Abolish rates for high-street firms: calculation note

Central fiscal result

+£2.5bn - Net fiscal impact in 2028-29

Low case: +£0.8bn. High case: +£6.0bn. Positive numbers are fiscal costs or borrowing pressure. Negative numbers are Exchequer savings or receipts.

Scenario and baseline

• Model rates abolition for qualifying high-street firms by 2028-29.
• Central case assumes £2.5bn net annual relief.
• Baseline uses business-rates receipts and existing reliefs.
• No replacement online tax is included centrally.

Affected population

• Affected population is business premises, not companies or workers.
• Direct exposure includes shops, pubs, cafes and local services.
• Indirect exposure includes landlords, councils and consumers.
• Existing small-business relief reduces additional gains for some premises.

Gross impact

• Central relief cost: about £3bn gross.
• Offsetting tax receipts from fewer closures: £0.5bn.
• High case assumes broad eligibility and weak offsets.
• No dynamic town-centre uplift is scored.

Fiscal build-up, central case

• Lost business-rates revenue: +£3.0bn
• Higher receipts from surviving firms: -£0.4bn
• Administration and boundary policing: +£0.1bn
• Local funding adjustment: -£0.2bn

Central net impact: +£2.5bn in 2028-29.

Behaviour and pass-through

• Low case assumes narrow eligibility and strong existing relief overlap.
• Central case assumes targeted retail, hospitality and local-service relief.
• High case assumes broad premises coverage and landlord capture.
• Price pass-through to consumers is uncertain and not fiscal-scored.
• Business survival effects are treated cautiously.

Phasing

• 2026-27: +£0.5bn. Preparation or partial implementation.
• 2027-28: +£1.8bn. Main ramp-up year.
• 2028-29: +£2.5bn. Target-year central estimate.
• 2029-30: +£2.5bn. Continuation at steady-state assumptions.

Main source groups

• Conservative Party, "Stronger High Streets" (2026): Used to define the pledge wording, policy scope and implementation scenario being modelled.
• Ministry of Housing, Communities and Local Government, "Non-domestic rating collected by councils: forecast for 2026 to 2027" (2026): Forecast business-rates data include receipts and reliefs collected by councils; anchors possible high-street rate relief costs.
• Office for Budget Responsibility, "Economic and fiscal outlook: March 2026" (2026): The OBR forecast sets the macro, borrowing and receipts baseline used for broad fiscal context; prevents treating tax cuts or spending changes as self-financing.
• HM Revenue and Customs, "Direct effects of illustrative tax changes bulletin" (2025): HMRC provides direct-effect estimates for illustrative changes to SDLT, VAT, fuel duties and other taxes; anchors tax costs before behavioural and macro adjustments.
• Mirrlees and review team, "Tax by Design: The Mirrlees Review" (Institute for Fiscal Studies and Oxford University Press, 2011): Efficient tax systems use broad bases, coherent rates and few arbitrary reliefs; frames the efficiency trade-off when tax cuts are not matched by credible funding.
• Saez, Slemrod and Giertz, "The Elasticity of Taxable Income with Respect to Marginal Tax Rates" (Journal of Economic Literature, 2012): Higher-income taxpayers respond more strongly to tax-rate changes through avoidance, timing and real behaviour; important where the policy changes top-pay, capital or business-tax incentives.
• Conservative Party, "Our Plan for Britain" (2026): Used to define the pledge wording, policy scope and implementation scenario being modelled.