Pubs and restaurants in ‘Red Wall’ areas will be hit disproportionately hard by a hospitality VAT hike, Greater Manchester’s night time economy adviser has warned.
Sacha Lord said increasing the tax to 20 per cent next year will ‘kill our industry’, with working class northern areas set to bear the brunt.
Hospitality makes up one in 12 businesses in the Red Wall seats won by the Tories in 2019 in traditional Labour heartlands including parts of the north, according to figures from an Axe The Red Wall Tax campaign launched by Mr Lord today.
With a higher proportion than the national average of one in 30, more businesses and jobs in those areas are placed in peril by the tax hike, the campaign claims.
As many as 120,000 jobs and 12,600 businesses are at risk, it warns.
Pubs and restaurants will have to bump up bills in a bid to survive, the campaign adds, hitting cash-strapped customers in the pocket.
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Chancellor Rishi Sunak slashed the rate of value added tax to 5 per cent in a bid to stimulate spending in the sector when it reopened after the first lockdown last summer.
It was raised to 12.5pc in October and is set to return to its full 20pc rate next April.
Mr Lord told the M.E.N he fears it will kill off businesses already facing a ‘perfect storm’ of problems.
He said: “I fully understand that they have to put it back to 20pc at some stage but the problem is going from 5pc to 20pc within six months.
“You’re creating a perfect storm here. There’s already a massive staff shortage at the moment, so you are paying more to get staff in. With supply chain issues, you’re paying a lot more for produce.”
As well as battling increased overheads and ‘dwindling’ profits, businesses are also now having to pay back the loans and deferred VAT payments that kept them afloat during lockdown, he added.
“Everyone’s having to start to repay their debt and he’s going to hike it up again,” he said of the Chancellor.
“It’s going to destroy businesses.
“Nobody in the industry wants to go cap in hand to the Government - they actually want to trade.
“I get that we need to be safe at the moment but they need to look at a long term vision to help us recover over the next two to three years.
“With the VAT we are not asking for money, we’re saying don’t hike us up again yet.
“If [Rishi Sunak] was sat right in front of me now I would say it’s far, far better to take 12.5pc of something than 20pc of nothing - and that’s where we’ll end up.”
The campaign comes as the country is plunged into Plan B restrictions including renewed work from home orders that have seen restaurants and bars hit by a wave of cancellations, despite being permitted to stay open themselves.
The embattled hospitality sector lost £80.8bn in the first 12 months of the pandemic, and revenue remains almost a third lower than it was before the crisis.
Greater Manchester was hit particularly hard, with tougher restrictions closing pubs and restaurants for longer than in many other parts of the country.
Mr Lord said: “Britain’s pubs, cafes, restaurants, and hotels have already suffered immense damage since March 2020. Sales across hospitality are around half what they were in 2019, and the sector remains in crisis mode.
“Yet for some unfathomable reason, this Government plans to practically double VAT for hospitality businesses, putting at risk the survival of 12,600 businesses, forcing them to raise prices for consumers and six in ten of them to cut jobs.
"And it’s in Red Wall constituencies that this tax will hit people the hardest. This Tory tax rise is a Red Wall Tax on working class northerners, plain and simple.
“I’m not sure why it’s left to me to tell a Conservative Government not to raise taxes, but the road we are going down will do nothing but stifle investment, economic growth and recovery.
“Despite having entered the pandemic as one nation, the Red Wall tax would mean that we emerge more unequal than ever. This is why I’m launching my campaign to Axe the Red Wall Tax.
“If politicians of all stripes are really serious about levelling up, and helping those parts of the country that have had a poor deal for so long, they need a strong and thriving British hospitality sector. The Red Wall tax will kill our industry and is the surest route to levelling down, and I’ll certainly be fighting it every step of the way.”
