Tax troubles of taverns and tea shops

Proposing the motion, Shadow Business Secretary Andrew Griffith criticised business rates, saying that: “From a business perspective, they are a terrible tax; they are paid before a business has made a single pound, and they get fewer and fewer services from local government in return.” He claimed that when the Conservatives were in government, “we shielded the sector with generous reliefs and exemptions”.

Speaking for the government, culture and tourism minister Chris Bryant attacked Griffith for being a Treasury minister in the Liz Truss administration, saying “[t]he problem with the argument that he has made today is that he has not learned a single thing since that mini-Budget. He still wants us to tax less and spend more at the same time. Yes, of course he wants to reverse the national insurance increase, but does he point to where the money should come from? No, of course he doesn’t. … He would re-run the Truss mini-Budget in the twinkling of an eye.”

Lib Dem Alistair Carmichael said that when the rate of duty on spirits was cut, “we did it with the expectation of a loss of £600 million, but it actually brought an increase of £800 million… For years, the UK hospitality sector has been asking for a reduced rate of VAT on its services, and that would be sector specific. It has given evidence… that that would in fact bring an increased tax take.” He asked the minister to make that point to the Treasury.

The minister replied that “[a]t nearly every meeting that I have with any sector in my portfolio, the sector says to me, “Can we have a cut in VAT?” While people in the hospitality sector have said to me many times that they would like a cut in VAT, that is also said by people in the theatre industry and a whole series of others.” These are matters for the Chancellor, he stated.

Lib Dem spokesperson, Sarah Olney, criticised both the Conservatives, for breaking a promise to reform business rates, and Labour, for not yet acting on its promise to replace the system. “The Liberal Democrats will continue to hold ministers accountable for their pledge,” she said, “because there is a need for a fundamental overhaul of the unfair business rates system. It penalises manufacturers when they invest to become more productive and energy efficient; it leaves pubs and restaurants with disproportionally high tax bills; and it puts our high-street businesses at an unfair disadvantage, compared with online retail giants.” Liberal Democrat proposals for fair reform would cut tax bills, breathe new life into local economies and spur growth, she claimed.

Conservative Charlie Dewhirst was another to raise the impact of VAT, on pubs and restaurants in particular. “I was told by a local landlord of a very successful pub in my constituency that he has 500 covers a week, and still struggles to make a profit, because although he is buying food without VAT, he has to charge it to the customer. That puts a serious squeeze on his ability to achieve a profit”. He urged the minister to raise this with the Chancellor.

MP after MP praised pubs, cafes and other hospitality venues in their constituencies for their contribution to town and village life and to local economies, with opposition MPs blaming Labour for closures and struggles in the sector, while government backbenchers pointed to measures taken to support the sector, such as putting in place a permanent 40% business rates discount for the sector.

Shadow Exchequer Secretary James Wild said he had heard on a visit to a pub in his Norfolk constituency how damaging the increase in the national insurance rate had been. “The jobs tax is costing the sector as a whole £3.4 billion a year. Little wonder that a third are now operating at a loss. Three quarters have had to put up their prices to cope with the increased costs that they are facing, and two thirds are reducing the hours of their existing staff, and are not taking on the people that they otherwise would have done.”

Catherine Fookes (Lab) praised the government for ‘cutting tax on pints’. Josh Fenton-Glynn (also Lab) praised “a £1.6 billion package that will save the average pub £3,300 next year”.

Vikki Slade (Lib Dem) said she first got involved in local politics because of “the crippling cost of business rates”. Another Lib Dem, Christine Jardine, responded to Conservative heckles about the ‘tourism tax’ by saying that yes, her home city of Edinburgh is taxing tourists, “but it is doing that to support its hospitality business, which has been under threat for a decade.

 The Conservative motion was defeated by 158 votes to 334.

You can read the full debate here.