Open Letter to the Chancellor

We are gathering signatures from business leaders for an open letter to the Chancellor and welcome signatures from CEOs, founders, directors, managing directors and other senior business leaders.

Please send the signatory's name, job title and organisation to realratesreform@holba.london

Open letter to the Chancellor

Dear Chancellor, 

The Hybrid Business Rate Proposal – Fixing a broken and unsustainable business rates system  

I am writing on behalf of the Real Rates Reform Alliance, a coalition that includes UKHospitality, the Institute of Directors, the Association of Town and City Management, the Music Venue Trust, the British Independent Retailers Association and Heart of London Business Alliance.  

Across the UK, too many towns and cities are being held back from realising their economic potential. In 2024 alone, almost 13,000 shops closed (around 37 every day), as rising costs continued to outpace growth. Businesses that invest in communities create jobs, drive productivity and sustain local economies, yet the current business rates system places a disproportionate burden on those businesses, while an increasing share of economic activity now takes place online without making a proportional contribution to the tax base. 

Against this backdrop, we welcomed the recent announcement by the Prime Minister to cut business rates for pubs, clubs and live music venues. However, while this decision recognises some of the inadequacies within the current business rates system, it is not the fundamental change required to fix this broken system once and for all. We believe this moment now presents a unique opportunity to go further and create a business tax system that fixes the current regime’s fundamental imbalances, support firms across all sectors and drive investment in communities and long-term economic growth. 

For more than two decades, governments of all colours have sought to reform business rates through new reliefs, exemptions and differential multipliers for individual sectors. While often well-intentioned, this piecemeal approach has produced an excessively complex set reliefs and special provisions that picks winners and losers without ever fixing the underlying problem. The result is a fundamentally flawed system that is harder to understand, less economically rational and increasingly disconnected from the way the modern economy operates. 

The next phase of business rates reform should build upon sector-specific interventions and modernise the system itself. The tax system should better reflect where economic activity takes place.  

We therefore urge you to consider a fundamental reset, of the sort Labour promised in opposition.  

We believe the Hybrid Business Rate is the comprehensive reform that this moment requires. It combines a lower property-based business rate with a modest levy on eligible online sales across the economy. The levy would be collected through the existing tax system, using an established administrative mechanism that minimises additional costs for businesses and government. Broadening the tax base in this way would generate sufficient revenue to reduce business rates by up to 37%, while maintaining sustainable funding for local government. Carefully designed exemptions would ensure that the levy applies only to eligible online sales, protects small businesses and continues to support investment in physical places and experiences. 

A Hybrid Business Rate is more than a reform of business rates. It is a modern fiscal framework designed for today's economy, one that supports investment and provides combined authorities with a broader and more resilient tax base to underpin devolution, infrastructure, and long-term place-based growth. 

Britain has spent three decades adjusting business rates instead of resolving their fundamental flaws. The time has come to modernise this broken system. 

We call on you to seize this opportunity to create a business tax system that is simpler, fairer, more sustainable, and better aligned with the economy of the future. 

Yours sincerely, 

Ros Morgan Chair, Real Rates Reform Alliance 
Chief Executive, Heart of London Business Alliance 

Allen Simpson, Chief Executive, UKHospitality 

Jonathan Geldart, Director General, Institute of Directors 

Ojay McDonald, Chief Executive, Association of Town and City Management 

Mark Davyd, Chief Executive, Music Venue Trust 

Andrew Goodacre, Chief Executive, British Independent Retailers Association