Calls to cut hospitality VAT to combat price rises

Hospitality and food industry leaders have reiterated calls for a cut in VAT to help businesses cope with soaring inflation.

Prices are continuing to rise at their fastest rate for more than 40 years, driven by increasing food and fuel costs.

Consumer Price Index (CPI) inflation jumped to 9.4% in the 12 months to June 2022, up from 9.1% in May, according to the Office for National Statistics (ONS).

Prices charged in restaurants and for accommodation rose by 8.6% in the year to June 2022, up from 7.6% in May.

Karen Betts, chief executive of the Food and Drink Federation, said companies were doing “everything they can” to limit price rises for consumers but warned the situation was “challenging” amid rising ingredient and energy costs.

She added: “Our industry wants to see bold new policies from a new prime minister that create the conditions for investment to boost productivity and competitiveness.”

Hospitality operators have called for a cap on commercial energy bills and warned they could face closure if costs continue to rise.

Lionel Benjamin, co-founder of AGO hotels, which has 14 properties across England, Scotland and Wales, said costs were rising "faster than they have in three decades" and warned businesses had "no option" but to pass these on to consumers.

He added: "Reducing VAT will allow some relief and will help to balance some of the cost-of-living pressures everyone is faced with."

Neil Manhas, managing director and chief financial officer at Pizza Hut UK and Ireland, urged the government to cut hospitality VAT back to 12.5% after it returned to its pre-pandemic rate of 20% in April.

He said: “Our industry is navigating continued labour shortages, skyrocketing food, fuel and utility prices and supply chain disruption. This coupled with softening consumer confidence is a heady cocktail – and is making the day to day for businesses such as ours very difficult.

"[We] need the new government to prioritise protections for businesses that provide opportunity, including by lowering VAT back to 12.5%."

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