Hospitality Sector VAT: Local Economies, Employment and Growth

Alex McIntyre Excerpts

Thursday 12th November 2026 Westminster Hall

[Alex McIntyre (Gloucester) (Lab)]

It is a pleasure to serve under your chairship, Dr Huq. If not for hospitality, I would not be here today—quite literally, because my parents met while working second jobs in a pub in north London. Later, they ran a small bed and breakfast, where I was cleaning rooms and serving breakfasts from an age I probably should not advertise here. I cooked my first full English for paying guests at 13 years old, and at the same age started working in the local pub as a pot wash. At 15, I moved to front of house at another hotel, where I worked for more than seven years. Hospitality gave me many of the skills that led me to this place, and I care deeply about the sector.

Times are tough. Small businesses across Gloucester tell me time and again about rising energy bills and soaring food prices, driven up both by the wars in Ukraine and the middle east, and by the tax burden they face. But in the middle of this difficult patch, Gloucester’s hospitality sector continues to deliver for local residents. Dr Foster in our docks was named best town pub at this year’s Great British pub awards, a real testament to the team there. We have fantastic independent coffee shops such as Coffee House 43, Forum Coffee and the Roastery, and brilliant restaurants such as Topoly’s Italian on Southgate Street. Just last Sunday, I was in The Fountain Inn for a fantastic roast dinner in between Remembrance Day services.

Many of those businesses have asked for a cut in VAT; I understand those calls, but I also recognise that in the current economic climate, that is a challenging decision for any Government to deliver. Any tax cut, proposed by any party, needs to be paid for, but that does not mean that we should not be supporting our hospitality industry, and in particular targeting support for local, independent small and medium-sized enterprises. I welcome the Government’s recent announcements on business rates: a 20% cut for pubs, clubs and music venues from April and taking around 70,000 smaller hospitality and retail businesses out of business rates altogether.

[Jessica Toale]

Does my hon. Friend agree that, if the Government cannot go the full way on the VAT cut that some in the hospitality sector are proposing, they should consider Hospitality Voice’s proposal, which is backed by research from Bournemouth University, for an emergency, time-bound cut from 20% to 13%? That would be an affordable alternative way to protect jobs and boost local economic activity.

[Alex McIntyre]

My hon. Friend makes an eloquent point raising important research from her constituency, and I am sure that the Minister has heard her intervention. I welcome the fact that the Government have made a start on business rates. I have continuously raised that issue with Ministers on behalf of Gloucester business owners, and it is good to see action.

I know that the Minister shares my commitment to our hospitality industry, so it would be helpful if he set out how the Government intend to go further to support hospitality businesses in Gloucester. For future generations, I know how important a first job in hospitality can be. We have 2,500 young people not in employment, education or training in Gloucester; that is why I am hosting the Gloucestershire futures summit later this month at Kingsholm rugby stadium. Can the Minister set out how the Government will make it easier for hospitality businesses to hire young people and offer the part-time weekend jobs that are the springboard for many young people in my city? Our pubs, cafés and restaurants are where Gloucester comes together. I owe my family to the jobs that they create. Let us make sure that they are still there for the next generation.

[Dr Rupa Huq (in the Chair)]

There are still nine people left and a hard stop at 4 o’clock, so there will be an immediate time limit of two minutes, although perhaps not everyone will get in.

--- Later in debate ---

[James Murray]

Thank you. I will continue, then. As hon. Members have mentioned, many people take their first step into the labour market through hospitality, and the sector provides flexible employment and apprenticeship opportunities across the country. That is why the Government have more than doubled the employment allowance, taking it from £5,000 to £10,500. That particularly benefits small businesses, taking many of them out of liability for employer national insurance altogether.

[Alex McIntyre]

Given that we provide some carve-outs for retail, hospitality and leisure businesses on business rates, will there be scope in future for expanding employment allowance for those businesses to allow them to take on more people before they incur national insurance contributions?

[James Murray]

The Chancellor takes decisions on fiscal policy at fiscal events, as my hon. Friend will know, but the employment allowance increase applies broadly across different sectors and parts of the economy, and sits alongside other reliefs in the tax system. I think that this will be of interest to him, given that he asked specifically about helping young people into work. The Government are protecting employer national insurance relief for all employees under the age of 21 and apprentices up to the age of 25. More recently, we have secured a commitment from the hospitality sector to create more than 100,000 opportunities for young people who are not in education, employment or training. That response from industry sits alongside the Government’s work through the youth guarantee and our reforms in respect of skills and employment support.

I might briefly address some other points from hon. Members. Some Members referred to the impacts of energy costs on hospitality businesses, and we recognise the impact that global events beyond our control are having on the costs of running a business in the UK. As all Members will have seen in the Budget two weeks ago, the Chancellor and the Government are taking that very seriously and starting the longer-term reforms needed to make the energy system fairer, cheaper and easier for businesses. That includes action to control new policy costs, reform energy institutions and improve access to grid connections.

Some hon. Members asked about the UK’s treatment of hospitality, compared with what happens among EU countries. A number of European countries do apply reduced rates to hospitality. France and Italy apply rates of 10%, Germany applies a rate of 7% and Ireland applies a rate of 9% for most hospitality supplies. But different countries make different choices about the balance of taxation and expenditure. The UK’s standard VAT rate is close to the OECD average and, as I set out earlier in my remarks, VAT is only one element of the business environment—it sits alongside business rates, which I have set out—and should not be considered in isolation.