Budget 2014: What can we expect from George Osborne?

By Luke Nicholls

- Last updated on GMT

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Chancellor George Osborne will make his 2014 Budget announcement at 12:30 GMT
Chancellor George Osborne will make his 2014 Budget announcement at 12:30 GMT
The Chancellor George Osborne will today present 'a Budget for a resilient economy'. But with further calls for another beer duty cut and a reduction in VAT, hospitality professionals will undoubtedly be among those watching most closely.

This time last year, Osborne referred to his announcement as ‘a Budget for hard-workers’;​ scrapping a planned 6p alcohol duty rise and getting rid of the controversial Beer Duty Escalator​ entirely.

And there were reasons to raise a glass for the rest of the hospitality industry - The ‘Employment Allowance’ was created, taking the first £2,000 of the employer National Insurance bill off of every company, and corporation tax on company profits was cut to 20 per cent.

But, as usual, there were some key issues that weren’t mentioned. While the pub sector breathed a sigh of relief, those selling wine and spirits were less happy at seeing 10p added to the price of a bottle of wine and 53p to the price of a litre bottle of spirits. A consumer survey released earlier this week​ revealed that the majority (97 per cent) of Brits believe alcohol is already too expensive, and they are likely to socialise at home rather than in bars and restaurants if prices increase further.

Moreover, a VAT cut - which hotels, restaurants and pubs have long been campaigning for - was avoided entirely in last year's Budget; as was business rates and a change in the Enterprise Investment Scheme (EIS) to specifically include hotels.

So, during what will undoubtedly be a day of big announcements and political grandstanding, will the Government budge on any of these key issues for the hospitality industry this year?

'Resilient economy'

One thing that hotels, restaurants and pubs can definitely expect to see being used in their business in the future is a new £1 coin. The new 12-sided coin, pictured in the tweet from @George_Osborne​ below, will be more secure, cutting down on millions of pounds worth of fraud. It is expected to be introduced in 2017.

Flying pigs

But when it comes to any announcements that would make a real difference to the hospitality industry - which already directly employs 2.7 million people and contributes around £40bn a year in tax revenues - Robin Sheppard, the chairman of Bespoke Hotels, certainly isn’t getting his hopes up.

“We hope the budget will see a reduction in VAT to all restaurant and hotel bills, ideally from 20 per cent to 8 per cent, but we are not holding our breath,” said Sheppard.

“We would welcome a change in the EIS regulations enabling EIS relief on investment into hotels where more than 20 per cent of revenue is derived from lodging income.  

“And finally, as two pigs fly past our window, we hope that a more permanent Minister for Tourism might be appointed for a governmental term rather than the usual one month at a time currently prevailing.”

VAT cut

Treasury minister David Gauke recently rejected calls for tourism VAT to be cut to 5 per cent,​ despite 28 MPs from all parties gathering to support the measure during a Commons debate.

Peter Johnson, the co-owner of Low Urpeth Farm B&B in County Durham, believes the benefits of such a cut are now clear for all to see. “This has been a particularly hard year for small accommodation providers,” he said.

“The VAT threshold is much too low; small businesses find it difficult to increase their turnover, costs only increase and providing quality food from local producers is a strong point in marketing but expensive. The VAT threshold should be increased.”

And it’s not just the individual hospitality businesses and MPs calling for these changes. The British Hospitality Association (BHA) last month wrote a letter to Osborne with three key recommendations for him to consider in the 2014 Budget.

BHA letter to George Osborne

  • Value-added tax​ - “We have, as you no put forward what the Prime Minister called ‘a very good argument’ for a reduction in VAT on visitor accommodation and attractions from 20 to 5 per cent,” reads the BHA’s letter. “The issue was the subject of a well-attended debate in Westminster Hall, at which MPs from all parties supported the case for a reduction.”
  • Enterprise Investment Allowance -​ “Smaller, family-owned businesses have found it difficult to secure bank finance, with the result that necessary refurbishment and improvement of hotels is being frustrated. We would urge you to use the 2014 Budget to reverse the 1998 decision to exclude hotels from the Enterprise Investment Scheme.
  • Annual Investment Allowance -​ “More generally, the need to refurbish post-recession and the fact that it is only now that hospitality businesses are starting to acquire funds for this purpose make it essential that the temporary increase in the Annual Investment Allowance to £250,000 is maintained for a further period beyond 2014 or put on a more regular and continuing basis.”

Beer duty cut

Another industry body hoping for positive changes is the British Beer & Pub Association (BBPA). While the Government implemented the highly-successful and historic cut in beer duty last year, new figures from the BBPA reveal that local pubs currently face an annual bill from the Government of over £122,000 each.

The BBPA’s chief executive Brigid Simmonds said: “Our new figures show the financial burden that excessive taxes and regulation place on pubs. This Government has shown that it understands the scale of the problem, but more action on taxation is needed, and action on beer duty in the Budget is the best place to start.”

What do we know?

So... Will any of these changes actually happen this year? Some accountants think that the 2014 will be relatively quiet because the Chancellor may wish to save his ammunition for next year's Budget, just before the next general election scheduled for May 2015.

One positive announcement we can expect will focus on National Insurance​, with Osborne set to scrap the employers’ part of the tax for staff under the age of 25. The move would be an extension of the exemption granted to under-21s in the Autumn Statement, due to come in next April. Business lobby groups say this could lift 1.5 million young workers out of the tax and therefore encourage more hiring.

But, as always, there will undoubtedly be something unexpected and eye-catching among the flurry of tax changes and revised spending policies. And hopefully Osborne will have taken heed of at least some the above.

Follow @BigHospitality for live coverage of the #Budget2014 from 12:30pm today (19 March). Tweet us your views and stay tuned to the website for a full news piece analysing the announcement.

Survey

Budget 2014: Were you happy with George Osborne's announcement?

  • YES - These new announcements will help my business over the coming year

    39%
  • NO - George Osborne missed a number of more important issues such as VAT

    61%

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