Martin took the opportunity to use Wetherspoon’s results for the half-year to 22 January 2017 to hit out at the “continuing tax disparity between supermarkets and pubs, in respect of VAT and business rates”, saying:
“The biggest danger to the pub industry is the continuing tax disparity between supermarkets and pubs, in respect of VAT and business rates.
“As previously indicated, we understand the need for the government to raise taxes. However, there should be a sensible rebalancing of the taxes paid by pubs and supermarkets, if the pub industry is to survive in the long term.
“Last Wednesday’s budget was presented by the Chancellor as providing tax relief of approximately £1,000 per pub, for pubs with a rateable value of less than £100,000.
“In fact, that sum is dwarfed by tax and regulatory increases. For example, costs to Wetherspoon will increase by approximately the following amounts in the next year:
- business rates: £7m
- electricity taxes: £4m
- excise duty: £7m
- Apprenticeship Levy: £2m
“In addition, the proposed sugar tax will cost approximately £4m from April 2018 and there will be further electricity tax increases of around £5m by 2020.
“Companies like Wetherspoon, on examination of the fine print of the budget, are not, in fact, eligible for the £1,000 per annum decrease in business rates, in any event.
“The company has previously emphasised the far-higher taxes per meal or per pint that pubs pay compared to supermarkets. For example, supermarkets pay less than 2p per pint for business rates, whereas pubs pay around 18p per pint.
“The increase in business rates per pint for pubs from next month will be around 2p, further exacerbating the tax gap.
“Pubs also pay VAT of 20% in respect of food sales, but supermarkets pay almost nothing, enabling supermarkets to subsidise the price of alcoholic drinks. An article written for the trade press on this subject can be found below.
“Wednesday’s budget will weigh far more heavily on pubs than supermarkets, especially since wage costs per pint or meal are approximately 10 times higher in pubs.
“The Chancellor was less-than-frank in his budget speech*, since he did not spell out the duty increases, giving the impression to many that there would be no increase.
“In effect, this was a budget for dinner parties, no doubt the preference of the Chancellor and
his predecessor – dinner parties will suffer far less from the taxes outlined above, whereas many people prefer to go to pubs, given the choice.
“In the six weeks to 5 March 2017, like-for-like sales increased by 2.7% and total sales decreased by 0.2%.
“As previously announced, the company intends to increase the level of capital investment in existing pubs from £34m in 2015/6 to around £60m in the current year.
“As outlined above, the company also anticipates significantly higher costs in the second half of the financial year. In view of these additional costs and our expectation that like-for-like sales will be lower in the next six months, the company remains cautious about the second half of the year. Nevertheless, as a result of modestly better-than-expected year-to-date sales, we currently anticipate a slightly improved trading outcome for the current financial year, compared with our expectations at the last update.”
* The Chancellor said, “I can also confirm that I will make no changes to previously planned upratings of duties on alcohol and tobacco.”