The Real Rates Reform Alliance, launching Tuesday, is calling on the Government to scrap and replace the current business rates system with a new hybrid model to level the playing field for high street firms. The coalition, which includes UKHospitality and the Institute of Directors, represents more than 28,000 businesses and leaders.
Proposed Tax on Online Sales
The alliance proposes taxing all online sales at 2%, which they estimate would allow a 37% reduction in business rates for bricks-and-mortar businesses. This would raise slightly more than the £34 billion currently collected annually through business rates, according to the group.
Ros Morgan, chief executive of Heart of London Business Alliance and chair of the Real Rates Reform Alliance, said: “Business rates should support growth, not hold it back. 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.”
Impact on High Streets
The alliance argues the reform would be a “major shot in the arm” for high streets and communities that have been forced to cut jobs, reduce investment, and raise prices due to rising business rate bills. A poll of 1,000 firms by Savanta found 17% have cut jobs, 15% have hiring freezes, and 31% have hiked prices in response to business rates.
Anna Leach, chief economist at the Institute of Directors, said: “The time has come for fundamental reform.” According to the coalition, digital firms pay only 9% of total business rates despite accounting for a fifth of economic activity, while retail and hospitality contribute 34% of business rates but make up just 9% of the UK economy.
Burnham’s Existing Proposals
Andy Burnham, expected to become Prime Minister as soon as next week, has pledged to reform business rates. His proposals include a 50% increase in the threshold for 100% small business rates relief in England, from a rateable value of £12,000 to £18,000, and extending the upper threshold for tapered relief from £15,000 to £21,000. However, the Real Rates Reform Alliance says he needs to “go further” by adopting their hybrid system.
Additional Pressure from Business Groups
The CBI and Energy UK also stepped up pressure on Tuesday, urging the Government to cut energy costs for companies, claiming it could unlock £130 billion of economic activity by 2050. They want the incoming prime minister to make tackling high energy costs an immediate priority.
