17th July 2026
When the Government announces a tax cut, most people naturally expect one thing - Prices should fall.
That is certainly the message politicians like to promote. A reduction in VAT is presented as a way to help families with the cost of living and encourage people to spend more.
But what happens in the real world?
The answer is often more complicated.
The recent VAT relief on certain family meals, attractions and events was designed to make it cheaper for families to go out and spend money. Yet many customers have probably noticed something interesting.
Where are all the adverts saying:
"VAT cut — our prices are lower"?
For many businesses, especially smaller independent cafés, restaurants and leisure operators, the answer is simple.
They are not necessarily ignoring customers.
They are trying to survive.
A VAT cut does not equal a 15% price reduction
When people hear that VAT has been reduced from 20% to 5%, it sounds like a large saving.
But the impact on the final bill is much smaller.
A meal costing £20 including VAT would not suddenly become £17. Instead, the maximum saving passed directly to the customer would be only a few pounds.
For a family, every saving helps, but for a restaurant dealing with thousands of pounds in extra costs every year, it is not enough to transform prices.
Businesses have their own rising costs
The past few years have been extremely difficult for hospitality businesses.
They have faced:
higher food costs
increased wages
rising energy bills
increased insurance costs
higher employer National Insurance contributions
rent and maintenance expenses
A restaurant that keeps prices unchanged after a VAT reduction may not be making significantly more money. It may simply be recovering some of the costs that have increased elsewhere.
For a small business owner, protecting the margin can be the difference between staying open and closing.
The customer may benefit without seeing a cheaper menu
This is the part often missed in political announcements.
A tax reduction does not always appear as a lower price on a menu.
Sometimes the benefit is:
a business avoiding job cuts
a café remaining open
a restaurant continuing to buy from local suppliers
a business having enough money to invest in improvements
In difficult trading conditions, survival itself can be the benefit.
Why this matters for Wick and Thurso
The issue is particularly important for smaller towns.
A restaurant or café in Wick or Thurso is not competing only against another local business. It is competing against:
supermarket meal deals
online shopping
home delivery services
people choosing to stay at home
A small price reduction may not be enough to change customer behaviour if people are already worried about household budgets.
The bigger challenge is creating town centres that people want to visit.
A family day out is rarely based on one purchase. It involves travel costs, parking, other shopping, perhaps a coffee or meal, and whether there is enough happening in the town to make the trip worthwhile.
Tax cuts are useful — but they are not magic
Governments often use tax cuts as a way to stimulate spending. Sometimes they work. Sometimes the benefit is less obvious.
The mistake is assuming that every tax reduction will immediately appear as cheaper prices.
Businesses operate in the real world.
If a café owner uses a VAT saving to absorb higher costs and keep staff employed, that may be just as valuable as reducing the price of a coffee by a few pence.
The debate about VAT cuts also links back to the wider question facing towns like Wick and Thurso.
Lower taxes can help businesses.
But they cannot, on their own, reverse changing shopping habits.
The future of our town centres will depend not only on prices, but on whether they continue to provide places where people want to meet, spend time and support local businesses.
The challenge is not simply making things cheaper.
It is making our towns worth visiting.