Tuesday, 13 October 2020
Financial Resolution No. 3: Value Added Tax
Obviously we need to support businesses during this difficult period but there are problems with this approach. I am not going to vote against this resolution but the Government could have provided supports in a more targeted way. The first point is that the employment in the sectors affected by this VAT change tends to be of very poor quality. I repeat the point we made during the last period of a reduced VAT rate that if a benefit like this is to be given to this sector, it should be contingent on improving the working conditions of staff. People working in the hospitality sector are among the poorest paid and have the most precarious type of employment with the lowest level of protections and it would be fair enough to make this VAT reduction contingent on improving both pay and conditions.
The second point is that there are more effective ways of supporting this sector. If the businesses involved are not generating turnover, then a reduction in VAT is not much good to them. It probably would have been better to introduce some kind of voucher system to encourage all of us to spend more in this sector, thus generating business and improving the lot of the industry rather than reducing VAT on a very low level of activity. That would have been a better way. There are lots of people whose incomes have not been impacted and who need to be encouraged to spend more in areas like this.
There are questions as to how targeted this approach is and what businesses are included. It has been confirmed this evening that hairdressers are included but it is not clear whether spas and beauty salons are covered. The Minister should provide clarity on that point. Overall, this is a very blunt instrument. I do not see why periodicals and magazines would get the benefit of a VAT reduction. It would have been possible to introduce a more targeted and more effective measure to help this sector. It is also important that workers in this sector are given some protection.