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CCA chief: Business rates don’t reflect community pharmacy's role

“Community pharmacy is uniquely impacted by unilateral government decisions”

The government should consider business rates differently for community pharmacy, argues Company Chemists’ Association (CCA) chief executive Malcolm Harrison

What do community pharmacies, children’s nurseries, landlords and gas storage companies all have in common? Bodies representing these sectors, including the CCA, have responded to a Treasury Committee inquiry into the impact of business rates on businesses [published on October 31]. The committee concluded that the business rates model is “broken”, and said the government should undertake a review to find alternatives to it.

The CCA is concerned that, unlike what is found in other parts of the healthcare system, business rates don’t take account of the important role that community pharmacies play in providing access to healthcare in local communities. In particular, the 1.1 billion prescription items supplied to the public through pharmacies every year, and the sector’s new role in delivering urgent care through the Community Pharmacist Consultation Service (CPCS).

Community pharmacy is uniquely impacted by unilateral government decisions, and should be considered differently from other businesses. For example, the imposition of a revised community pharmacy contractual framework for 2016-17 meant a significant cut in funding for the NHS services provided by community pharmacies. Even though this reduction in revenue was government imposed, business rates for community pharmacies remained unchanged.

The CCA believes the government should abandon the principle that the revenue it generates from business rates each year must remain constant apart from increases for inflation. This policy doesn’t reflect the economic reality that businesses are facing. If a business’s revenue falls, then it only seems fair that it can expect its business rates bill to fall too.

Rates are currently set by establishing the ‘rateable value’ of business premises and then applying a multiplier to calculate the actual rates to be paid. We are calling upon the government to review the process for assessing the rateable value, which is the estimate of a business’s open market rental value. This assessment only happens once every five years, which means the economic environment can change dramatically between valuations.

While the value of business properties could decline over this period, the business rates charged won’t. We were therefore very pleased to see that our concerns about “inconsistent valuation methodologies” were directly referenced in the Treasury Committee’s report.

We also want the government to address the alarming growth of the multiplier. Since 1990, successive governments have increased the multiplier by over 40%, meaning rates have disproportionately grown ahead of both inflation and rateable values. By stealthily increasing the multiplier, the government is essentially getting two bites from the business rates cherry. One bite is derived from the growth in property values, and the other from the arbitrary growth of the multiplier.

Unlike small businesses, large retailers such as pharmacy chains get little to no relief from charges or exemptions, which means they absorb a larger share of the rates burden. Large retailers often serve as anchors in high streets, providing strong reasons for shoppers to visit and maintaining the overall attractiveness of town centres.

Squeezed incomes, online shopping, changing tastes and increasing overheads have all contributed to the number of empty shops on UK high streets, which increased by 7,500 in 2018. The loss of ‘anchor tenants’ – which CCA members [the UK’s largest multiples and supermarket pharmacies] often are – can accelerate a decline in footfall, especially in medium-sized towns and cities.

The CCA is calling for a fairer way of obtaining business rates from all businesses, but in particular from community pharmacies. They’re an integral part of the primary care landscape and will become even more so in the years ahead through the delivery of services such as the CPCS. We wholeheartedly support the Treasury Committee’s call for a government consultation into alternatives to business rates, and hope to see this happen in 2020.

Malcolm Harrison is chief executive of the CCA, which represents Boots, Lloydspharmacy, Well, Rowlands and Superdrug, as well as the pharmacy arms of Morrisons, Tesco and Asda

Listen to Mr Harrison describe his career path:

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