Hospitality Sector: Fiscal Support

Hannah Bardell Excerpts

Wednesday 31st January 2024 Westminster Hall

[Several hon. Members rose—]

[Hannah Bardell (in the Chair)]

Order. I remind Members that they should bob if they want to be called. The hon. Gentleman was good enough to be brief to let colleagues in, but seven Back Benchers are looking to catch my eye. I will not impose a time limit, but I ask colleagues to try to keep to about five or six minutes.

--- Later in debate ---

[Rachael Maskell (York Central) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Ms Bardell. The hospitality sector is at the sharp end of all market sensitivities and feels every economic challenge acutely. Although it is used to seasonal highs and lows, when covid hit, the sector’s resilience became dependent on intervention. Whether businesses were supplying food, drink or accommodation or operating as a wider part of the tourism sector, the covid and post-covid shocks served their blows on hospitality. There are also the issues of the cost of living—whether that is seen through reduced customer disposable income or increased energy costs—and diversion of shipping in the middle east; each part has a story to tell about the sector.

Indeed, Brexit produced serious challenges in labour supply, and the new visa rules are also creating pressure. Last year, 8,500 visas were provided for the sector, and that is not to mention the dependants who come with health workers and so on, and the students; that also takes its toll. I ask the Government to think again. Although I welcome higher income and a rise in the minimum wage to address the wage disparity in this sector, we must recognise that it needs cushioning and that the sector needs support.

In York, we face the additional challenge of flooding. The floods have an impact. There is usually poor reporting describing York as being like Venice, but I can assure everyone that York is open and functioning. Today, because of the resilience measures that have been put in place, only a small cluster of hospitality outlets are impacted by flooding. However, they have received no business rate suspension—they must receive that, and I ask the Minister to look at that issue—and the Bellwin scheme cannot be triggered for a small area. Those businesses have costs associated with flooding, so that needs to be addressed.

Turning to other fiscal challenges and solutions, we would welcome a reform of business rates. I have long debated in this place how disadvantage and disincentives impact on the sector. Frankly, the Government have demonstrated a sticking-plaster approach during my time here. I am glad that Labour is listening and that it will bring in reform of business rates, but I plead that it puts those reforms in its manifesto so that everyone can be clear about that.

The hospitality sector and other businesses in York have talked about a profit-related tax to make it a fairer system in the long term; I urge the Minister to look at that.

The sector’s turnover in York is worth £1.16 billion annually and is ranked 16th highest in the country. For a relatively small, concentrated area it employs 16,500 people across 1,283 venues to date. However, there is a 5.4% vacancy rate—484 jobs—so we need to consider the impact that is having on the sector’s ability to stay open full time and welcome people into their establishments. I recognise how York has weathered this stormy time and I recognise its resilience. People enjoy coming to the incredible city of York and taking advantage of the offer that we have, but that should not be taken for granted. Ensuring that resilience measures and fiscal reforms are put in place is important for the long term for the hospitality sector in York.

I note that the overseas sponsorship programme has offset some of the vacancy issues, not least for chefs, and we need to ensure that the labour shortages are tackled. I ask the Government to look again at the impact that withdrawing from such schemes will have.

A focus of my work looks at how we can increase the family offer in York. We really need to broaden the base of people wanting to come and use our city for a broader interest. I certainly welcome those interested in talking about the family coming to York because that will also build greater resilience for the longer term.

I know that the Minister understands the sector well, given his previous roles. Indeed, he could come on a whistlestop tour round the city with me. I urge him, as we come up to the next fiscal event, to allow an extension, a quick win, on the covid loans. Businesses could make further investment to grow their businesses if they could pay their loans back over a longer period. That would be a quick and easy win for the Government.

On VAT, I concur with the remarks made earlier. Hospitality Association York has also made the case to me that a drop in VAT would very much assist the sector and provide an economic stimulus. We all want to see that benefit passed on to consumers and customers who use the sector. I want the work that Hospitality Association York is doing in growing the skills and talents in the sector and building for the long term to be recognised and supported.

Finally, as York becomes a world heritage site and York Central is developed for the future, we have great opportunities for investment beyond the walls as well. Up in Acomb we see many independent businesses now providing great opportunities. Right now we are in the heart of the most challenging season for our sector. Despite the ice trail coming up this weekend, the Viking festival over the half-term period and the residents’ festival that we have just had, we need action from the Treasury to ensure that the hospitality sector is sustainable now and in future.

[Hannah Bardell (in the Chair)]

Before I call the next speaker, I ask Members to stick to five-minute speeches because I want to try to call everybody and give equality to all.

--- Later in debate ---

[Priti Patel (Witham) (Con)]

It is a pleasure to serve under your chairmanship, Ms Bardell. I congratulate the hon. Member for Stirling (Alyn Smith) on securing a very important debate.

The tourism and hospitality sector in Essex is valued at just over £3.5 billion, and supports over 60,000 jobs. In the debate thus far, we have heard about the enormous contribution made by the sector across the United Kingdom. With the spring Budget approaching, it would be remiss of me not to make my representations to the Minister and His Majesty’s Treasury; I want to press the Treasury, and outline why further fiscal measures are needed in support of the hospitality sector and wider areas.

Across Essex, but specifically in my constituency, there is a strong case for lowering the tax burden on hospitality. We have already heard that is also the case for other parts of the country. We all have fantastic businesses in our constituencies; mine specifically has Colchester Zoo, the Langford Museum of Power, the Tiptree Tea Rooms—which most colleagues will know about—and many other venues, including a lot of hospitality and wedding venues, which did receive support from the Government throughout the pandemic. I pay tribute to those businesses because they have not only been resilient during the pandemic, but learned to adapt so that they can continue to grow and diversify.

Leisure businesses and attractions clearly suffer from volatility in the economy, and it is important that we do everything possible to support them, hence my modest call—and the collective modest call—for changes to the tax regime that we know would make the difference between businesses closing and surviving.

But although this is about surviving, it is also about thriving and growing; we already know about the impact on retail in our town centres and we have seen pressures in our local communities, but we need the sector to be vibrant and thriving. Central to that—and I make no apology to the Minister for saying that this is what we need—is a better labour market strategy. We have heard about labour shortages throughout this debate. I have been consistent, in my time not just in Parliament but in Government, in saying that I do not think it is right to associate or link our trade deals with automatic visas and some of the schemes proposed; I think we should have a better labour market strategy. We have to invest in the sector, grow the talent and pay people properly. We have a real epidemic of low wages in hospitality, and that is simply not good enough.

I would welcome the Government considering the whole issue of business rates, and I have also made representations on this previously. The freeze in the small business rates multiplier has been welcome, and I think it is vital, but we need a strategic, longer-term approach so that businesses can plan ahead, invest in the bricks and mortar of the properties they buy or lease, and look at how they can grow. With that, the 75% rates relief is welcome, but when reliefs of that size are removed, it clearly places seismic pressures on cashflows. We have to look at the sector from a basic day-to-day perspective and think about what this means for cash flows. Hospitality businesses operate with very tight margins, and they are having to absorb so many costs that they automatically pass on to their customers. I know that the Minister and the Treasury have heard me speak about this issue before, but we really need to look at it.

The case for reducing VAT has been made very clearly and I support it; we have seen so many issues around VAT levels, and their impact on hospitality and tourism. I absolutely support the case made by the hon. Member for Westmorland and Lonsdale (Tim Farron) for reducing VAT on shopping and tourism; there is really big argument for that. VAT is complex and we need to do much more to simplify our tax system, as the Minister has heard me say many times. We need a tax system that supports tourism and hospitality.

I am a great believer in encouraging overseas visitors to our amazing country—more so than perhaps other countries in the world. In Essex, we are always open for business, and one of our prized assets is of course Stansted airport. I praise its 24% growth in passenger numbers last year to nearly 28 million. It has massive and exciting expansion plans—I have also always supported expansion at Heathrow airport—and should be commended for supporting employment and apprenticeships. We need our airports to attract more tourism not just to Essex but to Britain; this is about the health and wellbeing of our country. I am therefore making the case to the Minister and pressing the Government yet again to re-examine their approach to tax-free shopping for overseas visitors, and to duty free at arrivals and air passenger duty—there is a long-standing argument in that regard. The case for tax-free shopping has been made many times in this Chamber and the main Chamber, and it will bring in huge dividends.

It is important to reflect, with the spring Budget coming up—that is why we are having this debate and everyone is making representations. I genuinely believe in making changes, as they could result in another £4 billion into our economy on the shopping side of things, but the principle of cutting tax and reducing the tax burden is also one of the most effective ways in which we can grow and support the hospitality sector, and that means more growth and more sustainability.

I urge the Minister and the Chancellor to take the maximalist approach—using the fiscal levers at their disposal to really support these businesses across all constituencies of the United Kingdom. They are the backbone of our economy and many of our communities, so of course we want them to thrive and grow.

[Hannah Bardell (in the Chair)]

We now come to Front-Bench speakers, who have around 10 minutes each, which should allow the sponsoring Member to sum up at the end.

[John Nicolson (Ochil and South Perthshire) (SNP)]

It is an honour and a privilege to see you up there in the Chair, Ms Bardell. Like so many colleagues, I started working in the food and hospitality industry. I was a shelf-stacker in Tesco, a caddie on the Old Course in St Andrews, and I worked in a cocktail bar. I have to say, cocktail bars do rather better in Glasgow than it sounds like they do in other parts of these islands.

Like many of my colleagues, I spend a lot of time visiting local businesses. Indeed, I was delighted recently to host the First Minister Humza Yousaf at the excellent Unorthodox Roasters in Kinross, where I chaired a roundtable discussion with business owners in the hospitality trade from across Ochil and South Perthshire. It was a listening exercise for the First Minister, with regional entrepreneurs updating him on their successes and their struggles. We were joined by an award-winning ice creamer, Stephen Sloper, from Penny Licks in Tillicoultry; those from Unorthodox Roasters themselves; Alex from the Glenturret distillery; and my friends from Café Rhubarb in Dollar.

Everyone, from the owners of a wee Syrian café in Alloa called Syriana—who arrived as asylum seekers and are now embedded in their community—to Scotland’s oldest distillery, kept telling us variations of the same story: times are beyond tough; and costs are so high that they are simply unsustainable in the long term. One business owner said

“the big issue which is strangling us is gas and electricity costs.”

That is a common refrain. The Westminster Government and the Prime Minister set out their solution: drill for more oil and gas in the North sea. Remember, that was the oil and gas that, during the independence referendum 10 years ago, they told us was worthless and about to run out. Due to disastrous decision making by successive Labour and Tory Governments, North sea energy is sold back to us at world market prices. This will not make energy cheaper for people in Scotland. Clean renewables are the future. To the glaikit Tory MSP who demanded to know what we would do when renewables ran out, the key is in the name—they are renewable.

The hospitality sector needs help now. Westminster has the levers to control VAT, and as we have heard from Members all around this room, it is important to get VAT down. The UK Government refuse to take measures to limit energy prices, so let them instead give the businesses in our communities a break by lowering VAT. We have been out and about talking to businesses in Alloa this past week to get a sense of the difference that a VAT reduction would make. Alison Turner, from the Ladybird Tea Room, said that this reduction would be “an enormous help”. Craig, the owner of the Royal Oak in Alloa, said,

“When the previous VAT reduction happened, it was amazing. It made such a difference.”

The owners we spoke to had little faith that Westminster would act to help.

In his latest toe-curling party political broadcast, I noticed that the Prime Minister briefly stopped attacking asylum seekers in order to pose in front of a massive sign reading, “TAX CUTS”. We might think, “Oh, good! A chance to relieve the burden on those hardest pressed in these difficult times.” No, of course not. He wants to cut taxes for the wealthy so that their families can benefit from inheritance tax cuts. Earlier this morning, we discovered that the Labour leadership now wants bankers—[Interruption.]

[Hannah Bardell (in the Chair)]

Order. If Members at the back would like to make an intervention and have it on the record, I am sure we would all be very interested. If they do not, perhaps they could keep their comments quiet so that the rest of us can hear Mr Nicolson deliver his speech.

[Mr Ellwood]

On a point of order, Ms Bardell. This is Westminster Hall; this is not “Just a Minute”, but if it was “Just a Minute”, that contribution would probably have been a deviation.

[Hannah Bardell (in the Chair)]

I say kindly to the right hon. Gentleman that whether in Westminster Hall or the main Chamber, that is not a matter for the Chair; that is a matter of opinion. The right hon. Gentleman is entitled to his opinion, but it is not a matter for the Chair.

[John Nicolson]

And that would certainly have been repetition; we all know the rules of “Just a Minute”—in fact, some of us have even been invited to be on it. If I may continue, I was about to highlight the new Labour policy of allowing bankers to keep tens of millions in bonuses.

The one subject that everybody in the hospitality sector wants to talk about is Brexit, and what a disaster it has been. The Gleneagles Hotel in my constituency is world famous, but it cannot get enough staff post-Brexit and so cannot operate at full capacity. Harvesters cannot get enough people to pick fruit and other crops. A cheese manufacturer in my constituency fears that they will have to lay off staff because one of their ingredient suppliers in France does not want to do the mountains of post-Brexit paperwork; it is simply not cost-effective.

The Glenturret distillery has stopped exporting to several European Union countries because the post-Brexit labelling rules are too cumbersome and expensive. It has told me that it sometimes now takes longer to get whisky to Paris than to Japan. This is the Tories’ Brexit dividend. And what of Labour? Well, it is now up to its oxters in Brexit Kool-Aid, too. The Labour leader tells us there is “no case” for rejoining the EU. Try telling that to young Scottish voters or to businesses in my constituency.

I am glad that this debate has been brought forward by my SNP friend and colleague, my hon. Friend the Member for Stirling (Alyn Smith). I am glad that Humza Yousaf spent so much time with entrepreneurs in my constituency. I thank all the businesses in Alloa and elsewhere for giving me their thoughts so that I could bring them here to the Westminster Parliament. The Minister, a friend of mine from our days on the Digital, Culture, Media and Sport Committee, is an expert in this field. He cares deeply about it, is knowledgeable about it and was passionately anti-Brexit; he warned wisely and accurately of its dangers, and I know that he will be listening carefully.

--- Later in debate ---

[Nigel Huddleston]

Again, these are ongoing conversations across multiple Government Departments. In my former capacity as tourism Minister, I certainly had extensive conversations. There were sub-working groups at UKHospitality identifying areas for further work. That has had some impact, including through apprenticeship schemes. My right hon. Friend was absolutely right to highlight this issue. We have debated Brexit, which probably goes slightly beyond the current remit, although I understand the impact—and, by the way, the opportunities that come from that. My right hon. Friend is right that we need to focus on the domestic skills agenda. The hospitality and leisure sector contributes to one in five new jobs, so it is absolutely pivotal to that.

If hon. Members will forgive me, I will try to get through some of my speech—and not try your patience too much, Ms Bardell—because I am not even on page 1 yet.

[Hannah Bardell (in the Chair)]

Just to clarify, the Minister has a little bit of flexibility. Given the extent of the debate and the number of questions, he is free to go over the 10 minutes and answer everyone’s questions—as he would like.

[Nigel Huddleston]

I will make sure I leave a minute or two at the end for the hon. Member for Stirling to conclude—I may have shot myself in the foot there by giving everybody the opportunity to ask all the awkward questions they now have.

Like many hon. Members, my first job was in the hospitality and leisure sector, with a travel agent. I then had the very difficult choice at the age of 22 between taking a job for Arthur Andersen and becoming a Club 18-30 rep. I wonder if my life might have been considerably different if I had taken that slightly different path. My right hon. Friend the Member for Witham is right: jobs in the hospitality and leisure sector help people with numeracy skills, self-confidence and interpersonal skills, which can stay with them for life.

We need to recognise that this sector is not just about part-time jobs for students or young people; we should not forget that there are also valuable, often very high-paying, long-term careers in the sector. The sector has evolved and changed, and is now a major contributor to the UK economy, with £140 billion of economic activity. There are masses of opportunities there, but the reputation and image of the sector is sometimes one of its inhibitors. I am therefore a huge champion of the sector for all the reasons we have outlined.

We have had quite a lot of debate today about the various support measures, including business rate relief. It is worth remembering that the Government provided £16 billion of business rate relief in England through the pandemic. In addition, we launched the temporary 50% retail, hospitality and leisure relief scheme at the 2021 Budget. That was built on in the 2022 autumn statement, and the Government announced further tax cuts to the sector in last year’s autumn statement—about £4.3 billion over the next five years—and extended the retail, hospitality and leisure relief scheme at 75% up to a cash cap of £110,000 per business for 2024-25.

As has been recognised, the Labour Government in Wales and the SNP Government in Scotland were not able to extend those reliefs. I recognise that everybody realises there are considerable financial pressures, but with the greatest respect to my opposite numbers, who have been somewhat critical, I do think this is important and it is something I will play up very heavily: we have done things in England, where we have controlled the levers, that have not been done in Wales and Scotland.

Overall, this tax cut is worth about £2.4 billion for around 230,000 retail, hospitality and leisure properties to continue support for our vital high streets and protect so many small shops and businesses. The Government have also decided to freeze the small business multiplier for the fourth consecutive year. That will protect over a million rate payers and 90% of all properties from a multiplier increase.

For example, as a result of the changes, the average independent pub will receive about £11,800 of relief off their final business rates bill in 2024-25. Combined with the small business multiplier being frozen, they will benefit to the tune of about £12,800 of support. I repeat: that is not the level of support that they would get in Scotland or Wales.

A few points were raised about other areas, and I remind hon. Members that reliefs are also available for improvements in property. If there is an incremental rateable value because of improvements, that will not be included for the first year where eligible. I also remind hon. Members about the changes in alcohol duty and the Brexit pubs guarantee, which are designed to support the pubs sector and to help it operate on a level playing field with supermarkets.

My right hon. Friend the Member for Witham (Priti Patel) made many points about skills and jobs. I will not repeat what I said, because I think I have made the point that we are very aware of the importance of that sector and the role we have in developing skills and opportunities.

Cutting VAT was mentioned by nearly everybody, and I want to be clear on this point. As we all know, VAT is a major contributor to the nation’s finances, which we then spend on our vital public services. It is forecast to raise about £173 billion in 2023-24. Since we left the EU, we have been taking advantage of multiple reliefs. I believe that if we were to rank ourselves against all other EU countries for the total number of reliefs we are able to exercise through VAT, we would be about second or third. We have been taking advantage of leaving by reducing reliefs and making real differences where and when we can.

The VAT cut for tourism and hospitality that we made during the pandemic came at a significant cost of more than £8 billion. Reintroducing it would come at a considerable cost. That was just one element of the support for the retail, hospitality and leisure sector during the pandemic, but it was a really important part of it.

--- Later in debate ---

[Steve Double]

Will the Minister give way?

[Hannah Bardell (in the Chair)]

Order. Before the Minister gives way, I just say that I gave him extra flexibility so that he could answer everybody’s queries and questions, but I want to give an opportunity to respond to the sponsoring Member, the hon. Member for Stirling (Alyn Smith). So please keep the intervention short.

[Steve Double]

On the housing issue, one thing that the Treasury could do is level the tax playing field on the tax breaks between short-term holiday lets and residential properties. That would make a significant difference and would really help. Perhaps the Minister will take that message back.