Financial Secretary to the Treasury James Murray has said the Government recognises the pressure on pubs but stressed a VAT cut would be costly.
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Though he did not rule out any measures in the upcoming Budget, telling The Sun the Government was looking at ways to support “important” high street businesses.
“We want to support hospitality, but let’s be upfront about this,” he told The Sun.
“If you’re having a big cut in VAT, it costs a lot of money, and anything we announce, we want to make sure it’s fully funded and we explain exactly how we’re going to do that.”
Following Murray’s comments, CEO of the British Institute of Innkeeping (BII) Steve Alton stressed a VAT cut to 10% was a “fair deal” for the sector.
“The Government has a huge opportunity to provide the conditions to drive investment, new skilled jobs and growth in our sector through fair taxes,” he told The Morning Advertiser (The MA).
Fair deal
“VAT at 10% is a fair deal, in line with our European neighbours, and will allow our sector to play its full part in a growing economy in all areas of the UK.”
Alton added independent pubs in particular had continued to face “intense pressure”.
He continued: “The cumulative tax burden they face [has been] compounded by high costs of employment and inflationary increases in all areas across their businesses.
“The impact of this is clear in the high level of failure of long-standing pub businesses and the significant reduction of vital skilled jobs across the sector.”
Furthermore, UKHospitality (UKH) chief executive Allen Simpson pointed to the fact that Prime Minister Andy Burnham previously backed calls for a VAT rate more consistent with Europe before taking office.
He added the current rate of 20% for VAT accounted for a “considerable part” of the cost burden faced by the sector.
“If the Government wants to turn closures into openings, lost jobs into new jobs and boarded up shops into thriving high streets, it’s critical it listens to the swell of public support and acts to deliver a VAT cut for hospitality,” Allen continued.
Tax pressures
The comments come as support continues to build for the #VATsTheProblem campaign.
Spearheaded by celebrity chef Tom Kerridge, the movement is calling for VAT to be reduced from 20% to 10% to help firms cope with rising costs while supporting jobs, investment and consumer spending.
At the time of publication, the petition had surpassed 345,000 signatures.
- Sign the petition here
The Government’s current support for pubs has largely centred on business rates, with a further 20% reduction for the sector due to come into effect from April 2027.
A separate review is also examining how pubs and hotels are assessed for business rates, following changes made in this year’s revaluation.
The Campaign for Real Ale (CAMRA) chief executive Tom Stainer told The MA while the Government had made a positive start on business rates, the Chancellor must use the Budget to address wider tax pressures for hospitality.
He continued: “[A VAT cut would] make sure we have thriving community businesses of all sizes for years to come.”
