Geoffrey Howe sipped a gin and tonic, Nigel Lawson quaffed a wine spritzer, while George Osborne and Gordon Brown stuck to mineral water. Ahead of his first Budget, one of the many decisions weighing on Chancellor John Healey’s mind will be whether to get a little squiffy at the despatch box.
If he does, it could be an early signal of what lies in Healey’s red box. The Chancellor has made much of his love for ale, and pub industry lobbyists are watching to see whether he brings a pint with him on Wednesday. The thought process is that if the Chancellor delivers the Budget nursing a beer, he won’t hike costs on the pub industry while doing it.
The hospitality sector is in a unique position ahead of this week’s Budget: the main tax cut they had been hoping for has already been announced. Just days into his premiership, Andy Burnham unveiled a 20 per cent cut to the business rates bill paid by pubs, clubs and music venues.
Burnham, who used his first photo-op as PM to get a round in at the Hare, a McMullen’s pub in Harlow, said the move would protect pubs, which he called “the beating heart of our communities,” adding that the tax cut was “just the start.”
Burnham was right to acknowledge that this tax cut was not the end of it, hospitality industry figures said, though they suggested pub companies are getting their hopes up that any more substantial support will come out of this Budget.
The industry has urged the government to reform the business rates system for good – a pledge in Labour’s election manifesto – and help employers curb the rising number of young people not in education, employment or training (Neet).
With Healey set to deliver a “steady-as-she-goes Budget” in a bid to restore the UK’s fiscal credibility, hospitality figures have accepted that these issues will not be solved in one session at the despatch box.
But this hasn’t stopped some pub bosses calling for another round. Some in the industry hope for an increase to tax breaks for draught beer, which the British Beer and Pub Association (BBPA) says could create 7,100 jobs, including 3,400 for workers under 25, and knock 10p off the price of a pint.
Chris Jowsey, chief executive of Legal & General-owned Admiral Taverns, which runs about 1,350 pubs in the UK, said the beer duty paid by British landlords is among the highest in Europe. “With costs continuing to rise and many pubs working hard to simply keep their doors open, there is often little choice but to pass the cost on to customers,” he said.
VAT is ‘elephant in the room’
Freezing beer duty and increasing the draught discount, so beer served on tap is liable for less tax, from 13.9 to 30 per cent, would “give pubs much-needed breathing space,” Jowsey said.
Luke White, managing director of the UK arm of Estrella brewer Damm, said a freeze to beer duty would “help pubs manage the continued pressure on their margins, keep pints affordable and give businesses greater confidence to invest and plan for the future”.
Action on beer duty at the Budget would leave a bitter taste for some pub bosses, who claim that the real way to slash hospitality costs is a cut to VAT. A campaign led by celebrity chef Tom Kerridge has been pushing for the current 20 per cent rate to be halved.
Sir Tim Martin, chairman of JD Wetherspoon, has long bemoaned the premium punters pay for pints at pubs compared to supermarkets. He claims cutting VAT could give pubs a leg-up by drawing more punters away from Sainsbury’s and Tesco.
“Reductions in beer duty and business rates would be warmly welcomed, but VAT is the elephant in the room,” Sir Tim said. The Wetherspoon boss said he will also be on the lookout for “sleight of hand” increases to pubs’ costs at the Budget, including hikes to sugar taxes or climate levies.
While Burnham’s business rates cut was welcomed, some pub landlords still haven’t forgiven Labour for the hikes to their tax bills that followed last year’s Budget.
Andy Lennox, who led hundreds of pubs in barring Labour MPs from their premises late last year, said a change to beer duty would be “completely and utterly the wrong thing to do”. The sector needs a cut to VAT and any other tax changes billed as a boost for pubs are “all just noise,” he said.
While pub landlords would toast the sight of John Healey clutching a pint of ale at the Budget on Wednesday, they will hope his efforts to revive Britain’s hospitality industry are not all froth.