Reeves’s tax cut on children’s meals a political ‘soundbite’, say restaurateurs | Tax and spending
Restaurateurs say cutting the tax on children’s meals is a political “key idea” that will make little difference to families and businesses.
This week Chancellor Rachel Reeves announced that VAT on children’s menus in restaurants would be temporarily reduced from 20% to 5% between June and September, to help families struggling to make ends meet and provide support to the hospitality industry.
It is part of a package that includes free bus travel for under-16s in England in August and cuts to import duties on some essential foods as part of the “Great British summer savings” campaign.
But there are questions about how much of the savings will be passed on to consumers; Many restaurateurs claim that children’s meals are often sold at a loss anyway.
Will Murray, owner of London restaurant Fallow, offers a children’s menu including pizza, cheeseburgers and grilled fish, priced between £5 and £10. “It’s such a small sound it won’t make any difference,” he said. “Most children’s meals are already discounted to restaurant prices: a VAT reduction wouldn’t even close this gap.”
Murray said there are many other actions the government can take to reduce costs for families and restaurants. “The most important thing they can help with is child care costs, and 5% of food doesn’t provide any meaningful benefit to families or restaurants.”
But Tim Martin, founder and chairman of the Wetherspoons pub chain, now plans to reduce the cost of the children’s menu over the summer. The chain offers children’s meals ranging from £4.99 to £5.75, including chicken nuggets, sausages and mash.
“During this period, we will be reducing the price of children’s meals and this will be appreciated by parents and families,” he said.
The hospitality industry has long called for VAT rates on food and drinks to be reduced, in line with other European countries. VAT, a consumption tax added to most goods and services, stands at 20% for restaurants in the UK; this is one of the highest rates in Europe. The European average for restaurants is around 12%. For example, in Italy, this rate is set at 10% for food sold in restaurants.
Martin said: “We want the government to consider VAT parity with supermarkets, which would mean a permanent VAT cut – a point we have of course raised many times.”
Restaurateur Daniel Crump, who owns Greyhound and Old Town Bistro in Beaconsfield, serves children’s meals for prices ranging from £5 to £10. He said the new measure on children’s food was only “symbolic”.
“It would be good for the government to go further to bring the UK on par with rates in Europe,” he said.
“Restaurants continue to struggle with rising food, energy and staff costs, and many in the hospitality industry are calling for a wider VAT cut that would provide more meaningful, long-term support across the sector.”
Industry lobby group UKHospitality said restaurants were likely to reduce costs on children’s menus following government guidance, but this was “up to individual operators”.
Kate Nicholls, the group’s chief executive, said:: “This should now be seen by the government as a down payment on a move to a lower VAT rate for the entire hospitality industry, with the aim of bringing us into Europe. Our biggest competitors enjoy VAT rates that average around 10% and can be as low as 7%, with the UK being a clear outlier.”
“As the government has acknowledged today, VAT is the biggest lever it can use to reduce prices, fight inflation, increase demand, increase spending, create growth and create new jobs. I would recommend that it be bold and reduce VAT for the entire hospitality sector.”
