According to The Times, Downing Street chief of staff Steve Barclay suggested a temporary VAT reduction to 17.5%, which would aim to ease tax bills and the rate of inflation.
UKHospitality chief executive Kate Nicholls said the proposal would be a “significant and positive step”.
She tweeted: “Steve Barclay is right – a temporary VAT cut has been used successfully in the past to reduce tax bill for millions and ease cost of living squeeze as well as supporting businesses.”
Steve Barclay is right - a temporary VAT cut has been used successfully used in the past to reduce tax bill for millions and ease cost of living squeeze as well as supporting businesses— Kate Nicholls OBE (@UKHospKate) July 1, 2022
Cutting VAT would be a significant and positive step https://t.co/IazymcHhsa— Kate Nicholls OBE (@UKHospKate) June 30, 2022
British Beer & Pub Association boss Emma McClarkin said a VAT cut was something the trade body had been championing for a long time, to ease rising costs pressures.
She added: "As one of the most highly taxed and regulated sectors in the UK, more needs to be done to create a fair and sustainable tax regime for our pubs and brewers and incentivise investment.
“The VAT increase to 20% in April added further burden to businesses that were already struggling to make ends meet with only one in three hospitality businesses currently making a profit, and almost half operating reduced hours. A reduction would be extremely welcome, and we hope the Government will seriously consider introducing it sooner rather than later.”
Earlier this year (May), a number of trade voices urged Government to slash VAT rates and provide financial help as inflation hits a 40 year high of 9.1%.
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.
Urgent relief required
JD Wetherspoon founder and chairman Tim Martin echoed Lord and called on the Government to make changes to the VAT rate.
Furthermore, there were also calls for “urgent relief” amid the spiralling level of inflation. British Institute of Innkeeping chief executive Steve Alton said: “Our members are only just beginning to rebuild their businesses after the last two years of closures and disruption. The busy summer months provide a much-needed opportunity to help them recover, however they will have to trade at even higher levels than 2019 to just stand still.”
He believed the high rate of inflation would be “yet another barrier” to profitability for members whose businesses were “incredibly fragile” at the moment.
The Government previously slashed VAT amid the pandemic, with the tax on food, accommodation and soft drinks being at 5% in July 2020.
It then rose to 12.5% in October 2021 before it returned to the pre-pandemic level of 20% from April this year.