Neil Burke, landlord of the Black Friar pub in Salford, has seen his monthly gas and electricity bill rise from around £2,500 five years ago to £6,500 today – even in a quarter when he hadn't needed to put the heating on. He has echoed calls from within the hospitality sector to cut VAT down from 20pc to 10pc, which would bring it in line with other European countries.
Rising Costs Hit Hospitality
Burke, who also owns a cafe next door and the Horse & Jockey pub in Chorlton, said the increase is indicative of the struggles facing many businesses in Greater Manchester. An increase in the national minimum wage has added around £80,000 a year to the costs across his pubs. A reduction in business rates earlier this year has saved him little more than £100 a month.
“It’s money, but it’s barely touching the sides,” he said. There are very few expectations that the upcoming Budget will transform his fortunes overnight.
Business Rates and VAT Relief
This summer, the prime minister announced there would be a 20pc cut to business rates for pubs, clubs and live music venues in April 2027. This was in addition to the 15pc relief announced by the previous government under Sir Keir Starmer. The relief has been welcomed by the sector, although calls remain for broader reform.
Back in 2024, Andy Burnham had suggested he vowed to reduce VAT on the industry, saying at the time that ‘VAT should be reduced on this industry’. But Burke is sceptical that chancellor John Healey will go that far.
“I doubt very much it’s going to happen,” he said. “Which is a shame because VAT is the one thing that leaves more money in the back pocket.”
Fiscal Devolution and Borrowing
Britain's national debt topped £3 trillion for the first time as the government borrowed more than expected again in September. The ongoing wars in Ukraine and Iran have blown a huge hole in Britain’s finances, halving the country’s fiscal headroom to £12billion. In the face of these international crises, Healey reportedly wants to deliver a ‘breathing space’ budget.
Much of its direction has already been signalled in advance, with suggestions that the chancellor will seek to ‘steady the ship’ rather than deliver a change in economic policy. Nevertheless, there is already excited chatter in Greater Manchester that the budget could mark another step towards fiscal devolution, which is part of Burnham’s ‘10-year-plan to rewire Britain’.
From April 2027, mayors will retain a greater share of business rates and from spring 2028 they will receive a share of income tax revenue. It is not yet clear what percentage of income tax the mayors will receive, but further details are expected from Healey. Mayors will also have the powers to impose an overnight visitor levy (a so-called tourist tax) – welcomed by local leaders, it has sparked some opposition from the hospitality industry.
Infrastructure and Devolution Critics
The prospect of greater financial freedom is particularly significant for transport infrastructure in Greater Manchester, including plans for an underground station at Piccadilly, which would allow for direct train routes, support future growth like a revived Manchester-Birmingham line, and serve as a hub for three new Metrolink tunnels. Earlier this year, a new Liverpool-Manchester line got the go ahead, something Burnham has said could turn Piccadilly Station into the ‘King’s Cross of the North’.
Henri Murison, chief executive of the Northern Powerhouse Partnership, is positive that the budget could help Greater Manchester and other mayoral areas deliver major infrastructure by combining public backing with locally raised funding and private investment. “Whether it be an underground Piccadilly station for Northern Powerhouse Rail or tram lines as part of the Bee Network, the ability to borrow against future income tax revenues will be a significant new freedom if designed properly,” he said.
But greater devolution is not without its critics. Graham Stringer, Labour MP for Blackley and Middleton South, says the success of the model depends on the quality of the people running it. “In Manchester’s case, devolution has worked because there were competent leaders and mayors,” he said. “It could go pear-shaped if it’s done everywhere. I’m not going to point them out but there are some less competent.”
Genuine devolution, he continued, should ultimately involve regional leaders raising a substantial share of their own funds, rather than relying on government grants. That, he argued, would create greater accountability to local voters. “Otherwise politicians tend then to blame the government, everything becomes, oh the government won’t give us this, it’s their fault,” he said. “For real devolution and accountability they have to be accountable to the electorate, not the government, and they have to be able to make these decisions and justify them to the electorate.”
Cost of Living and Business Confidence
For all the excitement over fiscal devolution, most households will be primarily concerned about the ongoing cost of living crisis. The government has already announced ‘everyday fixes’ such as temporarily removing the 5pc VAT on domestic electricity bills and capping bus fares at £2. With a large increase in energy bills projected in January, more support for some households is expected to be announced in the budget. Reports suggest that one option being considered is increasing the ‘warm home discount’, which provides a £150 bill reduction for around six million low-income households on means-tested benefits. According to the Guardian, the chancellor could add £100 to it.
Sam Booth, CEO of the business network group pro-manchester, said: “There is real ambition across our region, but greater certainty is needed around tax, employment costs and the wider economic outlook to make long-term investment decisions. We want to see a clear and consistent direction that gives businesses the confidence to move forward, rather than another period of waiting to see what happens next.”
The hospitality sector has been particularly vocal in calling for action. UKHospitality has proposed a few key measures to bring costs down and back hospitality growth, including cutting VAT to 10pc for hospitality, reform business rates, and reduce employer National Insurance Contributions for the sector. The body has also come out against the introduction of a tourist tax, arguing that it adds an unfair financial burden on top of the UK's 20pc VAT rate on accommodation.
Allen Simpson, chief executive of UKHospitality, said rising costs had put pressure on a sector that ‘creates jobs in every postcode’. “Government decisions in recent years have put that all at risk as hospitality’s tax burden has grown disproportionately to other sectors,” he said. “Hospitality was a growth engine that has been pushed back into the pack. Costs up, opportunities curtailed, jobs lost and businesses closing their doors for good.”
Businesses are looking for a clearer indication of how the government intends to encourage investment and improve productivity. Zoe Billingham, director of the IPPR North think tank, said: “For the North, we want to see regions like Greater Manchester get more financial control including over a share of income tax, so that mayors have real power to invest in their areas in ways that impact on the lives of their residents. To drive long term regional growth, the Chancellor should provide public financial corporations – such as the National Wealth Fund – with more capacity to invest and crowd in private funding.”
With pressure on public services, energy prices rising, and government borrowing already high, there is no doubt that the chancellor faces difficult choices next week. As one policy source told the MEN: “It’s that thing of, how big is the cake? The cake isn’t going to get dramatically bigger overnight.”
For Greater Manchester, however, the region wants more say in how the cake is divided, and more freedom to grow it. Giving mayors a greater share of locally generated tax revenues could help them plan beyond the limits of central government grants. But greater financial freedom comes with more responsibility. Regional leaders will have to show they can use those powers to improve the people and businesses they represent. The test for this budget is not solely if it can ‘steady the ship’, but also allow for an economy in Greater Manchester in which businesses have more confidence to invest, and a region that has more control over its future.
