Much has been written about the ‘death of the high street’, with commentators bemoaning the fact that it is mainly ‘pound shops’ flogging tat alongside the ubiquitous betting shops and fast food chains frequented by gangs of teens smoking weed who intimidate passers-by. The high street in my hometown of Huddersfield is no exception to this, and it is the same sorry scene in most towns around the UK.
It doesn’t have to be this way. One simple rule change could help our high streets while also raising significant amounts of revenue that could be spent on public services and revitalising our towns. The Government should end business rate relief for charity shops.
Under the current system, charity shops are eligible for business rate relief and so this makes it more affordable for charities to operate stores on high streets. This is obviously great news if you’re a charity, but less so if you’re an ordinary business. The UK’s ridiculously restrictive planning system means it is almost impossible to get anything built – including properties for businesses. This lack of supply drives rents up for businesses and this is exacerbated by spaces being taken up by charity shops. This is deeply unfair as it effectively amounts to the Government subsidising the business ventures of charities at the expense of profit-making businesses.
It’s time to create a level playing field. Removing business rates relief for charity shops would reduce the burden on small businesses and so help to revitalise our high streets. Increasing the number of for-profit firms on the high street would also see these new entrants boosting HM Treasury’s coffers by prompting an increase in corporation tax and VAT receipts. Obviously, such a policy won’t be sufficient by itself: the Government needs to liberalise the planning system so it’s easier to build property, but abolishing the charitable relief for business rates is a good start.
In fact, the Government should be even bolder. It should abolish all subsidies for charities, including scrapping schemes such as Gift Aid. These schemes are not only depriving the Treasury of revenue, they are also susceptible to fraud from criminals and increase the burden on taxpayers who have to fund the salaries of the bureaucrats at HMRC who are responsible for administering these systems.
An objection to this would be that this would lead to charitable donations drying up and so would end up costing taxpayers more money in the long run as the state would be forced to pick up the slack. While the first part of this objection may well be true, the second is not. While it could lead to a decrease in donations to charities, it does not follow that the entire burden would or should fall on the Government. It is true that many charities do perform important roles in promoting important causes which are socially useful, but many do not. Those which do would likely be picked up by central and local governments, which will have greater resources available to them thanks to the extra revenue brought in by these changes.
As for the first part of the objection, that is slightly more nuanced. It might lead to a decrease in donations to some charities and that may or not be a bad thing. It is not for me to say – and it’s certainly not up to the Government to decide – how people freely choose to spend their money.
Rather than the Government expecting taxpayers to subsidise the choices of others, it should treat almost all spending the same way. Ending all subsidies and tax breaks for charities would bring in extra revenue which should be used to increase funding for essential public services while cutting taxes for households. This would mean that people get to keep more of their own money and spend it how they see fit – which may or may not include giving money to charities.
In her first Budget next month, Rachel Reeves should be brave. Scrapping the generous subsidies to charities will not only help to revitalise our high streets, but also can also rebuild the public finances.
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