George Osborne poised to cap business rates Business rates have been blamed by retailers for the challenges facing the high street and for blocking new investment. The frustration at business rates has been growing ever since the Government cancelled a revaluation of Britain's commercial property last year. Rates are calculated by the rateable value of a property, which is measured every five years, and the annual rate of inflation. However, the Government postponed the revaluation scheduled for this year until after the next general election, meaning companies will have to pay business rates based on property values at the peak of the market in 2008 for another four years. According to Paul Turner-Mitchell, a small-business owner who worked with retailer Bill Grimsey on his review of the high street, postponing the revaluation will cost shops in England outside London £233m. Mr Turner-Mitchell said: "Business rates are so out of touch with property values that it is meaningless potentially offering a 2pc cap." A 2pc cap on the increase in business rates would be instead of the scheduled 3.2pc rise, which is based on the rate of RPI in September. The CBI and the British Retail Consortium have been calling for a 2pc cap, but Ian Cheshire, the chief executive of Kingfisher and chairman of the BRC, said: "At this point that would be a welcome sticking plaster, however the Government eventually needs to carry out more radical surgery." John Longworth, director-general of the British Chambers of Commerce, said: "It is heartening that the Chancellor appears to be listening to business, and is planning to limit the damage caused by relentless business rates increases. But a tax rise is still a tax rise. Although a cap on rates would spare businesses some £300m in tax hikes, and reliefs help many of the smallest firms, companies of all sizes will still be paying hundreds of millions more in rates to the Exchequer next year than the £27bn they are expected to pay in this year. The business rates system is still iniquitous, still broken, and still in need of fundamental reform. Businesses in Britain still pay far more in property taxes than their counterparts in countries like Germany and France - which undercuts the government's stated aim of maximum tax competitiveness. A cap on rate rises is better than nothing, but not nearly good enough. However, John Cridland, the CBI's director-general, said the cap could help to unlock new investment. "Capping business rates will help drive investment, create jobs and lead to more windows opening up on the high street," he said. It will also help our manufacturers and factories to remain competitive in the global market place. We must remember that the job on deficit reduction is only half done.