Pubs handed a lifeline as Reeves set to U-turn on plans to scrap business rate relief

Rachel Reeves is set to hand Britain’s ailing pubs a lifeline with a U-turn on plans to scrap business-rate relief for the hospitality industry, ministers have told The Independent.

In what will be another humiliating climbdown for the government, the chancellor is expected to extend the relief in an effort to help landlords with rising bills, instead of scrapping cash support from April.

It comes after a furious reaction from the industry, which has warned of widespread closures. Financial pressures have seen one pub close its doors every day since Sir Keir Starmer took office.

In the November Budget, the chancellor announced plans to scale back the business-rate discount that has been in force since the pandemic, from 75 per cent to 40 per cent – and said there would be no discount at all from April.

But ministers have told The Independent that Ms Reeves is now expected to row back on her plans, with one saying: “There’s going to be a U-turn on pubs.”

Another said that the changes were “politically unsustainable” in a year in which local elections, to be held in May, could decide whether Sir Keir survives as Labour leader and prime minister.

Pub landlords have reacted with cautious optimism to the news. Dawn Hopkins, 56, who runs the Rose Inn in Norwich, said news of the U-turn will come as a “huge relief” to many pubs, but that there are still concerns about the re-evaluation of business rates.

“Getting a discount back would be a huge relief, and at this point, anything would help,” Ms Hopkins, who is also the vice-chair of the Campaign for Pubs, told The Independent.

“But a major problem is that they’ve done these re-evaluations of business rates, which have been astronomical in a lot of places,” she said. “So getting a discount back would be amazing, but we still need to look at the re-evaluation issue.”

Chris Welch, 39, who runs the Fishnet Tavern in North Tyneside, said: “It’s really positive news if this happens, but I still think more needs to be done.”

While it is unlikely that the business-rate relief in existence since the pandemic will be completely reinstated in the same form, it is understood that an alternative discount could be negotiated.

The hospitality sector has already been hit by increases to national insurance contributions and the minimum wage, which have cut margins, meaning that many are making a loss.

Analysis by UKHospitality shows that the average pub faces a 15 per cent rise in business rates next year – an extra £1,400 – rising to £4,500 in 2027/28 and £7,000 in 2028/29, which represents an increase of £12,900 over the next three years. Hotels are to be hit even harder, with bills rising on average by £28,900 next year, £65,000 in 2027/28, and £111,300 in 2028/29, totalling £205,200 extra over three years. Meanwhile, online giants, office blocks and out-of-town supermarkets will benefit from far smaller increases.

Kate Nicholls, the chair of UKHospitality, said: “The entire hospitality sector is affected by these business-rate hikes – from pubs and hotels to restaurants and cafes.

“We need a hospitality-wide solution, which is why the government should implement the maximum possible 20p discount to the multiplier for all hospitality properties.”

Speaking on Radio 4’s Today programme, welfare secretary Pat McFadden was challenged about whether another U-turn was on the way, but refused to rule one out.

Hinting at changes to come, he said: “Believe it or not, we’re human beings as well as politicians, so we understand the role that pubs play. You know, we value that very much. We’ll keep talking.”

This will be the latest in a string of U-turns wrested from the chancellor by angry Labour MPs. Ms Reeves had to back down on her plan to cancel winter fuel payments to around 10 million pensioner households, was forced to abandon plans for £5bn worth of welfare cuts, and had lift the two-child benefit cap despite originally opposing the move. Finally, she had to drop plans to raise income tax in the Budget, which would have broken Labour’s manifesto pledge.

The chancellor has also had to water down inheritance tax changes targeting family farms.

Labour MPs have heaped pressure on the government to help out the struggling hospitality industry. York Central MP Rachael Maskell, who led the welfare cuts rebellion last year, said: “In York, hospitality businesses will see an average business-rate rise of 41 per cent, music venues a rise of 44.4 per cent, and many independent shops increases of around 27 per cent, meaning doors closing and trade ceasing – businesses simply cannot do it.”

Reacting to the potential U-turn on pubs, she said: “While I welcome the government announcing that they will provide relief, I want to ensure that the support goes far enough, and that cafes and shops are also protected. So this is a positive first step, and I will continue to engage with the government to protect our high streets.”

While Labour MPs welcomed the expected U-turn, a number were unhappy at the government’s communication on the issue.

One Labour MP told The Independent: “It’s good news we are U-turning on pubs, but why has it taken so long? And why don’t we have an announcement from the government with some proper detail, so we can tell people in our constituencies what is happening?”

Meanwhile, Andy Burnham, the Greater Manchester mayor, described pubs and other hospitality businesses as “critical infrastructure” in his city, adding: “People come here for it. They visit us, and actually people invest, locate their businesses here, because they think it is a great place to live and a great place to go out.

“That infrastructure is absolutely critical to us as a city region, and I am pleased, if there is this change coming, that the government is recognising that as well.”

The news follows a campaign, launched over Christmas and backed by TV presenter Jeremy Clarkson, in which hundreds of pubs up and down the UK banned Labour MPs from their premises.

The issue had also been pushed by the Conservatives, who believe that they are close to forcing another U-turn. Writing in The Telegraph, Tory leader Kemi Badenoch promised to scrap business rates altogether.

Reacting to the expected U-turn, she said: “Labour are killing Britain’s pubs. This rumoured U-turn is too little, too late. It’s time to back our local pubs.”