Budget 2018: Chancellor papers over the cracks in the high street
The Chancellor’s main announcements on business rates, high streets, and a digital services tax amount to a concerted attempt to rescue the high street. Or do they?
The Chancellor’s latest Budget contained, on the face of it, a range of useful measures for the property market. Against a background of rather insipid economic growth (a view we largely agree with), the Chancellor proposed a limited and targeted extension of Help To Buy; a fiscal loosening which will support the economy through a period of uncertainty; and a continued focus on road and rail infrastructure. And the dog that didn’t bark was Oliver Letwin’s review on the pace of residential development, which concluded that housebuilders are not engaging in strategic land banking.
However, the main news was on the high street. A £900m business rates cut for small retailers, a £675m offer to local authorities for high street related transport and regeneration improvements, and the proposed new ‘digital services tax’ (DST) have been presented as a concerted attempt to ‘rebalance’ retailer competitiveness in favour of the high street.
But is it?
The business rates cut, while no doubt very welcome to its beneficiaries, is no help to chain retailers of the sort who have been prominently collapsing in recent months. Independent stores often rely on passing trade drawn primarily to larger, more familiar brands. If such retailers are the ‘anchors’ propping up high streets and local shopping centres, it seems a little curious to target assistance elsewhere.
Perhaps the measure is not intended to defend independents against chains (the previous threat perceived to high streets) but independents against online retailers. The Chancellor’s proposal to place a 2% tax on large digital service firms’ revenues appears to be aimed at that target. But in fact it goes rather wider, because non-retailers like Facebook would be potentially caught, and thus it is more about ‘unfair’ offshore profit-shifting than it is about saving the high street. Indeed, the Government says that the DST “is not a tax on online sales of goods.”
Into this somewhat confusing picture, the Chancellor has also thrown £675m of funding for high street improvements. Good news. However, the Chancellor described this as ‘co-funding’, which usually means that councils or landlords will have to match this money with their own in order to access it. And this cash is pencilled in for 2021-24, which is no help to high streets struggling right now with the tail end (we hope) of falling real consumer incomes and Brexit-related uncertainty.
So it’s not clear that the Chancellor has done much more than paper over the cracks of a political problem. Perhaps the most useful part of the Plan for Our High Streets (well, a two-page Budget Brief, anyway) is the clear recognition that structural changes are afoot on our high streets and that a call to ‘save’ the high street is an unhelpful cliché. If the narrative can be moved to how we ‘change’ our high streets through a judicious mix of planning reform, cash, and good leadership, then retailers and their landlords will be in a much happier place.
Listen to EG’s Budget 2018 Podcast with Miles Gibson here.
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