The Treasury committee wrote to Hammond in the wake of an evidence session with the Valuation Office Agency (VOA) last month, highlighting concerns with the financial burden that business rates are placing on high street businesses, and asking if the Chancellor believes that business rates are still fit for purpose.

MPs also wanted to know if the Treasury has conducted any analysis into the competitive advantage for businesses that focus on online sales.

In response, the Chancellor stated in a letter that a fundamental review of business rates in 2016 had concluded that property-based taxes are easy to collect, difficult to avoid, relatively stable and have a clear link with local authority spending. However he said the government was aware ‘business rates can represent a high fixed cost for some businesses’.

Hammond said there was ‘no consensus on an alternative base’, although he also noted that the government recognised the need to find a better way of taxing the digital economy. The Chancellor said international corporate tax rules need updating for the digital age, and the government needed to wait for this to happen before making other changes to the business tax regime.

Commenting on the correspondence, Treasury committee chair Nicky Morgan said: ‘It’s clear that many bricks and mortar stores are struggling to remain competitive against online retailers, with the Chancellor admitting that business rates can represent a high fixed cost for some businesses.

‘The Treasury Committee is increasingly concerned with the financial burden that business rates are placing on high street businesses, and has examined the issue in its inquiries into VAT and the VOA.

‘We are likely to scrutinise business rates further as part of our Autumn Budget inquiry later this year.’

Chancellor’s letter to the Treasury committee is here.

Report by Pat Sweet