Darling U-turns on business rates

By Laura Miller

Alistair Darling has today scrapped controversial plans to raise business rates by five per cent, opting instead for a smaller two per cent increase.

Business owners will need to budget for the other three per cent, but over two years.

The move will be welcome by struggling retailers who have been forced to slash prices in an attempt try to entice cash strapped shoppers back to the high-street.

Earlier this month the chancellor had said he would not budge on the increase, which affects companies from April.

At the time he added that freezing business rates would cost almost £1 billion.

But the rates hike had been widely criticised by the sector, with the British Retail Consortium claiming the change will cost retailers across the UK up to £1.6 million.

Debenhams chief executive Rob Templeman said at the time: “No retailer is happy with the five per cent increase. It doesn’t reflect where inflation is now and what’s happening in the economy.”

Commenting on the Chancellor’s decision, Caroline Spelman, shadow local government and communities secretary, said today: “We welcome this u-turn because in large part it follows the campaign we have mounted asking the government to look again at the impact business rate increases will have at this time of recession.

“However there are a range of other tax increases which will damage businesses in the UK including taxes on empty properties, the end of transitional relief and the vast tax increases on businesses in ports.

“The Government needs to go through them all and look at the implications.

“The reality for business struggling to stay afloat is that whilst this delay is welcome, the spectre of a costly revaluation next April still looms large and threatens their very livelihood.”

Today Mr Darling said the five per cent rise was linked to the Retail Prices Index last year, but RPI inflation had now fallen to zero.