Rt Hon Philip Hammond MP

Chancellor of the Exchequer

HM Treasury

London

SW1A 2HQ

Date: 14th November 2017

Dear Philip,

I am writing to you ahead of the November Budget about business rates for small and micro businesses.

Brighton and Hove’s unique and vibrant small businesses are vital to the city’s economy.  As well as forming part of community life, they provide valuable services and jobs. Whilst it was welcome news that, following calls from small and micro businesses, the Government used the Spring Budget 2017 to announce a hardship fund for businesses facing the steepest rise in business rates, many of those hit hardest by re-valuation are still waiting for the delivery of the emergency relief package. Without this support, small businesses are warning they may be forced to close or scale back as a result of rate changes – that’s bad news for local economies and for the Treasury too. I therefore ask the Government to ensure that any businesses eligible for the emergency rate relief receive it as a matter of urgency.

In Brighton and Hove, there are around 1950 ratepayers who will receive revaluation rate relief and 32.5% of non-domestic properties have seen an increase of more than 2% in business rates. Brighton and Hove City Council have noted that, despite significant yearly reductions in the allocated funding, unspent budget cannot be carried forward. While the Government has made clear that the hardship fund was to act as a temporary relief for businesses experiencing hikes in rates, it is unclear how those same businesses will fare when funding is no longer available.

I am calling on the Treasury  to also use the Budget as an opportunity to further reform business rates. The current system of business rates simply isn’t working and I do not believe that UK small businesses should continue to be burdened by an unfair tax system which discourages investment. They are regressive taxes and place a disproportionate burden on small businesses.  As a first step, I hope to see the Government bring forward the switch from RPI to CPI-indexation from 2020 to 2018 in the upcoming budget.  As it stands, the RPI measure of inflation is outdated and should not be used to determine rates bill increases. More long term, I advocate a move towards a land value tax based system.

I reiterate the calls of the Federation of Small Businesses for the Government to commit to more frequent business rates revaluations in order to allow firms to benefit from fluctuations in the property market. I also firmly believe that the Government must put an end to the so-called “staircase tax” in the upcoming budget, particularly as it is unfair to tax small businesses differently solely on the basis of which areas between their spaces are communal or private.

I am also aware of concerns that the VAT threshold for small businesses and the self-employed is to be reduced in the upcoming Budget as a result of the Office of Tax Simplification review into VAT. Whilst it is welcome news to see the Government addressing concerns about the complicated nature of the VAT system, this should not come at the expense of small businesses.

Lowering the threshold could place an additional administrative burden on small businesses and would represent a significant barrier to development. I therefore ask you to ensure that the VAT threshold for small businesses and the self-employed is not lowered in the upcoming budget.

In addition, in the Spring Budget, the Government announced that a new Support for Pubs Scheme had been introduced, however this was only a one-year Government initiative. Pubs are also facing inflationary increases from April 2018.

As property-based, people-led businesses, whose core product is beer, community pubs are reeling under the weight of sharply rising taxes and regulatory costs, further compounded by rises in business rates. As I am sure you will be aware, CAMRA is calling for a permanent £5000 business rate relief for all pubs in England until major reform of the system takes places. I have heard from many licensees in my constituency who support this measure and I hope to see it announced in the upcoming Budget.

Please do not waste the opportunity to ensure that small and micro businesses in my constituency are fairly supported and deliver a Budget that makes local economic resilience a top priority.

I look forward to hearing your thoughts on this matter.

Yours sincerely,