Government & Legislation

Treasury Committee urges MPs to reform ‘broken’ business rates

The government has been urged to fix the “broken” business rates system as it is continuing to affect high street retailers, a Treasury committee has said.

An influential group of MPs has asked the government to examine alternatives to property tax, which puts more pressure on high street retailers than online.

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Branding the current business rates system as “unfair” and “broken,” the report published today (31 October), said the government should “acknowledge this and explain whether it is government policy to allow the growth in business rates to outpace inflation”. 

Alison McGovern, the treasury committee’s lead member for inquiry said: “It’s abundantly clear that the current business rates system is broken.The tax represents an increasing burden on businesses, particularly those with a physical high street presence struggling to remain competitive.”

“The government must ensure that business rates align with its aim to boost productivity and do not disincentive growth.

She added: “The committee was presented with numerous alternatives to the current system, but none of them had been sufficiently modelled to examine who would be the winners and losers of any change.

“The government must examine such alternatives in time for Spring Statement 2020.”

The report follows the appointment of Mel Stride as the new committee chairman.

BRC chief executive Helen Dickinson said: “Business rates are a significant driver of store closures and job losses and retailers have been getting a raw deal for too long.”

“While retail accounts for five per cent of the economy, it pays 25% of the business rates. Such imbalances can be seen in transitional relief – identified by the committee as needing reform – which takes £1.3 billion from retailers and redistributes most of it to other industries.

She added: “While the committee is right to recommend that government reviews alternatives to the broken business rates system, it must not do this in isolation. 

“Any review must look at the whole suite of business taxation with the aim of creating a tax system that is fit for the 21st century.”

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