The Labour government is poised to announce a significant reversal on its planned changes to business rates for pubs, following a fierce backlash from the hospitality industry and its own backbenchers.
Pressure from Pubs Forces Government Retreat
Ministers are preparing to unveil a revised package in the coming days, in what represents another high-profile policy climbdown. A government source indicated the changes aim to "recognise issues with how business rates are collated." The move comes after sustained pressure from pub trade bodies and a wave of discontent, with some publicans even putting up signs barring Labour MPs from their premises.
The controversy stems from the Autumn Budget, where Chancellor Rachel Reeves committed £4.3bn in support for retail and hospitality over three years, but also confirmed the end of Covid-era business rate discounts. This, combined with a property revaluation, was set to lead to dramatic increases in the tax bills for pubs, restaurants, and hotels from April.
Crippling Tax Rises on the Horizon
The impact of the now-suspended changes would have been severe and uneven across sectors. Analysis showed business rates were set to rise by 76% for the average pub and 115% for the average hotel. In stark contrast, large supermarkets faced a mere 4% increase, and distribution warehouses just 7%.
The revaluation pushed up the taxable value of hospitality venues from their pandemic lows. Major hospitality group Whitbread, owner of Premier Inn and numerous pubs, warned it faced an additional £40m to £50m in tax as a direct result.
A Wider Package of Support
The U-turn on rates will form part of a broader Treasury package designed to support pubs. This is expected to include measures addressing licensing, opening hours, and a general reduction in red tape. Chancellor Reeves commissioned work on this support package before Christmas, led by Treasury minister Dan Tomlinson.
While welcomed by the industry, this marks the government's third major policy reversal in quick succession, following U-turns on winter fuel payments for older people and changes to inheritance tax for farms.
Emma McClarkin, Chief Executive of the British Beer and Pub Association (BBPA), said: "News that the government is going to look again at business rates increases is potentially a huge win for pubs across the country... This could save locals, jobs, and means publicans can breathe a huge sigh of relief." The BBPA stated it had worked closely with ministers on a pub-specific solution and now keenly awaits the details of the imminent announcement.
