I am sure we will all have our own individual opinions on Chancellor George Osborne’s budget, and we have had quite a few industry comments, however, I feel it was a missed opportunity. Osborne could have been bold, brave and adventurous, but has, to my mind, chosen the safe route.
It comes to something when you are thankful when the Chancellor doesn’t tax an already overtaxed industry even more, but I suppose we should be grateful. Had the hated duty escalator still been in force beer prices would now be a staggering 17% more than they are. Had that continued I think it probably would have been a final nail in the industry coffin. 40% of the EU’s revenue raised in duty tax comes from the UK – we are the second highest duty in Europe – and the hospitality industry is facing wage increases, pension contributions and some of the larger companies contribute toward apprenticeships. I believe George Osborne really could have done more, a lot more, to help the tourism/hospitality industry.
The current level of VAT on the hospitality industry, as we all know, is stifling competitiveness. When Belgium reduced the level of hospitality VAT from 21% to 12% in 2010, an extra 2600 jobs were created between 2009 at 2010. Continuing to charge the level we do has flown in the face of all common sense. All research points to not only increased revenue for the Chancellor in the long term, but also the creation of new jobs. This is where he could have been bold, taken a huge decision, which in the long term would have paid dividends. However, he chose not to, despite independent research carried out by a Treasury adviser using the Government’s own economic model which concluded that lowering the rate of tourism VAT to 5% is “one of the most efficient, if not the most efficient, means of generating GDP gains at low cost to the Exchequer that we have seen with the CGE model”.
Whilst the budget has not been damaging to the industry, given the increase in costs businesses in general are facing it hasn’t been an entirely helpful one either.
Peter Adams, Editor of CLH News