Are business rates harming or helping shopping centres in Welwyn Hatfield and Hertsmere?
PUBLISHED: 15:56 16 January 2020 | UPDATED: 16:04 16 January 2020
Welwyn Hatfield Borough Council
Business rates or the tax paid by companies are often seen as one reason towns are losing shops on their high streets.
To cope with this problem empty shops, offices and warehouses do not have to pay business rates for three months when they're empty.
According to data released by the BBC today, this has meant that nearly £1bn a year is being lost from the Government and local council coffers in England and Wales.
The loss in Welwyn Hatfield and Hertsmere - which has to share its collections among themselves, Hertfordshire County Council and the Government - is fluctuating and has had dramatic changes in recent years, but remains low.
In Hertsmere, lost business rates jumped from £649,246 in lost income in 2017/18 to £1,601,784 in 2018/19 and in Welwyn Hatfield fell from £2,234,939 to £1,063,662 in the same period.
Dr Kevin Muldoon-Smith, an expert in property tax, said business rates were critical to the stability of local authorities going forward.
"We have this perverse situation where local government needs tax to go up and the business community are lobbying very hard for it to go down," Dr Muldoon-Smith said. Local governments are expected to have overall funding gaps of £8 billion by 2025.
This is exemplified with the chairman of Welwyn Hatfield Chamber of Commerce Nick Brown, who said that he thinks that business rates "should be abolished completely" because they are "destroying the high street".
Mr Brown said, "Business rates are effectively a tax on being in business. In a recession or as customer demand varies, businesses with commercial premises are often able to negotiate rent reductions with their landlords, as the landlord would prefer a tenant to having an empty premises.
"However the valuation office [who sets how much businesses pay by calculating the property's worth] only update the rateable values every five years, and then generally only upwards.
"For example they simply cancelled the revaluation at the depth of the 2008 recession. This means that businesses often close completely unnecessarily because of the business rates."
While Welwyn Hatfield borough councillor Bernard Sarson, who is also executive member for regeneration, economic development and partnerships, thinks it is unfair that councils are being drawn in on business rates when they are government policy.
Cllr Sarson said he was not "passing the buck" but he does not have the power to cancel business rates.
He also explained that he "would like to see business rates up to the council not the government", so they could have more power to respond to local business concerns.
Another issue has been the perceived under-allocation of business rates relief for struggling shops, with Hertsmere being one of a handful of authorities to fully allocate the funding that was made available by the government.
While, according to Better Retailing, Welwyn Hatfield failed to give £210,212 in 2018/19 of free funding to local businesses and currently has an under-allocation tax relief rate of 25.85 per cent.
WHBC said they have been proactive in finding businesses that meet the criteria and have asked businesses to apply.
"However, not all of these properties qualified or responded," a spokeswoman said. "We sent three reminders in 2017/18 to businesses who had not responded.
"We wrote twice to businesses that may have been eligible in 2018/19 before the start of the year, and also sent a reminder during the year. When ratepayers have contacted us we have also advised that they may qualify, and this is advice we continue to offer when contacted.
"Each year, the number of businesses entitled to the relief has varied due to ratepayers moving out of premises and property revaluations, which take them out of the qualifying limits, and these can result in a reduction in the amount of relief applied."
A Hertsmere Borough Council spokeswoman said: "This is more complex than being simply a funding issue and we consider that extending empty rates relief would have a detrimental impact as it removes the incentive to bring a business rates property back into use.
"Not only would this have an adverse impact on funding for Local Authorities and the government, it could also be detrimental to the high street and industrial estates increasing the number of vacant units."
A Treasury spokesperson said: "Empty property relief strikes a balance between incentivising property owners to put vacant properties to use, while not penalising those who lose a tenant at short notice.
"While the rate of business rates collection varies between individual authorities, the local government finance system has been designed so that business rates income is redistributed across the country according to the needs of local areas.
"We will announce further details of the business rates review in due course."