The Chancellor of the Exchequer, Rt. Hon. Rishi Sunak MP, announced plans for a one-year spending review on 25 November 2020. The Chancellor’s plans review government spending and income for the 2021/22 fiscal year. His announcement to Parliament did not include any specific mention of business rates, but the supporting document issued by HM Treasury confirms that the spending review “freezes the business rates multiplier in 2021-22, saving businesses in England £575 million over the next five years”. The review also announces that “the government is also considering options for further Covid-19 related support through business rates reliefs. In order to ensure that any decisions best meet the evolving challenges presented by Covid-19, the government will outline plans for 2021-22 reliefs in the New Year”.
The announcement regarding the multiplier relates only to England. The current (2020/21) multiplier is 49.9 pence for small properties (those with a Rateable Value under £51,000) and 51.2 pence for large properties. Under normal practice, these multipliers would have increased, in line with September 2020 CPI inflation, to 50.2 pence for small properties and 51.5 pence for large properties. The spending review announcement makes clear that these increase will not occur and the multipliers for 2021/22 will be at the current figures of 49.9 pence for small properties (those with a Rateable Value under £51,000) and 51.2 pence for large properties.
This announcement affects only England, but there will clearly now be pressure on the devolved administrations in Wales and Scotland to freeze their multipliers for next year in the same way. In Scotland the current multiplier is 49.0 pence for small properties, and 51.6 pence for large properties. In Wales the multiplier is 53.5 pence for all properties. If the freeze were to be applied in the same way, these figures would remain in place for 2021/22.
The question of rates reliefs will be uppermost in the mind of many ratepayers in England Wales and Scotland. Currently, properties occupied for “retail, hospitality and leisure” purposes enjoy 100% rates relief in England for the whole 2020/21 rate year. Similar reliefs apply in Wales and Scotland but are subject to rateable value limits. The spending review announcement suggests that some reliefs will continue next year, but does not give any detail as to what these might be. Ratepayers who are currently benefitting from a “rates holiday” will want to know at the earliest opportunity the extent to which that will continue into next year.
These announcements do very little to ameliorate the excessive burden of business rates on UK businesses. Annual property taxes in the UK are at a higher level, as a proportion of GDP, than in any other OECD country. Freezing a 0.5% increase that would otherwise have taken place next year will not alter that position. The Government needs to look much more fundamentally at the problems of the business rates system.
The failure to give any certainty to businesses affected by the COVID-19 pandemic as to their business rates liability next year is equally lamentable. Businesses will be making plans for next year now, and need to know whether the current reliefs will continue. A statement that the government is “considering options”, and that there will be further details “in the New Year” offers no assistance to businesses that are trying to plan ahead.