Posted: Wed 8th Jul 2020

Chancellor announces VAT cut to help support hospitality sector – along with ‘Eat Out to Help Out’ voucher scheme

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This article is old - Published: Wednesday, Jul 8th, 2020

The Chancellor of the Exchequer Rishi Sunak has this lunchtime announced a “Summer Economic Update”.

Today’s presentation in the House of Commons ran through the UK Government’s £160 billion pandemic ‘support package’, including details of the furlough scheme that helped pay the wages of an estimated 12m people.

The update covered a ‘second phase’ in the recovery, with the aim of the plan described as “supporting jobs by focussing on skills and young people, create jobs with investment in shovel-ready projects and greening our infrastructure, and protect jobs through a VAT cut for the hospitality sector and a landmark Eat Out to Help Out discount scheme for diners.”

The Chancellor of the Exchequer Rishi Sunak said: “Our plan has a clear goal: to protect, support and create jobs. It will give businesses the confidence to retain and hire. To create jobs in every part of our country. To give young people a better start. To give people everywhere the opportunity of a fresh start.”

The Chancellor said that following this second phase focusing on jobs, there will be a third phase focusing on rebuilding, with a Budget and Spending Review in the autumn.

As part of the plan to support jobs, a “Job Retention Bonus” 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.

Elements of the announcement are England only, but should trigger consequential payments to Wales which Welsh Government then can decide on what to spend the cash on. One such announcement was the english plan for £2,000 for each new apprentice hired under the age of 25 , or the green home grants that will see £2bn of improvements via subsidised ‘green’ improvements to homes.

It appears a new £2 billion “Kickstart Scheme” will be open in Wales, aimed to create hundreds of thousands of new, fully subsidised jobs for young people. Those aged 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.

UK Government said, “The tourism and hospitality sectors are massive employers in the UK and have been severely impacted by the pandemic due to necessary closures to protect public health. 80% of hospitality firms stopped trading in April and 1.4 million hospitality workers have been furloughed – the highest proportions of any sector.”

“Ensuring there is enough demand as businesses reopen is key to helping these businesses recover and have the confidence to protect jobs and rehire. Therefore, to encourage people to safely return to eating out at restaurants the Government’s new Eat Out to Help Out discount scheme will provide a 50% reduction for sit-down meals in cafes, restaurants and pubs across the UK from Monday to Wednesday every week throughout August 2020.”

This appears to be rolled out for Wales:

The rate of VAT applied on most tourism and hospitality-related activities will also be cut from 20% to 5%, with the UK Government saying “This will give these businesses the confidence to maintain their staff, as more people get through the door and business activity kick-starts again.”

Another England only move is the temporary increase to the Nil Rate Band of Residential SDLT (Stamp Duty) from £125,000 to £500,000 until 31 March 2021. In Wales that is the Land Transaction Tax, so again will require further detail on consequential and welsh policy decisions on any related schemes. In Wales devolved tax revenues are kept, however the block grant is reduced to compensate if there is a negative difference, so there could be some balancing of finances to decipher what is new money to Wales.

Commenting on the announcement by the Chancellor of the Exchequer, Darren Millar MS – the Shadow Minister for Covid Recovery – said: “The six-month cut in VAT from 20 percent to five percent for eligible hospitality and tourism businesses will be a shot in the arm for an industry which has been hit hard by the coronavirus pandemic.

“The announcement of further assistance from the Chancellor with the #EatOutToHelpOut discount of 50 percent off meals throughout August will also be music to the ears of the sector.

“The UK Government is doing everything it can to aid the economic recovery and help businesses to bounce back from the pandemic, we now need some urgency from the Welsh Labour-led Government to do what it can to re-open Wales and help businesses here to adapt so that we can protect as many livelihoods as possible while keeping staff and customers safe.”

Responding to the Chancellor’s economic statement, Plaid Cymru’s Ben Lake MP said it showed the Government had “not learned the lessons” from the start of the pandemic, “The Chancellor failed to announce any measures to support the next phase of public health policies, including support for local lockdowns. Plaid Cymru has been leading calls for employment support in local lockdowns, warning the less-than-£100 weekly Statutory Sick Pay that will be available to those put into quarantine will lead to difficult decisions for many people who may be forced to continue to work to put food on the table – making local lockdown measures less-effective.”

Top pic: The Chancellor in an image published recently with the caption “I can’t wait to get back to the pub…and I don’t even drink. “



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