Metro Police.

(Mayisela says that if city employees have broken the law, Abahlali baseMjondolo can file a complaint with the police. “There is no conclusive evidence to the effect that our members have killed them,”  he says.)

Other Abahlali baseMjondolo activists have been killed by what Zikode calls “izinkabi,” hitmen hired by politicians. Two eThekwini city councillors were sentenced to life in prison 2016 after they organized the killing of Thuli Ndlovu, an Abahlali baseMjondolo organizer. A member of the Land Invasion Unit who is currently facing a charge of attempted murder after severely injuring a person during an eviction remains on the job, Zikode says.

South Africa’s 1996 constitution is intended to protect the public from arbitrary state violence and guarantees a right to housing, as well as due process in evictions. But for Zikode, the South African constitution is a “beautiful document on a shelf”.

“For the working class and the poor, it’s still difficult to have access to court. You’ve got to have money to get to court,” he says. 

The actions by municipal law enforcement are breaking down social trust, says Buhle Booi, a member of the Khayelitsha Community Action Network, a community group in the largest township in Cape Town.

“There’s a lack of police resources and those very few police resources that they have, they use to destroy people’s homes, to destroy people’s peace, rather than fighting crime, real criminal elements that we see in our society,” Booi says.

For him, it’s a continuation of the practices of the colonial and apartheid governments, pushing poor people, most of whom are Black, to the periphery of cities.

Around one-fifth of South Africa’s urban population live in shacks or informal dwellings, according to a 2018 report by SERI. Many more live in substandard housing. City governments maintain that the shacks destroyed during anti-land invasion operations are unfinished and unoccupied. But Edward Molopi, a research and advocacy officer at SERI, says that this claim is an attempt to escape their legal obligations to get a court order and to find alternative accommodation for affected people. 

The roots of the current eviction crisis go back to apartheid, which barred non-white people from living in cities. Between the 1940s and 1970s, tens of thousands of people were forcibly relocated from neighbourhoods like Johannesburg’s Sophiatown and Cape Town’s District Six to remote townships.

In the 26 years following the end of apartheid, deepening economic inequality and rampant unemployment have limited access to formal housing for millions of South Africans. Government housing programs have mostly focused on building small stand-alone homes, often on the peripheries of cities far from jobs and amenities.

While these well-intentioned projects have built millions of homes, they’ve failed to keep up with demand, says Marie Huchzermeyer, a professor at the Centre for Urbanism & Built Environment Studies at the University of the Witwatersrand in Johannesburg. Government-funded housing projects “will never on it’s own be enough,” she says. “It has to be accompanied by land release.”

Government policies call for the “upgrading” of informal settlements and the formalization of residents’ occupation. But “there are still very, very, very few projects” of that nature in South Africa, Huchzermeyer says. “Even if it’s an informal settlement that’s been around for 20 years, there still seems to be a political wish to punish people for having done that.” The government wants people to go through the formal process of being given a house, she says – and for them to be thankful to the government for providing it.

At the municipal level, change will require “real leadership around informal settlement upgrading and around ensuring that land is available for people to occupy,” she says. 

Despite the end of enforced racial segregation, spacial apartheid remains a factor in South Africa. There are few mixed-income neighbourhoods. Those who can afford to often live behind walls in sprawling low-density suburbs, while the poor live in overcrowded slums and apartment buildings.

The creation of the apartheid city “didn't happen by chance,” says Amira Osman, a professor of architecture at the Tshwane University of Technology. “It was a deliberate, structured approach to the design of the city. We need a deliberate, structured approach that will undo that.”

Since last fall, Johannesburg’s Inclusionary Housing Policy has required developments of 20 or more units to set aside 30% of those units for low-income housing.

The policy, which faced significant opposition from private developers, won’t lead to dramatic change, says Sarah Charlton, a professor at the Centre for Urbanism and Built Environment Studies, but it is “an important and significant step.”

Zikode isn’t optimistic that change will come for shack dwellers, however.

“People in the high positions of authority pretend that everything is normal,” he says. “They pretend that everyone is treated justly, they pretend that everyone has homes with running water, that everyone has a piece of land – and hide the truth and the lies of our democracy.”

Jacob Serebrin is a freelance journalist currently based in Johannesburg. Follow him on Twitter.