There are good reasons to reform the business rates system – but it won't save the high street

Sad! Boarded up shops. Image: Getty.

Business rates were top of the news agenda again recently after Tesco’s Chief Executive Dave Lewis claimed in a BBC interview that the tax was playing a major role in the ongoing woes of the retail industry. He also argued that the business rates system creates an “uneven playing field” between high street shops and online retailers based in out-of-town warehouses,

These views echoed similar comments made by Sainsbury’s chief executive last year. They also reflect wider discontent with the business rates system, especially following the revaluation of the rates that took place last April – which saw rates go up for some firms and fall for others.

But at the Centre for Cities, our research suggests that these two concerns about the business rates system — that small and medium-sized firms (SMEs) on the high street are unduly penalised, and that online retailers unfairly benefit — are being overstated by business leaders.

On the first issue, our analysis last year suggested that many SMEs would benefit from the revaluation of business rates — especially in northern cities. Average rates would rise in only two cities — London and Reading, the UK’s most prosperous cities in terms of average wages. In contrast, firms in all other cities in England and Wales benefitted on average from a decrease in rates, with the biggest decreases to be found in Blackburn, Blackpool and Newport. Firms in these places had been overpaying on rates for years, and so the revaluation of their rates was long overdue.

Indeed, the real problem is that revaluations don’t take place regularly enough. Last year’s was the first in seven years — which is why businesses in the South East faced such a hike in their bills. The gGovernment has moved to address this problem by announcing at the last Budget that revaluations will take place every three years. This was a welcome move, though these revaluations would ideally take place annually to offer businesses and cities greater certainty and stability.

In terms of the second concern raised by business chiefs — that the business rates system creates an unfair playing field that benefits online retailers – these criticisms are wide of the mark for a number of reasons (outlined in detail in a previous blog by my colleague Paul Swinney).

Yes, Amazon sites have benefitted from decreases in business rates after the revaluation in April 2017 — but the scale of these decrease have on average been smaller than those enjoyed by high street retailers.


More significantly, however, the arguments made by Tesco’s boss and others overlook the fact that business rates is not a tax on retail — it is a tax on land use. As such, business based in the centre of bustling cities are charged more because land is at a premium in these places, but those in out-of-town locations – where land is abundantly available and less in demand — pay less.

Indeed, this is why businesses in these places choose to locate where they do — those based in out-of-town areas do so because they don’t want to pay high rents and rates, while those in central London show they are prepared to pay high prices for the benefits that the location brings to their business.

Nobody would argue that the business rates system is perfect. As we set out in our briefing Business rates: maximising the growth incentive across the country, reforms are needed to ensure that the system incentivises long-term growth in a greater number of cities and better rewards places for their contribution.

However, it is wrong to blame the rates system for the travails of high street shops. The causes of the decline in high street chains are complex and many – and thinking that changing the business rates system will solve these problems is misguided.

Hugo Bessis is a researcher for the Centre for Cities, on whose blog this article originally appeared.

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What it's been like living in one of the few places that never locked down

People enjoy sunny weather in Tantolunden park in Stockholm on May 30, 2020, amid the novel coronavirus pandemic. (Henrik Montgomery/TT News Agency/AFP via Getty Images)

While most of the Western world was confined to their homes for the better part of two months this spring, my friends and I in Stockholm continued hanging out. In stark contrast to most other places, we went to restaurants (occasionally, outside when possible), to one another’s houses (in our yards when possible), and even sent our kids to school. As the rest of the world opens up again, not much will change in Stockholm.

As an American expat living in the Swedish capital, I was initially angry at Sweden’s response to the Covid-19 pandemic. In my home country, early outbreaks in locations such as Seattle, New York City and the San Francisco Bay Area led to strict rules that were soon mirrored in many other states and cities. The Swedish strategy, meanwhile, boiled down mostly to recommendations: If possible, work from home; avoid unnecessary travel within the country; engage in social distancing; and if you’re above 70, stay home. I felt that, in the face of a global pandemic, a country known for its generous welfare policies – that took such good care of its citizens – wasn’t doing its part to protect us.

My friends and I are mostly expats with young families who, early on, pulled our children out of school against official policy. (Schools here only closed for those 16 and over.) We eagerly waited to hear what further action our current country would take. Surely a country known for its progressive social policies would take fast, decisive action to protect its citizens?

The regulations that were put into place in Sweden amounted to restricting public gatherings to no more than 50 people (reduced from 500, which concert halls skirted by restricting entry to 499), limiting restaurants to table service only, and no visiting retirement homes. People here did take the work-from-home guidelines to heart – no one I knew was going in to work. But bars and restaurants were full. My Instagram feed was a highlight reel of acquaintances clinking champagne flutes at the city’s major clubs and restaurants.

After the first few weeks, I slowly started meeting up with friends again. I sent my kids back to school, where they intentionally spent most of the day outdoors and drop-offs were restricted to outside only (parents weren’t allowed to enter the building). I was careful to take precautions like bringing hand sanitizer to playgrounds and wiping my hands after opening and closing the gate to school. Hardly anyone wore masks to the grocery shop or inside stores – the few times I’ve seen people wearing them I’ve done a double take. One busy Friday night in late April at the local supermarket there was a line out the door and someone regulating the number of customers allowed inside at the same time. I took a photo and sent it to my family in the US saying “Sweden finally catching up with the rest of the world!” (I haven’t seen entry to that store being regulated since.)

When I spoke to Swedish friends about the strategy many agreed with the relaxed approach, mentioning that other countries’ draconian measures would be unnecessary in Sweden. A recent poll showed that just 11% of people in Sweden felt they did not trust state epidemiologist Anders Tegnell, who is leading the strategy. In this country, the onus was placed on citizens themselves to follow recommendations. It's about personal judgement and individual responsibility within a framework that rested on mutual trust, rather than top-down control. Swedes’ high level of interpersonal trust and trust in authority was often cited in the press as the characteristic enabling the relaxed Swedish strategy in tackling the virus, as opposed to social distancing becoming a matter of surveillance and policing like in Spain or Italy, where any nonessential socializing was forbidden.

In early May, Sweden's ambassador to the US Karin Ulrika Olofsdotter said in an interview with the Washington Post that some media outlets made it look “like everyone in Sweden is out drinking and partying,” she said. “That is not the case.” But that was certainly how it felt to me. According to research by Esteban Ortiz-Ospina and Max Roser in 2016, in countries such as Norway, Sweden and Finland, more than 60% of respondents in the World Value Survey think that people can be trusted. And in the other extreme, in countries such as Colombia, Brazil, Ecuador and Peru, less than 10% think that this is the case.


Of course, many places in the US also took a similarly relaxed approach to tackling the pandemic, with conservative lawmakers and anti-lockdown activists citing Sweden as taking the right approach. Sweden, rarely finding cheerleaders among conservative US circles, suddenly stood as an example to follow. But since then, places such as Arizona, Texas and Florida have all seen significant spikes in cases following reopenings and are being deemed the new epicentres of the virus – while Sweden’s numbers have stabilised. According to some reports, the death toll in Sweden is one of the highest in the world per capita, but the total number of Swedish deaths remains at just above 5,000, compared to over 120,000 in the US, over 43,000 in the UK, over 28,000 in Spain and over 34,000 in Italy. The mortality rate in Sweden and the number of new intensive care cases in the country declined in the last week and contagion rates here are now “stable” according to the WHO.

Although it didn’t always feel like it at the time, Sweden issued clear guidance from the beginning, with the expectation that people would choose to follow it. It certainly was my experience that everyone I knew stopped going into the office and started working from home. William Hanage, an associate professor of epidemiology at Harvard’s School of Public Health, attributed Sweden’s slowing of the virus to implementing guidance early on. “Sweden’s policy is unusual in that it took a much less stringent approach to preventing transmission," he says, "but interestingly it implemented those measures at a very early stage in the pandemic, before large amounts of community spread had occurred.”

Now I go outside and all too often realise I’ve left my hand sanitiser at home. I even met a friend for lunch outdoors at a busy cafe one particularly sunny day, and another indoors one Friday night for dinner. In May I had a birthday bash in my garden with a dozen or so friends and we ended up at the local bar. I always felt guilty after, as if I’d done something wrong that I couldn’t tell my family in Baltimore about. When I watched international news or spoke to family back home I would feel a certain cognitive dissonance between my own seemingly low-risk reality and what I knew to be happening in the rest of the world. My family in the US calls me skeptically questioning why I’ve had people over in my garden, or been out to eat. I can’t explain the lack of logic that permits an entire city’s citizens to operate life as normal in the midst of a global pandemic. But Stockholm has become a bubble of exactly this.

Being relatively young and healthy, I’m not so worried about getting sick. Even though young and healthy people have gotten seriously ill, there haven’t been any reported cases at my kids’ or any of my friends’ kids’ schools. Nobody I know in Stockholm knows has gotten sick, allowing me to feel a certain distance from it. But my husband’s parents are in their mid-70s and weren’t able to see their grandchildren for two months save for a few visits to their hallway, where we wave and blow kisses to them standing at the door.

I’ve been grateful – but also felt a sense of guilt for – my freedom here. When there are no hard and fast rules about how to act, it’s easy to constantly question yourself: Is it really okay to be outside, sitting at this full cafe? Is it okay to invite a few friends over for a birthday? Is it okay to send my kids to school? These questions have surely gone through minds around the world in the past several weeks, and now it’s clear that that behaviour had dire consequences in some cities and not others.

While Swedish social media at times suggests an endless friend-filled party at summer homes and popular hangouts, the reality here is a balancing act between personal judgement and the freedom to continue life as normal. Self-regulation is what it comes down to in Sweden, anyway.

Elysha Krupp is a writer and editor currently living in Stockholm.