Rachel Reeves has avoided a damaging rebellion against her economic policies by promising a U-turn on controversial tax hikes for pubs in England, following weeks of protest from Labour MPs and the hospitality industry. Government sources confirmed on Thursday that the chancellor is finalising a support package that will include reductions to business rates for pubs, which had faced an average 76% rise over three years.
The U-turn, welcomed by industry figures, follows similar climbdowns on winter fuel payments, disability benefits, and inheritance tax for farmers. However, with Treasury details yet to be published, Labour MPs have warned they will push ahead with an amendment to the finance bill if the support is insufficient. Tonia Antoniazzi, Labour chair of the all-party parliamentary group on beer, said: 'I am over the moon, things are moving in the right direction,' but added that colleagues were prepared to rebel later if needed.
The decision comes after Reeves announced in November’s budget a reduction in headline business rates for hospitality, but simultaneously ended Covid-era reliefs. Combined with a three-yearly property revaluation, this dwarfed the rate cut, leading to average rate rises of 76% for pubs and 115% for hotels. Whitbread, owner of Premier Inn, said it faced an extra £40m-£50m in tax, sparking a backlash that saw landlords ban Labour MPs from pubs.
Reeves commissioned work before Christmas on a support package, led by Treasury minister Dan Tomlinson, who has met business groups. Officials are finalising details, with some calling for VAT cuts and MPs for modest rate discounts. Labour MPs welcomed the quicker U-turn but criticised the delay. 'It’s great the Treasury is in listening mode. It’s just a shame it wasn’t listening before,' said one.
More than 30 Labour MPs had planned to vote for an amendment to the finance bill on Monday, but Antoniazzi said they would hold it in reserve. Industry insiders, including Emma McClarkin of the British Beer and Pub Association, welcomed the news but awaited details. The U-turn has frustrated some MPs, who said the repeated climbdowns made them more likely to rebel in future.
