Key facts
- Prime Minister Andy Burnham faces warnings of 'shocks and challenges' from Chancellor Rachel Reeves.
- Business leaders are urging Burnham to expand business rates reform to include a tax on online sales.
- Trade bodies argue that current business rates system unfairly disadvantages high street firms against online operators.
- The Labour manifesto pledges to replace the business rates system to level the playing field between high street and online businesses.
- Burnham has committed to expanding business rates relief for small companies and hiking tax on out-of-town warehouses.
- A coalition proposed a 'hybrid' system with a two per cent tax on online sales to cut business rate bills for bricks-and-mortar firms.
Chancellor Rachel Reeves has cautioned incoming Prime Minister Andy Burnham that he will face 'shocks and challenges' and requires a 'worked-through plan' to govern effectively.
Burnham has been urged by hospitality and retail industry figures to expand his plans to overhaul the business rates system, which they argue unfairly disadvantages high street firms against online operators. Allen Simpson, chief executive of trade body UKHospitality, told City AM that Burnham would be breaking Labour’s manifesto if he did not commit to root-and-branch reform of the tax. The manifesto pledges to 'replace the business rates system' with one that 'levels the playing field between the high street and online giants'.
Burnham has committed to expanding business rates relief to more small companies in exchange for hiking tax on out-of-town warehouses. Simpson described this as a 'good start' but urged the incoming Prime Minister to go further by cutting business rates bills for large hospitality operators as well as small firms, calling the existing system a 'sin tax' on community-based businesses.
A coalition of trade bodies, including UK Hospitality, the Institute of Directors, and the British Independent Retailers Association, has called on Burnham to introduce a new 'hybrid' business rates system. They claim this could cut business rate bills for bricks-and-mortar firms by 37 per cent by applying a two per cent tax on online sales. Ros Morgan, chair of the Real Rates Reform Alliance, is attempting to arrange a meeting with Burnham's team.
Labour's previous changes to the business rates system have been described as 'sticking-plaster solutions' by Morgan. Changes announced by Rachel Reeves at last year's Budget sent bills soaring for thousands of hospitality firms, prompting a £300 million relief package. On top of business rates pressure, Burnham is also facing calls to cut value-added tax (VAT) from 20 to 10 per cent for pubs, bars, cafes, and restaurants.