UK airports face multimillion-pound business rates bills – money that should be paid to councils
Heathrow and Gatwick airports are facing £ multi-million business rates bills, despite the pandemic having grounded aircraft and dramatically cut their incomes. The airports are among thousands of UK companies set to appeal against their rates bills. Heathrow apparently owes £113.2m for the current tax year, the highest of any site in England and Wales, according to an annual review of business ratepayers by Altus Group, a real estate adviser. Gatwick has the next biggest bill at £29.2m. Business rates, which are paid to local councils, are calculated on the basis of rateable values — effectively an estimate of a property’s rental value at a given date. Rateable values are set according to rents on April 1 2015. They are not based on how well, or how badly, a company is doing. Heathrow bleated that the rates were based on “a world in which people flew”. The airports argue that rates relief will help them protect jobs. Some sectors – retail, hospitality or leisure – have been given rates holidays. The money from the rates is a key part of the income of councils, and if not paid, then the funding and spending of councils is at risk.
UK airports face multimillion-pound business rates bills
Heathrow and Gatwick to seek relief after income and passenger numbers plummet
Heathrow airport owes £113.2m for the current tax year
By George Hammond (Financial Times)
1st June 2020
Heathrow and Gatwick airports are facing multimillion-pound business rates bills, despite the coronavirus pandemic having grounded aircraft and sent their incomes plummeting.
The airports are among thousands of UK companies set to appeal their rates bills on the basis that the pandemic has materially changed their circumstances.
Heathrow airport owes £113.2m for the current tax year, the highest of any site in England and Wales, according to an annual review of business ratepayers by Altus Group, a real estate adviser. ( See https://property.altusgroup.com/2020/05/exclusive-heathrow-gatwick-airports-top-property-tax-list-despite-uncertainty-over-air-travel/ )
Gatwick, whose major customer Virgin Atlantic is to close its operations at the airport, faces the next biggest bill at £29.2m. [Next in size of rates bills are Sellafield Nuclear power station, and then Sizewell nuclear power station. See Altus link above]
Business rates, which are paid to local councils, are calculated on the basis of rateable values — effectively an estimate of a property’s rental value at a given date. Rateable values are set according to rents on April 1 2015.
But the economic downturn caused by coronavirus has made those values redundant, argue property owners. The £113.2m rates bill is based on “a world in which people flew”, Heathrow said.
“Covid-19 has decimated our industry — our passenger numbers are already down 97% and quarantine will come into effect in June. If the UK government wants aviation to be able to help play a role in rebuilding our economy, it must now act and give our sector a fair deal just as it’s done for others,” the airport added.
Stewart Wingate, chief executive of Gatwick Airport, said: “We are asking for a national system of business rate relief for English airports, administered by the government, so that we receive the same exemptions as other businesses to help us in our hour of need to protect jobs and to help us restart vital connections for business, trade and tourism.”
He added: “We find ourselves in the situation where governments in devolved nations in Scotland and Northern Ireland have provided airports in their jurisdiction with rate relief, giving them an unfair advantage over airports in England.”
Although the UK government has extended rates holidays to retail, hospitality and leisure businesses, some sectors have missed out.
“They haven’t got infinite money and can’t protect everybody. You have to decide who wins and who loses,” said Robert Hayton, head of UK business rates at Altus.
High-end department stores Selfridges and Harrods, typically two of London’s biggest ratepayers, are eligible for the rates holiday, saving them £17.7m and £17.1m respectively. Goldman Sachs, meanwhile, faces a £14.4m bill for its new £1bn headquarters in the City of London.
The payment holidays will reduce rates receipts in England and Wales by almost 40%, from £26bn in the 2019-20 financial year to £16bn in 2020-21, according to Altus. That shortfall in council income will be made up by central government.
Thousands more businesses are pushing for a reduction in their bills on the basis of exceptional circumstances — a loss of income that would be borne by councils.
Altus has launched appeals on behalf of more than 25,000 companies requesting cuts in their rateable values. Those reductions could last for years, said Mr Hayton.
Income from business rates accounts for about a quarter of council spending power, said Richard Watts, who chairs the Resources Board for the Local Government Association, a cross-party grouping representing 335 councils.
Any hit to business rates receipts “means vital resources being diverted away from stretched local services, such as caring for the elderly, supporting businesses and boosting local growth”, he added.
The Government’s advice on Business Rates is at
This is the Government’s advice on business rates relief
You’re eligible if your property is a:
- restaurant, café, bar or pub
- cinema or live music venue
- assembly or leisure property – for example, a sports club, a gym or a spa
- hospitality property – for example, a hotel, a guest house or self-catering accommodation
Financial impact of Covid-19 could be disastrous for Luton Council
Luton Council website
Luton Council is facing a devastating projected shortfall of £49m in its finances this year as a result of the Covid-19 emergency.
Plans are underway to prepare an emergency budget in the summer where councillors will be forced to agree to extremely difficult cuts to key services unless the council’s desperate plea to the government for immediate cash is successful.
With passenger numbers catastrophically impacted, the council’s airport company, London Luton Airport Ltd, is no longer receiving air passenger income which makes it impossible to pass on dividends to the council which it relies so heavily on to fund many vital frontline services.
Leader of the council, Councillor Hazel Simmons MBE, said “The council uses money from the airport to fund crucial services to everyone, particularly the most needy in the town. With this key source of income obliterated, the council is compelled to consider painful solutions which will drastically affect services and have a profound, long-lasting and bleak impact on the lives of many in the town.
“Luton faced huge challenges throughout the period of government austerity and the council sought to encourage growth of the airport as a key driver in balancing the books and stimulating the wider economy. Since 2010 the authority has had to make savings of £138m due to reduction government funding and the administration has fought tirelessly and successfully to ensure essential services are maintained.
“While all councils are suffering at this moment in time, Luton has had to rely heavily on the aviation industry due to the reductions in our grants from government, which has left it uniquely impacted and without emergency funding from the government – the town and its residents will suffer much more so than in other areas.”
A recent study by the Centre for Cities identified Luton as one of the country’s most financially vulnerable regions to the Covid-19 crisis, with 40 per cent of jobs hugely dependent on revenue from the aviation and motor industry. Income from commercial sources is the second highest of any council in the country.
Based on preliminary figures, the overall impact of Covid-19 on the council is expected to be £49m in 2020-21 after taking into account the support from central government. This forecast includes a £10.7m drop in council tax and business rates and a £37m drop in income from the airport in 2020/21 and increases in costs.
The current crisis has led to huge increases in demand for council assistance and a significant drop in fees and charges and other income, and given the fluidly of the situation, it could end being even worse than the current preliminary figures predict.
Councillor Simmons added: “I am not overstating this when I say Luton is currently staring at a nightmare scenario. I joined politics to make a difference to people’s lives but these huge financial losses will impact countless individuals whose lives are already being disastrously affected by this dreadful situation.
“I want to make another plea to Boris Johnson, Rishi Sunak and colleagues across Whitehall to please take a look at what has happened to Luton above and beyond other areas and please think about the thousands of local people who must not suffer any more than they already are.”
Councillor Andy Malcolm, the council’s portfolio holder for finance, added: “Our response to crippling years of austerity was to create innovative income streams to decrease our reliance on government funding. It is because of this that the local economy has blossomed, jobs have been created and the town had begun to enjoy the fruits of regeneration. This enterprising approach has not only kept the town afloat during these years, but has been praised many times by the government. We should not be punished as a result.
“The town and the council are facing a real cliff-edge moment in our history, and if we don’t get urgent support to avoid the devastating consequences of this crisis, we will be forced to make decisions in the summer which would have been unimaginable just a few weeks ago.”
Robin Porter, Chief Executive of the council, added: “I have sent out many messages over the last seven weeks thanking and praising the way people have responded to the crisis by going out of their way to help others. I’ve seen so much of this this first-hand and I have never felt so proud to lead an organisation in this wonderful town.
“However it’s also been the hardest seven weeks of my life seeing what this disease has done to people across the town and the further misery it could cause once the dust is settled and the financial impact is felt.
“The government assistance to date has been appreciated, but it is only a drop in the ocean of what is required to get the town through this. We’ve already spent much more than our allocation on vital things such as support for the vulnerable, emergency housing, financial and business support and providing a temporary mortuary for those who have sadly succumbed to the virus.
“We cannot escape that the council, by law, must set a balanced budget so we are now facing the unenviable task of having to look very closely at everything we spend and are staring at some very hard decisions that will affect the level of services we will be able to provide in the future.”
Over the next few weeks council officers will be putting forward a number of ideas for in-year savings in order to fill the massive multi-million pound hole caused by the Covid-19 pandemic.
An emergency budget will be scheduled for July in which members will be forced to agree to a reduction in services unless further and significant emergency funding is made available to the council.
Councillor Simmons has committed to continuing regular dialogue with the public over the next few weeks, including getting views on some of the ideas for savings once they are worked up. Later this week she will be joined by councillor Andy Malcom and Robin Porter in a webinar to provide more details of the financial situation and the grim choices facing the town, which will include a Question and Answer session.