Save the High Street: Haldane Urges Burnham to Tax Online Sales More Than Shops
Andy Haldane, former Bank of England chief economist and one-time senior adviser to Prime Minister Andy Burnham, has urged him to tax online sales at a higher rate than physical shop sales to save the high street, ahead of next week's budget on Wednesday.
Save the High Street: Haldane Urges Burnham to Tax Online Sales More Than Shops
A level playing field with online rivals
Andy Haldane, the former Bank of England chief economist who advised Andy Burnham before he entered Downing Street, has called on the prime minister to tax internet sales at a higher rate than sales in physical shops, levelling the playing field for high streets. Haldane, who is president of the British Chambers of Commerce but took no formal government position, wants a wider realignment of the tax system away from favouring online sellers, alongside a review of business rates and faster devolution.
In his own words:
The balance of tax incentives are strongly skewed towards the digital over the physical, and the large over small
He argued the current incentives work against both physical retail and smaller firms, and his intervention comes as part of a series on reversing the decline of British towns, urging the prime minister to act to stop growing numbers of shops across the UK closing.
Business rates and the budget test
Burnham and Chancellor John Healey are preparing their first budget, due on Wednesday, and Haldane wants it to deliver on Labour's manifesto promise to replace the business rates system. He said rates are one reason high streets and some towns are dying, because they are punitive for smaller shops.
The budget is tipped to include measures relevant to that argument:
- A tax crackdown on online marketplaces such as Amazon and eBay, potentially raising up to an extra £1bn by forcing them to collect VAT on behalf of large-scale UK-based and overseas sellers.
- Honouring the promise Burnham made in June to raise the rent valuation threshold at which businesses start paying business rates, taking more small players out of the system altogether.
Growing pressure for an online sales tax
Haldane is not alone in the idea. The Treasury has taken an interest in an IPPR thinktank report calling for an online sales tax to fund lower high street business rates, and retailers including Morrisons, Waterstones and Tesco have long backed such a move.
In April, taxes were increased on warehouses used by online retailers, but the change also hit other large valuable properties such as department stores and hotels, prompting calls for further tweaks. Allen Simpson, boss of UKHospitality, said ministers seemed wary of US retribution if taxes hit big US-based tech firms such as Amazon and eBay, warning that "Trump might hit us with a tariff".
Devolution and the politics of declining town centres
Haldane also urged Labour to give directly elected mayors eventual responsibility for setting local rates of income tax, national insurance and VAT, saying other countries have cracked the code. Healey is preparing a partial step: letting mayors retain a share of income tax in the budget, but is expected to stop short of transferring responsibility for setting local rates from the Treasury.
A regional economic development expert who masterminded Boris Johnson's levelling up plans, before distancing himself from the Conservatives over local government cuts, praised Burnham's devolution agenda but said a business rates revamp would be critical. He called it a very important element of "growth in every postcode" and making the most of devolution outside city-centric mayoralties.
Research also points to the political stakes:
- Public support for Nigel Farage's Reform UK has grown most in the places where high-street vacancy rates have risen most.
In his first weeks in power, Burnham made town centres a top priority after years of decline that left many hollowed out, with shops closed, buildings boarded up and once-busy hubs sitting empty. He announced a business rates cut for pubs, clubs and live music venues from April, and Labour has introduced community ownership funds and a £5.8bn "pride in place" strategy to hand more money and power to local leaders.
The Treasury said the chancellor is cutting business rates by 20% for pubs, social clubs and live music venues, alongside £4.3bn to limit bill rises funded by a higher tax rate for big online warehouses, and is capping corporation tax. A Treasury spokesperson said decisions on tax are a matter for the chancellor at fiscal events, rather than routinely commenting on rumour, speculation or proposals, with the budget due on Wednesday.
