Spring statement: pressure mounts on chancellor amid 'crunch time' for hospitality

The hospitality industry has been putting pressure on the chancellor to cut taxes in his spring statement on Wednesday (23 March).

Rishi Sunak is facing calls to help businesses and households struggling with rising costs and food and energy prices.

The Daily Mail has reported the chancellor is weighing up whether to extend the current 12.5% rate of hospitality VAT, which is due to revert to its pre-pandemic rate of 20% in April.

It comes after an inquiry by a group of MPs recommended a freeze in the tax to encourage businesses to offer lower prices and help them recover.

Chef Paul Askew, owner of the Art School restaurant in Liverpool, said it was “crunch time” for hospitality.

He added: “The chancellor has a unique opportunity to level up hospitality. But will he take it? Because putting hospitality VAT back up to 20% creates the very real issue that we all go backwards again.

“We are all already paying back CBILs and Bounce Back Loans, with insurance companies not paying out and many venues with crippling rent debt. Is this really the right moment to raise VAT?”

JD Wetherspoon founder Tim Martin said increasing hospitality VAT didn’t make “economic sense” when supermarkets were not subject to the same tax on food.

The Night Time Industries Association (NTIA) warned even small late-night venues were seeing energy costs and insurance premiums double or triple compared to previous rates and that many would close without government support.

“Billions of pounds in public funding will be wasted if the chancellor lifts taxes within the budget, crippling an industry that has worked hard to survive, only to be let down at the last hurdle,” said Michael Kill, chief executive of the NTIA.

In a joint statement trade bodies UKHospitality, the British Institute of Innkeeping (BII), the British Beer & Pub Association (BBPA) and Hospitality Ulster said it was “imperative” VAT remains at 12.5% as venues were having to cut trading hours and raise prices to combat spiralling costs.

A group of MPs in the All-Party Parliamentary Beer Group have also called on the chancellor to reform the business rates system and warned up to 20,000 pubs could otherwise close.

Sunak will announce his spring statement at 12.30pm on 23 March.

Image: Cubankite/Shutterstock