MPs demand rate reform as the high street falters

Urgent call as a raft of big stores warn over profits

THE influential Treasury Select Committee has intervened to call for an urgent review of business rates amid fears that some store chains are on the brink of collapse.

The warning, in a hard-hitting report sent to Chancellor Philip Hammond last week, follows a harrowing Christmas for many retailers.

Debenhams, Mothercare, Moss Bros, Card Factory and Carpetright all issued profit warnings after poor trading. Marks & Spencer, Next and House of Fraser said sales in their shops are declining.

Scottish business rates are set separately and have also proved controversial north of the Border.

The Scottish Government doubled the Large Business Rates Supplement from 1.3p to 2.6p, which has left medium and large firms paying £62million more those in England.

The outspoken view of members of the committee – chaired by Conservative MP Nicky Morgan – will ratchet up the pressure for radical reform of the widely hated business rates system, blamed by many for the blight afflicting town centres nationwide.

MPs warned that the crippling rates levied on retailers are causing ‘damage’ to high street shops which are left at a disadvantage to online and out-of-town stores.

They urged the Government to ‘urgently investigate’ shortening the time between rate reviews.

The current five-year gap has led to massive increases in places where property values have soared – such as London.

A plan discussed in 2017 to cut the timescale to three years is not enough, MPs say. Other concessions, also proposed last year, included rebates for small firms and changes intended to lead to more moderate rises.

MPs and leading retail executives say these measures are piecemeal and do not go far enough.

In a stark warning on the creaking system – which will reap more than £30billion next year – the committee said: ‘Business rates damage the competitiveness of shops on the high street relative to large out-of-town distributors and online retailers.’

John Rogers, chief executive at Argos, which has hundreds of high street shops as well as a big internet operation, said: ‘It is no surprise the profit warnings tended to be from those companies that predominantly have a high street presence, because they are paying a cost to their business that’s not borne by most of their online competition.’

He added: ‘What’s required is not just incremental changes, but a much more radical reform.’

James Daunt, chief executive of Waterstones bookstores, said earlier this month that his chain did not need concessions but small individual retailers should get more help.

‘It is a huge tax,’ he said. ‘Politicians ought to do something about it.

‘It is driving out the independents that give the high street its personality. That fragility of the high street is a worry.’

Physical shops pay about a quarter of the total collected in business rates. The rest comes from pubs, hotels, factories and other businesses. Online retailers pay a minimal amount.

The Treasury said it recognises ‘the vital contributions’ that high street businesses make to the economy. It added it had reduced future business rates by £2.3billion by changing the way rises will be set.

But business rates specialist Altus Group warned last night that many retailers have faced ‘very large increases’ in bills which ‘could spiral further in April’.

Credit agency Moody’s said last week that the outlook for fashion chains and department stores is ‘weak’. It added that festive trading updates ‘highlight the scale of the challenges’ facing Next, Marks & Spencer, New Look, Debenhams, John Lewis and House of Fraser.