All Chancellors give with one hand only to take with another – that's the job – but for far too many small businesses, George Osborne's Autumn Statement only prolongs the agony. For all the talk of targeted help for small businesses, the great business rates robbery will continue.
It's true that a minority of the smallest businesses will now benefit from small business rate relief for longer than previously expected – the doubling up of relief will now stay in place until April 2014, rather than expiring in a few months' time. But that won't help most small businesses because they're too large to benefit from the relief. The total number of properties in England (different rules on business rates apply elsewhere in the UK) eligible to pay business rates is 1.8 million, and their average rateable value is £32,000. On that basis, the £12,000 cap on business rates relief looks pretty stingey – particularly given that a small business is officially defined as any business in a property with a total rateable value of £18,000 or less. In fact, around half a million small businesses are theoretically entitled to claim this relief. In practice, many won't get the benefit because it has to be applied for, despite repeated promises to make payment automatic. Take-up rates in previous years have typically run at around 50 per cent. Bear in mind too that only businesses in properties with a rateable value below £6,000 are entitled to claim the maximum level of relief (50 per cent, or 100 per cent for as long as doubling up continues). Those in businesses with rateable values between £6,000 and £12,000 lose their relief on a sliding scale. Business rates are expensive for all businesses, of course, but for small and medium-sized enterprises, they account for a much more significant proportion of outgoings – in many cases, they're the third biggest bill paid by an SME each year. Moreover, Britain collects more money from taxes on business premises than almost any other Western country – roughly three times as much as Germany, for example. Indeed, businesses are still reeling from the swingeing increase in rates introduced in April, when the Government raised bills by 5.6 per cent. Their bills will go up again in April 2013, by another 2.6 per cent, assuming the Government links the increase to the rate of RPI inflation in the previous September. Some of the damage will be mitigated by corporation tax cuts, but these are small beer in comparison to the business rate rises that SMEs have been paying. In one poll earlier this year, 52 per cent of SMEs said they'd rather lose their corporation tax increase than pay the April business rate hike. Other tax incentives aimed at SMEs are also outweighed by the effect of business rate increases. The result is that the growth the Chancellor hopes to achieve with such incentives, particularly in employment, is unlikely to be achieved. To make matters worse, many SMEs feel that business rates are unfair and becoming more so. They're not calculated according to ability to pay – they penalise businesses that need larger premises to operate from, so manufacturers and retailers tend to get hit with especially large bills. And while it's quite right that businesses make a contribution towards the cost of the services provided by the local authorities where they operate, which is what business rates are for, they share the burden with council taxpayers. And council tax bills have been frozen – not least for political reasons – so businesses' share of the bill has been rising. Had the Chancellor really wanted to help SMEs in the Autumn Statement, business rates should have been a much bigger priority – starting with a sizeable increase in the cap on the rateable value of premises that qualify for relief.