Hospitality sector counting on Chancellor for support in Budget

In its submission to the Chancellor last month, UKHospitality urged Jeremy Hunt to introduce a new, lower business rates multiplier for hospitality; implement minor short-term immigration reforms; to reform the Apprenticeship Levy; to introduce a temporary reduced rate of VAT; and to give clear direction to Ofgem to intervene in the non-domestic energy market and instruct suppliers to renegotiate over-inflated contracts.

Meanwhile, in a letter to Energy Secretary Grant Shapps this week, leaders in the hospitality sector called for the Government to instruct Ofgem to enable energy contracts signed when prices were higher last year to be renegotiated, due to wholesale prices now being lower, as thousands of businesses are at risk of failing due to high wholesale prices and significant hikes in standing charges.

Elsewhere, the British Beer and Pub Association has warned that two thousand pubs could be at risk of closure without appropriate support in the Budget, and has called for a freeze in duty rates, ‘fair, modernised’ tax rates, a significant increase in the discount for draft beer sold in pubs, and introduction of the previously announced reduced rate for lower-strength beers from 1 August.

However, far from a freeze in duty rates, it’s been reported that an ‘alcohol tax raid’ will be announced instead, with Hunt set to confirm that alcohol duties will rise with inflation from 1 August – understood to be at least 10% for all alcoholic drinks. At the same time, a new system for taxing alcohol will come into effect, with stronger drinks subjected to higher duties.

As a result of the measures, around 90% of all still wines will be hit with a tax increase this summer, according to industry estimates – the biggest duty increase for wine in more than 50 years, according to the Wine and Spirit Trade Association (WSTA), as reported by The Telegraph​​​. The WSTA has estimated a bottle of still wine will be taxed by around 44% more from August.

Businesses are also expected to be hit by a rise in the main rate of corporation tax from 19% to 25% from 1 April, as announced in last year’s autumn statement, despite three ex-Chancellors calling for this decision to be reversed. It will also coincide with the expiry of the super-deduction on business investment.

In a bid to tackle the shortages in the labour market by encouraging older workers who have left the workforce to return, the Government is due to announce changes to taxation rules on pensions. This will increase the amount people can save tax-free on their pension from £1.07m to £1.8m, in a move expected to benefit nearly two million people, according to The Times​​​.

In terms of support targeted at consumers, the Chancellor is expected to announce an extension to the support for consumers on energy bills. The energy price guarantee had been due to increased from £2,500 for the average household bill, to £3,000 from April. However, it’s been widely reported that the Government is likely to extend the current level for another three months.

The Government is also expected to commit to maintain the 5p fuel duty cut, announced last March.

Chancellor Jeremy Hunt will deliver his Spring Budget in the Commons at around 12:30pm.