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More than 200 bosses urge Healey to overhaul business rates

More than 200 employers have urged John Healey to deliver business rates reform, proposing a 2 per cent online sales levy to fund a 37 per cent rates cut.

Paul Jones
By Paul Jones
Published
John Healey in front of a Union flag
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More than 200 employers have written to the Chancellor, John Healey, calling for an overhaul of business rates at his Budget on 28 October, proposing a 2 per cent levy on online sales to fund a 37 per cent cut in rates for businesses with physical premises.

The letter, organised by the Real Rates Reform Alliance, says the current system places a “disproportionate burden” on businesses that invest in communities and is holding back investment, jobs and growth. Signatories range from hotelier Sir Rocco Forte and the bosses of jeweller Boodles and The Ritz London to galleries, nurseries, cafes, independent shops and business improvement districts across the UK.

They argue that successive governments’ piecemeal approach of sector reliefs and exemptions has produced a system that “picks winners and losers without ever fixing the underlying problem”.

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The alliance’s Hybrid Business Rate would combine a lower property-based business rate with a levy on eligible online sales. According to the letter, broadening the tax base in this way would raise enough to cut business rates by up to 37 per cent while maintaining funding for local government, with exemptions designed to protect small businesses.

In its published proposal, Heart of London Business Alliance, a founding member of the alliance, says the online element would be assessed and collected through the VAT system and could be introduced from 2027.

The letter acknowledges the Prime Minister’s decision to cut business rates for pubs, clubs and live music venues. Andy Burnham has pledged a 20 per cent cut for pubs, clubs and music venues.

The signatories wrote: “However, while this decision recognises some of the inadequacies within the current business rates system, it is not the fundamental change required to fix this broken system once and for all.”

Rachel Reeves, Healey’s predecessor as Chancellor, had pledged to level the playing field between the high street and online rivals. The letter urges Healey to consider “a fundamental reset, of the sort Labour promised in opposition”. It cites figures showing almost 13,000 shops closed in 2024, around 37 every day.

Forte, chairman of Rocco Forte Hotels, said: “Hotels are facing average business rates increases of 115 per cent over the next three years, a level that will be unsustainable for some and will inevitably kill investment and jobs.

“We need fundamental reform, not another round of piecemeal reliefs for a few sectors. The hybrid business rate offers a practical way to create a fairer system which ensures online businesses make their contribution and reduces the burden on businesses that invest in physical premises.”

Michael Wainwright, managing director of Boodles, a family-owned jeweller for six generations, said: “Businesses that invest in bricks and mortar, employ people and contribute to the life of our high streets should not carry a disproportionate share of the tax burden simply because they have physical premises.”

Ros Morgan, chairman of the Real Rates Reform Alliance, said: “Decades of piecemeal reliefs have failed to fix the underlying problem. The Government now has an opportunity to deliver fundamental reform rather than simply move the burden between sectors.”

Helen Swaby, chief executive of Clarendon Fine Art, which has more than 90 galleries, said business rates were “a significant and unavoidable cost”.

Anda Rowland, director of Anderson & Sheppard, tailors to the King, said: “Business rates are not an abstract tax for a business like ours.”

She added: “We employ highly skilled people and invest in training the next generation of craftspeople, but every increase in the cost of our premises puts greater pressure on our ability to invest in those people and in the future of the business.”

The letter arrives as Healey is reported to be considering changes to small business rates relief at the Budget. The Times has also reported that he plans to make online marketplaces collect sellers’ VAT, with the proceeds expected to fund business rates cuts for high street shops.

The signatories conclude: “We call on you to seize this opportunity to create a business tax system that is simpler, fairer, more sustainable, and better aligned with the economy of the future.”

The letter in full

Dear Chancellor,

Across the UK, too many towns and cities are being held back from realising their economic potential.

In 2024 alone, almost 13,000 shops closed (around 37 every day), as rising costs continued to outpace growth.

Businesses that invest in communities create jobs, drive productivity and sustain local economies, yet the current business rates system places a disproportionate burden on those businesses, while an increasing share of economic activity now takes place online without making a proportional contribution to the tax base.

Against this backdrop, we welcomed the recent announcement by the Prime Minister to cut business rates for pubs, clubs and live music venues.

However, while this decision recognises some of the inadequacies within the current business rates system, it is not the fundamental change required to fix this broken system once and for all.

We believe this moment now presents a unique opportunity to go further and create a business tax system that fixes the current regime’s fundamental imbalances, support firms across all sectors and drive investment in communities and long-term economic growth.

For more than two decades, governments of all colours have sought to reform business rates through new reliefs, exemptions and differential multipliers for individual sectors.

While often well-intentioned, this piecemeal approach has produced an excessively complex set of reliefs and special provisions that picks winners and losers without ever fixing the underlying problem.

The result is a fundamentally flawed system that is harder to understand, less economically rational and increasingly disconnected from the way the modern economy operates.

The next phase of business rates reform should build upon sector-specific interventions and modernise the system itself. The tax system should better reflect where economic activity takes place.

We therefore urge you to consider a fundamental reset, of the sort Labour promised in opposition.

We believe the Hybrid Business Rate is the comprehensive reform that this moment requires.

It combines a lower property-based business rate with a modest levy on eligible online sales across the economy.

The levy would be collected through the existing tax system, using an established administrative mechanism that minimises additional costs for businesses and government.

Broadening the tax base in this way would generate sufficient revenue to reduce business rates by up to 37 per cent, while maintaining sustainable funding for local government.

Carefully designed exemptions would ensure that the levy applies only to eligible online sales, protects small businesses and continues to support investment in physical places and experiences.

A Hybrid Business Rate is more than a reform of business rates. It is a modern fiscal framework designed for today’s economy, one that supports investment and provides combined authorities with a broader and more resilient tax base to underpin devolution, infrastructure, and long-term place-based growth.

Britain has spent three decades adjusting business rates instead of resolving their fundamental flaws. The time has come to modernise this broken system.

We call on you to seize this opportunity to create a business tax system that is simpler, fairer, more sustainable, and better aligned with the economy of the future.

The signatories

Paul Jones
About the author

Paul Jones

Harvard alumni and former New York Times journalist. Editor of Business Matters for over 15 years, the UKs largest business magazine. I am also head of Capital Business Media's automotive division working for clients such as Red Bull Racing, Honda, Aston Martin and Infiniti.

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