VAT campaign group VAT Club Jacques Borel has renewed pressure on the Government to slash rates for the hospitality sector in order to counter unfair competition from supermarkets.
A reduction in food and drink VAT rates from 10% to 20% would create 425,000 new jobs across the hospitality sector over a three year period, the group’s new report has found.
According to the ‘Growth and Jobs’ report, the VAT rate should actually be set at 5%, which would create a further 150,000 jobs. It says a 10% reduction should be seen as a first step in boosting custom in the pub, restaurant, catering and visitor accommodation sectors. The new rate would lead to a surplus of £111m for the treasury after three years, it says.
The report – the organisation's first since the general election, budget and announcement of the increase in the minimum wage – will be submitted to the Treasury in October. It already has the backing of members including JD Wetherspoon, Subway, Pizza Hut, Fuller’s, Monster Energy, Matthew Clark, Pret a Manger. TGI Friday's and Heineken.
Jacques Borel, who has campaigned and won VAT cuts for the leisure and hospitality industries across European countries including France, Finland, Germany, Belgium, Sweden and Ireland, 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.'