Chancellor John Healey will not introduce further taxes on large warehouses in his 28 October Budget, according to reports, following warnings from major retailers that higher property costs could threaten high street businesses.

The decision means online retailers and large distribution centres will not face additional warehouse taxes beyond existing business rates changes, Sky News reported. The government had previously considered increasing charges on warehouses and out-of-town retail developments to fund business rates relief for pubs, restaurants and other high street venues.

Jason Tarry, chairman of the John Lewis Partnership, warned that higher taxes on large retailers could damage the wider high street by increasing costs for businesses that attract customers into town centres. Writing in The Telegraph, he said proposals for a warehouse tax reflected a “fundamental misunderstanding of how modern high streets work”.

Tarry argued that department stores and supermarkets act as anchor tenants, generating footfall for independent shops, cafés and other local businesses. He acknowledged that online retailers should pay a fair share of tax but rejected treating physical and online retail as competing interests.

The John Lewis Partnership pays around £170 million annually in business rates, its largest tax expense and second-largest overall cost after wages. Changes introduced in April have left more than 200 John Lewis and Waitrose stores facing higher charges, compared with 18 distribution centres, with around 80 per cent of the additional burden falling on shops.

Marks & Spencer chief executive Stuart Machin has similarly called for business rates reform, arguing that retailers already shoulder a disproportionate share of the tax burden. Machin described Labour’s previous two Budgets as a “disaster” and said M&S faced £150 million in additional annual costs following the government’s tax changes.

The warnings come as Healey prepares his first Budget as chancellor, with retailers seeking relief from rising employment and property costs. Labour has already increased business rates for larger properties, including warehouses with rateable values above £500,000, through changes that took effect in April.

Prime Minister Andy Burnham had previously indicated that higher business rates on warehouses and out-of-town retail developments could help fund tax reductions for businesses considered to provide social benefits. The proposed approach was intended to support high street venues, including pubs and music venues, but retailers argued that additional charges could undermine the businesses sustaining town centres.

An HM Treasury spokesperson said the government wanted retailers to thrive and was focused on creating conditions for businesses to invest, expand and create jobs. The department cited business rates cuts, a corporation tax cap and a £4.3 billion package to help businesses manage costs, while declining to comment on speculation about Budget tax decisions.

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