The UK’s pubs, hotels and restaurants are warning they face collapse under the weight of rising costs and what they describe as being “catastrophically overtaxed.”
Higher business rates, national insurance hikes, minimum wage increases and surging energy bills have left hospitality operators demanding urgent government intervention.
A new campaign led by celebrity chef Tom Kerridge and trade body UK Hospitality is calling on the government to cut VAT on hospitality from 20 to 10 per cent.
The lobby group, named VAT’s The Problem, claims the reduction would deliver “more vibrant high streets, more jobs for local people and more choice for the consumer.”
The campaign points out that only Denmark charges a higher VAT rate on hospitality than the UK, while France, Italy and Spain all levy a 10 per cent rate.
The petition has gathered more than 220,000 signatures, with over 50 cross-party MPs signing an early-day motion backing the policy.
Andy Burnham, the new MP for Makerfield and Prime Minister hopeful, has also called for VAT cuts on hospitality and pledged to lower business rates for pubs.
The Treasury costed the VAT cut at £10.5bn in February, stating that “tax breaks reduce the revenue available for vital public services and must represent real value for money for the taxpayer.”
However, independent think tank Tax Policy Associates argues the true cost is closer to £12bn, or potentially as high as £14bn, due to what it describes as the so-called Jaffa Cake effect.
The think tank warns that supermarkets and petrol forecourts would add seating and meal deals, while cinemas and sports venues would bundle tickets with food and drink to benefit from the tax break.
Dan Neidle, TPA’s founder, told City AM that UK Hospitality should have provided a full costing and suggested where savings could be found, adding there are “other things which could be good for growth and would be a lot less expensive than £12bn.”
Neidle’s analysis claims fast food giant McDonald’s would gain £432m from the cut, while pub owner Mitchells and Butlers and Premier Inn owner Whitbread (LON: WTB) would receive £246m and £238m respectively.
JD Wetherspoon (LON: JDW) chairman Tim Martin pushed back, telling City AM that “prices would inevitably fall,” arguing Neidle’s estimate of a £194m gain for Wetherspoon was “disingenuous.”
Leon Burton, who owns a string of pubs in the North West and the Midlands, said fast food firms should be excluded from any tax break, adding: “No hospitality operator is calling for that, we’re asking for support from our locals — not a Big Mac delivered in an Uber.”
Allen Simpson, UK Hospitality’s chief executive, told City AM: “Dan rightly points to the cost shock of the last budgets, but that came on top of a tax system that already saw the sector pay far more than its share.”
Simpson said the industry settled on a VAT cut after being told that reforms to national insurance and business rates “are too technically difficult to do, let alone all at once.”
Burton argued the comparison with supermarkets illustrated the unfairness clearly, saying: “Supermarkets have consistently come for hospitality. They sell a £10 premium gastro lasagne to heat at home and pay £0 VAT. In my pub, I’d pay £1.60 VAT for effectively doing the same.”
Martin echoed this view, claiming pubs have lost half their trade to supermarkets over the last 25 years, and that a VAT cut would help transfer food sales back from grocers who pay no equivalent tax.