Hospitality Sector VAT: Local Economies, Employment and Growth

Paul Kohler Excerpts

Thursday 12th November 2026 Westminster Hall

[Mr Paul Kohler (Wimbledon) (LD)]

It is an honour to serve under your chairship, Dr Huq. I refer Members to my entry in the Register of Members’ Financial Interests. I own CellarDoor, a small bar in Covent Garden, so I do not speak about hospitality in the abstract. I know what it means to have to find the money to make payroll in a bad month, to cut a shift I would rather keep and to wonder whether the doors will open next year.

We converted CellarDoor from a disused underground gentlemen’s toilet 20 years ago. We have weathered the financial crash, Brexit and covid, but I have never known it as hard as it is now. The new Prime Minister promised much, but his Chancellor delivered little. The Night Time Industries Association called the Government’s latest Budget “deeply disappointing” and said that it failed

“to deliver the meaningful support”

the sector “desperately needs”.

Raising the business rates relief threshold is welcome, but in Wimbledon just 1% of my local businesses will benefit. The hospitality industry is not a nice-to-have; it is an essential part of the economy, the largest employer of young people and school leavers, and the backbone of communities up and down the country. It invests £7 billion in high streets annually and supports 3.5 million jobs.

Across Wimbledon, the hospitality sector provides more than 4,200 jobs and brings £150 million into the local economy, but our pubs, bars, hotels, restaurants and cafés are feeling the strain. Craig Hurring of Love Wimbledon told me that businesses are facing “a perfect storm” of increased employer national insurance contributions, above-inflation uplifts to the minimum wage and continuing weak consumer confidence.

Nationally, the toll is stark. We are losing the equivalent of 13 night-time venues a week, while 100,000 jobs in the hospitality sector were lost in two years. Something must be done. The simplest lever is VAT. Our current rate of 20% is double that of some of our European neighbours.

[Leigh Ingham (Stafford) (Lab)]

Does the hon. Gentleman know when the rate was raised to 20%, and which parties were in government when that happened?

[Mr Kohler]

The issue is absolutely now, not the past. In Spain, hospitality pays a reduced rate of 10%, while across our one land border the Republic of Ireland has reduced VAT on hospitality to as low as 9%. We know that VAT cuts do work because we have done it before, during the pandemic. This summer, we learned that lower VAT brings more people through the door and helps struggling businesses.

Minister, will the Treasury commission a full cost-benefit analysis of reducing VAT on hospitality—not just the headline cost, but also the return in jobs, growth and lower welfare spending? The Night Time Industries Association has produced an analysis suggesting that it would have a net positive effect on the Government’s fiscal position—I think that is what we call a win-win.

In short, hospitality is in crisis. There is no point in the Government giving a little with one hand while continuing to take far more with the other. The time has come for real action, not warm words.