Matt Hancock’s Really Stupid Idea About Business Rates On The High Street

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As we all know there’s stupid, idiot and then politics. The last being the worst because people propose things just because they sound good rather than because they solve – or even understand – the problem at issue. So it is with Matt Hancock’s idea about an Amazon tax to alleviate the rates burden on small shops. The thing being it’s not the tenants of the shops – even the operators of them – that carry the rates burden. Rates, as with any other similar tax on property, are carried by the landlord. And why do we want landlords to make more money?

Matt Hancock has vowed to “level the playing field” for high streets by scrapping business rates for small retailers while hitting tech giants with the new Amazon tax. The Health Secretary has announced the £1.5 billion-a-year pledge, which would exempt hundreds of thousands of businesses from the levy, as part of his leadership campaign. In an interview with the Telegraph Mr Hancock said business rates are a “twentieth century tax” which needs a “21st century replacement” – and makes the system unfairly skewed against bricks and mortar businesses. The energetic minister wants to change that and “save the high street”.

There is some amount that a retailer is willing to pay for premises to retail from. How that is divided between tax and the rent for the property is immaterial to the retailer. The same is true if they own the place – any tax becomes capitalised into the price to be paid for the property.

The landlord is deeply interested tho’. The amount the occupant will pay is fixed. More tax means less of that flows to the landlord as rent. We do actually know this too, we lifted business rates in Enterprise Zones and rents rose to match.

So, Matt Hancock is suggesting a bailout of high street landlords, not an alleviation of the costs of high street retailers. And why the hell would anyone want to do that?

Well, the answer being that either he’s stupid or he thinks we are. Neither being an attractive attribute in a politician.

As to an Amazon tax, why? Leave aside the above split of who pays it and business rates are a tax upon property. Amazon uses less property than other forms of retailing. They should be paying less property tax.

Seriously, what is it about these simplicities that people aren’t understanding?

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