• CBI calls on Chancellor to overhaul the way rates are calculated
  • Basing rates on CPI rather than RPI could save businesses £1.6bn over five years
  • Tesco boss Dave Lewis warns government to overhaul rates or face the loss of retail jobs

Businesses are urging the Chancellor to reform business rates and stop basing the tax on the Retail Prices Index measure of inflation.

The renewed call from British business is being led by the Confederation of British Industry, which is piling pressure on George Osborne to instead base the property tax on the typically lower Consumer Prices Index inflation measure.

At the same time, Tesco chief Dave Lewis has warned government that if it does not overhaul the rates system, then retail jobs will be under threat.

Rain Newton-Smith, the CBI’s director of economics, told the Mail on Sunday: ‘We know over the course of this Parliament the overall burden from business rates will go up by £5bn.’

Retailer and business rates campaigner Paul Turner-Mitchell has calculated that a switch to CPI would save companies £1.6bn over the next five years.

He said: ‘CPI is the main government measure for inflation – used for pensions in particular. But for business rates it appears they have made a special case.”

Dramatic overhaul unlikely

The Chancellor is expecting to give more detail into the government’s review of business rates when he unveils the Budget on Wednesday, but retailers won’t be holding their breath for any dramatic overhaul. George Osborne has already said any reform must be ‘fiscally neutral’ and economists believe he will have to admit this week he has missed his targets for cutting the deficit by £5bn.

Meanwhile Dave Lewis slammed business rates as “completely disproportionate” and told The Guardian that the property tax puts traditional retailers operating from physical stores at a disadvantage.

He flagged that retail jobs are already at risk from factors including the Living Wage.

“If the government is not careful, it is going to keep piling on the burden. Business rates are the single biggest tax Tesco pays – £700m a year,” added Lewis.