Dear Constituent,
Thank you for contacting me about pubs and beer duty.
Pubs make a vital contribution to our national life, not only as places of employment and economic activity, but as hubs of community and culture. I fully recognise their importance, particularly in rural and small-town areas like ours.
In recent years, the former Conservative Government took steps to support the sector, including the introduction of the Brexit Pubs Guarantee and a freeze on alcohol duty at both the Autumn Statement 2023 and Spring Budget 2024. These measures were part of the most significant reform to the alcohol duty system in over 140 years. The new system, introduced in 2023, was based on common-sense principles, taxing alcohol by strength to simplify the system for businesses and support public health objectives. These reforms were welcomed by the British Beer and Pub Association at the time.
Despite Government MPs standing on a manifesto pledging to avoid raising tax on “working people”, at Autumn Budget 2024, the Chancellor, Rachel Reeves, announced £40 billion of tax increases, the largest in a generation. These tax rises included imposing a £25 billion tax on working people by increasing employers’ National Insurance.
As a result of this, the tax burden will rise to 37.5 per cent of GDP by 2028-29 - the highest level in the country's history. Indeed, as Kate Nicholls, chief executive of UK Hospitality, said, any rise in National Insurance would “particularly hammer sectors like hospitality, where staffing costs are the biggest business expense".
Additionally, as part of my ongoing work in Parliament, I led the official opposition debate on Labour’s NIC hike, which you can watch and read more about here. I also attended the UK hospitality event in Parliament, where the wider implications of the budget were discussed—more details on this can be found here. While I remain concerned about the Chancellor’s economic strategy, my colleagues and I will continue to scrutinise Government proposals and legislation to ensure they serve the best interests of families and businesses across the UK.
More broadly, I welcome that, from February, the Government cut alcohol duty on draught products, reducing it by 1 penny per average strength pint. I am, however, disappointed that alcohol duty on non-draught products will increase in line with inflation next year.
I am aware of reports that some pub chains have been forced to put up the price of a pint by between 3-3.5 per cent in order to offset some of the national insurance rise. The Chancellor was widely warned about the inflationary impact of her budget and we are starting to see the impact of businesses absorbing the tax hit.
The previous Government took a third of properties out of business rates completely through Small Business Rates Relief and froze the tax rate for the last three years at a cost of £14.5 billion. Additionally, at Autumn Statement 2023, the previous Government froze the Small Business Multiplier for 2024/25 and extended the Retail, Hospitality, and Leisure (RHL) Relief Scheme, offering a 75 per cent discount on business rates up to £110,000. This saved the average independent pub over £12,800 in 2024/25 at a cost of £4.3 billion.
At 2024 Autumn Budget, the new Labour Government froze the Small Business Multiplier for 2025/26 and provided 40 per cent relief on RHL properties, up to a £110,000 cash cap. I am disappointed that RHL relief has been reduced by almost half.
You may have seen at our Party Conference this year we announced that a Conservative Government will abolish business rates for retail, hospitality and leisure. 250,000 businesses will benefit from the relief, delivering substantial savings that can then be reinvested in better premises, more staff and lower prices, and lifting thousands out of business rates altogether. The relief would be capped at £110,000 per business.
£1 in every £3 spent in a pub goes straight to the Treasury and beer duty rates are now up to 12x higher than other European nations. This Government’s fiscal policies risk squeezing the life out of British pubs. The National Insurance hike, minimum wage rise, and the increase to business rates had led to a third of venues now running at a loss. The Government must change course or we risk losing our pubs.
I was pleased with the former Conservative Government's efforts to support pubs and hope the new Government will continue to build on this progress to address the challenges facing the hospitality sector.
Thank you again for taking the time to contact me.
Sincerely,
