Hospitality VAT cut: can it help the sector and at what cost to UK taxpayer?

It may seem like a no-brainer because the measure would ease pressure on the ailing sector and put the UK in line with most European countries. But critics say the measure would be extremely costly and reward big multinational businesses, without necessarily helping to spur growth. Why does hospitality need help? Pubs, bars, restaurants, nightclubs and hotels were among the hardest-hit businesses during the Covid-19 pandemic, when thousands of venues were forced to close. Energy prices have soared, first as a result of Russia’s invasion of Ukraine and more recently owing to the closure of the strait of Hormuz . Policy decisions, chiefly the increase in employers’ national insurance contributions and the national minimum wage, have added £5bn a year to the sectors’ costs since Labour took office. Nearly a quarter of businesses in the sector are losing money, according to fresh data commissioned by industry trade bodies. One in six fear they won’t last the year and 5% say they are no longer financially viable. In short, things are pretty grim. What does the sector want? The “VAT’s the problem” campaign, spearheaded by the celebrity chef Tom Kerridge, is calling for hospitality VAT to be cut from 20% to 10%. Countries across Europe have a lower VAT with Germany at 7% and France, Italy and Spain all at 10%. On Wednesday, the Republic of Ireland will lower its rate, for food-led businesses, to 9%. …