MPs call for reforms to ‘outdated’ business rate system

Sir Gavin Williamson (Con) began the debate by suggesting that reducing business rates relief for retail, hospitality and leisure (RHL) businesses from 75% to 40% has significantly impacted businesses, especially on high streets. He claimed that a typical shop has seen its bill rise from £3,589 to £8,613 and a typical restaurant from £5,051 to £12,122. He cited an assessment by the Campaign for Real Ale that 125 pubs have already closed since 1 April.

The Conservative MP argued that the current business rate system is outdated, adding: “there are concerns that, whether or not under pressure from President Trump, when it comes to changing how digital services taxes will be done, the Treasury might come for more money from small businesses, the high street and family companies”.

Dr Al Pinkerton (Lib Dem) echoed Williamson and said that the system needs to be reformed to reflect economic realities across all regions, not just deprived ones, and to support councils. He explained: “It cannot be right that struggling local councils such as mine… are expected to levy rates from local businesses, with local residents and business owners reasonably expecting that those funds will be used to enhance the local community and business environment, only for 97.5% of those funds to be spirited away by national government”.

Gagan Mohindra (Con) also criticised the current system, arguing that discouraging entrepreneurs weakens the tax base. He said that business owners should be supported and made a plea to the minister to create the policies that incentivise best behaviour.

“If business rates are not right, we are not incentivising the right mix in the community”, stated Mike Martin (Lib Dem), who believed the current business rates penalise investment. He said that if someone upgrades their premises, they pay more tax – this is a “tax on investment”, adding that online retailers like Amazon pay far less proportionally than local businesses.

Other Conservative MPs including Lewis Cocking and Stuart Anderson also expressed concerns. Cocking suggested that while the government has promised to support high streets, no pro-growth policies have been delivered. Anderson called on the government to reduce VAT to 12.5% and restore the 75% business rates relief until a new system is in place.

Steve Darling (Lib Dem) raised the increase in employers’ National Insurance suggesting that, combined with lowering the reliefs, it has hurt many businesses. He believed that a land value levy would help rebalance the system, adding: “an element of the government’s scheme is a cap of £100,000 on what chains pay, and I fear that the books will be balanced on the backs of the poorer independents in our town centres”.

The Shadow Exchequer Secretary, James Wild, praised previous Conservative government policies, saying that they helped high streets with doubled small business relief and the towns fund. He continued that cutting relief to 40% now means 250,000 businesses pay £925 million more. He cited the British Independent Retailers Association, which estimates that a shop with a rateable value of £60,000 will pay nearly £20,000 this year, up from only £8,000 in 2024.

Responding to the debate, the Exchequer Secretary to the Treasury, James Murray, recognised that business rates fall too heavily on property-intensive sectors, emphasising that it is a priority for the government to ensure that the burden is permanently rebalanced and that high street businesses are protected. He continued that in last year’s autumn Budget, the government announced permanent lower tax rates for RHL properties with rateable values under £500,000 from 2026–27 to support high street investment. He said two new RHL multipliers will be introduced—one for properties below £51,000 and one for those between £51,000 and £500,000—replacing the old system and removing the cash cap.

Reminding MPs of the recently passed Non-Domestic Rating (Multipliers and Private Schools) Act 2025, the minister said it gives the government flexibility in the creation of the new multipliers and their rates within appropriate guardrails, so that the government do not have “unfettered powers”. The rate for any higher multiplier cannot be more than 10p higher than the national standard multiplier, while the lower RHL multipliers cannot be less than 20p lower than the national small business multiplier.

The minister concluded his remarks by confirming that the permanently lower tax rates for RHL properties will take effect from April 2026. He told the House that, while some MPs have called for higher relief this year, maintaining the 75% relief would have cost £2.4 billion and wasn’t fiscally sustainable.

You can read the full debate here.