Why now is the time for Jeremy Hunt to rescue the high street

It’s become something of a hardy perennial: whenever a chancellor (and, in Jeremy Hunt, we’re on our fifth since the 2019 general election) is due for one of their big set pieces the British Retail Consortium starts screaming business rates.

This year the campaign started early. A letter signed by 44 retail leaders, representing roughly a third of the industry, calling for a freeze in the business rates multiplier used to calculate each payer’s bill, made its way to No 11 Downing Street in September.

The BRC upped the ante again last week, joining forces with UK Hospitality, the Association of Convenience Stores, the British Independent Retail Association and ukactive (representing gyms and leisure centres) to warn that “businesses, jobs and the future of high streets are at risk” without action on rates.

As things stand, an increase to the multiplier will cost retail businesses £480m and the hospitality sector £234m. An end to current reliefs for smaller businesses would, meanwhile, cost them £750m and £630m respectively.

What’s an embattled chancellor to do, especially when backbenchers with one-track minds and a yen for causing trouble are breathing down his neck, calling upon him to put income tax cuts ahead of everything else.

But maybe the retailers and their allies have a point on this occasion and not just because the 2019 Conservative manifesto promised to “cut the burden of tax on business by reducing business rates” via a review of the system which hasn’t yet materialised.

The impact of the cost of living crisis on consumer-facing businesses was somewhat mitigated by the fact that better-off Britons saved a lot of money through the course of the pandemic and were able to spend some of it in the aftermath.

Last week’s official figures, however, showed that the volume of products sold fell by 0.3 per cent to the lowest level since February 2021, when large parts of the UK were in pandemic-related lockdowns. That was quite a bit worse than forecasters had expected.

While wages have inched ahead of inflation recently, much of the benefit will have been accounted for by higher mortgage rates and/or rents. Meanwhile, the labour market is softening, which will inevitably affect already low consumer confidence and reduce wage settlements.

The entire consumer economy is thus in a perilous position. It needs a break. If it doesn’t get one, Wilko won’t be the last business to go down in flames.

But wait, wouldn’t offering a helping hand just be an example of throwing good money after bad? If the high street is doomed – as we’re often told – what would be the point?

The truth is that high street businesses still pay more than £10bn in business rates a year. To generate such a tax take, there must be some places that are surviving, if not thriving. Earlier this month, M&S posted a big and unexpected hike in profits thanks to a combination of revamped stores and an improved online business. Admittedly M&S has also shut stores, but it has managed to succeed where Woolworths, BHS and Debenhams failed.

But will that overall business rate tax take continue if rates are hiked? That is open to question. Raising this burden could put the successful at risk, which would be a case of the chancellor cutting off his nose to spite his face because if you force businesses to close they stop paying tax.

Perhaps the best argument in favour of taking action is that doing so would not be an inflationary measure. To the contrary. If the aim is to keep a lid on inflation – and it should be because it’s still too high even at 4.6 per cent – measures to reduce businesses’ fixed costs would help.

Now would be an ideal time for Mr Hunt to make good on an apparently long-forgotten manifesto pledge.