Burnham camp goes quiet on hospitality VAT cut

Allies of Prime Minister-to-be Andy Burnham have gone quiet on whether he would slash VAT for hospitality despite previously backing calls to do so and committing to a raft of other measures to support pubs, restaurants and bars.

The outgoing Mayor of Greater Manchester had previously said he would back calls to cut value-added tax (VAT) for hospitality firms, but his allies have refused to say whether he would enact the tax cut once in Number 10.

Industry chiefs have in recent weeks ramped up pressure on the government to cut their VAT from 20 to 10 per cent, claiming the tax break is needed to avert the collapse of the UK’s hospitality venues.

Former cabinet minister Louise Haigh, who managed Burnham’s successful campaign at the Makerfield by-election, said the former mayor would back pubs if he succeeded Sir Keir Starmer as Prime Minister. 

Burnham would slash the business rates bill of every pub in the country by 20 per cent and instead hike tax on out-of-town warehouses, Haigh confirmed at a British Beer and Pub Association (BBPA) event on Wednesday night.

But Burnham’s chief campaigner, who is said to be interviewing candidates for Burnham’s cabinet, stopped short of reiterating the Makerfield MP’s calls for a cut to VAT for hospitality firms. 

Speaking at a Night Time Industries Association event earlier this year, Burnham had said: “I would […] argue for a VAT rate more consistent with what you find in Europe, because of the social value that your businesses bring.”

Burnham pledges on business rates, but not VAT

Asked if he still backs the tax cut, a spokesperson for Burnham told City PM that he is “not going to set out policy positions off the cuff” and that the tax break ”would be something we will need to look at in due course”.

Emma McClarkin, chief executive of the BBPA, told City PM: “While the current relief in business rates for pubs is welcome, pubs continue to pay a disproportionately higher rate which grinds down their ability to keep the doors open.”

Some hospitality leaders, including celebrity chef Tom Kerridge, had thrown their weight behind Burnham ahead of the Makerfield by-election because of his support for a VAT cut.

UK Hospitality, a trade body leading the campaign for the tax break, told City PM that “it’s important that whoever becomes Prime Minister takes action to reduce the sector’s cost burden”.

Its chief executive Kate Nicholls said: “This includes cutting hospitality VAT to 10 per cent, meaningful reform of business rates and addressing the rising cost of employment. 

“We will engage with any candidates in a leadership election and, subsequently, the next Prime Minister to ensure the sector’s voice is heard and that hospitality businesses have the backing they need to thrive.”

Business rates cut ‘drop in ocean’

Andy Lennox, a pub landlord who led a campaign to bar Labour MPs from pubs over a business rates row, told City PM that it is “incredibly important” that Burnham does not drop his support for a cut to VAT.

“Business rates dropping by 20 per cent is a drop in the ocean against what is needed,” Lennox said.

Those calling for a VAT cut say the UK’s high rate makes it an outlier in Europe. Only Denmark charges a higher rate to pubs, hotels and restaurants, while France, Italy and Spain levy a 10 per cent rate.

A petition, titled VAT’s The Problem, has amassed more than 230,000 signatures, and an early-day motion in support of the policy has been signed by more than 50 cross-party MPs.

But the proposal has faced criticism from tax experts, who claim it could cost the Treasury as much as £12bn and hand multi-million pound tax breaks to huge corporations like McDonald’s and Mitchells & Butlers.

Dan Neidle, the founder of Tax Policy Associates, told City PM last week: “There are other things which could be good for growth and would be a lot less expensive than £12bn.”

Haigh did not respond to a request for comment.