VAT hike to hit industry jobs

Today’s VAT increase will lead to the loss of around 8,800 jobs in the beer and pub industry, according to a study by New Oxford Economics.

Further planned duty increases over the course of 2011 will cost the Treasury £40 million in reduced tax revenues and lead to another 10,000 job losses, according to the analysis.

The increase in VAT to 20% sees a typical pub pint break the £3 barrier for the first time, leading the British Beer & Pub Association (BBPA) to call for a halt to further rises in beer duty.

BBPA chief executive Brigid Simmonds says the 2.5% VAT increase will put over six pence on the price of a pint, and comes on top of a 26% rise in beer tax accrued over the past two years.

Simmonds said the duty and VAT “double whammy” is placing shackles on the pub and hospitality sector at a time when it could be creating jobs, and leading the UK economy out of recession. Instead, she feels the government should abandon plans for further beer tax increases.

A BBPA statement said: “The VAT rise will hurt pubs, in which beer is the key seller, far more than other retailers. As most are small, family-run businesses, they are far less able to absorb tax shocks than the big supermarkets.

“The move will further encourage drinking at home instead of in the sociable and supervised atmosphere of Britain’s much-loved locals."

The government is currently sticking to plans to increase beer duty above inflation in the Budget in March, through the tax escalator introduced by the previous Labour government.

However, the latest Oxford Economics research for the BBPA shows that rising taxes mean falling revenues and further job losses in the sector as beer sales fall sharply, leading to more pub closures.

The BBPA says the government should also consider a lower rate of VAT in the hospitality trade, amid growing evidence that similar moves across Europe are proving a winner when it comes to creating jobs and boosting tax revenues.

Simmonds said: “Today’s VAT rise is anther tax blow for the industry. The Treasury is piling tax on top of tax. The 26% rise in beer duty in the past two years will now have an even higher VAT rate charged on top of it. The Treasury needs to think again when it comes to plans for further beer tax hikes in March.”

“The government has recognised that tax increases harm to pubs, and wants policies that don’t damage the sector. Now is the time to translate this wish into action, with policies that keep pubs open, and create jobs and wealth in the UK economy.”

Alan Lodge, 04.01.2011