Gov urged to slash VAT rates as inflation hits 40-year high

18-May-2022 - Last updated on 18-May-2022 at 16:13 GMT

Soaring inflation: Sacha Lord and Tim Martin urge Government to back the sector and reduce VAT (Getty/ DNY59)

Related tags Wetherspoon Tim martin Sacha Lord Finance Manchester

Big players in the hospitality sector urged Government to slash VAT rates and provide financial help as inflation hits a 40 year high of 9%.

The consumer prices index, including owner occupiers’ housing costs (CPIH) rose by 7.8% in the 12 months to April 2022, up from 6.2% in March, the Office of National Statistics announced today (18 May).

Greater Manchester night time economy adviser Sacha Lord said while the inflation figures may be unprecedented, they were not unexpected.

According to Lord, the economic impacts of the past year, from Brexit, Covid and the war in Ukraine, had not only exacerbated weakness, but had also put the true instability of the economy on stark display.

"Businesses across the board are struggling and I know many who are making tough decisions on how and whether to survive,” he said.

This comes after the Bank of England warned inflation might reach 10% within months, as the prices of fuel and food put pressure on household budgets.

Practical financial help

What’s more, the statistics showed the largest upward contributions to the change in the CPIH 12-month inflation rate between March and April 2022 came from housing and household services (1.27 percentage points), restaurants and hotels (0.11 percentage points), and recreation and culture (0.10 percentage points).

Lord continued: "Some in hospitality are seeing energy bills rise to six, seven and eight thousand pounds per month, and this level of payout for businesses recovering post-pandemic, is simply unsustainable.
"I echo others in industry in calling on the Government to implement a temporary reduction in VAT on business energy bills from 20% to 5% to save small businesses and the livelihoods of the hundreds of thousands across the UK that they employ.

"Ideas and financial solutions to the cost of living crisis have been mooted by the chancellor and across the Government over the past months, but they are simply not coming to fruition fast enough.
"If Westminster is serious about levelling up and saving the high street across the UK, they must provide practical financial help now, not just make promises for the future.'

Gov should reduce VAT

Wetherspoon founder and chairman Tim Martin echoed Lord and urged Government to make changes to the VAT rate.

“The Government’s decision to return VAT to 20 per cent in April has affected the entire hospitality industry and is a contributory factor in the rise in inflation, said Martin.

He believed it did not make economic sense food bought in pubs, restaurants and cafes attracted 20% VAT when food was VAT-free in supermarkets.

He continued: “The argument is even more valid now as the increase in VAT from 12 per cent back to 20 per cent in April has been one of the factors in the increased rate of inflation.

“The government should reduce VAT from the current 20 per cent in the hospitality industry and as well as benefitting businesses and customers, it will, I believe help in lowering inflation in the months to come.”