The hospitality sector has welcomed a package of government support that will see VAT slashed and pub and restaurant meals subsidised during August.
Chancellor Rishi Sunak announced a Plan for Jobs on Wednesday that will see VAT temporarily cut to 5% for food and non-alcoholic drinks, and a new Eat Out to Help Out scheme whereby diners will be able to claim a 50% discount up to £10 in August on meals eaten outside the home.
UKHospitality chief executive Kate Nicholls said taken together the measures amounted to “a huge bonus” for the sector. “We hope that the UK public rightly sees it as sign that we are ready to welcome them back safely. The future of many businesses and jobs depends on it,” Nicholls said.
Heineken UK tweeted that the incentives provided “a huge boost to the sector which will see jobs secured and the hospitality sector revitalised”.
Environmental groups, however, warned that the Chancellor’s £30 billion package of measures – which included £2 billion in grants for improving energy efficiency in homes on top of the £5.6 billion in infrastructure spending announced by the Prime Minister in June – did not amount to the long-term strategy needed to ensure a green recovery.
Spending on restaurants, travel and entertainment fell by around 80% at its lowest point during lockdown leading to fears that a slow recovery would threaten the jobs of a large proportion of the 2.4 million workers in hospitality.
Sunak made clear that he was determined to support workers in the hospitality sector that are disproportionately young, with fewer qualifications, and therefore more likely to be unemployed for a long time if they lose their jobs.
He said the Eat Out to Help Out scheme would support around 130,000 businesses and help protect the jobs of their 1.8 million employees. It entitles every diner to a 50% discount of up to £10 per head on their meal, at any participating restaurant, café, pub or other eligible foodservice establishment. The discount can be used unlimited times and will be valid Monday to Wednesday on any eat-in meal, including on non-alcoholic drinks, for the entire month of August 2020 across the UK. Participating businesses will be fully reimbursed for the 50% discount.
The temporary VAT cut, from 20% to 5%, will apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the UK from July 15th 2020 to January 12th 2021.
Although the British Beer and Pub Association warmly welcomed the announcement, it said it would be less help to those pubs where revenue is more drinks led.
The government also announced a new Job Retention Bonus; a one-off payment of £1,000 to UK employers for every furloughed employee who remains continuously employed through to the end of January 2021.
While the measures were largely welcomed as providing a short-term boost to the economy, some experts questioned their long-term impact. Torsten Bell, chief executive of the Resolution Foundation think tank, tweeted of the eat out scheme: “Right idea. Far too small scale to have the lasting macro impact we need.”
Some health campaigners, meanwhile, suggested the 50% discount should only apply to healthy, sustainable foods. Action on Sugar tweeted: “This could have been an opportunity to discount healthy options that would benefit everyone.”
Carys Roberts, executive director of the IPPR think tank, said the money “could have been spent ensuring families have enough to put food on the table by giving proper support to those who need it most”.
Green Alliance said the Chancellor’s speech could mark a positive first step towards a green recovery but only if the ambition is continued throughout the rest of the year. “The Chancellor’s commitment to putting the environment at the heart of the recovery is obviously excellent – now we need funding and detail to turn this into reality,” said the think tank’s head of policy Chris Venables.
“The jury is still very much out on how green the UK government’s recovery will be,” Venables added.