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 IPPC report on the melting ice caps makes for terrifying reading

A Greeland iceberg, 2007. Image: Getty.

Earlier this year, the Intergovernmental Panel on Climate Change (IPCC) – the UN body responsible for communicating the science of climate breakdown – released its long-awaited Special Report on the Ocean and Cryosphere in a Changing Climate.

Based on almost 7,000 peer-reviewed research articles, the report is a cutting-edge crash course in how human-caused climate breakdown is changing our ice and oceans and what it means for humanity and the living planet. In a nutshell, the news isn’t good.

Cryosphere in decline

Most of us rarely come into contact with the cryosphere, but it is a critical part of our climate system. The term refers to the frozen parts of our planet – the great ice sheets of Greenland and Antarctica, the icebergs that break off and drift in the oceans, the glaciers on our high mountain ranges, our winter snow, the ice on lakes and the polar oceans, and the frozen ground in much of the Arctic landscape called permafrost.

The cryosphere is shrinking. Snow cover is reducing, glaciers and ice sheets are melting and permafrost is thawing. We’ve known this for most of my 25-year career, but the report highlights that melting is accelerating, with potentially disastrous consequences for humanity and marine and high mountain ecosystems.

At the moment, we’re on track to lose more than half of all the permafrost by the end of the century. Thousands of roads and buildings sit on this frozen soil – and their foundations are slowly transitioning to mud. Permafrost also stores almost twice the amount of carbon as is present in the atmosphere. While increased plant growth may be able to offset some of the release of carbon from newly thawed soils, much will be released to the atmosphere, significantly accelerating the pace of global heating.

Sea ice is declining rapidly, and an ice-free Arctic ocean will become a regular summer occurrence as things stand. Indigenous peoples who live in the Arctic are already having to change how they hunt and travel, and some coastal communities are already planning for relocation. Populations of seals, walruses, polar bears, whales and other mammals and sea birds who depend on the ice may crash if sea ice is regularly absent. And as water in its bright-white solid form is much more effective at reflecting heat from the sun, its rapid loss is also accelerating global heating.

Glaciers are also melting. If emissions continue on their current trajectory, smaller glaciers will shrink by more than 80 per cent by the end of the century. This retreat will place increasing strain on the hundreds of millions of people globally who rely on glaciers for water, agriculture, and power. Dangerous landslides, avalanches, rockfalls and floods will become increasingly normal in mountain areas.


Rising oceans, rising problems

All this melting ice means that sea levels are rising. While seas rose globally by around 15cm during the 20th century, they’re now rising more than twice as fast –- and this rate is accelerating.

Thanks to research from myself and others, we now better understand how Antarctica and Greenland’s ice sheets interact with the oceans. As a result, the latest report has upgraded its long-term estimates for how much sea level is expected to rise. Uncertainties still remain, but we’re headed for a rise of between 60 and 110cm by 2100.

Of course, sea level isn’t static. Intense rainfall and cyclones – themselves exacerbated by climate breakdown – can cause water to surge metres above the normal level. The IPCC’s report is very clear: these extreme storm surges we used to expect once per century will now be expected every year by mid-century. In addition to rapidly curbing emissions, we must invest millions to protect at-risk coastal and low-lying areas from flooding and loss of life.

Ocean ecosystems

Up to now, the ocean has taken up more than 90 per cent of the excess heat in the global climate system. Warming to date has already reduced the mixing between water layers and, as a consequence, has reduced the supply of oxygen and nutrients for marine life. By 2100 the ocean will take up five to seven times more heat than it has done in the past 50 years if we don’t change our emissions trajectory. Marine heatwaves are also projected to be more intense, last longer and occur 50 times more often. To top it off, the ocean is becoming more acidic as it continues to absorb a proportion of the carbon dioxide we emit.

Collectively, these pressures place marine life across the globe under unprecedented threat. Some species may move to new waters, but others less able to adapt will decline or even die out. This could cause major problems for communities that depend on local seafood. As it stands, coral reefs – beautiful ecosystems that support thousands of species – will be nearly totally wiped out by the end of the century.

Between the lines

While the document makes some striking statements, it is actually relatively conservative with its conclusions – perhaps because it had to be approved by the 195 nations that ratify the IPCC’s reports. Right now, I would expect that sea level rise and ice melt will occur faster than the report predicts. Ten years ago, I might have said the opposite. But the latest science is painting an increasingly grave picture for the future of our oceans and cryosphere – particularly if we carry on with “business as usual”.

The difference between 1.5°C and 2°C of heating is especially important for the icy poles, which warm much faster than the global average. At 1.5°C of warming, the probability of an ice-free September in the Arctic ocean is one in 100. But at 2°C, we’d expect to see this happening about one-third of the time. Rising sea levels, ocean warming and acidification, melting glaciers, and permafrost also will also happen faster – and with it, the risks to humanity and the living planet increase. It’s up to us and the leaders we choose to stem the rising tide of climate and ecological breakdown.

Mark Brandon, Professor of Polar Oceanography, The Open University.

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