Introduction to the U-Turn
A new year has begun, and with it, a new U-turn by the government. The Treasury has announced that it will step in to bail out pubs that were facing significant increases in business rates. This decision comes after the chancellor’s choice to end COVID-era support and the three-yearly revaluations of property rates, which were expected to result in an average increase of 76% by 2030.
The Impact on Pubs
The increase in business rates had prompted over a thousand pubs to ban Labour MPs from their premises over Christmas, and a growing campaign against the changes from both opposition parties and the government’s own backbenches. A substantial group of Labour MPs were even set to rebel in a vote next week. The Treasury’s decision to provide support to pubs is a direct response to the backlash.
Support for Pubs
The chancellor’s forthcoming package is specifically targeted at pubs, rather than other parts of the hospitality industry. Hotels, for example, are set to be even harder hit than pubs, with a 115% rates increase expected by 2030. However, Treasury sources have indicated that support for hotels is not currently being considered. "This is specifically about pubs. We’re not saying ‘no’ in general – the chancellor always keeps all taxes under review – but that’s not what this package is about," said a Treasury source.
Business Rate Reform
Business rate reform will be a key strand of the three-part package, with changes planned to the way pub valuations are carried out. This reform will not come into force until 2029, so the Treasury is also potentially looking at shorter-term relief. Additionally, a series of licensing reforms that were already underway will be rolled into the final package, including changes to the rules around opening hours or licenses for pavement drinking outside pubs.
The Cost and Timing
The total cost of the package is reported to be around £300m, although the Treasury insists that no final figure has been set. The announcement is expected to be made in the coming days. The government’s swift action may have prevented the worst of the political damage, unlike with previous U-turns on major policies.
Reaction from the Opposition
Anna Turley, the chair of the Labour Party, defended the government’s decision, saying that it was a sign of a government that is "listening" and "in touch with people." However, the rest of the hospitality industry, which will not receive support, will likely be disappointed by the decision.
Conclusion
The government’s U-turn on business rates for pubs is a significant development, but it may not be enough to alleviate the concerns of the entire hospitality industry. While pubs may be celebrating, hotels and other businesses will be left to wonder why they were not included in the package. The government’s decision to act quickly may have prevented some political damage, but it remains to be seen whether this will be enough to satisfy the rest of the industry.
