Labour’s business rates U-turn ‘too little too late’

Labour’s botched business rates U-turn was branded ‘too little, too late’ last night, amid warnings of a high street meltdown.

Rachel Reeves is facing a growing backlash after temporary help on business rates was restricted to pubs, leaving thousands of small shops, restaurants and hotels facing crippling tax rises in April. 

The Chancellor dodged the humiliation of explaining her latest climbdown by sending junior minister Dan Tomlinson to the Commons instead. The organiser of a campaign to ban Labour MPs from more than 1,500 pubs last night said it would stay in place until the whole hospitality sector was offered help.

Ms Reeves bowed to pressure to ease the business rates raid on pubs following a mutiny by Labour MPs. She said on Tuesday that ‘pubs are different’ as she unveiled a £300million package of temporary support.

But no immediate help was offered to thousands of other firms in the retail, hospitality and leisure sectors who also face huge rates rises.

This month’s U-turn on pubs was the 12th of Labour’s 18 months in power, many of which can be traced back to misjudgments by Ms Reeves. Hairdressers, florists and even pharmacies warned they could be driven to the ‘brink of collapse’.

Shadow Chancellor Sir Mel Stride said Ms Reeves’ ‘temporary sticking plaster’ will ‘only delay the pain for a few, while thousands of businesses despair as their bills skyrocket’.

Sir Mel said high streets across the country were facing a ‘tragedy’, with industry analysis suggesting six hospitality venues a day could close this year unless further help is provided. ‘The Government have proved today that either they do not understand the damage that they are doing or they do not care,’ he said. ‘Today’s announcement is far too little, far too late.’

Dorset landlord Andy Lennox, who masterminded the pub ban on Labour MPs, said the concessions were ‘welcome’ but that the Chancellor’s decision to send out a junior minister ‘shows you exactly what they think of our industry’.

He warned the climbdown would not be enough to save an industry battered by Labour’s hikes in National Insurance and the minimum wage, and said the hospitality sector ‘will not be divided’.

Mr Lennox added: ‘We stand in solidarity with wider hospitality who have been excluded, and will thus not be lifting the #NoLabourMP ban.’

Ominously for the Chancellor, Labour MPs also demanded help for the wider hospitality sector. Former minister Jim McMahon said ministers ‘could and should’ have done more to help businesses. He urged the Treasury to have a ‘second attempt to get it right and have a wider support package for the whole of hospitality’.

Fellow Labour MP Stella Creasy said it was not true that ‘pubs are somehow the only cornerstone of community life in this country’. She urged ministers to return with further support for ‘small independent venues, such as cafés, community centres and soft-play centres’.

Treasury minister Mr Tomlinson hinted at further concessions in the Budget in the autumn, telling LBC: ‘I want to work with businesses to see what more we can do. It isn’t going to be looking specifically at tax measures, but we’ll be considering them in the round, in the run-up to the Budget.’

Mr Tomlinson said business rates bills for pubs and music venues in England will be reduced by 15 per cent in 2026/27 and then be ‘frozen in real terms’ for the next two years. He added that the support will be worth £1,650 for the average pub next year.

Tina McKenzie, of the Federation of Small Businesses, welcomed the ‘temporary reprieve’ for pubs, but added: ‘Small firms across the rest of the hospitality, leisure and retail sectors – from your local greengrocer, hairdresser and café to the nail bar or florist – will be incredibly disappointed to not have been thrown any type of lifeline.

‘The Government repeatedly fails to recognise the difficulty that these businesses are in.’

Ms Reeves announced £4.3billion in ‘transitional relief’ at the Budget. But the average pub still faced a 15 per cent increase in business rates in April, rising to 48 per cent next year and 76 per cent in 2028. The increases result from the unwinding of Covid-era support, coupled with a revaluation of business premises.

Trade body UK Hospitality said the average restaurant faced a 54 per cent rates rise over the next three years, while the average hotel could see increases of 115 per cent.

Peter Collie, landlord of The Horseshoe Inn near London Bridge, said the 15 per cent relief was ‘nowhere near enough’ to save an industry in crisis. He added: ‘It’s better than getting a slap around the face with a wet cod, I suppose. But that’s about all it is.’

Henry Gregg, chief executive of the National Pharmacy Association, said it was ‘simply outrageous’ that the sector had been excluded from relief, adding: ‘This increase will push some pharmacies to the brink of collapse.’

Andrew Goodacre, chief executive of the British Independent Retailers Association, said: ‘The Chancellor has announced a half baked U-turn while flushing independent retail round the U-bend.’

‘I don’t think I have seen a worse policy decision,’ he added, warning that this ‘poor decision based on poor reasoning’ would result in more shop closures.

Celebrity hairdresser Richard Ward said Labour was ‘squeezing business to a point where profit is becoming a dirty word’.