Shopping & the High Street
The existence of the Internet has allowed a large and increasing portion of the population to shop on line. Many sellers operate from home and do not incur any business overheads. The only tax paid is on declared profit as part of personal income.
Conversely, high street shops have crippling levels of rent and business rates. Also tax on higher declared profit and class 4 contributions. Frankly there is really no way the high street shops can now compete with the smaller profit margins of the Internet sellers. This means that traditional retailing is dying.
The problem is exacerbated by town councils, who steadily increase the double yellow lines on roads around towns, install parking meters and have high levels of car park charges. Park and ride car parks are notorious as places where cars are broken into or are stolen. For these to be successful there needs to be better security, properly monitored by attendants. All of this actively encourages shoppers to go to out-of-town superstores, which are steadily increasing the range of products on offer.
A look around high streets at the type of businesses in operation, reveal they are almost exclusively those that do not buy a product to sell it on. There are large numbers of charity shops that don’t buy products for resale; they sell without having to charge VAT, they are exempt from business rates and probably have reduced rents.
Estate agents don’t buy anything. They provide a service at incredibly high price for a miniscule amount of effort. Card shops sell cards that they buy for pence and sell for pounds. Cafés sell buns costing them 20p for anything up to 10 times that amount, accompanied by a glass of Coke which they buy for £1 a litre and sell for £1.50 for 330ml, and so on. Opticians sell glasses at anything from £120 for two pairs to £300 a single pair, which can cost them as little as £6 a pair. Need I go on?
Solicitors likewise charge rates well in excess of £100 an hour for work that is largely routine and not rocket science. They don’t need a shop window though and can often be situated in rooms above the shops that command much lower rents.
We are approaching a tipping point where shoppers visiting town centres will dramatically fall, then even the charity shops and cafés will fail. Businesses that provide a service not available cheaper on the Internet will survive for a bit longer. Eventually opticians will go because eye tests will be paid for at medical centres and then the prescription used on-line to purchase glasses at discount.
The public know that domestic rates are really inflationary tax devolved to the Local Authorities by the government. The domestic rating system is incredibly unfair, even with 25% discount for single occupiers. It is people who use services, not property, so how can it be fair for five adults on good wages living in a house to pay the same rates as the couple next door.
The rolling above-inflation annual rises until recently in the domestic tax is particularly cruel not only on pensioners with a fixed income but additionally for many working people and families who are on wages which are not rising at the same numerical amount each year.
Logically the Poll Tax was the fairest system but was introduced in a really stupid way by Margaret Thatcher and her government. Removing all the subsidies at the same time meant it came in at too high a price.
Making people on the dole pay a chunk as well was also ludicrous. This was a typical example of the government giving money with one hand and taking it back with the other. Did the government not realise that unemployed people not only could not afford to pay it out of bare minimum benefit, but they had the time to demonstrate and get a groundswell of opinion rolling to destroy the scheme?
Though it was removed, it might be possible to go back to a Poll Tax system by modifying the present rating system. In year 1, change the present rates into a house charge plus a reduced charge per occupant. Let that run for two whole years then increase the charge per occupant at the same time as reducing the house charge. Let that run for two more years, then promise that after the next election that you intend to abolish the house charge completely.
The other alternative is local taxation, based on an ability to pay. Then people won’t be driven from their homes if they are on fixed wages or pensions. Unfortunately to set up a local income tax office system to administer the tax for domestic rates just employs a whole lot more local government officers and is quite unnecessary.
The government already receives the money raised by the councils and then returns a chunk back to them. So it knows exactly how much is raised by this method. It also knows how much income tax is normally raised. It really is not rocket science to work out a new rate of income tax that will achieve the same income.
These are also very unfair and are based on the rent value of the unit. In other words the council really wants a cut of what the landlord gets (or would get if the landlord is an owner-occupier). Nothing is provided in exchange for this tax. Nothing at all. It is immoral.
Everyone who works in a business premises lives somewhere, so is already paying domestic rates and income tax. The businesses also pay tax on profit, VAT on profit, capital gains tax, National Insurance Tax, Corporation Tax, etc.
Maybe the money raised in business taxes could be added to the amount raised from other business tax. Maybe even raising VAT to 20% would work out about the same. Then businesses would be taxed on profit and hence the ability to pay. It is likely then that it would be easier to start up and build up a business in appropriate premises. It might also allow town centre shops to compete better with the Internet sellers.
The present cost of retailing from shops is prohibitively expensive. In future everyone will buy goods from out-of-town shopping malls, or from Internet sellers.
Domestic rates need to become people taxes and not property taxes and related to income and ability to pay. Business rates need to become profit taxes, which again will be related to ability to pay.