There has been a lot of confusion and argument about how the pub trade can close the competitive gap with the supermarkets. Mostly the debate has centred on minimum alcohol pricing and the government’s puny version, a ban on below-cost selling, cost being defined as duty plus VAT, a measure that will have an impact estimated as something between nothing and next to nothing.
A lot of the confusion comes because pricing is seen as a lever to reduce alcohol harm by causing people to reduce their consumption.
As you might know, I’m sceptical about whether this will work. I’m also sceptical about whether it will help pubs, the effect of any of the minimum prices suggested being marginal as far as the widening gap between on and off-trade goes.
Now pub trade mag the Morning Advertiser has come up with a different plan with more interesting potential, and I don’t say that just because I write for it. Honest.
The idea is to cut VAT on food to 5% for pubs and the rest of the hospitality industry. With VAT going up to 20% in January this would be a significant move and go a long way towards redressing the scandal of supermarkets not paying any VAT on food at all.
Of course, this might not play too well to a government so conscientious about reducing the nation’s deficit. But it has a persuasive behind it logic – and a powerful example that it can work.
France introduced 5% hospitality VAT two years ago. As MA editor Paul Charity describes in this week’s issue, since then 21,700 jobs have been created in the industry, the tax they’re paying more than making up for the loss in government revenue caused by the VAT cut.
It has given operators the scope not only to create jobs, increase wages and invest in staff training and customer service but also to reduce prices to the customer.
There’s no reason why British publicans – the growing number that serve food at any rate - shouldn’t respond in the same way. It won’t solve all the problems but it’ll make a substantial difference.
It’s also a campaign that the whole pub industry, not to mention restaurants and hotels, can get behind without any quibbles or qualms.
And when our government says it supports pubs, 5% VAT will be a great way of showing it means it.
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