Analysis
What does the pub sector want from the 3 March Budget?
As previously reported by The MA, Chancellor Rishi Sunak told the House of Commons on 11 January that despite forecasts of further economic decline – including warnings of first double-dip recession since 1975 from the British Chambers of Commerce – there will be no additional financial support for Covid-hit businesses before his next Budget statement.
When quizzed on further backing amid January’s fresh lockdown measures, Sunak refused to be drawn on furlough scheme extensions, business rates relief and a VAT cut, instead citing existing fiscal stimulus worth £280bn and the fact that 1.2m employers had already furloughed almost 10m employees.
“The Budget is the appropriate place to consider those [measures] given the scale of the response and indeed the fact that all of our major avenues of support have been extended through to the spring,” he said.
In light of this – and the recent deadline for Budget submissions on 14 January – trade body UKHospitality (UKH) wrote to the Chancellor asking the Government extend its VAT cut to 5% for a further year and enact a further business rates holiday for hospitality throughout 2021.
What’s more, UKH urged the Government to announce additional support measures including a reformed Job Retention Bonus and an extended repayment period for all Government-backed loans to 10 years, with an extra year interest-free.
Finally, UKH has also called on the Government to further defer tax payments to December 2021 and extend the Coronavirus Job Retention Scheme – or furlough – until the end of June and assist the hospitality supply chain so it can support the sector’s recovery.
Hospitality to 'spearhead' recovery?
Previewing the 3 March statement, UKH chief executive Kate Nicholls described the upcoming Budget as “a fantastic opportunity” for the Government to deliver a “bold package of support” and put the hospitality sector in a position to recover from its Covid symptoms.
“Some businesses have inevitably and sadly gone to the wall, and we have lost about 650,000 jobs,” she explained. “Thankfully, many more businesses have managed to adapt and are still managing to cling on, keeping jobs safe and giving their staff, customers and communities hope that they will be able to reopen once the vaccine roll-out makes it safe to do so.
“Government financial support has been key – the two principal pillars of support, slashing hospitality VAT to 5% and providing a business rates holiday, have helped give employers the lifeline they needed to survive.”
She added that, with the required Government support, the hospitality sector could spearhead the UK’s economic recovery, revive high streets and provide nationwide employment and investment post-pandemic.
“We know from recent history that hospitality has the economic clout to be in the vanguard of economic recovery once the crisis has passed, but only if essential support is extended,” she continued.
“A wide-ranging package of financial support will give hospitality businesses the best chance of not just surviving the remainder of the crisis but leading the UK’s economic recovery in the years ahead.
“If we get what we need, hospitality can spearhead the economic recovery of the country, revive high streets and provide employment and investment in every single region.”
'We need all the help we can get'
Detailing their Budget wants and needs via The Morning Advertiser’s (MA) social media channels, publicans agreed the Government needed to amplify measures already in place to help the sector survive.
When asked “what measures to protect and support pubs do you think the Chancellor should include in his Budget on 3 March?” the operator of the House Without a Name in Harwood, Greater Manchester, tweeted: “The measures that have been in place since last March need to continue. We wouldn’t be here if they weren’t. Until we are allowed to fully reopen we need all the help we can get.”
Vat at 5% & include alcohol served in pubs
— Robert Smith (@robsmith66) January 19, 2021
No Business rates for 2 years
Offset cost of furlough for employers against losses 20/21
Offset VAT owed against losses for 20/21
Allow pubs to keep operating as takeaways without planning
Final grant of 50% of rates paid 2019/20
What’s more, commenting on The MA’s Facebook page, publican Dell Gill suggested refunding licensing fees given pubs haven’t been able to trade, while Buckinghamshire-based operator Kyle Michael advocated a year-long extension to the business rates holiday followed by a full revaluation of how rates are applied to account for online businesses “stripping footfall”
“A further year waiver of interest and repayments for bounce back loans given no pub has had the chance to bounce back,” he added on top of a change in beer duty and VAT to bring them into line with the rest of Europe.
“A full credit back for all beer on site out of date at the point of any closures including open stock and bottled products. A commitment not to penalise the pub industry disproportionally compared to other industries as is the case now.”
‘Firefighting’ should have started
Nick Griffin, chief executive of the Licensees Association, believed the Chancellor simply can’t put off announcing new support measures for Britain’s embattled pubs until the 3 March Budget given operators’ businesses are being “destroyed daily”.
“It’s an easy statement for the Chancellor to make, but he’s not running a pub,” he said. “We have a litany of issues that need addressing and urgently, procrastination is not going to help a single publican in distress.
“We have many local authorities dragging their heels in issuing grant payments, landlords unwilling to shoulder any of the burden because we have a Code of Practice that’s voluntary and claims that the Government is providing unprecedented support for businesses which is far from it.
“VAT cuts are of no assistance when you have no revenue, extended furlough schemes that are actually a business cost, not support, rates relief that wasn’t paid for most businesses in the last two months of the financial year and for many of our small wet led pubs were at zero already anyway.”
Too late by 3rd March! Many of us won't be here by then.
— Liz Hind (@LizHind3) January 19, 2021
Griffin added “firefighting measures” should already be underway and that there is no justification in waiting until the Budget to implement support for struggling businesses.
“It’s urgent and there’s no reason I can see for not having an emergency budget,” he says. “Not doing so will result in lost businesses and job losses.”
Need to go beyond ‘big-ticket items’
In addition to UKH, trade bodies such as the British Beer & Pub Association (BBPA) and the Wine & Spirit Trade Association called upon the Government to address issues including alcohol duty and the extension of the temporary cut in VAT to 5%.
Today we submitted our representations to @RishiSunak and @hmtreasury ahead of the March Budget.
— Emma McClarkin (@EmmaMcClarkin) January 14, 2021
In them, we’re calling for:
✅ Beer Duty cut⁰✅ Extended Business Rates holiday⁰✅ Extended VAT cut
These measures will be vital if our sector is to fully recover after COVID.
However, while Griffin had no doubt that a number of headline grabbing policies will be addressed by the Chancellor on 3 March – which he said would rightly be welcomed by larger businesses – his concern lies with smaller operators whose challenges he fears will slip under the radar.
“VAT on food at 5% will be on the table as will business rates reviews,” he says, “but we have to be honest here, for many of our smaller wet led pubs this is irrelevant – no VAT cut on drinks for a business that was already paying either no or very low business rates prior to the pandemic won’t benefit from them.”
Griffin added if the Government turns a blind eye to the issue of debt on 3 March, other measures will be “mere window dressing” for smaller pub operators.
“We need urgently to look at removing upward only rent reviews,” he continued. “It benefits landlords at the cost of the tenant and in recessionary times will lead to inflated rents without recourse to market value adjustment. The Retail Price Index (RPI) needs to be consigned to the bin too – it’s inflationary.
“These measures will provide some confidence to tenants that they will be able to have a future,” he continues. “If we don’t then many will be faced with rents payable that are not market rents, inflated and payable alongside deferred rent repayments.”
Rishi Sunak's recent record
In his first Budget on 11 March – less than a fortnight before pubs were forced to call last orders due to national lockdown measures – Rishi Sunak appeared to pay critical attention to the pub sector and its impending challenges.
It appeared that pubs and their staff would be shielded from pandemic fallout as much as possible with alcohol duty curbed and pubs with a rateable value of less than £51,000 having business rates scrapped for the next 12 months among measures announced.
While Chancellor Rishi Sunak’s ‘mini-budget’ in July – a £30bn relief package to help the UK economy recover from the Covid-19 – received a smattering of warm reviews from the on-trade, the pub sector reaction to his “winter economy plan” was largely frosty.
In July, the Chancellor delivered a Summer Statement to the House of Commons in which he laid out measures including a cut on VAT for the hospitality sector, a job retention bonus and the Eat Out to Help Out (EOTHO) scheme.
While his apparent awareness of the value of the hospitality sector was praised at the time, the sector seemed split over whether EOTHO was a stroke of creative genius or a “tokenistic gimmick” and he was criticised for appearing to leave wet-let pubs high and dry by a lack of tailored support.
This criticism of the Chancellor was repeated in September, when Sunak was criticised for leaving pubs out in the cold in his Winter Economy Plan – with The Morning Advertiser’s editor Ed Bedington describing his measures as “not good enough”.
While Sunak extended measures such as the VAT cut, announced a new Job Support Scheme and unveiled a new “pay as you grow” programme to help business repay Government-backed business loans, he drew sterner criticism than in July on account of his measures not being deemed to go far enough for hospitality.
Further reading:
Budget 2020 – Duty increase on beer, cider, wine and spirits frozen - Freeze on alcohol duties and business rates on pubs with rateable value under £51,000 abolished. Plus, national living wage to rise to £10.50 per hour by 2024. Here is a blow-by-blow account of Chancellor of the Exchequer Rishi Sunak's first Budget.
Who were the winners and losers from the Chancellor's 'mini Budget'? Chancellor Rishi Sunak has unveiled a £30bn relief package to help the UK economy recover from the Covid-19 pandemic
Who were the winners and losers from the Chancellor’s ‘winter economy plan’? Following on from his ‘mini-budget’ in July, Chancellor Rishi Sunak has unveiled a ‘winter economy plan’ in the hope of encouraging the UK’s post-lockdown economy to snowball.
Not good enough Mr Sunak - And so the much awaited Government support has been announced and greeted with not so much a cheer as more of a whimper from an industry that is crying out for help.
