Opinion: Hot issue - Do charity shops have an unfair advantage over small traders?

The Federation of Small Businesses complained last week that regulators take a soft approach to the UK's 6,500 charity shops, which get relief on business rates. Does this amount to unfair competition on the high street?

YES - STEPHEN ALAMBRITIS, CHIEF SPOKESMAN, FEDERATION OF SMALL BUSINESSES

Charity shops have an unfair advantage over small traders in the high street, given that business rates are a high-yielding tax, which for 2004/5 will raise more than £19 bn for the Exchequer.

Business rates for small businesses are the third largest expenditure after wages and rent, so rates can have a significant bearing on a small business. When a charity shop sells virtually brand new goods and receives 80 per cent mandatory relief against its rates bill, the unfairness is glaringly obvious. In fact, this is compounded when local authorities can top up this relief to 100 per cent - and many do.

The cost to government of relief on charitable properties is estimated to be in the region of £435m. In addition, charity shops enjoy VAT derogations, which are not available to small businesses. On any survey of small firms' burdens, the VAT system always scores highly on cost of collection and payment to Customs and Excise.

Some 15 charity retailers now have more than 100 shops, with many of them developing upmarket concept shops specialising in new furniture and new retro clothing. It is therefore time the business rate relief for such shops was removed so that the high street becomes a level playing field for all concerned.

NO - JO STETZEL, BUSINESS DEVELOPMENT AND MARKETING MANAGER, ASSOCIATION OF CHARITY SHOPS

The UK's estimated 6,500 charity shops are an important feature in our towns and cities, and operate as a means of raising funds for and communicating the work of their charities, as well as providing vocationally based opportunities through employment and volunteering.

It is important to remember that charity shops, just like other retail outlets, will only thrive if they are meeting a need. It is a reflection of how popular charity shops are that profits in the sector last year were well over £100m. This profit is driven by the support from the public through donations of unwanted goods, purchases and time given by volunteers, and is used to fund the work of a wide variety of both national and regionally based charities.

Charity shops benefit from a mandatory 80 per cent business rates relief, which is funded by central government, and is one illustration of their support for charity shops. However, charity retail outlets still have to pay other related costs like any other shop on the high street.

It is also important to remember that charity shops help to keep local high streets bustling with shoppers, which can surely only benefit small traders.

NO - SIMON LEDSHAM, RETAIL DIRECTOR, CANCER RESEARCH UK

Any suggestion that charity shops have a competitive advantage over small businesses is very misleading. Business rates relief for charity shops such as those run by Cancer Research UK represents less than 2 per cent of the costs of running our retail chain.

We pay the standard market rates for all of our other property costs, such as rent, and we receive no favourable treatment from suppliers of new goods. Any advantage is down to our size and purchasing power, our ability to source directly from manufacturers and the skills of our buying team. New goods represent only 17 per cent of the turnover in our retail chain, and much of this is Christmas cards and goods. Outside the festive season, our new goods represent a very small section of the shop.

Any claims that charity shops are adding to the deterioration of the high street are wholly untrue. Charity shops not only encourage more shoppers to visit the high street - they have also helped regenerate some shopping areas. Our continued good performance within the retail sector is proof that customers like and want to buy from our shops. For many years we have helped to keep traditional high streets alive as many commercial retailers moved to out-of-town retail centres.

NO - SIMON QUARRELL, HEAD OF INFRASTRUCTURE, CBI

You'd have to be hard-hearted to begrudge a charity a boost from the business rates system.That is my instant reaction. But I know there's a bit more to it, because I do the books for two charity shops, which raise money for a cottage hospital near my Hampshire home.

We sell only donated items. We're raising money for a needy cause and we don't feel we're taking anyone else's trade. In fact, we've been welcomed by commercial shopkeepers nearby who say we bring extra customers into the area.

We would make less money for the hospital - in fact our viability could even be threatened - if we faced the full force of business rates. It is hard to see how anyone would benefit from that.

But there is another sort of charity shop that buys in new goods to sell. In some locations they could be competing with commercial businesses that face costs the charity shops do not. And smaller retailers are probably more sensitive now because they have just been through a rate revaluation. A level playing field for traders is a basic principle, and it is not right to give an unfair leg-up to one, even when it is in the name of a good cause.

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