Retail and Hospitality Sector

Lord Fox Excerpts

Thursday 22nd January 2026 Lords Chamber

[Lord Fox (LD)]

My Lords, it was a delight to hear the four maiden speeches from the noble Baronesses, Lady Dacres and Lady Shah, and the noble Lords, Lord Forbes and Lord John, who bring really meaningful experience to your Lordships’ House. I want to empathise with the noble Lord, Lord Forbes: I was in exactly the same position with my father 10 years ago.

This has been an interesting but somewhat predictable debate. I expected all the issues that came out, and mostly from the people who I expected to give them, but it has been an important debate because it was an opportunity to air the pressures facing Britain’s high streets. Some of those pressures are historical—Covid, Brexit and things like that—and some are general and local, such as those brought up by the noble Lord, Lord Empey, such as parking, the overall environment, the variety on the high street and the presence of anchor stores. But some of the pressures can be laid at the door of the current Government.

Noble Lords talked about raising employers’ NICs, which has undoubtedly had a catastrophic effect on employment in businesses. Retail and hospitality are very people-centred and are among the businesses worst hit by this rise. Lib Dems oppose this and we would scrap it. Energy costs have hit some sectors of the high street particularly hard, and hospitality is very much hit by the increase. We do not think that the Government have demonstrated the necessary practical understanding of what that has done to those businesses.

SMEs—which, of course, many pubs are—in particular are exposed to a deregulated energy market with little support after the previous Conservative Government’s decision to slash the energy bill support for businesses by an average of 85% when they replaced the energy bill relief scheme with the energy bills discount scheme, which itself ended in March 2024. We estimate that 3.1 million SMEs saw a total bill increase of £7.6 billion when the initial energy bill relief scheme ended. That is a huge benefit.

A couple of Peers decided to relitigate elements of the Employment Rights Act, and I am delighted that they did. Since the noble Lord, Lord Young, trooped out his greatest hit, I am afraid I will have to bring mine out. During the debate, I felt the phrase “banter ban” to be entirely revealing. Since time immemorial, the phrase, “It was only a piece of banter”, has been used to justify homophobia, racism and misogyny, and I think it is a very revealing choice of words.

The noble Baroness, Lady Jones, was more subtle in her relitigation. I take issue with some of the points that she made, and the noble Lord, Lord Sharpe, will no doubt fail to resist that temptation. However, I note that she is correct in that there is still an awful lot of consultation and, of course, of secondary legislation to come. I reiterate another of my greatest hits: when the noble Lord, Lord Sharpe, stands up and brings this issue to the fore, I hope that he can persuade his Front Bench to engage in meaningful debate on secondary legislation—which means jeopardy that that secondary legislation will be voted down. Until His Majesty’s loyal Opposition meaningfully make that threat, the Government are on a pass. That is done for the day.

For retail, the competition from online sales has continued to mount. Over the past 15 years, we have seen internet shopping increase its market share by five times to around a quarter of all sales. It is clear that although some high street businesses also practice online trading, they cannot compete with the global concerns supplied from out-of-town fulfilment centres. There have been government claims of levelling the playing field between their two retail models, but there is no such levelling.

Here, we come to the bit about non-domestic rates. I know that the Treasury has been busy, but I find completely incredible the recent claims that the Chancellor was surprised by the effect of the changes she is making to business rates on retail and hospitality. This time last year, some of us were debating the then Non-Domestic Rating (Multipliers and Private Schools) Bill, which is now an Act. During the stages of that Bill, my noble friend Lady Pinnock, the noble Earl, Lord Lytton, on the Cross Benches, and I spoke at length of the twin effects of the scaling back of the Covid relief and the future valuation, which was, at that time, not available. We noted that the phasing would not eliminate the sharp jump in rates. We launched a wider critique of the structure and effect of business rates, arguing that the Government’s proposals on multipliers were poorly targeted and risked damaging public services and regional fairness, rather than delivering a genuinely fairer system for high streets.

My noble friend Lady Pinnock repeatedly criticised the lack of an impact assessment, saying that the Committee on the Bill was “debating in the dark” about a combined effect of the new higher multipliers and the withdrawal of the Covid-era reliefs. She argued that the Government’s claim to be creating a fairer system was not being met because the Act relies solely on rateable value rather than genuinely targeting online distribution warehouses, despite all that rhetoric about an Amazon tax. She was able to cite an Amazon warehouse near her home which is levied at about £25 per square metre, versus a local shop in the town just nearby which is at 10 times that, at £250 per square metre.

That said, without a root-and-branch change in the way that valuations are done, business rates will continue to penalise high streets and advantage large out-of-town operators. The noble Earl, Lord Lytton, with all his expertise, added further valuation data to that argument, which the Government and the Minister simply ignored.

Above all, we criticised the absence of a meaningful impact assessment and the absence of new valuations. It is clear that, without these, the ministerial comments at the time were plain nonsense; the Minister was reading out wild guesses and wishful thinking from the Dispatch Box. However, by the time the Chancellor stood up this autumn, that information was available, so either her comments at the time of the Budget were seeking to deceive us or she had allowed herself to be deceived. Either way, the new business rates will be a hammer blow for many high street businesses, where rates are often more than rent, as we heard, and the Chancellor should and could have been aware of that when she made her announcement.

There is, of course, a need for holistic reform of business rates. The Liberal Democrats have proposed a commercial landowner levy, but in the short term we also propose to lower the retail, hospitality and leisure multiplier by the full 20 pence permitted under the legislation recently passed by the Government, as opposed to the 5 pence reduction that the Government have implemented. Also in the short term, to further stem the haemorrhaging of businesses, we would cut VAT from 20% to 15% for hospitality, accommodation and attractions, and we set out details of that before the Budget.

Meanwhile, Parliament needs full details of the Government’s proposed U-turn on what exactly the rates will be and who will be paying what. Businesses need to know what they are facing; they need to be aware of the kinds of changes that are coming down the track. I have to say that the responses on Tuesday to the Question before your Lordships’ House were completely inadequate.

If there is to be a recovery in our economy, it will come from a turnaround in consumer confidence. For that confidence to materialise, we need vibrant and successful high streets where people go to buy things and enjoy flourishing hospitality. There is a big danger that that will not be available and that we are moving in the wrong direction. There is much to be done, and I look forward to the Minister’s response to this debate.

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[Lord in Waiting/Government Whip (Lord Leong) (Lab)]

My Lords, it is my privilege to respond on behalf of His Majesty’s Government. I am grateful to the noble Baroness, Lady Monckton of Dallington Forest, for securing this debate. I thank all noble Lords for their thoughtful, informed and passionate contributions on a subject of real importance to our economy and to communities across the United Kingdom. I will endeavour to answer all questions. If I do not, I will go through Hansard and write to all noble Lords, and I will place a copy of the letter in the Library.

I congratulate my noble friends Lady Dacres of Lewisham, Lord Forbes of Newcastle, Lord John of Southwark and Lady Shah on their excellent maiden speeches. They bring a vast amount of knowledge and insight in local government, regeneration, science, computing, law, education, arts and culture. I look forward to working with them and listening to their contributions in this House going forward.

I should also declare an interest. When I was much younger, I harboured ambitions of opening a nightclub —we called them discotheques in those days. In truth, however, I spent far more time boogying on the dance floor than on any serious business planning, and that, I fear, was the end of my nightclub venture. It might have been a brilliant idea, because it gave me the opportunity to set up various businesses, and I became a sort of serial entrepreneur before I joined the Front Bench.

More seriously, I have many friends and relatives working in hospitality, tourism and retail, owning restaurants, wine bars and shops. Through them, I see at first hand the pressures these sectors face every single day: rising costs, staffing challenges and the constant need to adapt. That personal experience informs my appreciation of just how demanding, and how important, these businesses are.

This debate resonates particularly with the noble Baroness, Lady Monckton, and I pay tribute to her remarkable charity, Team Domenica, and to its inspiring new establishment, the North Star in Brighton. This pub is a powerful testimony—an example of social enterprise in action. It supports young adults with learning disabilities and autism through vocational training in hospitality, while fostering inclusion, confidence and opportunity within the community. That it was delivered despite some well-publicised cautionary advice from one Jeremy Clarkson speaks volumes about the noble Baroness’s determination and vision.

Retail and hospitality are far more than economic sectors. They are part of what might be called the everyday economy. They are woven into daily life, shaping how people work, shop, meet and socialise. They anchor our high streets and town centres, provided first jobs and flexible work to many noble Lords—including me —and offer routes into long-term employment and management for those who wish to build a career within them. They also play a vital role in the character and vitality of our towns, cities, seaside communities and villages.

I note here the contribution made by the noble Lord, Lord Young, on Section 21. I do not need to say any more. The noble Lord, Lord Fox, has said everything I needed to say. I was a victim of a bit of banter, but it was nothing more than racist comments; I will just park it there.

A successful high street is rarely just about shops. It is about cafés, pubs, services, culture and places where people feel welcome and connected. Retail and hospitality sit at the heart of that mix. To summarise their impact briefly, in 2024 the retail sector produced something like £115 billion in gross value added, representing 4.4% of UK output, and by September 2025 it supported about 2.8 million jobs. The hospitality sector generated £51.3 billion, about 2% of total economic output, and supported approximately 2.1 million jobs.

While these figures are significant, they tell only part of the story. The true importance of these industries is in their functions as local employers, community centres and catalysts for footfall, investment and civic pride. The Government are clear-eyed about the pressures that retail and hospitality face. In recent years these sectors have weathered an extraordinary series of shocks: the pandemic, supply chain disruption, rising energy costs, inflation, labour shortages and profound changes in consumer behaviour. Government policy cannot remove all these challenges, but it can provide stability, reduce unnecessary burdens and help businesses plan, invest and adapt for the long term.

Several noble Lords mentioned business rates, which rightfully featured prominently in this debate. We recognise that the current system places a disproportionate burden on many high-street businesses, which is why we are continuing its reform in line with our manifesto commitment to protect the high street. From April 2026, we will introduce permanently lower tax rates for eligible retail, hospitality and leisure properties, benefiting more than 750,000 ratepayers. A higher multiplier will apply to the most valuable properties, affecting around 1% of premises, helping to fund this relief in a fair and sustainable way. In addition, we have announced a £4.3 billion support package over the next three years to protect ratepayers facing bill increases following revaluation. These measures are designed to ease pressure where it is felt most acutely, while ensuring local services remain properly funded.

On top of the support package announced at the Budget, the Chancellor also commissioned work to look at what more can be done to support pubs. Further details will be announced in the coming days. Treasury Ministers have met with a range of stakeholders to discuss business rates before and since the Budget, including the British Beer & Pub Association and UKHospitality. Many noble Lords have spoken with real feeling about the future of pubs.

[Lord Fox (LD)]

I thank the Minister. In outlining the changes in the rate system, the Minister is talking about the process. Could he perhaps talk about the outcome, which, when conjoined with the reduction and removal of Covid relief, leaves many businesses—indeed, most businesses—paying more, not less, business rates? Will he at least acknowledge that from the Dispatch Box?

[Lord Leong (Lab)]

I thank the noble Lord. I am coming to the part of my speech that addresses some of the noble Lord’s concerns.

Many noble Lords have obviously spoken with real passion about the future of pubs, including me, and understandably so. Pub closures are always painful, and each one represents the loss of a place where people meet, talk and feel part of something local. Around 2,000 pubs in England and Wales have closed permanently over the last five years. That is a matter of genuine concern, although it reflects a long-term trend that pre-dates recent changes to national insurance, the minimum wage or business rates. Much of this reflects changes in how people live and socialise. People are drinking less often, particularly young adults, including my 19 year-old daughter, with a growing interest in low and no-alcohol options. The pandemic accelerated shifts towards home-based socialising, remote working and more food and experience-led venues.

Costs do matter, and the Government continue to provide targeted support, including specific help for community pubs. The future of pubs depends not only on managing costs but on being supported to adapt to changing habits and expectations. Our approach reflects that reality. Following the establishment of the Licensing Taskforce last April, we published the National Licensing Policy Framework in November. This was co-created with industry councils and various trade associations.

The Government work closely with the Hospitality Sector Council to improve the productivity and reliance of hospitality businesses by co-creating solutions to issues impacting business performance. Likewise, the Retail Sector Council is also undertaking to support growth, working very closely with government on sustainability and the circular economy. High streets, international trading and cybercrime are the main areas of focus. It sets out a vision for a simpler, more consistent and pro-growth regime that reduces bureaucracy, supports investment and promotes cultural and community life. We will build on this work through further planning reforms to help hospitality and high-street businesses grow and adapt.

Alongside regulatory reform, we are also providing targeted support. The Government have introduced a £1.5 million hospitality support scheme, including £440,000 to help rural pubs diversify as community hubs delivered with Pub is The Hub. This initiative is only the start. The Government are committed to supporting pubs and further announcements will be made very soon. This has already unlocked more than 40 previously stalled projects, generating jobs and new services. Industry research suggests that every £1 invested generates more than £8 in social value, as my noble friend Lord Rook said.

The noble Baroness, Lady Neville-Rolfe, made a point about drink-driving. One in six road safety casualties involves drink-driving. I can share with the noble Baroness that the Government are consulting on lowering the limit, which is currently the highest in Europe. In 2014 an academic study showed no impact from the reduction of the limit in Scotland.

It is also right to recall the scale of support provided to hospitality and leisure during the pandemic. These sectors were, rightfully, among the largest beneficiaries of emergency intervention, including furlough, business rates relief, grants, VAT reductions, government-backed loans and measures such as Eat Out to Help Out. That support helped many businesses survive an unprecedented shock.

Since then many parts of the sector have seen a recovery in output and revenues, though I readily accept that this experience is not uniform and that pressures remain acute for some businesses. Emergency support was, by its nature, time-limited and designed to help businesses through an extraordinary period rather than to replace the need for long-term sustainability. The Government will continue to engage constructively and to support growth through skills, investment and proportionate regulation, as businesses move forward on a sustainable footing.

Labour and skills are central to the success of these sectors. I recognise the concerns expressed about changes to the national minimum wage and the national living wage—but I can say to the noble Lord, Lord Hannan, that we are not the highest. Countries with higher minimum wages include Luxembourg, Australia and the Netherlands. Working people have borne the brunt of the cost of living crisis, and it is right that pay reflects living costs, productivity and wider economic conditions. In setting wage rates, the Government rely on the independent expertise of the Low Pay Commission, which my noble friend Lord Hannett mentioned, balancing fairness for workers with the need for businesses to grow and employ.

Concerns have also been raised about the Employment Rights Act. I take this opportunity to thank my noble friend Lady Jones of Whitchurch, who was the Minister who took that Act through this House. My department consults daily with businesses in all sectors and trade associations on implementing the Act. There will be further consultation on parts of the Act, and further announcements will be made in due course.

Economic growth is our foremost priority, but growth cannot be built on insecure or unpredictable work. By strengthening employment protections we are improving stability for workers and employers alike, and supporting a modern, productive economy. These reforms sit alongside our wider commitments to skills development, tackling economic inactivity, accelerating construction and delivering a modern industrial strategy. Together they form part of our long-term plan for national renewal.

I want to address directly the concerns raised in this debate, including by noble Lords who take a different view from that of the Government. I recognise that the pressures that many businesses face, particularly smaller operators, are immediate and personal. Policy choices, even when carefully designed, can feel very different on the ground, and that is why the scrutiny of this House matters. I welcome that scrutiny. Where noble Lords have raised concerns about costs, regulation or the cumulative impact of change, I want to be clear that the Government are listening.

We do not claim that the system is perfect, nor that there are no difficult trade-offs. Our task is to strike a balance between supporting growth, protecting workers, maintaining public finances and enabling businesses to plan with confidence. Retail and hospitality succeed when high streets succeed. Through the Pride in Place programme we are investing £5 billion across 339 communities to renew high streets and centres.

The noble Lord, Lord Borwick, who is elegantly suited this afternoon, talked about retail crime, as did the noble Lord, Lord Sharpe. The Government are committed to restoring visible and responsive neighbourhood policing, with 3,000 additional officers in neighbourhood policing roles by the spring of 2026 and 13,000 by the end of this Parliament. We are also ensuring that the right powers are in place. In the Crime and Policing Bill, we have brought forward a new offence of assaulting a retail worker, to protect the hard-working and dedicated staff who work in stores. We are removing the legislation that makes shop theft of and below £200 a summary-only offence, sending a clear message that any level of theft is illegal and will be taken seriously. But funding alone is not enough, which is why we remain committed to ongoing engagement with local authorities, trade bodies, businesses and workers, so that policy remains grounded in lived experience.

The noble Baronesses, Lady Monckton and Lady Neville-Rolfe, asked about the visitor levy. The precise design and scope of the power for the levy is still under development. The Government have published a consultation, which will run until 18 February 2026, to ensure that the public and businesses can shape the design of this power.

Retail and hospitality are not just engines of economic activity but places of connection, opportunity and shared experience. They matter deeply to communities across the country, and they matter to this Government. Through targeted support, community investment and proportionate reform, we are determined to work with these sectors as they adapt to a changing world. We may not agree on every point, but I hope all noble Lords will recognise our commitment to engagement, stability and long-term renewal. I thank all noble Lords once again for contributing to this important debate. I owe the noble Lord, Lord Fox, an explanation about business rates, so I will write to him.