A Patchwork of Support for Struggling Businesses

The recent announcement by Andy Burnham to provide a 20% discount on business rates for pubs, social clubs, and live music venues in England has been met with relief from industry bosses. However, other High Street businesses have expressed a sense of injustice, questioning the fairness of the tax system and who should be included in future support packages.

Pubs are particularly vulnerable due to rising costs, including employer National Insurance increases, higher minimum wages, inflation, and the climbing cost of living. Industry estimates suggest pubs already contribute 35-40% of turnover to the Treasury, making them one of the most heavily taxed sectors.

Other businesses that provide essential services are being left out in the cold. Ruth Dawson’s HD3 Fitness Centre in Huddersfield is a case in point. Like pubs, her community gym keeps elderly residents mobile and connected, yet it remains ineligible for support despite doing similar work. Dawson argues that this highlights the need for a more comprehensive approach to supporting struggling businesses.

The problem lies not just with the narrow definition of what constitutes a “pub” but also with the broader tax system. Sam Lamiroy has called for reduced VAT rates for hospitality businesses, in line with European countries. This would benefit pubs and restaurants while providing a much-needed boost to the economy. Currently, the 20% VAT rate is unsustainable.

The government’s decision to target business rates rather than tackling VAT is a missed opportunity. By doing so, they are inadvertently perpetuating a system that favors large online retailers over small businesses. These companies pay a “ridiculously low” amount of business rates compared to their physical counterparts, creating a ticking time bomb waiting to explode.

The implications of this decision extend beyond the hospitality sector alone. It raises questions about the fairness and equity of the tax system as a whole. If pubs are eligible for support, why not other community-based businesses that provide essential services? The government needs to rethink its approach and consider a more holistic solution that addresses the root causes of business failure.

As Nick Smith’s experience with his board game cafe and bar in Croydon highlights, even those who think they might be eligible can end up missing out due to unclear definitions. This lack of transparency and consistency in government policies is a symptom of a broader problem – one that undermines trust in the system.

The real challenge for the hospitality sector lies not just with business rates but also with VAT. Reducing this rate from 20% to 10% would make a significant difference to businesses struggling to stay afloat. It’s time for the government to acknowledge this and take concrete steps to address it.

Ultimately, this decision highlights the need for a more nuanced understanding of what constitutes a “struggling business.” Rather than perpetuating a patchwork system that favors some over others, the government should aim to create a level playing field where all businesses can thrive.