£300m tax relief for pubs ‘a sticking plaster’
Chancellor Rachel Reeves has unveiled a £300m package to support to pubs in their battle against rocketing business rates after widespread backlash to Budget announcements, representing yet another government U-turn on tax plans.
The Treasury has announced it will give pubs and music venues a 15 per cent discount on business rates bills from April but industry groups and opposition MPs have warned the move is “too little, too late.”
Business rates will then be frozen for two years while valuation methods used in Whitehall will be reviewed.
Pubs will save an average of £1,650 this year compared to the previous terms of the deal.
The Labour government is also set to ease licensing restrictions ahead of the World Cup when some matches could be played as late as midnight.
The British Retail Consortium’s Helen Dickinson said the increases in business rates showed the tax was “now at tipping point”.
“Today’s announcement shows there is more to be done on rates reform and government must honour the promise of root-and-branch reform they made to the electorate at the 2024 election,” Dickinson said.
“If rates rises are left unchecked, it will lead to fewer shops and fewer jobs right at the heart of our communities.”
The new announcement could also spark a fresh row as the likes of hotels and restaurants are set to miss out on support.
Rachel Kelly, Associate Policy Director, British Property Federation, said that while they welcome the additional support for pubs, “the fact that emergency measures are needed just weeks after Government introduced its new two-tier system for business rates shows the changes have not been properly considered.”
She added: “The changes have made a bad system worse and Government must ultimately lower and fix the multiplier tax rate and move to annual revaluations to avoid these sudden swings and emergency measures in the future.”
John Webber, Head of Business Rates at Colliers, said: “The Government’s backtracking is welcome on the immediate front, particularly for the smaller independent pub, but for the bigger chains the package will be limited, as it appears the subsidies will be limited by State Aid rules.” He added that “unless the government is serious about reforming the current system, the solution purely kicks the problem down the line.”
Reeves’ latest U-turn
Reeves had given hints on the support package over several weeks, with the issue proving to be especially awkward when leftwing Labour MP Rachel Maskeel asked Keir Starmer whether proposals would be revised during Prime Minister’s Questions.
Some pubs had been facing business rates bills nearly doubling by 2029. Industry groups UKHospitality and the British Beer and Pub Association estimated bills to rise by an average of 15 per cent.
Hundreds of landlords signed up to a campaign group, Wonky Table, banning Labour MPs, piling pressure on the government ahead of crucial local elections in May.
Some hotels have warned that business rates are set to more than double over the three-year period in spite of a relief system in place to avoid instant hits to businesses.
The average increase to business rates is estimated to be over £32,700 by the end of the decade.
The new scheme unveiled at the Budget will lead to lower business rates for some properties valued under £500,000 while larger properties will pay a higher multiplier.
After the U-turn was announced, Kate Nicholls, chair of UKHospitality, said: “We welcome the recognition by the Prime Minister and the Chancellor of the scale of the challenges facing the hospitality sector.
“They have listened to us about the acute cost challenges facing businesses, all of which is impacting business viability, jobs and consumer prices.
“This emergency announcement to provide additional funding is helpful to address an acute challenge facing pubs. The reality remains that we still have restaurants and hotels facing severe challenges from successive Budgets.
“They need to see substantive solutions that genuinely reduce their costs.”
According to consumer intelligence firm NIQ, there were 382 fewer licensed premises at the end of December than there were three months prior, equivalent to four closures per day.
Revel Collective, which owns more than sixty venues comprising the Revolution Bars group as well as the Peach pub chain, said it expected to appoint administrators within ten days, reflecting the problems faced by businesses across the UK.
Not enough to fix the system
Some airports have also raised the alarm on the impacts of the new tax scheme for commercial properties.
Manchester Airport, Luton and Gatwick have warned that they could pull back some investment plans as a result of higher taxes.
Ros Morgan, chief executive of Heart of London Business Alliance, said: “This limited package of relief targeted only at pubs won’t fix our broken business rates system.
“It does nothing for hotels, gyms, visitor attractions, offices, retailers and countless other businesses facing unsustainable increases in bills.
“The time for temporary sticking plasters of this sort has long passed. Before the last election, Labour promised real rates reform which would address the unfairness of online businesses paying little or nothing while bricks and mortar ones face ever higher bills.”