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At The Morning Advertisers recent MA Leaders conference, British Institute of Innkeeping (BII) chief executive Steve Alton said the recent #VATsTheProblem campaign had demonstrated the level of support for change, with more than 400,000 people signing the petition to cut VAT for the industry.
He said: “The VAT campaign has been really important for lots of reasons. If we’d said a while ago we’d get 400,000 people to sign a petition just before the Budget, we’d have taken it.
“It’s frustrating we haven’t hit 1m. Respectfully, we’re a big sector but I think there are a lot of people watching and waiting.
“There’s a chronic unfairness in VAT and consumers particularly, and the wider sector, get that. Double here versus Europe, why is that the case?”
Alton said the rising tax burden had removed cash businesses would previously have retained for profitability and reinvestment.
“That 10% of revenue in taxation, that used to be the bottom line, the resilience, the profitability, the investment, has just disappeared into taxation,” he added.
“We need to reset the balance. If it’s VAT or a mix of other things, it’s got to be that magnitude to put that resilience back in.”
Alton said a recent survey from the trade body showed many operators wanted to invest in their businesses but were holding back, while more than 60% would increase rotas, hours and employment if pressures eased.
He added this presented an opportunity for the Government as it seeks to tackle economic inactivity and the number of young people not in education, employment or training.
The BII boss said: “The very issue this Government is trying to grapple with around NEETs (not in education, employment or training) and employment, we are ready to go but you need to take the pressure out of the system.
“Forty pence in the pound in taxation is too much. It’s unfair, it’s unsustainable.”
Employment costs
Alton also pointed to research from Northumbria University and Punch Pubs as evidence of the wider contribution pubs make to their communities, particularly around wellbeing and employment.
“They’re starting to recognise there are some real metrics behind this,” he said.
“It’s the NHS links around loneliness and general wellbeing, the social impact of first jobs in really tough communities where these operators put their arm around young people and take the risk.
“At the minute, the policy is driving that opportunity away because you’re spending as much on a new starter as on someone with experience and you haven’t got the time to put the energy into them in the same way because you’re so squeezed.”
The Society of Independent Brewers and Associate (SIBA) chief executive Andy Slee also highlighted the importance of the sector’s position within the Government’s industrial strategy, outlining how exclusion has consequences for businesses seeking finance.
“What do you get as a sector if you’re part of the Government’s industrial strategy? You get prioritisation and investment,” he said.
While supporting calls for VAT reform, Slee also warned how a reduction might affect different parts of hospitality.
He said: “At SIBA we have supported all initiatives on VAT.
“We have one note of caution on that, which is during Covid when VAT was reduced it didn’t apply on alcohol and, if it didn’t apply on alcohol, then it’s unlikely to do so now.
“What that means is the community pubs are less likely to benefit from any advantage, so Nando’s and Starbucks might benefit more than the Dog & Duck and the local pub.
“I’ve yet to see any campaigner looking for a laxer tax regime for Starbucks.”
As well as business rates reform, Slee said SIBA wanted to see the differential between beer duty in the on and off-trade widened.
Desire to expand
He said the differential, initially equivalent to 1p, was now 15%, with SIBA calling for it to reach 30%.
“The economist that modelled that work before we went into lower duty on draught beer did a piece of research to assess the impact a number of years later and, for the first time in a generation, beer volumes are moving from the off-trade to the on-trade and prices are moving ahead faster in the off-trade than they are in the on-trade,” Slee said.
“I’m not pretending this is the solution for the whole sector, it absolutely isn’t, but it is one of the things that will help.
“When we talk to the Treasury, we talk about needing rifle-shot help to the pub sector as opposed to broad-brush.”
Employment costs were another area both trade body bosses highlighted as limiting businesses’ ability to grow.
Slee said: “People want to expand but just can’t afford to do so.”
Alton also laid out how he hoped VAT reform would resonate with the Government because it could provide an immediate injection of cash into businesses and pointed to previous reductions as a precedent.
Furthermore, he called for action around employment and national insurance contributions to help stimulate recruitment.
On business rates, Alton highlighted how operators ultimately needed to see a significant reduction in the bills rather than further adjustments to the existing system.
“What matters is the bill that arrives needs to be half of what we pay today,” he said. “That then is fair and rebalances, but they [the Government] needs to get tough with the digital market and the big corporates.
“You can’t keep trying to tweak the model.”
He added: “Release the pressure, we’ll employ more people and invest, so it’s over to you.”
