Pubs U-turn dismissed as ‘non permanent sticking plaster’ as Reeves is blasted over botched enterprise charges reform

Rachel Reeves’ U-turn on pub taxes has been branded ‘a temporary sticking plaster’ amid calls for a complete overhaul of the ‘broken’ business rates system.

As the backlash over the Chancellor’s botched reforms of the property levy mount, ministers were warned the proposed relief package for pubs ‘goes nowhere near far enough’.

Ros Morgan, chief executive of the Heart of London Business Alliance, said ‘countless’ other firms also face ‘sharp increases’ in their rates bill from hotels and galleries to cafes and independent shops.

Warning that the levy ‘chokes our high streets’ and ‘penalises bricks-and-mortar businesses’, she called for a 2pc levy on online sales to raise £6bn a year to cut business rates bills by a third.

The comments came after Hilton hotels chief told the Mail Labour is ‘squeezing the life out of the hospitality sector’.

Sir Rocco Forte, chairman chairman of Rocco Forte Hotels, described the business rates row as ‘a mess of the government’s own making’ and said it ‘is frankly embarrassing that the Treasury has been trying to claim it didn’t understand the impact of its own policy’.

Reeves is now scrambling to put together a relief package for pubs – but this has sparked fury across the wider industry amid signs they will miss out.

‘Britain’s beloved pubs might have just been spared a tax disaster – but the Government’s latest concession on business rates is a temporary sticking plaster when what’s needed is surgery,’ said Morgan.

‘Unfortunately, it goes nowhere near far enough. Other sectors who won’t be helped are already in uproar. The business rates system itself is broken.’

She pointed out that hotels face a 115pc rise in their bills while pharmacies are braced for a 140pc increase pools, gyms and leisure centres are set for a 60pc hike.

‘Temporarily easing the burden for pubs alone does little for the broader economy or the millions of jobs tied to our high streets and town centres… We can and must do better than this piecemeal approach,’ said Morgan.

‘Yes, the immediate relief for pubs is a necessary response to an imminent emergency. But it should be accompanied by a solid commitment to real rates reform so that this never happens again.

‘The political test is now clear. The Government can continue to offer temporary fixes for individual sectors – or it can seize the opportunity to overhaul a broken system, bringing fairness, growth and resilience back to the heart of the British economy.

‘If ministers truly care about vibrant high streets, thriving towns and sustainable jobs, they will choose reform over more reactive tinkering. The future of our communities and our economy depends on it.’

Business rates system is broken – and Labour’s plans go nowhere near far enough 

By Ros Morgan, chief executive of Heart of London Business Alliance 

Britain’s beloved pubs might have just been spared a tax disaster – but the Government’s latest concession on business rates is a temporary sticking plaster when what’s needed is surgery.

After weeks of uproar from landlords, many of whom banned Labour MPs from their premises, prompting a backbench revolt, ministers have signalled a U-turn on planned business rates hikes for pubs, with a proposed £300million relief package.

This is welcome news and will soften the blow for pubs whose bills had been set to soar as properties are revalued for business rates. It shows that smart campaigning works when livelihoods are at stake.

Unfortunately, it goes nowhere near far enough. Other sectors who won’t be helped are already in uproar. The business rates system itself is broken.

My members were thrilled when Labour promised before the last election to replace it with something fairer and more fit for a 21st century economy. This isn’t the first government to duck that challenge. Successive administrations have looked at real rates reform and shied away. But what’s clear from this latest row is that this cannot go on.

We currently have a tax system that chokes our high streets, penalises bricks-and-mortar businesses and fails to face up the realities of an increasingly digital economy.

Make no mistake, the crisis is real. The business rates revaluation conducted by the Valuation Office Agency is recalculating rateable values across England and Wales, reflecting current market conditions for the first time since 2023. 

For pubs and other hospitality venues that had enjoyed temporary pandemic reliefs, the shock of seeing those measures vanish and values reset has meant potential bill increases of tens of thousands of pounds per year. Pubs were facing rate rises of 76 per cent over three years.

But what about hotels — which apparently won’t be helped by the Government’s U-turn – which are facing increases of 115 per cent?

Theatres, galleries, gyms, independent shops, pharmacies, cafes and countless other businesses that underpin vibrant communities are all also experiencing sharp increases. Pharmacies, for example, are braced for a 140 per cent increase in rates, while gyms, pools and leisure centres face a 60 per cent rise.

Temporarily easing the burden for pubs alone does little for the broader economy or the millions of jobs tied to our high streets and town centres.

We can and must do better than this piecemeal approach. Business rates were introduced in 1990, long before the explosion of online commerce and digital services that now make up more than one-fifth of national GDP. Yet property-light digital businesses usually pay only a tiny fraction of the tax burden that physical retailers and hospitality venues shoulder.

That’s why the Heart of London Business Alliance’s Hybrid Business Rate solution makes sense. It is picking up significant support from industry and we’re already talking to the Treasury about it. I urge ministers to consider this reform for the next Budget.

Instead of clinging to an outdated model that taxes occupancy rather than economic activity, we should expand the tax base to include a small levy on online sales, collected via the existing VAT system. A levy of around two per cent on online sales could raise roughly £6billion a year, allowing us to reduce the burden on traditional business rates by around a third for bricks-and-mortar firms.

This approach is fair, practical and forward-looking. It recognises that the way we buy, sell and consume has changed and ensures that all businesses – whether operating from a shop in my patch of London or a server in the cloud – pay something towards the public services they benefit from. It would widen the tax base, protect local services and give high-street businesses breathing space to invest, hire and grow.

So yes, the immediate relief for pubs is a necessary response to an imminent emergency. But it should be accompanied by a solid commitment to real rates reform so that this never happens again.

The political test is now clear. The Government can continue to offer temporary fixes for individual sectors – or it can seize the opportunity to overhaul a broken system, bringing fairness, growth and resilience back to the heart of the British economy.

If ministers truly care about vibrant high streets, thriving towns and sustainable jobs, they will choose reform over more reactive tinkering. The future of our communities and our economy depends on it.