Rachel Reeves, the Chancellor, is facing pressure to permanently reduce Value Added Tax (VAT) on the hospitality sector, having previously implemented temporary reductions to ease the cost-of-living crisis. A package of £1.8billion worth of measures has been unveiled by Reeves to alleviate the impact of the Iran war, including cutting VAT on visitor attractions and children's meals in the summer and lowering tariffs on imported food. However, the hospitality sector emphasized the need for a permanent VAT cut to survive, while the Conservative Party leader questioned the size and timing of the measures.
Rachel Reeves is under pressure to permanently cut VAT on the hospitality sector, after agreeing temporary reductions on family days out to ease the cost-of-living crisis.
The Chancellor on Thursday unveiled a £1.8billion package of measures to soften the impact of the Iran war, saying she wanted to give families 'a bit of breathing room'. The measures include cutting VAT on visitor attractions and children's meals this summer, as well as lower tariffs on imported food. But there was no immediate help with soaring energy bills, and the struggling hospitality sector said it needed a permanent cut in VAT to survive.
Shadow Chancellor Sir Mel Stride said the measures were too little, too late. But Sir Keir Starmer said the plan would allow families to 'enjoy moments that matter without the same level of financial strain'. The move, which echoes Rishi Sunak's Eat Out to Help Out scheme during the pandemic, will see VAT cut from 20 per cent to five on visitor attractions and children's meals from late June to the end of August.
If businesses pass on the reduction in full, it will be worth about 50p off the price of a McDonald's Happy Meal or £4 off a ticket to Alton Towers. Having a laugh: Sir Keir Starmer and Rachel Reeves at a children’s centre on Thursday Read More LETTS: The Chancellor used the word 'I' 45 times in 10 mins. Is she worried about getting the boot? Kate Nicholls, chair of UK Hospitality, welcomed the move as a 'positive step'.
But she urged the Chancellor to extend it to holiday accommodation 'to help tackle one of the biggest costs'. And she said it should be made permanent, pushing the Chancellor to see it as 'a down-payment on a wider shift to a lower VAT rate for the entire hospitality sector, to bring us in line with Europe'.
Ros Morgan, chief executive of Heart of London Business Alliance, which represents more than 500 businesses, welcomed the move but warned it was only a 'temporary and partial fix' for a sector which is 'operating under enormous pressure'. In the Commons, Sir Mel warned that the package did not reflect the scale of the cost-of-living crisis facing the country.
'If the Chancellor were serious about the challenges we face, she would commit to getting spending down, tackling the benefits bill and getting taxes down to strengthen our economy,' he said. Ms Reeves insisted the 'great British summer savings scheme' would 'help families and support our hospitality sector'. The discounts will apply to ticket prices for both adults and children, covering attractions such as circuses, theme parks, zoos and museums.
It will also include children's tickets for cinemas, concerts, soft play and the theatre, and cut the cost of children's meals in restaurants and cafes. The changes will apply from June 25 to September 1.
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