Rishi Sunak warns a FIFTH of businesses might not pass on savings from VAT cut to customers
RISHI Sunak has warned a FIFTH of businesses might not pass on savings from VAT being slashed to customers.
The Chancellor said today some businesses will choose to keep the savings from VAT being slashed from 20 per cent to 5 per cent.
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The Chancellor warned only 4 out of 5 businesses might pass VAT on[/caption]
Mr Sunak told the Treasury Select Committee: “I obviously am not going to be able to sit here and direct the pricing of every single business in the country and that wouldn’t be right or appropriate.
“But I think throughout this crisis businesses have been doing a difficult job and they’ve responded well when things have been asked of them.
“What we do know is last time around we had a generalised VAT cut in 2008/09 about 4 out of 5 businesses passed that VAT cut on to consumers.”
The tax cuts for businesses in hospitality and leisure sectors will last until January 12, 2021, as the Government tries to boost Brits’ spending to try and make up for lost time during the coronavirus lockdown.
The hope is that businesses will pass on the savings to households in the form of lower prices – tempting them to get out of the house and get spending.
If the savings are passed on in full, it means cuts of 12.5 per cent on the end price people pay.
Making the most of @Pret‘s price cut in response to the VAT reduction that takes effect today for the tourism and hospitality sectors.
— Rishi Sunak (@RishiSunak) July 15, 2020
Many restaurants have already announced they will be passing on the savings.
Businesses such as Accor Hotels – which owns Ibis, Mercure, Novotel and Sofitel – will pass on the full savings to future bookings and food and drink.
But others, such as KFC have made some price cuts but not across their entire menu.
Mr Sunak said even if the savings weren’t passed on to the consumer it would still help save many jobs under threat because of the shutdown.
He said: “I know lots of companies are making a feature of (passing on cuts) but obviously it will be a decision for individual companies to make.
“The important thing is not whether benefits slightly flows to consumers or to the businesses, or some mix of that, all of that is helpful for safeguarding jobs.
“There will be different ways that that benefit flows through but it will fundamentally make it more likely that we can safeguard more of those jobs and that’s what that’s about.”
Cuts to VAT come alongside the government’s new Eat Out to Help Out scheme, which is offering additional savings of up to £10 a head on meals out during August.
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