Leaders call for review of ‘unsustainable’ business rates

John Allan, who is also chair of Tesco, will tell a CBI conference today the “broken system” has contributed to many failing high street retailers including Debenhams, The Guardian reported.

“The business rates system has – over time – become uneconomical, unsustainable, and frankly, unintelligible,” Allan will tell the conference.

“Debenhams, once a stronghold of the British high street, fell into administration. But I’ve yet to read an explanation that doesn’t cite business rates as at least part of the cause.”

MPs on the treasury select committee are investigating the impact of business rates and will look at alternatives to the property tax.

Politicians on the committee have received submissions from high-profile retailers, including Boots and Tesco, as to how they can revamp the system.

Dave Lewis, the group chief executive of Tesco, which pays around £700m in business rates each year, has called for the government to impose a 2% online sales tax to help relieve the business rates burden for bricks and mortar retailers.

Boots boss Seb James has urged the government to consider a “business rate levy” based on a retailer’s turnover. The model would use as existing tax, such as VAT, to collect a levy of 1%-2% on all retail businesses, regardless of the sector or business model. It would raise somewhere between £4bn and £8bn. 

James said: “The rates regime is accelerating the visible decline of high streets in many parts of the UK, with a knock-on impact of increased job losses, lower national insurance revenues and a reduction in apprenticeships and skills investment.

“Shops are closing and the resulting impact on local communities goes beyond reduced access to products and services.”