Council finance director warns of ‘big challenge’ on business rates relief

Hackney Council’s chief finance mandarin has warned of a “big challenge” looming on unaffordable business rates in the borough.

The Town Hall’s director of finance and corporate resources Ian Williams was speaking as he presented a medium-term financial forecast to councillors on the borough’s influential audit committee, against a background of “uncertainty” he described as unprecedented in his time in the job.

The council has to date paid out £70m in grants to businesses as well as awarding £50m in the form of business rate relief, but speaking ahead of the government’s call for evidence for a fundamental review of the tax Williams cautioned businesses could feel the impact if government were not to carry relief policies over to the next financial year.

Williams said: “In the current financial year, in addition to the substantial amount of grants that we paid out to businesses to effectively keep them going, we’ve also awarded substantial sums of business rate relief, where the bill gets reduced.

“I think we can all see when we go out that, while the economy is starting to open up again in Hackney, whether it is in the retail, hospitality or leisure sector, it is still not opening back up to the level it was in back in pre-Covid worlds, either due to people not being out as much or having enough money to spend, but also from the impact of having to put in place different arrangements for social distancing.

“The double whammy for businesses will be having less income and higher costs. The big challenge I fear that could come down the tracks very soon, and hopefully will be addressed in the spending review, is that the business rates reliefs that we have been able to provide this year are continued into the next financial year.

“We’re already seeing businesses struggling to pay business rates. If we then have to go out next year not just to bill them for business rates at the same levels, but at a much higher level, then I do fear that they may not be able to pay those bills. It’s something we need to keep a close eye on.”

The next revaluation for business rates will take effect in April of 2023, and will be based on property values as at the same month of 2021 in order to reflect the impact from the pandemic.

The Treasury has said that its fundamental review aims to reduce the “overall burden” on businesses, while aiming for improvements of the transitional relief scheme.

The review will include a  look at whether a tax based on rental values on the open market remained the best base for commercial property, as well as how to minimise the impact of business rates on investment and growth, and is expected to Chancellor of the Exchequer Rishi Sunak by the autumn.

In a statement in March, Mr Sunak said: “Business rates are an annual tax on non-domestic property. They raise approximately £25 billion in England each year, and are an important source of funding for local services, including adult social care and children’s services.

“Building on the work of previous reviews, the government’s general view is that in common with other advanced economies, revenue should continue to be raised through the taxation of non-residential land and property.

“Business rates are less distortive than other taxes, easy to collect and hard to avoid. However, the government also recognises concerns about the impact of business rates on ratepayers, including on the high street, and the potential need to modernise our tax system.”