Treasury rules out cut in VAT
The Treasury has refused to consider a VAT cut to 5% for the hospitality industry, claiming the "fiscal challenge" is too great.
In a letter from the Government department, seen by the Publican's Morning Advertiser (PMA), the minister in charge of VAT — David Gauke MP — claimed there was no "compelling evidence" for such a cut.
The insight into the Government's thinking was revealed as the bosses of five major pubcos last week declared support for the PMA's Thrive on 5 campaign to get VAT reduced to 5%.
The Federation of Small Businesses and a range of trade associations have also backed the call. French lobbyist Jacques Borel, the man behind the 5.5% VAT rate for the hospitality sector in France, said a VAT cut in the UK could see the creation of up to 320,000 jobs.
Charlie Elphicke, MP for Dover and Deal in Kent, wrote to Chancellor George Osborne after licensee Peter Killin, of the Smugglers Inn, in Dover, raised the issue of a VAT cut to help the trade.
The letter of response said: "We have no compelling evidence, nor have we been presented with such evidence that leads us to believe there is a strong case for what the constituent is suggesting."
Gauke also added that, while EU VAT agreements allow a number of reduced rates of not less than 5% on a prescribed list of goods and services "separate supplies of alcohol generally do not form part of this list. It is, therefore, not possible to introduce a reduced rate for alcohol".
On the suggestion of a VAT cut on restaurant services, which includes food and drink such as alcohol as part of a meal, the minister said that the economic situation of the country remains a top priority.
"Any suggestions that are made will be considered in the context of the nation's finances," Gauke added.
Good evidence
Killin dismissed the minister's response, claiming there is good evidence to show how well a VAT cut has worked in other European countries.
He added: "In Europe they have instigated a 5% VAT rate and it has worked well. You can put a lot of time and effort into calling for the VAT cut, but the Government seems to have already made its mind up."
Jonathan Mail, head of policy and public affairs at the Campaign for Real Ale, added: "The Treasury confirms it would be legal under EU rules to cut VAT on pub meals and accompanying alcoholic drinks.
"However, they also imply EU rules do not allow reduced VAT on the sale of drinks separate from a meal.
"This is an interesting interpretation of EU rules and needs further consideration. A VAT reduction on pub meals and drinks would be a valuable lifeline for struggling community pubs.
"It would also increase tourism, create jobs and enable more people to enjoy local pubs as a result of lower prices. This boost in trade for pubs would generate added tax revenue for Government, potentially fully offsetting the cost of a lower VAT rate."
PMA's Ewan Turney said: "This is a long term campaign and we must keep up the support and keep banging on at the Government.
"I urge every licensee, pub customer, pub company and supplier to get involved in the campaign."
Take action: Join the campaign
• Download the VAT briefing pack
• Sign the Thrive on Five petition
• Join the debate on the Thrive on Five Facebook Group
• Download Thrive on Five poster (A3)
• Download Thrive on Five poster (A4)
Licensees can download the petitions here. When all your customers have signed up, please return to Ewan Turney, the Publican's Morning Advertiser, William Reed Business Media, Broadfield Park, Crawley, West Sussex RH11
