Over three and a half years ago, with the economy tanking, David Cameron did what all panic-stricken Prime Ministers without a real strategy do. He picked a fight. In this instance, he declared war on the “enemies of enterprise”. Pen pushers, ridiculous rules and regulations, and anything else that stood between the “go-getters” and genuine economic recovery would be ruthlessly taken down to let a dynamic tide of enterprise burst through the bureaucratic dams.
But for all his fighting talk neither Cameron or George Osborne have laid a glove on the biggest enemy of enterprise on the high street: the Valuation Office Agency (VOA). This little known quango sets business rates, which have become the bane of small high street retailers and are responsible for thousands of closures across the country.
It’s not just the fact that business rates have ballooned by 25 per cent since 2008 that makes the VOA an enemy of enterprise. Or that this tax has no bearing on a business’ ability to make a profit and that we now pay the highest property tax in Europe. It’s the fact that this shadowy quango is completely unaccountable and not fit for purpose. It’s still slowly ploughing through a heavy backlog of thousands of appeals against firms disputing their tax bills and its failure to carry out a much needed revaluation of business rates last year to make sure the tax is in line with current property values has ensured that unfairness is embedded in the system.
In this parliament alone over £5billion has been added to the business rates bill. Traders have had to bear the biggest increase in over 20-years and many know their rates bill is hopelessly out of touch with their property value. Quite often when they appeal against their bill it takes so long for the VOA to process it that they’ve gone bust long before a judgment is reached. And, because of the postponed revaluation, businesses all over the country are sometimes paying as much as three times their rent in business rates.
Businesses readily accept that they’ve got to pay tax. But all they ask is for it to be fair – and when a Rochdale fish and chip shop pays £6,000 in rent and has a business rates bill of £19,000 then this tax has lost touch with economic reality.
And that’s why nothing less than an urgent commitment to a revaluation and a total overhaul of this archaic tax is needed when George Osborne delivers his Autumn Statement this week.
We know that the economic recovery that’s slowly taking root is far from even. Hundreds of town centres blighted by empty shops, pay day lenders and charity shops all over the country is testament to this. Oxford Street and Westfield can’t be the sole yardstick of economic recovery. We need to give every high street a fair chance of finding its feet and allowing prosperity and enterprise to take root. Only by making sure bricks and mortar business entry costs are realistic enough to attract investment and encourage entrepreneurs to take a chance will this happen.
Last week research from the RSA showed a large downward trend in UK small business survival rates. Over half of small businesses don’t make it beyond their first five years. These are the ‘go-getters’ that Cameron rhetorically championed back in 2011. Is the government really doing enough to support these people? With a recent survey showing that over half of UK small businesses are disillusioned with government then it’s hard not to conclude that Cameron’s rhetoric means very little when it comes to real policy support.
This week, though, there’s a chance that the government could finally shake off criticism from Tory MPs like David Davis that the likes of Cameron and Osborne are too close to big business and only care about crony capitalism. But to do that Osborne will have to do something bold. Reforming business rates is just the start. Taking a million small businesses out of paying business rates altogether would send out a powerful message. It would make Cameron’s words about being on the side of ‘go getters’ actually mean something.
This can be done without a huge cost to the Treasury by streamlining the VOA, getting rid of the monster of administration that’s been created and introducing fairer, annual revaluations like they have in Holland.
If action like this were taken then Cameron could rightly claim to have taken the fight to the enemies of enterprise and given small businesses in every town across the country a better chance of succeeding. There is no point in flexing your muscles if all you’re going to do is put your hands back in your pockets and turn your back on the problem. We’ve heard a lot of talk from this government about being on the side of go-getting entrepreneurs. Now it’s time they walked the walk.
Bill Grimsey is Labour’s high streets adviser