Hospitality Sector: Fiscal Support

Alyn Smith Excerpts

Wednesday 31st January 2024 Westminster Hall

[Alyn Smith (Stirling) (SNP)]

I beg to move,

That this House has considered fiscal support for the hospitality sector.

We always say that it is a pleasure to see you in your place, Ms Bardell, and it is this morning; thank you for looking after us. I thank colleagues from all points of the compass for their support on a subject that is close to my heart: fiscal and other support for the hospitality sector—by which I mean on-trade pubs, restaurants, cafés, hotels, and bed and breakfasts. I am grateful to the Scottish Licensed Trade Association, the Scottish Beer and Pub Association, the Scottish and UK hospitality organisations, Castle Leisure Group, Greene King, and several dozen businesses in rural and urban Stirlingshire for helping me to prepare for the debate. I also thank Paul Anderson and Matt Gower from my office, as well as the House of Commons Library, which has produced a number of useful briefings that I commend to colleagues.

This issue is not easy, but I will be up front with colleagues. Am I looking for special treatment for the hospitality sector? Yes, I am: these businesses need and deserve it. They need it because of the unprecedented economic times that we are living through, and they deserve it because they are a part of not just our economy, but our society; they are community hubs at a time when we face an epidemic of post-covid loneliness, and they contribute to our sense of place and keep our high streets busy. As well as urban Stirling, I represent a number of rural communities, which turn into dormitories once the pub goes. That is not a sustainable future for those communities. Hospitality businesses promote social mobility. How many of us—myself included—had a first job waiting tables, pulling pints or doing dishes? Hospitality provides flexible employment that keeps a lot of people engaged in the workplace who might otherwise not find jobs that suit them. These are good, sustainable jobs, and great careers.

Hospitality businesses are also significant for the economy. The stats are vital: the beer and pub sector accounts for 936,000 jobs and contributes £26 billion to the UK economy; in Scotland, it accounts for 62,000 jobs and £1.8 billion in tax receipts. According to UKHospitality, the wider hospitality sector employs 3.5 million people in one form or another, and generates £54 billion in tax receipts. These businesses are at the sharp end of an economic crisis that is not of their making. They are at the sharp end of the post-covid slump, an energy cost spike and insurance cost rises. They face labour shortages and costs due to Brexit. Now, I do not blame Brexit for everything, but it has made everything worse, and we need to deal with its consequences, which hospitality businesses are living with right now. They also have lower footfall, because in the cost of living crisis everybody is cutting back on discretionary spend. They are dealing with a perfect storm, and they need more help.

During covid, we proved that we can act fast, as we did with the VAT cut and eat out to help out, with all its issues; we demonstrated that we could move fast when a demonstrated emergency was under way. For our hospitality businesses, there is still an emergency under way. I am supportive of the Scottish Government, although I am not part of it; I am clearly in opposition here, though I hope I am a constructive Opposition Member. I am bringing some ideas to the Minister, and look forward to his response. I am also not a part of Stirling Council. I am aware that budgets in all places are under real pressure, but I am calling for support because I am dread afeard that, unless we act, a number of these good, sustainable businesses will not make it through to the better times, when they do come, and that all those revenues and social benefits will be lost. Across my constituency, there are a number of great businesses, but they need help to make it through. It is up to all of us, in all our places, to put the badges to one side and work together to support these crucial organisations.

What am I calling for? I will be brief to allow colleagues to speak. First, if hon. Members remember only two words from me today, they should be “cut VAT.” I would cut VAT on food, soft drinks and alcohol to 5%. Of course, that is a big ask. I know the fiscal situation for the UK, Scotland and local government, but cutting VAT would be a clean and immediately effective way of supporting those businesses’ bottom line. It would be directly linked to turnover, so if a business is not doing much business, it will not get that much benefit, and if it is, it will. It would not require any complex architecture or bureaucracy and would not need much to administer. It would be an effective way to boost growth and help these businesses survive.

In other countries, a VAT cut would not be unusual. VAT on accommodation is 10% in Austria, 6% in Belgium and 9% in Cyprus. VAT on restaurants is 13% in Croatia, 5% in Hungary and 10% in Italy. Of course, it is not quite like for like, but the UK is taxing this sector far more than other European countries do, and I think we need to boost and celebrate it, not tax the bejesus out of it from all parts of Government.

Speaking of which, we need business rates reform. To be clear, I was glad that the UK Government temporarily cut business rates in England. I called for the Scottish Government to pass that on, and I regret that they did not, but let us remember that it was just a one-year suspension and the actual problem is that business rates are not fit for purpose in any of our countries. That outdated system is creating perverse incentives for a lot of good businesses. Of course, local government needs to be supported, but we need to find a better way to do that. Tom Arthur, the Scottish Minister, has been proactive in engaging with business across Stirling and elsewhere. He acknowledges the problem—but business rates are crippling a lot of businesses, and we need urgent reform in all our countries.

[Richard Foord (Tiverton and Honiton) (LD)]

I am very grateful to the hon. Gentleman for making that point about business rates reform. I have just pulled up the Midweek Herald, in which a pub that closed fairly recently, the Honiton Inn, is advertised at £395,000, but before the advert says anything about the pub, it says, “Business rates may apply”. Does he agree that business rates on pubs are deterring new tenants from taking over?

--- Later in debate ---

[Alyn Smith]

I do agree, and they are also deterring growth in existing businesses. A number of business owners in Stirling have told me that once they invested in refurbishing their pub or doing it up after covid, they got hit with a higher rates bill—so that was a disincentive to investment. The system is broken, and I commend to colleagues the House of Commons Library research that compares how other countries do this stuff. I am conscious that there is not an easy answer. It is easy for me to call for reform, which is pressing, but I do not necessarily have a preferred way to do that.

Hospitality businesses have been hit by energy costs. They are big energy users, in terms of heating and cooling, and have been hit by eye-watering uncapped price rises from the energy companies, many of which are making substantial profits. I do not begrudge companies making profits—I celebrate that—but if they are doing it in a way that shuts down big chunks of another industry, we need stronger regulation. The UK energy market is deeply broken and is not working for an awful lot of business consumers. In the meantime, I think we could look seriously at business rate rebates for energy users.

It will not surprise colleagues that a number of stakeholders are keen on a cut to duty for cider, beer and spirits. That is a way of supporting brewers and distillers. I am not hostile to that, but I think the best way to support the hospitality sector is a VAT cut. That would be a tide that raises everybody’s boat, although there is some evidence that previous cuts have not been passed on to the wider sector.

We also need to do things to rebalance the playing field between the on and off-trade sales. The Scottish Government have tried to do that with minimum unit pricing. I do not want us to turn into a nation—however “nation” is defined—of people who drink alone in front of the TV. Pubs, restaurants and cafés provide a social environment for the consumption of alcohol; they are socially inclusive, open to all and regulated constructively —whereas the other market is tending in the other direction.

There are a number of things we can do to help this sector, which is vital not just because of the social and economic aspects, but because it helps define who we are as a community. We all need to work together to make that happen. I think a VAT cut for the hospitality sector would be deeply popular. I appreciate that the Chancellor and the Minister do not have an easy task in the Budget ahead of us, but that would be a constructive way to boost growth and help these businesses through the tough times, because the emergency is not over. If the Chancellor introduces any of those measures, I will be the first to applaud, because these businesses are too important to all our communities.

[Several hon. Members rose—]

--- Later in debate ---

[Alyn Smith]

In the time available, I will just thank colleagues for a very constructive debate with a number of good ideas. I think the Minister gets it. He has proven that he understands the sector and that he is passionate about it, but I would stress the cross-party urgency. Whether we are talking about a VAT cut to 5% or 10%, there is unity for a cut. Businesses that go under do not pay any tax at all. They do not employ anybody and will leave gaping holes in our communities. I think the Minister takes that point. He knows he has an opportunity in the Budget coming up. If the Chancellor brings forward measures to support the hospitality sector, nobody will applaud louder than I will, because this is urgent and there is a need for all of us to work together on this point.

Question put and agreed to.

Resolved,

That this House has considered fiscal support for the hospitality sector.