Cut VAT to save £4.6bn and ‘level up’, industry bodies urge Government

UKHospitality, the British Beer and Pub Association (BBPA), the Tourism Alliance and the Association of Leading Visitor Attractions have published a study they say highlights the massive benefits that will accrue to the Government over a decade if the current reduced 12.5% level of VAT is retained.

At present the rate is set to revert back to its pre-pandemic level of 20% in April following a series of reductions made by the Treasury over past two years in response to the Coronavirus pandemic. 

The new report, commissioned jointly by the four bodies, found that a permanent rate of 12.5% will bring VAT on hospitality and attractions in line with the European average, adding that at 20% it is nearly double; and set off a 'virtuous cycle of industry investment and growth' to help ‘level up’ UK regions.

Headline results from the analysis of the impact of retaining VAT at 12.5%, rather than returning to 20%, for hospitality and tourism include creating 286,850 jobs over 10 years; generating £7.7bn of additional turnover over 10 years;delivering £4.6bn in net present value of fiscal gains to the HM Treasury over 10 years; and returning a positive gain on the Government’s investment in less than five years.

The industry bodies say the report constitutes a compelling case for making the reduced rate permanent and demonstrates the benefits such a long-term investment in UK PLC can bring.

This permanent cut in VAT is being asked for at a time when the hospitality and tourism sector is currently experiencing increased levels of debt and are facing increased costs across the board from energy through to raw materials, as well as supply chain difficulties and rising inflation.

“We must now reignite our industry with a long-term approach and vision to our sector recovery," says a spokesperson for the coalition of industry bodies.

“The report we publish today sets out the undeniable case for making permanent the 12.5% rate of VAT. The tourism and hospitality sectors can truly act as an engine for the UK’s recovery as we look beyond the pandemic.

“As we approach the point in April where the reduced rate comes to an end, we are united in calling on the Government to change course and cancel the planned increase. The economic and societal benefits of making this change would be enormous.”