SNP warns Rishi Sunak failure to make VAT cut permanent would be ‘final nail’ in coffin for hospitality and tourism
The SNP has urged Rishi Sunak to make the reduced VAT rate for hospitality and tourism permanent.
Ian Blackford, the party’s Westminster leader, has written to the Chancellor along with Shadow Chancellor Alison Thewliss calling for an urgent meeting to discuss the "deep financial struggles” facing the sector.
It comes as the UK government looks set to push ahead with plans to increase the VAT rate to the pre-pandemic level of 20 per cent - up from the temporary 12.5 per cent.
The pair wrote to Mr Sunak earlier this week warning the scheduled return could “represent the final nail in the coffin for hundreds of employers".
Mr Blackford said: "The reduction in VAT introduced by the UK government was welcome, however, it is now vital that that support is not abruptly pulled from under the feet of struggling businesses.
"The hospitality and tourism sectors have been particularly hard hit during the pandemic, and although hotels are now operating, businesses which would normally expect to run full books at this time of year are operating at much reduced capacity.
"Many are still navigating through the deep financial struggles due to the pandemic, and the reality is they face the real prospect of closing this winter and never reopening should the Treasury plough ahead with plans to raise VAT to 20 per cent.
"Increasing the VAT rate to its pre-pandemic level could be the final nail in the coffin for hundreds of employers at this difficult time.
"If the Chancellor is serious about protecting businesses then he must heed our calls for an urgent meeting ahead of the budget to discuss the real concern from within the industry over the planned increase in VAT."
In contrast to the UK government's approach, the Irish Government has confirmed in its budget that it intends to maintain its reduced rate of nine per cent for the hospitality sector till August 2022.
Ms Thewliss MP added: "The SNP has repeatedly called for a cut in VAT for the hospitality and tourism sector in order to protect businesses, jobs, and to ensure the industry is able to properly recover from the pandemic.
"We warmly welcomed the vital reduction to five per cent which was a lifeline to many businesses in these challenging times, however, the reality is that due to prolonged closures, many businesses have not seen the full benefit of the temporary reduction.
"The Treasury must take all the steps that it can to protect the industry, and it is critical that the Chancellor does the right thing and makes the 12.5 per cent rate permanent.
“Refusing to do so risks a wave of closures and job losses in the hospitality and tourism sector."
A Treasury spokesperson insisted the lower rate was always a “temporary measure”.
They said: “The hospitality and tourism sectors have benefited from extensive support over the pandemic through our Plan for Jobs, with the furlough scheme, tax cuts and deferrals.
“We went long with our support, and that’s why hospitality and tourism firms can continue to access a reduced rate of VAT through to March 2022 - and our Recovery Loan Scheme.”