Business

Halving VAT 'will create thousands new jobs'

Cutting VAT on food and drink could create new jobs
Cutting VAT on food and drink could create new jobs Cutting VAT on food and drink could create new jobs

THOUSANDS of new jobs would be created in the north if the British government halved value added tax (VAT) on food and drink, a campaign group claimed yesterday.

The VAT Club group believes 425,000 jobs would flow in Britain and Northern Ireland if VAT on food and drink was cut from 20 per cent to 10 per cent - and an additional 150,000 if the tax was reduced to 5 per cent.

And their research has been welcomed by South Down MP Margaret Ritchie, a vocal advocate for a reduction in taxation for the tourism and hospitality industries.

Jacques Borel said his research for the VAT Club found that cuts in other EU countries led to price reductions and increased customer demand.

He said: "The high rates of VAT applying to pubs, restaurants, hotels and catering businesses 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.

"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."

The group, backed by dozens of food and drink companies, will submit a report to the government next week, claiming that reducing VAT to 10 per cent will lead to a surplus for the Treasury of £111 million after three years.

Ms Ritchie, founder of the All-Party Parliamentary Group (APPG) on the visitor economy, has supported the VAT Club Campaign’s calls for a reduction on VAT on food and drinks.

She said: "The UK is one of only three countries in the EU that has not taken advantage of the opportunity to cut VAT on tourism and hospitality and, thus, stimulate employment in these industries.

"We only have to look to the south and see the 9,000 jobs created in the first year of their VAT reduction to 9 per cent to see how beneficial this could be.

"This measure would also go some way to addressing the current youth unemployment crisis given the high proportion of young people who find employment in the tourism and hospitality sector."

Ms Ritchie added: "Northern Ireland businesses, in particular, are at a distinct disadvantage as they try to compete with the south in tourism.

"This is a matter I have frequently raised with the Chancellor and one that I hope to pursue with even greater vigour now that we have established the APPG on the visitor economy.”

The Northern Ireland Hotels Federation has previously claimed that a refusal to reduce VAT to the same 9 per cent level in the Republic will cost the Northern Ireland economy £128 million in lost economic potential in the next six years.