When the announcement arrived this morning that Andy Burnham is cutting business rates for pubs, social clubs and live music venues by 20 per cent from next April, my first thought was: how much difference will this make? I run three village pubs in Oxfordshire with my wife. Of course, a £1,100 rate cut is welcome. But on the margins that pubs are running it is, very much, Nero fiddling while Rome burns.
Most pubs are making something like three pence in profit for every pound of turnover on beer sales. Staff wages and National Insurance routinely take 25 to 35 per cent of our turnover
At the beginning of the year, under Starmer, the revaluation of business rates felt like a ransom note. Average bills were set to climb sharply. More than 5,000 pubs saw their valuations double. The British Beer and Pub Association was warning of six closures a day. I wrote here for Coffee House at the time that the government was talking about growth while slamming on the brakes.
The partial 15 per cent rate relief announced by the government in January was a clumsy, badly handled U-turn that did nothing to fix the underlying system. In fact it managed to make everything deeply confusing and far worse, with pubs left unsure how the partial relief applied to their new higher valuations.
The relief offered today means that a typical pub is supposed to save about £1,100 a year, with almost 32,000 venues qualifying. The package is worth around £100 million. Any reduction in the rates bill is real money that stays in the till, rather than going to the council. Yes, it is a help, but very little compared to what they are relentlessly taking away at the same time.
Most pubs are making something like three pence in profit for every pound of turnover on beer sales. Staff wages and National Insurance routinely take 25 to 35 per cent of our turnover. And energy is still running from £650 to several thousand pounds a month. The recent National Insurance and National Living Wage rises alone added £1,000 a year to most of our bills.
Business rates themselves are usually only around 3 per cent of turnover, which is roughly equivalent to three weeks of one full-time bar person or a month’s energy for a small wet-led pub. On the paper-thin margins most of us are operating on, this is not trivial. But it is certainly not transformative. The cut will not offset the wider pressures that have hit hospitality like a freight train. Yes, it softens the rate hit that was coming down the track, but in truth, it barely softens the blow.
Restaurants have been left out of today’s specific relief, and the announcement is drawn tightly around pubs, social clubs and live music venues. Pure restaurants will get none of the extra 20 per cent, even though they sit on the same high streets and face the same pressures. They face the same rising wages, energy bills and supply costs that are squeezing every high-street business.
The decision to exclude larger music venues is misguided as well, stemming from the mistaken idea that they are ‘big business’. They aren’t. Many mid- to large-sized music venues operate on tiny margins. They are not all corporate cash machines. Many are close to going to the wall. These are venues where the next generation of talented Brits will get their break. Losing them will make it even harder for up-and-coming musicians and comedians.
The funding is politically neat and well timed. Relief for anti-social businesses such as vape shops will be reviewed, and there is a consultation underway to make online marketplaces liable for VAT on UK sellers as well as foreign ones. Revenue is meant to be reinvested in the business rate system. Fair enough, as far as it goes. We are all sick to death of the endless parade of vape shops and dodgy barbers on every high street.
I’ll take the £1,100. The pubs I look after will be a few thousand pounds better off between them. Some of that will go on keeping staff and desperately trying to keep the price of a pint from going up yet again. After the last few years though, pubs have learned not to mistake a temporary sweetener for a cure.
Labour needs to understand that small businesses are not kulaks. We are not enemies of the state sitting on vast piles of ill-gotten greedy wealth; we are not exploiters of the workers; we are the largest employers in the country; we are the heart of high streets and city centres; we are the home from home of cafes and pubs; we are the essentials in the early hours of the morning; we are the great driver of our economy.
Until the business rates system stops treating successful local businesses as cash cows, announcements like today’s will be small steps on a long road,
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