Budget: £435m business rate softener dismissed as 'drop in ocean'

A £435m Budget giveaway by Chancellor Philip Hammond to help offset a business rate rise and avert a potential rebellion from Conservative MPs was dismissed as a "drop in the ocean" by industry groups on on Wednesday.

Hammond had been under intense pressure to ease the pain of a revaluation, with retailers facing steep rises in business rates from 1 April - the first since 2010.

He told parliament no business losing small business rate relief would see their bill increase next year by more than £600 annually. Pubs with a rateable value of less than £100,000 were given a £1,000 discount for 2017 - expected to affect 90% of those businesses.

There was also a £300m discretionary relief fund for local authorities to support companies struggling to pay the new rates.

Helen Dickinson, chief executive of the British Retail Consortium, said that the £435m cut was “a drop in the ocean” compared with the £25bn a year that the tax raises and that this was “another sticking plaster on a chronically ill patient – an unsustainable property tax higher here than anywhere in the developed world”.

This was echoed by Adam Marshall, director general of the British Chambers of Commerce, who said “measures that mitigate the short-term impact of business rate rises are little more than a sticking plaster".

"The radical changes needed to improve the broken business rates system will have to wait for another day. The campaign for radical reform – and an end to punishing levels of business property tax to ensure the Treasury raises enough to fund local services – continues.”

Carolyn Fairbairn, director-general of the Confederation of Business Industry, also agreed saying that “with inflation rising and the cumulative burden weighing on businesses’ shoulders, limited relief for firms hit hard by business rates falls short”.

Lee Hopley, chief economist at manufacturers’ organisation EEF, said that the rates did not include the removal of plant and machinery.

“While changes to reliefs and thresholds for the upcoming rating list will bring some comfort to businesses who were set to lose out significantly, the continued lack of action in removing plant and machinery from the business rates system will be noted by industry," Hopley said.

“Despite today’s announcements on business rates, manufacturers who invest in rated plant and machinery at any point during the new rating list will continue to be hit by an increase in their business rates bills as a result of the chancellor’s lack of action on removing this today.”

Businesses pay rates based on the rental value of the size of their occupied space. Other factors taken into account include types of business. At the last revaluation almost 50% of business appealed against their bills. Ironically, the last recalculation was due in 2015 but was put off for fear of a backlash from the business community in a General Election year.

The government wants to cut the number of appeals and introduce a margin of error on valuations with a range of “reasonable professional judgement”. It rejects claims that it is trying to block appeals. However, some experts argued that the margin could be too wide, forcing business into overpaying.