Carmichael backs hospitality call for VAT cut extension after £115 billion lost sales

Orkney and Shetland MP, Alistair Carmichael, has today backed a call by the hospitality sector for the VAT cut on tourism and hospitality to be extended beyond April. VAT on hospitality is currently set at a lower rate of 12.5% following a tapering of the tax cut over the past year but is currently set to revert to the full 20% rate in April. UKHospitality said on Thursday that the pandemic had resulted in almost £115bn of lost sales since March 2020 for hospitality businesses, leaving the industry 43% down on normal trading conditions.

Mr Carmichael said:

“The figures revealed by the hospitality sector today are stark and a reminder that we risk long-term scarring of this vital industry if we do not support their recovery into the future. I have been campaigning for a long-term VAT cut for hospitality and tourism for years but the pandemic has shown the real need for such a change. When industry speaks with one voice the least the government could do is pay some heed.

“When I was a minister we cut the duty on spirits and instead of dropping, revenues went up. Likewise, a targeted cut to hospitality and tourism VAT could make a meaningful difference to growth in this critical period, particularly for small hospitality businesses like we have in the isles.

“I am glad that my party, the Liberal Democrats, continue to back a long-term extension of the VAT cut for tourism and hospitality, so that these vital industries have the chance to recover and grow strongly in the coming years. The government needs to wake up and realise that reverting to the higher tax rate risks trading a long-term investment in growth for a short-term revenue boost. They must think again.”

UKHospitality chief executive Kate Nicholls said:

“These figures lay bare the utter devastation that two years of this terrible pandemic has wreaked on the third largest private sector employer in the UK, with thousands of businesses closed, many on the brink of collapse, and countless jobs lost. The last thing operators need – and which a lot of them simply wouldn't survive – is a VAT increase.

“Two years on, and with all restrictions about to end, there are signs of hope and recovery. With government support, hospitality – which is full of energetic, creative and entrepreneurial people – must be at the vanguard of the UK's wider post-pandemic recovery.”

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