Hospitality Industry: VAT

Debate between Lord Pitt-Watson and Lord Hunt of Wirral

Monday 14th September 2026 Lords Chamber

[Lord Hunt of Wirral]

To ask His Majesty’s Government, following a letter signed by more than 800 hospitality industry leaders calling for VAT on hospitality to be reduced from 20 per cent to 10 per cent, what assessment they have made of the impact of rising costs on (1) hospitality businesses, (2) investment, (3) employment and (4) opportunities for young people.

[The Parliamentary Secretary, HM Treasury (Lord Pitt-Watson) (Lab)]

My Lords, I begin by recognising and thanking the hospitality businesses for their enormous contribution to jobs—it is nearly 3 million jobs—and to growth, communities and the economy. I think it is nearly a £100 billion contribution to the economy. They have seen rising costs, some to do with national insurance and many to do with rising food and labour costs. But the Government are providing targeted support to the sector, including lower business rates multipliers, a £4.3 billion business rates support scheme and the Great British Summer Savings scheme, but they are doing that while ensuring sustainable public finances. I must come back to that, because HMRC estimates that reducing VAT on accommodation and food and beverage services to 10% would cost around £11 billion a year. I think this figure is already known publicly.

[Lord Harper (Con)]

My Lords, I listened very carefully to—

[Lord Hunt of Wirral (Con)]

My Lords, the Minister has acknowledged that over the past two years hospitality has experienced higher cost, but it is nothing but higher cost, imposed in particular by this Government, from employment costs and business rates pressures to regulation, and now it faces the prospect of potentially sky-high holiday taxes. In February the Prime Minister, when Mayor of Greater Manchester, said he favoured halving VAT on hospitality to 10%,

“because of the social value that your businesses bring to places and towns that need that life injected into them”.

Will the Prime Minister now listen to himself and the 800 hospitality businesses and industry leaders who have written to him, and will he now cut VAT to support, in particular, our small business sector?

[Lord Pitt-Watson (Lab)]

I cannot comment about changes in taxation, particularly in the run-up to the Budget, but if I might just correct the noble Lord, the point I made in my first Answer was that there has been support given, particularly to pubs and music venues. Support has been given particularly to smaller businesses—750,000 properties—and in reductions in national insurance to 900,000 people who work for smaller businesses. The corporation tax here in the UK is the lowest in the G7 and it is reduced for small businesses, so I reject the thought that no help has been given.