Susanna Reid grills Anne Marie Trevelyan over VAT rise
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For nearly two years since the pandemic pubs have benefited from a cut to VAT, however this has now returned to 20 percent after Rishi Sunak left any extension to the cut out of his Spring Statement. Despite widespread pressure, next week will also see a rise in National Insurance, adding to business wage bills. Founder and chair of JD Wetherspoon Tim Martin warned: “In the circumstances it’s going to be a very big blow” Speaking to Express.co.uk he explained the pandemic had put pubs under their “greatest ever pressure” while supermarkets “in contrast have had possibly their best time ever” being able to avoid the closures and many of the restrictions pubs faced.
Mr Martin has been a long time advocate for VAT equality between pubs and supermarkets which he argues currently equates to a subsidy for supermarkets.
While pubs had been beginning to mount a recovery from the pandemic new challenges have arisen from soaring operating costs.
These have been particularly pushed recently by the war in Ukraine which has sent energy and food prices surging, making the April timing of tax increases particularly challenging for businesses.
Mr Martin said: “You don’t have to be Warren Buffet to see this is terrible timing because what you’re doing is jacking up taxes for the entire sector in a discriminatory way when the sector is at its weakest.”
“It’s one of several difficulties but it’s very very dire timing.”
With VAT increasing by 7.5 percent on top of an array of other cost increases, the ability of pubs to absorb such pressures has rapidly disappeared.
Brewer and pub chain Marston’s has already revealed plans to raise the price of a pint by up to 45p, citing energy and tax bills among the pressures.
Mr Martin warned it was “impossible” for pubs to keep absorbing costs, with food also seeing the impact of the VAT hike.
“It’s a straight selling tax, if you’re selling a steak at £10 now you’re going to be putting 60 or 70 pence just to cover the VAT, never mind the other costs.
“So it’s going to be, as everyone says, big price rises in pubs not matched by prices in supermarkets because they won’t have the tax increases.”
On April 1 as VAT rose pub trade bodies wrote to the Chancellor warning of the rising “cost of business” facing the sector.
In a letter signed by groups including the British Beer and Pub Association and the Campaign for Real Ale, Mr Sunak was told businesses were “disappointed” the reduced VAT rate was not extended and warned “the return to full VAT will double the price increases being planned.”
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While Mr Martin accepted the financial pressures on the Government he argued the Chancellor needed to take a pragmatic view, warning the significant contribution of pubs to the economy could be undermined in the long run.
He advised Mr Sunak: “There is no point, when a lot of your tax base is very stressed out financially in whacking up their taxes, it doesn’t make sense, and I think you’ll end up collecting less money.
“So yeah, you’ve got a problem Rishi.
“You need to stand back and look and take a deep breath and see whacking up taxes for certain industries now is not clever.”
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