The government has rejected suggestions it has underestimated business rate rises by 5-7% in a private letter sent to Conservative MPs, as criticism mounted of its calculations.
In an email to Tory MPs, Sajid Javid , the communities secretary, and David Gauke, the chief secretary to the Treasury, said there had been “a relentless campaign of distortions and half-truths” about a business rate revaluation and said most firms would not see a rise.
However, ratings agency Gerald Eve and the Liberal Democrats, which have done separate analyses, say the figures have been underestimated. They say they do not take into account inflation or “appeals adjustments”, which the government adds to its calculations to ensure total revenues do not decline as a result of appeals by firms against rating decisions.
Meeting Conservative MPs on Monday night, Philip Hammond, the chancellor, told them he was in listening mode but would not commit to looking again at the rises.
Tory MP Andrew Bridgen, one of those who spoke at the 1922 Committee meeting with Hammond on Monday, said he believed the figures in Javid’s letter “might not be giving the picture that businesses in the real world are going to get next week when they get their rates revaluations”.
Bridgen, speaking on BBC Radio 4’s Today programme, stopped short of calling the figures misleading but said it was “disappointing” that they did not appear to give the full picture. “The reality is that bills are going out next week and the suggestion was my seat would be having on average a 1.3% reduction in business rates. I think we’re going to see a 3% rise dropping through the letterboxes in my constituency,” he said.
Bridgen said he was also concerned about the signal that big rate rises, particularly on industrial premises, would send about the party. “We haven’t had a revaluation for seven years and I think it’s going to come as a bit of a shock to some businesses,” he said, citing one small business owner he had spoken to whose rates are going up from £50 a month to £700 a month.
“If we are anything in the Conservative party, we should be the party of business and commerce,” he said. “And we’ve put huge burdens on to the private sector which they are bearing and still delivering the highest economic growth in the G7 and I think we have to be very careful not to kill the golden goose.”
Bridgen said he was not yet threatening to block next month’s budget over business rates rises. “I’m not saying I’m going to vote against the whole budget on that basis but I’m registering my concerns,” he said.
Fellow Conservative MP Grant Shapps told Channel 4 News on Monday that he told Hammond he was very concerned about the revaluation, saying he wanted a “fundamental review” of the entire system.
According to the government’s own analysis, rates in Theresa May’s Maidenhead constituency will reportedly rise by an average 10%, and Hammond’s Runnymede seat in Surrey will see increases of about 13%. In minister Greg Hands. seat of Chelsea and Fulham in London rates will rise up to 22.8% but in former chancellor George Osborne’s seat in Cheshire rates are forecast to drop by 11.8%.
A spokesman for the Department for Communities and Local Government said: “This latest claim from Gerald Eve is nonsense – we have been clear how our figures are calculated and what they include. Councils and businesses can see how the revaluation is making bills fairer and is revenue-neutral.
“This is yet more scaremongering, when in reality the revaluation will mean businesses in 80% of council areas will see an average fall in their business rates bills due to revaluation before inflation.”
After the meeting with Conservative MPs, Treasury sources said Hammond told them he was also aware of the challenges of the growing digital economy, amid warnings that smaller shops could go under as a result of increases, while the online retail giant Amazon would enjoy a cut in the tax bill paid for its warehouses.
New rates will be set by the Valuation Office Agency in the coming weeks, and rates are due to rise unusually sharply in areas where property prices have increased rapidly in recent years.
A source said: “It is a real challenge to the tax system when you have a specific tax based on property. It is very difficult and he told MPs that he was alive to this but that it isn’t something that can be changed overnight.”
The Lib Dem leader, Tim Farron, said the calculations were “pure misinformation and half-truths” and called for a rethink. “Small businesses are panicking about the impact of these massive rate hikes,” he said. “The only people who gain are Sports Direct and Amazon. It is time for a U-turn. The government needs to make it soon.”