Chancellor slashes VAT for hospitality industry and launches his ‘plan for jobs’

Rishi Sunak preparing for the summer economic update statement (Credit: HM Treasury / Flickr / Creative Commons 2.0)

The Government is to cut VAT for the hospitality industry to 5% and introduce an “eat out to help out” discount scheme for diners as part of its plans to restart the economy.

The measures came as part of a wider programme to limit mass unemployment in the months ahead.

Chancellor Rishi Sunak said “the job has only just begun” as he unveiled his own “plan for jobs” this lunchtime.

Sunak told Parliament: “I will never accept unemployment as an unavoidable outcome.”

He detailed a “£4bn catalyst for the hospitality and tourism sector” by slashing VAT for those businesses by three-quarters on food, accommodation and attractions for the next three months.

He also launched a new scheme, “eat out to help out”, which will give a £10-per-head discount for every diner eating out between Monday-Wednesday in August.

Participating businesses will be able to claim the money back each week and have the funds in their account within days, the Chancellor said.

The hospitality sector had 1.4m workers furloughed and remains under huge pressure but Sunak encouraged consumers to find “that new balance between safety and normality”.

Sunak, who has been Chancellor for less than five months, also sought to find a new balance between huge financial support from Government that is deemed necessary and the traditional economic thinking his Conservative predecessors in Number 11.

The Government has already spent £35bn on furloughed and self-employed workers and guaranteed business loans worth nearly £45bn.

Sunak confirmed the furlough scheme would wind down as previously announced, ending in October.

But he launched a new jobs retention bonus that is potentially a £9bn policy to retain people in work.

“If you stand by your workers, we will stand by you,” said Sunak.

Businesses that bring a furloughed worker back will receive a £1,000 bonus if the employee is paid at least £525 per month from November to January.

He confirmed the well-trailled kickstarter scheme, a £2bn programme to pay the wages of 16-24 year-olds starting new jobs that provide training and support.

There were further financial measures for employers taking on apprentices and trainees.

Unemployed people will also be supported, with the DWP getting £1bn to support people back to work alongside funding to double the number of careers advisors.

Other economic stimulus measures were confirmed by the Chancellor in his 25-minute summer economic statement.

A £3bn green investment designed to cut carbon and create jobs will provide vouchers for up to £5,000 for people to insulate their homes while £1bn will be spent on public buildings.

Sunak also increased the stamp duty threshold to £500,000 to March 31, which will take effect immediately. The average cut is worth £4,500 but purchasers can save up to £15,000.

More to follow.