CBI warns of threat to economy after government ignores its call for a business rate freeze

The government has told local authorities that business rates will rise by 5% in April 2009, in line with last September's unusually high RPI rate of inflation.

The statement was put in a letter to local authorities from the government, quashing hopes of a freeze on rates to give the economy a boost.

Dr Neil Bentley, director of business environment policy at the CBI, labelled the decision to push rates up “unnecessary”.

He warned: “The unnecessary jump in business rates will affect nearly every firm, and struggling retailers will be particularly hard hit when they need all the help we can give them.”

The CBI had called for a freeze in business rates in a bid to boost the economy during the global economic downturn, but Bentley said that councils will now have “carte blanche to raise £1.15bn of extra money through business tax next year.

“Pegging the increase to September's record RPI rate - an 18-year-high - enables government to raise £400m in extra tax revenue from firms when they can least afford it,” he said.