Shopkeepers are urging Andy Burnham to spearhead a significant reform of the UK's business rates system, which they describe as the nation's most unfair tax. The British Independent Retailers Association (BIRA) is advocating for a new 'hybrid' model that would introduce a 2% levy on online sales while simultaneously cutting rates for brick-and-mortar businesses by 37%. BIRA chief executive Andrew Goodacre stated that the current system unfairly penalizes High Street shops simply for operating.
BIRA asserts that the era of minor adjustments is over, demanding a complete overhaul of business rates. The association points to recent reforms by Keir Starmer and Rachel Reeves, which they argue have not adequately leveled the playing field between independent shops and large online retailers. In fact, many small businesses are reportedly facing increased rates over the next three years, contrary to their expectations for significant relief.
Burnham has previously pledged to reduce business rates and expressed a vision of High Streets becoming a symbol of national renewal. With growing pressure on the government, BIRA is lending its support to the Real Rates Reform Alliance, a campaign set to launch on July 14.
Goodacre emphasized that business rates have been a persistent problem because they penalize businesses regardless of profitability, unlike corporation tax. He also noted that unlike employers' National Insurance, business rates do not acknowledge job creation, and can even increase if a shop owner invests in improvements before seeing any return. This, he argues, contradicts government objectives to promote growth.
Independent retailers have adapted to a significantly changed consumer landscape, with online sales now accounting for approximately 35% of the market. Despite reinventing themselves and embracing new technologies, many still face substantial increases in their business rate bills. BIRA is backing the proposed hybrid model, arguing it acknowledges the profound economic shifts since business rates were first introduced in 1990.
Ros Morgan, chief executive of the Heart of London Business Alliance and a participant in the Real Rates Reform Alliance, highlighted that independent retailers are among the hardest hit by recent changes. She believes Burnham has an opportunity to implement the fundamental reform that was promised but not yet delivered by the Labour party. Morgan described the current system as designed for a pre-digital economy and failing to reflect modern business practices.
The proposed hybrid model aims to reduce rates on physical premises by around 37%, returning the multiplier to its 1990 level. Concurrently, it would introduce a 2% levy on eligible online sales, collected via the existing VAT system. This, proponents suggest, would create a broader and fairer tax base, better aligned with the modern economy and potentially increasing overall revenue for the Treasury. The objective, they stress, is not to penalize online retail but to establish a level playing field for all businesses.