News & Insights
Shadow Chancellor Rachel Reeves has called on the government to freeze business rates next year and has stated that Labour would scrap business rates altogether.
Labour would replace the old business rates system with completely different alternative which would, according to Reeves, “incentivize investment, promote entrepreneurship; reward businesses that move into empty premises”.
Reeves spoke of the many brick and mortar retail tenants who had “faced huge adversity in the past year”, with COVID-19 restrictions having an impact on their ability to open their premises whilst still being expected to pay rent to their landlords.
Reeves estimates that “four out of five businesses…[could] close outlets if the government doesn’t act”. Many are still struggling, despite the easing of restrictions on July 19th, and this is likely to get worse once business rates relief comes to an end in March 2022.
Reeves thinks this could be the final straw for those businesses who are barely getting by.
She described the current taxation system as unjust, stating that “high street businesses pay over 1/3 of business rates, despite making up only 15% of the overall economy”.
She also gave the example of Amazon, an example of one of the online companies she described as “[having] thrived during the pandemic”, owing to the fact that they were still able to operate despite the COVID-19 restrictions. She highlighted how “when Amazon’s revenues went up by almost £2bn last year. How much did their tax go up? Less than one percent”.
This new tax system proposed by Labour would aim to “level the playing field” between the taxing of “online giants” and brick and mortar businesses.
Reeves speech comes a week after Steve Holmes, Chief Executive of the group Azzurri which owns Zizi and ASK Italian restaurants, denounced business rates as outdated and discussed how they have made it harder for businesses, particularly in the hospitality industry, to offer higher wages to attract skilled staff.
Brett Powis, owner of three hotels in the Torquay area, has struggled to hire enough staff to deal with the increase in demand his hotels saw over “the busiest summertime boom” the Devon resort has seen in decades.
“We struggled, but got through by paying higher wages, bonuses and said ‘Can you do as many hours as you can?’ We had just about enough, but there are other hotels who weren’t able to open because they couldn’t get the staff.”
Holmes believes that the current business rates system is exacerbating problems experienced by businesses in the hospitality industry, something that will be compounded further by the imminent end of the furlough scheme.