Former Tesco boss Sir Terry Leahy calls for business rates overhaul

Sir Terry Leahy, former Tesco chief executive, has said the business rates system should be reformed and "probably scrapped".

He told BBC Breakfast it "has not worked for years".

"It is an ancient tax based on the value of physical buildings," he said.

Sir Terry said in a "modern digital economy" with mobile phone and ATM networks, and online retailing, the system needed to be "completely reformed, probably scrapped".

He said if there had to be a tax it should be "low, broad-based, spread across the economy as a whole and not just for the owners of the buildings".

Sir Terry is credited with turning Tesco into an international force, and was the superstore's chief executive between 1997 and 2011.

Labour market 'distortion'

Shareholders enjoyed double-digit growth during his tenure.

He said the minimum wage was "good" for society.

"I think that the risk with the minimum wage is that you do not move it forward too quickly," Sir Terry said.

"Really, employers and the markets should set good wages for people.

"Good businesses reward their people and pay them well. If you move it too quickly, too artificially, you start to compress wage levels and start to distort the labour market and you can actually lose jobs."

Sir Terry, who now works at discount retailer B&M, said it was "very hard" for the British economy to cope with the recession, due to its focus on financial services.

He said the "huge energy spike" and cost of petrol had also hit the country.

Secret of success?

But he said the economy had "coped pretty well" with the recession, and that the government had moved "in the right direction".

When asked about the grocery market, Sir Terry said: "The winners of the future will be those who best understand customers' future needs and offer the products and services that suit them best."

"All you can do is try and serve ordinary customers - put something out there that is useful to them in their busy lives.

"They will come and shop with you and if you do it well, you will grow. And then who knows what the future brings."

Sir Terry said "all the best retailers" were "ambitious for growth", adding the value sector was doing "particularly well".

He said his success was in part down to a "large dose of luck".

"You have got to stick at things, be interested in business.

"I have always been curious about people. I am interested in how people change and how they get through life and if you look closely at what people need in their lives, that is where business opportunity comes from."