PolicyLens

Conservative - Business tax

Abolish rates for high-street firms

Remove business rates for qualifying high-street businesses, with replacement funding or online levy unspecified.

Last updated: May 2026.

Read the policy-specific methodology note

Rates baseline

The scenario removes business rates for high-street firms such as shops, pubs and local services. The fiscal range is wide because eligibility, premises value caps and replacement taxes are not specified.

  • Business rates are locally collected but fiscally important.
  • Small premises already receive reliefs.
  • Eligibility design drives the cost.

Core trade-offs

High-street firms gain lower fixed costs, which may reduce closures and support local employment. The public sector loses a stable tax base unless the policy is tightly targeted or replaced.

  • High-street occupiers gain most directly.
  • Councils or central government bear revenue loss.
  • Landlords may capture some relief.

Fiscal impact by 2028-29

+GBP 0.8bn to +GBP 6.0bn. Central estimate: +GBP 2.5bn.

  • Positive numbers mean net fiscal cost; negative numbers mean Exchequer savings.
  • Main cost is lost business-rates revenue.
  • Offsets depend on fewer closures and higher taxable activity.
  • Eligibility is not yet defined.
  • This is not an official costing.

Economic impact by 2028-29

  • Jobs: May protect local retail and hospitality jobs; deadweight gains likely for firms that would survive anyway.
  • Wages: No guaranteed wage rise; lower fixed costs may support hours in exposed firms.
  • Prices: Some prices may fall, but landlords can capture relief through rents.
  • GDP / productivity: Mixed: survival gains for local services, but inefficient premises may be preserved.

Assessment

A targeted rates cut can help exposed high-street firms, but the fiscal cost depends almost entirely on eligibility. Relief may also be captured by landlords or support low-productivity premises unless paired with planning and town-centre reform.

Confidence: Low. Business-rates baselines are available; the qualifying tax base is not defined by the pledge.

Main risks

  • Landlord capture: Relief can raise commercial rents, shifting gains away from occupiers.
  • Council funding: Local-government funding must be replaced or services are cut.
  • Poor targeting: Broad relief subsidises firms that were not at risk of closure.

Safeguards

  • Define premises and sector eligibility.
  • Prevent automatic rent capture in leases.
  • Show the replacement funding source.

Academic evidence

Mirrlees and review team, Institute for Fiscal Studies and Oxford University Press, 2011

Tax design principles

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.

Tax by Design: The Mirrlees Review (2011)

UK government evidence

Office for Budget Responsibility, 2026

OBR fiscal forecast

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.

Economic and fiscal outlook: March 2026 (2026)

Sources

Other Conservative policies

PolicyLens estimates are illustrative and should not be treated as official costings.