Finance (No. 2) Bill

Debate between Sarah Olney and Jamie Stone

Committee stage & Committee of the Whole House (Day 2)
Tuesday 20th April 2021 Commons Chamber

[Sarah Olney (Richmond Park) (LD) [V]]

I wish to speak to clauses 92 to 95 relating to VAT. This last year has been exceptionally tough on our hospitality industries and I welcome all measures to support our valuable tourism and hospitality businesses as they tentatively begin to open up after the pandemic. Like many others, I was delighted to be able to visit pubs, restaurants and cafés in my constituency last week. I had a particularly enjoyable Friday night drink at the Black Horse on Kingston Hill and a fantastic Sunday lunch at the Glasshouse in New Malden. I am very much looking forward to getting round to all the other excellent venues in my constituency over the next few weeks and months.

However, it is important to remember that tourism and hospitality will not recover overnight. While there is undoubtedly a great deal of pent-up demand for eating out and visiting the wonderful sights and attractions of our great nation, it will not be possible for all businesses to open immediately and in full. And we do not know whether the Government’s road map will be able to progress as planned. Despite the wonderful success of the vaccine roll-out, we are still at risk from new variants and there may still be a need in future to restrict people’s ability to socialise indoors. So, although we welcome the cut to the VAT rate on hospitality and tourism sales to 5% until September 2021, the Liberal Democrats argue that the cut should be extended for the whole of the financial year, instead of moving to 12.5% from September to March.

Household incomes also need time to recover, and encouragement to spend on luxuries and leisure such as meals out should be continued for much, much longer. Indeed, the Government could and should have gone a great deal further to support these businesses and to safeguard the jobs that they create. Many businesses are able to partially reopen this month. There are estimates that up to 60% will not be able to reopen because they do not have outside space. But they will all be faced eventually with large VAT bills, deferred over the last 12 months.

A much better way to support businesses would have been to provide relief on the deferred VAT owed. That would have relieved businesses of an immediate cash burden and freed up that cash flow to invest in stock, staff and making their premises covid-safe. Instead, the Government propose to start imposing penalties from June this year on those businesses that have not yet started repaying this VAT. That will fall on businesses that have had extremely limited opportunities to earn any revenue in the last 12 months. The measures to allow businesses to pay this in 11 instalments is welcome, but will not help those businesses that cannot yet reopen and will not have any cash coming in to pay any of those instalments.

Businesses will also be carrying a great deal of debt and it is very disappointing to see a lack of measures in the Budget to address that. In particular, many businesses will be indebted to their landlords and it is disappointing that the Government have done nothing at all to help businesses with those costs. The Liberal Democrats would have introduced a revenue compensation scheme to help businesses with fixed costs such as rent. The burden of repaying those will fall very heavily on businesses that cannot yet reopen fully.

I am probably unique in the House in having direct experience of implementing Making Tax Digital for VAT reporting in my former role as an accountant for a large organisation. While the overall objectives of the programme are sound, I can tell the Minister from personal experience that they are not always straightforward to implement. I am puzzled as to why the Government think it should be a priority for struggling small businesses to deal with the additional administrative burden of implementing Making Tax Digital, at a time when they are having to deal with the huge burden of reopening in a highly uncertain time, and at the risk of further fines if they do not comply. Surely this could have waited another 12 months. The imperative to close the tax gap surely pales into insignificance when compared with the imperative to support precarious businesses at this time. How can additional red tape and administrative burden be the right response to the current crisis?

In short, this is not a Government who understand the needs or priorities of small businesses; it is a Government who choose to impose punitive costs and paperwork rather than provide effective support.

[Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)]

Dame Rosie, my humblest apologies for being late in attending the Chamber. I was badly caught out by the fact that this debate is way ahead of where I thought it would be. [Hon. Members: “Hear, hear.”] There is a silver lining to every cloud.

My good friend and colleague, my hon. Friend the Member for Richmond Park (Sarah Olney), has said it all, but I would like to touch on the issue of the hospitality sector. I am sure the Minister is tired of hearing this again and again, but business in my part of the world is very fragile. The hospitality sector depends on making as much money as it can during the short tourist season because the weather can be so inclement—it is like living on the fat you can make in the good times to get through the winter.

I give credit to the Government for the help that has been given, but I am very concerned that some tourism businesses may still yet shut down permanently. I do not know how many times I have said this in the Chamber, but the fact is that, if we lose one business, two businesses or three businesses, we are impoverishing the tourism product that we can offer in a remote part of the British Isles and, if we do that, there is less for tourists to come, see and do, or to eat and drink, and then we do not get as many tourists coming, and it becomes a downward, vicious circle. The VAT reduction we have had so far is welcome, but could we look at extending it a little further, perhaps for as long as my hon. Friend the Member for Richmond Park said? That would be very welcome. I have said several times in this place that it would be helpful if the Scottish Government and the UK Government could look at an overall, longer-term strategy to try to get businesses back on their feet, seeing them through the difficult times and nursing them so that we get to—to quote Churchill—the “sunlit uplands” that surely will come our way.

There is one other issue: we need some form of training element in that package. I was talking to Murray Lamont, who owns and runs Mackays Hotel in Wick, and he said: “Talk about training, Jamie, because we need to keep improving the product and making it still better because the competition is out there.” My hon. Friend the Member for Richmond Park touched on the revenue compensation scheme, and I would be extremely grateful if that could be looked at.

I am tempted to chance my arm and talk about banks, given the name of this section of the debate. Members will have heard me say many times that we have one branch of the Bank of Scotland in the huge county of Sutherland. That is a massive problem, but rather than incur the yawns of those on the Treasury Bench—