Call time on unfair and disastrous business rates rises for pubs
Sector-specific relief is needed for to address the current imbalance in business rates system, argues Greg Mulholland MP.
As is well known, the last few years have been tough ones for Britain’s exceptionally hard working publicans. Working very long hours, with little if any time off, facing changing habits, irresponsible supermarket pricing, the collapse of the property scam of the tied leased pubco model and the smoking ban, many licensees are just about making a living and keeping vital community assets open. Yet with all these issues and challenges, some pubs are facing a challenge that they simply cannot deal with, an unprecedented and huge rise in taxation, through a hike in business rates.
If the Government’s proposed business rate rises go ahead in their current form, some 37% of pubs will see a rise in business rates. A revaluation hasn’t taken place since 2008 and things have changed since then and other sectors are also seeing rises in business rates. However the level of many rises for pubs are mindboggling. For example in Manchester, an average rise of 23% is expected, pubs in the centre of London are facing an average rise of 43% and one pub, in St Albans has been told that its business rates will rise be close to 300%. These rate rises are proposed against a backdrop of pubs closing at a rate of 21 a week. Since April 2010, some 11,443 pubs have closed across England and Wales.
Pubs are, of course, businesses and need to pay their share of tax. Yet when research for the British Beer and Pub Association shows that pubs are paying 2.8% of the entire business rate bill, whilst only generating 0.5% of business turnover, the plain unfairness of the current system towards pubs is laid bare. The revaluation will further this disadvantage, with pubs and restaurants receiving a 15% and 23% increase in rateable value respectively, being the only sector to see an increase in every region. Half of all pubs and restaurants will see an increase in bills, with average bills rising by a fifth. Analysis shows that 2,700 pubs will receive an increase in their bills from April of over £5,000 per annum, which is incredibly difficult – indeed in many cases impossible - to absorb.
The sector is already unfairly disadvantaged by the way that business rates are levied. Pubs and restaurants are unique in that the link of rental value to turnover means that many SMEs are trading from large, higher banded properties, providing a comfortable community amenity. This is reflected by the fact that the pub sector pays more than five times than if rates were comparable to turnover – an overpayment of around £500 million.
The revaluation also means that fewer businesses than ever are classified as small and there are 51% more premises in the “large” bill banding, resulting in many businesses seeing increases in year one. The revaluation has further had the disadvantage of penalising those who have invested in their businesses, bringing growth and jobs to local areas – business rates should not act as a disincentive to investment. Some measures introduced by the Government, including the extension of small business rate relief (SBRR) and transitional relief but more needs to be done to stop this threat to our heritage and history.
So action is needed and needed urgently. Transitional relief for first year bill increases needs to be capped at 12.5% for all pubs and licensed hospitality, or the definition of large businesses should be doubled for the sector, to reflect that more businesses trade from larger properties. The Government should also urgently consider a sector-specific relief to recognise the current imbalance in the business rates system. There must be no restrictions on appeals, which currently is the case.
Yes, pubs are businesses, but they also hold a vital place in communities and unique role in our culture that other businesses simply don’t. This is what the Ministers need to recognise. Warm words about the value of pubs are all too easy, it is time that this was backed in in policy terms. So we need a system that recognises the unique qualities of pubs, their place within society and their worth, not just in pounds and pence but in community value as well. It is also time that Ministers woke up to the fact that we urgently need an actual definition in law of a community pub, separate from other licensed premises. Not only would this allow for proper protection against predatory purchasing of pubs by supermarket and developers, but it would allow for a different system of taxation and one that would allow for the social value of true community pubs to be recognised in the tax system.
A broader debate about business taxation is also necessary, in light of the growth of online retail and the changing dynamic of business operations, with an ever-increasing call for funding from a diminishing amount of trade being carried out through physical properties. In the 21st century, the current business rates system is no longer fit for purpose, and we now need a genuine, independent review and root and branch reform, something the Government have so far ducked doing.
It was, perhaps ironically, a Frenchman who wrote the great lines about the threats faced our pubs just over 100 years ago. In This and That (1912) he wrote those famous words “But when you have lost your Inns drown your empty selves, for you will have lost the last of England”. Hilaire Belloc was also a Liberal MP, perhaps he too raised this in Parliament and no doubt would do so today were he around.
So Ministers must listen to publicans and to those in the pub sector and all who care about our pubs. Unless they act to stop these rates hikes for pubs, many will close despite being viable businesses. So they must now change their hearts and quickly and call time on these unfair and disastrous rates rises. Then they need to sit down, perhaps in a pub with a pint, show some leadership and work with others to come up with a way to at last turn their warm words into a genuine pro pub tax system.
Greg Mulholland is the Liberal Democract Member of Parliament for Leeds North West and is Chair of the British Pub Confederation, a Top 40 CAMRA Campaigner of all time and a 3 time winner of a CAMRA national award for pub campaigning @thepubchampion
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