Andy Burnham’s initiative to reform business rates aimed at revitalising high streets could carry a hefty price tag of approximately £880 million each year, according to recent assessments. The frontrunner for the Labour leadership has outlined a strategy that seeks to ease the financial burden on over 140,000 small businesses by shifting the tax load onto larger commercial properties, particularly targeting e-commerce giants like Amazon.
Major Changes to Business Rates
In a bid to bolster local economies, Burnham proposes a significant adjustment to the business rates structure in England. His plan suggests raising the threshold for complete small business rates relief from £12,000 to £18,000, alongside extending the tapered relief cap from £15,000 to £21,000. This reform is designed to alleviate the financial pressures faced by small enterprises, particularly in the retail, hospitality, and leisure sectors, which have been hit hard in recent years.
Ryan, a global tax consultancy firm, has projected that these adjustments could exempt more than 140,000 small premises from paying business rates altogether. Burnham, speaking on LBC earlier this week, highlighted his commitment to supporting high streets while adhering to Labour’s fiscal guidelines. He indicated a willingness to explore tax modifications as part of the party’s manifesto.
Funding the Initiative: A Tax Shift?
Burnham’s proposal raises pressing questions about funding. He has suggested that the financial gap could be filled by increasing property taxes on larger warehouses, specifically targeting online retail giants that have transformed the market landscape. “There is room for movement on tax,” Burnham stated, reiterating the need for larger businesses to contribute more significantly to local economies.
Alex Probyn, a property tax expert at Ryan, noted the importance of supporting small businesses but expressed concern over how such initiatives would be financed. He pointed out that larger commercial properties are already contributing to the existing business rates surtax, which applies to properties with rateable values exceeding £500,000. “The obvious question is whether they are now going to be asked to contribute even more,” he said.
Implications for the High Street
In the lead-up to the recent Makerfield by-election, which Burnham won decisively, he advocated for a more equitable tax system that favoured small businesses over their larger counterparts. During his campaign, he proposed that online giants should bear a greater tax burden to help sustain local shops and pubs.
This shift in taxation could potentially alter the competitive landscape, enabling small businesses to thrive against the backdrop of a challenging economic environment exacerbated by the pandemic. However, the success of these reforms hinges on the ability to maintain a revenue-neutral approach while ensuring that larger corporations contribute fairly.
Recent Reforms and Future Outlook
The government’s recent changes to business rates, introduced in April, imposed a 2.8p surtax on properties valued above £500,000. While this aims to generate additional revenue, many small businesses are bracing for significant tax hikes over the next three years. The balance between supporting local businesses and ensuring that larger firms fulfil their fiscal responsibilities continues to be a contentious issue.
Why it Matters
Burnham’s proposed overhaul of business rates is not just a financial adjustment; it reflects a broader commitment to revitalising the high street and supporting local economies in the face of rapid digital transformation. As small businesses wrestle with mounting challenges, this proposal could provide crucial relief. However, its success will depend on careful implementation and a robust commitment from larger corporations to contribute fairly to the community. The outcome of this initiative could set a precedent for future economic policies aimed at fostering a more equitable business environment in the UK.
