Rachel Reeves is set to hand Britain’s ailing pubs a lifeline with a U-turn on plans to scrap business rate relief for the hospitality industry, ministers have told The Independent.
In what will be another humiliating climbdown for the government, the chancellor is expected to extend relief to help landlords with rising bills instead of scrapping cash support from April.
It comes after a furious reaction from the industry, which has warned of widespread closures which have seen one pub close its doors every day since Sir Keir Starmer took office.
At the Budget, the chancellor announced plans to scale back business rate discounts that have been in force since the pandemic from 75 per cent to 40 per cent – and said there would be no discount at all from April.
But ministers have told The Independent that Ms Reeves is now expected to row back on her plans, with one saying: “There’s going to be a U-turn on pubs.”
Another said that the changes were “politically unsustainable” in a year where the elections in May could decide whether Sir Keir survives as Labour leader and prime minister.
Pub landlords have reacted with cautious optimism to the news. Dawn Hopkins, 56, who runs the Rose Inn in Norwich, said the U-turn will be a “huge relief” to many pubs, but that there are still concerns about the re-evaluation on business rates.
“Getting a discount back would be huge relief, and at this point anything would help,” Hopkins, who is also the vice-chair of the Campaign for Pubs, told The Independent.
“But a major problem is that they’ve done these re-evaluations of business rates which have been astronomical in a lot of places,” she said.“So getting a discount back would be amazing, but we still need to look at the re-evaluation issue.”
Chris Welch, 39, who runs the Fishnet Tavern in North Tyneside, said: “It’s really positive news if this happens, but I still think more needs to be done.”
While it is unlikely the Covid relief will be completely reinstated in the same form, it is understood that an alternative discount could be negotiated.
The hospitality sector had already been hit by increases to National Insurance contributions and the minimum wage which had cut margins and meant many were making a loss.
UKHospitality analysis showed that the average pub faces a 15 per cent rise in business rates next year, increasing to £7,000 more by 2028/29 and £12,900 extra over three years. Hotels are hit even harder, with bills rising £28,900 next year and £111,300 by 2028/29, totalling £205,200 extra over three years. Meanwhile, online giants, office blocks and out-of-town supermarkets benefit from far smaller increases.
Kate Nicholls, Chair of UKHospitality, said: “The government promised in its manifesto that it would level the playing field between the high street and online giants. The plan in the Budget to achieve this is quickly unravelling, and will deliver the exact opposite.”
Speaking on Radio 4’s Today Programme, welfare secretary Pat McFadden was challenged about another U-turn coming but refused to rule one out.
Hinting at changes to come, he said: “Look, I’m not going to predict anything, but I do say to your listeners, we do appreciate the role of the pub in British life is something we value, believe it or not, we’re human beings as well as politicians, so we understand the role that pubs play. You know, we value that very much. We’ll keep talking.”
This will be the latest in a string of U-turns forced on the chancellor by angry Labour MPs. She had to back down on her plans to cancel winter fuel payments to around 10 million pensioner households, she had to drop her £5bn cuts to welfare, she was forced to agree to ending the two child benefit cap despite originally opposing the move, and she had to drop plans to raise income tax in the Budget which would have broken the general election pledge.
The chancellor has also been forced to water down inheritance tax changes targeting family farms.
Labour MPs have heaped pressure on the government to help out the struggling hospitality industry. York Central MP Rachael Maskell, who led the welfare cuts rebellion, said: “Many independent business owners I have met fear the cumulative impact of the rateable value revision and relief reductions. In York, hospitality businesses will see an average business rates rise of 41 per cent, music venues a rise of 44.4 per cent and many independent shops increases of around 27 per cent, meaning doors closing and trade ceasing—businesses simply cannot do it.”
The issue had also been pushed by the Tories who believe that they are close to forcing another U-turn.
Writing in the Telegraph, Tory leader Kemi Badenoch said: “Pubs are part of the fabric of our nation – or at least in many places they used to be. Because in Britain today, we are losing a pub nearly every single day.”
She vowed to go further than just reinstating the covid rate relief.
Promising to scrap their business rates altogether, she said: “Not cutting rates, not freezing them, not pausing them until a later date. Abolishing them entirely for thousands. The future of pubs is more important than any number of silly things the Government is currently wasting money on.”
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