£435m-a-year transitional relief fund will help companies worst affected by April’s proposed hike in business rates, the Chancellor has announced.
However, there was no outright reform of the tax with Mr Hammond instead proposing a number of short-term relief measures.
Local business owners had previously expressed outrage over the changes to business rates. They labelled the rises as “crazy” and “unfair.”
Hackney traders are set to be hit with an average increase of 46 per cent. It’s the second highest rise in the country. Figures reveal over 370 businesses in Hackney may have their rates increased somewhere between £10,000 and £100,000 in April. The figure continuing to rise year-on-year.
Bowing to mounting political pressure, Mr Hammond said he was “listening to the voice of business”. He promised a £300m fund for discretionary relief to councils to help businesses who lose out.
Mr Hammond also announced a cap on rate rises. This means that small businesses will pay no more than £50 a month more in rates, and a £1,000 discount on rates for pubs with less than £100,000 rateable value.
— Philip Hammond (@PHammondMP) March 8, 2017
The reforms represent a retreat from the Treasury, who had previously dismissed concerns over the rate revaluations and insisted three-quarters of UK businesses will see either no change or a fall in their business rates.
Business rates are effectively the commercial form of council tax. The amount an organisation pays depends on the estimated value of the property it occupies. This means high street stores in prime locations, like Hackney, are set to pay comparatively more than online retailers such as Amazon, when the revalued rates come into effect in April.
The petition was launched by small business community group East End Trades Guild. It was handed into Downing Street by Mayor of Hackney Philip Glanville, Meg Hillier MP and other community leaders on Tuesday. It called on Theresa May to provide relief for affected businesses and on the Prime Minister to halt the implementation of new property values.
The announcement was met with a lukewarm response in Hackney. East End Trades Guild organiser Krissie Nicolson said: “The announcement did meet what we called for but that doesn’t mean the fight is over. This isn’t about applauding the government it is about applauding our members for making a stand and making a change.”
Hackney’s Mayor, Philip Glanville, expressed his disappointment that the Chancellor did not raise the threshold for rates relief in London. “The extra money allocated to councils for discretional support will far from cover the spiralling bills in areas disproportionately affected like Hackney,” he said. “The detail and process of these policies needs to be made clear immediately so councils and local business can begin to properly plan.”
Jolanta Kaczmarek, who runs the Polski Sklep on Homerton High Street, said: “It will be very difficult for local businesses to carry on. I pay £828 per month in business rates in Hackney but for my shop in Waltham Forest it is £150 per year. Hackney has become trendy and they [the government] know they can get more money.”
Elsewhere, Hackney’s self-employed entrepreneurs were the biggest losers in the budget. Mr Hammond announced a two per cent rise in National Insurance contributions (NIC) for self-employed people earning more than £16,250-a year by 2019.
Tax-free dividend allowance was reduced from £5,000 to £2,000 by 2018, in a bid to raise an extra £145 million a year in revenue. The government had previously pledged not to increase VAT, Income Tax or National Insurance contributions before 2020.
Not a #budget on the side of ordinary people. Smoke and mirrors on health and social care funding and no measures to support the low paid.
— MegHillierMP (@Meg_HillierMP) March 8, 2017
Hackney’s self-employed workers reacted angrily after the announcement. Nash Patel, who works at Edgware Food and Wine shop in Hackney, said: “It is disgusting what the government is doing to punish self-employed people. We take all the risk, get no paid holiday and pay all our taxes. Yet this is how they treat us.
“The government has not been friendly to us for quite some time. This really is the final nail in the coffin for small businesses.”
Selma Yildiz, who owns the Italian Kafeteria on City Road, said: “I don’t know why the government is taxing small business owners even more. It is another burden on the self-employed, first they increased VAT, business rates and now this.”
The increase in NIC and the cut to tax-free dividends is expected to raise £2 billion for the Treasury. This money will be used to finance an increase in the social care budget. A Green paper on social care outlining the details is to be published later this year.
On the subject of the NHS, £100m was promised for 100 onsite GP treatment centres at hospitals in England. This money will be used to ease the burden scheme on struggling A&E units. Such a scheme already exists in Homerton hospital. There was also £325m of capital promised for the NHS, to be used to fund new sustainability and transformation plans.
Hackney’s smokers and drinkers will suffer with the price of a pint increasing by 2p in line with inflation. The cheapest pack of 20 cigarettes now stands at £7.35. Shopkeeper Patel criticized these changes.
“50 per cent of our business is from cigarettes and when the price of those go up it punishes us as well.”
The Chancellor also announced £320m for 110 new free schools to take the total number to 500. This will include an expansion of the free school transport scheme to include children receiving free school meals at selective schools.
There was also official confirmation of the widely reported introduction of T-Level (technical qualifications) for 16 to 19-year-olds. The government hopes will become a viable alternative to A-levels for young people..
Overall GDP growth forecasts for the economy were revised upwards to two per cent in 2017. Lower forecasts of 1.6 and 1.7 per cent are projected in 2018 and 2019 respectively. Inflation is predicted to be higher than expected, at 2.4 per cent in 2017, falling to 2 per cent by 2019.
Public sector borrowing looks set to continue to fall. The government seeks to cut the deficit to 16.8 bn by 2021/22.
Laurence Sleator and Miles Dilworth contributed to this post.