Hospitality trade says chancellor failed to help save sector with VAT cut, while travel industry laments air duty rise
Graham Watson's insight:
A lukewarm reception for the Budget from the business community with hospitality and travel, in particular, left dissatisfied with their lot. It seems that the former were pinning their hopes on a VAT cut and a cap on business rates increases and the latter feel that higher Air Passenger Duty is ill-conceived.
Campaign for Better Transport calls on government to make wealthy pay for ‘hugely damaging’ private flights
Graham Watson's insight:
The Campaign for Better Transport have called for private jet travel to be taxed, ostensibly on environmental grounds, and then use the revenues raised to fund public transport. They argue that by raising the rate of Air Passenger Duty on private flights and also charging VAT on each private jet take-off and landing.
Under all likely scenarios, millions of households will still face energy bills that are unaffordable
Graham Watson's insight:
Nils Pratley's Business Briefs are also focused on the Spring Statement, noting that the poor receive next to no help, and the VAT cut on green homes is equally insignificant.
Is it just me, or am I the only one humming the tune to "Busy doing nothing, working the whole day through...trying to find lots of things not to do" whilst reflecting on the article?
Will the government try to defer soaring energy costs to cushion bill-payers?
Graham Watson's insight:
This article could be Microeconomic or Macroeconomic - however, Faisal Iqbal is mainly looking at the macroeconomic implications for government spending in trying to smooth out the expected rise in energy prices in April. Households are likely to see the proportion of their incomes that they spend on energy to double.
Most analysts expect energy prices to rise by around 50%, but there's also an expectation that the government will somehow look to offset this. All of the usual suggestions are here - cutting VAT, removing environmental levies, and the possibility of some sort of 'cost deferral' mechanism with the government looking to either stagger price increases over 5 years, or with some form of upfront payment to offset the rising costs faced by energy suppliers.
The trade-off is about whether we want this to be short-term, or whether we're prepared to pay for this over 25 years. And, of course, the underlying problems with the market remain - not least a lack of storage facilities.
Coalition of UK industry bodies warns of ‘painful’ job losses if Treasury returns tax to pre-Covid levels in April
Graham Watson's insight:
Accompanying the end of the furlough scheme is a much less discussed change in fiscal policy, with VAT on hospitality and tourism rising to 12.5% today and then returning to 20% next April.
Of course, this isn't popular with a sector that has struggled through the pandemic, and hospitality bosses estimate that prices are going to rise by somewhere near 10% as a result. Even Wetherspoons is increasing the price of its food.
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Publicans welcome grants and reduced VAT rate but still face problems such as big rent bills
Graham Watson's insight:
Just one more Budget story - the hospitality sector aren't overly enamoured of the Budget - whilst they welcome grants and the reduced VAT rate until 2022 - but they are still upset that sales of alcohol aren't included in this.
The other group less than impressed? Aviation - who see the nod in their direction as rhetoric, and nothing more.
The "shared economy" has grown rapidly thanks to technology platforms like Uber and Airbnb.
Graham Watson's insight:
It seems that the net is closing in on the gig economy, with the current state of the public finances providing extra impetus for the Treasury to look at changing its tax rules so as to be able to claim VAT from the sector.
Expect to hear lots of complaints, and recall Necker's thoughts about the similarities between it and plucking a goose.
Chancellor Rishi Sunak has told Tory MPs there won’t be a “horror show of tax rises with no end in sight”, but with the UK cost of the pandemic already at approximately £190 billion, how does the Chancellor plan to pay for everything?
With the cost of the pandemic at approximately £190 billion and counting, how does the Chancellor plan to pay for everything?
Graham Watson's insight:
Newsnight looks at a simple question? Who is going to pay for the cost of meeting the coronavirus lockdown.
It looks at the possibility of there being tax increases, and, I'm pleased to say it makes an early statement that one of the underlying problems is an intergenerational one. Of course, as I've earlier noted, the Conservative manifesto implies that the Chancellor can't raise income tax, national insurance and VAT.
It also looks at other factors - the low borrowing rates, the fragility of the economy and so on.
Rishi Sunak announced his plans to help the economy recover. Here's what you need to know.
Graham Watson's insight:
A handy guide to the Chancellor's Summer Statement highlighting what's going to the furlough scheme, temporary tax cuts - for VAT in the hospitality sector and Stamp Duty - a Green Homes Grant, and help for young workers.
Measures on VAT, business rates and training could be part of his July stimulus package
Graham Watson's insight:
The Chancellor has an emergency budget to deliver this summer: the Guardian outlines some of the policy options that might be available to him - looking at a range of tax cuts, cuts to National Insurance and business rates and infrastructure investment.
All of which costs money - but where is this going to come from? Increased borrowing is my guess. I wonder if George Osborne is going to try and take credit for this, by suggesting that if it wasn't for austerity, we'd never be in a position to do this?
The BBC's Reality Team takes a look at the tax pledges of three of the leading Conservative party leadership candidates, and does a better job than I would of keeping calm.
The point out that all of these grandiose pledges of income tax or VAT cuts would cost and awful lot of money, with some groups, notably wealthy pensioners in one case, doing remarkably well out of them.
However, at some point they'll need to be funded. I wonder is Sajid Javid has found his 'magic money tree' yet?
Some people struggle to get online, putting them at a disadvantage, a Lords committee says.
Graham Watson's insight:
This is an inequality issue - with a House of Lords Committee suggesting that digital exclusion is a major problem and that the government should try to do something to close this gap, not least because 90% of jobs are now only advertised online.
The policy that the recommend is in cutting VAT on low-cost broadband, and in trying to encourage those eligible for so-called social tariffs to use them. According to the article only 5% of the 4.3 million people eligible use them.
Of course, such a move would also enhance the nation's productive capacity too, boosting the supply-side.
Firms in Slough tell us what they are hoping to hear from the chancellor next week.
Graham Watson's insight:
The first of what will be numerous 'vox pops' in the next week, asking people what they want from the Budget. And ironically, given the the Prime Minister is the former Head of School at Winchester, and his Chancellor, the former Head of School at Charterhouse, the BBC has gone to Slough - next door to Eton, to ask, at one of the rare times in the past decade when the Prime Minister hasn't been an Etonian.
Still, it's worth reading what ordinary businesses want. Frankly, I think they've set the bar a bit high. Would competence be too much to ask...
Britons face a shock as household costs soar – and some unexpected items such as beer also go up
Graham Watson's insight:
So good, it's got its own name. The rising cost of living triggered by higher energy bills, means that some are calling today 'Bleak Friday'. This Guardian piece, never slow to chastise the government, explains why looking at the different factors that contribute to a squeeze on disposable incomes.
Fuller’s chief thinks Monday will be ‘trigger point’ for revival as plan B eases and Dry January ends
Graham Watson's insight:
Is there light at the end of the tunnel for the hospitality sector: certainly UK pubs are hopeful that drinkers will return to them from Monday, with the end of Plan B restrictions.
As result of the last lockdown, the Omicron lockdown, pub sales were down by 12% relative to pre-pandemic levels but nearly 25% in London, and the sector are hoping for a reduction in VAT on hospitality.
Chancellor Rishi Sunak will deliver his second Budget for 2021 next week. How will it affect you?
Graham Watson's insight:
I suspect that I'll spend a lot of my weekend looking at Budget articles - this one details a number of potential changes, to VAT on energy bills, to alcohol duties, to capital gains tax, to student loans repayments, to the minimum wage, to tax relief on pensions.
It's a week for thinking about the implications of fiscal policy, not least in distributional terms.
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Analysis: both employers and employees pay NI but the burden weighs heaviest again on younger workers
Graham Watson's insight:
It seems that the government is considering financing increased expenditure on social care by increasing National Insurance contributions. This, according to Larry Elliott, is fraught with difficulty: it imposes higher costs on businesses; it worsens inter-generational equity, by effectively taxing the young to subsidise the elderly.
Of course, it could be financed in other ways - out of taxation for example - but that would fall more squarely on individuals, and governments are reluctant to do this, even if it would make sense.
Grants for 700,000 firms come as Rishi Sunak warns public finances face a challenge ahead of the Budget.
Graham Watson's insight:
The latest in the government-by-leak season comes as it is revealed that the Chancellor is preparing a £5bn High Street 'relief fund' for next week's Budget. This scheme is designed to give a one-off payment of up to £18,000 to firms to support them as the economy recovers.
That said, whilst business owners have welcomed the scheme, there's also a sense that other things, such as an extension of the furlough scheme, another business rates holiday, and a VAT reduction for hospitality business might be a better use of the money in the long-term.
The chancellor has announced that a VAT cut to 5% across hospitality and tourism will be extended.
Graham Watson's insight:
Part of the Chancellor's address to the House today covered the extension of a VAT cut for tourism and hospitality from the end of January until the end of March 2021.
Some chains have passed this onto consumers - predominantly large chains - but for others it's provided a Covid-buffer as they struggle to cover costs.
Starbucks and McDonald's also say they will cut prices after the chancellor 's VAT reduction.
Graham Watson's insight:
The Chancellor's Summer Statement offered restaurants a temporary VAT cut from 20% to 5%, and a number of leading chains - KFC, Nandos and Pret - have agreed to lower prices.
However, it's easy for large chains with substantial cash reserves to pass on VAT. Smaller chains aren't necessarily passing on the cut, but using it to shore up their finances.
It's interesting to see the distributional consequences of this - is the temporary VAT cut designed to support businesses or increase consumer demand. Or both.
The £2bn pledge for the young unemployed will be part of the chancellor's proposals outlined on Wednesday.
Graham Watson's insight:
The Chancellor is going to deliver his Summer statement today, promising to boost job creation for the young, money for environmentally friendly projects, a Stamp Duty holiday and the possibility of a temporary VAT cut, all of which have been trailed over the past ten days.
It's an attempt to stimulate the economy, but rather than the measures themselves, the main effect of the measures is likely to be on consumer and business confidence. That said, this is a vital determinant of future growth.
The notion that the policies are "Youth, youth, youth" another repetitive tricolon amuses me though - it is thought to be forceful. To me it smacks of a government trying to convince itself...
Former chancellor Alistair Darling calls for emergency VAT cut | Alistair Darling | The Guardian
Graham Watson's insight:
Former Chancellor, Alistair Darling has called on Rishi Sunak to repeat his November 2008 move and impose a temporary cut in VAT to encourage consumer spending.
At that time, VAT was temporarily cut from 17.5% to 15%, and there are calls for the current 20% rate to be cut, either by 5% or 3%. However, there's a significant opportunity cost associated with the move and others also think that there are more effective ways of getting money into the hands of the poorest in society.
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