Shadow Chancellor Rachel Reeves has launched a scathing attack on the government's decision to extend the VAT cut for the hospitality sector, branding it "unfair" for small businesses.
Speaking at a Gaucho restaurant event, Reeves argued that the policy disproportionately benefits large chains while doing little to support independent operators struggling with rising costs.
"Big chains win, small businesses lose"
Reeves highlighted how major hospitality groups like Gaucho can take full advantage of the VAT reduction from 20% to 12.5%, while smaller establishments often lack the resources to benefit similarly.
"This policy is fundamentally flawed," Reeves stated. "We're seeing big chains pocket the savings while small businesses, the backbone of our high streets, continue to struggle."
Alternative proposals
The Labour frontbencher proposed alternative measures including:
- Targeted business rates relief
- Reform of National Insurance contributions
- Direct grants for independent hospitality businesses
Reeves warned that without proper support, many small hospitality businesses risk closure as they face a "perfect storm" of energy price rises, staffing shortages and supply chain issues.
Industry reaction
While large restaurant groups have welcomed the VAT extension, representatives from small business organisations have echoed Reeves' concerns.
"The current system creates an uneven playing field," said one independent restaurant owner. "We're competing with chains that can now undercut us on price thanks to government policy."
The Treasury maintains that the VAT cut has helped protect jobs across the sector, but pressure is growing for more targeted support as the cost of living crisis deepens.
