Concerns chancellor's VAT break could be undermined by promises of price cuts

Just days after the industry welcomed the job-saving potential of the chancellor's VAT cut, operators have expressed concerns that promises of price cuts could undermine its impact.

Last week Rishi Sunak announced a temporary reduction in VAT from 20% to 5% applying to food, accommodation and attractions in order “to support businesses severely affected by forced closures and social distancing measures”.

But some operators have complained that the initiative is being undermined by businesses passing on at least part of this reduction to attract customers.

JD Wetherspoon has said it will cut prices on a range of meals and drinks - including real ale, coffee, breakfasts, pizzas and burgers - from Wednesday.

Founder Tim Martin said: “Wetherspoon will invest all the proceeds of the VAT reduction in lower prices, spread across both bar and food products, with the biggest reductions on real ale.”

BrewDog also said it would “pass on every single penny to our amazing customers” after last week’s announcement.

Other operators fear this could lead customers to believe the VAT cut should be passed on, rather than used to help businesses recover from months of closure and the requirement to reopen at a lower capacity.

Managing director of Rudding Park in Harrogate, Peter Banks, said: “I have already had many guests asking for ‘their money back’. It is my belief that the government made this a sector specific VAT cut to throw a lifeline to a fundamentally damaged industry, not to pass the saving on to our guests.”

He added: “The reason Rishi did this was to save jobs and businesses. Every time one of us gives the VAT back to a guest, we are increasing the pressure on other businesses to do the same, the logical conclusion to this is that those businesses will not make as much money, and therefore have to make more redundancies. The equation is simple. VAT refund to guests = redundancies.”

Paul Foster, chef-patron of Michelin-starred Salt restaurant in Stratford-upon-Avon, added: “I believe the chancellor has done this for businesses not for the consumer. He’s done something very direct for the consumer, which is the 50% discount up to £10 to directly encourage them to come out. I think he’s trying to do everything he can for both parties.

“Consumers will also see this - our eight-course tasting menu is £78, and unless something crazy changes it’s still going to be £78. Without this VAT reduction it would have had to have been more expensive because we will be doing less tables.”

John Abbey, owner of the Abbots Elm in Cambridgeshire, was one of a number of operators who took to social media last week warning consumers not to anticipate large discounts. He tweeted: “This wasn’t done to save diners money. It was done to save the industry. Pay what you normally pay. Willingly. It’s saving jobs and paying for measures that keep you safe.”

*Picture: Shutterstock *