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Ministers dismiss business rates 'underestimation' reports

The Government has dismissed as "nonsense" reports that Cabinet ministers underestimated business rate rises by 5-7% in a letter sent to Tory MPs.

In the private email, Communities Secretary Sajid Javid and Treasury Chief Secretary David Gauke said there had been "a relentless campaign of distortions and half-truths" about a business rate revaluation which will leave more than a quarter of companies facing higher bills.

They insisted that most firms will not see any rise in their bills and attached a list revealing many of the areas facing rate rises are in Tory heartlands, with the Home Counties facing some of the biggest increases.

Rates in Theresa May's Maidenhead constituency will reportedly rise by an average 10%, while Mr Hammond's own Runnymede seat in Surrey will see increases of about 13%.

But according to reports, the figures have been underestimated because 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.

A Department for Communities and Local Government spokesman said : "This latest claim from (rating agent) 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."

It came as Chancellor Philip Hammond assured Conservative MPs that he is listening to their concerns about the revaluation.

But he stopped short of committing himself to action in next month's spring Budget to soften the blow on affected firms.

Treasury sources indicated that the Chancellor was looking at a longer-term solution to level the playing field between the traditional high street shops and pubs hard-hit by the revaluation and the internet giants whose out-of-town warehouses benefit from low rates.

At an 80-minute meeting of the Tory backbench 1922 Committee in Westminster, a series of MPs confronted Mr Hammond with examples of businesses in their constituencies facing steep rises due to the first revaluation of business rates since 2008.

With bills for the coming year due to go out over a five-week period starting on Friday, there is little time left for concessions from the Chancellor.

A Treasury source said the Chancellor was "open to listening to the issues of the hardest-hit, but he didn't make any commitments either way".

Mr Hammond raised the point that the development of the digital economy, which has seen a growing amount of commerce shift online, has created "challenges" for a form of taxation based on property rental values, said one source.

However, the Chancellor made clear that a solution to this issue would not be found overnight, raising the possibility that a more fundamental overhaul for the business rate system may be in the pipeline further in the future.

The Government insists that almost three-quarters (73%) of businesses will see their rates reduced or stay the same after revaluation, with some 600,000 firms paying no business rates at all.

Mr Hammond stressed that the revaluation, which was set in motion under the previous administration of David Cameron, was the subject of a consultation exercise in which business organisations were involved.

Conservative MP Grant Shapps told Channel 4 News that he told the Chancellor he was "very concerned" about the revaluation, stressing he wanted a "fundamental review" of the entire system.

Senior Labour MP Angela Eagle told the programme: "At the last election, Labour said that we would not reduce corporation tax and would use that money to freeze and then reduce business rates, particularly at the small business end. That's what we would have done.

"I think there's a wider issue with the sustainability of business rates in areas such as internet businesses which don't pay rates.

"It impacts on the High Street, which does pay rates. The whole base of how we do this now needs looking at again."

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