Welcome to today’s final panel of the Business and Trade Committee’s hearings into small business strategy. Thank you to our final panel of witnesses for joining us. Lydia, I am going to start with you. How is business?

I am afraid that it is not all good news. A simple answer to that is that, in hospitality, there have been 84,000 job losses since 1 April. What does that mean to me personally? I have three cafés in the Midlands. I used to hire 50 people. We are down to 45. This happened as a result of the minimum wage increase—which, by the way, I do not think is a problem—and then national insurance contributions, all overnight. My business had to try to find £38,000. I just did a week-on-week example of last week’s revenue versus the same week in the previous year. It was 14% down in revenue and 29% down in footfall, bearing in mind that the industry, on average, has increased prices by at least 6%. The maths does not really math. What is important to mention there is that, in that climate where you are seeing a decrease in revenue, the only option was to shed people. I hire 45 people, but, in my wider role as a representative of the Birmingham hospitality collective, I have easy access to hundreds of other hospitality vendors and operators, and I am not alone. I have operators saying that they are regularly not taking money out of their business, and regularly doing things such as remortgaging their houses. Business is down and we are trying to save jobs. We do not want that to be the answer. What I also did, which I think is useful, was put together some case studies of how we would make that money up. As an example. We sell coffee, we sell cake, we sell food. If we were to try to make this up and save those jobs, not to grow or to make more profit, but to stay in the same place from pre 1 April, a reasonably busy café would have to sell an additional 400 croissants. You look surprised. Does anybody here know how many croissants a café usually sells a month? For a busy café outside of London, 300 croissants a month would be pretty good, so you are asking for a 133% increase in a particular product, in a climate where I have just told you that we have a 14% decrease in revenue and a 29% decrease in footfall. It breaks my heart to sit in front of people and make them redundant and not give them jobs, but that has been the unfortunate answer in order to stay alive.

Morgan, what is your experience?

I can absolutely echo what Lydia has just said. I represent the pub sector, where we are seeing a lot of that anecdotally from our members. The point that Lydia made at the end about overtrading is something that we are really trying to get across, because, for every £5 cost increase, it is not just selling one extra pint; it is selling 42 extra pints to make up that £5. That overtrading thing is something that we are really trying to impress on you. A lot of it is down to employment as well. Employment costs are up. Energy costs are still very high, as are business rates. Last year’s autumn Budget added £650 million on to the sector. That is hitting pubs, resulting in people having to make difficult choices such as employing fewer people, opening for fewer days, closing early, or not opening their kitchens because they cannot afford to turn on the ovens. You are really getting a lot of those difficult decisions that change the fundamental offer that pubs can bring to their community, whether it is the number of people they can employ, events they can host, or people they can serve. It is getting quite difficult for pubs as well.

Are you seeing the same kind of decline in sales?

It really depends. Pubs are so seasonal. They are also so location-specific. You might find it difficult to believe that pub footfall has changed at all if you go out in a city on a Thursday, for example. In communities, it is certainly going to be a different story, depending on where you are. Of course, the weather is a really big deal for pubs. If you have a great summer, as we have had over the last few months, that is great, but the second the weather starts turning footfall goes down. It really is on a case-by-case basis. What we also want to impress is that it is not for a lack of people supporting their pubs. It is that, for every pound that comes in, more goes out in bills and costs. It is the cost of doing business, not the model, that is in trouble.

Stephen, what is going on in your world?

Thank you for inviting me to join you today. I am not going to go over what has already been stated. Hospitality is a stand-alone issue, separate from retail. We probably need a separate session on it, because 40 minutes is not going to be enough. I sit here today representing the Scottish Hospitality Group. However, I have a small business of my own in a rural part of Scotland.

Give us a sense of what is going on in your business, and we will work backwards from there.

Going to costs, two weeks ago, I had to work a full week in my own restaurant as well as having to do other things. To give you an idea, I worked 76 hours that week. In terms of what I take out of that business for a weekly wage, that worked out to £3.16 an hour. I would chastise anybody who says that they work for £3.16 an hour and then expect to make a profit. It does not happen. When we talk about footfall and spend per head, looking at my own business from last year against this year, just as Lydia was saying, the spend per head is down roughly £4.73. For me, that equates to just over £100,000 a year, yet we had the colossal increase in employers’ national insurance. I am now looking at, before I go into my new financial year, paying off probably two of my 14 staff who I have employed just now to make that. Where do I make up the hours? I am currently working from a Wednesday to a Sunday. I do not open on Monday or Tuesday. I did not come into this business to open five days a week, but the affordability is not there for me to open on Monday or Tuesday, which goes to the point that we were making earlier on. Hospitality is on the high street. It is seven days a week. People come into our high streets. Nowhere is open on Monday or Tuesday, and that is becoming the norm now. That is not good for tourism. We in the rural parts of Scotland are far different from the Royal Mile, although the issues are still the same.

Do you have a sense of what is driving that decline in spend?

There are two parts to that. There is the difference in discretionary spend and essential spend. Your essential spend is going to a supermarket. You have the same issue if my ceiling is leaking in my restaurant and I have to call out a plumber. If they charge £50 an hour, you have no choice but to pay that. Otherwise, you need so many other people to fix the problem. That same plumber comes into my restaurant and I charge £40 for a fillet steak. He goes, “Hang on a wee second. Where are you getting £40 from?” I say, “Are you telling me that my employees are less qualified and less professional than what you are to fix a leaking pipe? No, they are not.” The person who shakes the cocktail or cooks the fillet steak is just as professional as anybody else in the sector. What we need to get back to is the professionalism that comes across in hospitality, because it is not just a one-stop job.

Lydia, do you recognise that analysis when it comes to the decline in sales and spend per customer? What is going on there?

Everybody is seeing the impact of the cost of living crisis. Even in one of my cafés in Leamington Spa, which is notoriously quite affluent, there has been a massive decrease in footfall. Everybody is having to watch where they spend their money. At the same time, we are having to increase our prices to cover all these costs that we just talked about. We are outpricing ourselves, which seems counterintuitive, but we have no choice. I cannot sell an avocado smash, for example, for less than £12, but people are like, “£12 for an avocado smash is wild.” UKHospitality released some really interesting figures earlier in the week about profit left on dishes. If I look at that in particular, £2.40 of it goes to the Government; 88p of that stays with me, but I cannot charge any more. This is the problem. We are outpricing ourselves, and people do not want to come in, but we have to charge that much to try to keep the doors open.

What have you had to do to, say, the price of a cup of coffee?

We increased everything by around 5% to 6% as a minimum. Where we are slightly luckier with coffee is that, generally, everyone kind of charges the same amount. People point to that a bit less.

Some of the evidence that we heard when we were touring the country and talking to small businesses revealed that people felt they were at that price point where they just could not put prices up any more. People would talk about a £5 flat white or a £10 pint, and they just said, “We are now at the limits of what more we can charge.” Is that an analysis that you recognise?

If anything, we have already gone past it, because of the fact that people are voting with their feet. People are not coming in as much. My flagship store in Leamington was rocking. People used to queue to get into that place. I was proud that we created this vibe. Now, on a Saturday, you can walk in and get a table with no problem. That is wild. Like I said before, people are voting with their feet. We cannot keep increasing prices. I also mirror what my colleague here said about how we are different from other industries.

Just on that as well, what we are seeing on the decrease in spend is that there is still an appetite among people to come out and socialise, because we are social animals by nature. However, what is happening, which we see in our own business—everybody else across the panel will probably say the same—is that people are coming out but, instead of having three courses, they are having two. Instead of having that second glass of wine, they are having one. They are asking for that extra bottle of free water at the table, because they still want to sit down and socialise. That is one of the biggest problems. When you have that, with the added costs that businesses have, be it utilities or the absolute devastation of the employers’ national insurance contributions on every single small business, where is the risk now? The risk for employers is in taking more people on, because we do not want to be remortgaging our houses. Businesses do not want to do that. We want to make a profit. We have to make two profits: one to keep the business going and the other to keep our own mortgages and finances in order. That gets missed by so many people.

Thank you for setting the stage for us.

Just to pick up on a couple of points, you have clearly articulated some of the pressures that the 2024 Budget has brought. I would be interested to know about some of the challenges that may also have been contributing to the viability of business prior to the 2024 Budget. Starting with you, Morgan, in terms of the pub sector, what were those pub businesses facing post covid and other hiatuses?

Post covid, one the biggest issues, as we remember, was high inflation. That was mainly manifesting in the cost of food and of beer. Wheat prices were high. Energy prices are high. Brewing is a very energy-intensive sector, and so, when energy prices are high, it costs more to produce beer.

Would many of your pubs, do you reckon, have taken out loans, especially for some of the energy hikes that they saw?

I would not have that figure to hand. I can see whether I can get it for you. At the time, during the peak of the energy crisis in 2022, energy was by far the biggest single issue. It was a crisis for a lot of businesses. Their contracts ran out and they had to get new contracts, and they had to take what they were given. It is possible that they were locked in for a few years at a time in that instance. While we see that the immediate energy crisis has passed, energy bills are still running at two and a half times historic levels at least. Again, going back to my point about how many days a week you open, every time you decide to open the door, whether or not there is anyone in your pub, you are paying for the electricity; you are paying for the kitchen to be turned on; you are paying for heating in the winter. All of that really comes back to the overall cost of doing business and the amount that goes out before that first customer even comes in to buy a pint. Energy is definitely one of those big ones, along with the cost of food and drink, which is now structurally higher after that period. Even though inflation has gone down, throughout the whole supply chain things are just more expensive.

Lydia, are there any other costs that are really bearing down on the business?

I can mirror the point about the cost of goods having increased. We notoriously sell much less meat, as an example. That has a knock-on effect. We used to use a local butcher. We are giving them less business. The knock-on effects go on and on. Again, we either outprice ourselves or we make these sorts of decisions. Energy prices are a big deal. They really are, especially pre 2024. One of my sites is a wholesale bakery. We went from £1,800 a month to £3,500 a month. We still pay that to this day. That is basically two baker’s salaries, which affects how much we can produce and affects revenue. Again, we are talking about a knock-on effect. I do not really want to get lost in energy prices because that is something that affects a lot of industries. We are all here today to talk specifically about hospitality. Yes, it is wild.

It is just those other additional pressures on the sector. The margins may have been reasonable to slim.

They were already tight, absolutely.

This is putting a lot of pressure on them. What about covid loans? Is that something that you can relate to? Are there issues with outstanding covid loans that you may have taken out or that have been taken out across the sector?

I did not take one out, so I cannot speak on this.

Can I come in on this? I would make a distinction. The covid loans were structured as predictable interest rate loans that could be paid off over time. Those have been more bearable for businesses that are medium-sized and up, where the structure was a floating rate above base. Hindsight is a powerful thing, but, if you take yourself back to 2020 to 2021, it would have been rational to assume inflation after the pandemic. If you have constrained supply and demand builds up, you get inflation afterwards. For sure, there are a lot of businesses that are, in effect, at the moment zombie businesses purely servicing debt because the cost of the debt is higher than anticipated when it was taken on. There is a very—I will not say “simple”—achievable solution to that, which is to convert that debt into something that feels a lot more like a non-voting preference share either with a limited coupon or delayed to the end of the term. That would have two benefits, would it not? First, it allows businesses to invest in growth so they could pay it back. Secondly, it helps with the balance sheet design. We are absolutely in a situation where some of our mid-sized hospitality businesses are at the moment structurally unprofitable because of unexpectedly expensive debt.

As a Committee, we would benefit from a short paper on that.

I will do that tomorrow.

Thank you.

Allen and I had a brief chat about this outside earlier on. We are seeing a lot of businesses that are now—it is not just now; it is probably a little over the last year—at the end of their capex schedule. They are now looking to reinvest and to do whatever they need to do to make the place look better and more attractive for people coming in. That capex is now being turned into working capital. It is going from one budget to another to keep the business afloat. We cannot keep doing that. Otherwise, it is a race to the bottom. The other pressure that we have is around skills and training. I know Scotland is a wee bit different. We had a fund there that medium to large-sized businesses could draw down on to train staff. In previous years, they have been doing that. The Scottish Government, without getting into the politics of it all, took that fund away. They had to look at taking the budget from one budget within the business and putting it into that to continue that training. You cannot just say to somebody, “I am sorry. I am not going to train you any more.” If you do not train them, somebody else will, so you are maybe losing a key member of staff. The other pressure that we have, again talking about Scotland, which is going to be more of a chat come the Budget here in Westminster, is the non-domestic rates issue that we have in Scotland. The way that the hospitality sector is rated in Scotland is absolutely catastrophic. It is beyond belief. I hear colleagues in England shouting about how hard it is in hospitality down here. Try living in Scotland. We had no business rates relief for three years when everybody down here was getting 75%. Although the Barnett money was coming from England to Scotland, it was not being used because there is nothing in the Scotland Act, to my knowledge, that says it has to be used like for like. That was a big issue. Now, thankfully—we would agree—business rates are getting looked at in England come this Budget. Whatever happens here, we would like to see that mirrored in some way, if it is good for hospitality, in Scotland. Thankfully in 2026, due to the work that we have done, we are going to see an independent review. That will not take effect until 2029. The support has to be there before that.

My apologies, I have to be out of here in five minutes, so hopefully you will be able to give me very short snappy answers. First of all, Lydia, I worked in hospitality in Leamington as a student. It is great to have you here. From listening to you, and in fact to all of you, what struck me is that this is not a cost of living crisis. This is a 2024 Budget crisis. It is not affecting only the hospitality industry; it is affecting every single business, which is in turn affecting the footfall that all of you have across your doors. Not only are you lacking the confidence to hire a student—like me back in the day—but every other business is worried about whether to take on staff. Is my characterisation of this something that you recognise?

No, I would say. There is an important point here. The Budget did not have a whole-economy impact. Half the jobs lost since the Budget have been purely in hospitality. Hospitality is not half of the economy. This is a very asymmetric impact, which is really important. If you take NICs as an example, it was a regressive tax. The less you earn, the more you are hit. If you earn £25,000 a year, you lost half your pay rise to NICs alone. If you earn £150,000—I spent most of my career in banking—as lots of mid to late 20s people do, you only lost about 20% of your pay rise to NICs. It is really important to understand that the impact of the Budget was specific to hospitality and, to a certain extent, retail. It was not universal across the economy. That distinction matters.

Is it affecting the number people coming through your doors? You rely on people coming through your doors.

Sure, yes.

Do you mean customers or are you talking about new hires? What are you referring to?

I mean your customers. If people have less money themselves, they are not going to be spending the money in your stores.

Of course, yes.

The whole thing becomes a self-fulfilling prophecy. Vacancies are down; unemployment is up; people are concerned about their jobs. They are less likely to spend in a discretionary way.

Yes, absolutely. The touchpoints of hospitality on the high street are broader. For example, my partner has a hair salon. She has been doing it for 30 years. Even she is saying that in the last few years her numbers are dropping away. We talked about this before. When you are going out on a Saturday, ladies normally start planning on a Wednesday: their nails, their hair and all these kinds of things. Every touchpoint in hospitality, being the top point, is being affected by this. With less disposable income, they are not going out to get their hair done. They are not going out to get whatever unless it is a special occasion. Spend is down; footfall is down. People still want to socialise, but the bottom line factor is that the cost of doing that is being outweighed. People sit at home, order from Deliveroo and get friends around the house. It gets out of control because you have a health crisis because it is the home poor and all these kinds of things. We want people back into hospitality. Governments need to act before it is too late. Pin back your ears and listen to what is happening on the ground. Do not just sit and act like we are all happy. We are not. Everybody in this room is touched by hospitality, and we need to understand that.

I will give you a minor positive note before we go back into the gloom. My constituency had the best pub in the country in 2023 and 2024. They are going for it for a third time, so I am rooting for them.

What is the pub?

It is the Tamworth Tap. They have done brilliantly well. They have used heritage as their USP. They are right in the town centre and they are right on a high street. However, they are not immune. They have talked to me about many of the issues that we have just talked about. My biggest bugbear, which the Committee and the Chair have indulged me in, is business energy and the absolute state of that sector. Many businesses have been put under by very bad practices, by going in with debt, by all kinds of things and by various third-party intermediaries not being regulated at all. There needs to be a focus on this. Money can be saved if we change the attitudes within that sector, if we get the regulation right and if we look to best practice. There are a number of people who are trying to push for that. My question is really around the things that could support this difficulty around the price of energy. I will give you one example before I let you come in. I met with a company called Tem, which is in the climate tech area. This is very much around looking again at how we supply energy and trying to bring the cost of it down to directly benefit customers. The Startup Coalition is also looking at this problem. You have to have energy to produce beer, to turn the lights on or to open your hospitality venue. We need to deal with that. It is not all about the global crisis. Some of this is about what we can do tomorrow by just getting it right. Do you have some thoughts around what you would do? Perhaps I will start with you, Morgan, as I kicked off with my brilliant Tamworth Tap pub.

There are definitely a few things around energy. For years, particularly following Ofgem’s review into non-domestic energy, we have been calling for Ofgem to be empowered to make those recommendations, especially if we are talking about tackling poor service provider behaviour. The third-party intermediaries review may go some way to helping that. Again, one of our concerns is lack of access. Pubs are considered a high-risk venue for electricity suppliers. Not all suppliers will offer a contract to a pub. If you are in an area where you are whittled down to just one provider that is willing to even have a meeting with you, you have to take what it gives you, which is difficult. Especially if you are an SME, you do not have any bargaining power. If we are talking about the small business strategy in particular, that is something that could be looked at. We are slightly concerned that the industrial strategy focuses a lot on access to energy for industries that are not hospitality. It is a finite resource. Our big concern is that, because we were not included in the industrial strategy, we are going to the back of the queue for grid access. We are going to the back of queue for all these improvements that the Government are proposing to make because we are not one of the eight selected sectors. That is something that ought to be kept in mind. When you are dealing with a finite resource, you will inevitably have to exclude some industries from that. We seem to be at the bottom of the queue now, which is another concern. My final point on energy is more on energy efficiency. Pubs are often in older buildings, listed buildings or historic buildings. It is difficult to make those buildings energy-efficient. It is expensive. It is sometimes impossible, if it has listed status. We are calling for some sort of green super-deduction. If you are making improvements on your property that improve energy efficiency or make your energy provision greener, there should be investment incentives for that in particular. That would help unlock a lot of this investment that is sitting waiting, hoping that it can be used with the right incentives. Those are the main points that I have on energy as a whole.

There is one additional thing. I agree with all of that. We are increasingly seeing—I cannot think of a better word—ambulance-chasing firms going after small businesses for alleged prior liabilities. Quite often, the businesses that they pursue are run by an older couple who have all the normal indicators that we would recognise for vulnerability to fraud. That sector is in need of a stick.

You are in this strange situation where you can have vacancies and be letting people go at the same time because you have a problem with the affordability of the staff. There are absolutely areas where we have high levels of vacancies and high levels of unemployment. Part of that is skills. You made the point about businesses not being able to open some of the week, for example. That has been made worse by the impact of NICs on part-time work. You will all understand the asymmetric impact on people who work maybe 14 or 16 hours a week. The ability to plug gaps across the week has been reduced. I will give you two solutions. First, I would absolutely encourage the Government to look at a specific easement on the cost of NICs for hiring people out of unemployment. That would help to address it. If you said to HMRC, “You don’t get NICs on the first year of salary, but on the plus side that person is off your benefits bill,” that is probably a net benefit. The second solution would be early-stage training. We have just launched a hospitality skills passport, which is a universal entry standard for jobs in the sector. In the first instance, that has been funded by DWP with further education colleges across the country. That is a really positive thing. Phase two is the industry rolling it out itself. Anything that derisks hiring would really help. Just very briefly, if you are taking somebody at the start of their career out of unemployment, there is a higher risk that, having trained them, they then do not come back. Anything that derisks that training process helps with the willingness to hire and with retention would help.

The long-term solutions are about addressing the affordability of employment. I am absolutely clear that this newly regressive approach to taxes on wages is unacceptable in economic and moral terms. We need to make it possible for businesses such as Lydia’s to hire people rather than lose them. We will have lost 100,000 jobs by the next Budget. It may well be 200,000 the year after and then it will start to plateau. If you consider the jobs that are currently non-filled and the people we are losing as two parts of the same problem, it is about addressing the costs of hiring people in that part of the job market.

Allen, do you think policymakers understand the value that the hospitality industry has?

My team have told me to say, “Yes, of course.” I am not sure that is true. Take the small business strategy. It is basic economics: the performance of a business is mostly defined by its sector. The second correlation is its geography. The third is the size of the business. Gibrat’s law applies. We saw an industrial strategy that included eight industrial sectors. You can argue about how you define them, but they represent somewhere between one-quarter and one-third of the economy. Maximally, you might get to 40% of the economy. You still have 60% of the economy unserved. The solution to that has apparently been an SME strategy, which will absolutely not do the job we need it to do. In an observed sense, no, they do not. I will spare you the lecture on why they should.

Stephen, do you think policy makers understand?

No.

Do you have different reasoning?

No. I will tell you why. I enjoy meetings, but I am sick to death of going to meetings day after day and of politicians—not including anybody in this room—nodding their head and then going away, ticking the box and saying, “We have met them.” Nothing gets done. Nothing gets done about it. Why do we still stay in the business? Again, Allen and I were talking about this earlier on. Why do we, on this panel, who are operating businesses, stay operating our businesses when we are making 1%, 2% or in many cases a loss? We are passionate about it. We love it. We love entertaining. Hospitality is there to host, to entertain people and to give them a good feeling. When that becomes laborious, it is just a waste of time. The other thing that I want to bring in here is around the mental health benefits that are created by employers, and nobody cares. Nobody cares. We are getting sandwiched. Governments are telling us what to do. Employees, many times, are telling us what they are entitled to, which we are not arguing with because we are told by Governments that we have to do it. However, we are in the middle. Nobody is helping us. That is what needs to change. We need to talk about hospitality more as a profession, not as just a stopgap for young people coming into the job market. We need to keep them there. It is professional and it can take you all around the world. It is a passport to the world. We need everybody to talk about how professional it is.

Lydia, you are nodding along. Why is hospitality not seen as a profession in the UK? In other countries that you go to, it is a career. In the UK, it is almost frowned upon in some quarters.

I have a lot to say on that, but this is probably a lot to do with the fact that it is labelled as unskilled and a lot to do with the pay, the reward, that people are given. We talk about the skills shortage. For me, it is more about skills retention. I retain a lot of staff, in terms of the industry average. If I lose them, it is because I have maxed out what I can pay them and it is not meaningful to them any more. They have been with me six, seven or eight years. They are really highly skilled chefs, but I cannot pay them any more so I lose them to other industries. That is what it is. With the minimum wage going up so much, they are now on barely any more than minimum wage. To a chef in their 30s who has been working in the industry since they were 13, it is a little bit insulting. As for not being valued, the answer is kind of in the question and the fact that we are having this conversation. If policymakers understood the unfair tax burden and the way that it works, we would not have the VAT model that we do. It is as simple as that.

I would just add a few points. There are two things that have been pointed to in recent years, within the last Budget mostly, to show that the Government were listening to hospitality. The first was the draught cut for beer duty, which was pitched as a penny off a pint, and the second was the commitment to reform business rates. It is very easy to say that that is the Government paying attention to hospitality and valuing it, especially pubs. We are very privileged that every MP champions their local pub. That is amazing. When the Government say, “We have given you a penny off a pint,” they have not accounted for the 21p that they have added in other costs, which means the price of a pint is going up. There is a disconnect between the overarching picture of the sector and a few sector-specific asks. The same is true for business rates, which I hope we get to speak about a bit more. The reform of business rates is incredibly welcome. The BBPA has been very vocal about our support for the lower multipliers. Even if the Government make the full 20p reduction, the full reduction that legislation allows, in the best-case scenario we are standing still from where we are right now. In not even the worst-case scenario, business rates are probably still going to go up because the revaluation is going to see higher business rates for businesses. I want to disconnect the rhetoric from the actual results on the ground. These conversations are always very welcome, but you have to look at the impact over the months and years after those decisions have been made.

Very briefly, from talking to pubs in my constituency, Warwick and Leamington, they would really welcome minimum pricing for alcohol. Stephen, in Scotland, how does it work for you?

In Scotland, we have a big issue with alcohol. Some 80% to 85% of all the alcohol sold in Scotland is sold in off sales, not in pubs, restaurants or hotels. Minimum unit pricing for the on trade means nothing. It was brought from 50p to 65p. A lot of people in Scotland and the general public think that minimum unit pricing is a tax that goes to Government. It is not. It stays with the retailer. For the on trade, it will not affect us until it gets to about £1.40 or £1.50 a unit. Is it having an impact on the sale of alcohol in off sales? I do not think it is. If people want alcohol, they will get it. Wales has brought it in as well. What is the benefit of it? It is making profits for big retailers such as supermarkets. There was an argument at the start about it. The retailers and the big supermarket chains would welcome it going up even further because they keep the profits.

Morgan, would you welcome something along those lines?

Yes. I presume that the pubs are asking for that because they anticipate that it would drive footfall back into pubs. If people wanted a beer, they would come to a pub. The reason why beer is so much more expensive in a pub is not because of the price of the alcohol. It is the fact that you have to employ people to serve it; you have to turn the lights on. It is all these things that we have been talking about. Even in the best-case scenario, there will never be a world where the price is going to be equivalent between a supermarket and a pub because of all those extraneous costs that a hospitality venue incurs. If you want to talk about tackling the cost of people going out, it is the cost of doing business. It is all those things we have been speaking about. Of course, the cost of raw goods is one of those, but it is by no means the most substantial by any stretch of the imagination.

The Government have the small business plan, which was mentioned briefly there. If you look at the hospitality offer within that, it has some quite interesting things about hospitality zones, fast tracking licences and things like that. Listening to what you are saying here today, it strikes me as though the Government are amputating your legs but offering you new shoes in the morning. Stephen, you said we need to act before it is too late. I might just come to you afterwards because this business plan does not apply in Scotland. Looking at that plan, what do you think of it? What changes would you make to make it more efficient and more helpful?

There were a few interesting points about licensing in particular, like you say. One of the issues with pubs and the hospitality sector in general is—I was listening to the session just before this—about creating that space where people are coming to the city centre to have a holistic experience. Maybe they are shopping; they are coming to a pub for a drink; they are having a meal. Hospitality is special, but you are not going to go to a pub that is in a supermarket car park. You need to have a space that is more holistic. That is one thing that should be tackled, if you are looking at the hospitality development zones in particular. Licensing is important. A lot of local licensing can be a bit restrictive. There is also a misconception. People say, “Pubs are closing at 9 pm because of their licence.” They are closing at 9 pm because they cannot afford to employ people to stay there or to keep the lights on. I keep going back to that issue about the overall cost of doing business. Regulation is a huge issue, undoubtedly, but the margins are so fine that you have to take those decisions where you can. I will add one final point on licensing. Unfortunately, there is a predisposition to paint hospitality, especially pubs, as the bad guy in the scenario. If you get noise complaints, even if the pub is pre-existing and has been there for many years, that can have a really detrimental impact on that pub’s ability to trade, especially if their licence is restricted in terms of their pub garden, how many tables they can have outside or how many people they can serve outside in particular. When every person drinking a pint counts, any restrictions on who you can serve and where really have an impact.

The licensing elements of the strategy are the bits that I liked. My colleague Kate, our chair, was involved in the sprint for that. In particular, having a national licensing policy framework will be good. We are all NIMBYs. NIMBY is an irregular verb. You are a NIMBY; I am simply concerned for my local community. A national policy framework will be a good thing. Equally, the agent of change proposals will help with that problem, where people buy a flat next to a pub and are then annoyed to find that there is a beer garden. It is more what is not in it. As I said, it is not about whether or not you are a small business. You just have to look at the credit behaviours of a set of businesses. The sector drives businesses’ success and failure rates far more than the size of a business. A small hotel, restaurant or bar has more in common with a large hotel, restaurant or bar than it does with a small accountancy firm. It is the wrong prism for policy and the wrong mechanism. This Committee will have been told this for 30 years, with various members. Pulling the SME lever to help specific sectors is not going to work. We have sectoral lenses on the eight industrial strategy sectors, which tells me that the Government know I am right; otherwise, we would just have a large business strategy. We are excluded from that. There are practical effects on, for example, skills and bringing people into the workforce. The eight industrial strategy sectors are going to have the flexibility that they need on the apprenticeship levy to train people in more modular ways. We will not. There is nothing on energy, which is useful for us. Fundamentally, it drives the asymmetric fiscal decisions we saw in the Budget last year. It is very positive on the licensing framework, but let us be clear: this is mistaken and misshapen policy.

We had a slight interruption. Can you just say the last sentence again, please?

It is mistaken and misshapen policy. I am not sure that adds much, but it is a nice turn of phrase.

We will make sure we got it down.

Lydia, do you agree with that? You are on the ground. Is this policy much help to you at all?

No, not particularly. I will mirror what Morgan said. We need to deal with the bigger problem, which is the cost of being open and, ultimately, the way that we are taxed. If you genuinely want to help this industry, that is the answer. Anything else, if I am honest, is lip service.

Stephen, finally, on the Scottish position, the Government here have a plan and, while it might be flawed, I am not convinced that the Scottish Government have any kind of plan other than to tax you into the ground. Would you agree with that?

Yes, probably. We already know that we are taxed heavier anyway.

It is quite remarkable that the Scottish Government got money through the Barnett formula to pass on rates relief and that money just disappeared into Edinburgh. We never saw it. That seems quite remarkable, does it not?

Not a penny. We had to struggle on. I often wonder how much Governments across the whole of the United Kingdom want to slice out of the cake. I will give you an example. In Scotland, 34p in every single pound that comes across the till goes on a tax of some kind. Whether that is to the UK Treasury, to Scotland or whatever, it is 34p in every pound. That is an important figure. We are left with 66p to do everything else. When you talk about licensing, we have really strict licensing laws in Scotland. They are different from England. We do not have happy hours, as they like to call it. Everything has to be 72 hours in Scotland. We are down in the borders. I am 15 minutes on the train to Carlisle. People can go and buy whatever they want down there. They can get three for one, two for one, whatever it is. We do not have that in Scotland. That relates to the bigger issue of alcohol in Scotland.

This goes back to my colleague’s point about minimum unit pricing. We are close to that border. There is no minimum unit pricing south of the border. There is north of the border. Are we getting to the point where it would pay you to do a bootleg run across the border, load up and come back over?

You see it every day of the week. You see white vans coming down the road to Asda in Carlisle or wherever it is and filling up for their clubs. We have seen it with DRS and the issues that we are going to have with the deposit return scheme in Scotland. We can get on to all of that and what is happening in Wales now as well. We need a good hospitality sector that is for everybody. It is not about handouts. Nobody wants handouts. I am fed up of going to Governments and asking for a handout at a Budget. We just want fairness. The key word here is “fairness”.

That is a very good note on which to draw this panel to a conclusion. Thank you very much for bearing with us as we ran over time. We very much wanted to make sure that we had the space to let you say what you wanted to say. As you can see from this Committee’s attempt to lever in the name of our favourite hospitality outlets in each of our constituencies, we share the passion that you have for this industry. You have really helped us make sure that we have the evidence to draw the right conclusions. Thank you very much indeed for the time that you have spared for this Committee today. That concludes this panel. That concludes this session.