CBI boss calls for gov to fix ‘antiquated’ rates system
The CBI said firms want to see a fair and balanced approach to reform, which requires ditching the revenue neutrality principle and creating a bridge between the current system and any long-term systemic changes
CBI CEO Rain Newton-Smith has called on the government to fix the “antiquated” business rates rules in England to boost investment and grow the economy.
Ahead of the Autumn Budget, the CBI convened firms from 12 sectors, including retail and manufacturing, to develop cross-economy solutions for a competitive and transparent business rates system.
It said businesses from all regions of England told the CBI that the current business rates system is “too complex, unpredictable and unfair” – factors which dampen productivity and economic growth.
The government has already committed to reforming the rates regime but insists that overall revenue must remain the same, however the CBI noted this makes root and branch reform “almost impossible” and risks simply creating new and different imbalances.
The CBI said firms want to see a fair and balanced approach to reform, which requires ditching the revenue neutrality principle and creating a bridge between the current system and any long-term systemic changes.
The CBI’s recommendations include:
- Create a tailored approach that works across the economy
- Change the application of business rates multipliers to a banded (‘slice’) approach, more like income tax, removing cliff edges and creating a more progressive system
- Implement annual revaluations from April 2029 to address uncertainty caused by current revaluation cycles
- Make business rates investment-friendly to boost growth
- Introduce a 120% green super deduction to shift the dial on net zero investment for businesses that invest in retrofitting business properties to make them more energy efficient
- Make improvement relief more generous for companies who invest to upgrade commercial properties by extending its duration from 1 year to 3 years and removing the requirement for the same business to occupy the space before and after the works.
- Streamline reliefs and exemptions to free up funding
- Review all reliefs – prioritising reform over reliefs where possible. A banded (‘slice’) approach removes the need for many existing reliefs altogether.
- Cut out bureaucracy by excluding public sector buildings without a commercial purpose, such as NHS hospitals and government departments, from business rates and provide local authorities with equivalent levels of funding via another route
- Prioritise Valuation Office Agency (VOA) transparency and performance to help firms meet their obligations to pay
- Delay the introduction of the duty for businesses to notify the VOA of changes to their properties to 2028 as current timelines are unrealistic and will create an unmanageable administrative burden
- Provide the justification for changes in valuation methodology and set out a clear and fair challenge and appeals process for firms facing higher bills.
CBI CEO 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.
“Businesses want a system built on certainty, simplicity, competitiveness, transparency and fairness. Together with members, the CBI has developed cross-economy solutions to establish a business rates system that helps, not hinders our growth ambitions. At the Autumn Budget, firms will be looking for an investment-friendly, tailored approach to business rates, with streamlined reliefs and more transparency.”
She added: “Firms have wholly welcomed the Government’s commitment to reform business rates. But the insistence on revenue-neutrality is misplaced. It’s key that this condition is reconsidered, to ensure that business rates reform is approached with an open mind. Not doing so risks perpetuating the imbalance the Government says it wants to fix.
“The CBI stands ready to work hand-in-hand with the Government to ensure that the reform of business rates improves competitiveness and boosts our growth prospects.”
Dan Foxton, senior director – Estates and Acquisitions at Asda, said: “With a property portfolio spanning more than 1,200 properties across the UK, business rates are one of the most significant costs for Asda.
“The current business rates system is an obvious inhibitor to growth, which prohibits investment in retail stores, and we welcome Labour’s plans to replace business rates with a system for the 21st century. The CBI’s report sets out clearly how the government can deliver that reform in a way that benefits businesses, levels the playing field and ends the penalty for investing in our store estate.”
