Comment: The tired business rates system needs some political TLC

Any taxation system has to be fair, transparent and the burden should be equally borne irrespective of sector. Sadly these traits are currently missing from the business rate system.

There is no doubt that retailers are angry and quite rightly so. The high street has been treated as a cash cow for far too long. However, to a certain extent, that anger does not stem from the rating system itself but the amount of money it derives. In 1990, when the national business rates system was introduced, business rates raised £9.6 billion. Last year before reliefs that amount had rocketed to £24.5billion and the Office for Budget Responsibility predict by 2017 that will hit £31.2billion.

2015 will also be a watershed moment not because of a general election but because revenue from business rates will outstrip council tax.

We could look at abolishing the current rating system and replacing it with other forms of taxation. Some believe that it would be better to tax businesses entirely on the basis of profits or sales, others say a tax on land values or a combination of the both. However, how far would that get us unless the Government accepts that the yield is too high and damaging? What would be the point in replacing one system with another with the end result being exactly the same? The issue here is the current £24.5billion and the fact that the only way is up.

We are left in no doubt that business rates need to be looked at more holistically within the overall context of the economy and other taxes and not simply as a guaranteed revenue stream. We need to fully understand the impact of business rates on business decision making processes not just for retail but as a whole. Could lower business rates act as a catalyst to drive growth and create employment? Would those additional taxes compensate for any loss in revenue for business rates?

During the course of the Grimsey Review, and previously reported, we found that one in every seven business premises was summoned before a magistrate last year over business rates. It has become clear that the amount derived from the system is the issue and sadly that is an issue for the majority of sectors. Virtually every sector is lobbying government and stating their case. Acting in isolation will not deliver change. There cannot be different rating systems for different sectors, just as certain sectors cannot be treated more beneficially then others. A co-ordinated response, across sectors, could deliver much-needed change.

As online sales rocket, retailers consolidate their store portfolios and rents in town centres tumble, it is understandable at the anger felt. Lets look at the last five years since properties were revalued: internet sales have surged 222% yet business rates growth over the last five years was 22.5% versus bricks and mortar retail sales growth of 11.4% - almost twice as fast.

A revaluation in 2015 would have brought some respite to our sector but political interference leading to a fundamental change to the system has compounded our woes not for all but for the majority.

What we have learnt since the last revaluation is that our sector has changed beyond recognition and will continue to change. Shopping habits have changed, retail space in many parts of the country is not as desirable as it once was, and if that was not enough we had a double-dip recession. The postponement of the revaluation to 2017 was a poor decision.

But rather than visiting old ground, we need to learn from the past and how these shifts could make the system better and fairer moving forward. Far more frequent revaluations, which would make the system more responsive, would have reduced the carnage and the pain.

The abuse of reliefs is epidemic, mandatory relief is spiralling out of control, anomalies exist and attitudes need to change at the Valuation Office Agency. That is why we say the current system is not broken but in a state of disrepair. But with the political will required, it can be repaired to become fit for purpose again.