The VAT Club is planning to open an office in London and appoint a deputy to Jacques Borel in an effort to turbo-charge the campaign for a lower rate of VAT on hospitality after the Treasury formally rejected its arguments, M&C Report has learnt.

Borel has identified an office building on Trafalgar Square to become the London HQ for the campaign and proposes the recruitment of a “deputy of high calibre having experience with HM Treasury, Whitehall and Westminster” and an executive assistant - at a cost of more than £200,000 per year.

In a report for VAT Club members entitled Autumn Estimate 2013, seen by M&C Report, Borel outlined the scale of the challenge now facing the VAT Club, and stated: “One man alone cannot do it.”

After receiving a knock-back from the Treasury earlier this year, Borel revealed that the campaign is now targeting a VAT cut in the 2015 Budget, rather than the 2014 Budget as originally planned.

“While the aspiration would be to get concessions in April 2014, it was more realistic to have a target date of April 2015, as it would take time to build up a constituency of support among MPs, opinion formers and civil servants,” he said.

Treasury response
Following a meeting with Treasury officials on 25 September 2012, attended by Borel and Kate Nicholls, strategic affairs director of the ALMR, Borel received a letter from then-head of VAT rates Stephanie Farr, dated 21 February 2013, stating: “We disagree with your conclusions [that a VAT cut would lead to increased income and corporation tax receipts and lower social security payments]. We disagree with your conclusions on the number of jobs created, neither do we agree that these would be new, rather than displaced jobs.

“For the reasons set out above, we are unable to agree that a VAT cut for the hospitality sector would bring the economic benefits suggested by your report. I know you will be disappointed, but I can assure you that we have thoroughly considered the case.”

Borel is now seeking a further meeting with the Treasury to explore a discrepancy in the two parties’ estimates of the direct fiscal loss resulting from a VAT cut to 5% for hospitality. The Treasury says £11bn-12bn; the VAT Club £7.8bn.

Campaign objectives
Meanwhile the report revealed that the VAT Club - on the advice of specialist PR company Fleishman Hillard - considered revising its campaign objectives, to include an initial VAT cut to 10% instead of 5%; a VAT cut for beer and wine with food instead of an across-the-board reduction; and the VAT cut limited to pubs, restaurants and catering, with accommodation excluded at this stage. All these proposals were rejected at a strategy meeting on 4 September 2013.

The minutes recorded: “While at some point the campaign may have to accept that only a lesser reduction is achievable, at this stage we should ‘shoot for the stars’ and seek a reduction to 5%.”

The VAT Club did agree to pursue an all-party approach to its lobbying activities - “to continue dialogue with all major parties [including UKIP] with the aim of getting them to include a promise to reduce VAT rates on hospitality services in their respective manifestoes”.

Fleishman Hillard “held a meeting with the special adviser to shadow chancellor Ed Balls, which had gone well, with interest expressed in the concept of a fiscally neutral rebalancing of VAT on prepared food”.

The VAT Club was also “cautioned against getting into arguments with individual MPs not supportive of the campaign, most notably Andrew Griffiths MP, an influential backbencher…”.

Membership recruitment
In a frank assessment of the VAT Club’s activities to date, Borel conceded that too much time has to date been spent on recruitment of campaign members, and not enough time on lobbying. “The time was improperly allocated: 80% on financing search; 20% on lobbying. It should have been 50/50.”

That said, the report stated “that a key priority going forward would be the financing of the campaign through to 2015, as this was the likely target date to secure concessions from HM Treasury”.

It emphasised the importance of increasing membership of the VAT Club, which has been static at 43 since the beginning of February 2013”, and set a new and “ambitious” target of five new members per month towards a total of 32 new members.

The report praised JD Wetherspoon chairman Tim Martin for his efforts to recruit fellow industry leaders. “Tim Martin has written to 34 CEOs already contacted by [Borel] in the past inviting them [to] 15 different information sessions… from September 2013 to December 2013. Fifteen CEOs have so far answered positively and six have refused. Nine more are anticipated to accept the invitation. [Borel] anticipates that 12 of the 24 will sign the contract and pay the entry fee.”

And it urged other VAT Club members to do the same. “Now time is of the essence. We have only 18 months to win,” wrote Borel.

As the campaign intensifies, its expenses have increased from £1,000 per calendar day up to December 2012 to £1,528 in the third quarter of 2013 - in part to fund the recent Tax Parity Day on 25 September.

Borel update
Borel told M&C Report: “The London office has been approved on the condition that we raise revenues at a certain level in October, November and December. The odds of that are 70% to 80%.”

He explained this was necessary as “England has been the most difficult country to campaign in - much more difficult than any of the others, because the English are sceptical. But I remain very confident that we will win - even more so after the success of the Tax Parity Day”.

Borel said VAT Club members had provided “excellent feedback” on the Autumn Estimate 2013 report, and “they are excited that the campaign is going to accelerate”.