Reeves to rake in extra £12bn from ‘pubs tax’
Reeves to rake in extra £12bn from ‘pubs tax’
Tom HaynesSat, May 16, 2026 at 7:00 AM UTC
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Rachel Reeves was forced to provide more help to pubs after a campaign by The Telegraph - Stefan Rousseau/PA
Rachel Reeves is poised to rake in an extra £12bn from the pubs tax as inflation sends business rate bills soaring.
The Treasury is expected to raise £118bn from business rates in England over the four years to 2029, according to Ryan, a consultancy group. That compares to £106bn had the tax been frozen at current levels.
The £12bn increase, which only covers England, is significantly larger than previous estimates by the Office for Budget Responsibility (OBR). The budget watchdog forecast that the bill for business rates across the UK would rise by £6.7bn over this parliament.
The sharp increase in the forecast comes as economists predict a fresh surge in inflation, sparked by the war in Iran. The Bank of England has warned the rate of price rises could climb as high as 6.2pc later this year.
Inflation is one data point that is used to calculate business rate bills. The Chancellor has promised to freeze business rates in real terms for two years. However, this still means overall bills can rise in line with inflation, suggesting potential sharp increases.
Ryan’s analysis prompted calls for the Chancellor to intervene to prevent punishing rises in tax bills for businesses already facing sharp rises in costs elsewhere.
Nick Mackenzie, the chief executive of Greene King, said: “We have long said permanent reform of business rates is essential, alongside other measures to reduce the huge regulatory burden pubs face.
“Inflation-linked rises are another example of how this outdated system is adding unnecessary costs for pubs, which must be addressed if the Government is to deliver on its promise to back the industry.”
The call for more permanent reform came as the Chancellor backed the Telegraph’s National Pub Day event on Saturday, adding that it was “all part of our plan to boost town centres and keep pubs buzzing”.
Publicans found themselves at the centre of a row over business rates last year when a spate of revaluations dragged many into paying business rates for the first time, and landed others with extraordinary tax bills.
Despite an emergency tax carve-out for the sector after campaigning by The Telegraph, pubs, restaurants, retailers and other hospitality businesses are still grappling with soaring wage bills, energy costs and plummeting consumer confidence.
Jon Hendry Pickup, chief executive of Butlins, said: “Inflation is already impacting consumer confidence, higher costs and ongoing uncertainty, and the Government doesn’t need to maximise business rates receipts at every opportunity.
“The reality for hospitality operators is that we’re already being hit by a double whammy of inflation-linked cost rises on energy alongside proposals like the holiday tax.
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“Government has shown flexibility and changed course elsewhere when policies risked damaging growth.”
Previous governments have repeatedly intervened to limit increases in business rates, including freezing them or capping rises during periods of economic pressure.
Conservative governments imposed a 2pc cap on increases in 2014 and 2015 rather than applying full inflation-linked rises, before George Osborne switched the system from the Retail Price Index to the Consumer Price Index to reduce the burden on businesses.
Ministers also froze the business rates multiplier entirely between 2020 and 2024, amid soaring post-pandemic inflation.
Kate Nicholls, of the lobby group UKHospitality, said: “It’s critical that at the Budget, the Government significantly increases the business rates discount offered to hospitality businesses and limits any inflation-linked increase.”
In her 2025 Budget, Ms Reeves unveiled targeted relief for retail, leisure and hospitality businesses, replacing pandemic-era support.
In January, she bowed to pressure from publicans, and The Telegraph, to announce additional support for pubs.
James Cleverly, the shadow housing secretary, said: “The relief Labour have pledged is small change compared to soaring overall bills, which will force many firms out of business in the coming years, destroying jobs and damaging growth.”
He accused Labour of imposing a “cocktail of stealth taxation” on businesses and trying to “gaslight firms and the public”.
“Rachel Reeves claimed to be delivering lower business rates, while actually sending them soaring with an array of extra charges,” he added.
Ryan’s figures for business rates in England provide the first indication of how much the Labour Government will raise from Ms Reeves’s overhaul of business rates. The taxes in Scotland, Wales and Northern Ireland are set locally with funds going to devolved administrations.
The modelling assumes inflation of 3pc this year, 2.75pc in 2027 and 2.5pc in 2028, only slightly higher than the assumptions underpinning earlier OBR forecasts.
A Treasury spokesman said: “Our £4.3bn support package will limit bill rises, we’ve cut the business rates multipliers by 5p for eligible retail, hospitality and leisure properties.”
Source: “AOL Money”
