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.

 
 
 
 

A helpful and informative guide to London, for the benefit of the New York Times editorial board

The sun rises over quaint old London town. Image: Getty.

It’s like with family members you hate: it’s fine for you to slag them off, but if anyone else has, you’re up in muted, backhanded arms about it.

Yesterday, the world’s number one London fan the New York Times tweeted a request for experiences of petty crime in the city. This was met by a deluge of predictably on-brand snark, like “Sometimes people scuff my leg and only apologise once”, and “Dicks who stand on the left-hand-side of tube escalators”. This served the dual purpose of uniting a divided London, and proving to the NYT that we are exactly the kind of chippy bastards who deserve to constantly lose their phones and wallets to petty crime.

By way of thanks for that brief endorphin rush, and in hopes of leading things in a more positive direction, I’d like to offer the Times this uplifting guide to London, by me, a Londoner.

I take my London like I take my coffee: on foot. If you are with someone special, or like me, like to reimagine your life in the format of Netflix dramady as you walk alone on Sundays, I can highly recommend the Thames Path as a place to start.

Kick things off next to Westminster, where we keep our national mace in the House of Commons. Useful though the mace might prove in instances of street theft, it is critical that it is never moved from the House. It acts as a power source for our elected representatives, who, if the mace is moved, become trapped in endless cycles of pointless and excruciatingly slow voting.

Cross Westminster Bridge to the Southbank, where in the manner of a spoiled 2018 Oliver Twist, you can beg for a hot chocolate or cup of chestnuts at the Christmas market for less that £8. Remember to hold your nose, the mutton vats are pungent. Doff your cap to the porridge vendor. (LOL, as if we make muttons in vats anymore. Box your own ears for your foolishness.) Then buy some hemp milk porridge, sprinkle with frankincense and myrrh, and throw it at the pigeons. There are thousands.

In the spring, head a little further south through Waterloo station. If you pass through the other side without getting ABBA stuck in your head, Napoleon’s ghost will appear to grant you three wishes.

Proceed to the Vaults, which is like the rabbit warrens in Watership Down, but for actors and comedians. No-one knows the correct way in, so expect to spend at least 45 minutes negotiating a series of increasingly neon graffiti tunnels. Regret not going to art school, and reward yourself upon your eventual entry with a drink at the bar. Browse the unintelligible show programme, and in no circumstances speak to any actors or comedians.

When you emerge from the Vaults three days later, turn back towards the river and head east. Enjoy the lights along the Thames while you pick at the spray paint stains on your coat. 


After about 20 minutes, you will reach the Tate Modern, which stands opposite St Paul’s Cathedral. Close to sunset, the sky, water, and cathedral might turn a warm peach colour. The Tate remains grey, coldly confident that for all its brutalist outline, it was still fantastically expensive to build. Feel grateful for that loose knit jumper you stole from the Vaults, and go inside.

Spend two minutes absorbing the largest and most accessible art, which is in the turbine hall, then a further hour in the museum shop, which is next to it. Buy three postcards featuring the upstairs art you skipped, and place them in your bag. They will never see the light of day again.

Head further east by way of Borough Market. Measure your strength of character by seeing how many free samples you are prepared to take from the stalls without buying anything. Leave disappointed. Continue east.

At Tower Bridge, pause and take 6,000 photos of the Tower of London and the view west towards parliament, so that people know. Your phone is snatched! Tut, resolve to take the embarrassment with you to your grave rather than shame Her Majesty's capital, and cross the river.

On the other side of the Bridge, you could opt to head north and slightly east to Shoreditch/Brick Lane/Whitechapel, where you can pay to enjoy walking tours describing how some pervert murdered innocent women over a century ago.

Don’t do that.

Instead, head west and north. through the City, until you reach Postman’s Park, which is a little north of St Paul’s, next to St Bartholomew's hospital. Go in, and find the wall at the far end. The wall is covered in plaques commemorating acts of extraordinary and selfless bravery by the city’s inhabitants. Read all of them and fail to hold back tears.

Then tweet about it.