Government rules out further warehouse tax rises after John Lewis and M&S warnings

Government rules out further warehouse taxes after retail warnings

The government has ruled out any further increases to the tax on warehouses, after warnings from two of Britain's best-known retailers that higher business rates would hurt the high street. The decision follows a fierce campaign from John Lewis and Marks & Spencer, who said extra costs would force cuts and undermine smaller shops.

The Treasury's official position is that it does not comment on tax plans before the Budget on 28 October. But it is understood ministers have ruled out another rise in the existing warehouse tax. That tax already went up once this year to pay for relief for smaller high street businesses.

The idea of higher taxes on large warehouse units used by online retailers had been raised by the prime minister before he took office. He had talked about funding tax relief for struggling high street and smaller businesses that way. Retail bosses warned that this approach misunderstood modern retail.

Jason Tarry, the boss of John Lewis and Waitrose, wrote in The Telegraph that major department stores and supermarkets are vital anchor tenants. He said the 36 John Lewis stores and hundreds of Waitrose branches generate the footfall that sustains surrounding independent shops, pubs, bakeries and cafes. Penalising anchor retailers through higher business rates risks harming the smaller businesses in their orbit, he said.

Stuart Machin, the boss of Marks & Spencer, went further. He attacked previous Labour budgets under Rachel Reeves as catastrophic and crushing. He said M&S had to pay another £150 million a year on top of the half a billion pound tax bill it already paid. He called on the government to reverse several measures, including national insurance increases and warehouse taxes, and to cut business rates.

The interventions appear to have stung the government. Improving the high street has been a priority for the prime minister and his team, including support for small music venues and pubs. At the same time, the Chancellor faces difficult choices before the Budget.

Ian Wright, former chief executive of the Food and Drink Federation, said taxing these businesses is not easy in a changing retail environment. Shopping patterns are shifting so quickly that tax authorities around the world struggle to keep up. He said the Treasury is better than most at coming up with new approaches, but each one risks causing problems for employees, shoppers or property values elsewhere.

The Treasury said the Chancellor is focused on long-term growth. It said he wants to create conditions for businesses to invest and create jobs, backing firms through business rate cuts, a cap on corporation tax and a £4.3 billion package to help businesses manage costs and keep investing.

The bigger picture is a difficult balancing act ahead of the Budget. The government is dealing with the impact of the war in Iran, rising interest rates and growing calls to increase spending, particularly on defence, as well as promises made by the prime minister.