Paul Askew: The Government’s budget, 'Not the quantum leap we hoped for'

Yesterday, the government announced its budget for the coming year. Measures affecting wide swathes of the economy were mentioned, a handful of which will have a direct impact on the hospitality industry. We talked to Paul Askew, chef owner of The Art School in Liverpool, to get his thoughts.

The measures that will most affect the hospitality industry are undoubtedly the living and minimum wage increases, the changes to the alcohol duty charge, the 50 percent business rates discount for hospitality – and the decision not to freeze VAT rates.

When it comes to the increase to minimum wage and living wage Paul is of the opinion that for most of the bigger businesses, there’s not going to be any change. Because of the staffing shortages and difficulty in hiring new staff members, most bigger businesses have already been paying more than this new living wage.

Minimum wage and duty charge changes

However, he also mentioned that for many smaller businesses who have been hit hardest by the pandemic, this increase could be quite difficult for them with their budgets already tight.

Overall, the scheme should help, but with the changes happening in the industry such as four-day week policies gaining in popularity, it doesn’t seem like it’ll be a particularly big turning point.

The changes seen to the alcohol duty charge were a more obviously positive change.

The simplification of the categories will definitely make it easier and the end of the duty premium on sparkling wine is a big win for British sparkling producers. Paul said they’ll be “dancing for joy” at this announcement.

The other changes that have been made along with the duty charge change are less exciting - with the small producer relief being more of a gesture than a true boost for the industry.

The draft relief is similar, with it being a decent change but when you add it the small change to the price is unlikely to actually change people’s habits.

Business rates and VAT

The 50 percent business rates discount for hospitality is very welcome, as Paul expressed the industry wants a “full reform” that will last longer than the year-long extension. However, he was clear that this discount is “peanuts compared to VAT.”

That is where the issues with this budget start to appear: in the Chancellor’s statement, there was no mention of VAT at all, and current plans suggest a return to 20 percent VAT by April 2022. However, the hospitality industry has been campaigning to make the current 12.5% VAT rate permanent for hospitality and tourism to help business rebuild after Covid.

Paul stated, regarding the governments lack of statement on VAT, that “Their silence is deafening”  in a time when the industry needs certainty.

He also stated that the current plans for a return to 20 percent, VAT will cause the industry to shrink.

Recovery isn't impossible

In their budget address, the government also claimed that the economy will return to pre-covid levels by the turn of the year, which Paul stated was a “very bold statement”.

He said that while the government clearly wants people to be optimistic about the rate of recovery, they only have two months to make this happen.

However, he did note that bounce back in demand across the hospitality industry has been good, so it is possible that the government are correct. He is also of the opinion that if the government’s Covid ‘Plan B’ – which would involve the implementation of Covid passports in as of-yet undefined hospitality settings - came into effect then the return would not happen by the turn of the year.

Overall, it seems clearly that much of the government’s budget has been positive but that it is only a small gesture. A step in the right direction rather than the big changes the industry was hoping for. A lot of it looks like it will help but only time will tell if it actually does.

This budget has put a lot of pressure on the March Budget. It is safe to say everyone is hoping for a big festive period to help set them up for the next year.