A morsel for the masses

Well, Budget Day has come and gone, and there has been the usual phenomenon of various unpalatable measures being trailed in advance, and a sigh of relief being breathed when some of them at least are not implemented. There is also usually at least one surprise pulled from the Chancellor’s hat, and this year it was the decision to reduce the rate of duty on draught beer and cider by 1.7%, equating to about 1p on the sale price. The duty on packaged beer and all other alcoholic drinks will increase in line with RPI.

This comes across as a pointless empty gesture that will achieve nothing. Even if pubs see a small reduction in price from their suppliers, in pretty much all cases they will take the entirely understandable decision to slightly widen their margins rather than passing it on to the customer. Virtually no drinkers will see any reduction in the price of a pint over the bar. This was unsurprisingly met with widespread derision, and realistically the optics would have been much better if the rate had simply been frozen. Yet they have the brass neck to shout it from the rooftops as though it is a significant benefit.

Any effect of this will be vastly outweighted by a whole raft of other factors that will increase the costs incurred by pubs. The first is that the 75% discount on business rates that they have enjoyed since the period of lockdowns will be reduced to 40% from April 2025, pending a comprehensive revamp of the system in 2026. This will more than double a pub’s business rates bill. The Morning Advertiser reports that the rates bill for the average pub will increase from £3,938 to £9,451.

The rate of Employer’s National Insurance contributions will be increased from 13.8% to 15%, and the minimum threshold on which they are charged will be reduced from £9,100 to £5,000. This will greatly increase the cost of employing staff, and will hit hospitality, where there are many low-paid and part-time workers, particularly hard. For the very smallest businesses, there will be some relief from raising the exempt band, but the vast majority will still suffer.

Meanwhile, the main adult rate of the National Living Wage is being increased by 6.7%, over three times the rate of inflation, bringing it to £12.21 an hour, while the 18-21 rate will be increased by no less than 11.6% to £10 an hour. Again this will have a particularly severe impact on hospitality due to the profile of their workforce. Some idiot on Twitter opined “why shouldn’t workers be paid a fair wage?”, but you can’t pluck a figure out of the air without any regard to employers’ ability to actually pay it.

On top of this, the government are planning to implement changes in employment law to give workers full rights from Day 1, which will make it much more difficult to dismiss unsatisfactory employees, and make businesses much more reluctant to take anyone on without a proven track record.

One publican reckoned that, to recoup the cost of all these changes, she would need to increase the typical price of a pint by 30p. But then you run into the problem of your customers, who are experiencing similar financial pressures, being unable or unwilling to pay that, resulting in a vicious circle of diminishing returns.

The inevitable result will be that, after the Christmas and New Year period, we will see a rising tide of pub closures, and many of those still standing will be reducing staffing levels, opening hours and food service times. But the joyless wowsers, never missing an opportunity to kick a man when he is down, will still no doubt go ahead with their Dry January campaign.

And, while I have done my best to avoid making wider political points that go beyond the drinks and hospitality industry, it’s hard to escape the conclusion that we are being consigned to four and a half years of Britain being a high tax, low growth and low enterprise economy.