The Confederation of British Industry (CBI) has backed Labour's plans to scrap business rates if the party is elected.
“Change to this outdated system is chronically overdue," said Tony Danker, CBI director-general. "The Labour party should be applauded for grasping the nettle and putting forward a pro-growth, pro-investment package of reforms that will reflect our green ambitions, spur the economic recovery, and help level up our regions."
The shadow chancellor Rachel Reeves said a Labour government would freeze business rates and plans to replace them with a new system.
Any details of the new policy have yet to be released but Reeves said that it would recognise and reward investment — especially businesses investing in decarbonisation and green technology.
"The CBI is keen to explore further how such a move could be funded and will review the party’s wider tax reform proposals. Ensuring suggested reforms promote the UK as the best place to start and grow a business is critical," said Danker.
The new structure will include more regular revaluation and make sure businesses receive immediate reductions in bills when property values fall, according to Reeves. Labour also wants to incentivise businesses to move into empty properties to revive high streets and local areas.
Labour said the business rates freeze will benefit sectors like retail and hospitality, as well as small businesses (SMEs).
“With businesses just recently starting to recoup their losses a freeze in rates will provide much needed breathing room, as will the rise in rates relief for SMEs. But going it alone on digital services tax is high risk and could undermine the UK's competitiveness at a time when need to be prioritising going for growth," the CBI said.
“The next Labour government will scrap business rates. We will carry out the biggest overhaul of business taxation in a generation, so our businesses can lead the pack, not watch opportunities go elsewhere,” Reeves is expected to say at the Labour party conference on Monday.
The shadow chancellor suggested the current government should be focussing on raising money from private equity companies and big corporations, instead of raising national insurance and council tax and cutting universal credit.
The CBI said: “More than half of business investment is subject to business rates; this unfair, uncompetitive system has become a tax on investment that simply isn’t fit for purpose. Firms will be expecting to see the government’s ongoing review address of some these structural issues at the Budget in October.”
The reforms would be part of a wider review of existing tax reliefs.
“We will look at every single tax break. If it doesn’t deliver for the taxpayer or for the economy then we will scrap it,” Reeves said.