“A slap in the face”, “an insulting token gesture”, “a meaningless political gimmick” - even “rearranging deck chairs on the Titanic”. That’s just a small sample of the predictable and not very nuanced criticism the wider hospitality industry has levelled at the Government’s Great British Summer Savings Scheme.
The headline for food and drink-led venues is that VAT on children’s meals will be cut from 20% to 5% between 25 June and 1 September. But the discount will also apply to family tickets at theme parks, zoos, museums and fairs, as well as children’s cinema, theatre, concert and soft-play admissions.
The summer VAT reduction has been received more warmly by these hospitality adjacent sectors, which are in general more reliant on the family pound than pubs and restaurants and therefore have more to gain. That said, the wider leisure sector has just as much reason to be furious at those currently in charge having also been hit by changes to NI and the Living Wage. In many cases, they have also been more adversely affected by changes to business rates than pubs and restaurants.
Hospitality businesses are understandably angry about how the sector has been treated over the past few years but to lash out over something that could be genuinely useful for some operators feels counterproductive and - frankly - childish.
Take London pub The Blue Stoops, which has introduced The Chancellor’s Children’s Menu after Government guidance appeared to confirm the lower VAT rate applies to meals marketed, presented and priced specifically as children’s offerings, meaning that the age of the person that eats it does not matter (this will definitely not be the case in practice, so be warned). It features a dessert called The Tax Break Tart.
Misogynistic digs directed at Rachel Reeves, who co-announced the initiative alongside Kier Starmer last week, are a bad look for the sector. Yes, this is hardly a lifeline and a permanent reduction in VAT across the board would have been better but the Great British Summer Savings Scheme is at least a step in the right direction: an acknowledgement that cutting VAT can improve consumer sentiment, drive footfall and help struggling businesses. It’s also the first major sector-specific support the whole hospitality industry has received since the pandemic.
The accusation from the industry that this is a PR stunt also seems a bit naive. Of course it is. What Government policy isn’t devised with optics in mind? A bit of positivity around the industry and an acknowledgement of the role it plays in the happiness of the nation is no bad thing, and something that has been sorely lacking from Starmer’s premiership to date.
And it’s not nothing either. While some businesses that don’t have much to do with families will be left out in the cold as the mercury rises, operators that make much of their revenue from holidaymakers over the summer holidays period could well see a significant effect on bottom line.
Beyond the macroeconomics, critics of the scheme have also pointed to administrative costs - from reprinting menus and updating till systems to additional accountancy fees and staff training. However, while the Government ‘expects’ the savings to be passed on, it is not mandatory.
Businesses are not legally required to lower prices; operators are within their rights to maintain current pricing and retain the VAT differential. In that context, the burden may be less onerous than some suggest.
Well done to most - if not all - trade bodies for striking a more measured and constructive tone. UKHospitality and the British Beer & Pub Association have taken roughly the same line by welcoming the move as positive for both consumers and businesses, while emphasising that it should be a starting point for a broader, permanent reduction across the sector. That seems a lot better than ‘5% VAT for hospitality or go swivel’ (or worse than that in some cases).
While there are caveats, Great British Summer Savings Scheme represents a positive move forwards, signalling that the Government is at least willing to consider flexibility for a sector disproportionately affected by a flat 20% VAT rate. With a bit of encouragement from the sector it might just be persuaded to do more.