Labour is expected to force a vote of MPs on cutting business rates after research from the party revealed that up to 332,000 businesses, employing over 800,000 people across the country, are at risk of closure in the next three months.
The House of Commons will consider the motion, which is not binding on the government, during Labour’s opposition day debate on Tuesday afternoon. The opposition party will urge ministers to support high street businesses by cutting rates.
Ahead of the debate, Rachel Reeves said: “Our high street businesses do so much to enrich our lives and our communities, facing huge adversity in the past year. They are struggling right now, with a cliff-edge in rates relief coming up in March, and increasing shortages and supply chain issues increasing pressure and costs.”
The Shadow Chancellor used her speech at Labour’s conference in Brighton last month to outline how Labour in government would “oversee the biggest overhaul of business taxation in a generation”, including scrapping business rates entirely.
Reeves has said that Labour’s proposal would allow businesses to “lead the pack, not watch opportunities go elsewhere”, adding: “Today, we are urging MPs to get behind this urgent change and back cutting business rates for our brilliant British businesses.”
In the short term, Labour has told the government to freeze rates until the next revaluation and increase the threshold for small business rates relief, from £15,000 to £25,000, to give small- and medium-sized businesses a discount on their 2022/23 bill.
The party has said it would pay for its proposals by raising the UK digital services tax from 2% to 12% for 2022/23. According to Labour, the move would raise £2.1bn for the government, allowing it to cut business rates and boost the high street.
Recent research by Opinium found that 68% of businesses want to see a reform of business taxation in a way that levels the playing field between major online retailers and the ‘bricks-and-mortar’ high street companies with which they compete.
The Confederation of British Industry and 41 other leading trade groups, representing 260,000 businesses with nine million employees across the UK, called on Rishi Sunak earlier this month to cut business rates in the upcoming budget.
In their letter, the groups also called for the Chancellor to remove disincentives for green investment. The current system means a firm installing solar panels or heat pumps, which would add to the value of the building, would see its rateable value rise and the tax burden of the business increase.
They told the Chancellor: “If we as a country are to truly level up and meet our net zero commitments, leading by example in the year we host COP26, then unleashing a wave of business investment should be the focus.”
According to the trade associations that signed the letter, including the British Retail Consortium, UK Hospitality and the Federation of Master Builders, up to 50% of business investment is potentially subject to business rates.
Below is the full text of the motion tabled by Labour.
That this House recognises the importance of British businesses to high streets and communities across the UK and the exceptional challenges they face due to the pandemic and rising costs; regrets the government’s current plan to end all temporary support for businesses from April 2022; and calls on the government to support businesses by freezing the business rates multiplier and extending the threshold for small business rates relief from £15,000 rateable value to £25,000 in 2022/23; and further calls on the Chancellor of the Exchequer to update the House in person before January 2022 on his department’s assessment of the impact that removing the temporary business support will have on small businesses.