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.

 
 
 
 

How US planners experimented with “the iron hand of power” over colonial Manila

Manila in ruins, 1945. Image: Wikimedia Commons.

In 1904, Manila must have appeared to its new overlords a despairing prospect. Racked with poverty and disease, it was still recovering from years of war, epidemic and a fire that had left 8,000 homeless.

For architect Daniel Burnham, it was an opportunity to put to work the radical ideas he had dreamed of in America.

He was among those asking how America’s unprecedented wealth at the turn of the century could be reconciled with the lives of the country’s poorest. Like many, he admired the ideas of harmonised city-planning articulated in Edward Bellamy’s bestselling science-fiction Looking Backward (1888).

At the 1893 World’s Columbian Exposition in Chicago, Burnham constructed the “White City”. Built across 686 acres of parkland, boulevards, gardens and neoclassical structures rendered a spray-painted plaster vision of the future – all laid out to one comprehensive plan.

It was impressive – but implementing grand designs where people actually lived meant laborious negotiations with citizens, businessmen and politicians.

Instead, opportunity lay in America’s new overseas territories. As Daniel Immerwahr describes in How to Hide an Empire: A Short History of the Greater United States, “They functioned as laboratories, spaces for bold experimentation where ideas could be tried with practically no resistance, oversight, or consequences.”

An architect’s dream

The US had gone to war with Spain in 1898, taking advantage of an empire-wide insurrection. It ended up controlling the entire Philippines, along with Guam and Puerto Rico.

As a “territory”, the Philippines existed outside the protections of the constitution. Congress could impose any law, proclaimed the attorney general in 1901, “without asking the consent of the inhabitants, even against their consent and against their protest, as it has frequently done.”

Which is how Burnham, upon invitation by the Philippine’s new rulers, came to wield what the Architectural Record called “the iron hand of power” over Manila.

 Burnham’s plan for Manila. Click to expand.

Where Burnham’s Chicago plan was complex, took years and entailed collaboration with hundreds of citizens, Burnham spent six months on the Manila plan, and just six weeks in the Philippines. And with no voters to persuade, there seemed little reason to register Filipino input in his designs.

In 1905 Burnham submitted his Report on Improvement of Manila. It described filling the toxic moat of the Spanish fortress Intramuros and developing a rectangular street system modelled on Washington D.C., with diagonal arteries which even Chicago lacked.


Central to his plan was the city’s beautification through monumental buildings, waterfront improvements, and parks – “wholesome resorts” to “give proper means of recreation to every quarter of the city”

Burnham charged William E. Parsons as the omnipotent “Consultant Architect” to interpret his plan, who relished its authority over all public building as an “architect’s dream”. When concerned with the extent of his purview, he also chose to standardise a number of public buildings.

“I doubt if this method would bear fruit in our own city improvement plans, in which everything depends on slow moving legislative bodies,” reported the Architectural Record’s correspondent.

Despite Burnham’s colonial sentiments his biographer concluded his plan was “remarkable in its simplicity and its cognizance of Philippine conditions and traditions.”

His plans did not shy from asserting the colonial government’s authority, however. The Luneta, a favourite park, was to become the nuclei of government. The city’s avenues would converge there, for “every section of the Capitol City should look with deference toward the symbol of the Nation’s power.”

Unusual monumental possibilities

Burnham also worked on a summer palace for US administrators at Baguio, 150 miles north in the mountains. On land inhabited by Igorot people, Burnham saw an opening “to formulate my plans untrammelled by any but natural conditions”.

Baguio’s “unusual monumental possibilities” were facilitated by a road whose construction employed thousands, risking death from disease and falling off cliffs. Civic buildings would “dominate everything in sight” and a golf course would rival those of Scotland.

“Stingy towards the people and lavish towards itself,” griped La Vanguardia, the government “has no scruples nor remorse about wasting money which is not its own.”

As enthusiasm for US empire soured in the States, local power was relinquished to Filipinos. Parsons resigned in protest in 1914. He was replaced by Manila-born Juan Arellano, whose rebuke to imperialists was the mighty, neoclassical Legislative Building which hosted the elected Philippine Legislature. Arellano upheld Burnham’s plan, producing a beautified city bearing resemblance to Burnham’s White City.

But the Legislative Building, along with Burnham’s great edifices and almost everything else in Manila, was levelled as US troops recaptured it in 1945, this time ousting the Japanese in a brutal battle. “Block after bloody block was slowly mashed into an unrecognizable pulp”, recorded the 37th Infantry Division as they exercised their own “iron hand” over Manila.

American artillery had transformed Manila into ruins. “It was by far the most destructive event ever to take place on US soil,” writes Immerwahr, even if few soldiers realised they were liberating US nationals at the time. Burnham’s expansive vision was lost in the debris, and though some buildings were rebuilt a majority were replaced. Today, Manila’s pre-war architecture is remembered with fondness and nostalgia.