“A tax which reflects inequality of prosperity can't correct inequality of opportunity”: on business rates

The chancellor's famous red box, because you try illustrating a story about bloody business rates. Image: Getty.

On 30 September, for the first time since 2010, the Valuation Office Agency published revised property values used to calculate how much firms across England only owe in business rates. The government says that the revaluation would be fiscally neutral – but while the overall burden will not rise, but rather will be redistributed across the country.

Here, Paul Watson, the Labour leader of Sunderland council and chair of the Key Cities group of 26 mid-sized cities, warns that the change could disadvantage areas of the country beyond the rich south east.

We have heard a lot in recent weeks about the effect the business rate revaluation will have on businesses. London Mayor Sadiq Khan has called it a “kick in the teeth” for the capital, and many businesses have expressed fears that it will stifle entrepreneurship and employment.

I think we can all conclude from the process that it is better if in future, we don’t bottle up major changes in business taxation, only to open the floodgates all at once. Especially following the referendum result, businesses are craving certainty to lay plans for the investment our country needs. Major changes in their tax burden may contribute to the overall perception of instability.

But business rates, despite the name, are not just a business concern, and there is another side to the story: public services. Business rates are a critical source of revenue for our councils. The tax funds about 17 per cent of local council spending on housing, social care, bin collections, and other services we provide.

Of course the rateable value of property varies across the country, and the revaluation reflects that – in London, rateable values will rise about 11 per cent on average. In the North East, they will fall 11 per cent. In fact, they will fall on average in every region outside London.

Now, normally, we account for this variation: central allocations of revenue smooth out the differences between the regions. The last chancellor George Osborne, however, announced that local authorities would have full retention of business rates by 2020. As I reflected last October, however, without some element of fairness and redistribution, full retention will be a blunt and crude instrument which will undermine public service delivery by many local authorities.

The facts are clear: we can’t rely on a tax which reflects the inequality of prosperity across our country to correct the inequality of opportunity we see. Business rates reinforce the income of councils in areas which have benefited from the economy we have built over the last 30 years.

And we know that the British people want a different economy. The one we have now has excluded too many people from sharing the benefits of growth – a concept that has only really been accepted by policy makers following the EU Referendum.

It is especially important to remember the key facts even as the mood music from the government shifts. The Chancellor of the Exchequer has made welcome noises about abandoning the previous chancellor’s significant deficit reduction targets and about expanding infrastructure investment.

We hope that this is followed through to action. But it cannot conceal the fact that local authorities have taken budget cuts greater than almost every other part of government in the last six years.

We are still under pressure. The cuts we have made are not being restored. If the government moves toward full retention of business rates without that element of fairness and redistribution, our revenues will fall still further even as our residents’ needs keep rising. Less affluent local authorities will be punished with another major round of spending cuts.

T0hat threatens to stop the devolution agenda in its tracks. It threatens to stop any inclusive industrial strategy – which the government has been keen to stress as its priority – in its tracks as well. It threatens the people of my city, and the people across the Key Cities group, with the risk of falling further behind the South East.

It also risks failing to heed one of the key lessons of the EU Referendum result – that we have still not done enough to spread growth around the country.

The task of building an inclusive economy with meaningful devolved power is so much more than passing on the responsibility for cuts. That’s why we need to take the opportunity of the revaluation to reflect on the resources local authorities need, particularly in areas which voted Leave, to turn around years of an economy that didn’t work for them. Abandoning a policy that risks entrenching unequal growth would be a good place to start.

Cllr Paul Watson is leader of Sunderland City Council and chair of the Key Cities group of 26 mid-sized cities. 


In South Africa's cities, evictions are happening despite a national ban

An aerial view shows a destroyed house in Lawley, south of Johannesburg, on April 20, 2020. The city has been demolishing informal structures on vacant land despite a moratorium on evictions. (Marco Longari/AFP via Getty Images)

On the morning of 15 July, a South African High Court judge ruled that the city of Cape Town’s Anti-Land Invasion Unit had illegally evicted a man when it destroyed the shack where he was living.

That afternoon, the Anti-Land Invasion Unit was out again, removing shacks in another informal settlement.

Evictions were banned in South Africa for nine weeks, after the national government placed the country under a strict Covid-19 lockdown in late March. At present, eviction orders are automatically suspended until the country moves to a lower “alert level” and can only be carried out with a special order from a judge.

Yet major cities including Cape Town, Johannesburg and eThekwini (created through the merger of Durban with several surrounding communities), have continued to use municipal law enforcement agencies and private security companies to remove people from informal housing. In many cases those operations have been conducted without a court order – something required under regular South African law.

Around 900 people were evicted from three informal settlements in eThekwini during the eviction ban, according to the Church Land Programme, a local NGO. Its director, Graham Philpott, says it’s also aware of evictions in other informal settlements.

While evictions aren’t a “new experience” in these communities, the NGO released a report on lockdown evictions because they were “so explicitly illegal”. “There was a moratorium in place,” Philpott says, “and the local municipality acted quite flagrantly against it. There’s no confusion, there’s no doubt whatsoever, it is illegal. But it is part of a trend where the eThekwini municipality has acted illegally in evicting the poor from informal settlements.”

Evictions also took place in Cape Town and Johannesburg during so-called “hard lockdown” according to local activists. In eThekwini and other municipalities, the evictions have continued despite restrictions. In Cape Town, authorities pulled a naked man, Bulelani Qholani, from his shack. That incident, which was captured on video, drew condemnation from the national government and four members of the Anti-Land Invasion unit were suspended. 

The cities say they’re fighting “land invasions” – illegal occupations without permission from the land owner.

“Land invasions derail housing and service projects, lead to the pollution of waterways, severely prejudice deserving housing beneficiaries and cause property owners to lose their investments over night,” Cape Town’s executive mayor, Dan Plato said in a statement. (Plato has also claimed that Qholani did not live in the shack he was pulled from and that he disrobed when municipal authorities arrived.)

South African municipalities often claim that the shacks they destroy are unoccupied. 

If they were occupied, says Msawakhe Mayisela, a spokesman for the eThekwini municipality, the city would get a court order before conducting an eviction. “Everything we’re doing is within the ambit of the law,” Mayisela says. But “rogue elements” are taking advantage of Covid-19, he added.

“We fully understand that people are desperately in need of land, but the number of people that are flocking to the cities is too much, the city won’t be able to provide housing or accommodation for everyone overnight,” he says. 

While eThekwini claims to be a caring city, local activists say the evictions show otherwise.

In one case, 29 women were evicted from shacks during the hard lockdown. With nowhere to go, they slept in an open field and were arrested by the South African Police Service for violating the lockdown, Philpott says.

“These evictions are dehumanizing people whose dignity is already compromised in many ways,” says S’bu Zikode, the president of Abahlali baseMjondolo, a community organization whose Zulu name translates to “the people of the shacks”. 

“It has reminded us that we are the people that do not count in our society.”

Municipal law enforcement and private security contractors hired by cities regularly fire rubber bullets, or even live ammunition, at residents during evictions. Some 18 Abahlali baseMjondolo activists have been killed since the organization was founded in 2005, Zikode says, most by the eThekwini Land Invasion Unit and Metro Police.

(Mayisela says that if city employees have broken the law, Abahlali baseMjondolo can file a complaint with the police. “There is no conclusive evidence to the effect that our members have killed them,”  he says.)

Other Abahlali baseMjondolo activists have been killed by what Zikode calls “izinkabi,” hitmen hired by politicians. Two eThekwini city councillors were sentenced to life in prison 2016 after they organized the killing of Thuli Ndlovu, an Abahlali baseMjondolo organizer. A member of the Land Invasion Unit who is currently facing a charge of attempted murder after severely injuring a person during an eviction remains on the job, Zikode says.

South Africa’s 1996 constitution is intended to protect the public from arbitrary state violence and guarantees a right to housing, as well as due process in evictions. But for Zikode, the South African constitution is a “beautiful document on a shelf”.

“For the working class and the poor, it’s still difficult to have access to court. You’ve got to have money to get to court,” he says. 

The actions by municipal law enforcement are breaking down social trust, says Buhle Booi, a member of the Khayelitsha Community Action Network, a community group in the largest township in Cape Town.

“There’s a lack of police resources and those very few police resources that they have, they use to destroy people’s homes, to destroy people’s peace, rather than fighting crime, real criminal elements that we see in our society,” Booi says.

For him, it’s a continuation of the practices of the colonial and apartheid governments, pushing poor people, most of whom are Black, to the periphery of cities.

Around one-fifth of South Africa’s urban population live in shacks or informal dwellings, according to a 2018 report by SERI. Many more live in substandard housing. City governments maintain that the shacks destroyed during anti-land invasion operations are unfinished and unoccupied. But Edward Molopi, a research and advocacy officer at SERI, says that this claim is an attempt to escape their legal obligations to get a court order and to find alternative accommodation for affected people. 

The roots of the current eviction crisis go back to apartheid, which barred non-white people from living in cities. Between the 1940s and 1970s, tens of thousands of people were forcibly relocated from neighbourhoods like Johannesburg’s Sophiatown and Cape Town’s District Six to remote townships.

In the 26 years following the end of apartheid, deepening economic inequality and rampant unemployment have limited access to formal housing for millions of South Africans. Government housing programs have mostly focused on building small stand-alone homes, often on the peripheries of cities far from jobs and amenities.

While these well-intentioned projects have built millions of homes, they’ve failed to keep up with demand, says Marie Huchzermeyer, a professor at the Centre for Urbanism & Built Environment Studies at the University of the Witwatersrand in Johannesburg. Government-funded housing projects “will never on it’s own be enough,” she says. “It has to be accompanied by land release.”

Government policies call for the “upgrading” of informal settlements and the formalization of residents’ occupation. But “there are still very, very, very few projects” of that nature in South Africa, Huchzermeyer says. “Even if it’s an informal settlement that’s been around for 20 years, there still seems to be a political wish to punish people for having done that.” The government wants people to go through the formal process of being given a house, she says – and for them to be thankful to the government for providing it.

At the municipal level, change will require “real leadership around informal settlement upgrading and around ensuring that land is available for people to occupy,” she says. 

Despite the end of enforced racial segregation, spacial apartheid remains a factor in South Africa. There are few mixed-income neighbourhoods. Those who can afford to often live behind walls in sprawling low-density suburbs, while the poor live in overcrowded slums and apartment buildings.

The creation of the apartheid city “didn't happen by chance,” says Amira Osman, a professor of architecture at the Tshwane University of Technology. “It was a deliberate, structured approach to the design of the city. We need a deliberate, structured approach that will undo that.”

Since last fall, Johannesburg’s Inclusionary Housing Policy has required developments of 20 or more units to set aside 30% of those units for low-income housing.

The policy, which faced significant opposition from private developers, won’t lead to dramatic change, says Sarah Charlton, a professor at the Centre for Urbanism and Built Environment Studies, but it is “an important and significant step.”

Zikode isn’t optimistic that change will come for shack dwellers, however.

“People in the high positions of authority pretend that everything is normal,” he says. “They pretend that everyone is treated justly, they pretend that everyone has homes with running water, that everyone has a piece of land – and hide the truth and the lies of our democracy.”

Jacob Serebrin is a freelance journalist currently based in Johannesburg. Follow him on Twitter.