286. Dan Neidle: Pubs don’t deserve a VAT cut

Summary

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The Rest Is Money – Episode 286: “Dan Neidle: Pubs Don’t Deserve a VAT Cut”

Release Date: June 10, 2026
Hosts: Robert Peston, Steph McGovern
Guest: Dan Neidle, Tax Policy Associates

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Episode Overview

In this episode, Robert Peston and Steph McGovern are joined by tax expert Dan Neidle to tackle the heated debate over VAT (Value Added Tax) cuts for pubs and restaurants—a policy supported by high-profile chefs and some politicians. Amid a backdrop of rising costs (minimum wage hikes, rising employer National Insurance, increased business rates), calls for a VAT reduction and preferential business rate treatment for hospitality are on the rise. The hosts and guest dissect these proposals, discussing their economic sense, fairness, long-term effects, and the broader issue of how best to support struggling high street businesses.

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Key Discussion Points & Insights

1. Why a VAT Cut for Hospitality Is a Bad Idea

• The Scale of the Proposal:

  • Dan Neidle emphasizes that cutting VAT to 10% for hospitality would cost £10 billion, questioning if this is the best use for such a sizable amount.
    • Quote: “Out of all the things we could do with £10 billion, which is what it would cost, this is one of the worst.” (04:29)

• Who Benefits from VAT Cuts?

  • Historical evidence suggests VAT cuts benefit producers more than consumers.
  • Example: When VAT was abolished on ebooks, there was no evidence of price decreases; the savings went to publishers.
    • Quote (Dan): “The evidence suggests that it’s the producer who gets it, not the consumer.” (05:05)

• Would Lower VAT Keep Businesses Alive?

  • Neidle argues targeted support would be more efficient, as broad VAT cuts primarily help larger chains rather than the small, struggling businesses they are meant to aid.
    • Quote (Dan): “Most of it would go to the really big guys… Why are we giving money to the Ritz?” (05:59)

• International Comparisons:

  • Robert Peston notes that Britain's VAT burden on hospitality is higher than in some European countries, but Dan argues for a simpler, broader VAT base with a lower rate—like Denmark or New Zealand—not more exemptions.
    • Quote (Dan): “We’re much better off having a simpler system with a low rate of VAT that applies to everything.” (08:17)

2. Problems with the UK’s VAT System

• Narrow VAT Base:

  • The UK applies VAT at 20% but exempts many items, creating complexity and inefficiency.
  • Neidle suggests abolishing exemptions (like for children’s clothes), using savings to help low-income families, and slightly reducing rates overall.
    • Quote (Dan): “If you look on the Harrods website, you will find an £8,000 girl’s gold jacket that is free from VAT. That is not a sensible use of our resources.” (10:15)

• VAT Thresholds and Small Business Growth:

  • Current threshold (£90,000) incentivizes businesses to remain small to avoid VAT, stunting growth.
  • Reducing the threshold and simplifying the system would be better for productivity.
    • Quote (Dan): “VAT incentivizes businesses to not grow, to keep their size below £90,000… The rational policy is to have a much smaller threshold.” (11:31)

3. Business Rates and Local Taxes for Pubs

• Economic Incidence of Taxes:

  • Most business rates cuts benefit landlords, not businesses renting the premises.
  • When business rates go down, rents go up; the reverse also holds. This is well evidenced, especially from a 1990 London study.
    • Quote (Dan): "If you have a business rate cut on pubs, what you're doing is a tax handout to landlords…" (13:44)

• Local Variations:

  • In London, up to 86% of a business rates cut flows to landlords; elsewhere it's 45%+. Thus, permanent business rate cuts mainly benefit property owners.

• Temporary vs. Permanent Cuts:

  • Temporary business rate holidays can help tenants, but permanent cuts will see benefits shift to landlords through higher rents.
    • Quote (Dan): “A one-year business rate holiday for pubs, for example, is not going to go through into rents, but a permanent one will.” (19:33)

• Better Alternatives:

  • More frequent, accurate business rates revaluations would help tenants, ensuring rates reflect current property values and not outdated ones.

4. Political Popularity and Small Business Policy

• Politicians’ Special Pleading for Hospitality:

  • Every politician, it seems, wants to support pubs, assuming public affection translates to votes. However, such policies can create inefficiency.
    • Quote (Robert): “Every politician loves pubs, right?... I’ve never actually seen empirical evidence for this.” (12:44)

• France’s Example of Small Business Disincentives:

  • Citing the work of John Van Reenen, the hosts discuss how well-intentioned policies (thresholds, special benefits) in France led to a glut of very small firms and discouraged growth, harming overall productivity.
    • Quote (Dan): “The French system is mad… Drawing lines around small businesses is always attractive for politicians, but it’s a very dangerous thing.” (21:21)

5. Cost Pressures Facing Small Businesses

• Steph’s Lived Experience:

  • Steph details how her own business faces a 26% increase in costs due to policy-driven rises in NICs, minimum wage, business rates, energy and rent.
    • Quote (Steph): "Costs in our business have gone up about 26%...we are now considering closing some of our bigger units, even though they're profit making." (23:47)

• What Really Hurts Small Businesses?:

  • Dan observes that in hospitality, the real struggles are due to minimum wage and National Insurance hikes, not VAT or business rates.
    • Quote (Dan): "If people are complaining about two things and saying two things are the problem, maybe politicians should be thinking about those two things and not about other things." (24:37)

6. Broader Economic Philosophy: Support vs. Propping Up

• Peston’s Skepticism on Special Protection:

  • Robert Peston expresses concern about an economy too focused on propping up unproductive businesses—leading to low growth and stagnation.
    • Quote (Robert): “An economy that thinks that all businesses have to be propped up under all circumstances becomes a low growth, low productivity, low wage economy.” (27:02)

• Big Picture:

  • Both Robert and Dan advocate level playing fields, not sectoral special treatment, and warn against policies that discourage growth and efficiency.

• Dan’s Neutrality:

  • Neidle underscores that while hospitality is suffering, so are social care, retail, the arts, and leisure; policymakers must avoid favoring efficient lobbies and focus on reforming damaging policies (like employer National Insurance increases).
    • Quote (Dan): “Governments need to say no. They need to think less about handing out favors to their favorite sectors and more about not doing stuff that damages those sectors.” (29:19)

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Notable Quotes and Memorable Moments

• On the Inefficiency of VAT Cuts:

  • Dan Neidle: “Most of the benefit from the VAT zero rate on food doesn't go to the poor... most goes to people spending a lot on food, and that's people who are richer.” (10:15)

• On Business Rate Incidence:

  • Dan Neidle: “If you have a business rate cut on pubs, what you're doing is a tax handout to landlords and in some cases that will be almost all of the cut, in some cases maybe half the cut.” (14:50)

• On Small Business Romanticism:

  • Robert Peston: “Broadly, there should be a level playing field so that there is no disincentive to grow. And secondly, we should not be protecting businesses that cannot be competitive.” (30:34)

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Timestamps for Major Segments

| Timestamp | Segment | |:-------------:|:------------------------------------------------------| | 02:53 | Introduction of Dan Neidle and VAT debate setup | | 04:29 | Dan Neidle: “A VAT cut is a terrible idea” | | 05:59 | Who benefits from VAT cuts? Discussion | | 08:17 | Should UK copy EU’s lower VAT on hospitality? | | 10:15 | Discussion on broadening the VAT base | | 11:31 | The growth disincentive created by VAT thresholds | | 13:44 | Who actually benefits from business rate cuts? | | 17:48 | Can you prevent landlords from raising rent? | | 19:33 | Temporary vs. permanent business rate cuts | | 21:13 | France’s small business policy and productivity | | 23:47 | Steph on real-world challenges running a small business| | 24:37 | Where cost pressures on hospitality really come from | | 27:02 | Dangers of excessive business protection | | 29:19 | Why targeted support is fairer than sector handouts |

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Conclusion

Dan Neidle offers a compelling, evidence-based critique of sector-specific VAT and business rates relief, especially for pubs and restaurants. Across the discussion, the consensus is that such policies mainly benefit large chains and landlords, fail to pass on savings to consumers, and create economic inefficiencies. Instead of costly, scattergun relief, the panel recommends simpler, broader tax systems—while also recognizing the acute pressures on small businesses from payroll and policy-driven cost hikes. The episode is an insightful guide for anyone seeking to understand the real impact of tax policy on the high street and the dangers of well-intentioned, but economically dubious, favorites for popular sectors.

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Transcript

[Dan Needle]

£10 billion. That is an awful lot of money.

[Robert Peston]

Sorry, £10 billion just for restaurants and hospitality. Good God.

[Dan Needle]

VAT is a really big tax. Hospitality is a pretty large, large part of the economy.

[Steph McGovern]

You know, people like Andy Burnham talking about what he would do if he came into power cutting business rates for pubs. And those in the hospitality sector saying that they want a cut on VAT for pubs and restaurants to 10%.

[Dan Needle]

It's a terrible idea. And out of all the things we could do with £10 billion, which is what it would cost, this is one of the worst.

[Robert Peston]

So talk us through why the likes of Tom Kerridge are wrong that cutting VAT would be the right thing to do.

[Steph McGovern]

We're delighted to say that this year, the rest is money is powered by Octopus Energy. So we're joined by its founder and CEO, Greg Jackson. Hiya, Greg. You traveled with Prime Minister Keir Starmer on his latest trip to China. Why?

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[Steph McGovern]

Greg, thank you very much. Now, on with today's episode.

[Robert Peston]

So good, so good, so good.

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[Steph McGovern]

And me, Steph McGovern. And back with us is Dan Needle from Tax Policy Associates. Now, Dan, obviously a friend of the show, we love getting him on because he knows absolutely everything there is to know when it comes to tax. And it is really in the news at the minute. We've got chefs calling for cutting VAT for pubs and restaurants to 10%. And we've got Andy Burnham out talking about tax, haven't we, Robert? Too?

[Robert Peston]

We have Andy Burnham in Makerfield trying to be their mp, also trying to be our next Prime Minister. And one of the policies that he hopes will make him more popular is he says he wants to help pubs by cutting the council tax they pay. So does that make any sense at all? How should we help struggling smaller businesses? So here's the. Here's our conversation with a guy who knows everything about that kind of thing, Dan Needle.

[Steph McGovern]

Dan, good to have you back. We want to jump straight into talking about the kind of the noise around VAT at the moment and the pressure that's putting on businesses along with, you know, obviously there's the national Insurance contributions going up for employers, there's the fact minimum wages gone up. There's lots of talk around business rates as well. So lots of businesses are really feeling the pressure. And we're hearing chefs and those in the hospitality sector saying that they want a cut for V it on VAT for pubs and restaurants to 10%. So, first of all, what do you think about this? Is that something that you think, Dan, would make a difference, this. This rate cut to the hospitality sector and, you know, would it be fair?

[Dan Needle]

I guess it's a terrible idea. So it's a really bad idea. And out of all the things we could do with £10 billion, which is what it would cost, this is one of the worst.

[Robert Peston]

So talk us through why the likes of Tom Kerridge are wrong, that cutting VAT would be the right thing to do.

[Dan Needle]

There are so many reasons this is a bad idea. It's quite hard for me to get them out coherently. But I have a go. First thing is the cost. 10 billion pounds. That is an awful lot of money.

[Robert Peston]

Hang on, sorry. £10 billion just for restoratives and hospitality, that's the cost of that?

[Dan Needle]

Yes, 10 billion. It's a lot of money. And if you were the Chancellor and a magic pixie appeared and gave you £10 billion, would you use it for this? I think you probably wouldn't. It's the benefit of it, who gets it. So whenever you have a VAT cut in one service, the evidence suggests that it's the producer who gets who gets it, not the consumer. When there was a VAT was abolished on ebooks, that followed a long campaign by the publishing industry who promised it would reduce prices. It didn't. We couldn't see any change in prices at all. All the benefit went to people selling ebooks. Same would happen here. So, yes, that would help small, struggling family restaurants that are currently having difficulty. But most of the money wouldn't go there. Most of it would go to the really big guys, chain restaurants, large, hot. Why are we giving money to the Ritz?

[Steph McGovern]

So basically what you're saying is this price cut, which is essentially what they're arguing for, wouldn't actually be a price cut for consumers, it would just be a profit gain in terms of an increase in margins for the actual restauranteurs.

[Dan Needle]

I mean, I think that's intuitive. If you go to the man or woman in the street and say, hey, we're going to cut VAT on a product, do you think the person selling the product is going to pass on that benefit or are they going to keep it to themselves? I think most people's intuition would be, well, of course they'll keep it to themselves. And the evidence across Europe studying over 100 VAT cuts has shown that's what happens.

[Steph McGovern]

But these are restaurants that are struggling, a lot of them. So how would you then surely they'll want to bring down their prices in order to get more people through the doors. And then in the longer term, that's tax potential, tax revenues going up because they'll be making more profit and more people will be coming into the business.

[Dan Needle]

You might think so, but the evidence suggests that in the main, in fact, almost entirely that doesn't happen, that the difference is kept as additional profit.

[Robert Peston]

So can I just, though, make the counter argument that some would make, which is that many of these businesses are either going bust or quite close to going bust. And rebuilding their margins would keep them alive, would preserve employment and potentially would increase employment. This is again, obviously an argument that you don't find compelling.

[Dan Needle]

Well, it's a very inefficient way to do it. If you wanted something targeted at struggling small businesses, you could think about ways of doing that rather than a 10 billion VAT cut, most of which will not be going to those guys, but will go to large chains.

[Robert Peston]

And can I just ask you another question which has gained quite a lot of attention, which is, does it matter that the costs on British restaurants and in particular from VAT are significantly higher than in other countries? Because it is the case. I mean, I have actually sort of double checked that this is the case. The indirect cost of VAT in this country is in some cases double the equivalent tax on other European countries and indeed in America. You take the view that that doesn't matter?

[Dan Needle]

Well, I take the opposite view, which is that it's a bad feature of VAT systems to tax different things differently. And when people laugh at disputes over Jaffa cakes, disputes over whether rotisserie chicken is taxed or not, it's because we have a complicated VAT system which taxes lots of things differently. We're much better off having simpler system with a low rate of VAT that applies to everything. And there are countries like Denmark, like New Zealand that do that. We should be copying them, not countries like France that have a whole bunch of special deals to suit special interests, including, yes, hospitality.

[Steph McGovern]

So if you look then at those countries you mentioned where they do have this kind of flat rate VAT across all, all products and all services and things is what's their income from it then? Do the, the governments of these countries actually make a decent, you know, revenue from it then?

[Dan Needle]

Yeah, I mean the, the total amount of GDP raised from VAT is, I mean it varies. But the base, the stuff which is taxed is just as important as the rate in this country. We have a kind of average rate at 20%, but our base is incredibly narrow, one of the narrowest in the world. We're much better off having a lower rate and a wider base. None of which is going to help restaurants. But the problem with restaurants isn't vat. VAT has always, well, for a very long time been the same rate. That's not causing the problem. We need to look at what the problems are and solve those problems rather than reaching the VAT as some kind of cure or solution because it's a really bad solution for problems caused by other things.

[Robert Peston]

And just to be clear, if we had the broadest base, so we would include food we buy in shops, for example, we might include children's clothes, we might include actual books, as it were, that you think would lead to a much more competitive sort of industries all round.

[Dan Needle]

It would be simpler for everybody, it would be much cheaper for businesses to apply, it'd be cheaper for government to collect children's clothes, for example. If you look on the Harrods website, you will find an 8,000 pound girls gold jacket that is free from VAT. Thanks to us, that is not a sensible use of our resources. Much better would be to abolish the VAT exemption for children's clothes, use some of the savings to increase child benefits that the average family is not worse off, and book the savings to slightly reduce the rate. Now, children's clothes are fairly small element, food, much bigger element. But again, what we should be doing is we should be equalising the rate with everything else. We should be dropping the rate and we should be protecting people on lower incomes so they don't lose out. Because most of the benefit from the VAT zero rate on food doesn't go to the poor, most goes to people spending a lot on food, and that's people who are richer.

[Robert Peston]

I think you also believe in something that's going to upset people in food trucks who actually some of them may not cross the VAT threshold. You think the VAT threshold should be reduced very significantly as well, don't you, so that more businesses pay vat.

[Dan Needle]

There is a big problem with VAT and its effect on business, which is that if you do a chart of the number of businesses for each sort of size of business, each amount of turnover the businesses do, what you'd expect to find is lots of tiny businesses and then fewer and fewer numbers, nice smooth curve till you get to a small number of very large businesses. That's what you'd expect. What you actually see is the curve goes down until it gets to the VAT registration threshold, then there is a huge bump up, a number of additional people deliberately holding their revenue below what's now 90,000 and then a cliff edge and very, very few businesses beyond that. So VAT incentivizes businesses to not grow, to keep their size below 90,000. Now, some people say, oh, well, you should increase the threshold. Yes, madness. It's bad enough to stop small businesses growing, to stop larger businesses growing is even more economically damaging. So the rational policy there is to have a much smaller threshold, which most of the rest of the world does.

[Steph McGovern]

Yes, because you also get those businesses that do everything by the book up to the VAT threshold and then after that, everything's in CA cash. So that's where, you know, the revenue, tax revenue potential is, is being lost as well.

[Robert Peston]

So while we're on hospitality, one of the things that is very striking is everybody, every politician loves pubs, right? For whatever reason, pretty much every politician I've ever come across thinks, if you help pubs, that's a vote winner. I've never actually seen empirical evidence for this. But they definitely, it's definitely something they all passionately believe and unsurprisingly therefore, Adi Burnham wandering around Makerfield where he wants to the next MP and where he's campaigning to be Prime Minister of the uk, he has said that were he to be Prime Minister he would cut business rates for pubs. Which I suppose raises two questions for me, which is in general, should pubs be a special case? But secondly, you know, what is your view about essentially cutting council tax as a route to help any sector of business, including pubs?

[Dan Needle]

There's something weird about business rates and the weirdness is this. There's a difference between the person who pays it and the person who economically is paying it. And in the tax nerd world you call that economic incidents. We're all familiar with one example. So vat, who pays VAT legally? And the answer is the shop pays vat. If I go to buy a chocolate bar, there's VAT on the chocolate bar. Who is cutting the check to hmrc? Obviously not me, it's the shop who is bearing the cost of the vat. Well, you know, that's me. Obviously if VAT went up by 20% tomorrow, the shop is not eating that, I, the consumer am eating that. Sorry. So we say the economic incidence of a rise in VAT falls on consumers. Interestingly, the opposite isn't the case. If you have a VAT car, these shops tend to snaffle the profit, but that's a different discussion. So, okay, business rates, who pays the business rates? The answer is the person occupying the property, the pub. But who economically is actually paying that? And the answer turns out to be, and the evidence for this is super strong, mostly it's the landlord in the long term. In other words, if you increase business rates, then the amount they can charge in rent goes down and if you cut business rates, the amount they can charge in rent goes up. And there was a, the biggest study of this was in 1990 when there was some reform of what were then non domestic rates. And for every one pound increase in rates, rental values fell in London by 86 pence, meaning that 86% of business rates in London go through to landlords. Now in other areas it's less. Outside the Southeast it can be only 45%. But either way, if you have a business rate cut on pubs, what you're doing is a tax handout to landlords and in some cases that will be almost all of the cut, in some cases maybe half the cut.

[Steph McGovern]

But I mean obviously you're saying the Big chunk of the evidence is from London. For places outside of London where shops are empty, where, you know, areas are really struggling on their high streets and things. Do you really think a landlord is going to put up the rent equivalent to what the business rates go down by? Because isn't it in the landlord's interest to, to fill those units and actually have some income coming in? But if it doesn't change the how much the costs are for a business, they're not going to be able to sustain the costs. Or it's a lose lose then for the landlords, isn't it?

[Dan Needle]

No, I mean right now you've got a tenant who's paying a hundred pounds and the tenant is also paying business rates of 10. If you change it so that the tenant is paying business rates of 5, well then they can afford to pay more rent. The market shifts and that happens because the supply of commercial property is what economists describe as inelastic lands. Fixed planning's restricted. Landlords can't easily move the building somewhere else. But on the other hand, tenants demand is elastic. They can do other things. They can relocate, they can close, they can move online, they can bargain more. So tenants, when they're negotiating rent and their power, such as they have to demand and set rent is driven by the total cost of occupying it and that means rates and rent. So that's a theory, but the evidence has shown that, and that's certainly outside London as well as inside London, just to a lesser extent. Ultimately it flows through to landlords. And this is not some esoteric secret, this is really well known. Government knows it, ifs know it, the treasury certainly know it. And so it's really sad to see politicians who either don't know or are pretending not to know that business rates go through to landlords. And if you spend millions of pounds on a cutting business rates, that is mostly a handout to landlords.

[Steph McGovern]

But that just feels like deeply unfair. Can't you bring in a rule which says you can't. Landlords can't pull up their rent if business rates come down. Like can't you legislate for that? For example, one of the units I've got up here, we have, our business rates have gone up, up quite dramatically with the changes. If that, if they came down and then the landlord said we're going to put the rent up, we'll go bus stuff you, we'll move somewhere else or we'd, or we our business just wouldn't be able to make money.

[Dan Needle]

But it's never that transparent. Is it because you're, you're, you've probably got upward only rent reviews in your contract, the rent would go up anyway. You're not going to know how much it would have gone up if there hadn't been a change in business rates. It's all unenforceable. But you're pausing for a second. Simply abolishing business rates for pubs is a really bad idea. You're giving money to landlords. Don't do it. But there are other features of business rates that are problematic to tenants. The biggest one is that the market adjusts quickly, but business rates adjustment is really slow. And so if your business rates go up overnight, which often happens, that's not reducing your rent.

[Robert Peston]

One of the things that is quite striking is that governments have cut business rates to help sectors, but they have tend to make it, tend to have made it explicit that they were temporary reductions, presumably to prevent the landlords from, you know, either depending on your point of view rapaciously or sensibly, you know, essentially, you know, adjusting the rent in their favor, as it were. And so I assume that what you assume you're not opposed to temporary support in a crisis via the business rate system, your concern would be about permanent cuts in business rates.

[Dan Needle]

Yeah, a one year business rate holiday for pubs, for example, is not going to go through into rents, but a permanent one will. There are better things that could be done that would actually help, like having more regular reviews of business rates. So you don't have this problem of business rates going up when the actual economic value of the property has fallen just because of the time lag between the valuation and the payment.

[Robert Peston]

So one of the things I was very struck by, there was quite a famous review by a bunch of economists, including John Van Reinen, who was one of this Chancellor's early advisors of productivity, particularly productivity in France. This was about 10 years ago. And one of the things that they showed is the point that you are actually making about VAT and the fact that when you get these cliff edges of taxes going up above a particular threshold, you create this deterrent for businesses to grow. So in France there's a whole raft of benefits for being a small business, which means that they have an astonishing number of small businesses below a certain threshold and not as many, perhaps bigger businesses as would be good for the productivity of the country. And so these, you know, so when you provide special help for small businesses, you've really got to be very careful that you're not creating disincentives to grow and become more Productive and better employers.

[Dan Needle]

Yeah. I mean the French system is mad. Anyone listening? If you Google John Van Reenen. R E E N A N En.

[Robert Peston]

It's en at the end.

[Dan Needle]

En. Yeah. And French firm chart. You will see this most astonishing chart showing how you have a large number of French firms up to 50 employees. And after that the numbers just plummet because there are so many French rules that complicate stroke, punish the lives of businesses with 50 employees. So drawing lines around small businesses is always a very. Is a very attractive thing for politicians to do. But it's a very dangerous thing and it can do quite serious damage.

[Steph McGovern]

Dan, I'm going to ask you to sit tight for a couple of minutes while we go to a quick break.

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[Steph McGovern]

So as a person with a small business, can I just ask then if you. So as things stand, the costs in our business have gone up about 26%. When you look at all the different elements of employer national insurance contributions. Minimum wage because rises because we employ lots of people who are young with business rates with Rents going up with energy and everything else. It, it means that things are a lot tougher and the margins are a lot smaller and we are now considering closing some of our bigger units, even though they're profit making. So how do you help? And that's going to mean potentially jobs being lost there. So how, how can you help small businesses at this point and not, and not leave business mine that are making money from deciding to bail from it all because it's just not worth it anymore?

[Dan Needle]

I live in Norfolk and hospitality is, I don't know about the major, but a very, very major employer here. And I talk to local businesses and people that run them and the two biggest complaints are the rise in minimum wage and the rise in employer national insurance. And seems to me if people are complaining about two things and saying two things are the problem, maybe politicians should be thinking about those two two things and not about other things. I can see why Andy Burnham maybe doesn't want to, but maybe you should.

[Robert Peston]

I mean, I've got a sort of different sort of concern, which is more of a long term concern. I mean, my view has always been that it's a really bad idea to set up a business to take advantage of tax breaks. And obviously tax and cost levels make businesses uncompetitive in a global market above a certain level. But I've broadly taken the view that taxes should not be fundamental to your decision about essentially whether to create a business. You obviously, as I say, need to have a government that keeps costs at a reasonable level. But special tax breaks I'm just inherently anxious about, and I'm particularly anxious about a Britain whose economy really did change Fairly fundamentally in 2007, 2008, after the financial crisis. Before that, I would say that we'd had about 20 years of a sort of ideology, which I think is the right kind of ideology, which is that if businesses run into difficulties, you create a sort of administration bankruptcy system that smooths the release of and allows those resources to go somewhere else to create new businesses. And equally, when people leave their jobs, you need a retraining system and a welfare system that basically helps those people into new employment and minimizes the very significant social costs that arise when a business goes bust. But I do fundamentally believe that an economy that thinks that all businesses have to be propped up under all circumstances eventually, and I think we have moved more in that direction, becomes a low growth, low productivity, low wage economy. And I do think actually broadly part of the problem that we've had since 2007, 2008, is not, I mean people are going to scream at me I imagine when they hear this. But I think not enough businesses have gone bust since then and we would be in a better place if more businesses had gone bust and more of the talent from those businesses and more of the capital from those businesses had been redeployed to more productive businesses. So I immediately slightly recoil when I hear politicians making special pleading for particular sectors. It's different from saying we need support for growing new sectors. Of course in a global competition you want to make sure that you're providing scale up finance to businesses that are going to be world beaters. And you can provably see that these have the potential to be world leading, highly productive firms. But propping up businesses that have over a period of years failed to increase their productivity and indeed have been going in the opposite direction. I just think that is the way to penury as an economy.

[Steph McGovern]

No thoughts Dan?

[Dan Needle]

Yeah, I'm not an economist, I'm a tax guy. But when I speak to economists I'm always struck by the gulf between what the economists say and what the politicians say. The politicians will say we need to support small business. Small business needs to be the priority the economy. Economists say small business is less efficient, less productive, doesn't drive growth. We should not be supporting small business. We should be having a level playing field.

[Steph McGovern]

And then all those people out there who are absolutely grafting, who are you know, doing 12, 14, 16 hour days to run their businesses which eventually might become bigger ones but you've all got to start somewhere. What do they just give up? Like you'll lose all the high streets again would be just become homogenized. You'd lose all of the, you know, the independent brilliant shops. The people around here run the, the gift shop. What do we just say to them? Give up?

[Dan Needle]

I'm not going to take side, I'm not going to take sides on that and I don't have the expertise to judge it. But I will say this, that you know, hospitality is under pressure, demanding a VAT car. They're not the only people under pressure. Social care.

[Steph McGovern]

That's my point.

[Dan Needle]

Everyone is retail, arts, leisure. Yeah, everyone's under pressure once when we start handing out VAT cuts, business rate cuts to someone because they have attractive lobbyists who are able to make powerful arguments and shoot nice videos is where's it going to stop. So governments need to say no. They need to think less about handing out favors to their favorite sectors and more about not doing stuff that damages those sectors and the tax rise in employers national insurance was seen at the time. In fact, before it happened, I said it would be the worst possible tax increase. I didn't think the government would be crazy enough to do it. Obviously I was wrong. But it's well known that employer national insurance increases damage low paid workers because it cuts jobs and it damages higher paid workers because it cuts their income. In the long run, the pain is not suffered by business in the long run, the pain is suffered by workers in the short run. You have dislocation and the kind of effects we're seeing now. So it was a very bad policy and it should be reversed. But that would require tax rises somewhere else and I don't expect Andy Burnham wants to do that before I get

[Robert Peston]

hatebub as a result of step characterization of my parent. Unbelievable insensitivity to the needs of small high street businesses. That is not my position. My position is broadly there should be a level playing field so that there is no disincentive to grow. And secondly, we should not be protecting businesses that cannot be competitive. Right. The business is going bust because it's desperately inefficient right then. And there have been plenty of examples in recent years of the government propping up businesses and they frankly never thrive. And that is throwing good money after bad. And that is what I'm opposed. That is what I'm opposed to. We've agreed many, many, many times on this podcast that putting up employers national insurance was a ridiculous thing to do if you wanted to create employment and promote investment. And of course that's my position. Position.

[Steph McGovern]

My point is you're right, of course. Businesses have got to survive on their own. They've got to be able to, you know, be product productive, to be efficient and everything else have got to be agile and all of that. My beef is that all of these things, all of these tax rises and cost increases happened at the same time. So suddenly within the space of a few months, everything went up in price. And a lot of that was policy driven. Not just energy, you know, energy costs or raw material cost, you know, things like that. It was policy driven decisions which suddenly ramped up everyone's costs. And it is unfair to expect businesses to just be able to shoulder all that and stay as productive and as efficient and as everything else. And that that was my point is it just feels that we as businesses were told when then 40 billion tax rises came in, don't worry guys, you'll just be hit with this once. And it isn't. It's just an endless stream of costs going up, and that is very high, hard for all those business owners out there to shoulder.