By Scott Wright
JD Wetherspoon is bracing itself for “more subdued sales” when a popular Government measure to encourage people to dine out comes to a close, as its outspoken boss repeated calls for a fairer tax regime for pubs.
The pub giant, which has 65 outlets in Scotland, said it has seen sales pick up sharply since the Eat Out to Help Out discount scheme was introduced at the start of August.
The scheme, which entitles consumers to a 50 per cent discount on food and non-alcoholic drinks on Mondays, Tuesdays, and Wednesdays, has helped Wetherspoon recover from a 16.9 per cent drop in like-for-like sales in the 44 days to August 16, though the firm expects to make a loss for the year.
Asked if he would like to see the scheme extended beyond August 31, when it is due to come to a close, chairman Tim Martin said while it has been an “enormously beneficial shot in the arm for a beleaguered industry”, he viewed Eat Out to Help Out as “really a short-term measure”. Mr Martin, who has courted controversy for his views on coronavirus throughout the pandemic, said achieving “tax equality between pubs and supermarkets is the key” to the long-term health of the pub industry.
He urged the Treasury to make permanent the temporary cut in value-added tax (VAT) for the hospitality industry from 20% to 5%, and for action to reduce the burden of business rates on pubs in Scotland and England. Pubs on both sides of the Border were given a 12-month holiday from business rates in March to support them through the pandemic.
Mr Martin told The Herald: “Until recently pubs paid 20% VAT on food sales and supermarkets zero. Pubs also pay about 20p a pint of business rates versus 2p for supermarkets. Those tax breaks have enabled supermarkets to subsidise beer prices, enormously widening the gap between the on and off trade.
“The Chancellor temporarily reduced on-trade VAT to 5% on food and soft drinks recently but it ends in January. If this reduction is made permanent it will be an enormous boost to employment, high streets and will eventually produce more taxes. Taxes should be fair and equitable. It makes no sense for the hospitality industry to subsidise supermarkets – which are often located out of town.”
Mr Martin described the business rates regime in Scotland as “very punishing for technical reasons”, adding that it “makes it very hard to justify opening in small towns”.
Wetherspoon said yesterday that it has now reopened 844 of its 873 pubs following lockdown, noting that sales have been helped by the addition of extra seating outside its outlets. It praised licensing authorities on both sides of the Border for their flexibility in this regard. But it added: “The company nonetheless expects a period of more subdued sales once the scheme for subsidised early-week meals and drinks ends.”
With the cost of high-street rents having been brought into sharp focus by the pandemic, Mr Martin said there would be some merit in the industry attempting to strike lease deals with landlords on a turnover-based model, as being pursued by Innis & Gunn at its new Taproom in Leith. However, he said that, with turnovers high and margins low in Wetherspoon outlets because of lower prices, “I’m not sure how it would work for us”.
He questioned the effectiveness of lockdowns in tackling coronavirus, and said: “Many academics, including Nobel Prize winner Michael Levitt of Stanford University and Swedish government adviser Johan Giesecke, believe that they are not – and that social distancing, combined with rigorous handwashing are the practices for which there is genuine scientific evidence.”
He added: “The debate is riven with rancour and political factionalism, but I believe, on the balance of the arguments, that avoiding full lockdowns and adopting the Swedish approach, is the better solution.”
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