Prime Minister Andy Burnham has announced a 20 per cent cut to business rates for pubs, clubs and live music venues from April 2027, but ministers have struggled to explain, in full, how the £100 million policy will be funded.
Downing Street said the cut would save the average pub around £1,100 in the next financial year and benefit close to 32,000 hospitality venues across England.
Announcing the move on Thursday, Burnham said his government would “back the businesses that people want to see in their communities,” and described pubs and high streets as “the beating heart” of local life.
Chancellor John Healey backed the announcement, saying pubs, clubs and live music venues “are at the heart of communities across the UK” and help keep town centres busy.
Government guidance published on GOV.UK said the changes would be fully funded, in part by reviewing rate reliefs for businesses judged not to make a positive contribution to their local area, such as vape shops, alongside a crackdown on online marketplaces that do not meet their tax obligations.
How ministers say it will be paid for
The government’s own explanation, repeated across several outlets, rests on two main measures: withdrawing rate reliefs from vape shops, on the grounds that they do not benefit their local areas, and tightening tax compliance among sellers on online marketplaces. Burnham had previously pledged to raise taxes on out-of-town warehouses used by online retailers such as Amazon to help pay for the cuts. No 10 also said it was consulting on ways to make online marketplaces more responsible for stopping non-compliant sellers avoiding tax.
Why the funding is being questioned
Despite that framing, senior figures in Burnham’s own government have been reluctant to confirm the money is actually secured. Emma Reynolds, the Chief Secretary to the Treasury, told broadcasters on Thursday that ministers were still “looking at” both the online retail tax rise and the vape shop crackdown, and that full details would only be set out at the autumn Budget. Pressed on whether she could say the pub policy was fully funded, she conceded the wording would only be accurate in future tense, saying it “will be” fully funded, rather than that it already was.
This is not the first Burnham policy to run into funding scrutiny. An £850 million cut to VAT on electricity bills, announced earlier in the week, had been linked by Number 10 to savings from Sir Keir Starmer’s scrapped digital ID scheme, but Darren Jones, who oversaw that scheme before being removed from Cabinet, said no money had ever actually been allocated to it. A separate pledge to cap single bus fares outside London at £2 was said to be funded by repayments from developing nations on climate loans, though Transport Secretary Heidi Alexander was unable to confirm whether any interest would be generated by those loans.
Matt Vickers, chairman of the Conservative Party, described the pub rates policy as the government’s “third unfunded spending commitment in three days,” and argued ministers had removed a larger, pandemic-era rates discount before offering back a smaller one.
Reaction from the hospitality sector
Industry reaction has been mixed. Iain Hoskins, who owns the Ma Pub Group in Liverpool, said a previous 15 per cent discount had ended up applying to only one of his five venues, because the rest did not have “pub” in their business name, and questioned how many venues would actually benefit this time.
Hotelier Steve Perez, whose venues include pubs and restaurants, argued the saving would make little practical difference given that his own business rates bill had risen by around 130 per cent, and noted the new discount does not extend to restaurants or hotels, even though many pubs now also serve food and offer accommodation.
The wider picture
The announcement follows a period of pressure on the hospitality sector after business rate reliefs introduced during the Covid pandemic were gradually withdrawn. A 15 per cent discount for 2026/27 was announced by the previous chancellor in January, with rates due to rise in line with inflation from 2027 to 2029; Burnham’s 20 per cent discount from 2027/28 builds on that. The rates-free threshold for small businesses, currently £12,000, has been frozen since 2017; Burnham has previously said he wants to raise it to £18,000.
With the detailed costings for all three of this week’s announcements (pubs, energy VAT and bus fares) now pushed back to the Budget, opposition parties and some in the hospitality industry say they will be watching closely to see whether the funding commitments hold up to scrutiny.
