George Osborne, UK chancellor, will be delivering the budgetary statement in November 2011. Business owners will be among those who are eagerly awaiting the outcome of the chancellor’s statement, hoping that he will ease back on the austerity deal which is to last for four years. The catering sector is among the hopefuls waiting for news of a cut in VAT rates.
A number of experts believe that the chancellor intended the VAT to rise to 20 percent in January 2011 as a temporary measure which may be reduced in the next 12 months. However, some sectors, which includes the catering industry, are hoping that individual services and goods will be given a varying rate of VAT. According to a report published by Oxford Economics on Thursday 13th October, UK tourism has been hugely affected by the rise in VAT. The report reveals that 2.4 million individuals are employed directly by restaurants, caterers and hotels, which produce £34 billion annually to the local economy in profits and wages. The report was commissioned by the British Hospitality Association who outlined the expected benefits of a VAT reduction. It is their belief that 236,000 jobs would be created from a cut in VAT on the services and accommodation for tourists by the year 2015, and another 239,000 by the year 2020.
The report argues that the reduction in unemployment benefit and extra revenue, generated by people in new jobs, would compensate the Treasury for the lowering of VAT in the hospitality industry. However, it is recognised that most sectors have the same argument, so it is a case of waiting to see if the chancellor will decide to reduce VAT.
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