Hospitality Sector VAT: Local Economies, Employment and Growth

Gareth Davies Excerpts

Thursday 12th November 2026 Westminster Hall

[Gareth Davies (Grantham and Bourne) (Con)]

As always, it is a great pleasure to see you in the Chair, Dr Huq. I congratulate the hon. Member for Gower (Tonia Antoniazzi) on opening the debate—as a former Welsh rugby player, she certainly knows what to do with a loose ball.

I speak for the whole Chamber when I say what a pleasure it is to see the hon. Member for Blackpool South (Chris Webb) in his place. He has been a long-standing champion of the hospitality industry. He serves as chairman of the APPG, and records show that he has been quite consistent on this subject, so I pay tribute to him. He gave an excellent speech.

In fact, with all the talk of cutting taxes on business and slashing VAT, which is of course a tax that we are now free to set ourselves following our departure from the European Union, as the MP for Grantham I can tell the hon. Member that Margaret Thatcher would have been proud of his speech—maybe that is an endorsement he can put on his leaflet in Blackpool. We will see.

Every Member gave a fantastic speech, but it is fair to say that we do not spend enough time in this place talking about the businesses where so many people spend their evenings and weekends. As has been rightly pointed out, there are approximately 170,000 hospitality businesses in the UK, almost all of which are small businesses. They provide 2.6 million jobs, spread throughout every corner of our country. They are economically vital, providing 4% of our economic output, but like so many other businesses across the country, as has been eloquently pointed out from all sides of the Chamber, the sector is certainly suffering.

My hon. Friend the Member for Berwickshire, Roxburgh and Selkirk (John Lamont) pointed out that his constituents are suffering just as others are in Wimbledon—in fact, the hon. Member for Wimbledon (Mr Kohler) speaks with great authority in this area as the owner of hospitality businesses. When he speaks on this matter, we should all listen.

I have been struck by the number of examples that Members from all parties have provided. We all share the desire to help pubs, restaurants and cafés so that they thrive. I am particularly delighted that a Labour Member secured this debate to call for tax cuts on businesses, which the Conservative party of course agrees with. I hope we can agree, as a general principle, that businesses are taxed too much, and that that has a significant negative impact.

[Rosie Duffield (Canterbury) (Ind)]

Does the hon. Gentleman agree that the Government not cutting VAT on hospitality is quite literally a false economy, because three or four businesses shutting a day generates precisely zero income for the Treasury? Does that not strike him as completely bonkers?

[Gareth Davies]

We have to be clear that any support or tax cut has to be fully funded and cannot drive borrowing and debt even higher, particularly now that our debt has reached more than £3 trillion. Some have suggested that a 10% cut to VAT would cost £10.5 billion. As has been mentioned today, that is not an insignificant figure. I have not heard anybody detail how we should pay for such a significant cut, but I am sure the Minister would welcome suggestions.

A VAT reduction is just one way in which we could support the hospitality industry. If hon. Members are serious about cutting taxes and being low-tax champions, let me suggest a few other policies to help hospitality survive and grow, which are fully funded as part of our £71 billion plan of savings.

One of the measures addresses business rates. As has been pointed out, quite rightly, business rates are a significant contributing factor to the cost base of hospitality businesses. We have set out a plan to abolish business rates for 250,000 retail, hospitality and leisure businesses, which would cost £4 billion. Under Labour, business rates have increased. Some pubs and clubs are seeing their business rates increase by as much as 95% over just a couple of years. The Government inherited 75% rates relief for the sector, and then they cut it to 40%. I urge all Members to support the Conservative plan to bring 250,000 hospitality businesses out of paying business rates altogether.

Perhaps more than any other sector, hospitality relies on workers. Working behind a bar or in a kitchen is where so many young people get their first taste of work, as was set out in many examples today. The £25 billion national insurance tax hike has made hiring young people far more costly—often too costly, when combined with Labour’s increase to business rates. Under this Government, the hardest thing to get right now is a job in the hospitality industry. That is not right and does not help young people.

To address that, we Conservatives have outlined how we would cut in half the national insurance paid by an employer hiring someone between the age of 21 and 24. Halving national insurance would mean more young people getting a good start in life, fewer people starting life on benefits and employment costs cut for hospitality. That would cost £2.3 billion, paid for in full by reinstating the two-child benefit cap at a saving of £3.1 billion.

[Ben Lake (Ceredigion Preseli) (PC)]

On the point about the cumulative impact and pressures on businesses, and underlining the urgency of the situation, I spoke to some hospitality business owners in my constituency last week who told me that I could offer them a newly refurbished town centre restaurant and they would throw the keys back at me, because it is not worth it any more.

[Gareth Davies]

I am extremely sorry to hear that. The hon. Member represents a beautiful part of the country. People should visit it and give all the custom they can to the businesses that he represents. The reality is that the compound effect of multiple costs and tax rises is having a real-life impact. I hope the Minister is listening.

I have not yet mentioned the holiday tax, another measure forcing hospitality businesses to raise their prices for working families who just want to take a break away and have a holiday. Many Members have compared this particular tax with those of our European competitors. UKHospitality has been clear that the holiday tax will mean that holidays in England are charged double the tax of visiting Paris and 70% the tax of visiting Barcelona or Rome. Only this Government could look at a wet weekend at the British seaside and decide that the problem was that it was too cheap.

We have to take action. There has been so much anti-growth taxation and regulation, I could go on and on, but I will save Government Members their blushes. This Government now tax the pint, the pub, the person pulling the pint, and the bed upstairs—alcohol duty, energy costs, labour cost hikes, the Employment Rights Act or, as some have called it, the unemployment rights Act—all piling on pressure at the same time. This Government keep ordering rounds and leaving the landlord with the tab.

Prosperity begins small. It begins with the pub on the corner, the small B&B and the family-run café. Those are the employers and businesses that we should seek to support. I hope that the Minister will listen to the many concerns expressed across the Chamber. The Opposition share them, and that is why we have set out a number of costed ways in which to ease the pressure on the hospitality industry for all our constituents.