Hospitality Sector: Eastleigh

Debate between Tom Gordon and Liz Jarvis

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.