Government must fix ‘antiquated’ business rates, firms and CBI urge

The government must fix the “antiquated” business rates system which is dampening productivity and growth, firms and the Confederation of British Industry (CBI) has urged.

A cross-sector panel including retail and manufacturing firms met to develop proposals to improve the current system in a bid to boost investment and supercharge the economy.

CBI chief executive Rain Newton Smith said: “It’s time to fix the antiquated business tax system once and for all, seizing the chance to boost investment and grow the economy. 

“The current system is simply not fit for purpose, and enduring inaction has hurt firms across the country.”

It comes ahead of an autumn Budget which is widely anticipated to see Chancellor Rachel Reeves deliver painful tax rises and cuts to public spending.

Firms told the CBI the existing system is overly complex, unpredictable and unfair.

Labour has pledged to reform the rates regime but insisted that overall revenue must remain the same, which the lobby group argued makes root and branch reform almost impossible.

Firms, the CBI stressed, want a fair and balanced approach, which requires ditching the revenue neutrality principle and creating a bridge from current rules to long-term change.

Short-term support for adversely affected sectors is called for, as well as a long-term plan at the upcoming fiscal statement on October 30.

Recommendations from the CBI include: a tailored cross-economy approach; adopting a ‘banded’ system like income tax; removing cliff edges; introducing annual revaluations; bringing in a 120 per cent green super deduction for retrofitting; boosting improvement relief; streamlining exemptions; reviewing reliefs; and excluding public buildings such as the NHS.

They also want to see Valuation Office Agency (VOA) transparency; property change notification to be delayed; and justification for changes in valuation methodology.

“Businesses want a system built on certainty, simplicity, competitiveness, transparency and fairness,” Newton-Smith added, stressing the CBI “stands ready” to support government.

“Firms have wholly welcomed the government’s commitment to reform business rates. But the insistence on revenue-neutrality is misplaced.” 

Director of estates at Asda, Dan Foxton, said: “Business rates are one of the most significant costs for Asda. The current business rates system is an obvious inhibitor to growth.

While Tim Beattie, head of UK rating at JLL, added: “These reforms address key business concerns and promote fairer, more predictable taxation.

“If implemented, these proposals would be a crucial step towards creating a more equitable and dynamic business environment.” 

The Treasury has been contacted for comment.