The UK’s largest food retailers have been urged by MPs to waive their entitlement to a business rates holiday before issuing dividends to shareholders.
So far this year, the three listed supermarkets — Tesco, Sainsbury and Wm Morrison — have declared dividends worth about £1.35bn on a combined basis.
According to the consultancy Altus group, the supermarkets have benefited from about £1.36bn of business rates relief targeted by the government at the retail and leisure sectors during the coronavirus crisis.
Altus estimated that once Asda is included, £1 in every £6 of rates relief went to the Big Four supermarkets, which have recorded strong sales during the Covid-19 pandemic.
Shadow business minister Lucy Powell said that any large company that had received government subsidies while seeing its own business boom “should do the socially and morally responsible thing”.
That could potentially include reimbursing all or part of the rates relief or suspending dividends, she added.
“People want to know that big business subsidies are not going towards paying out dividends or to offshoring jobs,” said Ms Powell.
Kevin Hollinrake, the Conservative MP who co-chairs the all party parliamentary group on fair business banking, said the Treasury “could not have known how long Covid would last or how it would affect certain sectors” at the time it devised the business rates relief.
But he agreed that supermarkets should not be paying dividends while taking public money.
“We know there are some sectors who are really struggling and need that money,” he added, saying it would be a “brilliant gesture” if the supermarkets repaid the rates relief.
Ed Davey, the Liberal Democrat leader, said the original design of the business rates holiday scheme by the government was “clearly flawed”, adding that supermarkets should forgo their entitlement.
“The Treasury must have been able to predict that unrestricted sectors like food retail would be boosted and not need support, whilst others in total lockdown would struggle even with the rates holiday,” he added.
The call by MPs for supermarkets to relinquish business rates relief was first reported by the Sunday Times.
Supermarket groups countered that the business rates holiday, which runs until March next year, merely offsets significant other costs in their businesses — including hiring thousands of extra staff, mainly for their online operations.
Tesco said last month that it expected additional costs to total £725m in the company’s current financial year while the business rates relief would amount to £523m.
Sainsbury has predicted costs of £460m in its current financial year, with expected rates relief of £453m.
Supermarkets benefited from a big transfer of consumer spending during the first lockdown when pubs and restaurant were forced to close.
Some voices within the food retail industry have questioned the need for support by the government.
Bill Grimsey, who previously held senior roles at Tesco and Iceland Foods, told a parliamentary committee recently that supermarkets “have had a great time” and that help going to food retailers through the business rates holiday “could have been spent on supporting the smaller businesses that need it”.
Andrew Goodacre, chief executive of the British Independent Retailers Association, said it was “wrong if the savings on rates are being used to supplement a dividend”, adding that if some companies were repaying money secured under the government’s furlough scheme, others could relinquish rates relief.