By Denis Sheehan MIH, Publisher, H&C News: Does the new Truss government’s first U-Turn give hope to hospitality.
The Chancellor’s mini budget a few weeks ago gave nothing to struggling hospitality businesses hoping for a reduction in the VAT rate and a reassessment of business rates. Instead, Kwasi Kwarteng focused on tax cuts for millionaires that later the same day he celebrated whilst quaffing champagne with hedge fund managers.
But this morning the unpopularity of his attempt to abolish the 45p tax rate, his first clear policy of direction of travel, has forced him to perform a U-Turn. Former cabinet ministers and dozens of Tory back benchers threatened to vote down his first headline move, and as such he was forced into reverse.
In a tweet just after 8am this morning the chancellor messaged: “We get it, and we have listened.” The UK government will now not go ahead with its controversial plan to scrap the 45p top rate of tax paid by high earners.
On the back on the news the pound immediately recovered to $1.12, but at 9am has now slipped back to $1.11. As the day ahead unfolds, the pound exchange rates alongside gilt yields will add further clarity on international confidence in Truss’ new government.
Last Friday, ratings agency Standard & Poor’s cut the outlook for its AA credit rating for British sovereign debt to “negative” from “stable”, judging that prime minister Liz Truss’s tax cut plans would cause debt to keep rising.
Truss said yesterday morning in an interview with Laura Kuenssberg she was absolutely committed to abolishing the 45% top rate of tax. Less than 24 hours later she has performed a 180.
So, following such a pivot can hospitality now once again hold out some hope that VAT and business rates may be addressed to give businesses more hope of surviving the winter ahead.