The BRC has shelved its proposals for alternatives to the business rates system, including a radical plan for a new energy tax, after admitting that it is too soon to be suggesting a format for a ready-made replacement.

While the retail organisation today released research showing that 80% of MPs believe the business rates system is “not fit for purpose”, it has rowed back over its consultation on alternatives, which had included plans for a new tax on energy use.

It has also admitted that other suggestions including the possibility of tax incentives for companies who employ the most people, or a system based on how much Corporation Tax they pay, have too many potential unintended consequences to be rolled out as alternatives.

Instead, the BRC said it had decided to pursue agreement from the political parties for the principle of “fundamental reforms”.

A new document published today, called Business Rates: Manifesto Milestones, said that the total amount of business rates should be reduced, that rates should flex with overall economic performance, be shared equitably across different industries and come with positive incentives for businesses.

The BRC said it would now concentrate on securing reform of the system before April 2017, although it said it would continue to work “as required” with accountants Ernst & Young, which had drawn up the original list of radical alternatives.

BRC director general Helen Dickinson said it had realised there would be “no big reveal moment” about a system that could replace rates but said that it hoped elements of its previous proposals would be brought together to form the basis of reform which “would not be just tinkering around the edges.”

“Our idea to use energy usage as a wholesale replacement of the basis of the tax, for example, won’t be in our thinking going forward but it has opened up a dialogue with the manufacturing industry during which we have established many points of similarity on the way in which rates disadvantage our industries,” she explained.

“We believe a new consensus has emerged that sends the powerful message that business rates aren’t a retail problem, but a business problem,” added Sainsbury’s CFO John Rogers, who has chaired the group of executive level members from the industry leading the project for the BRC.

“The present business rates system is archaic and flawed,” added Nick de Bois (Conservative MP for Enfield North and member of the All Party Retail Group).

“Often business rates exceed rents and are not linked to business performance. The government have eased rates for many small business but these measures are only temporary fixes. We need structural reform and the BRC have made a useful contribution to this policy debate.”

Responding to the BRC report, high streets minister Brandon Lewis said the government had a long term economic plan to support business.

“We have already taken targeted action, including providing over £1bn of business rates support, introducing a new £1,000 retail discount and the doubling of small business rate relief for the past three years helping an estimated half a million small firms,” he said.

“Looking forward our business rates review is considering options for longer-term administrative reform of business rates after 2017 that balance the need for the system to deliver simplicity, fairness, stability and predictability to ratepayers.”

Topics