‘A small snippet’: what pubs make of Burnham’s £100m rates giveaway | Hospitality industry

One of Andy Burnham’s first policy measures as prime minister was a 20% reduction in business rates for pubs, clubs and live music venues.

The policy, announced on Thursday, is part of a wider agenda to support the high street and will cost £100 million.

So how is politics measured in the context of running a business, and where does the money on your pub bill actually go? And could lowering rates stop the trend of pubs closing about once a day?

A pie and a pint, Red Lion, Hollington, Derbyshire

You pay: £20.50
Publishing profit: £2.97

The Red Lion serves 15 types of pies, 15 types of potato side dishes, 15 types of vegetables and 15 types of sauces, but the most common order is the steak and beer pie, washed down with a glass of sea bass, chips, cauliflower cheese and onion sauce.

“We’re the place for pies,” says Dan Smith, owner of the Derbyshire pub.

“We’d sell about 300 of them over the course of a week and buy about six 25kg bags of potatoes from a farmer up the road. A local brewery produces our own beer, Pie & Glory, but Bass is our most popular.”

Smith says he pays no business fees thanks to subsidies for rural businesses. He now pays around £680 a year and has seen his estimated bill fluctuate several times due to successive policy changes, including property revaluations across the country.

“They made it 10 times more complicated than it needed to be,” he says.

He reckons business rates work out to around 16p a cake and a pint, compared with VAT of £3.42.

“I won’t steal it [the business rate cut]It shows that Mr. Burnham is willing. But it’s a small piece,” says Smith.

He is backing a hospitality-wide campaign to reduce VAT from 20% to 10%, a measure Burnham supported when he was mayor of Manchester. This could cost the Treasury around £10bn.

Fault

Contents: £6.48
VAT: £3.42
Staff: £3.88
Employer taxes: £0.74
Bills, running costs and mortgage: £2.85
Business rates: £0.16

A typical accommodation establishment

Endorsement: £1 million
Profit after tax: £13,500

Packed House is a family-run consultancy that acts as commercial director for independent hospitality businesses, providing a breakdown of annual costs for businesses with a turnover of around £1 million.

Colm O’Leary, director of Packed House, says: “We help overworked and underpaid owners build profitable, successful businesses.”

Costs include high tax rates paid on alcohol purchased by bars. Personnel costs include national minimum wage and national insurance contributions; both of these increased under Labour.

The forecast shows why some hospitality bosses have given only a lukewarm reception to the business rates discount package, given the extent of other costs they face.

The amount paid depends on the type and location of the premises, but O’Leary says £5,000 would not be unusual for a business with a turnover of £1 million. This represents a saving of around £1,000 from the policy, in line with what the government says pubs could save.

“The speed of this policy decision is a positive sign, but its benefit pales in comparison to what is needed,” says O’Leary.

Fault

VAT: £166,667
Net sales: £833,333
Purchases: £333,333
Other costs (rent, utilities, PR, travel, etc.): £203,333
Business rates: £5,000
Operating profit: £16,667
Corporate tax: £3,167