Calls for business rates reform heighten amid corruption denials

By Emily Hawkins contact

- Last updated on GMT

Bias allegations: pub companies and their representatives were accused of having undue influence ahead of a report urging reform
Bias allegations: pub companies and their representatives were accused of having undue influence ahead of a report urging reform

Related tags: Business rates

Allegations that there was bias towards pub companies and their representatives in deciding the business rates system have been denied as a new report pushes for urgent reform.

The British Beer & Pub Association (BBPA) has responded to claims that pub companies and their representatives had an unfair role in agreeing the business rates system by saying the suggestion was “simply untrue”. 

Claims were made in evidence submitted to the Treasury Select Committee’s inquiry into the impact of rates on businesses earlier this year, which were reported on by The Times​ newspaper this week.

Pub operator Paul Crossman said he felt tenant operators had to fight to have their voice heard by the Government while representatives for pub companies were in “constant contact” and had “direct influence over policy formation”.

He also told MPs he believed Ei Group had exercised undue influence in agreeing the rates system with the Valuation Office Agency (VOA) and the trade-related valuation group.

The valuation group was part of the Royal Institution of Chartered Surveyors (RICS) and formerly chaired by Ei’s national rent controller. 

Government decision

British Beer & Pub Association chief executive Brigid Simmonds has said the claim of undue influence was not true.

The approach to rates calculation is, ultimately, the decision of the Government and VOA, with major changes requiring ministerial or Treasury approval, she said.

Simmonds said: “The suggestion that the guidance on the valuation of pubs is unduly influenced is simply untrue. 

“The guidance on the valuation of pubs is owned by the VOA and, although pub operators and trade associations like the BBPA work with them to ensure that the guidance is relevant and as up-to-date as possible, it is ultimately the decision of Government and the VOA what goes into the guidance.”

The BBPA has urged the Government to relieve the pressure placed on pubs from business rates, citing figures that pubs overpay by an approximate £500m in rates each year.

She added: “Bricks and mortar businesses like pubs are shouldering far too high a burden when it comes to business rates.”

Simmonds’ assertions come as the All-Party Parliamentary Group for Hospitality (APPG) has asked for an urgent reform of the rates system in a report published today (Wednesday 9 October).

The report makes several conclusions, including that underfunding of the VOA means it takes so long for some pubs’ appeals to be addressed that they have had to stop trading after paying the wrong rates. 

Root and branch reform

Steve Double MP and chair for the APPG said reform should be both short-term and long-term through reliefs and a rebalancing of the tax system so that digital businesses do not receive preferential treatment. 

Licensees Association chief executive Nick Griffin said any reform should involve a transparent process that avoids disproportionate consultation from any sector of the industry.

He said: “The issue of business rates is a massive concern for all publicans. We are dealing with a broken system that requires root-and-branch reform, and it requires it quickly.” 

Griffin said that regardless of whether bias played into the system calculation or not, tenants were disadvantaged by the approach decided. 

He said: “Whether the trade-related valuation group was influenced by representatives of an obviously interested party is conjecture, perhaps the RICS will release any related documentation and minutes to ensure the process was right and proper.” 

Pubs with high turnovers find themselves facing “unsustainable” increases in their rateable value rather than the rates being calculated on the property.

Publicans penalised

Griffin continued: “Leaseholders face the entire business rates bill but only benefit from well under half the profitability of the site, the majority of which is retained by the property owner in the form of wet and dry rents. 

“The Government needs to get to grips with this issue and stop penalising hard-working publicans.”

The VOA said it aimed to calculate a rateable value which reflects the rent a property can be expected to achieve on the open market.

A spokesperson added: “The approach used for the valuation of pubs is in line with what happens in the rental market, where trading potential is a key factor in setting rents.

“This has been agreed with the pubs rating forum comprising a wide range of industry bodies representing large and small ratepayers.”

In a letter to the committee, Ei Group managing director Simon Townsend called Crossman’s allegations of bias false and expressed concern at the suggestion “that the system was corrupted as a result”.

Ei Group did not wish to comment on the claims. 

The Treasury confirmed it was set to consider a draft report of its inquiry in the next fortnight with the aim of publishing it soon after, but could not specify a date.

Related topics: Property law

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