Exclusive: Business rates ‘could be scrapped by next year' under Lib Dem campaign, party leader reveals

The Liberal Democrats will pressure the Government to abolish "onerous" and "unsupportable" business rates in a move which could potentially see the system scrapped as early as next year, party leader Vince Cable has told The Caterer.

The former Business Secretary under the coalition government said his party would look to work with MP's across the political divide to abolish business rates in the 2019 Autumn budget, replacing the system with a tax on land owners.

While this tax would filter down into rises in rent, he argued this would mean less money paid out overall by 93% of companies in the country - particularly in poorer areas of the UK.

He argued the policy could also be more manoeuvrable - adjusting annually to the realities of the economy - and simpler for small and medium sized businesses.

He told The Caterer: "The whole point about taxing the land rather than the business is that you're not taxing improvements. So if somebody wants to invest in their company, the outside facade, or put in some equipment, you're currently penalised under the business rates system and it's a very strong incentive never to do anything.

"It's also very bureaucratic at present, and taxing the landlord rather than the tenant - or the lessee or whatever the relationship is - is a much less red-tape-intensive system."

He added the policy was significantly more versatile than current rates, which are based on fluctuations in the market and can be between two and five years out of date.

Cable said: "You could operate it through annual valuations so you're not having this constant system of big jumps in business rate with valuation three or four years behind and then catching up suddenly".

The system, which has been costed as revenue neutral, would make up for the loss of Government income from business rates by taxing landowners who do not have businesses operating on their property. Currently landlords are not liable to pay rates if their property is empty or derelict.

Asked about businesses in affluent areas like central London, Cable added that "Areas where there are higher land values - of course, relatively - pay more. But they will also already have high business rates at the moment, so the question is comparing one with the other rather than just looking at land value in isolation."

The Liberal Democrat leader went on to say that MPs were starting to feel the pressure from businesses unhappy with rates.

Asked if there was enough political willpower in parliament to scrap the business tax, he said: "There are a lot of MPs who are being lobbied by people like The Federation of Small Businesses or [The Caterer] and others. They're getting a very strong message from the small business community that the current system is just unsupportable and causing a lot of unhappiness."

UKHospitality Chief Executive Kate Nicholls welcomed the move - but said more needed to be done in the short term.

Nicholls said: "Despite Government commitments to a fundamental review of business rates, we are still stuck with an out-of-date system that unfairly hits hospitality businesses.

"The Lib Dems' recognition that we need radical reform on rates and a complete overhaul of the system is positive for hospitality businesses. A move away from a property tax is positive, although any future system must also incorporate a tax on digital businesses to ensure they pay their fair share.

"We need action immediately, however, or hospitality businesses will continue to struggle against unfair taxes and there will only be further closures. In the short-term, we need to see a freeze of the multiplier, expansion of the pub relief to incorporate the wider sector and positive plans to use digital tax revenue to slash rates for community businesses."