A North Ayrshire and Arran MP has challenged the premature scrapping of the reduced VAT rate on hospitality goods and services, despite the pandemic having a disproportionate impact on the sector.

Describing the UK Government's plans as "reckless", Patricia Gibson, who is the SNP's Consumer Affairs spokesperson, welcomed the Treasury's earlier cut in VAT but has warned against prematurely ending support which proved to be a lifeline for many.

Commenting, Mrs. Gibson said: "Hospitality and tourism have been hard hit during the pandemic and it’s critical that every avenue is explored to prevent firms from going under or being pushed into avoidable financial hardship and debt.

"The reduced VAT rate on hospitality goods and services has served as a lifeline for many businesses in these challenging times.

"Prematurely scrapping the cut as we recover from the pandemic is reckless, hitting businesses that barely survived COVID. 

"Rather than imposing arbitrary deadlines and setting up many already struggling businesses for a financial blow, the Chancellor should assess the potential merits of extending the reduced VAT rate - common across Europe - and strengthen support to protect businesses and jobs."

When challenged by Mrs. Gibson if the Treasury will make an assessment of the potential merits of extending the reduced VAT rate on hospitality goods and services, Financial Secretary to the Treasury, Jesse Norman MP rejected the call and instead confirmed the UK government has "no plans to make the reduced rate of VAT permanent."

Mrs. Gibson’s Question: “To ask the Chancellor of the Exchequer, if he will make an assessment of the potential merits of extending the reduced rate of VAT on hospitality goods and services.”

Mr. Norman Replied: “In order to support the cash flow and viability of around 150,000  businesses and to protect over 2.4 million jobs, the Government has applied a temporarily reduced rate of VAT (5 per cent) to goods and services supplied by the tourism and hospitality sectors, which will now end on 30 September 2021.

"On 1 October 2021, a new reduced rate of 12.5 per cent will be introduced for these goods and services to help affected businesses manage the transition back to the standard rate of 20 per cent. The new rate will end on 31 March 2022.

“The Government has been clear that the reduced rate of VAT is a temporary measure. It is right that, as restrictions are lifted and demand for goods and services in the tourism and hospitality sectors increases, this relief is reduced and eventually removed in order to rebuild and strengthen the public finances.

"This policy will cost the Exchequer over £7 billion and, while the Government keeps all taxes under review, there are no plans to make the reduced rate of VAT permanent.”