Should we follow the French on VAT?

JD Wetherspoon isn’t universally admired in the Scottish trade, at least certainly not within the independent sector.

The pub giant has made life far too difficult for the small guy in towns and cities across Scotland as it’s gone about establishing its formidable presence on the high street. But when its founder Tim Martin speaks, it’s usually worth listening. Martin made headlines recently when he voiced his opposition to the larger retailer levy proposed by the Scottish Government.
To recap, the levy, designed to fill part of the £1.3 billion Scottish budget gap said to have been left by Westminster cuts, was voted down by the parliament’s Local Government Committee as it debated the Budget Bill last week. But the proposal, which finance minister John Swinney said would raise £30 million by increasing the business rates of the largest retailers, from 2% to 2.3% of their turnover, will go to a full vote in parliament this week.
Martin’s take on the issue is perhaps surprising: one might have thought a tax on the supermarkets would have been manna from heaven for a pub operator.
However, he is first and foremost a successful businessman, and people like him generally get queasy when governments talk of imposing more tax, no matter who it’s aimed at.
He does favour an alternative tax move, though, which he reckons would be far more effective for pubs than a raid on supermarket coffers.
Speaking to SLTN last week, Martin called for the disparate elements of the pub industry to unite and lobby Westminster for a reduction in VAT specifically for bars, hotels and restaurants.
The inspiration comes from France, where its government successfully secured from the EU the right to lower VAT (the minimum rate of VAT in the EU is 15%) to help the struggling hotel and restaurant trade. That followed lobbying by the Union des Metiers et des Industries de l‘Hotellerie, led by Jacques Borel, which argued that the higher VAT was making French bars and cafes too expensive. With fewer people eating out, it argued, jobs were being put at risk in the sector.
The notion of cutting VAT, a vital stream of government revenue, might seem to be a remote possibility at present, given the UK’s yawning deficit.
But Martin contends that, should such a measure be introduced here, Treasury income would actually rise, as lower bar and restaurant prices would stimulate footfall. And that in turn, he claimed, would boost growth and jobs.
In Martin’s view, the pub trade has been “notoriously bad” at coming up with proactive proposals to benefit the industry, and to a certain extent I agree.
I accept resources are limited, but, from my observer’s standpoint, it does seem that too much time is spent fighting against government measures the trade has no hope of stopping, and not enough on working out creative solutions to problems.
However, I would have to disagree with Martin over the significance of the supermarkets rates issue. Compared to pubs, supermarkets already pay a much lower percentage of their turnover on rates (2% versus 9%, according to the Scottish Licensed Trade Association), which seems grossly unfair, given that the majority of alcohol now sold in Scotland goes through their tills. Any move that goes some way to tackling such iniquity has to be welcomed.