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Employers call for business rate reforms to boost green investment

Image credit: Lovelyday12/Dreamstime

Employers representing millions of workers have called for a reform of business rates to help boost investment in ‘green’ initiatives.

The Confederation of British Industry (CBI), and 41 trade associations, have issued a joint statement outlining how action by chancellor Rishi Sunak in this month’s Budget to reform the business rates system could unleash a wave of investment across government priorities, including net-zero and levelling up.

The existing business rates regime was described as “outdated” and said to act as a drag on the government’s goal of a high-wage, high-productivity and high-investment economy. The current system actively disincentivises business investment in decarbonisation, the statement said.

“Action to get investment flowing into and around the UK is sorely needed to reinforce our recovery,” said Rain Newton-Smith, CBI’s chief economist. “The government deserves credit for convening the supply chain advisory group to unblock temporary challenges, but as we’re seeing with energy prices, there is no substitute for longer-term planning and investment.”

Newton-Smith believes the chancellor has an opportunity to fix this, starting with fundamental business rates reform in the Budget and comprehensive spending review. “By setting out an approach which attracts investment, he can equip the UK with the tools it needs to secure the high-wage, high-productivity and high-skill economy of the future,” he said.

“With up to half of business investment potentially subject to business rates, it has literally become a tax on investment. If we as a country are to truly level up and meet our net-zero commitments, leading by example in the year we host COP26, then unleashing a wave of business investment should be the focus.”

Newton-Smith stated that up to 50 per cent of business investment is potentially subject to business rates, therefore the financial burden on firms is high and the 2023 revaluation could see it increasing further. “With the current business rates system acting as a tax on investment, action is needed to rebuild the UK’s international competitiveness.”

The joint statement was backed by trade associations, including the British Retail Consortium, UK Hospitality and the Society of Motor Manufacturers and Traders, representing around 261,000 businesses and nine million employees.

“The business rates system is no longer fit for purpose. It penalises high-street shops in favour of online giants and deters businesses from investing in new green technologies,” said Rachel Reeves, the shadow chancellor. “That’s why Labour announced we will cut - and eventually entirely scrap - business rates, replacing them with a new system of business taxation that is fit for the 21st century.”

A government spokesperson said: “We’ve provided extensive business rates relief worth £16bn to support businesses and the high street throughout the pandemic, with support continuing until March next year.

“We’ve also shown we are committed to supporting investment through the tax system, extending the Annual Investment Allowance increase for another year and introducing the super-deduction – the biggest business tax cut in modern British history.”

The spokesperson added that the government is currently reviewing business rates, a process scheduled to conclude in the autumn.

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