However, operators warn the Autumn Budget will be the key moment for wider reform.
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The reduction, announced yesterday (23 July), will apply from April next year and is expected to benefit almost 32,000 venues, saving the typical pub around £1,100 in the next financial year.
However, the Government also confirmed it would “return to our commitment to reform the wider business rates system, including small business rates relief, at the Budget”.
This means today’s announcement is likely to be the first step rather than the final package.
What could come next?
The biggest outstanding question for smaller operators is whether the Government will move ahead with Prime Minister Andy Burnham’s previous proposals on small business rates relief.
During his campaign, Burnham proposed increasing the threshold for 100% small business rates relief from £12,000 to £18,000, and extending the taper from £15,000 to £21,000.
In practice, this could mean more small premises are taken out of paying business rates altogether, while others pay less.
Analysis from global tax firm Ryan previously estimated the plan could cost around £880m a year and lift more than 140,000 additional small business premises out of paying rates.
That would make it a much larger package than today’s £100m support for pubs, social clubs and live music venues.
However, the Government has not yet confirmed whether those proposals will be introduced in full, changed or scaled back before the Budget.
It has also not confirmed how any wider expansion of small business rates relief would be funded.
Alex Probyn, practice leader for Europe and Asia Pacific property tax at Ryan, warned business rates reform must not simply move the tax burden from one part of the economy to another.
He said: “The risk is that business rates reform becomes an exercise in redistribution rather than reduction when the yield is already far too high and the highest of any developed economy.
“Reducing liabilities for one part of the economy by increasing them for another does not reduce the overall tax burden. It simply shifts it.”
Who misses out?
While pubs, clubs and live music venues will benefit from the 20% cut, concerns have been raised that large parts of hospitality will not be covered.
Champa Magesh, managing director at Access Hospitality, said the announcement was welcome news for much of the sector and would help venues stay open, invest in staff training, refurbishments and technology.
However, she warned the current plans did not go far enough.
She said: “A large part of England’s hospitality sector will not benefit from today’s announcement.
“The food services and accommodation sector contributes 2.8% of the UK’s total economic output, yet the Government has explicitly named hotels, guest houses, and boarding houses as excluded from this relief.
“This means that businesses like country inns or boutique hotels with public bars and restaurants do not qualify, highlighting a significant flaw in current plans.”
Magesh said eligibility appeared to be based on what a business is called, rather than what it does.
She added: “If the Government’s goal is to nurture hospitality businesses and drive economic growth, this support needs to be extended across the entire sector, and not just select parts of it.”
Operator reaction
Several pub operators have also urged the Government to use the Budget to deliver wider reform.
Wetherspoon founder and chairman Tim Martin described the rates cut as a “small move in the right direction”, but said the biggest disadvantage for pubs remained VAT.
Greene King chief executive Nick Mackenzie said the announcement was “much needed relief”, but called for long term reform on business rates, VAT and duty.
Fuller’s executive chairman Simon Emeny said the move was a “positive start”, but added it was “not yet the total reform of business rates” promised by successive administrations.
RedCat Hospitality chief executive Richard Lewis also warned support “should not stop at pubs”, arguing inns, hotels and pubs with rooms played a similar role in local communities.
The key detail for operators will now come at the Autumn Budget, when the Government is expected to set out how far it intends to go on wider business rates reform and whether more hospitality businesses will be included.
