Burnham urged to go further to fix ‘broken’ business rates
Incoming Prime Minister Andy Burnham must broaden his plans to reform the “broken and unsustainable” business rates system, hospitality and retail industry leaders have warned.
The former mayor of Greater Manchester has already pledged to slash business rates for high street firms but a coalition of trade bodies has urged him to go further.
Ros Morgan, chair of the newly-formed Real Rates Reform Alliance, said that the business rates system is “broken, unsustainable and no longer fit for purpose”.
“Andy Burnham has already acknowledged the current system isn’t fair and talked about levelling the playing field between online and some physical businesses. We want him to go further,” he said.
The new group, which represents 2,800 companies and includes UK Hospitality, the Institute of Directors, the British Independent Retailers Association, has called on Burnham to scrap the divisive business rates system with a new “hybrid” scheme which taxes all online sales at two per cent.
High street businesses have long campaigned for Labour to deliver wholesale reform to business rates, which they say unfairly disadvantages them compared to online shopping giants like Amazon.
‘Broken, unsustainable, no longer fit for purpose’
A new two per cent tax for online sellers would allow for a 37 per cent tax cut for bricks and mortar firms, the groups claim.
The alliance claims this proposal would raise slightly more than the £34bn currently contributed to the Treasury through business rates.
Currently, retail and hospitality businesses account for nine per cent of the UK economy but contribute about 34 per cent of all business rates receipts, the trade bodies claim.
Burnham’s existing proposal to reform the tax would see the threshold for 100 per cent small business rates relief hiked from £12,000 to £18,000.
To fund this, the Prime Minister-to-be would hike taxes on out-of-town warehouses. Some retailers have warned that this could backfire on the high street sellers which use these sites.
Business rates ‘suppressing growth’
The group claims that businesses are hiking costs for consumers, slashing investment and cutting staff as a direct response to rising taxes.
Nearly half (47 per cent) of businesses say their business rates bill has gone up since April this year, according to a poll of 1,000 firms by research firm Savanta.
Almost one in three (31 per cent) have raised prices for consumers to keep up with the higher tax, while 17 per cent have reduced staff numbers, the polling found.
Allen Simpson, chief executive of UK Hospitality, said business rates are “actively suppressing investment and growth”.
“The negative impact on young people’s job prospects is only increasing and customers are facing higher prices. Reform is long overdue,” he added.