Westminster is buzzing. The government has just backed a demand from the nation's top chefs. A cut to VAT for pubs and restaurants to 10%. This is not a leak. It is a signal.
The move, confirmed by Treasury sources late this afternoon, follows a coordinated campaign by culinary heavyweights. They argued the current 20% rate is choking the hospitality sector. They have a point. The sector is still reeling from pandemic debt. Rising energy costs. The burden of business rates. Pubs are closing at an alarming rate. Some 1,500 have called last orders in the last two years.
But here's the politics. This is a classic No 10 gambit. A policy to win back the 'Red Wall' seats lost or threatened by Labour. Those voters like a pint. They like a Sunday roast. A tax cut they can see on their bill is a message: we feel your pain.
I have spoken to a Downing Street adviser. Off the record, of course. The briefing is that the Prime Minister was 'deeply moved' by a letter from chefs including Tom Kerridge and Angela Hartnett. That might be true. But the polling numbers are what really moved him. Internal polls show the hospitality sector is a key battleground. A VAT cut is a wedge. It divides Labour. The unions want more public spending. The shadow chancellor is under pressure to match the pledge or be seen as anti-business.
There is a catch. A big one. The Treasury has not yet costed the policy. Cuts to 10% could cost £4-5 billion a year. That is a lot of uncosted spending for a chancellor who preaches fiscal responsibility. The Treasury is pushing back. They want a 'temporary' cut, maybe two years. No 10 wants permanent. This is not settled. It is a classic cabinet scrap in the making.
Another twist. The Treasury wants a 'two-tier' system. Full VAT for supermarkets. Reduced for restaurants. That would be a nightmare to enforce. But it shows how serious the government is about targeting the relief.
Let's look at the lobby. The British Beer and Pub Association is delighted. The Wine and Spirit Trade Association is less so. They want the cut extended to off-licences. Expect them to kick off in the coming days.
Now for the timing. The government is expected to announce this at the Budget in March. But there is chatter of a 'mini-Budget' before then. That would be risky. Rachel Reeves would tear them apart. But No 10 is rattled. They need a win. They need to show they are on the side of the 'squeezed middle'.
One final thing. This is a test of the new Number 10 operation. The old team was leaky. This one is supposed to be more disciplined. Today's story came out of the gate fast. That suggests a controlled leak from the PM's team. They are setting the agenda. For now.
Veteran watchers will remember the headline: 'Pubs and Restaurants VAT Cut'. It sounds like common sense. But in Westminster, it is a loaded weapon. It will be used to bludgeon the opposition. It will also be used to settle scores inside the cabinet. I suspect we will see a few bruised egos before this is over.
