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Prime Minister Theresa May has ordered a review of the government’s scheme for softening the blow of a business rates revaluation, following mounting pressure from Tory MPs.

Responding to a question from Green Party co-head Caroline Lucas during Prime Minister’s Questions on Wednesday, Ms May said she had asked chancellor Philip Hammond and communities secretary Sajid Javid to make sure there was relief for smaller businesses that would be “particularly adversely affected”.

Ms Lucas argued that the government’s business rates hikes “could devastate the local economy” in her Brighton community, citing hikes on small businesses as high as 400 per cent.

Mrs May told MPs that she wanted to ensure there was “appropriate relief” for small businesses hardest hit by the changes, which will see big rises in business rates in areas where properties have risen sharply in value.

The prime minister’s spokesman did not say whether the review would lead to an increase in the proposed £3.6bn transitional relief scheme or simply a reallocation of funds within it.

Meanwhile, the Commons treasury committee will take evidence on the business rate revaluation.

Andrew Tyrie, committee chairman, said: “The delay to business rates revaluations was bound to store up trouble. For businesses whose properties have increased disproportionately in value over the last seven years, the increases may be painful.”

Ms May told MPs: “Business rates are based on the rental value of properties and the rental value of properties do change over time; they go up and down and it’s right that rates change to recognise that – that’s the principle of fairness that underpins the business rates system.”

She added:

We also, though, want to support businesses and recognise that for some business rates will go up when these revaluations take place: that’s why we’ve put significant funding in place for transitional relief.

I recognise that there has been particular concern that there’ll be some small businesses that will be particularly adversely affected by the result of this revaluation and that’s why I’ve asked the Chancellor and the Communities Secretary to make sure there’s appropriate relief in those hardest cases.

The chancellor told Conservative MPs on Monday night that he was listening to their concerns over businesses that would be hardest hit by the new business rates, which are being updated for the first time in seven years to bring them into line with property valuations.

The changes are set to take effect on April 1 but many MPs within the Conservative Party have warned of the damage the changes could do to local businesses within their constituencies.

Copyright The Financial Times Limited 2017. All rights reserved.
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