Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment he has made of the (a) effectiveness of the reduction in VAT for the hospitality sector and (b) potential merits of extending that reduction.

This question was answered on 15th November 2021
The temporary reduced rate of VAT was introduced on 15 July 2020 to support the cash flow and viability of around 150,000 businesses and protect over 2.4 million jobs in the hospitality and tourism sectors. As announced at Spring Budget 2021, the Government extended the 5% temporary reduced rate of VAT for the tourism and hospitality sectors until the end of September. On 1 October 2021, a new reduced rate of 12.5% was introduced for these goods and services to help ease affected businesses back to the standard rate. This new rate will end on 31 March 2022.

All taxes are kept under review, but there are no plans to extend the 12.5% reduced rate of VAT. This relief has previously been costed at over £7 billion, but the latest forecast means it may now cost over £8 billion. The Government has been clear that this relief is a temporary measure designed to support sectors that have been severely affected by COVID-19. It is appropriate that as restrictions are lifted and demand for goods and services in these sectors increases, the temporary tax reliefs are first reduced and then removed in order to rebuild and strengthen the public finances.