‘Smoke and mirrors’: Why high street still faces a £250m tax hike under Healey

Andy Burnham propelled himself to Downing Street by pledging a revival of Britain’s struggling high streets. Felix Armstrong asks: has John Healey delivered it? Among the sectors clamouring for John Healey’s attention ahead of his maiden Budget, none were louder than those calling for the government to revitalise Britain’s ailing high street retailers. Shuttered shops, peeling paint and lifeless town squares have become the norm and are in dire need of support, they had told Healey.

Bosses of retail juggernauts including Tesco, Sainsbury’s and B&Q owner Kingfisher were among those lending their voice to this cause, though their influence was eclipsed by one man. “I’ve heard calls from members across this house,” John Healey said at the despatch box on Wednesday. “A call from one member in particular” was the loudest, he said, “my right honourable friend the member for Makerfield,” gesturing to the Prime Minister. Burnham made his pledge to bring new life to British town centres a central pillar of his campaign to become Makerfield’s MP, and later a guiding principle of his still-young premiership.

Healey said his first Budget delivers on this ambition, freeing thousands of businesses from suffocating tax burdens and allowing them to invest again in jobs and their premises. He set out plans to hike the threshold at which small firms receive business rates relief from £12,000 to £18,000, exempting 70,000 more companies from the tax, and “freeze” business rates bills for all other retail, hospitality and leisure firms. The move, funded by a tax raid on gambling firms and a VAT crackdown on e-commerce platforms, will “help provide the funding for our pubs, cafes and shops to thrive,” the Chancellor said.

But retail bosses are not so sure. The British Retail Consortium (BRC), which represents some of the industry’s biggest names, including Tesco, Sainsbury’s and Marks & Spencer, dubbed Healey’s policies a “smoke and mirrors announcement”. Though the Chancellor said business rates would be “frozen” for these industries they are still set to rise by 3.5 per cent, in line with inflation, meaning the high street will be saddled with extra £250m in business rates bills next April.

Healey’s ‘underhand trick’ Helen Dickinson, the BRC’s chief executive, said these rising bills will deal “another body blow to high streets already struggling with rising costs and empty units”. Just two weeks ago Healey met with high street bosses to ensure them that he would tackle the burden of business rates, as well as helping firms to take more young people off the growing list of those not in education, employment or training (Neet).

The measure was designed to shield companies who currently receive transitional relief on business rates from rising bills, but it is understood that this is relevant to only a small number of high street firms. Retail bosses are disappointed by the Budget, which they had expected to deliver some cuts to employment costs and more meaningful changes to business rates, it is understood. On top of the lack of significant tax cuts, retailers feel let down by the Chancellor’s attempt to position the Budget as a major boost for British high streets.

Framing a £250m rise in business rates as a “freeze” feels like an “underhand trick”, one industry figure said. Sam Waller, a consumer markets expert at consultancy PwC, said the retail, hospitality and leisure sectors “had a lot riding” on this Budget because Burnham had put “the revival of Britain’s high streets front and centre of his premiership”. “[But] there was no movement on some of the high street’s biggest asks around lower VAT for hospitality, the restoration of tourist tax refunds, or an easing of the payroll pressures introduced in the last Budget,” he said.

Ros Morgan, chief executive of the Heart of London Business Alliance, said “serious questions” remained about whether the Budget went “far enough” towards the government’s pledge to boost Britain’s high streets. The loudest campaigner for a retail revival, Andy Burnham, may be content with Healey’s efforts but, for retailers, his “steady-as-she-goes” Budget fell far short of satisfying those on Britain’s high streets.