08 Nov 2024
Pubs, high street shops and other hospitality businesses are reeling in the wake of a devastating Budget.
Chancellor Rachel Reeves has reduced the business rate relief discount from 75 per cent to 40 per cent, which is a huge leap in payable rates, especially with many pubs rated up to £120,000 in parts of St Albans.
Not only do they face additional bills for rates between £5K and £35K, but their wage bills are expected to rise by seven per cent and their National Insurance contributions are now 15 per cent.
So what does this actually mean?
For a pub rated at £100,000, following the increase in the multiplier at the last Budget from 0.49 to 0.54 a pub would have to pay £54,000 in business rates.
But following the acknowledgement that the rates system was broken, the previous Government put a 75 per cent discount in place, so a pub that would have paid £54,000 was paying £13,500.
Following the latest Budget and the lowering of the rates relief to 40 per cent those pubs will now pay £32,400. This is an increase of £18,900 to find.
Sean Hughes, chair of Save St Albans Pubs and landlord of The Boot and Dylans, said: “What we are mostly concerned about is the implication of the minimum wage for staff under 21. These staff play a key part in seasonal work and this job is often the first job they have during A-levels or leaving school or working seasonal hours at busy periods.
“By increasing this rate, pubs simply won’t be able to employ the current volume of staff. They will therefore cut the jobs available to local students returning from uni.”
He said the impact of the rate relief change on The Boot was immense.
“The Boot is rated at £99,000. So our increased figures are roughly: rates increase £18,900, wages increase £29,400 (if we choose to increase wages in line with Government living wage proposals), employers’ National Insurance increase £11,609 (based on the previous wage year so this will be higher due to increased wages).
“That means the total increase in budget for The Boot is around £59,609, and without raising wages we are looking at a minimum increase in tax in our company of £30,509.”
St Albans MP Daisy Cooper also responded to the Budget: “I’ve been campaigning for reform of the broken business rates system alongside Save St Albans Pubs for longer than I’ve been an MP. Most recently I called on the Chancellor to make this Budget the final one to include business rates as a permanent feature.
“Unfortunately, despite promises to abolish the broken system, the Government has only committed to further tinkering. From 2026 there will be a rebalancing of the burden so big out-of-town delivery distribution warehouses pay more, but not before an enormous increase of 140 per cent in business rates bills for high street companies in 2025. Far from saving high streets, this will further stifle their revival.
“The rise in employers’ National Insurance contributions will be a body blow to small businesses. Some local businesses here in St Albans are already telling me that they’ll have to lay staff off or shut up shop. I’ve always been clear that big corporations should carry the burden of this budget, not small businesses. Sadly, this measure means it will be our pubs, retail shops and beauty salons, as well as GPs, hospices and pharmacists who will bear the brunt.
“We Liberal Democrats will be looking for ways to oppose and mitigate these changes in Parliament, but sadly, unless the Government thinks again, there is only so much that can be done.
“The smallest businesses – of say just four employees – will be protected by the increase in employers allowance, the employment costs they can incur before paying National Insurance. But any business much bigger than that, will have to absorb the costs – either by suppressing the wages of the staff they have, reducing or freezing staff numbers and services, or in some cases, shutting up shop.
“We’ve long maintained that the burden for funding our public services properly should be borne by the big corporations, not small businesses.
“Capital gains tax could have been reformed in a way that was fairer and raised more revenue, by freezing CGT for most people but raising it on the 0.1 per cent super-wealthy. The Chancellor could have reversed tax cuts for the big banks or levied a gambling tax – but she didn’t do these either. We will continue to advocate for this approach.”
Sean added: “Hospitality – especially pubs – cannot absorb any more tax increases. This will mean for us the price of a pint rising to over £7 a pint in the new year and will be a new inflationary tax rise.
“We desperately need the business rates reform that we have been calling for since 2017. As a chairman for Save St Albans Pubs we are very disappointed the rates relief has been reduced especially when Labour know the business rates system is unfit for purpose.
“They should have maintained the relief at 75 per cent until a time that they have had a fundamental review on the system. We are also calling for a cut on VAT to 12.5 per cent for all hospitality for the next five years to boost growth and employment.
“This Budget will only be bad for employees as pubs will have no choice but to reduce their workforce to save costs. We really need to work out a new tax system to bring the cost of a pint DOWN not up.”
