Hospitality Sector VAT: Local Economies, Employment and Growth

Graham Leadbitter Excerpts

Thursday 12th November 2026 Westminster Hall

[Graham Leadbitter (Moray West, Nairn and Strathspey) (SNP)]

It is a pleasure to serve under your chairship, Dr Huq. I commend the hon. Member for Blackpool South (Chris Webb) for securing the debate and the hon. Member for Gower (Tonia Antoniazzi) for moving it.

First, I reiterate the SNP’s steadfast, long-standing support for an immediate reduction of hospitality VAT to 10%. From the highlands to the borders, hospitality is the beating heart of our communities, yet our pubs, cafés, restaurants and hotels are being crushed under the perfect storm of soaring energy costs, food inflation and the UK Government’s hike to employer national insurance contributions.

[Ben Maguire (North Cornwall) (LD)]

A very well-known hotelier in my constituency said that if he had known about that national insurance rise, he would not have opened a particular hotel and potentially not given all its job opportunities to young people. Does the hon. Member agree that a targeted national insurance cut for young employees would be a good way to boost the hospitality sector?

[Graham Leadbitter]

Yes, absolutely. That was well debated this week, and we supported it. The sector pays an unsustainable 82p in business taxes for every £1 of profit. The Prime Minister has previously recognised the situation and has stated his support for cutting VAT for the hospitality industry. Now that he sits in Downing Street he must finally match his past rhetoric with action.

That call does not come from the SNP alone; it is backed by an overwhelming coalition. Over 400,000 people, including 100 leading chefs, have backed the “VAT’s the Problem” campaign, alongside UKHospitality and the British Beer and Pub Association. The public demand is deafening—and nowhere is that clearer than in my community. Of all constituencies in the country, Moray West, Nairn and Strathspey recorded the highest number of signatures—616—to the recent parliamentary petition calling for a 10% VAT rate on hospitality.

We have already felt heartbreaking losses. Many venues are struggling to recover after devastating summer wildfires that kept visitors away from affected areas. Champions of our local hospitality economy are backing that campaign to stay afloat, including—among many others—Scribbles restaurant in Elgin, Harbour Lights café and restaurant in Lossiemouth, the Aberlour hotel, the Apiary café in Dalwhinnie, Antlers café in Newtonmore and, needless to say, the Cairngorm mountain, which has the highest venue in the UK at 3,500 feet above sea level.

The Treasury continually hides behind its static, short-sighted cost figures, but a VAT cut is not lost revenue. It will be substantially offset as businesses reinvest their cash flow directly into physical assets and additional staff. The Treasury should listen to the hundreds of thousands across the country backing the campaign, listen to businesses and residents, and deliver the 10% VAT cut that will release the potential of our hospitality sector.

--- Later in debate ---

[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.

[Graham Leadbitter]

I appreciate all the different taxes and all the different aspects that the Minister is juggling, but given that the now First Lord of the Treasury has said as recently as this year that he supports this proposal, is it not just a matter of time?