Thank you for contacting me about a reduced rate of VAT for hospitality and tourism businesses.
I absolutely appreciate your concerns. Hospitality has been hit extremely hard by the pandemic and even now businesses continue to face difficulties and a long road to recovery, especially with all the uncertainty as the Government refuses to take decisions. At the same time, the industry is vital to our revival and with the right support can help us bounce back from the crisis.
I note the calls from hospitality businesses for the current reduced rate of VAT to be maintained. As you will know, at the Budget the Government made no announcement on continuing with the reduced rate of VAT and it therefore remains due to increase by 7.5 percentage points in April. The Government says the reduced rate was designed as a temporary measure and that any permanent VAT reliefs would have to be balanced by cuts to public spending or increased borrowing or taxation elsewhere. I can nevertheless assure you that I will continue to keep in mind the concerns of the hospitality and tourism sector and I will write to the Treasury to pass on your comments.
More widely, I am concerned that the Government is not listening to hospitality and other businesses about the support they need. While the one-year business rates discount announced in October is a positive step, UKHospitality has highlighted that it is not enough to offset tax increases and inflationary costs, while many businesses are also excluded.
On the business rates system as a whole meanwhile, I believe the Government has missed the opportunity for fundamental reform. In the final report of its business rates review, it says it is “not proposing changing the nature of the tax, or the basis of valuation”. I believe, though, that we need to scrap the current system and replace it with one that is fairer and provides a level playing field for the high street businesses that do so much to enrich our lives. Such an overhaul is long overdue and must be part of a real plan to help our hospitality industry thrive.
That’s why the Labour Party have been calling for an overhaul of business rates, a freeze on VAT on energy bills and an increase in statutory sick pay, to help people get through the difficult months ahead and protect business in the long term.
Over the course of the pandemic, businesses supported us when we needed them most. It is vital that our hospitality sector recovers strongly from the crisis and does not lose out because of the sacrifices it has made.