Business rates have increased dramatically even though the previous government pledged to help companies through the recession.

Some of the High Street devastation we can now see is mainly due to business rates rising by 11% in the three years to end of March 2010, according to Financial Mail.

The Department for Communities and Local Government says that the rates businesses pay are linked to the RPI, but this has only risen by 7.44% over the three year period. In 2007/8, the Treasury collected £17.4bn, in 2008/9 the figure was £19bn and in 2009/10, £19.4bn was collected in business rates. The average rates bill in 2009/10 was £11,432, a rise of £1,102 from 2007/8.

Phil McCabe from the FPB said that struggling firms have been hit extremely hard by this significant increase.

The situation is not likely to improve next year either unless the coalition takes some action quickly.

The annual increase in commercial property rates is based on the RPI for September. The RPI figure for September was 4.6% which will produce a much higher increase than most businesses had budgeted for. Retailers in particular are expected to be badly hit by such a rise, especially at a time when public sector spending cuts have dented consumer confidence.

The director general of the British Retail Consortium, Stephen Robertson, has already sent a letter to the government urging them to change the way they calculate next year’s increase. He pointed out that nobody expected inflation to fall as slowly as it has been doing. Retailers faced with massive rates increases will have to trim costs elsewhere and this will prevent them from creating new employment to soak up some of the public sector fall out.

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Image: Shopping – Grim Sweaper by David Blackwell.

The chief executive of Hays, Alistair Cox, has some worrying news for those in the public sector who work through umbrella companies and are worried about the loss of their contract.

The government is widely expected to wield the axe on up to 750,000 public sector workers in the next 5 years but the private sector is highly unlikely to be able to create enough new jobs to absorb them.

One measure outlined by Mr. Cox to encourage private sector growth would be for the government to abolish employers’ National Insurance contributions. This would enable companies to take on more staff. The coalition has already gone some way towards easing the NI burden for small businesses start-ups outside the south-east by granting a 12 month NI holiday on their first 10 employees.

The Treasury currently raises around £55bn from employers NI contributions and its abolition would leave a gaping hole in the government coffers.

As if that news isn’t depressing enough, the CEBR has more doom and gloom for people in the north of England. The Centre has predicted that 10% of northerners will be unemployed in the next five years. Economic output in the North-west, north-east, Yorkshire and the Humber and the West Midlands will fall whilst London and the South will get a larger share.

Manufacturing centres such as the West Midlands are already suffering more than other areas. Although the situation has improved strongly in recent months, it is still well below pre-recession levels.

The recruitment market has been showing signs of improvement but a large proportion of that is due to employees changing jobs rather than an influx of new jobs being created.

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George Osborne has announced that, as part of the government’s Spending Challenge, the public have submitted more than 100,000 ideas on how the coalition should cut spending.

Last week, after drawing up a shortlist of those ideas, the chancellor said that the electorate, including umbrella company contractors, would now have the opportunity to say which of these ideas should be implemented.

This news was welcomed by contractors and small business owners who see it as an opportunity to get rid of IR35. Since its inception 10 years ago, IR35 has damaged the competitiveness of the UK marketplace by inflicting unfair regulations on the flexible workforce.

Other contributions included running the government’s computer systems on open source software and forming teams of civic gardeners to clean up local areas.

Nearly 66% of the ideas came from employees in the public sector who identified ways to make specific job related savings.

The Chancellor has already passed some of the ideas to the cabinet ministers in charge of high-spending departments. The MoD for example is already looking at some of the ideas it has received from the public.

David Cameron has hailed the exercise as a huge success saying that some great ideas have been submitted. Angela Eagle, the shadow Treasury secretary, on the other hand has complained that the Spending Challenge website contained ‘drivel’.

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The Office of Tax Simplification was officially established by George Osborne and David Gauke, the Exchequer Secretary, on Tuesday.

Two tax experts have been appointed to the board on an interim basis and they will have the responsibility of identifying areas where the tax system could be simplified to help businesses and individual taxpayers.

Michael Jack is the former financial secretary to the Treasury and he will chair the OTS, whilst John Whiting is the tax policy director at the CIOT and will perform the same duty for the OTS one day per week. Whiting is understandably delighted to have been given the opportunity to help simplify the country’s tax system, a measure he believes is long overdue.

Over the next 12 months, the OTS is going to undertake reviews on small business tax simplification and tax reliefs. Initial findings on tax reliefs will be published in the late autumn, whilst the small business tax review findings will be published before next year’s Budget. Of particular interest to freelancers and limited company contractors in the small business tax review is the remit to find an alternative to the hated IR35 regulation that has dogged the self-employed for more than a decade.

In addition to the newly appointed board members, The OTS will be drawing on the expertise of external legal and tax professionals who will focus on advising the board on specific areas of the UK’s complex tax system.

The Government wants the UK to be the most competitive of the G20 countries and they believe one way to do this is to reduce the complexities in our tax system. The size of the current tax code has doubled to over 11,000 pages in the last 10 years and we have slipped down to 13th in the Global Competitiveness Index compiled by the World Economic Forum.

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