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Will Rishi trim the VAT? - Ed's letter

Next week sees Rishi Sunak’s latest Budget and, at the time of writing, he was very much hoping it was going to be back to Budget as normal.

However, at the time of writing - yes, we’re back there again - it was looking as though the winter was going to deliver if not a full lockdown, then possibly some restrictions, from masks to passports to outdoor service and back again. None of them guaranteed, maybe all of them avoided, but something to startle the balance sheet.

For Rishi, this will mean clamouring for more support, support he is unlikely to want to give, which means that the sector must raise its voice to push for anything which will limit the stress of the coming winter as well as the current state of play.

At the time of writing (yes yes, I know) inflation figures showed costs for hospitality businesses across all lines rising by 11% to 13%. There is no plan in play to suggest that this is going to be resolved soon. At yesterday’s PwC hotels 2022 forecast, Hamilton Hotel Partners’ Frank Croston said that he was paying wages 10% to 20% ahead of the previous norm to attract and retain staff and he is no outlier. And utilities are getting no cheaper.

There is no quick fix available for staffing and utilities, so the sector has turned to VAT as the government pressure point of choice.

A coalition of the country’s hospitality and tourism trade and membership bodies has called on the Prime Minister to keep VAT low for businesses in these vital sectors, enabling them to play their part in the government’s levelling-up and job creation agenda.

The letter argues that keeping VAT at its current rate of 12.5% for these sectors will help to accelerate the UK’s economic recovery from the pandemic, safeguard the future of businesses and millions of jobs and allow firms to invest in their workforce with higher wages and improved training opportunities.

The letter states: “All of us in the hospitality and tourism sectors share that ambition and our businesses are present in all parts of the country, including, crucially, towns around the country that have been left behind, including coastal areas. We will be critical to your levelling-up agenda and we are eager to play our part. To facilitate our role there is one crucial lever that government can pull – to keep VAT at 12.5%.

“The pressures on business at present are well-documented and are already creating inflationary pressures. Increasing VAT for our sectors back to 20% will push many to breaking point. Retaining it at 12.5% will relieve upwards pressure on prices and will leave people with more money in their pockets, while delivering on our shared goals.”

Is Rishi listening? Tune in on 27th.


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