Chancellor Alistair Darling has announced a reduction in VAT by 2.5 per cent in his pre-budget report, but is raising duty on alcohol and tobacco to off-set it.
In the report today, Darling said VAT would be cut from 2.5 per cent to 15 per cent for 13 months from December 1 to prompt consumer spending, but is set to raise the price of alcohol duty so it does not benefit from less VAT, meaning a mixed blessing for the hospitality industry.
The chancellor did offer hope to small businesses, however, with the news that he will be making £1bn available under the Small Business Finance Scheme, allowing firms to apply to borrow between £1k and £1m.
Neil Morgan, head of pubs and restaurants at Christie & Co, said: “On the one hand a number of measures were announced to support small businesses, such as a temporary increase in tax relief thresholds for empty properties and more money given to banks for the purpose of helping small firms. There was also the much trailed cut in VAT, which will hopefully generate consumer spending on the high street and transfer through to hotel stays, plus out-of-home eating and drinking out.
“However, on the other hand calls to reduce alcohol duty and the burden faced by the pub sector have been ignored, which in the current trading conditions the sector faces is another blow. The government has missed a trick by not giving a much needed helping hand to the licensed trade by charging extra duty on off sales.”
The Wine & Spirit Trade Association said raising alcohol duty was the "wrong tax rise at the wrong time".
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