Posted by

Adam Marshall, Director of Policy and External Affairs

21 Mar 2012

That’s why the British Chambers of Commerce has been campaigning on a business tax issue that threatens to stifle local growth and the creation of jobs from April: the stonking 5.6% rise in business rates set to take effect in April unless the Chancellor takes action in his Budget.

Why does this obscure rate rise matter so much?

First, it hits nearly all companies that occupy premises – and the bigger those premises, the higher your bill. So our exporters and manufacturers, and our retailers, will be hit extra-hard.

Second, it feels like local businesses are paying for ministers’ crowd-pleasing decision to freeze local council tax rates. Business should not be seen as a cash cow to pad out local government budgets.

Third, and most important of all, it’s anti-growth. If you tell a business owner that their cost base is going to rise, they will respond by cutting investment or by putting hiring plans on hold. It’s illogical for any government to beg hard-working businesses to grow, on the one hand, while making it harder for them to do so by raising their tax bill on the other.

So far, the government’s response has been too little, too late. Ministers think they’ve solved the problem by extending a rate relief scheme for the very smallest companies, and by allowing bigger businesses to put off some of their higher bill next year. But that’s just storing today’s pain for tomorrow. The cost base for most businesses – already stung by inflation, by rising energy costs, and by by regulatory red tape – will only go higher.

As the BCC’s Budget submission made clear, the Chancellor can make a simple choice. He can use some of his accumulated fiscal credibility to cancel the rates rise, along with associated burdens on empty property rates. Will it cost him some money? Yes. But ultimately – and crucially – it will unlock some of the growth we’re all so desperate to see.

A version of this blog also appears on the New Statesman website here.