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Firms cheer £435m bid to soften impact of business rate changes

Pubs and small firms will benefit from a £435 million emergency relief package for those set to be hardest hit by business rate changes, but the Chancellor faced calls for urgent reform of the "out-of-date" tax.

The new measures will mean that 90% of pubs will be given a £1,000 discount on their business rates this year, while firms losing small business rate relief will see their bill increases capped at £50 a month.

Philip Hammond also announced a £300 million fund for local councils to provide "discretionary relief" to hard-pressed firms facing steep rate rises.

Pub groups and small businesses cheered the relief measures, but business bosses and experts urged the Government to carry out a "root and branch review" of business rates.

The Chancellor was also accused of "picking winners" by offering the pubs discount, while business leaders said online firms were being given an unfair advantage under the current system.

Mike Coupe, group chief executive at Sainsbury's, said: "Business rates are an analogue tax, not fit for the digital age.

"We would ask the Government to carry out a root and branch review of business taxation to create a level playing field across all businesses, rather than penalise property-based companies," he added.

Mr Hammond admitted there was scope to reform the revaluation process to make it "smoother and more frequent".

He said the Government will set out its "preferred approach in due course" and consult on it before the next revaluation.

He also acknowledged the Government needed to find a "better way of taxing the digital part of the economy", although no commitments were offered.

But he dismissed calls for business rates - the commercial equivalent of council tax - to be abolished, saying they raise £25 billion a year.

Mike Cherry, national chairman at the Federation of Small Businesses, said the Budget relief measures were a " direct and much-needed response to those facing astronomical hikes in their business rates".

"But this tax remains out-of-date, so today we call for a cross-party commission to create a simple, fair tax system for a modern economy."

Mr Hammond said the move to help pubs recognises the "valuable role that local pubs play in our communities".

It will be open to all pubs with a rateable value of less than £100,000.

He added the £300 million fund for local authorities will target "individual hard cases" in their areas and will be allocated by a formula, with details due to be set out soon.

Brigid Simmonds, chief executive of the British Beer & Pub Association, welcomed the rates discount for pubs.

"We campaigned very hard for this and it is vital that this is extended in future years," she said.

The Government has maintained that three-quarters of companies will see their rates fall or remain unchanged under the controversial changes to business rates.

But the Institute for Fiscal Studies has estimated firms in London will see an average rise of 11% over the next five years due to soaring property valuations in the capital, while rates in the North will fall by 10%.

It is the first rates revaluation since 2010 and Communities Secretary Sajid Javid and Mr Hammond have come under pressure to help businesses facing large rises because they are in areas where rental values have increased dramatically.

Small retailers and pubs are among those who are facing the steepest hikes.

The Treasury said that 16,000 businesses would benefit from the £150m of targeted support for smaller companies, while others may receive sums from the £305m discretionary fund. Each local authority will receive at least £100,000 from the fund to distribute as they see fit to those facing rate hikes.

An estimated 36,000 pubs will enjoy the one-year only £1,000 discount to their rates.

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