Three cheers for stability
Ion Fletcher summarises the policy announcements (or comparative lack thereof) in this year’s Budget.
The Chancellor showed little sign of backsliding on his promise to move from a Spring Budget to a Spring Update. Today’s Budget paper is one of the lightest in living memory and given the tsunami of tax changes that the industry has faced over the last few years, that is something to be thankful for.
As expected, the Chancellor announced additional relief for those businesses hardest hit by the upcoming business rates revaluation. While welcome, it is only needed to help solve a problem that the government created for itself when it decided to delay the 2015 revaluation. It is also a small pot of money spread very thinly, which won’t make a difference to many ratepayers in urgent need of relief. And much as I love a good pub, why should they get special treatment and not tea shops or deli counters?
Ultimately, the only way to reduce the trauma of rates revaluation is to make these more frequent and I’m pleased that the government hasn’t forgotten its commitment to look into how to make that happen. I imagine that its preferred approach will be for businesses to self-assess their business rates bills. This is already the case for most taxes and it would certainly reduce administration costs for the VOA (albeit by foisting those costs on businesses).
The real challenge for both the government and the business community will be how to fairly tax new business models that are less reliant on bricks and mortar than their traditional counterparts. There has been a lot of noise around the negative high street impact of online retailers’ “tax advantage”. But it’s not just retail; as our economy evolves, the way we use commercial property more generally is changing and any review of business rates should go beyond ‘clicks vs. bricks’ to consider the broader context and what that means for the sustainability of that tax.
In non-business rates news and amid a flurry of rhetorical pot-shots at the Opposition benches, the Chancellor made some welcome noises around continued infrastructure investment, although there was little new money beyond that pledged at last year’s Autumn Statement. We’re also interested in the potential creation of new infrastructure funding models, but would stress that they should be developed as part of a root and branch review of CIL and in partnership with the development community so as to not raise additional barriers to creating great places. And while more capital investment in A&E departments is good news, committing instead to increase funding for primary care would allow for cheaper, more efficient treatment of non-severe ailments and ease the pressure on A&E.
Finally, I leave you with a warning – the Autumn Budget could be a big one for our industry. We know that Treasury and HMRC officials are thinking about real estate tax; indeed they’ve gone as far as inviting us to develop proposals for reform. While they will no doubt be interested in how to minimise distortions and reduce the compliance burden, the Chancellor has bills to pay and will be on the lookout for additional sources of revenue. It will be up to all of us to show why he and the country would be better off supporting real estate than taxing it.