OVER 200 business leaders from across the UK have written to Chancellor John Healey calling for fundamental reform of the “broken” business rates system, warning that decades of piecemeal changes have failed to address the underlying problems with the tax.
The open letter, organised by the Real Rates Reform Alliance, brings together senior figures from retail, hospitality, tourism, property, leisure, culture, professional services and businesses operating on high streets and in town and city centres across the country.
The signatories include leaders of some of Britain’s best-known independent and high street businesses, alongside representatives of businesses and organisations operating across the regions and nations of the UK.
They call for fundamental reform of the rates system to level the playing field between online and bricks and mortar businesses, enabling a cut in bills of over a third for high streets.
Among those signing are the bosses of Boodles, The Savoy, Goodwood Estate Company, British BIDs, the UK Cinema Association, the Institute of Hospitality, Clarendon Fine Art, Rocco Forte Hotels, Soho Estates Ltd, the Hippodrome Casino, Delfont Mackintosh Theatres, Gieves & Hawkes, Theo Fennell, Cumbria Tourism, Retail NI, Sophie’s Steakhouse, The Ritz, Home House, F Hinds, The Entertainer, David Morris International, Capital Arches Group and Jo Hansford.
The breadth of the signatories extends from major established businesses and luxury retailers to independent restaurants, pubs, galleries, hotels, markets, specialist retailers and businesses based across the country.
The letter warns that the current business rates system is fundamentally out of step with the modern economy, placing a disproportionate burden on businesses that invest in physical premises, employ people and contribute to their local communities.
It argues that successive governments have attempted to address the problem through new reliefs, exemptions and differential multipliers for individual sectors, creating an increasingly complicated system that “picks winners and losers without ever fixing the underlying problem.
Businesses that invest in communities create jobs, drive productivity and sustain local economies, yet the current business rates system places a disproportionate burden on those businesses, while an increasing share of economic activity now takes place online without making a proportional contribution to the tax base,” the letter says.
The business leaders are calling for a Hybrid Business Rate, combining a substantially lower property-based business rate with a modest two per cent levy on eligible online sales across the economy.
Under the proposal, broadening the tax base would allow business rates on physical premises to be reduced by up to 37 per cent, while maintaining sustainable funding for local government.
The letter comes as the Government considers the future of business rates and ahead of the Autumn Budget on October 28.
The signatories welcome the Government’s decision to cut business rates for pubs, clubs and live music venues, but argue that sector-specific interventions are no substitute for fundamental reform of the system as a whole.
They say the current approach has been tried for more than two decades and that the next stage of reform should address the underlying imbalance between businesses operating from physical premises and the growing share of economic activity taking place online.
The letter says: “The next phase of business rates reform should build upon sector-specific interventions and modernise the system itself. The tax system should better reflect where economic activity takes place.”
Ros Morgan, chair of the Real Rates Reform Alliance, said: “This letter shows that business rates reform is a concern across every sector of business and right across the UK. Businesses recognise that the current system is holding back investment, growth and jobs.
“Decades of piecemeal reliefs have failed to fix the underlying problem. The Government now has an opportunity to deliver fundamental reform rather than simply move the burden between sectors.
“The Hybrid Business Rate would cut the burden on businesses investing in physical places while broadening the tax base. With the Budget approaching, the Chancellor should seize this opportunity to deliver lasting reform.”
Sir Rocco Forte, chairman of Rocco Forte Hotels, said: “Hotels are facing average business rates increases of 115 per cent over the next three years, a level that will be unsustainable for some and will inevitably kill investment and jobs.
“We need fundamental reform, not another round of piecemeal reliefs for a few sectors. The Hybrid Business Rate offers a practical way to create a fairer system which ensures online businesses make their contribution and reduces the burden on businesses that invest in physical premises.
Helen Swaby, CEO of Clarendon Fine Art, said: “With more than 90 galleries, our physical presence is at the heart of what we do. Business rates are therefore a significant and unavoidable cost. We need a system that recognises the value bricks-and-mortar businesses bring to our high streets and town centres, rather than placing a disproportionate burden on those that invest in them.
“That is why we support the Real Rates Reform Alliance’s campaign for a Hybrid Business Rate. By broadening the tax base, the proposal would cut business rates for bricks-and-mortar businesses by more than a third. For companies like ours, that would create greater scope to invest, grow, create jobs and bring more art to the UK’s high streets.
“If we want thriving town centres and successful businesses across the country, we need a rates system that supports investment in physical places as part of thriving communities.”
Michael Wainwright, managing director of Boodles, a family-owned jeweller for six generations, said: “Businesses that invest in bricks and mortar, employ people and contribute to the life of our high streets should not carry a disproportionate share of the tax burden simply because they have physical premises. At Boodles, our stores are an important part of how we engage with customers and showcase British design and craftsmanship, but the cost of occupying those premises is a significant fixed cost.
“The answer is not another series of short-term reliefs or sector-specific adjustments. We need to rebalance the system so that the growing contribution of online commerce is properly reflected in the tax base, while businesses that invest in physical places can see a substantial reduction in their rates bills.
“That is why I support the Real Rates Reform Alliance’s Hybrid Business Rate proposal. A modest levy on eligible online sales, combined with a significant cut in business rates for bricks-and-mortar businesses, would create a fairer system and give businesses greater scope to invest in their people, premises and future growth.”
Anda Rowland, director of Anderson & Sheppard, tailors to the King, said: “Business rates are not an abstract tax for a business like ours. We employ highly skilled people and invest in training the next generation of craftspeople, but every increase in the cost of our premises puts greater pressure on our ability to invest in those people and in the future of the business.
“The impact also extends beyond our own team. We rely on a network of specialist suppliers, cloth makers and skilled craftspeople, so when the cost of running physical businesses rises repeatedly, that pressure travels through the supply chain and makes it harder for those businesses to invest and employ too.
“We need a business rates system that recognises the value created by businesses that invest in people, skills and physical places. The Hybrid Business Rate offers a practical way to reduce that burden while creating a fairer tax base for the modern economy, which is why I am pleased to support the Real Rates Reform Alliance.”
The Real Rates Reform Alliance was launched earlier this year by UKHospitality, the Institute of Directors, the Association of Town and City Management, the Music Venue Trust, the British Independent Retailers Association and Heart of London Business Alliance.
Together, the organisations represent more than 28,000 businesses and business leaders. The Alliance is campaigning for a Hybrid Business Rate that would significantly reduce property-based business rates while introducing a levy of two per cent on eligible online sales.
The campaign argues that the proposal would create a broader and more resilient tax base, while supporting investment in high streets, town centres and communities.
The letter concludes: “Britain has spent three decades adjusting business rates instead of resolving their fundamental flaws. The time has come to modernise this broken system.”
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