Plans by Prime Minister-in-waiting Andy Burnham to overhaul business rates for smaller High Street firms could incur an annual cost of approximately £880 million, according to new analysis by global tax firm Ryan. Burnham has pledged a significant reform of business rates if he enters Downing Street, aiming to bolster 'family-owned businesses.'
This forecast has amplified concerns regarding potential tax increases under a Burnham government. Burnham, formerly the Greater Manchester mayor, has previously indicated that there remains 'some room' within Labour's manifesto for 'movement on tax.' He has expressed support for wealth taxes, including a 'land value tax,' and has considered changes to inheritance tax and a potential increase in capital gains tax.
Burnham is currently engaged in 'access talks' with the civil service as he prepares for a potential transition to office on July 20. However, reports suggest jitters about the composition of his transition team, with Burnham having yet to announce key Cabinet positions, including the Chancellor. Discussions with Whitehall officials are reportedly being led by Burnham alongside ally Louise Haigh and chief of staff James Purnell. One Labour figure expressed that Burnham's delay in naming senior appointments is hindering meaningful discussions with Cabinet Secretary Antonia Romeo and her team, emphasizing that decisions need to be made to avoid a 'moment of risk.' Conversely, a senior Whitehall official noted that Burnham's team includes individuals with prior government experience, suggesting a level of preparedness and a lack of panic.
During his Makerfield by-election campaign, Burnham committed to raising the threshold for business rates relief, effectively eliminating the tax for very small businesses like cafes, shops, and hairdressers. He also proposed a 20 percent reduction in business rates for pubs and music venues. His team estimated the cost of these measures at around £100 million for pubs and an additional £250 million for eliminating rates for other small businesses, aiming to raise approximately £500 million by increasing taxes on large online retailers and their warehouses, and by addressing issues with empty commercial properties and tax evasion.
The Ryan analysis forecasts that Burnham's proposed policy could exempt over 140,000 additional small businesses from paying business rates. This would translate to a reduction in business rates liabilities of around £880 million, based on government tax data. The proposal includes increasing the threshold for 100 percent small business rates relief from a rateable value of £12,000 to £18,000 and extending the upper threshold for tapered relief to £21,000 from the current £15,000.
Alex Probyn, a practice leader for property tax at Ryan, acknowledged the positive objective of supporting small businesses but raised concerns about funding, particularly if revenue neutrality is a requirement. He noted that larger commercial properties already contribute significantly to subsidizing lower liabilities for retail, hospitality, and leisure sectors, questioning if they would face further increased contributions. Senior Conservative MP Andrew Griffith, shadow business secretary, welcomed any support for small businesses but argued that shifting the tax burden to larger businesses does not encourage economic growth and that Labour misunderstands the relationship between taxation and growth.