Chancellor Rishi Sunak has today announced a business rates discount for the hospitality sector as well as plans to reform alcohol duty as part of his 2021 Autumn Budget.
The discount is a one-year 50 per cent business rates discount for retail, hospitality and leisure sectors, with any eligible business in these sectors able to claim a reduction of up to 50 per cent up to a maximum of £110,000, a business tax cut worth almost £1.7bn.
Businesses had called for a sweeping overhaul of the system, however Mr Sunak said he would retain the rates system with “key reforms to ease burden and create stronger high streets.”
“We on this side of the House are clear that reckless, unfunded promises to abolish a tax that raises £25bn every year are completely irresponsible,” he said.
UKHospitality’s chief executive, Kate Nicholls said: “We have been lobbying hard for significant reform of the outdated business rates system and therefore very much welcome the Chancellor’s move today to extend the 50 per cent business rates relief for the hospitality and leisure sector for the next financial year.
“The devil will be in the detail, though, so we look forward to learning to what extent it will benefit businesses.”
Taxes on draught beer, cider and sparkling wine are also being cut as part of a huge overhaul of the UK’s alcohol duty system, the Chancellor has announced. Describing the existing system as “outdated, complex and full of historical anomalies”, he announced five key points that would create a system that is “simpler, fairer, and healthier.”
The number of duties has been slashed from 15 to 6, in order to reflect a “common sense principle” that the stronger the drink, the higher the rate.
He is also introducing a new lower rate for craft producers, reducing the duty premium on sparkling wines, arguing that sparkling wine is no longer “just the preserve of the wealthy”, as well as introducing a new lower rate of duty for draught drinks and cancelling the planned increase on spirit duties. The duty on drinks made out of fruit – including cider will also be cut.
The chancellor also confirmed plans to increase the National Living Wage by 6.6% to £9.50 an hour.
Largely Positive Reaction
The chancellor’s budget has received a largely positive industry reaction:
Miles Beale Chief Executive of the Wine & Spirit Trade Association, said: “The decision to freeze wine and spirit duty comes as a huge relief to British businesses, the hospitality sector – including its supply chain – and consumers, giving everyone a much-needed break to help them recover from the pandemic.
Chancellor Rishi Sunak should be commended for listening to our calls for support and understanding that punishing tax hikes are not the best way to reinvigorate the sector.
By offering continued respite to the UK wine and spirit sector his actions will help save jobs and – in time – replenish revenues to the Treasury through growth in our potential-filled sector.
We welcome the reduction of the sparkling wine super tax, which is long overdue. We look forward to seeing the detail of a new system which should remove the existing unfairness of how different products are treated.”
CAMRA Chairman Nik Antona said: “The introduction of a Draught Duty Rate is a gamechanger for cask beer drinkers, cider and perry drinkers and the Great British local.
“This is something CAMRA has campaigned on for many years and we are delighted that the Government has listened, supported our locals and introduced the important principle that beer, cider and perry served in a pub or social club should be taxed at a different rate to alcohol bought at places like supermarkets.
“CAMRA has previously commissioned research that showed that a Draught Beer Duty rate could pull consumption into pubs and social clubs from the off trade, providing a boost to pubs and local economies.
“We hope that pubs and producers will make sure drinkers see the impact of this revolutionary policy on the price of their pints, to encourage them to return to their locals.
“We look forward to campaigning for future reductions in Draught Duty, to make sure that consumers, brewers and publicans can enjoy the maximum benefits of this ground-breaking new policy.”
Chris Jowsey, Chief Executive of Admiral Taverns, said:
“This is a fantastic result for wet-led community pubs. Given the extreme difficulties over the past 18 months, it is vital that the cut in draught beer duty is introduced as soon as possible. It demonstrates targeted support for a sector particularly hard hit and it’s good to see the government recognising the meaningful economic and social contribution the pub industry makes. This will give licensees the support needed to rebuild their businesses and continue providing vital support and employment to local areas.”
Emma McClarkin, Chief Executive of the British Beer & Pub Association, said:
“Pubs, brewers and beer drinkers will be toasting the Chancellor today for a range of business-boosting measures.
“Pubs pay 2.5% of Business Rates despite accounting for only 0.5% of rateable turnover – an overpayment of £570m. Cancelling the rates multiplier and cutting rates for pubs by 50% for one year is a much-needed boost to our sector in its fragile recovery.
“The 50% cut to business rates alone will save pubs £169 million. However, the cap of £110,000 per business is a huge dampener and means a significant number of pubs will not benefit from the relief at all.
“The multiplier freeze will save English pubs £32 million.
“The announcement that business rates revaluations will happen more frequently is also welcome, as is the one year improvement allowance. However, we remain concerned that for the longer term the inherent unfairness of the business rates system for pubs has not been addressed.
“The Chancellor’s decision to freeze beer duty instead of the RPI linked increase he had planned is to be warmly welcomed. It will save £177 million and secure 9,000 vital jobs across the country. Clearly, the Chancellor listened to the 134,000 people who signed the Long Live The Local petition calling on him to support pubs and brewers in the Budget.
“Pub goers will also be toasting the Chancellor today for announcing a 5% lower duty rate on draught beer worth £62 million. This is great news for our local pubs and recognises the crucial role they play in our economy and society. However, the overall beer duty rate in the UK remains amongst the highest in Europe. It is vital for Britain’s brewers, a world class homegrown manufacturing success story, that the overall beer duty burden is reduced – not just duty on draught beer in pubs.
“Beer is a low-strength product and breweries have invested heavily in developing a range of innovative, exciting and great tasting low and no alcohol beers. We therefore welcome proposals to reduce duty on lower-strength products as part of the proposed modernisation of the alcohol duty regime to better incentivise the consumption of lower-strength drinks.
“Overall, this has been a good Budget for pubs as they recover from the pandemic. The measures announced today will help pubs and breweries play a leading role in levelling up the economy and building stronger, more vibrant communities throughout the country.”
Nick Mackenzie, chief executive of Greene King, commented:
“Today’s budget is a much needed vote of confidence in the great British pub as we face into an uncertain winter, labour disruption and rising costs. Creating a draught rate and simplifying the duty system is positive news for our 2,700 pubs and the communities we serve across the UK.
“We welcome the efforts to reduce the burden of business rates for our tenants and small operators, but the cap on the 50% discount means there will be little benefit for medium and large pub owning businesses. The long term health of the UK’s pubs still demands fundamental reform to lower the day to day cost of running a pub.”
Steven Alton, BII CEO commented:
“We are encouraged that the Chancellor has yet again referenced the importance of pubs in their communities and specifically as safe spaces for people to enjoy alcohol responsibly. This has been reflected in the business rate reduction for next year and the specific cut in duty for draught products served in our pubs.
“Our members have consistently shown throughout this crisis, their commitment to their local communities, and their ability to keep customers and staff safe. Whilst the measures announced are positive steps, pubs continue to face huge challenges across all areas of their business, in staffing, supply chain, deliveries and debt. Trading for their businesses remains difficult amidst the speculation in the media around Plan B, which continues to affect consumer confidence, at a time where they need to be trading at much higher levels than in 2019, just to break even.
“Ongoing support will be needed both in the form of a fundamental reform of business rates to rebalance this unfair burden on our pub businesses with the online economy, and a long term reduced VAT rate to support our members’ recovery over the coming years. This investment in our nations’ pubs will ensure that they can play their full part in our collective economic recovery.
“We will continue to work closely with Government ensuring that we do all we can to safeguard the future of our nations’ pubs at the heart of our communities.”