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Chancellor Rachel Reeves has opened the door to expanding her business rates U-turn beyond pubs to other hospitality businesses.
Reeves said on Wednesday changes to business taxation would have to be carried out “in a balanced way” and that details of a more generous transition package would be announced “in the days to come”.
Until now the Treasury has insisted the post-Budget business rate U-turn would be limited to pubs, with some government officials fearing a wider package potentially costing hundreds of millions of pounds might “spook the markets”.
Reeves on Wednesday confirmed she was looking to provide additional support to businesses with their rates beyond the £4.3bn of transitional relief that has already been earmarked for the next three years.
“We need to make sure that we do that in a balanced way that particularly supports our pubs and the hospitality sector,” the chancellor told the BBC.
That comment will come as a relief to hotels and potentially other hospitality businesses, such as music venues, which had complained that — like pubs — they had been hit hard by a post-Covid business rate revaluation.
However, the chancellor suggested shops were unlikely to receive extra help because many had stayed open during the pandemic and therefore their “rateable values” — estimates of a premises’ annual rent used to calculate rent — had not fluctuated so wildly.
Government officials confirmed Reeves was considering broadening the support package to the wider hospitality sector but that any details would be announced in the next few days.
The move would be another big U-turn by the government, following retreats on inheritance tax for farms and digital ID cards. Reeves also conducted major retreats last year on welfare reforms and winter fuel payments.
Reeves’ allies claim the chancellor was taken by surprise by the fact some businesses could see their business rates double overnight in April, but others in government admitted the problem should have been spotted.
Jonathan Russell, the head of the Valuation Office Agency, told MPs this week that his body had provided regular updates on the effects of the revaluation on different sectors before the Budget.
“That data will include pretty much every classification of sectors in England,” he said. “It will show at sectoral level what the impact of revaluations will be.”
Hospitality industry figures said they had also warned the government in the run-up to the Budget that there would be substantial increases from the first valuation since the pandemic, when premises were largely shut.
The sector has been particularly hit hard after 40 per cent rates relief was scrapped for retail, hospitality and leisure businesses in favour of introducing new bands of discounts.
However, these discounts are not enough to offset the huge increase in bills as rateable values have risen substantially.
While pubs have launched a noisy campaign that has included landlords banning Labour MPs from 1,000 pubs, other hospitality places have been harder hit.
Music arenas have seen an average 142 per cent increase while four-star hotels and chain-operated three-star hotels have seen a 97 per cent increase, according to analysis by tax firm Ryan.
Russell Imrie, president of BWH Hotels GB, a network of more than 200 independent hotels, said “arbitrarily singling out just one segment of the hospitality sector for special treatment” risked creating an uneven playing field, as on-site bars and restaurants in hotels “compete directly” with pubs.
Andy Lennox, the landlord behind the Labour MP ban movement, told the FT last week he would continue with his campaign until support was given for the whole hospitality sector.