Hospitality Sector VAT: Local Economies, Employment and Growth

Tonia Antoniazzi Excerpts

Thursday 12th November 2026 Westminster Hall

[Dr Rupa Huq (in the Chair)]

As it is more than 10 minutes past 3 pm and the Member in charge is not here yet, I call Tonia Antoniazzi to move the motion.

[Tonia Antoniazzi (Gower) (Lab)]

I beg to move,

That this House has considered the impact of VAT policy for the hospitality sector on local economies, employment and growth.

It is an honour to serve under you chairship, Dr Huq; I am moving the motion on behalf of my hon. Friend the Member for Blackpool South (Chris Webb). Hospitality and tourism are not just industries; they are major employers, anchors of local economies and a vital part of the social fabric of communities right across the United Kingdom. Yet in my roles as Chair of the Northern Ireland Affairs Committee and chair of the all-party parliamentary beer group, we have seen that current VAT policy, combined with a range of other tax pressures, is placing hospitality businesses under significant strain and undermining their ability to compete.

Our inquiry heard from hotels, pubs, restaurants, caterers and tourism operators across Northern Ireland. We travelled to Derry/Londonderry and met businesses on the ground. Their message was consistent and clear: the current tax environment is holding back growth, limiting investment and threatening the long-term viability of businesses that are already operating on tight margins. Hospitality businesses are contending with a perfect storm of rising costs. Increased employer national insurance contributions have also hit the sector, which relies heavily on part-time and lower-paid workers. We heard evidence that it is around 8% more expensive to employ someone on the minimum wage in Derry/Londonderry than it is just a short distance away from the border in the Republic of Ireland.

Businesses also face high business rates and rising energy costs. Hospitality is an energy-intensive sector with little flexibility to move consumption away from peak trading hours. At the same time, consumer spending remains under pressure, particularly in Northern Ireland, where average wages remain lower than the UK average.

[Gregory Stafford (Farnham and Bordon) (Con)]

The hon. Lady is giving an excellent description of the problems happening in Northern Ireland, but they are happening in England, Wales and Scotland as well. I hold a regular quarterly meeting with my local publicans and hospitality businesses. They say repeatedly that the situation they face at the moment is worse than it was under covid, because at least under covid the Government stepped in to support them. The Government are now penalising them through all the things the hon. Lady just mentioned, such as the business rates increases—for one pub in my area they are going up by £32,000. That is just not sustainable, and there are the national insurance rises, too. Does she agree that although VAT is part of the picture, the Government really need to deal with all sorts of other parts of the tax system?

[Dr Rupa Huq (in the Chair)]

Order. The hon. Member’s remarks are a bit long for an intervention.

[Tonia Antoniazzi]

The hon. Member may question why, as a Welsh MP, I am not calling for a UK-wide reduction. I am not calling for that per se, but I do want to lay out why Northern Ireland is a special case and why it could be useful for the Government to do a pilot.

The more striking issue raised during our inquiry was the impact of VAT policy on competitiveness. Hospitality businesses in Northern Ireland operate in a unique environment, competing not only with businesses in other parts of the UK, but directly with establishments in the Republic of Ireland, and therefore Europe. The Republic of Ireland’s hospitality services benefit from significantly lower VAT rates, including a 9% rate on food and catering services and a 13.5% rate on accommodation, compared with the UK’s standard rate of 20%. That disparity has real-world consequences.

We were told that tour operators organising itineraries across the island of Ireland are increasingly choosing accommodation south of the border because of lower costs. Conference organisers, wedding planners and major event operators are making similar decisions. In many cases, Northern Irish venues simply cannot compete, despite offering excellent facilities and service. The result is real: lost business, lost investment and lost opportunities for growth. I wish to be clear: witnesses did not argue that VAT is the only challenge facing the sector, but many viewed it as the most straightforward and effective lever available to Government.

A reduction in VAT would provide businesses with breathing space. It would improve cash flow, strengthen margins, support investment in premises and staff, help to absorb rising operating costs and enhance competitiveness in an all-island market. Importantly, businesses told us that the primary benefit would not necessarily be cheaper prices for consumers. Rather, it would allow businesses to remain viable, invest for the future and create the conditions for sustainable growth. That is why the Committee has called for the Government to introduce a four-year pilot scheme in Northern Ireland, reducing VAT to 10% on food, excluding alcohol, and on accommodation.

A pilot scheme would provide an opportunity to gather robust evidence. It would give businesses sufficient time to adapt, secure new contracts, influence customer behaviour and demonstrate whether a lower VAT rate can stimulate economic activity, increase employment and ultimately generate broader returns for the public finances. Such an approach would not only benefit Northern Ireland; it could also provide valuable lessons for hospitality policy across the UK.

We have also called on His Majesty’s Treasury to engage with the Irish Government and Tourism Ireland to examine the impact of Ireland’s recent VAT reductions and previous temporary cuts. If there is evidence that lower VAT rates in Ireland have supported growth, jobs and tax revenues, we should be willing to learn from Ireland’s experience.

Hospitality businesses do not want special treatment. They want a fair opportunity to compete, and a tax system that recognises the unique pressures they face and the immense contribution they make to local economies. If we are serious about supporting jobs, encouraging investment and strengthening our tourism offer, we must recognise the role that VAT policy plays in shaping competitiveness. The case for a targeted VAT pilot in Northern Ireland is strong, the evidence is compelling and the potential rewards for growth and prosperity are significant. I urge the Government to listen to the sector and act accordingly.