Business leaders in parts of Suffolk hit hardest by changes in rate payments say they are a “kick in the teeth” and threaten the diversity of rural towns.
The warning comes after analysis produced for this newspaper highlighted huge variations in the Government’s new rateable values (RV) – which came into effect on Saturday – and have seen some businesses’ annual payments increase by thousands of pounds.
The biggest change in RV – an estimate of a property’s rental value used to calculate business rates – is in coastal areas where property prices have risen steeply.
According to analysis by business rates specialists CVS, which looked at changes since 2010 across all business types in each of the region’s “postcode towns”, those in Southwold (IP18) face the biggest RV increase of 53.6%.
Looking only at shops, Southwold will see the largest increase in RV of any place in England and Wales at 152.48%.
The Southwold and Reydon Society previously found shops in the town face an average 180% increase, with one award-winning bakery, the Two Magpies, staring at a 245% rise thanks to a more than three-fold increase in RV.
Bakery owner Rebecca Bishop said that while the budget had since led to a “better deal” for her, many of her neighbours had not been so fortunate. “It’s still an issue and there’s a lot of uncertainty so it’s really important the council looks at ways to help,” she added.
Most other big losers are in Suffolk Coastal: Aldeburgh (IP15); Felixstowe (IP11) and Saxmundham (IP18) with rises of 17.6%-47.5%.
Jenny Stockman, chairman of Suffolk Coast Business, said the new rates felt like a “penalty charge”.
“It’s a bit of a kick in the teeth when Ipswich and Chelmsford are seeing a decrease in rates,” she said.
“The disproportionate RV increase in ascending areas seems to hit the smaller independent businesses, threatening the diversity that makes the location attractive and differentiating it from larger town such as Ipswich.”
Felixstowe Chamber’s chairman David Button said there had been a “mixed reaction” in the town and he was “keeping a close eye” on developments.
“As a Chamber we plan to meet the local authorities to discuss future changes to ensure positive effect in Felixstowe,” he added.
Iain Wickes, of the Federation of Small Business (FSB), said many businesses in north Essex were also concerned.
Again, coastal areas such as Walton-on-the-Naze (CO14) and Frinton-on-Sea (CO13) are the worst hit, with RVs rising on average by more than 10%.
Mr Wickes said members found the proposals unfair and inconsistent – with some businesses set for a decrease in RV while neighbours faced a hike.
“It seems to be based on the roll of a dice,” he added. “I’m not sure anyone knows how to justify that.
“There’s just no fairness to the scheme and it seems to be hardest on small independent businesses.”
The few areas to see RV reductions are Ipswich, Chelmsford and Leiston.
Leiston’s change is mainly due to the huge reduction in Sizewell B’s RV. While the power station is the sixth largest ratepayer nationally, its RV has fallen by £14.32m – the third biggest decrease after Heathrow Airport and Sellafield Nuclear Power Station.
While support is available to businesses in the form of “transitional arrangements”, small business rate relief (SBRR) and a £300m discretionary relief fund (see below), business leaders say it does not go far enough to off-set the impact of the changes.
Mr Wickes said many firms had seen such large RV increases that they were no longer eligible for SBRR. And although businesses moving out of SBRR have their increases capped at £50 a month for the first year, he described the effect as a “double whammy”. “None of it is based on profit or turnover,” he added. “The whole system is unfair.”
Mrs Stockman is calling for councils “invest wisely” in towns hardest hit to help businesses remain competitive and the region retains its appeal. Suffolk Coastal and Waveney district council both said they were working “to determine how best we can help the most affected businesses”.
Suffolk Chamber of Commerce called for the whole system to be reformed. Nick Burfield, policy director, said: “The CVS data suggests the impact of the business rates re-evaluation is in many cases playing out inconsistently and unfairly here in Suffolk, as elsewhere. The way this revaluation, in particular, has been handled is likely to be detrimental to the investment plans of a number of the county’s employers – and that is unhelpful at this time.”
What support can businesses get?
The worst-hit firms can get support to take away some of the pain of the business rate hikes.
Transitional arrangements place caps on the amount payments increase or decrease, before inflation, varying from 5%-42% depending on business size.
Small business rate relief also means premises with an RV of £6,000 or less pay nothing. Premises with an RV up to £15,000 can also claim SBRR on a sliding scale.
The Chancellor announced a £300m relief fund to help firms most affected which local authorities will administer. Those plans are under consultation until April 7, but Suffolk Coastal District Council could receive £440,000 in 2017/18.
Suffolk Coastal MP Therese Coffey said she had raised issues faced by Southwold and Aldeburgh and asked the Chancellor to help. “I was pleased to hear he was using my figures in the Treasury the next day and it is good news we now have this £300m discretionary pot to help our small businesses,” she added.
Around 90% of pubs can also claim a £1,000 rate discount.
Analysis: ‘More winners than losers’
The government insists there are more winners than losers from the changes. In theory the places which have done the best economically since 2010 will have seen the biggest rises in rents and will therefore rightly have the largest increases in business rates.
Rents are used to calculate the rateable value of a premises which in turn is used to work out business rates. It means areas which haven’t done as well should pay less.
But many businesses are still in an uncertain situation of waiting to hear whether or not appeals have been successful and what relief they may be able to get.
Mark Rigby, chief executive of CVS, said; “The purpose of a business rates revaluation is to try and achieve fairness by ensuring that tax liabilities are based upon up-to-date rental values.
“Revaluations create ‘winners’ and ‘losers’ as ratepayers’ liabilities are shifted in line with relative movements in property values since the previous revaluation.”
He urged any businesses which felt it was not paying a fair rate to challenge it by lodging an appeal.
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