Chancellor announces VAT cut and voucher scheme to help cafés and restaurants
Chancellor Rishi Sunak has announced that VAT will be reduced from 20% to 5% on purchases in cafés and restaurants, as part of a £30billion plan to save jobs in the UK.
Starting from Wednesday 15th July, the tax cut is intended to give a welcome boost to the hospitality sector and it also applies to tourism.
Additionally, the Treasury unveiled a voucher scheme to give 50% discounts to people eating out during August – although details are yet to be announced – and pledged to pay businesses a £1,000 bonus for every staff member kept on for three months after the furlough scheme ends in October.
Mr Sunak sought to reassure the public that it was safe to dine out. “I know people are cautious about going out. But we wouldn’t have lifted the restrictions if we didn’t think we could do so, safely,” he said.
The VAT cut, which applies to eat-in, or hot take-away food from restaurants, cafés and pubs, was welcomed by industry bodies and pressure groups.
Mike Cherry, the chairman of the Federation of Small businesses said: “A VAT cut for food businesses alongside the ‘eat out to help out’ initiative marks a critical step forward. We look forward to collaborating with policymakers on the latter to ensure that those who are deserving don’t miss out.
“The Treasury should now assess how it can build on this progress, taking another look at our regressive business rates system once we get to the autumn.
The Food and Drink Federation chief executive Ian Wright welcomed the news but cautioned that the measures may not go far enough to keep some small businesses afloat.
“We hope these measures will lead to a significant boost in demand for the hospitality industry,” he said. “However, if demand does not return quickly, these firms will continue to struggle unless they 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 50% discount scheme will not apply to alcohol but to food and soft drinks up to £10 per person and can be used unlimited times during August and applies to participating restaurants, cafés, and pubs across the UK.
Businesses that want to take part in the scheme will have to register through a website that opens on Monday 13th July.