Business rates and Tourism

During a period of acute problems for the business sector across North Wales, it is time for the Assembly to look again at the business rates system it currently operates.

As this column has pointed out over the last few months, the relief that is provided for small businesses in Wales is worse than either Scotland or England, despite the earlier promises made by one half of the Labour-Plaid Government to reduce the burden on the wealth creators in our local communities.

In many rural areas, businesses have seen their rates increase by an average of £800 since April 2007. This, of course, comes directly out of the pocket of many owner-managers who essentially pay themselves whatever is left over after expenditure on the business every month.

Therefore, ironically, even though the Assembly Government does not have direct tax-raising powers, by ignoring calls for a fairer business rate system in Wales it has actually added to the personal tax burden of thousands of entrepreneurs across the country.

One sector that has been hit hard by the inequities of the rate system is the self-catering sector. During the last twenty years, it has been one of the real success stories of the tourism industry in North Wales. In particular, it has allowed farmers to diversify their businesses and provided an attractive option for those wishing to visit the area.

However, it is clear that many owners of self-catering properties are being dealt with unfairly by the current system of business rates. Unlike small shops and bed and breakfast businesses, which are rated on their internal area, business rate inspectors are now examining the gross rental charged by self-catering properties and basing their valuation on this.

This conveniently ignores the fact that many self-catering cottages have considerable costs. For example, holiday cottage owners are responsible for all exterior and interior bills and the renewal of the cottages, and include water, heating and electricity as part of the rent.

In addition, many self-catering properties often have few returning parties and must spend considerable sums on marketing to attract customers. However, these issues have been ignored by inspectors and many self-catering businesses are paying far more rates than any other equivalent businesses of the same size.

For those who have spent their own money on improving their properties, as encouraged by the Assembly Government’s tourism department, they are given a higher valuation and consequently are charged higher rates, even though the size of the property has not increased. Therefore, one of our few success stories in tourism is being strangled by a double whammy of bureaucracy and unfair rates.

What government officials seem to conveniently forget is that any increase in rates means that the business has less to spend on improving itself in the long term. More significantly for the self-employed, many of whom have a lower take-home pay than the average worker in Wales, any increase in businesses rates represents an additional tax on their own personal earnings.

The main problem of course is that the current system, adopted from England, does not take into account the structure of our economy which is biased towards tourism across areas like North Wales.

If we truly believe in devolution, then the Assembly must develop its own business rates system that reflects the Welsh business sector and, more importantly, ensures that our growing sectors, such as self-catering, are not penalised unfairly, but supported to develop their businesses.

I am sure that Alun Ffred Jones, the new Minister for Heritage with responsibility for tourism, and who led the calls for business rate cuts in Gwynedd last June, will re-examine this issue and provide the relevant support to businesses that need it.

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