Plans To Cut Inflation Link To Benefits Should Be Applied To Business Rates

With the increasing speculation that the Government is going to cut benefits payments next year by £1 billion by breaking the traditional link with inflation, a leading business rates expert is calling for a similar approach to be applied to the rates bills paid by the country’s 1.8 million businesses.

Jerry Schurder, Head of Rating at Gerald Eve explained: “If the business rate continues to be linked to inflation, businesses will have to pay an additional £1.35 billion in business rates next year as a consequence of September’s 5.6% increase in RPI.

This would be the biggest annual jump in rates bills for over 20 years.

The Uniform Business Rate would rocket from 43.3p per £ of Rateable Value to 45.7p with businesses in London paying an additional 2p per £ as their contribution to the funding of Crossrail.

Schurder said: “A tax rate approaching 50% whilst the country still experiences economic struggles will prove unsustainable to many businesses. Ever since the Uniform Business Rate was introduced in 1990 successive governments have linked the UBR to the previous September’s Retail Prices Index even though the legislation permits the adoption of a lesser figure. Benefits payments used to be linked to RPI but the Government has already legislated so that these payments are linked to the alternative inflation measure, CPI, which historically has shown lesser growth.

The Government has been criticised for fixing the sums it pays out using the lower inflation measure, whilst continuing to charge business rates using the higher RPI.

Schurder added: “The Bank of England expects inflation to tumble next year in which case the Government should surely assist businesses and the struggling high street by keeping business rates as low as possible for 2012/13.  It has found funding to freeze Council Tax for a second successive year and seemingly intends to slash £1 billion from the cost of its benefit payments by breaking the normal inflation link. It would be cynical for the Government not only to retain the inflation link for business rate payments but to continue to use the higher RPI measure.”