Stephen Jardine: We can't compete on eating out so it's time to follow France and cut restaurant VAT

Published on Saturday 9 July 2011 02:54

IF YOU want to see the real impact of the recession, look inside almost every Scottish restaurant.

Fewer people are eating out and those remaining diners are spending less. For most restaurants across Europe, this is a tough summer…but not for all of them.

In France, cafes and brasseries are reporting brisk business thanks to the government's decision to slash restaurant VAT from 20 per cent to 5.5 per cent. Overnight the menu du jour looks affordable again and some reports suggest the measure has saved up to a third of French restaurants from closure and created up to 30,000 new jobs.

Think about it, lower restaurant prices mean more diners generating increased turnover, leading to increased staffing and more money spent with suppliers. Even the economic bread basket-case that is Ireland has spotted the need to balance tax-revenue raising with the idea of encouraging people to eat out more often, cutting restaurant VAT from 13.5 per cent to 9 per cent. As in France, the Restaurateurs Association of Ireland reckons it will have "a great knock-on effect".

Good news for them but guaranteed indigestion for our own hard-pressed restaurant industry. In a global travel trade, having some of the highest eating out taxes in the world means we simply aren't competing on a level playing field. The annual report from the British Hospitality Association says the current high rate of VAT "is clearly a deterrent to visitors and discourages staycations". On the hospitality frontline, frustration is turning into anger.

The Three Chimneys on Skye has repeatedly been voted one of Britain's top restaurants but after 27 years in the business, owner Shirley Spear believes the industry has reached a watershed.

"Small privately run businesses are being slowly and painfully hung, drawn and quartered and yet the government is depending on us to soak up unemployment and provide career starts for young Scots," says Shirley.

This summer The Three Chimneys advertised for staff and got one application. With food tourism a key government strategy, Shirley believes urgent action is needed. "The proportion of VAT levied on every item we sell is disproportionate to other service industries and also other European countries," she says. "A substantial reduction in VAT could assist with paying better, more encouraging wages to draw staff into the hospitality industry".

And it's not just rural businesses feeling the pressure. In Edinburgh, Andrew MacInnes has just opened a second branch of his popular cafe-bistro Porto and Fi on The Mound, but he's also made time to write to the Prime Minister urging the UK government to follow the French and Irish examples.

"Many of my friends and colleagues are deeply concerned about the future.

The restaurant and hospitality industry is a major source of employment for hundreds of thousands of people, especially during hard times in other industries. The government needs to act and act now," he believes.

So far the Treasury has ignored all the pressure so perhaps it's time to turn up the heat. VAT is not a devolved issue but that doesn't mean the Scottish Government can't have a view on it.

The SNP administration has so far shown a genuine commitment to food and tourism but actions speak louder than words. The Scottish Government should be lobbying for change and leading the way on this issue, demanding a cut, with lost revenues made up by a levy on the supermarkets' record profits.

Next week, Martin Wishart launches his new restaurant in Edinburgh. But if nothing changes closures, not openings, will be the shape of things to come.