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Saqib Bhatti
The hon. Member makes an interesting point. When publicans speak to me about taxes, they talk about their turnover either increasing or staying stable but the costs going up. The Government have to set out what they will do to improve the fiscal landscape for pubs, and for the hospitality industry more broadly.
A lot has been made of Lord Milburn’s report on NEETs—those not in education, employment or training—and the rise in the number of 16 to 24-year-olds in that category. Has the Minister considered the impact of these tax rises on pub-specific jobs? Some 51% of people working in pubs are under the age of 24, meaning that many are likely to be balancing working in the pub with other part-time commitments such as school or university. These new employment costs mean that publicans will think again about hiring staff on a part-time basis, driving many people into worklessness. The national insurance rise has had the single most damaging effect on the Saturday job.
In addition to the crippling jobs tax, pubs are also suffering because of stifling increases in business rates. These policies threaten to be a huge—maybe even the final—nail in the coffin of many pubs that are really struggling. Analysis from UKHospitality has found that, by 2027-28, the average pub’s business rates will be £4,500 higher than they are today, rising to an astonishing £12,900 within three years, even with the reduced multiplier and transitional relief. I asked one of my staff members how much they paid for a pint of beer in one of the pubs in my constituency, and they said a pint of lager came to £7.50. That pub would have to sell an extra 1,720 pints just to offset the cost of those shocking tax increases.
The Conservatives recognise the value of our pubs. We have pledged to scrap business rates for 250,000 retail, hospitality and leisure businesses because we recognise the importance of ensuring that businesses keep more of what they earn, allowing them to invest in the community rather than sending it back to central Government. I say to the Minister that Governments do not create growth or jobs; our businesses do. This announcement formed part of our larger campaign to get Britain working again, freeing up money for businesses to hire new people, often younger and always local. It would drive new jobs and economic growth across rural areas of the UK.
Building on that, The Telegraph revealed last month that landlords will be hit with a “nice pub tax” under new guidelines. It found that HMRC has ordered officials to levy higher business rates on pubs that are in attractive locations or based in character properties. That is a complete disaster, and could mean that many pubs are forced—
The Exchequer Secretary to the Treasury (Dan Tomlinson)
It is important to note that the article in The Telegraph on the changes for rural pubs was about the fact that we published, with full transparency, the guidance used to value pubs that was signed off under the previous Government. This Government are cutting pubs’ business rates by 15% this year, freezing them for the next two years and reviewing that very guidance. We respect the press, but that article was fake news, and I do not think it should be repeated in this place.
Saqib Bhatti
I love the Minister’s passion, but I have not finished yet, and I encourage him—[Interruption.]
Charlie Maynard (Witney) (LD)
It is a pleasure to serve under your chairship, Mrs Hobhouse.
I thank the hon. Member for Meriden and Solihull East (Saqib Bhatti) for securing this important debate and I thank all my colleagues who gave such excellent speeches, which set out not only how much they love their pubs, but the struggles that they face. That is the important thing. I do not want to talk about how much those pubs matter to our communities or how much fun I have had in pubs over the years, because the thing that we must focus on is the big screaming problem. We need to take it seriously. Warm words go only so far right now. We have a huge problem that is hitting pubs every day, and we have to do something about it.
I will set out how big the problem is. In the first half of last year, more than 200 pubs closed in six months. That is eight a week. A year on, things are even worse. The British Beer and Pub Association said that 161 pubs closed in the first three months of this year alone in England, Scotland and Wales. That is about 2,400 jobs. Those in rural and coastal constituencies have been among the hardest hit, and according to UKHospitality, running costs for pubs have risen by an estimated 43% since 2019. One third of hospitality businesses are operating at a loss, six in 10 have cut jobs and 63% have reduced staff hours. That is bad.
Anyone knows that pubs are much more expensive than they used to be. That is hurting customers, as fewer people can afford an evening out. When a plate of fish and chips costs 15 quid, that is hardly surprising. It is obviously not because pubs are raking it in. Sadly, quite the opposite is true. Pubs are facing many of the same pressures that are hammering small local businesses across the board: spiralling food prices, high rents, sharp business rate increases, soaring energy bills, increased employer national insurance contributions and rising wages. As an entrepreneur who spent 24 years building a business, the overall situation scares the daylights out of me. I am not envious of them in that position.
I am grateful to Nick at the Old Crown in Faringdon and Tommy and Mike at the Three Horseshoes in Witney, who sat me down and talked through just how tough it is to run these businesses. The Minister is smiling at me because he is a Witney boy, so he understands.
Charlie Maynard
Well, there you are. It is a wonderful pub, and we need to keep it open.
This is all doubly tough for rural pubs. City pubs have a much larger catchment of potential customers who are within walking distance and not car-dependent, which matters with drink driving. Rural pubs are likely to rely on oil, liquefied petroleum gas or electric heating rather than the gas grid, and they have a small labour pool from which to hire. On top of all those hurdles, pubs in the countryside are much more significant to their communities, as they are typically the only pub in the village and a key hub in village life, as so many Members have pointed out.
In west Oxfordshire and the Vale of White Horse, we have fought really hard to enforce making pubs assets of community value, so that everyone understands that they cannot make a quick buck from buying a pub, turning it into a house and selling it—the cost to the community is far too great. But being a community asset alone does not pay the bills. We have to make those pubs into survivable businesses.
The changes announced in last year’s autumn Budget—the business rates revaluation and the removal of reductions that dated from the covid pandemic—led to extreme distress for publicans. While I recognise that the Government have subsequently acknowledged the crisis facing Britain’s pubs, the package of support that they announced at the start of the year, including the 15% cut to pubs’ business rates bills from April and a two-year real-terms freeze, was only a partial U-turn, and it will still leave many pubs facing a business rates increase on top of the other cost pressures that I have listed.
The Exchequer Secretary to the Treasury (Dan Tomlinson)
It is a pleasure to speak under your chairship, Mrs Hobhouse. It is some of the most impressive I have seen in Westminster Hall, as you managed to keep this unruly lot to time. I am grateful to the hon. Member for Meriden and Solihull East (Saqib Bhatti) for securing this debate and for his contribution on the importance of rural pubs.
I represent an urban seat here in London—it is at about midday on the clock from central London—but it has a plentiful supply of green belt, and I have 12 farms in my constituency, even though it is within Greater London. So I have some understanding of the situation for rural communities. I also grew up in the constituency of the hon. Member for Witney (Charlie Maynard), as was mentioned earlier. I spend every Christmas eve doing carols at the Three Horseshoes, so the owners have to look out for me this year. It is a fantastic pub. We want to make sure that pubs like that, and pubs in all the constituencies mentioned today, have the support they need.
I thank my hon. Friend the Member for Redditch (Chris Bloore) for mentioning the pubs in his constituency, including the Golden Cross—I hope that England can get a golden cross in this evening and that we can score some goals. [Interruption.] Thank you, one and all. I thank all Members for their contributions and for sharing the stories of the businesses in their constituencies. Pubs are so important to so many communities, particularly rural communities. The Government have rural rates relief for pubs that are the only pub in villages with populations of 3,000 or less. There are a couple of thousand businesses across the country that make use of the rural rate relief scheme, which covers shops as well. I encourage all Members to make sure that local businesses are aware of that scheme, which was also in place under the previous Government. I know that it is welcomed by those businesses that use it.
I will deal with the topics that were raised in turn. We are reforming the business rates system and have implemented permanently lower multipliers for eligible retail, hospitality and leisure properties, such as pubs. That is funded by a high-value multiplier on the 1% of the most expensive properties, which includes large distribution warehouses used by online giants. That change will mean that the tax rate paid by the smallest businesses on the high street will have a wedge of a third compared with the tax rate paid by the online giants. That is a permanent change, not a temporary relief that will jump up and down. Those changes are worth nearly £1 billion a year for the 750,000 retail, hospitality and leisure businesses that are the lifeblood of our high streets.
Members, particularly Liberal Democrats, talked about the need for a significant change to the way that pubs are valued. As I mentioned, this Government are the first in a very long time to commission an independent review of how pubs and hotels are valued for business rates purposes. In the weeks after the Budget, we heard very clearly from businesses that they had concerns about the opaqueness of the methodology. Some who spoke about business rates for pubs mentioned the feeling of running to stand still, which Members mentioned: their turnover goes up, but then their business rates bill goes up, too. We have been clear that, as was set out in law in the 1980s, it is right for business rates to reflect rents, and we will not separate out pubs entirely. The question is: how can we best value pubs and communicate their value through the Valuation Office Agency to individual ratepayers?
Mike Wood
I am sure that one of the messages the Minister will have heard from pub owners is that the unique way that pubs are valued for business rates—through an assessment of their fair maintainable trade—means that if they invest in their own business, one of the first things that happens is they face a higher bill, long before they have started to repay the money that they invested. Will the Minister consider addressing that with a business rates holiday to provide space for businesses to recoup some of their investment before it is taken off them in business rates?
Dan Tomlinson
I love an intervention like that one. We are looking at exactly that. Last year, in a call for evidence on how we can improve the business rate system to support investment, we set out that we would look at improvement relief. At the moment, it does give a relief if a business invests, but only for a short time. That is under active review as a result of the call for evidence, where we heard that businesses were interested in the extent to which changes to improvement relief could support them and their investment decisions. I would happily receive further representations on that from Members.
Calum Miller
Further to the comments from the hon. Member for Kingswinford and South Staffordshire (Mike Wood), the Minister will be aware of the way in which the pub industry is dominated by major pub companies, which often own tied pubs. That has a major bearing on the leasable value of many of these properties. Many publicans in my area tell me that that drives up their rates, even though they do not have full control over that, just as they do not have full control over their purchasing. Is the Minister working with the Department for Business and Trade to review that, and is he talking to the Competition and Markets Authority to review whether the pubco structure in our country is fit for purpose?
Dan Tomlinson
I thank the hon. Member for raising that issue; it is one that publicans in my constituency have raised with me as their MP. Of course, there are benefits to having a link with a major supplier, and I understand why many publicans choose that route, but it is clear that there are significant challenges, too. DBT has looked at this, and I am sure that conversations are ongoing with the Under-Secretary of State for Business and Trade, my hon. Friend the Member for Halifax (Kate Dearden), about what reforms could be made. This is not my policy brief, so I do not want to speak too far out of turn, but I totally understand the issue. I will raise it personally with my hon. Friend. I have done so in the past, after being asked to by my constituents.
On a related point, guest beers and access to the bar for guest beers in tied pubs was mentioned. DBT has met the parties involved in the beer market access review to hear their evidence directly, and it is giving due consideration to all the evidence, along with input from competition policy experts. This is under active review by the Government, and we are committed to making sure that we can have a diverse and competitive beer market. On a personal level, I hope that the Government can look really closely at this so that we can improve competition and choice, but it is being led by my hon. Friend the Member for Halifax.
As has been mentioned, in January this year we went further to support pubs, with a further 15% off their business rates bills and a real-terms freeze in business rates for pubs in the next two years of this revaluation period. That support is worth £1,650 for the average pub this year. It means that three quarters of pubs are seeing their bills either fall or stay flat this year and, as a sector, pubs will pay 8% less in business rates in 2029 than before the revaluation took effect.
Moving on from business rates, the Government recognise that pubs often serve as crucial community assets, particularly in rural communities, as the hon. Member for Meriden and Solihull East and many others have mentioned. They support local economies and communities, provide spaces for gatherings, support those in need and foster a great sense of local pride.
Jim Shannon
The circumstances around VAT in Northern Ireland, and reduced VAT across the border, are peculiar and particular to us compared with other parts of the United Kingdom. Has the Minister had chance to speak to Colin Neill, the chief executive of Hospitality Ulster, to ascertain some of the things that he feels might be a way forward? If so, have there been discussions not only with him but with the relevant Minister in the Northern Ireland Executive?
Dan Tomlinson
I have not managed to have that conversation, but the hon. Member is very welcome to write to me, and I am happy to consider those representations. Of course, I have heard calls from Members to cut VAT for hospitality, and I am aware that there is a campaign on that matter. I just say that cutting VAT for hospitality from 20% to 10% would cost £11 billion. A range of policy ideas have been raised, all of which involve cutting tax. The right hon. Member for Salisbury (John Glen) was right to acknowledge that there are important fiscal considerations for the Government. It is important that we manage the public finances and bring down Government borrowing, and we are forecast to have the fastest reduction in Government borrowing of any G7 economy, with our deficit falling below the G7 average for the first time in a very long time. Of course, I will listen to the representations made and the asks from campaigners, but I caution that we have to ensure that we have sufficient revenue to fund our public services in a sustainable way.
John Glen
The Minister will acknowledge the distinct combined effect of a whole range of Government decisions on the rural pubs sector. While I acknowledge the need for fiscal responsibility, what work has he done to look at the net effect of all Government decisions, and at why a distinct solution is needed for this particular sector?
Dan Tomlinson
We consider our policies in the round, on a sector-by-sector basis, as well as looking at measures tax by tax. The right hon. Gentleman is right that, as politicians in the Treasury, it is important for us to push the civil servants to make sure that we look not just at individual measures in silos, but at them in the round.
There are some cross-cutting measures that particularly help hospitality. For example, if a hospitality business wishes to employ a young person, aged 21 or younger, as long as their wage is less than around £50,000, the business is relieved from NI. That is up to 25 years if it hires a young apprentice. Of course, the Government are always considering the impacts of their policies on sectors as a whole.
Ben Lake (Ceredigion Preseli) (PC)
Building on what the Minister said about employment costs, we have heard about the pressures that many hospitality businesses, particularly pubs, are feeling following the reduction to the threshold on the increase of the rates. As part of the work that the Minister is undertaking to review things in the round, could he focus on the possibility of increasing the employment allowance for smaller businesses in the sector? That could be a very welcome relief for them.
Dan Tomlinson
Thank you, Mrs Hobhouse. We continue to look at the impact of tax policies across sectors. The Chancellor and I will keep tax policy under review in the run-up to the Budget later this year. Let me make a couple more points before wrapping up in sufficient time for the hon. Member for Meriden and Solihull East to conclude.
We want to make sure that we cut the stifling red tape that is holding our pubs back across the country. At the Budget, we announced the first iteration of the national licensing policy framework. That does not sound very exciting, but it is very interesting. I have been pushing colleagues across Government on it, so that we can provide more clarity in our licensing framework to give pubs that want to open in certain ways or do certain things the flexibility to do so, to support their growth and wider economic growth.
There is the world cup game tonight, and pubs across England and Wales can soon benefit from extensions to licensing hours, as we are letting pubs stay open later for home nation games in the knockout stages. It is encouraging that Scotland did well the other day; hopefully, both teams will make it through to the knockout stages.
We are also backing pavement pints, with a commitment to make it easier for pubs to serve food and drink outside by cutting unnecessary bureaucracy. At present, many businesses are forced to reapply repeatedly for pavement licences to continue serving customers outdoors. That process can cost up to £350 each time, creating an avoidable and costly burden for businesses. I hope that the reforms we have announced will bring that to an end. Finally, in January, the Chancellor announced a £10 million package of funding for hospitality support over three years, up from £1.5 million for one year announced last April.
We understand the need to make sure that we do all we can to support pubs and our hospitality sector, particularly in vital rural communities. I thank Members for their contributions, which I will take back with me to the Treasury in the weeks and, I should hope, months to come.
Wera Hobhouse (in the Chair)
After this debate, we all feel very thirsty for an ice-cold lemonade.