The Federation of Small Businesses (FSB) is calling for a new 100% business rates relief scheme for childcare providers in England, reflecting the mounting cost pressures on the sector.
With rising staff costs and an increasing funding gap for the 30 hours free entitlement, property-dependent childcare businesses are coming up against spiralling business rates bills.
Introducing a rates relief discount, fully funded by central government, would not only give recognition to the cost pressures for those in the sector, but also support the delivery of affordable childcare and the 30 hours free entitlement.
Exempting nurseries from business rates would cost the Government approximately £120m per year. A rates relief system has been put in place by both the Scottish and Welsh governments.
FSB has submitted its views on the broken business rates system to the Treasury Committee’s business rates inquiry.
The consultation document also calls on the Government to eradicate a quirk in the rates system, which is penalising small businesses that want to expand to another premises.
Current rules say that if a small business decides to grow into a second location they would lose all their relief when they take on a second property, even if the combined rateable value is below the £15,000 threshold for 100% relief.
FSB National Chairman Mike Cherry said: “The business rates system remains regressive and is not linked to a business’ ability to pay. While we’ve worked hard for rates discounts this year, a huge amount of further reform is needed.
“Most small business owners have seen an increase in their operating costs in the last few months, and the childcare sector is no exception.
“In fact, the vast majority of childcare providers are small, independent set ups, which must meet strict requirements; maintaining staffing levels, having a certain amount of space on site, paying for up-to-date training and being able to deliver the 30 hours entitlement. On top of this, utilities, rent and business rates bills are placing significant pressure on their costs.
“These small nurseries and pre-schools want to be able to continue to provide high-quality childcare, but are being scuppered by ever increasing costs. It is time for the UK Government to step up and alleviate the pressure by bringing in 100% rates relief scheme in England, as has been done already in Scotland and Wales.”
On the second property expansion issue, Mike Cherry added: “If a business is in a position to take the plunge and expand to another location, this ridiculous rule means they are being unfairly penalised.
“Instead of hitting flourishing firms with penalties and stifling growth, the Government needs to back small businesses by allowing them to keep existing reliefs on properties.
“We’re calling for the relief to be changed to a personal threshold for a business owner, so that it instead would apply to multiple properties owned by one business.”