Business rates are crippling the region’s high streets, claim bosses, as new figures reveal the West Midlands is raising an increasing amount of the tax for central government.
The amount of business tax raised for Whitehall by Birmingham alone has soared by nine per cent in a year at a time when many shops and firms are still struggling to make ends meet.
The city council gave £396.7 million in business rates to government in 2012/13, an 8.9 per cent increase on 2011/12.
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It represented one of the largest increases across the country, with the West Midlands raising £1.45 billion for the Government’s coffers as a whole, a 3.7 per cent rise.
David Johnson, owner of jeweller Rex Johnson and Sons in Birmingham’s Corporation Street, said retailers are struggling to meet rates based on out-of-date valuations that increase by inflation when real income is actually falling.
He said while his firm had enjoyed some relief because of business rates aid as a result of metro work along the street, the price he was paying was still too high.
He said: “It is impossible to cope with the level of business rates that we have here. It is not realistic.
“The compensation that we have had is only because we are in Corporation Street, which is basically a building site. If we were paying the usual rates then we would be gone.
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“And inflation means nothing to us – it is going the other way. You could understand if people were spending more, but they are spending less and have been for the last 10 years.”
Retailers including Sainsbury’s chief executive Justin King have called for business rates to be overhauled to help protect the high street.
Business rates are costing the retail industry more than £7 billion a year and increased by £175 million in April.
The tax is subject to an annual increase every April based on the Retail Price Index in the previous September. Inflation figures released last week show RPI was running at 3.1 per cent in July. It is based on the rateable value of a premises but is not linked to sales or profits.
Paul Lamb, owner of Sims Footwear in the Great Western Arcade, said some city centre sites have remained empty for 10 years because business rates are too high.
He said a major part of the problem was the revaluation of properties, which was supposed to be completed by 2015, but has now been deferred to 2017.
He said: “We are having to pay based on these valuations from 2008 which were optimistic even in boom times.
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“Most of the traditional retail areas in Birmingham have been decimated over the last few years but the rateable values are still based on them being the main shopping areas – like Bull Street.”
Business rates brought in £21.4 billion in total for the central government pool in 2012/13.
The Birmingham Chamber of Commerce Group has now called for a change in how it is administered and welcomed plans for councils to share in the income.
Chief executive Jerry Blackett said: “Unless a business’s premises are the size of a double garage, or if a firm is building speculatively over the next two years, there’s little relief on offer. Heavily taxing inputs, like property, drags down business profitability.
“There are new proposals to allow local authorities to retain approximately 50 per cent of business rates with the rest sent to central government for redistribution.
“While we welcome this increased discretion and flexibility, we believe that more needs to be done to ensure that revenue from business rates is spent in ways that are best for local business.”
The Department for Communities and Local Government claims business rate relief to small firms has grown from £333 million in 2010 to £900 million.
A spokesman said: “In the past, central government collected all business rates. Now, following our reforms, councils now retain nearly £11 billion locally instead.
This new incentive lets local authorities grow their income by supporting new firms and jobs, which could deliver an extra £10 billion to the wider economy by 2020.
“This Government is also working hard to boost our high streets and to offer business practical support to help them thrive.
“That’s why over half a million small firms and shops are getting their business rate relief doubled with 300,000 paying no rates at all for three and a half years and we have scrapped Whitehall guidance that pushed for higher parking charges.”
The British Retail Consortium (BRC) recently performed a U-turn on calls to freeze rates entirely by scrapping the annual inflation-based increase.
In a letter to retailers, Helen Dickinson, director-general of the BRC, said it was “unrealistic” to ask the Treasury to freeze business rates and that the industry must focus on a medium-term reform of the entire business rates system.
Business rates expert Graham Knight, director of property advisory firm GVA in Birmingham, said businesses in the region are struggling more than most because of the revaluation deferment.
He said: “I’d expect 20 to 30 per cent falls in valuations of some properties. That would have a genuine cash benefit to businesses in our region. Across the board, every sector in this region would probably have a lower rateable value.”
The rise in business rates comes as Communities Secretary Eric Pickles hit out at councils for draconian parking policies and pointless street clutter that could deter shoppers.