Chancellor Rishi Sunak has announced VAT cuts by up to 15% for the hospitality sector, as well as meal vouchers, to help the foodservice sector recover from the impact of Covid-19.
As part of the ‘Eat Out to Help Out’ scheme, Sunak said he will be cutting VAT from 20% to 5% for the hospitality industry from 15th July until 12th January.
The initiative will also offer consumers 50% off, up to £10 per head, on meals out on certain days of the week during August.
Announcing his plans to the Commons, Sunak said: “At the moment, VAT on hospitality and tourism is charged at 20%.
“So I’ve decided, for the next six months, to cut VAT on food, accommodation and attractions. This is a £4 billion catalyst for the hospitality and tourism sectors, benefiting over 150,000 businesses, and consumers everywhere.
“Meals eaten at any participating business, Monday to Wednesday, will be 50% off, up to a maximum discount of £10 per head for everyone, including children. Businesses will need to register, and can do so through a simple website, open next Monday.
“Each week in August, businesses can then claim the money back, with the funds in their bank account within five working days.”
Food and Drink Federation (FDF) chief executive, Ian Wright CBE, said: “The FDF is extremely appreciative of the unprecedented support the UK Government and the devolved administrations have provided throughout this crisis. Up and down the country, the ‘Hidden Heroes’ of the UK’s food and drink industry have kept the nation fed through the last few difficult months.
“The UK’s food and drink manufacturers who supply into the hospitality and catering trade have been hard hit by the crisis, as their customers disappeared overnight. These ‘squeezed middle’ firms will enthusiastically welcome the Chancellor’s announcement today to cut VAT on food and hospitality and slash the cost of eating out. We hope these measures will lead to a significant boost in demand for the hundreds of manufacturers who supply into hospitality and the out of home sectors and help them to manage increased supply costs.
“However, if demand does not return quickly, these firms will continue to struggle unless they – and the sector they supply – receive additional employment support. The Chancellor must therefore keep the option of extending full furlough support to hospitality and their food and drink suppliers in his back pocket so we do not lose vital jobs and businesses.
“The closure of hospitality has disproportionately affected young people’s employment prospects. We applaud today’s interventions to increase employment opportunities for young people who would otherwise be hit hardest by unemployment. The FDF is pleased that Government heeded our call to introduce cash incentives for employers taking on new apprentices. We would now welcome the opportunity to work with Government to ensure food and drink manufacturers can make the most of the schemes announced, as our industry offers great careers, in every constituency.”
National Farmers’ Union (NFU) president, Minette Batters, added: “It remains clear that the entire nation and economy will be facing a long recovery to bounce back from the coronavirus pandemic.
“The hospitality sector reopening is significant for British farmers and it will play a central role in farming’s recovery. We hope the announcement…to stimulate the hospitality and tourism sectors by cutting VAT will see increasing demand which will help British food flow back into our pubs, cafes and restaurants. This will start to ease the pressure many farm businesses are facing.
“There are thousands of diversified farms with tourism and hospitality businesses that could also benefit from the stimulus created by this cut, helping them to play a key role in reviving the economy. The ‘Eat Out to Help Out’ discount could also play a significant role to stimulate demand for the quality British produce they supply.
“There is an opportunity now for food service to demonstrate their commitment to British farmers and provide the public with even more opportunities to purchase quality British food and drink.
“We look forward to further announcements by the Chancellor in the Autumn on how his recovery package will support the rural economy. We are submitting our own proposals to Government to ensure the farming sector plays a full and lasting role in the green recovery the Chancellor announced today.”