Vara criticises threat of restaurant and takeaway tax on local residents
Shailesh Vara, MP for North West Cambridgeshire, has expressed concern at the latest tax increase being considered by the Government.
Vara criticises threat of restaurant and takeaway tax on local residentsShailesh Vara, MP for North West Cambridgeshire, has expressed concern at the latest tax increase being considered by the Government. Chancellor Gordon Brown has set up a review of local taxation which is considering a new tax on eating out and takeaway food. The money raised would help fund local authorities. However, it is likely that any extra money raised by local authorities will lead to a corresponding decrease in the central government grant.
This proposal comes after research has shown that spending on eating out and drinking has doubled in the last decade and is worth £88bn a year. It seems that the Government wants a slice of that success. This new tax would be in addition to another controversial proposal, a new tax on hotel rooms.
Mr Vara said:
"I am very concerned with this proposed new tax on restaurants and takeaway food. A tax along the lines suggested would force up the price of eating out or ordering a takeaway and will threaten the existence of many small restaurants. It will also mean that some people will stop going out to eat or stop ordering takeaways, as it may be one tax too many for them.
"These plans need to be nipped in the bud before local residents find themselves paying through the teeth - quite literally - for eating out or ordering a takeaway. "
Mr Gulzar Ahmed of Maharanis Indian restaurant in Hampton Hargate commented:
"This is a very competitive business and any new taxes will only make matters worse. An additional tax will mean that some people will stop eating out, which is bad news for them and bad news for us."
Cllr Gary Parker added:
"This proposal will be a disincentive for restaurant owners and will lead to a lot of confusion and extra cost for diners. People pay enough in taxes already. Charging them extra to dine out is a step too far."
Notes to editors:
The Government is currently conducting a review into local government finance which will report by the end of 2006. This review was commissioned by Gordon Brown and John Prescott, and is headed by former Labour councillor, Sir Michael Lyons. Sir Michael Lyons previously sat on Gordon Brown's review of the location of government departments.
The final report in town hall finances will be published at the end of this year. The interim report in December suggested:
"The most frequent proposal was for a local tax on hotel and similar accommodation… I also received research commissioned by the Association of London Government on the options for levying taxes on restaurants, entertainment venues and sporting events... I am interested in exploring this issue further"
Lyons Inquiry into Local Government, Consultation Paper and Interim Report, December 2005, p.76-77.
The Association of London Government, which represents London boroughs, has been lobbying the review to introduce new 'minor' taxes. Its follow-up submission in April 2006, approved by the then ruling Labour administration on the body, asserted:
"The ALG supports the proposal that local authorities should have access to a wider range of local taxes and charges. The Association therefore welcomed the increased flexibility arising from the Local Government Act 2003, which allows local authorities to set charges to cover costs of discretionary services and gives them more freedom to trade. There may be a range of other 'minor' local taxes"
ALG, Response by the Association of London Government to the Lyons Inquiry Consultation Paper and Interim Report, April 2006.
Following the May 2006 local elections, the ALG is now no overall control. The ALG is funded by London boroughs - and has commissioned detailed work at the local taxpayers' expense on these new local taxes.
In its detailed submission to the Inquiry, the ALG have outlined how such a tax will work. They assert:
"A tax on restaurant eating would fit well into a package of measures to tax tourists' activities without placing an undue burden on one particular aspect" (para 4.34).
"Research suggested total expenditure on eat-in meals from restaurants and pubs of around £8 billion. A supplement of, say, 6% would yield around £500 million. As with a tax on hotel accommodation, this would represent only a small proportion of total local government expenditure and therefore could be deemed a 'minor tax'." (para 4.36).
"A percentage supplement to each meal makes most appeal for the form of the tax. Definition would not be a problem, but the large number of premises selling both eat-in and take-away food suggests that the tax would work best if set at the same rate for both" (para 4.50).
"A new tax on take-away food would yield more than that for accommodation or restaurant food if taxed at the same rate, but even a rate of 10% would still leave the tax as 'minor', yielding around £1 billion in England" (para 4.55).
"A take-away tax could be introduced on its own given the strong link to costs, but our view is that introducing it alongside a restaurant tax at the same rate would solve many definition problems and avoid any distortion of trade between the two streams" (para 4.61).
"On balance, a percentage supplement to each meal is our recommended form of the tax" (para 4.62).
"There are no particular issues about setting, collecting or distributing the tax; it would be stable and relatively buoyant. The tax would, however, be less progressive than a restaurant tax but could be defended if it were introduced alongside the more progressive restaurant tax" (para 4.63).
Association of London Government, Exploring the scope for minor local taxes, 2005.
Analysis by the Office of National Statistics last month found that consumers spent £88 billion on food and drink in restaurants, pubs and takeaway meals in 2004, double the figure spent in 1992.
Office of National Statistics press release, 'Spending on eating out overtakes meals at home', 18 August 2006.
A study by research group, Mintel, in April observed that, "eating out is now truly ingrained within the British culture with the majority of consumers eating out on a regular basis. It is an important aspect of social habits whereby consumers can maximise their free time by eating and meeting with friends and family at the same time. The increased frequency and informality of dining out has been made possible by two key factors. Eating out has firstly become a cheaper and more low-key affair and consumers have become better off. This is not to say that eating out is no longer a special occasions since the market clearly offers a spectrum from premium restaurants of notoriety to casual dining outlets that provide more everyday fare."
Mintel, Restaurants - UK, April 2006.
· Restaurant taxes are common in the United States and Europe.
For example, in France, VAT is levied at 19.6% on restaurant meals. The French Government has been trying to reduce its unpopular VAT rate on restaurant meals, but has been blocked by the European Union.
In Las Vegas, there is a 7.25% on restaurant and take-away meals, in Columbia 10% and in Washington state, 9.3% on restaurants and coffee shops.
As the label of a 'minor tax' suggests, a restaurant and fast food tax could not raise enough money to cut the level of council tax. Even if it raised £1.5 billion, this pales into insignificance compared to the fact that council tax currently raises £19 billion in England, and government grants to local government represent £62 billion on top. The Government would be likely to cut government grants to compensate for the additional revenue to councils, turning a local tax into a central 'stealth' tax for the Treasury.
Photo:From left to right: Cllr David Thorpe, Mohammed Yasin, Zafar Mohammed, Shailesh Vara MP, Cllr Shiela Scott, Gulzar Ahmed and Cllr Garry Parker.