Hospitality Sector: Eastleigh

Tom Gordon Excerpts

Wednesday 4th December 2024 Westminster Hall

[Liz Jarvis]

Yes, I do share the hon. Gentleman’s concerns. Despite the remarkable community contribution that our hospitality generates, the sector is under immense pressure. Nationally, hospitality employs 3.5 million people. It generates £140 billion in economic activity and pays £54 billion in taxation. The Government’s Budget, however, introduced £3.4 billion of cost increases, including rises in employer national insurance contributions. Those measures disproportionately impact lower-paid and part-time workers, who form the backbone of the industry. The Office for Budget Responsibility has said that next year 60% of the employer national insurance contribution’s increase will be paid for by staff in reduced real wages.

According to UKHospitality, employer national insurance contributions for a part-time worker on 15 hours will increase by 73%. Combined with reductions in business rates relief from 75% to 40%, these policies are creating unsustainable pressures on businesses already operating on razor-thin margins.

The Steam Town Brew Co. is a local success story. David from Steam Town raised the issues of residual inflation in food and drink, the prices of raw ingredients for brewing and high interest rates. He wants to grow the business, but the current economic conditions and existing market restrictions, such as the lack of access to tied pubs for smaller breweries, have made it challenging. The situation is made worse by the surging costs of energy. Hospitality businesses are among the most energy-intensive sectors, with pubs and restaurants relying heavily on refrigeration, heating and cooking equipment. High energy costs have led to dramatic increases in operating expenses that are becoming too hard to bear.

For smaller businesses the increases are not sustainable and many businesses are at risk of closure. Will the Minister share the steps the Government are taking to help hospitality businesses to manage their energy costs in the coming months? Post-covid recovery remains a significant challenge for hospitality businesses. Many are grappling with debt, reduced footfall and the shift of consumers to online food shopping. Last year alone, 2,704 hospitality businesses went into insolvency, highlighting the fragility of the sector and the urgency for Government support.

The cost of living crisis has created a perfect storm for the hospitality sector, as households across the UK tighten their belts, reducing discretionary spending on dining out, hotel stays and social experiences. That squeeze on disposable income directly impacts the vibrancy of our high streets. Individual prosperity and high street prosperity are intrinsically linked. When families feel they cannot afford to participate in social activities, it is not just their individual wellbeing, but the fabric of our communities that suffers.

[Tom Gordon (Harrogate and Knaresborough) (LD)]

I thank my hon. Friend for bringing forward this debate. The high streets in both Harrogate and Knaresborough are struggling. Does she agree that the Government need to do more to reform business rates properly? That is the key that underpins the vibrancy of our local high streets. Reforming business rates would give an injection of cash and the ability to do what they do best.

[Liz Jarvis]

My hon. Friend makes an excellent point and I will say more on that shortly. When the previous Conservative Government presided over an historic drop in living standards—the first time British households ended a Parliament worse off than when it began—it is no wonder that the hospitality sector has struggled in recent years. A sector thrives when people have confidence in their financial futures. That confidence has been eroded by years of poor economic management. High streets should be centres of activity, creativity and connection. The Government’s current policies risk turning them into boarded-up remnants of what once was. Hon. Members know that all too well, as we witness the slow erosion of our high streets with each closed pub, restaurant or café.

What reassurances can the Minister provide that the Government are committed to preventing further closures and fostering growth in our high streets? This weekend sees Small Business Saturday, an opportunity to celebrate and support our small businesses. Instead of stifling those businesses with increased taxes, the Government should lift burdens to allow the hospitality sector to thrive. A strong hospitality sector brings busy pubs, bustling hotels, vibrant nightlife and a renewed sense of community spirit. That is what our towns and cities need to recover from years of economic stagnation.

The Government should create economic conditions so that entrepreneurs are clamouring to open new restaurants, cafés, bars and pubs, finally putting a stop to the steady erosion of the sector in our communities. Every closed hospitality venue is not just a lost business but a lost opportunity for social connection and local employment. The Government must step up and deliver policies that support hospitality and ensure a brighter future for our high streets and the communities they serve.

I would like to know the specific steps the Government are taking to support this vital sector and restore hope to our high streets. If we want to see thriving high streets filled with energy and purpose, the Government must act decisively. At the heart of these challenges lies a deeply flawed business rate system. Business rates actively harm productivity by taxing structures and equipment instead of profits or land value. That outdated system discourages investment, stifling innovation and growth. Liberal Democrats have long called for its replacement with a commercial landowner levy, which would tax only the land value of commercial sites. That reform would encourage investment in buildings and infrastructure, reduce taxes in 92% of local authorities, particularly in deprived areas, and shift the administrative burden from businesses to landlords.

For high streets such as those in Eastleigh, that could provide a much-needed lifeline. It would allow businesses to focus on growth and innovation, while alleviating the crisis faced by small enterprises and hospitality venues. Although the Government have announced plans to introduce lower business rates for retail, hospitality and leisure properties from 2026-27, those changes are far too delayed. By the time those reforms take effect, many businesses will already have shut their doors. Moreover, reducing relief for small businesses from 75% to 40% is a devastating blow to thousands of enterprises trying to recover from years of economic strain.

In particular, pubs are bearing an unjust share of the burden. According to the British Beer and Pub Association, despite accounting for just 0.5% of total business turnover, they pay 2.8% of the business rates bill, an overpayment of around £500 million each year. I ask the Minister what plans the Government have to review that inequity.

Road Fuel Market

Tom Gordon Excerpts

Wednesday 6th November 2024 Commons Chamber

[The Minister of State, Department for Energy Security and Net Zero (Sarah Jones)]

I start by congratulating my hon. Friend the Member for Dunfermline and Dollar (Graeme Downie) on securing this debate, making such an excellent contribution and championing the needs of consumers, both in his constituency and across the UK, where so many people have the same struggles.

I welcome the opportunity to discuss the important matter of the road fuel market. This Government are committed to fixing the foundations of the economy, delivering change by protecting working people and rebuilding Britain. It cannot be the case that fuel retailers register record profits and do not pass on savings when the burden is being unduly felt by hard-working families and businesses. That is why I am so grateful for my hon. Friend’s story about Aimee. Her story is one that I suspect is familiar to many other MPs from their constituencies. We are committed to supporting people with the cost of living and the cost of fuel.

I agree with my hon. Friend that, for so many, vehicles are more than just a means of transport; they are a lifeline. They play an integral role in connecting working people, families, communities and businesses, especially in rural areas. In the case of young people, including Aimee, their car is a means to forge a career and earning meaningful, well-paid work. This Government are committed to delivering for drivers, but also providing a range of transport options to make it possible that people such as Aimee should not have to worry about how they get to work.

That is why this Government made the decision at last week’s Budget to freeze fuel duty for a further year, which I know my hon. Friend has welcomed. I commend his dedication to campaigning against high fuel prices and for families, working people and small businesses to get a fairer deal on fuel across his constituency and Scotland. It is imperative that we have a well-functioning, transparent and competitive road fuel market. We want to ensure that drivers can get a fair price for their fuel, and that fuel retailers remain transparent and do not overcharge. We expect all fuel retailers to pass on any savings at the pump.

As my hon. Friend set out, the Competition and Markets Authority published its road fuel market study in July 2023, and it found that competition across the retail market had weakened. The CMA found problems in relation to three aspects of the retail market: national, local and motorway.

At a national level, the CMA found that retail margins had risen significantly since 2019, with the supermarket retailers following a similar trend of increased margins on fuel. The historic price leaders in the market—primarily Asda, but also Morrisons to some extent—had taken a less aggressive approach to pricing and had significantly increased their margins over recent years. The rest of the fuel retailers took a passive approach and followed that trend.

At a local level, the CMA found significant price differences between local areas, with lower prices at a forecourt typically associated with having a supermarket competitor nearby. I know that my hon. Friend is concerned about that and recently raised it with the Leader of the House at business questions, as he has done today in this debate by sharing Aimee’s experience.

On motorway pricing, the CMA found that drivers without access to fuel cards, which account for 20% to 25% of fuel sales on motorways, were paying significantly more to fill up at a motorway service area than they would elsewhere, due to limited competitive pressure.

As a result of those factors, the CMA found that drivers have been paying more than would otherwise have been the case. It is estimated that the financial impact of the 3% increase in average supermarket fuel margin from 2019 to 2022 resulted in a combined additional cost of around £900 million for customers of the four supermarket fuel retailers in 2022 alone. That is equivalent to approximately £75 million a month for this period.

While fuel prices are now a lot lower than at the all-time peak in July 2022, weakened competition persists. The CMA’s latest monitoring update in July this year estimated that the increase in retailers’ fuel margins compared with 2019 resulted in increased fuel costs for drivers in 2023 of over £1.6 billion. Weak competition is still failing consumers; that is hugely concerning. The price of petrol and diesel is an important issue. When prices are high, the impacts are felt by everyone. We expect all fuel retailers to pass on any savings at the pump.

As my hon. Friend said, to address these issues, the CMA made recommendations for the Government to implement an open data scheme for fuel prices, requiring retailers to share their prices on a real-time basis and allow drivers to be better informed on prices and easily compare prices, and to launch an ongoing monitoring function for the retail market to assess how well competition is working. The Government accepted those recommendations.

On the CMA’s first recommendation, as part of the Budget last week, we confirmed that we will implement a statutory open data scheme called fuel finder. It will require all retail petrol filling stations in the UK to report prices and when a fuel becomes unavailable within 30 minutes of a change. The data will be shared openly and freely to third parties so that it can be incorporated into their price comparison websites or apps, sat-navs and other consumer-facing products that consumers can use. Fuel finder will empower drivers to compare prices more easily and make more informed decisions on where to buy their petrol and diesel. That will increase pressure on fuel retailers to compete strongly to attract consumers by lowering their prices or improving their services at the forecourt.

The Government are committed to implementing fuel finder as quickly as possible. We will begin procurement for the fuel finder aggregator in early-2025. The Data (Use and Access) Bill that the Government have introduced will provide the legislative basis to set up fuel finder. Subject to parliamentary timings, we aim to launch fuel finder by the end of 2025.

On the CMA’s second recommendation, it will receive statutory information-gathering powers through the Digital Markets, Competition and Consumers Act 2024 to undertake the permanent monitoring function. We are aiming to commence those provisions by January 2025. The CMA will be able to assess and monitor the state of competition in the retail market, both nationally and locally, provide ongoing scrutiny of prices and advise the Government if further intervention is needed to protect consumers.

The transition from fossil fuel to zero carbon vehicles is likely to lead to further risks of weakening competition in the remaining fossil fuel-based road fuels market. The transition is likely to be felt particularly by less well-off consumers and those living in rural areas. The CMA will be able to monitor the market through the transition and benefit consumers by ensuring that the market continues to function properly.

The CMA will therefore publish an annual report on the state of competition in the sector, three shorter updates on prices, costs and margins, and information on price trends across the UK and over time. Taken together, fuel finder and the CMA monitoring function will reinforce each other in providing a new source of competitive pressure in favour of greater competition in the road fuel retail sector.

[Tom Gordon (Harrogate and Knaresborough) (LD)]

One of the interesting things brought to my attention by residents in Harrogate and Knaresborough is that while we are quite rural, being on the periphery of North Yorkshire, there is an aspect about being an area with tourists, along with higher housing and other costs more generally. When we are talking about trying to reduce fuel prices, can the Minister give any further information on what consideration will be given to regional and inter-regional inequalities in pricing?

[Sarah Jones]

The hon. Gentleman makes a good point. That is why we need to start monitoring the situation properly. When we all have access to that real-time data and can understand exactly what is happening—the CMA can be monitoring that and reporting to the Government—the Government can say, “Actually there is a more systemic problem here that we need to tackle. We need to make more interventions.” The Government stand ready to look to do those things, but the first stage of having the data available so that we understand properly what is going on will help us to do that.

Fuel prices are inevitably uncertain and sensitive to wider global factors, but our published impact assessment estimates that increasing transparency and encouraging competition between petrol filling stations could result in fuel cost savings for drivers totalling £7.7 billion over 10 years. That amounts to savings of 1p to 6p per litre at the pump. I am sure that my hon. Friend and others will agree that that would be welcome.

In addition, at the Budget the Chancellor announced that the Government are extending the temporary 5p cut to fuel duty rates for a further 12 months, until 22 March 2026. Alongside that, the Government will not increase 2026 rates in line with the retail price index, or RPI. Taken together, that is a tax cut worth £3 billion in 2025-26. The freeze in fuel duty will save the average car driver £59 in 2025-26. These actions have been welcomed by stakeholders such as the RAC and the AA.

Let me assure the House and my hon. Friend that the Government are committed to delivering for drivers. Our ultimate goal is to increase the levels of transparency for consumers and encourage fuel retailers to become more competitive. That way, consumers will send the clearest signal to them that they will not pay extortionate prices when given a range of options to choose from. We are confident that these measures will help facilitate a competitive road fuels retail market, increase price transparency and protect consumer interests. I thank hon. Friend again for securing this important debate.

Question put and agreed to.