VAT Club proposes staggered tax reduction

Rather than an immediate cut from 20% to 5%, founder Jacques Borel is now suggesting a starting point of 10%.

He said the VAT cut to 10% would result in 425,000 new jobs being created across the UK in the pub, restaurant, catering and visitor accommodation sectors over a three-year period, as a result of lower prices, improved food quality and service and better staff training leading to increased custom.

He said a later reduction to 5% would create a further 150,000 jobs (575,000 in total).

The campaign has produced a report: Growth and Jobs​ (The impact of lower VAT rates on the British pub, cafe, restaurant, catering and visitor accommodation sectors), which will be submitted to the Treasury in October.

Borel said the report would enable the campaign to engage further with politicians as well as prove the financial case to the Treasury.

'Viable solution'​

The report highlights that a VAT cut from 20% to 10% will lead to a surplus of £111m for the Treasury after three years.

Members of the campaign backing the VAT cut include JD Wetherspoon, Subway, Pizza Hut, Fuller’s, Monster Energy, Matthew Clark, Pret a Manger. TGI Friday and Heineken.

Borel said: “The high rates of VAT applying to pubs, restaurants, hotels and catering businesses in the UK is restraining the growth of the UK hospitality industry. Also the increase in the minimum wage will result in increased costs for businesses in the leisure and hospitality industries and a VAT cut would offer a viable solution to this.

“By lowering the rate of VAT in the sector, the government will reduce the unfair competition from supermarkets which benefit from the zero VAT rates that apply to the food it sells and which is used to subsidise the sale of alcoholic drinks.

“Our experience of VAT cuts in other EU countries shows that operators reduce their prices and customers respond to those lower prices with increased demand. The increased demand then results in new investment by the operators and as a result new jobs are created across the sector.

Beneficial​

“A VAT cut, in the first instance to 10%, will be a win-win situation for companies in the leisure and hospitality sectors, as well as the Government. It will result in hundreds of thousands of new jobs as well as increased investment from businesses.

“This will be particularly beneficial in providing opportunities for young, unskilled, disadvantaged and part-time workers.

“A VAT cut will provide the resources for companies to train tens of thousands of young people and provide an opportunity for them to progress up the career ladder into management positions. This is especially important for young people aged 18-24.

“The Government will also benefit from the creation of additional jobs and apprenticeships, lower social security payments and higher tax revenues.

“Providing more equal tax treatment for out-of-home meals and drinks served in a supervised and responsible environment will assist in encouraging healthy eating and drinking habits.”