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What are Labour's plans on business rates? And what will it mean for pubs?

On 25/09/13

The big policy announcement ahead of Ed Miliband's keynote speech on Tuesday was a 'cut' in business rates for small businesses in 2015, if Labour were to be elected. This would be funded by a reversal in the planned reduction in Corporation Tax for larger businesses. Whilst details remain sketchy the plan seems to be to turn back the increase expected in 2015, effectively maintaining the 2014/15 level for businesses with a rateable value up to £50,000.

At first glance this sounds like a positive measure, who wouldn't want a tax freeze at the moment? About 38,000 pubs in England & Wales have a rateable value of less than £50,000 (although the central Government only sets rates for England).

Business rates are a big issue for pubs and BBPA is currently campaigning to alleviate the cost pressure they place on publicans. A key part of this work is the extension of Small Business Rate Relief (SBRR) to the end of the Parliament, which has been a real benefit to small pubs, adding an extra £1,000 to the bottom line of the average pub.

This is where the Labour leader's plans may unravel. There seems to be no mention of SBRR. About 16,000 pubs currently benefit from a discount of between 50 and 100 per cent. If SBRR is extended until the end of the Parliament then Labour's plans seem to suggest that the publican of one of the smallest pubs could go from paying nothing to a ‘freeze’ that costs them thousands!

Admittedly this is all confused by what a small business is. Ed Miliband says it is up to £50,000; SBRR applies to businesses below £12,000; but there is a separate overall rate for businesses with a rateable value below £18,000. Pubs currently not receiving SBRR, but captured by Labour's rate 'cut', may therefore benefit. An easier solution to help see pubs would be to extend the SBRR threshold.

Businesses across the country have welcomed current plans to cut corporation tax. It rewards growth and makes Britain a more attractive place to do business and invest. Reversing this downward trend in corporation tax will undo much of that good work. It shouldn't be about pitting big against small businesses. In our sector we need both to thrive. Reversing cuts to corporation tax are just likely to lead to a stifling of innovation and reduce the level of support that large businesses offer to the smallest.

It is of course extremely positive that Labour is recognising the burden that business rates place on pubs and other operators, and the BBPA is be more than willing to discuss the principal behind these proposals with the party. At the same time the proposals outlined in Ed Miliband's do not seem to be the most effective way forward and could end up costing some small businesses more.


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