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.

 
 
 
 

The tube that’s not a tube: What exactly is the Northern City line?

State of the art: a train on the Northern City Line platforms at Moorgate. Image: Haydon Etherington

You may never have used it. You may not even know that it’s there. But in zones one and two of the London Underground network, you’ll find an oft-forgotten piece of London’s transport history.

The Northern City line is a six-stop underground route from Moorgate to Finsbury Park. (It’s officially, if confusingly, known as the Moorgate line.) But, unlike other underground lines, it not part of Transport for London’s empire, and is not displayed on a normal tube map. Two of the stations, Essex Road and Drayton Park, aren’t even on the underground network at all.

The line has changed hands countless times since its creation a century ago. It now finds itself hiding in plain sight – an underground line, not part of the Underground. So why exactly is the Northern City line not part of the tube?

The Northern City line, pictured in dotted beige. Source: TfL.

As with many so many such idiosyncrasies, the explanation lies in over a century’s worth of cancellations and schemes gone awry. The story starts in 1904, when the private Great Northern Railways, which built much of what is now the East Coast Main Line, built the line to provide trains coming from the north of London with a terminus in the City. This is why the Northern City line, unlike a normal tube line, has tunnels wide enough to be used by allow mainline trains.

Eventually, though, Great Northern decided that this wasn’t such a bright idea after all. It mothballed plans to connect the Northern City up to the mainline, leaving it to terminate below Finsbury Park, scrapped electrification and sold the line off to Metropolitan Railways – owners of, you guessed it, the Metropolitan line.

Metropolitan Railways had big plans for the Northern City line too: the company wanted to connect it to both Waterloo & City and Circle lines. None of the variants on this plan ever happened. See a theme?

The next proposed extensions, planned in the 1930s once London Underground had become part of the domain of the (public sector) London Passenger Transport Board, was the Northern Heights programme. This would have seen the line would connected up with branch lines across north London, with service extended to High Barnet, Edgware and Alexandra Palace: essentially, as part of the Northern line. The plans, for the main part, were cancelled in the advent of the Second World War.

The Northern Heights plan. The solid green lines happened, the dotted ones did not. Image: Rob Brewer/Wikimedia Commons.

What the war started, the Victoria line soon finished. The London Plan Working Party Report of 1949 proposed a number of new lines and extensions: these included extension of the Northern City Line to Woolwich (Route J) and Crystal Palace (Route K). The only one of the various schemes to happen was Route C, better known today as the Victoria line, agreed in the 1950s and opening in the 1960s. The new construction project cannibalised the Northern City Line’s platforms at Finsbury Park, and from 1964 services from Moorgate terminated one stop south at Drayton Park.

In 1970, the line was briefly renamed the Northern Line (Highbury Branch), but barely a year later plans were made to transfer it to British Rail, allowing it to finally fulfil its original purpose.


Before that could happen, though, the line became the site of a rather more harrowing event. In 1975, the deadliest accident in London Underground history took place at Moorgate: a southbound train failed to stop, instead ploughing into the end of the tunnel. The crash killed 43 people. The authorities responded with a major rehaul of safety procedure; Moorgate station itself now has unique timed stopping mechanisms.

The last tube services served the Northern City Line in October 1975. The following year, it reopened as part of British Rail, receiving trains from a variety of points north of London. Following privatisation, it’s today run by Govia Thameslink as the Great Northern route, served mainly by suburban trains from Hertford and Welwyn Garden City.

Nowadays, despite a central location and a tube-like stopping pattern, the line is only really used for longer-scale commutes: very few people use it like a tube.

Only 811,000 and 792,000 people each year enter and exit Essex Road and Drayton Park stations respectively. These stations would be considered the fifth and sixth least used in the tube network – only just beating Chorleywood in Hertfordshire. In other words, these usage stats look like those for a station in zone seven, not one in Islington.

One reason for this might be a lack of awareness that the line exists at all. The absence from the tube map means very few people in London will have heard of it, let alone ever used it.

Another explanation is rather simple: the quality of service. Despite being part and parcel of the Oyster system, it couldn’t be more different from a regular tube. The last (and only) time I used the line, it ran incredibly slowly, whilst the interior looked much more like a far-flung cross-country train than it does a modern underground carriage.

Waiting for Govia. Image: Haydon Etherington.

But by far the biggest difference from TfL is frequency. The operators agreed that trains would run between four and six times an hour, which in itself is fine. However, this is Govia Thameslink, and in my experience, the line was plagued by cancellations and delays, running only once in the hour I was there.

To resolve this, TfL has mooted taking the line over itself. In 2016, draft proposals were put forward by Patrick McLoughlin, then the transport secretary, and then mayor Boris Johnson, to bring "northern services... currently operating as part of the Thameslink, Southern and Great Northern franchise" into TfL's control by 2021.

But, in a story that should by now be familiar, Chris Grayling scrapped them. At least it’s in keeping with history.