Talking Shop

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Rate rises are hammering the local businesses most in need of protection.

When the government lands an independent bakery with a bigger tax increase than the Costa down the road, the system is clearly broken. We have uncovered exactly that in Southwold in Suffolk, and the problem is replicated around the country. Small businesses that breathe life into British high streets are under threat from the first rise in business rates for seven years, while big ones are getting off lightly. The system needs an overhaul.

Business rates are taxes levied by local government on non-residential properties such as shops, pubs, warehouses and factories. As a rule more valuable properties pay higher rates. But the numbers are determined in an opaque fashion by the Valuation Office Agency, a Whitehall black box.

The latest update to the rates was meant to happen in 2015 but was delayed until this year, probably to avoid embarrassment before a general election. The hikes are no less embarrassing now. Rates for the Two Magpies Bakery have gone up by more than 250 per cent. The Serena Hall Gallery, which Ms Hall set up with the help of a Prince’s Trust grant while homeless after losing both her parents, has been reclassified as a medium-sized business. Her bill will soar, but the reasons for the change are mysterious and many big chains have suffered less. As they do most of their production off the high street, they can use low-value shop fronts, and pay advantageous rates.

The solution is twofold. First, the government should rewrite the rules so the independents pay less than behemoths. With wider margins, supermarket giants and the like can take the hike. Second, local authorities should be allowed to make up any shortfall with taxes such as the tourism levy being considered in Bath. High street diversity matters. It keeps communities strong, markets dynamic and customers satisfied. Ministers should act to protect it.