Dan Neidle

Who pays the business rates?

The answer is the person occupying the property, the pub.

But who economically is actually paying that?

And the answer turns out to be, and the evidence for this is super strong, mostly it's the landlord in the long term.

In other words, if you increase business rates, then the amount they can charge in rent goes down.

And if you cut business rates, the amount they can charge in rent decreases.

goes up.

And there was a, the biggest study of this was in 1990 when there was some reform of what were then non-domestic rates.

And for every one pound increase in rates, rental values fell in London by 86 pence.

meaning that 86% of business rates in London go through to landlords.

Now, in other areas, it's less.

Outside the southeast, it can be only 45%.

But either way, if you have a business rate cut on pubs, what you're doing is a tax handout to landlords.

And in some cases, that will be almost all of the cut.

In some cases, maybe half the cut.

No, I mean, right now you've got a tenant who's paying £100 and the tenant is also paying business rates of 10.

If you change it so that the tenant is paying business rates of five, well, then they can afford to pay more rent.

The market shifts, and that happens because the supply of commercial property is what economists describe as inelastic.

Land's fixed, planning's restricted, landlords can't easily move the building somewhere else.

But on the other hand, tenants' demand is elastic.