Chancellor Rishi Sunak has delivered his spring statement, which has left the live sector largely disappointed.
The principal concern is the VAT rate, which was cut from 20% to 5% for hospitality (including concert tickets) during the pandemic. Even though venues were unable to stage gigs for much of that time, the sales tax cut was seen as a welcome development and helped venues once they reopened last summer.
The planned six-month reduction was subsequently extended twice, and was followed by an increase to 12.5% for 12 months. But despite widespread calls for the reduction to remain in place, Rishi Sunak has resisted the clamour for another extension as part of his mini-Budget. VAT will return to 20% next month as planned.
“Live music is facing new and unprecedented challenges that threaten to wreck one of the UK's cultural crown jewels - a 7.5 percentage point increase in VAT on tickets, wholesale cost increases and major ticket cancellations due to spiking covid cases,” said Greg Parmley, CEO of umbrella trade group LIVE. “At the same time, the last remaining help from government is being withdrawn.
“While we welcome the Business Rates discount, we need further measures that can provide a cash injection to all areas of the sector, such as action on VAT. We are calling on the Chancellor to look again at these measures, which would help secure the sector’s recovery and allow our £4.5bn industry to continue boosting the UK economy.”
The pre-announced 50% Business Rates relief package is effective next month for eligible retail, hospitality, and leisure properties.
LIVE is calling for the VAT increase to be deferred, and for a cultural rate of 5% VAT on ticket sales to be considered by the Chancellor. The trade body also wants a restructure of the government’s reinsurance scheme to allow for artist cancellation due to Covid-19 to be covered.
There has been a flurry of festival announcements for 2022 in recent days. But the sector remains fragile after two summers were impacted by the pandemic.
“We are disappointed that the Chancellor has not responded to our repeated calls to grant an extension to the 12.5% VAT rate on festival tickets beyond the end of March,” said Association of Independent Festivals CEO Paul Reed. “Festival organisers are experiencing cost increases of between 20-30%, which is way beyond rapidly rising inflation, with extreme pressure along the entire supply chain. We urge the government to look at this again and maintain the reduced rate on VAT.
"We also ask the government to urgently reconsider the removal of tax incentives to use certain biofuels. These should be maintained at the current rate as a transitional measure to encourage use of greener fuels at festivals. To do otherwise is completely contrary to the government’s objectives of incentivising energy efficiency and reducing emissions.”
The spring statement missed the opportunity to help the music industry at a crucial point in its fightback
Music Venue Trust CEO Mark Davyd has used his latest Music Week column to highlight the third highest VAT rate in Europe for cultural ticketing.
Reacting to the Chancellor’s statement, Davyd said: “Music Venue Trust warmly welcomes the Business Rates discount, which will maintain the 50% Business Rates for grassroots music venues that the government announced pre-pandemic. With no action for businesses on energy bills, NI liability and the missed opportunity of action on VAT that would support the sector to recover from the Covid crisis, the outcome of the budget is that none of the extraordinary financial pressures being placed on venues have been mitigated or alleviated.
“This Budget has failed to respond to inflationary increases from rent, supplies, and services running in excess of 20% across the sector. The government has recommitted itself to supporting business investment, especially research and development. We again ask that the Secretary of State for Culture should enter into meaningful discussions with the live music industry to create R&D tax incentives and direct financial support to achieve that outcome.”
UK Music chief executive Jamie Njoku-Goodwin has been calling for action on VAT to help the music sector.
"After two years of devastation from the pandemic and fresh economic challenges coming down the track, the music industry has been desperate to get back on its feet and get the support we need to secure a sustainable recovery,” he said. “So we welcome the confirmation of the extension of business rates relief that will benefit many music venues. However, the spring statement missed the opportunity to help the music industry at a crucial point in its fightback from the impact of Covid.
“We are disappointed the Chancellor failed to abandon his planned VAT hike in April from 12.5% to 20% on ticket prices which would have been a lifeline to grassroots music venues in particular. The tax hike is likely to mean that ticket prices could increase at a time when household budgets are already stretched because of the rising cost of living. As the collective voice for the UK music industry, we will continue to press the government to help the music industry play a leading role in the post-pandemic recovery."
Njoku-Goodwin called for the music industry to receive targeted support like other creative sectors.
“We would like to see the government pave the way for the music industry to enjoy the same kind of fiscal incentives enjoyed by the film, television and animation industries," he said. "This would encourage investment and help us nurture the talent pipeline for our world-leading music industry.
"The government must also look at more support for the self-employed who were among the hardest hit by the pandemic, particularly in the must industry where two-thirds of the workforce are self-employed."
Michael Kill, CEO of the Night Time Industries Association, added: “Today marks two years to the day since we went into lockdown and nightlife businesses were forced to close. Though you wouldn’t know the hell that these businesses have gone through in those two years from today’s statement, which lacked the kind of support the sector needs if it is to fully recover from the pandemic amid an unprecedented cost of living crisis."