Ministers have been warned that ‘tinkering’ with Britain’s hated business rates system is not enough as the government launched a consultation on reform.

Firms want to see a complete overhaul of the system which some say, as currently operated, means hospitality firms are ‘punished for success’.

Many high street operators also want to see more of the business rates burden shifted onto warehouses operated by online retailers.

The consultation – to be led by veteran tax expert Jerry Schurder – will review the way pub and hotel business rates bills are calculated.

Schurder will report back to the Treasury by March 2027. His recommendations will then be introduced in 2029 – the next time commercial properties are valued and the amount of rates they pay is determined.

James Murray, financial secretary to the Treasury, has said the review will feed into a plan to ‘build a fairer system for the future’.

But business chiefs said Labour must ‘move beyond piecemeal relief’ and offer radical reforms – as well as helping the High Street with rising costs at the Budget.

Jonathan Lawson, chief executive of Butcombe Group, which has 120 pubs in England, told the BBC that the current methodology for pubs’ bills means they are ‘punished for success’.

That is because their rates go up when their turnover increases. 

By contrast, big online giants operating from warehouses are not affected by revenue-based calculations.

Bricks and mortar firms want Labour to deliver on its election pledge for a major shake-up to level the playing field between their premises and online operators.

Ros Morgan, chair of the Real Rates Reform Alliance, a coalition of business organisations calling for rates reform, said the review is ‘narrowly focused on pubs and hotels when what is needed is full-scale reform of the system.’

She added: ‘We cannot keep tinkering with business rates one sector at a time.

‘Any lasting solution for pubs and hotels must be part of a wider overhaul... which would create a broader tax base by ensuring all firms, including online, pay their fair share.’

Jonny Haseldine, head of business environment policy at the British Chambers of Commerce (BCC), said full reform was ‘urgently needed’ and a ‘continued piecemeal approach to reform is the wrong approach.’

UK Hospitality chief executive Allen Simpson said the plans would not ‘solve the immediate financial challenges caused by rising business rates bills.’

High Street firms were last year hit with big rates increases.

Simpson said these businesses will want help announced at the October 28 Budget.

Shadow Chancellor Sir Mel Stride said the latest review was thus ‘far too late for a sector this Labour government has already done its best to kill off’.