Letter-writer Adrian Waite argues it's time to scrap business rates

Everyone agrees that something must be done to enable the high street, and especially the retail and hospitality sectors, to bounce back when the coronavirus pandemic restrictions come to an end.

But the government fails to recognise that one of the main barriers to that happening is the way that the business rates system distorts the market.

Firstly, it taxes the value of buildings and other assets as well as land, so it penalises investment.

Secondly, it takes £25billion a year from businesses that trade from premises while the digital sales tax takes only £0.5billion a year.

Inevitably, there will be changes on the high street, but we must ensure that there is fair competition between independent traders and multi-nationals.

One way to so this would be to abolish business rates and replace them with a ‘Commercial Landowner Levy’ (CLL). Such a system is already in place in countries including Australia, Denmark, and Estonia. This has been Liberal-Democrat policy since 2018 and would have several advantages:

  • Business rates harm the economy because they tax capital investment directly rather than taxing profits or land values. In contrast, a CLL would tax only the land value of commercial sites, not productive investment. Removing buildings and other physical capital from taxation would boost business investment, thus increasing productivity and wages.
  • Britain’s economy is characterised by big inequalities between regions. CLL would reduce business taxes in areas with lower property values comprising 92% of local authority areas – including those in Cumbria. This would help with the ‘levelling up’ agenda.
  • The CLL would boost struggling high streets by cutting taxes for retailers in most areas.
  • Business rates discourage investment in renewables and improving energy efficiency. The CLL would make it cheaper for businesses to invest in renewables.
  • Rather than increasing tax bills when businesses improve their premises, the CLL would concentrate on capturing increases in land values driven by public and community investment. This would help to make the business case for new publicly funded infrastructure, while businesses investing would not face higher taxes.
  • The CLL would be paid by the owner not the tenant, relieving over half a million small businesses of the need to pay property taxation – 61% of small to medium sized businesses in England with premises would stop paying business rates and would not have to pay the CLL.

Business rates are a crucial part of local government financing so central funding and redistribution between local authorities would need to be adjusted to ensure that there was no adverse effect on local government finances in areas with relatively low property values.


Chair of the Penrith & the Border Liberal Democrats