Healthcare sector heading into ‘perfect storm’ as over 70% of premises face rates increase

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The healthcare sector across England and Wales is reaching crisis point, as the NHS, social care and other public health authorities struggle to cope with increased patient demand, alongside cuts to many vital services and a dire lack of funding.

Worryingly, analysis from national commercial property consultancy Lambert Smith Hampton (LSH) suggests the sector could be thrust into despair as the next business rates revaluation comes into effect on 1 April 2017, when over 70% of all healthcare-related properties across England and Wales will see their rateable values increase.

The findings come amid an escalating row between those liable for paying business rates and their advisors, and the Communities Secretary Sajid Javid, who earlier this month claimed that most ratepayers will be ‘celebrating a fall in their tax bill’ come 1 April 2017, when in actual fact rateable values for the premises, which include hospitals, GPs surgeries and healthcare centres, are set to rise on average by 20%.

However, some occupiers of healthcare-related properties will see their rateable values rise significantly more. Indeed, Hafod Y Wennol Assessment and Treatment Unit in Pontyclun, Wales is set to see the biggest percentage increase of all at 1036%, rising from £2,200 in the 2010 rating list to £25,000 in 2017. While in England, the Hospital of St John and Elizabeth in London will see a 311% increase in its rateable value, rising from £80,500 in 2010 to £310,000 in 2017.

At £17,480,000, The Royal London Hospital in London will have the highest rateable value of all healthcare premises across England and Wales from 1 April 2017, rising from £11,810,000 in the 2010 rating list – an increase of 48%.

Paul Easton, National Head of Business Rates at LSH, commented: “While the increases in rates bills will be cushioned by transitional phasing, any increase in this sector will more than likely have a negative impact on patient care.

“The majority of healthcare premises are valued on a cost basis known as the contractor’s method. As a result, facilities which have undergone improvements or extensive rebuilding will suffer most because of the peculiarities of this method of valuation. So you could end up with a situation where you have a brand new, state-of-the-art hospital which you can’t afford to staff due to the significant increases. It’s ludicrous.

“With Government reforms pushing the responsibility for social care to local authorities under the localism provisions, many are worried about how they will fund it when they are granted 100% retention of business rates revenue in 2020.

“The social care precept will not meet the increasing demand for community care and the proposed cuts in the number of hospital beds and closure of some acute hospitals announced earlier this month in a desperate bid to plug the deficit will only exacerbate the problem.”