# Labour Government Faces Backlash Over £1.5 Billion Business Rates Increase Chancellor John Healey's budget strategy triggers accusations of stealth taxation on retail and hospitality. - **Source:** [Daily Express :: Finance Feed](https://www.express.co.uk) - **Published:** 2026-10-31 - **Topic:** [Business](https://brifing.si/c/business) - **Original article:** - **On Brifing:** https://brifing.si/s/1b284a7e-be53-4054-9809-cb64229b79ce ## Budget Policy Shift Chancellor John Healey announced a significant adjustment to business rates in the recent Budget. The plan increases the threshold for 100% small business rates relief from £12,000 to £18,000. This measure aims to remove 70,000 firms from the tax burden, specifically targeting struggling retail, hospitality, and leisure sectors across the country. ## Targeted Sector Exemptions The Treasury reports that the relief will benefit 3,500 pubs, 3,900 restaurants, and 2,200 cafes. Additionally, 1,700 hairdressers and beauty salons will gain exemption from business rates. These changes are designed to provide immediate fiscal support to high street businesses, though the funding mechanism behind these exemptions has sparked intense political debate. ## The Stealth Tax Allegation Critics argue the relief is funded by a £1.5 billion stealth tax hike. Analysis by the FT and tax firm Ryan suggests the relief is financed through a two-year extension of a temporary business rate charge. This supplement, originally intended to expire in April 2026, will now remain in place for longer. ## Rateable Value Supplement The supplement adds £1 to every £100 of a premises' rateable value. Originally introduced by Rachel Reeves, this charge was meant to last only one year. Extending it for two additional years generates the £1.5 billion needed to cover the small business relief, effectively shifting the financial burden between different business tiers. ## Industry Expert Criticism Alex Probyn of Ryan described the move as a stealth tax rise for businesses that expected costs to drop next April. He noted that companies cannot plan with confidence when the government shifts end dates beyond previous commitments. This unpredictability complicates long-term financial forecasting for firms already managing tight operating margins. ## Retail Sector Impact Helen Dickinson of the British Retail Consortium labeled the announcement as smoke and mirrors. While the small business relief is welcomed, the retail sector faces a 3.5% increase in real terms. This will add approximately £250 million to retailers' bills next April, further straining high streets currently dealing with empty units. ## Structural Economic Imbalance Retail accounts for roughly 5% of the UK economy but contributes over 20% of total business rates. Industry leaders argue that increasing this burden limits capital available for investment in jobs and store maintenance. With one in seven shops already vacant, the sector warns that these costs hinder necessary growth and innovation. ## Future Funding Strategy To offset the costs of these relief measures, the government intends to target gambling firms with higher taxes. Additionally, officials plan to launch an online sales tax crackdown. These combined efforts represent a broader attempt to rebalance the tax system, though the immediate impact on traditional retail remains a significant concern. ## Sources covering this story - https://www.express.co.uk/news/politics/2262078/labour-stealth-business-rates-hike — --- _Summary written by Brifing from the original reporting. Copyright in the original article belongs to its publisher; read the full piece at the link above._