Welsh businesses at a crippling disadvantage to English firms
From the owners of golf ranges in Wrexham to fishmongers in Cardiff, my encounters with Welsh business owners have led me to the conclusion that they are an especially hardy bunch. And they have to be.
Small firms are the lifeblood of the Welsh economy, representing 99% of all registered businesses, but this isn’t being reflected in Wales’s regressive taxation policies. Their plight has only worsened since the new business rate evaluations were announced. Some face the real risk of going out of business after 1 April.
In England, small business rate relief – essentially a 100% rebate – will be available to small businesses with a rateable value of up to £12,000 (and tapered thereafter to £15,000) from April. In , business rates have been fully devolved to the Labour-led Welsh government since April 2015, meaning they get to decide what happens this side of the border. Here, small business rate relief is only available to businesses with a rateable value of up to £6,000. This places Welsh businesses at a crippling disadvantage. In Scotland, the rate relief threshold is set to be even higher; businesses there with a rateable value of up to £15,000 will qualify for 100% relief.
The amount of business rates a firm pays is worked out using their rateable value and a multiplier, set by the government. In England, small and large businesses have different multipliers, which reduces the amount of business tax paid by smaller firms – in this was 48.4p for small businesses and 49.7p for larger businesses. The small business multiplier is also expected this year, to 46.7p. Yet the Welsh government does not set different multipliers for small and large businesses, making the playing field disproportionately uneven, and is planning to increase it this year from 48.6p to 49.9p, to protect the government from a fall in business rate revenue. Our calls in 2012 for this to be addressed have gone unheeded. With so many businesses in this effective chokehold, it is little wonder that Wales consistently ranks as the .
Overall, Wales is facing a 2.9% cut in rateable values, with shops falling by nearly 9% and offices by 7%. But with a higher multiplier, what many retailers effectively pay is unlikely to reduce in real terms. And despite a national fall overall, rateable values will increase for small retailers on many high streets across Wales.
In Monmouthshire, 65% of businesses are expected to be affected. Take for example Monnow Fish Bar, whose owner will be hit with a rise of more than 200% – from £9,800 to over £20,000. Other small businesses, including in my own town of Cowbridge, have indicated that meteoric rises mean they will have to close, dealing a big blow to local economies.
Since 2009, the Welsh Conservatives have campaigned for the 100% relief threshold to apply to businesses with a rateable value up to £12,000 to give small and medium enterprises the spare cash to grow.
There was a tax break promised by the Welsh Labour government in their manifesto but this transpired to be an extension of the temporary small business rates relief scheme. This announcement was by the Federation of Small Businesses, who said that to describe such a move as a tax cut for small businesses was “blatantly misleading” and “the worst form of spin doctoring”. I am inclined to agree.
The UK government is offering £3.6bn in transitional relief for businesses in England. The proportionate amount for Wales would be around 5% – or £180m. So far, the Welsh government has only announced £10m, and it is still unclear who will qualify for this. My colleagues and I continue to campaign for greater relief and greater certainty – Monmouth’s assembly member, Nick Ramsay has launched an to prevent the multiplier rise.
Ministers in Wales are ignoring a simple truth: What’s good for our small and medium businesses is good for the Welsh economy. The Welsh government have the devolved powers available to them to reform business rates and put an end to a great deal of anguish. To date, their response to this critical change has been marked by lethargy and a reluctance to listen to people on the ground. Their handling of the revaluation will surely be measured by the number of To Let and For Sale signs visible on the high street in the weeks ahead.
Andrew Davies is the leader of the Welsh Conservatives.
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