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Explained: How effective is UK’s ‘Eat Out to Help Out’ scheme in helping restaurants?

The EOHO is an economic recovery measure by UK to support hospitality businesses as they reopen after the COVID-19 lockdown in the country.

Written by Pooja Pillai , Edited by Explained Desk | New Delhi |
Updated: August 27, 2020 4:18:20 pm
Eat Out to Help Out Scheme, UK restaurant scheme, UK restaurant stimulus, UK covid news, hospitality sector Covid, riyaz amlani, lockdown impact hospitality sector, express explained, indian expressA sign outside a pub reads "Wanted Customers" in central London. (Photo: AP)

Since the lockdown began in India, different bodies representing the country’s hospitality sector, including the National Restaurants Association of India (NRAI) and Indian Hotel and Restaurant Association (AHAR), have repeatedly asked the government for financial assistance to help tide over the crisis.

In an interview to The Indian Express last week, restaurateur and former president of the NRAI, Riyaaz Amlani, cited the UK’s popular Eat Out to Help Out (EOHO) Scheme as an example of the kind of intervention the Indian government could make.

What is the EOHO Scheme?

The EOHO Scheme is an economic recovery measure by the UK government to support hospitality businesses as they reopen after the COVID-19 lockdown in the country.

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The brainchild of Chancellor of the Exchequer Rishi Sunak, the scheme was announced on July 8 as part of the Plans for Jobs summer economic update. Under the EOHO Scheme, the government would subsidise meals (food and non-alcoholic drinks only) at restaurants by 50 per cent, from Monday to Wednesday every week, all through August. The discount is capped at GBP 10 per head and does not apply to take-away or event catering.

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There is no minimum spend and no limit on the number of times customers can avail the offer, since the whole point of the scheme is to encourage a return to dining in restaurants.

EOHO is only one of the schemes in the UK designed to help the food services sector. Other financial support measures include a furlough scheme for workers, cutting VAT to 5 per cent from the standard 20 per cent, a business rates holiday and small business grants, besides temporary changes to licensing laws and outdoor seating under Business and Planning Act 2020, which would make it easier for restaurants and pubs to seat and serve customers outdoors and to comply with social distancing guidelines.

How much will the scheme cost the British government?

When presenting the Plans for Jobs update, the Treasury estimated that EOHO would cost GBP 500 million. However, according to the House of Commons research briefing on the scheme, published on August 20, “the final figure will depend on take up of the scheme and could be higher or lower. If take-up continues at the rate shown over the first two weeks of the Scheme, the cost of the scheme would be around £388 million, less than that forecast.”

Also Read | ‘Only 17% of restaurants open, industry operating at 8-10% of pre-COVID levels’

Why was this scheme deemed necessary?

All over the world, the food services sector is one of the worst affected by the pandemic. In the UK, a survey of 300 UK food services operators, conducted in April by Opinium, a London-based market research and insight consultancy, revealed that the top two concerns were customers avoiding restaurants for fear of contracting the virus (46 per cent) and customers having less disposable income for dining out (44 per cent).

It is the second of these concerns that Sunak’s scheme addresses, because, instead of delivering a financial package to operators, it makes eating out more affordable for consumers directly and helps restore demand. Restoring consumer demand is being seen as crucial to the UK’s economic recovery.

In a letter addressed to Sunak, dated July 7, Jim Harra, chief executive and first permanent secretary of HM Revenue and Customs, wrote, “…private household consumption contributes around 60 per cent of UK GDP and increasing consumer confidence and re-establishing consumer behaviour will be integral to economic recovery. This specific part of the economy is a major employer, supporting 2 million jobs (5.5 per cent of UK). Spending on restaurants and fast food has significantly reduced during the pandemic (down 65 per cent in May 2020 compared May 2019) with an expectation that demand will continue to be depressed by nervousness among consumers about eating out.”

According to data put out by the research briefing ‘Getting Britain working (safely) again’, by the independent British think tank Resolution Foundation, the hospitality sector would be a key contributor to the jobs recovery post-COVID. The report stated that the sector, despite accounting for only 10 per cent of employment in the UK overall in 2010 and 2011, had accounted for 22 per cent of new jobs for unemployed people during those years.

Significantly, the sector also employs more women (56 per cent) than men (44 per cent), according to the most recent survey (2017) by the UK’s Office of National Statistics on graduates in the nation’s labour market.

Why are UK lawmakers worried about the economic impact of consumer nervousness?

Observations about the impact of consumer nervousness on different sectors of the economy are important, because as of August 24, the UK was reporting 853 daily coronavirus cases, up by 150 from the previous week, according to data published in The Guardian. The number of daily deaths was at 4, with the total number of deaths at 41,433.

Earlier this month, researchers in the UK warned of a second wave that would be much worse than the first, if schools were reopened, as planned, in September, without an effective test, trace, isolate (TTI) strategy in place.

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Has the scheme made a difference?

As of August 16, GBP 18 million had been claimed by registered businesses, with 35 million covers having been served until that date. In an official statement on the data released, Sunak said that this was “equivalent to over half of the UK taking part and supporting local jobs in the hospitality sector”.

Chandigarh cafes, Chandigarh business, chnadigarh coronavirus cases, covid news, Chandigarh news, Indian express Amlani said the main problem confronting the restaurant industry in India has been consumer fear, even as the government has remained silent about specific recovery packages. (File)

In an indicator of the scheme’s popularity within the sector, 85,000 individual restaurant premises had registered for the scheme as of August 16, according to the House of Commons research briefing. More meaningfully, the government’s online restaurant finder showed that businesses were registered within five miles of any postal code entered.

Also in Explained | Is it time to reopen schools? What a study from England says

What do critics of the scheme say?

While the scheme has been welcomed by the hospitality sector, some reservations have been expressed about the efficacy of EOHO. In its analysis of the summer economic update, the London-based Institute for Fiscal Studies, a microeconomic research institute, argued that the scheme may have been introduced too early, since it was not yet clear whether the problem was on the demand side, with people being reluctant to go out and eat, or on the supply side, with restaurants unable to serve enough people, thanks to social distancing.

The Institute for Government, a governance think tank, deemed the scheme a “deadweight” since it benefits everyone, regardless of income and stated that higher income households would have returned to restaurants anyway.

Harra, too, in his letter to Sunak, had noted that while there was “sound policy rationale” for the scheme, it was difficult to establish whether or not it would work. “It has proved difficult to establish a counterfactual for this scheme, which depends on the future demand for eating out in the absence of this scheme, which is currently highly uncertain. That uncertainty also applies to the efficiency of the measure. Given the acute urgency of the situation, there is insufficient time to gather further evidence and wider external opinions that might enable me to reach a conclusion,” he wrote.

Would the Indian hospitality industry benefit from something similar to the EOHO?

Amlani, in his interview to The Indian Express, said that the main problem confronting the restaurant industry, following Unlock 1.0 in June, has been consumer fear, even as the government has remained silent about specific recovery packages aimed at the hospitality industry.

“The war cry for being atma nirbhar has been well-received. Everybody has been told to be self-reliant, everyone has learnt to live with that reality. But I think while the supply side will solve itself, the government will need to work on the demand side. For example, UK’s Chancellor of the Exchequer, Rishi Sunak has come up with this scheme where the government will pay 50 per cent of your bill. That is solving the demand side. They’re not putting money in the hands of restaurants. I think that is something the government will have to do if it wants to save the industry from complete disaster. The question is not ‘if’, the question is ‘when and how’,” he said.

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