Landlords ‘underestimated’ scale of business rates overhaul
The architect of Labour’s business rates overhaul has blamed the political backlash to the controversial policy on landlords and industry chiefs not fully understanding that a pandemic-related subsidy was coming to an end.
Treasury minister Dan Tomlinson told MPs that business owners were taken off-guard by the scale of their tax rise because they weren’t aware of the scale of the discount they had enjoyed because of a subsidy announced to help tide firms over during the height of coronavirus.
“People did underestimate the impact of the unwinding, not internally, but externally,” Tomlinson said at a Treasury Committee appearance to a question on pubs’ anger over rises to their business rates tax brackets, known as the ‘rateable value’.
“The individual businesses, who had to wait till the day of the Budget to see their rateable values, did probably underestimate the extent of the unwinding of the increases in their rateable values after the pandemic.”
Last month, the government was forced to announce a £300m emergency support package for the pubs industry, after a fierce backlash broke out over ministers’ plans to shake-up the commercial equivalent of council tax, known as business rates.
The government had reassessed the level of property tax paid by businesses at its November Budget, handing hospitality and retail industries a 5p cut their tax rate in a move the Chancellor hailed as bringing the overall rate of taxation down to its lowest since 1991.
But due to a simultaneous reassessment of venues’ valuation that coincided with an end to pandemic-era support, the overhaul left hospitality firms’ bills set to rise by an average of 94 per cent in three years.
Business secretary Peter Kyle said that the government “didn’t have access” to the amount the Office for Valuation – a government agency that oversees business rates – would change pubs’ rateable values as pandemic support was brought to an end.
But speaking to MPs, Tomlinson contradicted that assessment saying the impact of of the unwinding was underestimated in the industry “but not internally”.
Pubs industry failed to raise business rates concerns ahead of Budget – Tomlinson
The MP for Chipping Barnet, who was made exchequer secretary to the Treasury as part of Downing Street’s 2025 reshuffle, also told committee members that industry bodies had not raised concerns about the subsidy cliff edge ahead of the Budget.
“Before the budget, we hadn’t had strong and significant representations from the sector about the way that they were valued,” he said. Tomlinson added that industry chiefs had not made any representations over the special methodology used to calculate pubs’ business rates.
“The different members of the industry had previously supported the guidance on how the methodology was applied to the evaluation of pubs.
“There’s this group called the Pub Rating Forum, which consists of the British Beer and Pub Association, UK Hospitality, British Institute of Innkeeping (BII) and some other important sector bodies.
“On 2 December – so after the Budget – the BII withdrew their support for the guide that they had previously given their broad support to. The day after – on 3 December – the BBPA, UK hospitality and the society of independent brewers and Associates also did the same thing.”