BHA steps up pressure on Government to reduce VAT

01 December 2011
BHA steps up pressure on Government to reduce VAT

The British Hospitality Association (BHA) is to ramp up its efforts to campaign for a reduction in VAT for hospitality, as its behind-the-scenes work with Treasury officials begins to bear fruit.

The association, which is already thought to have spent a six-figure sum building a case for a reduction in VAT to 5%, is about to make a significant investment in the engagement of PR firm Portland to highlight to local councillors and MPs the importance of hospitality and its effect on the UK economy.

One of the chief aims of the campaign is to alert local politicians to the huge barrier to growth a VAT rate of 20% is proving to be for hotels, restaurants and tourist attractions. It will also attempt to tackle other industry issues including Air Passenger Duty and red tape.

The move comes after the BHA held two meetings with the Government on the issue of VAT, first with Exchequer Secretary to the Treasury David Gauke MP, and then with Treasury officials. The BHA presented findings from reports produced by former Deloitte partner Graham Wason, who worked with the accountancy firm on a report commissioned by Bourne Leisure and Merlin Entertainments, to demonstrate the beneficial effects on both jobs and tax that a reduction in VAT to 5% in the hospitality sector could have for the economy.

Wason has estimated that a reduction in the rate for accommodation and tourist attractions alone could generate an extra £2.6b for the Government over 10 years, and create 78,000 jobs. The association also indicated it was committed to campaigning for a VAT reduction for restaurants, although it would initially seek a reduction for accommodation and attractions because this is expected to generate the greatest economic benefit for the lowest cost to the Government.

Officials have since agreed to allow the BHA to use a Government economic model, which is employed for making policy decisions, with the aim that the two sides can reach fundamental economic agreement on what tax reduction would mean. The process is expected to take around three months to complete.

A BHA spokesman said: "There is a huge amount of work on VAT going on behind the scenes. We need a carefully thought-through argument, careful calculation and thorough discussion with the Treasury to get any reduction in VAT approved."

It said that reducing VAT would boost the number of diners and head off a contraction in the curry restaurant industry, which contributes some £3.5b to the UK economy and employs 100,000 people.

The call was made at the annual British Curry Awards, which this year were attended by London Mayor Boris Johnson, employment minister Chris Grayling and Conservative Party co-chairman Baroness Warsi.

Event organiser Enam Ali said: "Along with virtually all other sectors in the hospitality industry, we are feeling the squeeze of the spending downturn. If we are not to see our industry contract seriously for the first time, we need some Government help to stimulate spending."

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By Neil Gerrard

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