Steel gets £20m windfall as Wales hands out tax cut
Footsie giant’s boss demands fairer levy fit for internet era
THE battered Welsh steel industry is to be one of the biggest beneficiaries of the Welsh Assembly’s decision to pass on cuts to business rates immediately. It will enjoy a boost of almost £20million over the next five years.
By contrast, English businesses will have to wait for the reduction to be phased in over four years.
The contrast is starkest in the steel sector, where the huge plants attract high rates. The Port Talbot site in Wales, owned by Tata Steel and under the threat of closure, will enjoy a £1.7million-a-year cut to its rates bill from April. The similarsized Scunthorpe steel plant – renamed British Steel after it was sold by Tata earlier this year – will get a cut of just £360,641 next year.
Business rates consultancy CVS, which made the calculations, said the ten steel plants in England will eventually see a £5.4million-a-year drop in bills. However, because of the transitional arrangements in England, their overall bills will fall by just £1.1million next year.
CVS chief executive Mark Rigby said: ‘The contrast is frankly unbelievable for a sector in such crisis.’
Business rates are calculated on property and rental values, which have changed hugely in many areas since the last revaluation in 2010.
The Government has introduced the transitional scheme to ease the burden on firms facing higher bills. But the Welsh Assembly, which assumed responsibility for business rates in Wales last year as part of devolution, has not followed Westminster’s lead.
Roland Junck, British Steel’s executive chairman, said: ‘I’m sure the move will be welcomed by Welsh steelworkers. It demonstrates the type of support our industry needs.
‘We want to increase productivity and our global competitiveness. All we are asking for is a level playing field. A reduction in business rates for us would be a significant step in the right direction.’
He added: ‘We face much higher business rates than many of our global competitors – some do not pay any at all – and we are operating in a challenging environment. We are already making a profit and that is largely down to the incredible efforts of our employees. However, to be truly sustainable, we do need more Government support.’
Westminster has earmarked £3.4billion to assist firms struggling with higher than expected bills and is in consultation over how that might be implemented. Firms in London face big rises due to the steep rise in property prices.
‘We are committed to helping all businesses flourish as we make the system fairer up and down the country,’ said a spokesman.
THE chief executive of FTSE giant Sage has called for business rates to be scrapped and replaced with a sales tax.
Stephen Kelly left his role as chief operating officer for the Government in November 2014 to lead The Sage Group, which sells business services and software to 3million of Britain’s 5.4million firms. Its services and software range from accounting and payroll to customer relationship management and payments.
He told The Mail on Sunday he wanted the firm to ‘be the voice’ on issues its customers face, and blasted the property-based tax system for ‘suffocating’ small firms.
He said the problem was ‘particularly relevant coming up to the Autumn Statement’, which Chancellor Philip Hammond will present on November 23.
‘Any small business on the high street has got an anchor around its neck called business rates, which are horrible fixed costs,’ he said at the company’s headquarters in The Shard, Central London. A hairdresser in Kingston, South West London, might have business rates of £100,000 a year, for example, but ‘when you look at the number of haircuts needed before those business rates are paid, it really suffocates growth.
‘Before the digital age and the internet revolution, it was probably a good way to collect taxes, based on property. But it makes no sense when bricks and mortar have no role, and companies like Amazon compete with small and mediumsized businesses on the high street on a very unlevel playing field.’
Ahead of the Budget in March, Sage president Brendan Flattery said small firms had been unequivocal that rates were their top concern. It was announced in the Budget that more than 600,000 small firms would be given business rate relief.
Kelly said the company has written to Philip Hammond. The former Chancellor, George Osborne, had announced reform, he said, ‘but we don’t want any tinkering around the edges, we want radical reform.
‘The genesis of business rates was in Shakespearian times. It’s a 400year-old property based tax system. How can you have that in the digital age when it’s suffocating small and medium firms? They kick things into the long grass with “consultations”. There’s little political will.
‘The truth is, it’s a very easy tax to collect. Small and medium businesses are very auditable and they are very honest, and the system collects £22 billion a year for the Exchequer. But there have to be more sensible ways to fill that gap that are relevant to the digital age.
‘I’d look at the things you can measure and collect easily, and it’s probably going to be more related to sales to even up the playing field. You’ve got to look at the fact that it is 2016 – it is a digital-based economy. There’s probably a more sensible way you could incur a tax where companies like Amazon and the multinational digital retailers pay their way.’
He also called for companies to spell out how long they take to pay suppliers so that late payers can be named and shamed. ‘Late payment creates antipathy and it undermines most small businesses. This is a constant theme for me because when I was chief operating officer for the Government, one of the things we introduced was that all small businesses got paid within 30 days, and any department that failed to meet that got fined.
‘There are only two FTSE 100 firms – us and Lloyds – which have a policy to pay small and medium-sized businesses within 30 days. In the UK it can be 60 to 75 days before small firms get paid. That is an anchor on growth and it means they have to invest lots of time chasing invoices.’
He explained: ‘I’m not a big fan of driving loads of regulation, because I think we want light touch regulation. But I think companies should have policies where they pay the little guys swiftly. You can change
It’s a 400 year old property based tax system. How can you have that in the digital age?
this, because we changed it in Government. There’s no excuse. I challenge every Footsie chief executive to say if you haven’t got your procurement director running policies that have around 30-day payments as part of your way of operating, then it’s disappointing.
‘Why should a big firm withhold payment from a small one? It lacks any moral compass. I would call for companies to codify their procurement policies. I think it will get a groundswell of momentum. What gets measured gets done, and it all comes from the tone at the top.’
Kelly, who has worked for US software giant Oracle, said it is a ‘golden era for start-ups’ in the UK. But he said there is a ‘different DNA, a different culture of ambition’ in the US. He said: ‘The confidence level of the Americans is unparalleled.’
And he complained: ‘A lot of boards in British companies become a victim of the exit conversations they have. If a board spends half its time looking at exits, then its not investing the time it should be on building the company. Why aren’t British firms going out and buying overseas companies as well?’