The Chancellor announced a six-month cut in VAT on tourism and hospitality from 20% to 5% today as part of package of measures to stimulate the economy and protect jobs.
Chancellor Rishi Sunak unveiled the package saying it “will help one of our hardest-hit, high employing sectors, hospitality and tourism”.
The £4 billion cut in VAT will apply from Wednesday July 15 and extend to January, with the 20% rate cut to 5% on food, accommodation and attractions including theatres and theme parks.
The Chancellor also announced a series of incentive payments to businesses to bring furloughed workers back to work and to take on trainees and apprentices.
But Sunak insisted the government’s Job retention Scheme “cannot and should not go on” beyond October.
He said: “Calling for an endless extension to the furlough scheme would be irresponsible. It gives people false hope they could just return to the job they had before.
“The furlough scheme will wind down through to October.”
However, he pledged a Jobs Retention Bonus of £1,000 to employers for every furloughed worker brought back to work who is retained at least until January.
Sunak said: “We will pay the bonus for all furloughed employees [who return]. Our message to businesses is if you stand by your workers we will stand by you.”
He promised a three-point plan to support jobs, create jobs and to help people find jobs.
This includes a ‘Kick Start’ scheme for those under 25 which will see the government “pay employers to create jobs for 16-24-year-olds”.
Sunak pledged to pay the wages of ‘Kickstarters’ for six months for a minimum 25 hours a week at a rate of “at least the minimum wage”.
He said £2 billion would be made available for the scheme immediately and there would be no cap on the number of places.
He also promise a £1,000 payment to employers for each trainee taken on, and a £2,000 payment for each six-month apprenticeship place filled, with the addition of a £1,500 payment for hiring apprentices aged 25 and over.
The Chancellor also unveiled an ‘Eat Out to Help Out’ scheme to encourage people to eat out with a 50% discount offer of up to £10 per head on meals in pubs and restaurants on Mondays-Wednesdays throughout August.
Sunak noted 1.4 million hospitality workers had been furloughed during the Covid-19 lockdown and said: “The best job creation measure we can take is to get our pubs, restaurants, cafes and B&Bs bustling again.”
Joss Croft, chief executive of inbound tourism association UKinbound, welcomed the cut in VAT and the Job Retention Bonus Scheme, but called for more support for the sector.
Croft said: “The Chancellor’s economic recovery plan clearly recognises the value of hospitality and tourism.
“The Job Retention Bonus Scheme will also help tourism and hospitality businesses, but only those that survive into next year.
“These measures will not help the many businesses involved in inbound tourism who are on the brink. Longer-term support will still be required for these businesses.”
There was nothing specific in today’s economic stimulus package for the aviation or outbound travel sectors.
However, Prime Minister Boris Johnson told Parliament earlier: “The aviation industry has been very hard hit. That is why we are supporting the industry in all sorts of ways.
“The most important thing is to get a medium and long-term solution so that airlines can get flying again.”
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