Treasury minister casts doubt on VAT cut

James Murray, the financial secretary to the Treasury, has cautioned that cutting hospitality VAT from 20% to 10% would cost the government “a lot of money”.

The minister told The Sun: “We want to support hospitality, but let’s be upfront about this. If you’re having a big cut in VAT, it costs a lot of money, and anything that we announce, we want to make sure it’s fully funded, and we explain exactly how we’re going to do that.

“So, when the prime minister announced 20% cut off business rates last month, we said exactly how we were going to pay for that.”

Murray added that he would “not get ahead of anything that might be announced at the Budget. But we need to keep looking at how we can support high streets and particularly pubs because they’re so important to everyone right across the country”.

The campaign calling for hospitality VAT to be cut to 10% launched in June and was spearheaded by chef Tom Kerridge. It was backed by industry bodies including UKHospitality, the British Beer & Pub Association and the British Institute of Innkeeping.

Kerridge said at the time that “the key to unleashing hospitality’s potential to grow and thrive into the future comes through a VAT cut”. Since then, the industry petition in support of the cut has so far garnered more than 345,000 signatures.

The government has introduced a temporary VAT cut from 20% to 5% to all children’s menu meals served in restaurants between 25 June to 1 September, but has stopped far short of a permanent cut across hospitality.

Kate Nicholls, chair of UKHospitality, said at the time: “It’s good to see the government recognise the importance of a lower rate of VAT for hospitality as the quickest and simplest way to lower prices and boost consumer confidence.”

Andy Burnham pledged to reform business rates upon taking office in June, then announced a 20% cut in business rates for pubs, social clubs and live music venues in England, which will come into effect from 1 April 2027.

This week the Treasury launched a review into the way business rates are calculated for pubs and hotels in England and Wales.

Photo: HM Treasury/Flickr