VAT Club Jacques Borel is calling on the government to cut the level of VAT on food and drink in the hospitality sector from 20 per cent to 10 per cent.
It says the VAT cut will result in 425,000 new jobs being created across the UK in the pub, restaurant, catering and visitor accommodation sectors over a three year period, as a result of lower prices, improved food quality and service and better staff training leading to increased custom.
VAT Club Jacques Borel says the reduction to 10 per cent is the first step and that VAT should, at a later stage, be reduced to five per cent, which will create a further 150,000 jobs (575,000 in total).
Growth and Jobs
It has produced a report: Growth and Jobs (The impact of lower VAT rates on the British pub, cafe, restaurant, catering and visitor accommodation sectors). It is the organisation’s first report since the General Election, Budget and announcement of the increase in the minimum wage, and the report will be submitted to the Treasury in October.
Mr Borel says the Growth and Jobs report will enable the campaign to engage further with politicians as well as prove the financial case to the Treasury.
The report highlights that a VAT cut from 20 per cent to 10 per cent will lead to a surplus of £111 million for the treasury after three years.
VAT restraining the growth of the industry
The VAT cut campaign is led by Jacques Borel, who has campaigned and won VAT cuts for the leisure and hospitality industries across a number of European countries, including France, Finland, Germany, Belgium, Sweden and Ireland.
He says: “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. The increased demand then results in new investment by the operators and as a result new jobs are created across the sector.
“A VAT cut, in the first instance to ten per cent, will be a win win situation for companies in the leisure and hospitality sectors, as well as the government. It will result in hundreds of thousands of new jobs as well as increased investment from businesses.
Resources for training thousands
“This will be particularly beneficial in providing opportunities for young, unskilled, disadvantaged and part-time workers.
“A VAT cut will provide the resources for companies to train tens of thousands of young people and provide an opportunity for them to progress up the career ladder into management positions. This is especially important for young people aged 18-24.
“The government will also benefit from the creation of additional jobs and apprenticeships, lower social security payments and higher tax revenues.
“Providing more equal tax treatment for out-of-home meals and drinks served in a supervised and responsible environment will assist in encouraging healthy eating and drinking habits.”
Win win for the sector and government
Members of the campaign backing the VAT cut include JD Wetherspoon, Subway, Pizza Hut, Fuller’s, Monster Energy, Matthew Clark, Pret a Manger. TGI Friday and Heineken.
The members of the VAT Club Jacques Borel (at its 56th meeting on Wednesday September 2) stated: “Lower prices, as a result of a VAT cut would help stimulate demand, while greater investment and training would enhance service quality.
“So although the Treasury would experience a decline in direct VAT receipts, were the rate to be reduced to 10 per cent and then to 5 per cent, it would gain additional revenues from higher sector turnover.
“It would also benefit from higher income tax and National Insurance payments, higher corporation tax receipts, and savings in unemployment benefits.”
Jacques Borel added: “A VAT cut to ten per cent will be a win win situation for companies in the leisure and hospitality sectors, as well as for the government.”