Joint Letter to John Denham on 2010 revaluation from Mayor and business representative bodies

Mayor’s Office City Hall The Queen’s Walk More London London SE1 2AA Switchboard: 020 7983 4000 Minicom: 020 7983 4458 Web: www.london.gov.uk Direct telephone: 020 7983 4100 Fax: 020 7983 4057 Email: Mayor@london.gov.uk

Rt Hon John Denham MP

Secretary of State Date: 23 September 2009

Communities and Local Government

Eland House

Bressenden Place

London SW1E 5DU

Dear John

Businesses in London will contribute almost £5.3 billion in national non domestic rates this year which amounts to more than one quarter of the total tax take for England as a whole. Ratepayers in the City of Westminster alone will be contributing £400m more in rates than will be generated across the entire North East region and a greater sum than the combined contributions from businesses in the cities of Birmingham, Leeds and Manchester. Quite simply without the contributions from London’s business ratepayers the existing levels of grant funding provided to local authorities in the other English regions through business rates will be unsustainable in the medium term.

We are therefore concerned that the proposed business rates revaluation planned to be introduced by the Government from next April is likely to increase average business rates bills in London by 10 per cent before inflation over the next five years. This is equivalent to an increased tax burden on the capital’s businesses approaching £600m per annum before inflation just as they are emerging from the recession. This London wide average data – which is the only information which CLG has disclosed publicly so far – appears to mask wide variations across the capital and is likely to have created a misleading impression as to the impact of the revaluation on individual ratepayers.

It has been estimated by independent rating experts that rateable values in parts of central London and Canary Wharf are likely to increase dramatically and in some cases double. This could result in ratepayers in these areas of the capital seeing their business rates bills rise by up to 100% before inflation by 2014-15. The Government itself has estimated that there are around 71,000 businesses nationally which are likely to see their rates bills increase by more than 75% over the next five years before inflation under your Department’s current plans and it is not unrealistic to expect that a large proportion of these will be located in London on the basis of the information disclosed to date.

It will be even more difficult to justify these rises to the business community as they are being driven by rental values set at 1 April 2008. Commercial property rental values in parts of London have fallen by over 40 per cent due to the economic downturn and further declines are expected for office blocks in the West End during 2010 where the revaluation is expected to hit businesses the hardest. Ratepayers – most of whom in central London are tenants rather than property owners – will not have derived any benefits from the commercial property bubble. As a result of this turbulence large number of ratepayers in London are likely to appeal against their valuations which may well create uncertainty and instability in the government’s NNDR tax take over the next three years.

We would encourage you to consider the following improvements to your proposals for the implementation of the revaluation in order to ensure that it does not place extra burdens on London’s businesses at a time when so many are struggling due to the effects of the recession:

London – and particularly Westminster, Canary Wharf and the City - is home to many multi national companies in the financial, banking, creative and commercial sectors who are key to the UK's future economic growth and prosperity. If these companies are driven out of London by rising tax burdens there is a risk that they will simply relocate abroad placing jobs and tax revenues at risk. It is clearly inconsistent for one part of government to provide limited assistance to London’s businesses in the form of VAT reductions and loan guarantees while another part seeks to impose a significant tax rise through business rates.

Finally, there is a clear distributional issue, which is that it would appear that the huge increases in business rates in London are supporting very widespread minor reductions around the rest of the country – it cannot be fair that a small minority of businesses are paying a huge price to provide marginal benefits to the large majority. You are required to consider the distributional impacts of policy and we do not believe that sufficient consideration has been given to the impact on London.

Therefore, it is critical that the Government reconsiders its plans and takes mitigating action. In order to enable businesses to plan effectively and local authorities to implement the arrangements it is also important that the government’s final proposals are confirmed as soon as possible.

In view of the significance of this issue and its particular impact on London we would be interested in meeting with you or one of your Ministerial colleagues to discuss our concerns further.

Yours sincerely

Mayor of London

Chief Executive, London First

Chief Executive, London Chamber of Commerce and Industry

Chair, London Policy Unit, Federation of Small Businesses

Cc: Rt Hon Alistair Darling MP, Chancellor of the Exchequer

Rt Hon Lord Mandelson, Secretary of State for Business, Innovation and Skills

Rt Hon Rosie Winterton MP, Minister of State for Local Government, CLG

Rt Hon Liam Byrne MP, Chief Secretary to the Treasury