Chancellor slashes VAT and introduces voucher scheme to get people back in restaurants

By James McAllister

- Last updated on GMT

Chancellor cuts VAT to 5% hospitality and introduces 'eat out' voucher scheme to get people back in restaurants

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Chancellor Rishi Sunak has announced he will cut VAT from 20% to 5% for parts of the hospitality sector and introduce a month-long 'Eat Out to Help Out' discount scheme for diners.

Speaking during today's (8 July) summer statement, the Chancellor set out a three-stage plan to 'support', 'create' and 'protect' jobs. 

In a bid to secure jobs in the hospitality sector, the Chancellor announced that the rate of VAT applied to food - both eat in and takeaway - accommodation and attractions will be cut from 20% to 5% from next Wednesday (15 July) for a six month period until 12 January 2021.

Furthermore, to help ensure there is enough demand as businesses in the sector reopen, Sunak also set out plans for an 'Eat Out to Help Out' discount scheme.

The scheme will provide a 50% reduction for sit-down meals in cafes, restaurants and pubs up to a value of £10 per head, across the UK between Monday and Wednesday every week throughout August.

Combined, the Chancellor says the two initiative will support over 2.4 million staff across 150,000 businesses, with the VAT cut set to save households around £160 per year.

"This will give these businesses the confidence to maintain their staff, as more people get through the door and business activity kick-starts again," he said.

In order to support jobs, the Chancellor also set out plans for Job Retention 'bonus scheme', which will be introduced to help firms keep furloughed workers.

UK Employers will receive a one-off bonus of £1,000 for each furloughed employee who is still employed as of 31 January 2021.

According to Sunak, 80% of hospitality firms stopped trading in April and 1.4 million hospitality workers have been furloughed under the Coronavirus Job Retention Scheme (JRS); the highest proportions of any sector.

As had already been reported, the Chancellor also set out plans for a new £2bn 'Kickstart Scheme' to create 'hundreds of thousands' of fully subsidised jobs for young people across the country.

Those aged between 16-24, claiming Universal Credit and at risk of long-term unemployment, will be eligible.

Funding available for each six-month job placement will cover 100% of the National Minimum Wage for 25 hours a week, and employers will be able to top this wage up.

Businesses will also be given £2,000 for each new apprentice they hire under the age of 25.  

Reacting to today's announcement, Jane Pendlebury, CEO of the Hospitality Professionals Association (HOSPA), said: “The reduction in VAT is absolutely massive news for the hospitality industry.

"It’s not often that I can say I’ve felt a rush of emotion following a House of Commons announcement, but today I certainly have – and that’s something that just serves to underline how much of a huge relief the latest measures are. 

"As an industry, we’ve long been lobbying for reduced VAT to bring us in line with other European countries that already offer favourable rates to help drive tourism. Given the current crisis the clamour for this within the UK has grown – and it’s fantastic to see the Government respond so positively. 

"The reduction will provide businesses operating on wafer thin margins with some essential breathing space, helping them to recover and rebuild, as well as to retain more jobs – with the £1,000 job retention scheme offering yet further assistance here.

"The additional announcement of the ‘Eat out to help out’ vouchers is yet another much needed and very welcome boost, and it’s a move that, will not only help businesses, but should also help to encourage consumers to return.

"All in all then, the Chancellor’s announcements today are wonderful news for our industry, and offer not just light at the end of the tunnel but a real blaze of sunshine, helping to deliver hope to hospitality businesses up and down the country.”

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