Treasury has 'no plans' to extend VAT cut but Sunak insists more support is coming

Speaking during Treasury Questions in the Commons yesterday (26 January), Rishi Sunak told Tory MPs that the cost of the new Coronavirus bailouts they are demanding could reach £30bn, and urged patience among backbenchers, stating that additional measures would be unveiled in the Budget on 3 March.

While details of what the next financial package may include remain thin on the ground, it would appear that presently the Treasury has no intentions to further extend the cut to 5% in VAT for hospitality, tourism and leisure, despite multiple calls from industry bodies including UKHospitality and the British Beer & Pub Association (BBPA) for the Chancellor to do so.

Addressing MPs, Financial Secretary to the Treasury Jesse Norman said the Government has 'no plans' to extend the cut to VAT for the sectors, despite the uncertainty over reopening.

“The relief comes at a significant cost, and while the government keeps taxes under review, it has no current plans to extend it further,” he said. 

Sunak announced the cut in VAT from 20% to 5% for parts of the hospitality sector during last year's Summer Statement.

While the tax break was originally only intended to last until January this year, it was subsequently extended until the end of March.

In the Commons yesterday, Sunak was faced with calls to approve a range of financial measures to help support businesses through the next phase of the pandemic.

Caroline Ansell, MP for Eastbourne, asked that the cut on VAT become permanent for the hospitality sector.

“I have long believed there was a compelling case for reducing VAT for the hospitality sector, and the pandemic-inspired cut helped to save the season between lockdowns,” she said.

While Ian Levy, the MP for Blyth Valley, asked that the Government consider 'reinstating' the Eat Out to Help Out scheme, or similar, once lockdown measures are lifted.

Sunak said he would review all economic support schemes at the Budget, saying: “I have put in place a series of measures but I have always said that we cannot protect or save every job and every business.”

Last week, the Confederation of British Industry (CBI) called on the Government to announce extensions to business support measures​​, in order to ensure the survival of firms until the economy reopens.

In a letter to the Chancellor, CBI director-general Tony Danker called for the furlough scheme, business rates holiday and deferral of VAT to be extended until at least the summer.

Danker also added that the announcement of such extensions will be needed in the next few weeks, ahead of the Budget, to help protect UK companies through the spring.