Business rates are set to rise for more than 500 businesses from 1st April 2017.
That’s correct, although rates are set to fall for many others.
There’s been a reduction in the quantity of business rates across the board in total.
That’s correct. In the past few years a combination of increased reliefs, threshold changes and caps on business rate increases have reduced the amount businesses are paying overall.
Claim 1 of 2
On the BBC Today programme, the Secretary of State for Business, Energy and Industrial Strategy said that business rates were going down overall:
“There's been a reduction in the quantity of business rates across the board in total.”
Greg Clark MP, 23 January 2017
He was countered by the interviewer:
“Well hang on, there’s been big rises for more than 500 businesses.”
BBC Today, 23 January 2017
Both these claims are correct; the interviewer and Mr Clark were talking past each other.
The revaluation on 1 April isn’t meant to push up business rates overall
Business rates are a tax on businesses, based on the value of the property they occupy. The Valuation Office Agency assesses the rent a property could be let for at a specific date, what's called its 'rateable value', and local councils charge a portion of this at a rate set by the government, called the 'multiplier', minus any reliefs they have in place locally.
Every few years properties are revalued, and the next one is set to come in to force on 1 April. It will push the ‘rateable value’ of some properties up and others down to reflect how property prices have changed.
But the difficulties of ‘more than 500 businesses’ are one part of a wider story. Overall, rising and falling tax bills after a revaluation are designed to balance each other out.
And, as some have observed, these rate changes are a reflection on the way the property market has changed rather than a direct outcome of decisions from central government.
Government policies have cut business rates in the past few years
In the past few years, the government has made a series of deliberate policy decisions to cap or cut business rates for particular businesses and areas. The Institute for Fiscal Studies, a think tank which focuses on tax policy, told us that the combined effect of these will be to have cut the overall burden on UK businesses.
So it’s fair to say that ‘there's been a reduction in the quantity of business rates across the board in total’.
Local Authorities have the power to give business rate discounts too. They’ve been able to do this whenever they like since 2012, although reports suggested only 18 out of 326 local councils offered them in 2012-13.
It’s hard to say whether past take-up will be a good guide to how many councils will offer local rate reliefs in future. The government hopes that the shift to a system where local councils keep 100% of business rate revenues will encourage them to offer rate cuts in a way that will grow the local economy (and so increase the tax they collect overall).
A note on inflation
Finally, from 2020 business rates will rise with a newer measure of inflation. That’s likely to slow down annual rate increases by a small amount as well.
Update 6 February 2017
This article was updated on to include more detail on how business rates are set.