Budget 2015: Mixed news for the hospitality industry

By Sophie Witts contact

- Last updated on GMT

The budget brought good news for pubs, but failed to mention a cut in Tourism VAT
The budget brought good news for pubs, but failed to mention a cut in Tourism VAT

Related tags: Cut tourism vat, Hospitality industry, Pint, Minimum wage

The 2015 budget brought good news for pubs across the UK, with a reduction in duty on beer, cider and spirits, but failed to mention a cut in Tourism VAT.

In a budget designed to ‘get Britain walking tall again’, the Chancellor cut a penny off the price of a pint of beer for the third year in a row.

“I am cutting cider duty by two per cent to support our producers in the West Country and elsewhere,” George Osborne told House of Commons this afternoon (18 March).

“And to back one of the UK’s biggest exports, the duty on Scotch whisky and other spirits will be cut by two per cent as well. Wine duty will be frozen. More pubs saved, jobs created, families supported, and a penny off a pint for the third year in a row.”

The changes follow calls from the British Beer & Pub Association (BBPA) for a third duty cut​, after the previous reductions saw a rise in beer sales following years of decline, and created 16,000 new jobs.

The reduction in tax on spirits partially meets recommendations made by the Wine and Spirit Trade Association’s (WSTA) ‘Drop the Duty’ campaign​, which has argued that a two per cent reduction in duty could increase the wine and spirit industry’s contribution to the economy by £3.9bn.

Boost for beer

Beer tax is now ten pence lower than it would have been under the beer duty escalator, abolished by Osborne in 2013.

The Chancellor was hailed as a ‘Hat Trick Hero’ by The British Beer & Pub Association.

“His third, successive beer tax cut shows he has listened to consumers, publicans and brewers. It will boost employment by 3,800 this year alone and attract new capital investment. It will put 180 million pounds in the pockets of beer drinkers and pubgoers,” said BBPA chief executive Brigid Simmonds.

Wine and spirits

The WSTA welcomed the reduction in spirits tax, but were disappointed by the wine duty freeze.

“We are delighted that the Government has listened to consumers and taken action to address the UK’s excessive spirit duty rates. This small drop in duty will result in a big cheer for the UK’s 24m spirit consumers,” said Miles Beale, WSTA chief executive.

“We campaigned for a cut in duty across all products and are disappointed that the UK’s wine consumers did not receive a duty cut too. Freezing wine duty is an improvement, and a first step towards supporting wine businesses that are looking to invest in the UK, create jobs and back British pubs.”

Minimum Wage

Osborne stated that National Minimum Wage was on course to rise to over £8 by the end of the decade, following the government's plans to increase the hourly rate to £6.70 by October 2015​.

The pledge matches proposals outlined by Labour in 2014, which were welcomed by Trade Union's but criticised by UK business groups, who said the rise could result in smaller firms employing less staff.

“Raising wages in this way would put a serious strain on businesses, particularly hard-pressed smaller firms with tight margins,” said Katja Hall, CBI deputy director.

“Instead politicians should address how people move on in their careers, through training and better skills, helping them move to higher paying roles over time.”

Business rates

The Chancellor also outlined plans to abolish National Insurance tax for employing under 21’s this April, extending it to the employment of apprentices in April 2016.

“The scrapping of NI contributions for apprentices will help to further encourage the industry to assist the government in reducing the level of unemployment amongst young 16-24 yr olds, which today stands at over 743,000," said Keith Knowles, chairman of Perception Pubs & Bar Careers Group.

"This move will enable many more companies, including the smaller multiple operators and independents to really get behind this scheme which brings young people into valuable long-term careers. I encourage companies to pass the savings on and invest them back into apprenticeships pay.”  

Corporation tax will be cut 20 per cent, and small business rate relief and help for the high street will both be extended.

Oil Prices

There was hopeful news for the hospitality industry in Aberdeen, where hotels have felt the knock on effects of the troubled North Sea oil and gas sector​.

Osborne pledged £1.3bn to tackle of the ‘pressing danger to future’ of the industry, as well as introducing a tax allowance to stimulate business investment.

What was missing?

The Chancellor made no mention of a cut to Tourism VAT, despite a campaign supported by 118 MP's and the British Hospitality Association (BHA).

“The Chancellor has missed a great opportunity to give a much-needed break to British hoteliers, tourism attraction operators and holidaying families and boost the UK economy at the same time,” said Graham Wason, from Cut Tourism VAT.

“Cutting VAT on accommodation and attractions from 20 per cent to 5 per cent would have generated £3.9bn for the economy over the next 10 years and created 123,000 jobs.”

Former Tourism Minister John Penrose told BigHospitality in 2012​ that the hospitality industry would find it difficult to prove to the government why it was deserving of a VAT cut over other sectors.

Next Steps

The hospitality industry is set to continue lobbying the next parliament.

Cut Tourism VAT has said they will keep ‘vigorously’ pursuing a reduction in Tourism VAT, with a spokesman confident that ‘the recognition of the huge benefits of a Tourism VAT reduction continues to grow’.

The BBPA are hoping to persuade future MP’s that further action is needed to encourage consumers towards a lower-strength, British-made national drink.

The WSTA will continue to campaign for a reduction in wine duty, estimated to affect over 30m UK consumers.

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