A reduction in VAT on food and drink in the hospitality sector from 20% to 10% could result in the creation of 425,000 new jobs as well as offset the cost to employers of the new National Living Wage.
That's according to the latest figures from campaign group VAT Club Jacques Borel.
The group says the new jobs would be created across the UK in pubs, restaurants, catering and visitor accommodation over a three-year period, as a result of lower prices, improve food quality and better staff training, leading to increased custom.
VAT Club Jacques Borel said the reduction to 10% would be the first step and that VAT should, at a later stage, be reduced to 5%, which would create a further 150,000 jobs (575,000 in total).
Its new report detailing the figures, entitled Growth and Jobs (the impact of lower VAT rates on the British pub, cafe, restaurant, catering and visitor accommodation sectors), will be submitted to the Treasury in October.
The report highlights that a VAT cut from 20% to 10% will lead to a surplus of £111 million for the treasury after three years.
Members of the campaign backing the VAT cut include JD Wetherspoon, Subway, Pizza Hut, Fuller's, Monster Energy, Matthew Clark, Pret a Manger, TGI Friday's and Heineken.
Veteran campaigner Borel (pictured) claims to have helped win VAT cuts in France, Finland, Germany, Belgium, Sweden and Ireland.
He said: "The high rates of VAT applying to pubs, restaurants, hotels and catering businesses in the UK is restraining the growth of the UK hospitality industry.
"Also the increase in the minimum wage will result in increased costs for businesses in the leisure and hospitality industries and a VAT cut would offer a viable solution to this."
The National Living Wage, introduced by Chancellor George Osborne in his last Budget, will start at £7.20 an hour when it comes into force in April 2016, rising to £9 an hour by 2020.
Borel added: "By lowering the rate of VAT in the sector, the Government will reduce the unfair competition from supermarkets, which benefit from the zero VAT rates that apply to the food it sells and which is used to subsidise the sale of alcoholic drinks."
"Our experience of VAT cuts in other EU countries shows that operators reduce their prices and customers respond to those lower prices with increased demand.
"The increased demand then results in new investment by the operators and as a result new jobs are created across the sector.
"A VAT cut, in the first instance to 10%, will be a win-win situation for companies in the leisure and hospitality sectors, as well as the government."
Borel's campaign is separate to that of Cut Tourism VAT, which is chaired by Butlin's managing director Dermot King and backed by the British Hospitality Association. That campaign claims the support of over 1,000 hospitality and tourism operators and more than 100 MPs.
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