Labour under pressure to review ‘flawed’ pub taxes as thousands face ruin

The government is under growing pressure to scrap the ‘flawed’ business rates system for pubs after a minister admitted the way bills are calculated should be reviewed.

Landlords have seen property tax valuations balloon by as much as fourfold, putting thousands in financial jeopardy.

After an outcry, pubs and music venues were given a 15 per cent discount on business rates from April and will not see rises for two years.

Junior Treasury Minister Dan Tomlinson has ‘acknowledged concerns’ about the valuation process and promised a ‘review of the methodology’. But the Government will not change it until the next three-yearly revaluation in 2029.

Tory MP Andrew Snowden, vice chairman of the all-party parliamentary group on beer, said: ‘By sticking with current valuations, huge bills are still landing on local pubs and many simply will not be able to cope. Unless urgent action is taken now, hundreds, if not thousands, will close.’

His call comes as Angela Rayner and Andy Burnham, tipped as Labour leadership candidates, call for more tax support for pubs.

Landlords are already under pressure from National Insurance and National Minimum Wage increases, plus high energy bills.

Last week accountancy firm Price Bailey said one in eight pubs could face winding up petitions.

Recent changes to business rates mean a lower multiplier of the estimated rental value of a property is used to calculate the tax. As well as the 15 per cent discount, Chancellor Rachel Reeves introduced transitional reliefs over the next three years after axing 40 per cent Covid-era discounts.

But publicans say revaluations mean the lower multiplier and transitional relief make little difference. Industry bodies UKHospitality and the British Beer and Pub Association have warned the bills will still rise by an average of 15 per cent, or £1,400, in April.

Reeves has avoided more fundamental changes to business rates, and other hospitality businesses – restaurants, hotels and cafes –miss out on any relief at all.

Tomlinson’s intervention came after a rising backlash from industry bosses and MPs – which saw Labour MPs, including the Chancellor, barred by pub landlords in response to November’s Budget.

In an exchange with Shadow Chancellor Sir Mel Stride, Tomlinson blamed the Tories for the current system and accused trade bodies of changing their position in the wake of November’s budget.

He said: ‘Before the Budget, every pub sector body was broadly signed up to the methodology for valuing pubs. Since then, the same bodies have withdrawn support.’

In response, Stride said: ‘Labour admit the pub valuation system is flawed, promise a review later – but make pubs pay now.’

He added the Tories would ‘abolish business rates for thousands of pubs and give them the certainty they deserve’.

Meanwhile Reform UK, which has proposed a £3 billion support plan for pubs including scrapping business rates and National Insurance rises while reducing VAT and duty, said: ‘The current business rates valuations have left the pub sector on its knees.’

Publicans are angry that the current revaluation process, by the Valuations Office Agency, factors in turnover to calculate rateable value when it is supposed to use a measure called Fair Maintainable Trade – the takings of a fair, competent landlord.

Landlords say they are unfairly penalised for upping turnover, such as through offering food or live music, even if it incurs extra costs, regardless of profits.

Chris Wright, of the Pubs Advisory Service pressure group, said: ‘The government needs to restore confidence in the rateable values system and prove they are going to stop using turnovers.’

He added that revaluations should ‘show full data’ used and supporting evidence.

Meanwhile, Allen Simpson, chief executive of UK Hospitality, said the pub sector needs help now rather than at the next valuation.

He said: ‘This entire situation proves that the business rates system is still not working for hospitality businesses. The Government’s review of valuation methodology is positive, but that is a longer-term reform that will not change the bills that are rising across the sector in April.

‘Hospitality businesses and industry bodies were well aware that rateable values were set to increase significantly and that the existing 40% business rates relief was due to expire.

‘It’s why, for months prior to the Budget, we were calling for the Government to introduce a maximum 20p business rates discount, because that was the only way to deliver lower bills. The Government chose not to heed those warnings.’

A British Beer and Pub Association spokesperson said: ‘The methodology has been in question for some time and in light of the recent revaluations and the unprecedented increases many pubs have seen, we withdrew our support for the latest guide. 

‘We are pleased that Government has listened to our request to now review the pub valuation methodology.’ 

A Treasury spokesman said: ‘We are backing Britain’s pubs with a cut to their business rates bills followed by a two-year real-terms freeze whilst we review how pubs are valued.’