The distressing inability of people to get business rates right
Business rates aren’t perfect by any means but they are rather close to the best form of taxation we’ve got, land value such. Which is what makes the pleas for special treatment under such taxation an error:
Pressure is mounting on the Government to offer childcare providers in England 100pc relief on business rates, following in the footsteps of Wales and Scotland.
Nurseries are struggling to survive in the face of rising costs such as staff wages, rents and business rates. As a result, fees are going up and this is putting pressure on household finances.
We have a scarcity of urban land where people would like to partake in economic activity. Which activity should take place on such a scarce resource? Quite obviously whichever activity adds the most value. It is by adding value that society advances and becomes richer of course. If nurseries are adding more value than other activities on that same land then they’ll be able to pay higher taxes than those other activities. If they can’t pay the higher taxes then they’re not adding more value.
No, not value as determined by the desires or hopes of those who would plan us all, but value as determined by the revealed preferences of those willing to pay for it. That being the only objective measure of value we’ve got.
So, theory tells us that if a nursery cannot pay business rates then said nursery shouldn’t be using that urban land it is not adding sufficient value to.
Another way to put this same point. We have that scarce resource, urban land. The price of it is the combination of rents and rates. The total of the two is going to be the same whether rates are high or low - business rates are incident upon landlords, not tenants. When we’ve reduced rates, as with business enterprise zones, rents just rose to fill the gap. That price of that urban land is the sorting mechanism used to determine who should be using it - those who add enough value to be able to do so. If that’s not nurseries then that’s not nurseries, is it?