The chief executive of Tesco has attacked retailers’ £8bn business rates bill as “unsustainable” and in need of “urgent reform”.
Dave Lewis, speaking at the CBI Conference, said that over the past five years, property values had fallen, profits were down but business rates were up “quietly but dramatically”.
Retailers’ £8bn contribution accounted for more than a quarter of the rates bill, and was significantly more than any other sector, he added.
As a result, Mr Lewis said retailers faced a “potentially lethal cocktail” from business rates and the planned increases in the national living wage.
He called on the on the government to take into account the burden on shopkeepers from the national living wage, as well as other initiatives such as the apprenticeship levy, when setting taxes and to discuss plans with retail chains.
“The British Retail Consortium is already attempting to do this but it takes two to tango,” he said.
He said the government needed to be “careful and strategic on regulation and taxation,” and discussion was needed to “iron out unintended consequences”.
There needed to be a tax framework that “actually reflects very real pressures on businesses right now as they navigate unprecedented change”.
While businesses could be innovators and help the government in tough areas, he warned: “A balance has to be struck between allowing investment for growth and collecting taxes through mechanisms like the apprenticeship levy which wipes out the equivalent of our whole training budget.”
Mr Lewis said Tesco’s own business rates bill had risen 35 per cent in the past five years. It was now the biggest tax it paid and was three times the OECD average. For every £1 large UK retailers paid in corporation tax, the business rates burden was £2.31.
At the same time, he said, retailers faced the requirements of the higher national living wage. If benefits were included, Tesco already paid £8.80 to staff outside London.
“Our concern, and the concern of many colleagues, is that there is pressure to increase base pay at the expense of benefits. We don’t think that is the answer,” he said. “We shouldn’t simply strip down employment to an hourly rate or draw arbitrary lines. It’s more complex than that.”
He added “We need a fuller debate aimed at doing the right thing for the people in our industry without imposing more cost without providing individual benefit or business return.”
Big retailers are among the most affected by the national living wage, which comes into effect next April, because they employ large numbers of relatively low-paid workers.