Nigel Farage’s proposal to reduce taxes in order to support pubs has faced criticism from an expert.

The leader of the Reform UK party recently unveiled a £3 billion aid package for pubs, intending to finance it by reinstating the two-child benefit limit and slashing VAT on the hospitality sector from 20% to 10%. The party estimates that these measures could save the industry £1.7 billion annually and stimulate demand by lowering prices.

Additionally, the plan includes eliminating the employer national insurance hike for hospitality businesses, decreasing beer duty by 10%, and waiving business rates for all pubs.

Reform UK asserts that the funding for these initiatives would come from reintroducing the two-child limit on Universal Credit, potentially saving around £3 billion by 2029/30. Farage emphasized the urgency of supporting struggling pubs and the hospitality sector, describing the situation as critical.

However, the IPPR think tank challenged the party’s financial projections, arguing that the actual VAT revenue loss could amount to approximately £5.6 billion based on government data showing £11.7 billion in net VAT receipts from the hospitality sector last year.

Professor Ashwin Kumar, research and policy director at IPPR and a former advisor to Gordon Brown, criticized the proposal, stating that while the hospitality sector requires assistance, it should not be funded by reducing support for disadvantaged families. He highlighted that the plan is not financially balanced, as halving VAT would incur higher costs than the projected savings from reinstating the two-child limit, making it an unsupported tax reduction.

This debate arises as Labour introduced its own set of measures to aid pubs, including a 15% reduction in the threatened business rates hike for April and a freeze on rates for the following two years. Nonetheless, critics argue that these initiatives fall short given the escalating costs and evolving consumer behaviors, partly influenced by the price of alcoholic beverages.