This week, UKHospitality stepped up pressure on the Government to retain the current 12.5% VAT rate for hospitality long-term by launching its #VATsEnough campaign. We caught up with CEO Kate Nicholls to find out why she’s hopeful the Treasury will listen this time.
What do you think the issues are with the current way that VAT is charged?
No comment here as it’s the rate, rather than the system, with which we have an issue.
What are you calling for, how are you getting this message out there, and who are you working with to achieve this?
UKHospitality is calling on Chancellor Rishi Sunak to commit to introducing a permanent low rate of VAT for hospitality and tourism in his autumn Budget, on 27th October. It’s vital that the rate doesn’t return to 20%. We’ve launched a high-profile campaign – #VATsEnough – aimed at rallying UKHospitality members, employees MPs and the public behind our call to keep VAT lower for these vitally important sectors. #VATsEnough is an integrated multi-channel campaign encouraging sector businesses, employees and consumers to lobby their local MPs, urging them to lock VAT in at 12.5% permanently and show their support for hospitality and tourism businesses all across the UK.
In your mind, what’s a realistic outcome?
We believe there is a strong and compelling economic and social argument for retaining the 12.5% VAT rate brought in on 1st October, and evidencing why a return to 20% in April 2022 would be harmful to hospitality and tourism.
What are the main benefits this would achieve for the industry?
In the long-term, a low VAT rate will help keep prices more affordable for customers, safeguard jobs, promote greater choice on the high street, and foster investment by hospitality and tourism businesses. It will also help many of them rebuild their balance sheets after the terrible damage caused by the Covid-19 pandemic. Businesses are at a perilous stage of their recovery; costs are increasing and there are widespread operational challenges to deal with. A failure of the Government to act risks the future of cafes, takeaways, pubs, restaurants and myriad other venues and attractions across the country. A return to VAT’s pre-pandemic level would curtail investment, set back our tourism recovery and risk yet more job losses.
Have you any evidence of these benefits that a lower rate of VAT would bring?
The economic case for maintaining a reduced rate of VAT at 12.5% is as compelling for Government as it is for the sector. Our thorough analysis of key economic metrics highlights the benefits of a permanent reduction, as opposed to a return to 20%. It will create 125,00 full and part-time jobs – a full time equivalent of 85,000 jobs; the policy is revenue positive – generating money for the Government – after just four years and; the net cost of the policy is minimal at £213.4m per year in the early years.
Attempts in the past have failed, so what makes you think the Government will listen now?
We owe it to our members and to the wider hospitality industry to keep pressing Government on this. The results of a consumer survey we commissioned has given us extra impetus and a renewed conviction that a permanent low VAT rate will not only help businesses survive, but also thrive. The poll showed that 81% of UK adults believe hospitality is important for local jobs, 79% said it was a vital part of their community, while 70% believe central Government has a responsibility to support the sector’s recovery. Critically, a VAT hike back up to 20%, inevitably leading to price increases, would see half the adult population eating out less frequently, according to the survey.
What can the industry do to help push this message forward?
By engaging with MPs, the media and the public. Our #VATsEnough campaign will help us do that across a number of different channels, including a dedicated social media campaign. We’re also encouraging all hospitality businesses, their employees and customers to lobby their local MPs. More details can be found via the #VATsEnough campaign website.
How important is it for the industry as a whole to support this campaign?
It’s absolutely vital. We must present a united front and speak with one voice on this important issue in order to get our message across loud and clear. There are many strands that comprise the hospitality and tourism industries, but on the issue of VAT, it’s vital we come together at this extremely critical time for the sector.
If you don’t get the outcome you are after, will you continue your campaign or is this the final chance?
We will campaign hard in order to prevent the VAT rate returning to 20%, because once it’s back at that level, the industry cannot realistically expect to see it reduced again. So we are fighting hard to keep it at 12.5% in the future. The difference between those two rates is significant, and could determine whether or not a hospitality business survives, or goes to the wall. We’ll continue to make our case to the Treasury on behalf of an industry that creates £130bn in economic activity and which generates £39bn of tax for the Exchequer, funding vital services.