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Cut VAT on food and create 670,000 jobs, Borel claims

30 April 2013 by
Cut VAT on food and create 670,000 jobs, Borel claims

A cut in VAT from 20% to 5% on food and drink within the hospitality industry would create as many as 670,000 jobs.

That's the claim from the Jacques Borel VAT Club, which represents 43 pub, restaurant and hotel operators.

Members include Charles Wells, Fuller's, Heineken, JD Wetherspoon, Mandarin Oriental, Pret A Manger, Prezzo, St Austell, Subway and TGI Friday's.

A survey of operators members in the VAT Club showed that they would pass on more than 50% of any VAT reduction in lower prices, creating increased customer traffic of between 10 and 12%. That increased traffic would lead to the increase in job numbers, according to the VAT Club. It would also lead to increased staff pay and investment levels and training, it claimed.

The study also found that the Treasury would see an initial loss of between £5.5b and £7.8b as a result of reducing VAT to 5% in the sector.

The report stated: "Under certain potential scenarios, the overall impact of the dynamic stimulus that a VAT reduction would give to sector growth would be fiscally neutral. In other words, the indirect gains to the Exchequer could offset the direct loss in VAT yields."

Jacques Borel, a veteran French entrepreneur who claimed to have successfully campaigned for VAT reduction in hospitality across Europe, said: "The study shows that a targeted VAT reduction to 5% in the hospitality sector would be a very powerful and cost-effective way of creating employment in the UK. There would be an initial loss of revenue to the Treasury but, as many other countries in Europe have discovered, the losses are quickly reduced - and even made neutral - as the sector grows turnover and creates jobs."

A total of 13 of the EU's 27 countries already apply a reduced rate of VAT to out-of-home foodservice.

Borel added: "The UK should follow the lead of its European neighbours in boosting its economy and creating employment, particularly among the young, many of whom already begin their careers in the leisure sector."

Jacques Borel's VAT Club is not the only campaign to cut VAT in the hospitality sector. The Cut Tourism VAT Campaign, spearheaded by Bourne Leisure Group, Merlin Entertainments Group, the British Hospitality Association and the British Association of Leisure Parks, Piers and Attractions, has around 500 businesses committed to its campaign to cut VAT for visitor accommodation and attractions.

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