Jury still out on ‘Eat Out to Help Out’

Like many, I was sceptical about the ‘Eat Out to Help Out’ scheme when it was first announced. Indeed, we may never really know what the net impact on the economy has been. But the evidence so far at least is encouraging.

To recap, ‘Eat Out to Help Out’ (EOTHO) was a UK government subsidy that allowed customers at participating restaurants, cafés and pubs to save 50% on food or non-alcoholic drinks to eat or drink in, up to a maximum of £10 discount per diner. The scheme applied on every Monday, Tuesday and Wednesday between 3rd and 31st August, and people could use it as often as they liked.

The scheme certainly had a good take up rate, and the anecdotal evidence from restaurants themselves was mostly positive. Indeed, one of the few negatives was that some restaurants were unable to cope with the additional demand.

This is backed by the latest official data. According to HMRC, 84,700 individual restaurants had registered on the scheme by 27th August and 100 million meals had been claimed for by the end of the month, at an upfront cost to the government of £522 million. (These figures may rise a little as more claims are received.)

Of course, this alone does not mean very much. It is no surprise that people were willing to take advantage of more than £500 million of free (or at least half-price) food and drink (or that, combined with the temporary VAT cut, this contributed to a sizeable drop in CPI inflation in August). The true measure of success will be whether the scheme has got people back into the habit of eating out, even after it ends, without killing anybody. As Andrew Sentence has tweeted, EOTHO may prove to have been ‘a flash in the pan with no lasting benefit to the economy’.

Nonetheless, there are three positive points to take away now.

First, the scheme does seem to have boosted overall restaurant spending, rather than simply diverting it to those days when the discounts applied. Several surveys – notably by the food and drink consultancy CGA – have found that sales were higher across the whole week, not just on Mondays to Wednesdays.

Admittedly, it is still possible that the scheme has diverted spending to restaurant meals that would otherwise have been spent on other goods and services. But by encouraging people to eat out again, the scheme could have encouraged them to return to other normal activities as well. (For example, people visiting a restaurant may have popped into other High Street businesses too, including shops.)

Second, there is some evidence that people dined out who would not normally have done so. The Opinions and Lifestyle Survey run by the ONS has found that more than half (53%) of adults who had heard of EOTHO dined out in August just to make use of the scheme.

This also suggests that the benefits have not simply gone to relatively well-off people who would have dined out anyway. One important feature of the design of the scheme is that the £10 cap on the discount meant it was worth proportionately more to those buying cheaper meals.

Third, people have become more confident about eating out. In the same ONS survey, 51% of adults said they would now feel ‘comfortable’ or ‘very comfortable’ to eat indoors at a restaurant, an increase from 43% two weeks previously. And 38% of people who had left their homes in the survey period said they had visited a restaurant, café, bar or pub, a large increase from 9% seven weeks ago. We cannot be sure how much of this is due to EOTHO, but it seems likely that it played a big part.

The big unknown is the extent to which EOTHO may have contributed to a resurgence of the health crisis. There has recently been a marked increase in the number of people testing positive for Covid, mainly among the young, only some of which can be explained by an increase in the number of tests being carried out. But this was probably inevitable as the economy opened up again and, as we know, young people are at relatively low risk of becoming seriously ill. Most importantly, hospitalisation and deaths with Covid are still very low.

Overall, I’m not usually keen on state interventions of this kind. The choice of how to spend leisure time should be left to individuals, just as the decision whether to work from home or from an office isn’t really the government’s business either.

However, EOTHO did at least work with markets rather than against them, because it was consumers who decided which businesses would be helped the most. The cost to the taxpayer was also relatively modest in the grander scheme of things (especially if we subtract any resulting increases in tax revenues and savings on benefits, including furlough subsidies).

While we cannot yet be sure that EOTHO has successfully kick-started a sustained recovery in the hospitality sector, I think there’s enough evidence so far to give the scheme the benefit of the doubt.

2 thoughts on “Jury still out on ‘Eat Out to Help Out’

  1. Hi Julian.
    I have read your comments with interest. I personally am uncertain as to the benefits of the scheme. However, what does concern me is that from information that I have received the scheme is wide open to fraud. It would appear to be more of an I’ll thought out gimmick ? I sincerely hope that this is not the case.

    Liked by 1 person

  2. Thanks Bunny (good to hear from you!). There will undoubtedly be some fraud – HMRC has estimated that 5-10% of claims for the furlough scheme are fraudulent or otherwiss in error – but at least the cost to the taxpayer of EOTHO is relatively low.

    Like

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