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Britain softens business rates blow with 13.6 billion stg support package

FILE PHOTO: Britain's cabinet meeting at Number 10 Downing Street, London

By James Davey

LONDON (Reuters) -Britain will provide 13.6 billion pounds ($16.1 billion) of support to retail, hospitality and leisure companies facing higher business rate bills next year, to help them through the recession and a fall in consumer spending.

British companies have for years complained that business rates - a property tax charged on most commercial properties to fund local services - is archaic and hands an unfair cost advantage to online retailers such as Amazon.

Delivering his budget to parliament, Hunt said he would proceed with a planned revaluation of business properties from April 2023 that could lead to higher business rates for some. But he said he would provide temporary support to limit the impact of surging inflation.

"I will soften the blow on businesses with a nearly 14 billion pound tax cut over the next five years. Nearly two thirds of properties will not pay a penny more next year and thousands of pubs, restaurants and small high street shops will benefit," he said.

The package means that the total increase in business rates bills will be less than 1%, compared with more than 20% without intervention, the finance ministry said.

The British Retail Consortium, UKHospitality and the British Beer and Pub Association (BBPA) welcomed the relief but said more radical changes were still needed.

"It remains the case that the current system is outdated and not fit-for-purpose. The government made a manifesto commitment of root and branch review and it’s essential that this (is) delivered as soon as possible," UKHospitality CEO Kate Nicholls said.

The trade body warned last month that over a third of the sector was at risk of going bust early next year due to soaring energy costs and rises in the cost of goods.

Britons are also facing a bleak economic outlook. With inflation at a 41-year high of 11.1% and consumer confidence close to the gloomiest on record, they are cutting back.

Britain's budget watchdog said rising prices would further erode people's wages and reduce living standards by 7% by April 2024.

The government also said it had decided not to introduce an online sales tax, which some businesses have called for in combination with business rates reform.

That decision, which it said reflected concerns raised about the proposed tax's complexity and the risk of unfair outcomes between different business models, was criticised by the beer industry's BBPA.

"It seems the government doesn’t recognise the completely archaic nature of the current system," CEO Emma McClarkin said.

($1 = 0.8463 pounds)

(Reporting by James Davey; editing by Alistair Smout and Jane Merriman)