Labour’s Big Ideas… Are They Actually Thinking?

The Labour  Goverment’s plan to overhaul business rates by linking them to land value instead of the current rateable value has both potential benefits and challenges.

Potential Benefits:

1. Fairness: It could create a fairer system by ensuring that businesses with valuable land contribute more, potentially easing the burden on smaller businesses.
2. Support for High Streets: This change aims to level the playing field between high street businesses and online retailers, which could help revitalize local economies.
3. Simplification: A land value-based system might be simpler and more transparent, reducing administrative burdens.

Potential Challenges:

1. Implementation: Transitioning to a new system could be complex and costly, requiring significant adjustments for businesses and local authorities.
2. Valuation Issues: Accurately assessing land value can be challenging and may lead to disputes.
3. Impact on Property Owners: Property owners might pass on increased costs to tenants, potentially affecting small businesses.

Overall, while the plan has promising aspects, its success will depend on careful implementation and addressing potential challenges.

The Concern:

The major concern over this should be that land is often be more valuable than the building on it. This is because land is an appreciating asset, meaning its value tends to increase over time, while buildings are depreciating assets, meaning their value typically decreases as they age.

So whereas the current rateable value of a property may consider it’s age and reflect that in the rates demand, the valuation of the land would not include that consideration.  Ultimately, this would mean that the tax liabilty would increase… and therefore be at the detriment of the ratepayer, rather than the benefit.

Several factors contribute to the value of land, including its location, proximity to amenities, and potential for development. For example, in urban areas where land is scarce, the value of the land can far exceed the value of any structures on it.  Given that Labour’s commitment is to retail and high street locations, a valuation policy based on land seems counterintuitive.

As many will appreciate, the value of land can be so high that it makes financial sense to demolish an existing building to make way for new development.