NHS hit by crippling rates rise
Health trusts threaten legal action as they warn business levy increase will worsen budget black holes
NHS hospitals and GP surgeries in England and Wales face a £635 million rise in business rates over the next five years, it emerged as health authorities threatened legal action.
An analysis found that health trusts, many of which are struggling to cope under huge financial pressure, will face rises in the levy by an average of a third by 2021.
Some of the biggest hospitals will have their business rates doubled, potentially forcing them to find further savings to fill black holes in their budgets.
Theresa May is being urged to reconsider “penal and unfair” measures amid warnings that some firms face being hit with a huge increase in their bills.
Ministers will today hear calls to end anomalies in the tax system that force high street shops to pay higher rates on small premises than online giants do for vast warehouses.
The Institute of Directors (IoD) called on the Government to “level the playing field” to help smaller businesses after an analysis suggested the business rates bill for Amazon’s nine distribution centres would fall by 1.3 per cent.
By contrast, street retailers in parts of the country – particularly the South East – will be hit by rises of up to 400 per cent.
Stephen Martin, the director general of the IoD, said: “In the short term, the Government must take action to relieve some of the pressure on the small businesses facing hikes in business rates and encourage companies to bring forward productivity-boosting investment.
“But we should also look to the fu- ture, launching a new Tax Commission to look at what the growth of self-employment and online business mean for the tax system.
“The goal must be a much more level playing field, which treats both high street and online businesses fairly and adapts to the growth of the ‘platform economy’, which is leading to an increase in flexible work.”
The new rates, which take effect in April and represent the first change in almost a decade, will see companies paying amounts that have been calculated to take into account the rise in property prices since 2008, which is why many businesses in the South East face such a jump in their rates. Other businesses in areas where high street rental prices have fallen will benefit.
Business rates are supposed to be reviewed every five years, but the previous revaluation was delayed by ministers for two years, making the change in bills from April more pronounced.
The Daily Telegraph reported how the changes have led to warnings that some retailers and charities will struggle to survive in the face of rising rates, the increased cost of the living wage and Brexit uncertainty.
There is growing concern in Whitehall about the impact of the rate rises
on the NHS. More than 150 health trusts have joined forces and are threatening to mount a major test case against a local authority unless they are granted an exemption or rebate.
One in six Accident & Emergency departments is under threat of closure as part of efforts to close a £22 billion hole in the health service budget by 2021. A total of 33 casualty units could face closure or being replaced with minor injuries units.
Hospitals will be hit hard as they are large premises and the equivalent cost of rebuilding – on which the rate is based – would be high.
The analysis found that business rates for hospitals will rise from £328 million to £418 million in five years’ time, while GPs and health centres will see their costs rise from £257 million to £332 million annually over the same period.
Some health authorities will have to pay millions more. Peterborough City Hospital, which will see rates go from £2.5 million to £4.8 million by 2021, while the University Hospital Birmingham NHS Trust’s bill is set to rise from £4.2 million to £7.6 million. Royal London Hospital in east London will face an increase of nearly 60 per cent to £9.7 million.
Peterborough and Stamford Hospitals NHS Foundation Trust said that rising business rates mean that it needs to put “additional cost efficiencies in place” on top of existing savings.
The trusts are being represented by Billfinger GVA, a property consultancy, which said that hospitals are facing “exponential” increases in business rates.
Jerry Schurder, of analysts Gerald Eve, which advises companies and public sector bodies on business rates, said: “At a time when the NHS is under huge budgetary pressures, these rises in business rates liabilities highlight just how punitive the system has become and will be a cause of real concern for those tasked with delivering hospital and clinic services.”
Sally Gainsbury, of the Nuffield Trust think tank, said: “Hospitals are currently overspending at a rate of between £150 million and £250 million a month. They will struggle to absorb an extra hit like this.
“When a hospital has to cut costs, it doesn’t take long before they end up having to look at their staffing numbers, at doctors and nurses. They will be rushing around having to treat more and more patients.”
The Treasury pointed out that the retail sector as a whole would see a 6 per cent fall in its business rates bill – a saving of £400million – following the revaluation, with a third of all businesses never having to pay rates again.
A spokesman said: “All taxes are kept under review and any changes are announced at fiscal events.”