Speaking in the House of Commons, Theresa May said that a £3.6 billion transitional relief package put in place by the government would be prioritised for the "hardest cases". However, she also said that regular revaluations played an essential part in "the principle of fairness that underpins the business rates system".
Meanwhile, communities secretary Sajid Javid has indicated that those businesses facing "the steepest increases" in their rates bills as a result of the revaluation could receive additional support as part of next week's Budget. Last week the Scottish Government, which has had similar lobbying from business about the impact of its own rates review, confirmed additional support for areas and sectors including hotels, renewable energy and commercial property in Aberdeen.
The effect of the rates review in England will be fiscally neutral, with no additional revenue raised for the UK Treasury. However, Javid told parliament that this was of "no consolation" to those businesses facing the steepest increases.
"I have long recognised the need to provide support, and that is why we have put in place a £3.6bn package of transitional relief to help more than 140,000 smaller businesses," he said.
"However, as colleagues and the media have highlighted in recent days, some individual businesses will face particular difficulties … I have always listened to businesses and this situation is no exception. It is clear to me that more needs to be done to level the playing field and to make the system fairer. I am working closely with [the chancellor] to determine how best to provide further support to businesses facing the steepest increases. We expect to be in a position to make an announcement in the Budget," he said.
Javid rejected calls for more fundamental reforms of the system, saying that "little appetite" for this emerged from a Treasury consultation in 2015.
"[Business rates remain] a vital part of the local government finance settlement, and [their] importance will only increase with the introduction of business rate retention," he said.
"However, with underlying concerns about globalisation, international tax structures and the struggle between the high street and the virtual world, there is clearly room for improvement. We will look closely at all possible steps to make the system fairer and more sustainable in the short and long term," he said.
Business rates are paid by occupiers of non-domestic properties such as shops, offices, warehouses and factories, and are based on the 'rateable value' of the property. Rates account for the third largest cost for small businesses, after rent and staff costs. Business rates revaluations usually take place once every five years, although the revaluation which was due to take place in 2015 was postponed by the government following the financial crisis. Rates will be based on 2015 property values as of April 2017.
Nearly three quarters of businesses in England will be unaffected or better off as a result of the revaluation, particularly those outside of London, according to government analysis. However, it has announced that the new rates will be phased in over a five-year period, with any increase capped at 5% in each successive year. Those businesses whose rates bills will be reduced as a result of the changes will also have those reductions phased in over a five-year period.
From 2020, local authorities in England will be allowed to keep 100% of locally generated business rates, rather than transferring a share to central government for redistribution in the form of a grant as is the case at present. The government also intends to abolish uniform business rates and give local authorities the power to cut rates as a way of attracting business to their areas.
The House of Commons Treasury Select Committee has announced that it will review the impact of the business rate revaluation "and its effects on the economy" as part of its regular scrutiny of the Budget settlement. This review "may make recommendations for reform", according to committee chair Andrew Tyrie.
"The delay to business rates revaluations was bound to store up trouble," he said. "For businesses whose properties have increased disproportionately in value over the last seven years, the increases may be painful … The longer the interval between revaluations, the larger the one-off adjustments and consequential pain for the losers. A way needs to be found to implement revaluations more frequently," he said.