In an entertaining but hard-hitting speech at the Business in Sport and Leisure Conference last week, Roger Devlin challenged the government to encourage growth by removing the many obstacles to new development that are faced by the hospitality and leisure industries in the UK, as well as reducing both business rates and cumbersome planning requirements.
Roger is Chairman of Marston’s, sports media group Satellite Information Services, and Gamesys, the highly successful online soft gaming company. He is also the Independent director on the board of the Football Association.
A man, therefore, with great experience and wide contacts, and Roger began by recognising the importance of sport and leisure – but went on to point out that both are being crushed beneath an untenable burden of tax and regulation.
Is the economy recovering?
Despite the positive opinions of many experts, the country divides into the prospering London and the South East, and the rest of the country – the further north you travel, the more difficult it gets, with discretionary spend severely limited. The fragile recovery will therefore be very slow nationwide, and subject to external shocks – such as Greece or Portugal quitting the eurozone, with the inevitable resulting economic chaos.
Pubs matter
Pubs are at the heart of our local community, with beer enjoyed by 32 million adults who socialise, relax and make connections. They are small businesses, critical to the local economy; contribute £19 billion to UK GDP and generate £10 billion in tax revenue – £4 billion in VAT that supermarkets don’t have to charge on food, and £1 billion in business rates that are suffocating both pubs and the high street. They support 1 million jobs, half for those aged under 25.
But – beer duty has increased by 42% since 2008, resulting in consumption down by 17%; 6,000 pubs have closed; 60,000 jobs have been lost.
“We are a chronically over-taxed and over-regulated sector despite the fact that we are an engine for job creation…For the economy to grow, for jobs to be created, for tax revenues to rise, for the national debt to come down…individuals and companies need confidence. The overall tax burden for the pubs sector is far too high to foster the spirit of dynamism, creativity and entrepreneurialism that this industry is capable of.”
Challenge to government
These comments were followed by a powerful call for action:
“I challenge this government to encourage growth by removing obstacles to new development, reduce business rates and cumbersome planning requirements. An extension of the small business rate relief and an increase in the threshold for full relief would help so many small leisure businesses. Look to remove inequity in our tax system. Why do we in the UK pay 40% of European beer duty when we only drink 13% of the beer? Can anyone explain why VAT is charged on food in pubs, but not in supermarkets?”
And he added one final, powerful question. In the case of Marstons, they pay £300m in taxation across the group, whilst shareholders receive just £35 million: does this seriously reflect a fair balance of risk and reward?
If you think it’s bad for pubs…
…take a look at betting and gaming, which are subject to no less than nine different taxes whose cumulative effect is to leave an average of 17 pence with the bookmaker for every £10 bet. 30% of UK betting shops now earn less than £15,000 each year, leaving thousands of shops and jobs balanced on a knife edge.
Betting shops, too, are at the heart of the local leisure community, and the burdens they carry put their existence in danger – as well as adding a further threat to the high street. Yet the new Machine Gaming Duty standard rate is punitive in its effect; then there’s the ‘misdirected, disproportionate’ 4th Anti Money Laundering Directive from Brussels; the requirements of the 2005 Gambling Act , and more.
Why is the state so greedy?
In Roger’s view, the answer is simple: despite the austerity rhetoric, the present government has done little to reduce ‘our giant bloated welfare state’. The Treasury has become dependent upon stealth taxes and off balance sheet levies, many of which are not known to voters.
“This indirect tax burden is entirely regressive. The bottom 20% of society spend £1300 each year on betting taxes, tobacco and alcohol duties, and motor related taxes – in addition to £1,150 on VAT.”
And the next Government?
Whilst the burden of tax and regulation on the sport and leisure industries is not justified and is stifling to enterprise, it is unlikely that the present government will help: the burden of financing the state is simply too vast.
So what about the next Government? The Conservatives could not win an outright majority in 2010 when the economy was at rock bottom and against ‘probably the weakest Prime Minister in British history’. They may well suffer the consequences of what they have (not) delivered since – particularly if the promised economic recovery does not materialise. The sport and leisure industry should remember:
“We’re on our own in this. Don’t say you haven’t been warned.”