Writing for CapX, director of the Centre for Progressive Capitalism Thomas Aubrey argues that the current business rates system is not fit for a dynamic 21st century economy.
The current system suffers from its inability to signal to firms the changing nature of rents through time. “The system is based on the idea of setting the rates, then assuming that rents will rise over the subsequent five or seven years. But this idea is without empirical foundation. Between 2007 and 2012, average rents fell by between 15 and 20 per cent between 2007 and 2012 – but business rates actually went up, due to the 2008 revaluation.”
He contends that “rates should be linked to actual rental values and updated frequently, providing firms with more efficient price signals”. The government must think carefully about how to do this efficiently, with Aubrey stressing that digitising the expensive and cumbersome activities of the Valuation Office Agency would be a good place to start.
The image is ‘London’ by Rick Ligthelm, published under CC BY 2.0