Labour pledges to scrap business rates

A future Labour government would scrap business rates in England, shadow chancellor Rachel Reeves has said.

Delivering her speech at the Labour Party conference in Brighton, Reeves called on the government to take immediate action to help high street businesses by freezing business rates and increasing small business rates relief so more firms pay no business rates at all.

To pay for it, she said the digital services tax, paid by large online firms like Facebook and Amazon, should be increased from 2% to 12%.

A future Labour government would go even further, Reeves pledged, by "overseeing the biggest overhaul of business taxation in a generation" and scrapping business rates in England completely.

She said the system to replace it "will incentivise investment, promote entrepreneurship and reward businesses that move into empty premises".

Reaction from small business owners

Retailers welcomed the announcement.

Enterprise Nation Rebecca Saunders is the founder of Seekology, which showcases independent beauty and wellbeing brands. She had to close her first high street shop due to the pandemic and has subsequently run a series of pop-up shops, helping over 100 independent brands into physical retail.

"Since Seekology is a small retailer, the cost of business rates on top of rents has made it impossible to commit to a permanent lease," Rebecca said. "I've looked at empty shops as potential sites for Seekology where business rates are about 80% of the annual rent!

"Business rates have been in need of reform for many years, so I welcome change that supports growth and innovation on high streets - especially if it enables start-ups and small companies to compete on a wider stage.

"It will need to be done in conjunction with additional measures including - potentially - online taxes, the closure of other tax loopholes and other measures to support independent retail, to ensure that companies like Seekology face a level playing field compared to those with international operations. This is critical for the future of high streets, and also to ensure retail entrepreneurs are given a chance."

Mike Turner, co-founder of tea business Bird & Blend, which has 14 stores across the UK, said: "As a retailer with both physical one online sides, we fully support the proposal to cut and then end business rates and replace them with a new scheme fit for the modern world.

"Business rates are a legacy scheme that has been damaging high streets, and harming jobs for too long. In a post-pandemic world, where retail has changed massively and landlords are often negotiating turnover based rents - a tax scheme that discourages physical retail makes even less sense so we're excited to hear proposals for an updated tax system fit for the world we live in."

Emma Jones, founder of Enterprise Nation, also welcomed efforts to deal with the negative impact of business rates but cautioned on using the digital services tax to pay for it.

"Having seen business rates prevent small businesses from setting up shop, we look forward to seeing details of the new modern business tax that Labour will put in place of rates and our one request is that it be fair and simple," she said.

"I am nervous about the proposed increase in digital services tax as it shows a lack of understanding on how small businesses start and grow. Major social media and trading platforms enable people to become their own boss and build their own livelihood. Through taxing the platforms, you are taxing small businesses operating on them and this is a tax on revenue, not profit. My fear is this would lead to online selling becoming untenable for thousands of small businesses and I cannot believe this is the desired effect."

Supporting the 'everyday economy'

The announcement was part of Reeves' efforts to court small businesses by saying the party's approach is "unapologetically pro-business". She added: "It's not about just about a few big firms at the top, it's about all of our businesses, large and small, that need to be feeling the benefits of new technology and new investments."

Reeves said Labour will support the "everyday economy", such as the retail, hospitality and care sectors "which have never before been the focus of industrial strategy."