Burnham’s VAT cut promise earns him hospitality backing

Fresh focus has fallen on the high rate of VAT paid by UK hospitality businesses – and the urgent need for it to be cut to give the sector some ‘breathing space’.

A VAT cut has been on the industry’s wish-list for many years, but the idea has been given fresh political fire by recent ructions within the ruling Labour Party, where anticipated leadership challenger Andy Burnham has stated that, in power, he would cut the rate from 20% to 10%.

As mayor of Manchester, currently home to a thriving hospitality ecosystem, Burnham has some credibility with the industry, so his support for a rate cut has been warmly welcomed by the celebrity chef leading the campaign for a cut.

Restaurateur and BBC presenter Tom Kerridge whose pubs have three Michelin stars between them, said he hoped Burnham would become prime minister and follow through on his promise.

Kerridge and others are fronting the ‘VAT’s the problem’ campaign for a UK hospitality VAT rate more in line with Europe – in France, Spain and Italy, VAT in pubs, restaurants, hotels and bars is 10%, and in Germany it is just 7%.

“Andy Burnham has backed a cut to VAT and as Manchester mayor he represents one of the most vibrant and exciting cities in the UK with a growing food scene,” said Kerridge.

“This is somebody who understands nightlife, food, hospitality and entertainment, he sees it as the lifeblood of creativity.

“It’s looking like there may be a future leadership contest and this is someone the whole of hospitality should get behind.”

Kerridge claimed that hospitality venues were closing at a rate of 21 a week in the UK because of recent hikes in business rates, employer national insurance and the minimum wage, as well as rising energy bills and food inflation.

“We have a country that is being run by spreadsheets in the Treasury as opposed to operators,” said Kerridge.

“There are many people in government who are trying to understand hospitality. Andy Burnham has an understanding of it. It is perhaps the Treasury and Rachel Reeves who lacks understanding.”

Kerridge concluded: “Hospitality is now at full breaking point. It has now been bled dry. It is one of the highest-taxed industries. If Andy can do with the country what he’s done with Manchester, it would be great.”

Representing one of Scotland’s largest independent restaurant operators, Vittoria Group, chairman Tony Crolla agreed that a VAT cut would be the most direct mechanism to breathe fresh life into the industry.

“The hospitality sector has been hit from every angle in recent years, with rising National Insurance contributions, higher energy costs, business rates and supply chain inflation all piling pressure onto already tight margins,” said Crolla.

“A reduction in VAT from 20% to 10% would give businesses some much-needed breathing space.

“This is not a play to increase profits, but to let hospitality operators reinvest in their people, suppliers and venues and ultimately relieve some financial strain from the end customer.”
There was, said Crolla, only so much rising cost that operators could absorb, and only so much customers could be expected to pay before they simply stopped dining out.

“We need hospitality businesses to be in a position where they can thrive, not just survive, and for many operators a reduction in VAT would be a significant step in the right direction.

“Hospitality is a vital part of our communities and local economies,” he added. “When restaurants are able to invest, that spending supports jobs, tradespeople, suppliers and professional services across multiple sectors.”

The UK VAT rate is entirely under the control of the UK Government – but that hasn’t stopped it cropping up in Scottish parliamentary discussions.

SNP MSP for Stirling, Alyn Smith, has officially backed the ‘VAT’s the problem’ campaign, and recently called on Scottish First Minister John Swinney to support a VAT rate cut.

“The First Minister is well aware that hospitality businesses are not having their troubles to seek at the moment with rising input costs on all fronts,” said Smith. “But the UK already charges far higher VAT than most other European countries.”

Smith noted that all the major industry organisations – including UKHospitality Scotland, the Scottish Hospitality Group, the Scottish Licensed Trade Association, and the Scottish Beer and Pub Association– were supporting ‘VAT’s the problem’.

“Would the First Minister join me in backing that campaign and calling on the UK chancellor to cut VAT for these vital hospitality businesses?”

However, the SLTA has since criticised Swinney for failing to give a ‘straightforward answer’.

The SLTA’s Colin Wilkinson said that the lack of response, neither positive nor negative, signalled ‘a high level of disinterest’ in one of Scotland’s key economic sectors.

Wilkinson added: “We thought that progress was being made when ‘tourism’, one of Scotland’s most important key industries and intrinsically linked with hospitality, was now a named portfolio at Cabinet Secretary level.

“However, the First Minister’s lack of response to support a campaign to help the hospitality sector has dented our aspirations.”