Government faces criticism for limited business rates review

The UK government has launched a targeted review into the calculation of business rates bills for the hospitality sector, a move that has drawn sharp criticism from industry bodies who argue it represents a piecemeal approach to a system in urgent need of wholesale reform. The Treasury confirmed on Monday that it is examining the property valuations which determine the tax liabilities for pubs and hotels, with the aim of making these assessments fairer for the businesses concerned. This specific focus has led critics to accuse Prime Minister Andy Burnham of failing to honour the Labour party’s manifesto pledge to replace the existing tax framework entirely.

Jerry Schurder, described by the government as a business rates expert, has been appointed to lead the inquiry. Ministers stated that the review is designed to address the complexities of the current valuation process, which has been ridiculed by hospitality leaders. Some operators have warned that rural venues are effectively subject to a tax on desirable features, as the system counts attributes such as waterfront views and play areas towards the overall value of the property. This development follows Burnham’s announcement last month of a twenty per cent reduction in business rates bills for pubs, social clubs, and live music venues, a measure intended to provide financial relief to the sector.

However, the British Chambers of Commerce has criticised the government for restricting the scope of the review to only pubs and hotels. Jonny Haseldine, the group’s head of business environment policy, stated that while the move is welcome for the specific businesses represented, the review should cover every sector. He argued that the full reform of business rates, which was promised during the last election, is urgently needed and that the continued piecemeal approach is incorrect. The review will not consider the rates paid by retailers, despite warnings that high street shops are being saddled with substantial bills. The British Retail Consortium, which represents major retailers including Tesco, Marks and Spencer, and Waterstones, welcomed the appointment of Schurder but stressed that the needs of retailers must not be overlooked. Tom Ironside, the trade body’s director of business and regulation, noted that retail represents five per cent of the economy but pays twenty per cent of the business rates bills.

Restaurants are also excluded from the review, a decision that comes amid reports that the UK’s top one hundred restaurant groups saw profits fall by forty four per cent to two hundred and four million pounds in the last year. Consultancy group UHY Hacker Young has indicated that rising employment costs and business rates have made it far more difficult for these firms to convert sales into profit. The Real Rates Reform Alliance, which has urged the Prime Minister to replace business rates with a new system, described the narrowly focused review as disappointing. Ros Morgan, the group’s chair, stated that the government cannot keep tinkering with business rates one sector at a time and that any lasting solution must be part of a wider overhaul. The Alliance has called for a thirty seven per cent cut in business rates for bricks-and-mortar businesses, funded by a two per cent levy on online sales, arguing this would dramatically reduce the burden on businesses with physical premises.

During his campaign for the Makerfield by-election, Burnham had supported increasing tax on warehouses to fund business rates cuts for high street firms, a proposal opposed by some retailers who fear it would push up prices. Labour’s 2024 election manifesto pledged to replace the business rates system to raise the same revenue in a fairer way. Financial Secretary to the Treasury James Murray said the government is committed to making the system fairer, adding that the review of valuations is a step towards building a fairer system for the future.