Rachel Reeves's sticking plaster for pubs isn't enough - we need real reform

Britain's pubs may have been thrown a last-minute tax lifeline, but the Government's bailout is little more than a sticking plaster on a system that is fundamentally broken. The U-turn on planned business rates hikes for pubs is welcome. Many are under pressure from every direction - rising wages, soaring energy bills and higher National Insurance costs - and any relief is better than none.

But this fix is temporary, partial and deeply unfair. It helps one sector while leaving countless others exposed. And it avoids the real issue: Britain's business rates system no longer reflects how the modern economy works.

Before the last election, Labour promised to level the playing field between bricks-and-mortar businesses, which bear the brunt of the existing business rates system, and online firms, which get away with paying little or nothing.

But instead of embracing real reform, the Chancellor tweaked the existing system. As a result, and as part of a revaluation of property values, many high street firms are now discovering rates bills are about to explode. Across retail, hospitality, leisure and culture, they are facing increases of 15 to 30% a year for several years running. In London alone, this is expected to add around £2billion a year to costs.

In the capital, where Heart of London Business Alliance represents more than 500 businesses, my members report eye-watering increases - in some cases more than 200%.

In many cases, they will be paying more in rates than rent.

Industry estimates suggest the average pub faces a 76% rise over three years, while the average hotel is looking at a 115% increase. Theatres, pharmacies, galleries, gyms, visitor attractions, shops and offices across the country are all bracing for similar shocks.

There is only so much business can take and if they disappear, we don't just lose jobs. We lose tax revenue, tourism, investment and the character that makes towns and cities worth visiting.

The government's response has been to keep trying to patch up the old system. It already spends more than £4.3billion a year on business rates reliefs. Now it will spend hundreds of millions more to soften the blow for pubs. This cycle of crisis, protest and emergency relief is expensive, inefficient and entirely avoidable.

We need to confront the fact that business rates are based on an economic model from another era. When the tax was introduced in 1990, basing it on property made sense.

Today, it does not. More than 20% of the UK economy is now digital, and that share is growing. Digital businesses are typically property-light, yet they benefit from the same infrastructure, workforce and public services as high street firms - while paying a fraction of the tax.

The result is a shrinking tax base being squeezed harder and harder. The Government raised £34billion from business rates last year. This year it plans to raise more than £37billion.

By 2030, that figure is forecast to reach £45billion. All of this is being extracted from a declining number of physical premises.

This is why HOLBA is calling for real rates reform - not another temporary fix. Our proposed Hybrid Business Rate offers a practical, deliverable solution that modernises the system without ripping it up.

The idea is simple. Keep a property-based business rate, but slash it significantly. At the same time, broaden the tax base by introducing a modest levy - around 2% - on online sales, collected through the existing VAT system.

Applied across the digital economy, with some sensible exemptions to protect the high street, this levy could raise around £6billion a year. That would be enough to cut traditional business rates by roughly 37% - taking them back to a level businesses could actually afford.

Crucially, this approach would bring the UK into line with many European countries that already tax economic activity, not just physical footprint. It would ensure that all businesses, whether trading from a shopfront or an internet server, make a fair contribution.

The proposed pubs bailout shows ministers know something is badly wrong. But if they stop there, the next crisis is already baked in. Another sector will revolt. Another relief will be rushed through. Another crucial sector will miss out and foot the bill.

Politicians talk endlessly about growth, but we risk taxing growth out of existence. If the Government is serious about vibrant high streets, world-class cultural centres and sustainable jobs, it must move beyond tinkering on business rates.

The next Budget is the moment for courage. Let's see real rates reform, not another sticking plaster.