Self-solving problems are those we don’t need to do anything about. They are, quite naturally and without intervention, going to sort themselves out without requiring any intervention. This is so of business rates. Something Lord Wolfson, of Next, should know. For he is, after all, a clever chap:
In Wolfson’s view, there will still be a place for physical stores even as footfall dwindles. But he believes property owners and ministers have a part to play in keeping the high street alive.
“The future of retail is going to be driven by three things,” he says.
“Most important will be consumers. At the end of the day if consumers don’t want to shop in shops, they don’t. Secondly, landlords. As landlords continue to be as pragmatic in determining rents going forward, that will allow shops to stay open. And thirdly, we do need some form of settlement on business rates [reform].”
Leave aside that economic point that rates are in fact incident upon the landlord, not the tenant. Let us continue with the assumption that this difficult truth is not in fact so.
How are rates determined?
Business rates are worked out based on your property’s ‘rateable value’.
This is its open market rental value on 1 April 2015, based on an estimate by the Valuation Office Agency (VOA).
You can estimate your business rates by multiplying the rateable value by the correct ‘multiplier’ (an amount set by central government).
So, as rents fall – given that landlords are being more realistic – so do business rates fall. It is not necessary to change the system in the slightest that is.
Which is, of course, good. Given that the economic point about incidence is actually true. Rates are a tax upon landlords and why shouldn’t we be taxing rentiers?