One Labour MP said they feared “pubs will become the next farms” as the threat of bar closures linger over high streets and rural areas following last week’s Budget
Rachel Reeves has been warned by Labour MPs she will have to climb down on a so-called “pub tax” as she prepared to try and placate backbenchers over the Budget move.
Several Labour MPs have voiced concerns to the Government and party whips over changes to business rates, which have led to warnings that 30,000 hospitality firms, including pubs, could go out of business.
The i Paper has learnt the Treasury has invited Labour MPs to a private briefing on Monday evening to highlight the “transitional relief” for hospitality venues spelled out by the Chancellor on Sunday, which she said would soften the blow of soaring tax bills.
One Labour MP said they feared “pubs will become the next farms”, a reference to inheritance tax changes in last year’s Budget that sparked deep anger among rural voters and protests outside Parliament.
A second Labour MP said they “expect movement” from the Treasury to help pubs and hospitality because “people aren’t happy” and “there is a concern that this has been a sleight of hand by ministers”.
The MP said that the transitional relief was “not enough”, telling ministers: “If they are so confident, I’d suggest they go and visit some pubs across the country.
“The bigger politics is outside city centres – [disappearing] pubs and hospitality are real viable signs of the decline of town centres and high streets.”
Calling for Reeves to step in to help firms, the MP said the Government was “in need of a retail offer for punters” and “this would be ideal, with a clear rallying call this side of Christmas – go and back the British pub and hospitality”.
Reeves announced sweeping reforms to business rates in her Budget speech on Wednesday, which she claimed would usher in the lowest tax rates on the hospitality sector since 1991.
But businesses have warned the changes will mean the hospitality sector faces soaring tax bills, with an average rise of 76 per cent or £13,000 a year for pubs and 115 per cent, or £200,000 a year for hotels over three years.
Hotel group Whitbread, which owns Premier Inn, said it faced additional costs of up to £50m due to the changes, while some publicans said they were left “in tears” by the changes.
The crux of the concerns centre around the fact that while hospitality firms with a rateable value of under £500,000 will be charged a lower tax rate, the changes will come alongside a revaluation of all business properties’ rateable values, which have risen sharply.
The Chancellor said the jump reflects the fact that the previous assessments were carried out during the pandemic, when property values were depressed across the economy.
But the result has meant hospitality businesses, including pubs, are paying a smaller percentage but on far higher amounts.
UKHospitality said that said the rate changes mean that in some areas Amazon warehouses will see an increase of 6.4 per cent on the value of their property, while a pub in Northampton will see a 291 per cent increase, and one in Norwich is due to rocket by 500 per cent, according to the Government’s own business rate calculator.
Responding to the concerns, the Chancellor on Sunday highlighted £4.3bn in transitional support for firms as the new business rates system is implemented, capping rate rises at different rates depending on the value of properties over a rising scale for three years.
“The last time valuations were done for business rates was in 2021, in the middle of the pandemic, now of course the valuations have changed since then, particularly for hospitality and leisure,” she told the BBC’s Sunday with Laura Kuenssberg.
“I would urge people to look at the detail and particularly to look at that transition support because I think a number of people who have spoken about that haven’t seen that.”
But UKHospitality chair Kate Nicholls told The i Paper she had spoken to “hundreds” of businesses who are “really fearful about their future” despite understanding the transitional relief highlighted by the Chancellor.
She added the relief was “wholly inadequate” and criticised Reeves’s suggestion that those with concerns had not read the Government’s factsheet outlining this, which was published on Friday afternoon.
“It is unhelpful to be so dismissive of small businesses who are facing an existential threat.”
Nicholls said it is “not too late” to mitigate the impact of the business rates reforms, saying it was a “matter of life and death” for the affected businesses.
She called for a “wholesale readjustment” for the “uniquely affected” hospitality sector “or we are going to have mass casualties on the high street”.
In the past, governments have frozen revaluations for three years when faced with similar issues to allow market conditions to catch up with valuations.
Reeves could also follow through on a pledge to give firms a 20p reduction in the tax rate for hospitality, rather than the 5p she eventually opted for.
Those two measures would cost less than a billion pounds, Nicholls said.
She went on: “It’s time we supported our high streets and if you don’t then come the local elections next year you are going to see large swathes of the high street closed, hundreds of thousands of jobs lost, and businesses failing simply because of Treasury pushing forward with an unrealistic, unsustainable business model.”
James Nye, managing director of Anglican Country Inns, which runs 10 pubs across East Anglia and employs 470 people, said the changes are “going to put more and more pressure onto pubs, especially small independent pubs, and it’s going to push more people out of business. And that means they’re not going to employ people”.
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Tom McNeeney, manager of The Oxford pub in Rochdale, Greater Manchester, which employs 21 people, said: “We’re going to have to find an extra £500 a month towards our business rates, which is abhorrent when we are currently facing an industry that’s completely on its knees.
“Given these new rateable values that are going to come in, it’s going to be incredibly tough.”
The Treasury has been approached for comment.
