Hospitality Industry: VAT

Debate between Lord Pitt-Watson and Lord Harper

Monday 14th September 2026 Lords Chamber

[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?

--- Later in debate ---

[Lord Pitt-Watson (Lab)]

I entirely echo the noble Baroness’s congratulations to the hospitality industry. I will be more than happy to answer the questions she has asked after the Budget, but I think most of them anticipate changes in tax, which it would be inappropriate for me to discuss at this point.

[Lord Harper (Con)]

My Lords, I apologise to my noble friend on the Front Bench, and to the House, for jumping the gun in my attempt to ask a question. I listened carefully to what the Minister said. I think he accepted that the industry is under a great deal of pressure, because he talked about some of the areas where the Government are attempting to help. Can I press him on the point that my noble friend raised? Given that the industry is under pressure, how on earth will allowing mayors around the country to impose a tax on people going on holiday help anybody with the cost of living?

[Lord Pitt-Watson (Lab)]

As the noble Lord may be aware, those sorts of rights exist for mayors and other local authorities in almost every other European country. In the UK they will need to consult locally before they introduce any such tax, but many mayors will believe that the extra revenues can raise the economy of their local area and provide better facilities so that the hospitality industry, along with everyone else, will prosper. As I said, this is part of a devolution agenda, but it is one where there will be consultation before any additional charge is introduced. It will be proportionate, of course, in the sense that it is a percentage of the cost, so it would cost more for an expensive hotel than for lower-cost accommodation.