Last week, I wrote about the issue of revaluation and how it will hit many small businesses hard next year.Given that this is an issue that affects every part of Wales, I am astounded at how, despite eight economic summits, it has been ignored by the Welsh Assembly Government.
In the middle of a recession, government should be reducing the financial burden on small firms, and an increase in business rates through revaluation is the last thing that the Welsh economy needs at this time.
So what can be done?
First of all, WAG could follow the lead shown by the Northern Ireland Executive and look to postpone the revaluation exercise for 12 months until the economy picks up again.
This should be possible as all powers for business rates contained within the 1998 Local Government Act were transferred to Welsh ministers in 2006. So WAG should, according to the terms of the Act, be able to “include such supplementary, incidental, consequential or transitional provisions as appear to be necessary or expedient” to deal with this issue.
Secondly, I would urge ministers to drastically reduce the multiplier which is used to calculate business rates.
For example, if the rateable value of a property is £10,000, then to calculate the 2009-10 business rates bill you would multiply the value by the current multiplier of 48.9p to get a total annual bill of £4,890.
In my opinion, this should be reduced to around 40p in the pound if a significant proportion of businesses are not to be hit by any increases in the revaluation of their property.
It would also mean that, despite a higher revaluation of business, the impact of the business rate revaluation would be cushioned in the short term.
WAG could also introduce transitional rate relief for those businesses hardest hit by the revaluation, as it is designed to reduce the impact of significant changes in rateable values. This would mean that any increase for businesses would be phased in over a number of years. While such transitional relief is available in England, WAG has, to date, refused to bring in such a measure.
Finally, and most importantly, WAG needs to examine its overall policy towards business rate relief for small businesses.
In Scotland, business rates have been abolished for all properties with a rateable value of £8,000 or less, a scheme that has benefited 120,000 Scottish businesses. To date, WAG has not even considered such a move here.
Will any of this happen?
Apart from the fact that the multiplier will probably come down this year (but rise in subsequent years), it is unlikely that WAG will take the issue of reform of business rates seriously until it is too late. But don’t take my word for it.
Ieuan Wyn Jones said last week that he was “not persuaded currently that [business rate relief] is the best use of the limited resources that we have. We still think that they are best used for things like ProAct and ReAct”.
Such a statement is essentially saying that large foreign-owned firms – which have been largely targeted by the ProAct funds to date – will be given additional support during this recession while the thousands of small firms across Wales facing an increase in their business rates will not.
How can WAG claim with any credibility that the era of offering large grants to multi-national companies is over when its entire focus during this current recession has been on providing £48m of taxpayers’ money to help a couple of hundred firms through the ProAct scheme?
At a time when we have 130,000 unemployed across the country there could, and should, have been a balance between supporting large manufacturers and the general small business community, and yet this has not happened.
At the very least, half of the sum allocated to ProAct could have extended business rate relief, even if for only one year, thus pumping £24m into supporting thousands of small businesses across Wales.
Worst of all, politicians have shown that devolution does not lead to a better deal for Welsh business, only a few weeks before Emyr Jones Parry’s Commission is to report on further powers for Wales.
Indeed, our government in Wales has disappointingly failed to show the ambition shown in Scotland on an extended business rate relief scheme, or the pragmatism of the Northern Ireland Executive in postponing the revaluation exercise.
Instead, our political leaders appear to be content to allow this tax hike to go ahead without any support for the thousands of small firms that will be affected by it.
Given this complete failure to support the needs of Welsh businesses up and down the land, I certainly hope that no minister will have the audacity, in the future, to utter their usual line that “small firms are the backbone of the Welsh economy”, when they continue to do little to help them out of this recession.
Comments
But everyone should know what happens when you break a backbone and they are on that road
That is the only explanation I can think of as to why an honourable man would break his election promises to the business community of Wales on rates.