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.

 
 
 
 

What’s killing northerners?

The Angel of the North. Image: Getty.

There is a stark disparity in wealth and health between people in the north and south of England, commonly referred to as England’s “north-south divide”. The causes of this inequality are complex; it’s influenced by the environment, jobs, migration and lifestyle factors – as well as the long-term political power imbalances, which have concentrated resources and investment in the south, especially in and around London.

Life expectancy is also lower in the north, mainly because the region is more deprived. But new analysis of national mortality data highlights a shockingly large mortality gap between young adults, aged 25 to 44, living in the north and south of England. This gap first emerged in the late 1990s, and seems to have been growing ever since.

In 1995, there were 2% more deaths among northerners aged 25 to 34 than southerners (in other words, 2% “excess mortality”). But by 2015, northerners in this age group were 29% more likely to die than their southern counterparts. Likewise, in the 35 to 44 age group, there was 3% difference in mortality between northerners and southerners in 1995. But by 2015, there were 49% more deaths among northerners than southerners in this age group.

Excess mortality in the north compared with south of England by age groups, from 1965 to 2015. Follow the lines to see that people born around 1980 are the ones most affected around 2015.

While mortality increased among northerners aged 25 to 34, and plateaued among 35 to 44-year-olds, southern mortality mainly declined across both age groups. Overall, between 2014 and 2016, northerners aged 25 to 44 were 41% more likely to die than southerners in the same age group. In real terms, this means that between 2014 and 2016, 1,881 more women and 3,530 more men aged between 25 and 44 years died in the north, than in the south.

What’s killing northerners?

To understand what’s driving this mortality gap among young adults, our team of researchers looked at the causes of death from 2014 to 2016, and sorted them into eight groups: accidents, alcohol related, cardiovascular related (heart conditions, diabetes, obesity and so on), suicide, drug related, breast cancer, other cancers and other causes.

Controlling for the age and sex of the population in the north and the south, we found that it was mostly the deaths of northern men contributing to the difference in mortality – and these deaths were caused mainly by cardiovascular conditions, alcohol and drug misuse. Accidents (for men) and cancer (for women) also played important roles.

From 2014 to 2016, northerners were 47% more likely to die for cardiovascular reasons, 109% for alcohol misuse and 60% for drug misuse, across both men and women aged 25 to 44 years old. Although the national rate of death from cardiovascular reasons has dropped since 1981, the longstanding gap between north and south remains.

Death and deprivation

The gap in life expectancy between north and south is usually put down to socioeconomic deprivation. We considered further data for 2016, to find out if this held true for deaths among young people. We found that, while two thirds of the gap were explained by the fact that people lived in deprived areas, the remaining one third could be caused by some unmeasured form of deprivation, or by differences in culture, infrastructure, migration or extreme weather.

Mortality for people aged 25 to 44 years in 2016, at small area geographical level for the whole of England.

Northern men faced a higher risk of dying young than northern women – partly because overall mortality rates are higher for men than for women, pretty much at every age, but also because men tend to be more susceptible to socioeconomic pressures. Although anachronistic, the expectation to have a job and be able to sustain a family weighs more on men. Accidents, alcohol misuse, drug misuse and suicide are all strongly associated with low socioeconomic status.

Suicide risk is twice as high among the most deprived men, compared to the most affluent. Suicide risk has also been associated with unemployment, and substantial increases in suicide have been observed during periods of recession – especially among men. Further evidence tells us that unskilled men between ages 25 and 39 are between ten and 20 times more likely to die from alcohol-related causes, compared to professionals.

Alcohol underpins the steep increase in liver cirrhosis deaths in Britain from the 1990s – which is when the north-south divide in mortality between people aged 25 to 44 also started to emerge. Previous research has shown that men in this age group, who live in the most deprived areas, are five times more likely to die from alcohol-related diseases than those in the most affluent areas. For women in deprived areas, the risk is four times greater.


It’s also widely known that mortality rates for cancer are higher in more deprived areas, and people have worse survival rates in places where smoking and alcohol abuse is more prevalent. Heroin and crack cocaine addiction and deaths from drug overdoses are also strongly associated with deprivation.

The greater number of deaths from accidents in the north should be considered in the context of transport infrastructure investment, which is heavily skewed towards the south – especially London, which enjoys the lowest mortality in the country. What’s more, if reliable and affordable public transport is not available, people will drive more and expose themselves to higher risk of an accident.

Deaths for young adults in the north of England have been increasing compared to those in the south since the late 1990s, creating new health divides between England’s regions. It seems that persistent social, economic and health inequalities are responsible for a growing trend of psychological distress, despair and risk taking among young northerners. Without major changes, the extreme concentration of power, wealth and opportunity in the south will continue to damage people’s health, and worsen the north-south divide.

The Conversation

Evangelos Kontopantelis, Professor in Data Science and Health Services Research, University of Manchester

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