Last week the Office of National Statistics announced that the Retail Price Index for September had been set at 3.2%. Ordinarily, the rate of RPI is a footnote to the Consumer Price Index, which measures monthly changes in the price of goods and services for consumers. However, September’s RPI figure is the rate at which business rates will increase for local shops across the UK in April and will result in a bill of £25.8m for the convenience sector, an average of around £500 per store.
The unpredictability of setting business rate increases against an arbitrary inflation figure from several months prior has led to significant variation in those increases. The last three RPI rates for September have gone from 5.6% in 2011 to 2.6% last year and now 3.2% this year. In cash terms, the business rates increases for the last three years could have cost the convenience sector up to £80m – money which could have been invested in stores and staff and in some cases (especially forecourts, where rates bills are incredibly high) kept businesses from closing altogether.
As we move closer to the Chancellor’s Autumn Statement in December, we will be lobbying for a complete overhaul of the business rates system to ensure that retailers can plan ahead financially. This includes setting the business rates increase against the average rate of CPI across an entire year, enforcing a 2% cap on those increases in line with the government’s own inflation targets, and creating a more effective system of discretionary and small business rate relief to give start-ups and businesses at the heart of the communities a chance to invest in their stores. In 2011, Parliament enacted powers in the Localism Act that gives every council the chance to discount business rates for any business, but two years on it is still not widely used – this has to change.
The Chancellor has so far got it wrong on business rates, and he can’t continue to ignore the growing collective voice of business leaders calling for change if he has any ambition of keeping his job beyond the next election. The rates system is broken; on December 4th we’ll see if George Osborne intends to fix it.