The Saviour of the British Pub - A Frenchman?

Ever heard of Jacques Borel?  No, neither have I, but this 85 year old Frenchman is on a mission – to breathe life back into British pubs by slashing the rate of VAT levied on food and drink.

He has a good track record so far - In Belgium, the Czech Republic, France and Germany, VAT on restaurant food has been cut to around 5%. Before the French parliament slashed VAT, Borel had four meetings with Nicolas Sarkozy.

Borel claims that his campaign has already created 650,000 new jobs and it is his ambition to have launched one and a half million new jobs in bars and restaurants throughout Britain and Europe before he finally calls it a day and retires

 “Before you meet a minister, you must convince junior ministers and their aides that you have a convincing argument,” he says. “If they agree to set up a meeting, they prepare a two-page briefing for the minister, with the key points highlighted, so he will have a summary of the case before he meets you.”

In Britain he is backed by 32 supporters from the food and drink industries (and me) including the Independent Family Brewers of Britain (IFBB), the British Beer and Pub Association (BBPA), and the Association of Licensed Multiple Retailers (ALMR).  The aim is to create 140,000 new jobs in Britain as a result of cutting VAT from 20% to 5%.

The facts are as follows - In Britain there is a 42% rate of tax on beer and Ireland and the UK are the only EU countries where supermarket food is zero rated for VAT. As a result, the supermarkets can subsidise alcohol by selling it at a loss while people who eat in pubs have to pay 20% VAT. 

“Cheap supermarket booze,” adds Jacques “is the cause of binge drinking. The medical profession says that 95% of people they treat for liver disease bought their alcohol from supermarkets. The best way to tackle binge drinking is to get people back into pubs.”

The brewing industry accounts for 1,300,000 jobs if you include pub and brewery workers, farmers that grow the raw materials needed to make beer, and transport companies that deliver the raw materials and the finished beer. Cutting VAT would not only create new jobs in pubs but there would be a knock-on effect in the supply chain. For every 100 new jobs in the pub trade, a further 70 would be added in brewing, farming and transport.

Jacques Borel has had success in in mainland Europe, where the Belgian, Czech, French and German governments have responded to his campaign by slashing VAT from 19% to 5 or 7%. In Finland, where VAT is an astonishing 23%, the rate has been cut to 13% for the restaurant industry. In France alone 21,700 jobs have been created since tax was reduced. 

Now the European Commission has adopted a unanimous decision by the 27 Ministers of Finance to allow each member state to apply a reduced rate of VAT to the restaurant industry instead of the standard rate.

Jacques Borel stresses the impact of a tax cut on trade by pointing to the effect on one French restaurant group. Flo runs steak houses and brasseries and is listed on the Paris Stock Exchange. The reduction in VAT in France enabled the chain to cut prices by 5.2%. As a result, the number of customers rose by 8.5% in just three weeks and the company’s share price rose from two euros before the cut to 4.16 today.

He fully expects a similar increase in trade for British pubs. The money created by a tax cut and increased trade would be used, Borel says, to not only cut prices but also create employment, raise wages, improve training, refurbish pubs and increase profits.

Of course it would! Listen to Jacques and read  Keynesian Pub Economics