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Chancellor Rishi Sunak will cut VAT by 15% and introduce “eat out to help out” meal vouchers in a bid to save the Covid-hit UK hospitality sector from disaster.
Unveiling his mini-budget in the Commons on Wednesday, Sunak said he would cut VAT from 20% to 5% for the hospitality and tourism sectors from July 15 until January 12.
The “eat out to help out” discount will also offer 50% off, up to £10 per head, on meals out on certain days of the week during August.
He said the measures would help to protect as many as 2.4 million jobs in a sector of the economy hit hard by the coronavirus pandemic.
The temporary VAT cut does not include alcoholic drinks, however, and is therefore likely to anger pubs.
And while the 50% meal discount can be used “unlimited times” on eligible days, it is only valid for non-alcoholic drinks, the Treasury documents add.
Echoing comments made by Boris Johnson when lockdown measures were eased, Sunak said he wants to see pubs, restaurants, cafes and B&Bs “bustling again”, telling MPs: “At the moment, VAT on hospitality and tourism is charged at 20%.
“So I’ve decided, for the next six months, to cut VAT on food, accommodation and attractions.”
Sunak added: “This is a £4 billion catalyst for the hospitality and tourism sectors, benefiting over 150,000 businesses, and consumers everywhere.”
He added that the meal vouchers would help get customers back into restaurants, cafes and pubs.
He told the Commons: “Meals eaten at any participating business, Monday to Wednesday, will be 50% off, up to a maximum discount of £10 per head for everyone, including children. Businesses will need to register, and can do so through a simple website, open next Monday.
“Each week in August, businesses can then claim the money back, with the funds in their bank account within five working days.”
Responding to the measures in Sunak’s mini-budget, shadow chancellor Annaliese Dodds said “fear is hurting our economy”, with many people still worried about going out to spend again.
She urged the government to get the public health response, including the NHS Test and Track system, “right”, adding: “The best the government can do to boost demand is to give consumers and workers the confidence and psychological security that they can go out to work, to shop, and to socialise in safety.
“So please chancellor work with your colleagues so the public health response catches up with that operating in other countries.”
Labour’s shadow business secretary Ed Miliband also pointed out that the voucher scheme was limited.
He tweeted: “Any help for hospitality welcome, including vouchers, but they will only be available for 13 days in August and that does not feel at all equal to the scale of the crisis in the sector.”