Business rates to be staggered - thanks, Darling

Chancellor Alistair Darling last night agreed to stagger this year's 5% increase in business rates.

Last Updated: 31 Aug 2010

Credit-crunched firms will now face a 2% increase as of today, and then be able to defer further payments over the next three years and boost their cash flow in 2009.

'The Government recognises that businesses need help to ease their cash flow at a time when money is very tight. This measure will help businesses to smooth their rates payments over the next three years,' the Chancellor said in a statement yesterday from the Treasury. The decision will reportedly cost the Treasury some £600m in lost revenue.

The move is a massive victory for small businesses across the UK, as well as for local councils and major retailers that have been campaigning for this for weeks.

However, it looks like it’s not all rosy. Some are already champing at the bit and saying the rise should have been frozen, not just delayed. The British Chamber of Commerce thinks the scheme will be too complex, and many businesses will still be hit. The shadow communities secretary Caroline Spelman said the re-evaluation next April will 'loom large' and threaten many firms, while the Federation of Small Businesses (FSB) said there was still 'room for manoeuvre' and called for automatic business rate relief for eligible small firms. Plus, think of the inevitable administration nightmare when hordes of firms apply to their councils for a revised payment plan. Jerry Schurder, from surveyors Gerald Eve, predicted there will be 'red tape madness'.

So has Government not thought this through properly? Perhaps in trying to conjure up short-term solutions it’s ended up leading business into a boggy minefield next year? Reports claim the move will shunt most of the burden of the extra rates into the next parliament – a Conservative one possibly. For their part, the Tories welcomed the decision but warned businesses were facing an onslaught of other tax rises. Still, every little helps in times like these.

The other big local authority story today is the scrapping of local services in 44 English districts. They will be replaced with nine supersized unitary authorities. The shift will involve slashing 300 senior posts, and will save the Government an estimated £22m in the process. That’s the theory anyway. Council cost-cutting schemes have a habit of not delivering the desired outcome, so we’re not holding our breath.
So all those small businesses which have less tax to pay may now find themselves having to contact a new unitary HQ miles away from their town when someone forgets to empty the bins…

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