Business rates expert’s plea over ‘distorted’ rates

A rating surveyor has called for the Government to use the Consumer Price Index (CPI) instead of Retail Price Index (RPI) figures to measure inflation, claiming business rates are being distorted and rates bills will increase by 3.2% next year.

According to the Office for National Statistics (ONS), the CPI grew by 2.7% in the year to September 2013, which was unchanged from August. CPIH, the new measure that includes the costs owner occupiers’ face in owning, maintaining and living in their own homes, grew by 2.5% in the year to September 2013, unchanged from August. RPIJ, the improved variant of RPI calculated using formulae that meet international standards, grew by 2.5%, down from 2.6%. These latest numbers continue the trend of broadly steady inflation seen since spring 2012.

David Cureton, head of rating at Birmingham-based chartered surveyors Johnson Fellows, said the RPI figure, which fell slightly to 3.2% in September, is distorting rate payable on properties in the retail sector. He believes there are many positive reasons for using CPI to calculate inflation instead of RPI.

He said: “There have been calls for the Government to look at RPI v CPI as part of the proposed revaluation in 2015. However, it has, yet again, ignored these calls. Why commission people like Mary Portas to review the high street and make suggestions for improvements, which included a revaluation in 2015, then ignore the findings?

“The RPI is normally higher than the CPI and rises by 1.2% on average each year. For 2013/14 the multiplier for business rates is currently 47.1p but this can be increased next April by September’s RPI figure of 3.3%, which will produce a multiplier of 48.0p with effect from 1 April 2014.”

The British Retail Consortium (BRC) said September’s RPI figure would be used to calculate next year’s increase in business rates meaning the jump would hurt High Street shops, leaving many retailers wondering whether they will be able to survive.

David added: “Changes in inflation can affect businesses in all areas from running costs, increases in wages due to the cost of living going up and the reluctance to plan ahead. By using the CPI figure, it could ease the costs of business rates in the future. The rateable value of a property is based on rental values as at 1 April 2008, rental values in the UK have fallen significantly since this date because of the economic downturn. The cancelation of the rating revaluation in 2015 and this will potentially be the final straw for many businesses that are already on the brink of survival.

“It has been strongly argued that CPI is a more accurate measure and actually reflects the inflation that most people experience. The RPI is more volatile and increases and decreases regularly, where as CPI changes more slowly. Changing to the CPI would also save the Treasury money, so why not?”