Burnham Details Tax Shift: Lower Rates for Small Shops, Higher Levies on Warehouses
Andy Burnham, the Labour MP widely expected to become the next prime minister, has confirmed that his first major tax overhaul would involve a significant redistribution of the business rates burden. In comments to LBC and in policy documents circulated over the past week, Burnham outlined a plan to lower the threshold for small business rates relief, effectively exempting over 140,000 additional premises from the tax, while simultaneously increasing property taxes on large warehouses used by online retailers such as Amazon.
The proposal, first floated during his successful Makerfield by-election campaign, is now at the centre of the political debate as Burnham prepares to succeed Sir Keir Starmer. According to analysis by global tax firm Ryan, the changes could reduce business rates liabilities by approximately £880 million annually. The scheme would raise the 100% small business rates relief threshold from a rateable value of £12,000 to £18,000, and extend the upper threshold for tapered relief from £15,000 to £21,000.
Burnham has been careful to frame this as a revenue-neutral rebalancing rather than a net tax cut. “There is some room within that manifesto for movement on tax,” he told LBC’s Andrew Marr. “I stick by the manifesto and the promises that it made. So, let me be absolutely clear about that, but there is some room within that manifesto for movement on tax.” He specifically ruled out raising VAT, income tax or national insurance, sticking to the pledges made in Labour’s 2024 general election manifesto.
The Funding Mechanism: Targeting ‘Online Giants’
The estimated £880 million cost of the relief would be offset by increasing the business rates surtax on large warehouses, particularly those owned or operated by major e-commerce companies. The government’s current business rates system already includes a 2.8p surtax on properties with rateable values above £500,000 in England. Burnham’s plan would raise this further, potentially expanding the surtax to properties with rateable values above £250,000 or applying a higher multiplier to distribution centres.
In a separate report by The Mail on Sunday, it was claimed that Burnham also plans to lower the threshold for the so-called mansion tax, bringing homes worth £1.5 million into the levy. This would affect more than 150,000 families, according to the newspaper’s analysis. Burnham’s team has not confirmed this specific measure, but sources close to him have suggested that a review of property taxation, including higher bands for council tax and a revamped stamp duty, is under consideration.
Fiscal Credibility and Internal Party Debate
Burnham’s tax proposals arrive amid heightened scrutiny of his economic credentials. Critics, particularly from the Conservative Party and some business groups, have warned that targeting warehouses could have unintended consequences for supply chains and consumer prices. Alex Probyn, a practice leader for property tax at Ryan, noted: “Supporting small businesses is a great policy objective. The concern is how that is funded if things have to be revenue neutral. Larger commercial properties are already contributing more through the existing business rates surtax to fund lower liabilities for retail, hospitality and leisure. The obvious question is whether they are now going to be asked to contribute even more.”
Badenoch, the Conservative MP and former business secretary, accused Burnham of dodging media scrutiny ahead of his planned Reddit AMA, questioning his willingness to defend the proposals in detail. Downing Street, meanwhile, has remained largely silent, with the Prime Minister’s spokesperson saying only that the government’s own business rates reforms were well under way.
Context: Why This Matters Now
The business rates shake-up comes at a critical moment for the UK economy. High streets across the country are struggling with the legacy of the pandemic, rising energy costs, and changing consumer habits. Small retailers, pubs, and music venues have been particularly vocal about the burden of business rates, which they argue are based on outdated property valuations that do not reflect the shift to online shopping.
Burnham’s plan directly addresses this by shifting the tax burden away from physical high street premises and onto large warehouses used by online retailers. This is a politically shrewd move, tapping into public frustration with the perceived tax advantages enjoyed by global tech giants. During the Makerfield by-election campaign, Burnham explicitly argued that “online giants should contribute more through higher taxation of large warehouses to support smaller businesses and Britain’s high streets.”
The Stakes for the Labour Leadership
Burnham’s tax proposals are also a key test of his leadership credibility. Having won the Labour leadership contest and a by-election in quick succession, he now faces the challenge of uniting a party still divided over fiscal policy. Some on the left of the party are calling for borrowing rules to be relaxed to fund more public spending, a position Burnham has historically been sympathetic to. In the past, he argued that the UK had “got to get beyond this thing of being in hock to the bond markets,” a phrase that continues to haunt him.
However, in his LBC interview, Burnham sought to reassure markets and centrists by insisting he would not be “indisciplined” with the public finances. “The finances in Greater Manchester were rock solid when I was mayor,” he said, pointing to his previous experience as a Treasury minister in the last Labour government. “I am not going to be someone who is reckless with the economy.”
Reaction from Business Groups and Think Tanks
The reaction from business organisations has been mixed. The British Retail Consortium (BRC) welcomed the focus on small business relief but warned that higher taxes on warehouses could lead to higher prices for consumers. The Federation of Small Businesses (FSB) was more supportive, calling the plan “a long-overdue rebalancing of the tax system in favour of the high street.”
Meanwhile, Sir Tony Blair’s think tank, the Tony Blair Institute for Global Change, has urged Burnham not to increase capital gains tax, according to a report in the Sunday Telegraph. The institute argued that the country cannot “tax our way to prosperity” and warned that higher capital gains tax could discourage investment. Burnham is understood to be considering bringing capital gains tax — which typically applies to real estate, shares and investments — in line with income tax.
Perspective: Broader Implications and What This Changes
Burnham’s tax proposals mark a significant departure from the centrist fiscal orthodoxy of the Starmer era. While he has pledged to keep the big three taxes (income tax, VAT, and national insurance) unchanged, his willingness to restructure business rates and potentially lower the mansion tax threshold signals a more interventionist approach to taxation.
The Political Landscape
If implemented, these proposals could reshape the political landscape ahead of the next general election. By directly targeting online giants, Burnham is positioning himself as a champion of the high street and small businesses, a demographic that has traditionally been seen as Conservative-leaning. However, the risk is that alienating large logistics firms and e-commerce platforms could deter investment and job creation in the warehousing sector, particularly in regions like the Midlands and the North West.
Burnham’s plan also intersects with broader global trends. Governments around the world are grappling with how to tax the digital economy effectively. The UK’s existing digital services tax has been criticised as too narrow, and business rates are often seen as an imperfect proxy. Burnham’s approach — taxing the physical assets (warehouses) of online companies — may be more straightforward to implement than a pure digital tax, but it also opens the door to legal challenges and potential retaliation from trading partners.
What This Changes for the UK Economy
The immediate impact, if the policy is enacted, would be a reduction in business rates for tens of thousands of small shops, pubs, and cafes. For many, this could be the difference between survival and closure. The £880 million cost of the relief would be borne by a relatively small number of large warehouse operators. According to government tax data, there are approximately 2,000 properties in England with rateable values above £500,000, many of which are distribution centres.
The policy could also accelerate the trend of warehouse automation, as companies seek to reduce their reliance on large, highly-taxed physical premises. Conversely, it could encourage e-commerce companies to locate their fulfilment centres in other jurisdictions, potentially undermining the UK’s logistics sector. The government would need to balance these competing pressures carefully.
Broader Trend: A Shift Towards Targeted Taxation
Burnham’s approach fits a broader pattern among Western leaders of using targeted tax measures to address specific social or economic goals. From President Biden’s corporate tax increases to the OECD’s global minimum tax agreement, the trend is towards higher taxes on large, profitable corporations, particularly those in the tech sector. Burnham’s plan, if successful, could serve as a template for other countries looking to support their high streets without breaking the bank.
However, it also raises questions about the long-term sustainability of the business rates system itself. Many experts argue that the system, which is based on property valuations from 2017, is fundamentally broken and needs a complete overhaul, not just a tweak. Burnham has acknowledged this, but his immediate focus is on providing relief to struggling small businesses.
As the UK prepares for a new prime minister, the debate over Burnham’s tax proposals is likely to dominate the political agenda for weeks to come. With the World Cup providing a brief distraction, the government’s response — both from the current administration and from Burnham’s own party — will be closely watched.
In the meantime, small business owners on the high street are paying close attention. For many, the promise of lower business rates is a lifeline. Whether the tax raid on warehouses proves to be the right way to fund it will be the subject of intense political and economic scrutiny.
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