Hospitality Sector VAT: Local Economies, Employment and Growth

John Lamont Excerpts

Thursday 12th November 2026 Westminster Hall

[John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)]

It is a pleasure to serve with you in the Chair, Dr Huq. Whether it is a seaside town in Lancashire or on the Berwickshire coast, the story is much the same. In the coastal town of Eyemouth, next to the harbour, stands Giacopazzi’s, which was established in 1898 by Lorenzo Giacopazzi. Arriving in Scotland on his way to America, he instead decided to stay on the Scottish coast to seek his fortune. The business has been run by his family ever since, becoming famous for its fish and chips and award-winning ice cream. The family has recently invested in a new ice cream factory, a bar and bistro, and holiday accommodation. However, Peter Giacopazzi has written to me, as have many hospitality businesses across my constituency, to say that pressure has never been greater. The costs of employer national insurance, wages, energy and ingredients have all gone up. On top of that sits VAT at 20%.

In the borders, hospitality is the lifeblood of the high street. From the hotels of Kelso and Melrose to the cafés of Hawick and Galashiels and the bed and breakfasts at St Abbs and Coldingham, these businesses are often a town’s largest private employers, providing our young people with the opportunity to take that all-important first step into the world of work.

At the same time, many of these businesses in the Scottish Borders, Scotland and across the UK are competing for customers who might otherwise go to Europe. Our hospitality VAT rate is the second highest in Europe. France, Italy and Spain charge 10%, Ireland charges 9%, and Germany charges only 7%. The consequences are bleak. UKHospitality reports that three hospitality businesses have closed every day this year, and nearly 100,000 jobs have been lost across the sector. There is no doubt that lowering the rate of VAT would help save jobs.

[Mr Gagan Mohindra (South West Hertfordshire) (Con)]

My hon. Friend is making an excellent speech. As the shadow Minister, my hon. Friend the Member for Grantham and Bourne (Gareth Davies), will be aware, the Laffer curve says that if we tax something, we discourage it. Does my hon. Friend the Member for Berwickshire, Roxburgh and Selkirk agree that the Government’s increase in employer national insurance contributions means they are forcing companies and businesses not to expand and, in some cases, to close down?

[John Lamont]

My hon. Friend makes an excellent point. We taxed smoking to try to stop people smoking, and the Government’s philosophy seems to be that they are taxing jobs to try to stop people being employed.

During the pandemic, hospitality VAT was cut to 5% to help businesses to survive. The Prime Minister has spoken in favour of a rate more aligned with Europe. Last month’s Budget was the chance to make that change, and it was missed. Business rates in Scotland are, of course, devolved so changes to rates in England do nothing for businesses in my constituency. However, VAT is UK-wide, so a cut would reach every hospitality business in the country, including those in the Scottish Borders.

My ask of the Minister, on behalf of the hundreds of businesses across the Scottish Borders that are desperate for financial relief, is that the Government reduce the pressure on businesses by looking again at a reduced VAT rate for the sector. Businesses such as Giacopazzi’s have served our communities for hundreds of years. Let us give them a fighting chance to survive, Minister.