As the fallout from Sajid Javid’s decision to quit as Chancellor of the Exchequer continues, incoming Chancellor Rishi Sunak is already under pressure to reform. Lobby groups and pressure groups see the change in Chancellor as an opportunity to further their case, place more pressure on the government and seek to find compromise in an array of different areas.
Business rates
It is no secret that the UK high street is under extreme pressure. We have seen the demise of companies that have been retailing in the UK for literally hundreds of years. The Internet has taken over, giants like Amazon now dominate the online arena yet still councils continue to charge huge business rates for high street operations. However, could a change in Chancellor lead to significant changes in the business rates system?
Many experts, those in and out of the retail sector, believe that the modern day business rates system is “broken”. This is a system which penalises physical shops over and above their online competitors. As there is a lack of flexibility from councils towards business rates, many companies have attempted to squeeze their landlords into reducing shop rents with mixed successful.
Could change be coming?
It will be interesting to see what the new Chancellor decides when it comes to business rates which have long been a bone of contention amongst retailers. Under austerity, councils were squeezed by central government and many chose to increase business rates and general local taxation to make up the shortfall. In many ways this has been to the detriment of the high street which is very often the centre of the local community. So, yes, businesses have fallen by the wayside but many high streets/communities up and down the country have been decimated.
There has long been talk of an e-commerce tax but the difficulty is policing this and ensuring that “everybody pays their way”. We regularly see accusations that Amazon is paying a pittance of tax in the UK despite being one of the largest companies in the world. The same can be said of Google and many other leading companies of today.
Retail property values
Every investment market depends on supply and demand. So, it will come as no surprise to learn that retail property assets have fallen in value in recent years with many experts seeing further downside in the short to medium term. We see tenants struggling, companies going under and an inability to replace them with tenants paying historic rental rates. So, in simple terms, something has to give?
Buy to let taxation
It will also be interesting to see whether the new Chancellor considers reining back some of the recent property related taxes introduced by Theresa May. There was speculation Boris Johnson might make a relatively early decision on buy to let taxation but of course Brexit has taken over. There is also the issue of reining in taxes amid accusations of “helping the rich”. Two things to remember here, not all buy to let landlords are rich and there is a huge shortage of living accommodation across the UK.
Summary
We have a situation of a new Chancellor, new start, with many lobby groups and pressure groups looking to catch the ear of the new man in his early days. While unlikely to see any major changes in the short term this will not stop an array of different groups looking to get there issues on the Chancellor’s desk!