Question to the HM Treasury:

To ask the Chancellor of the Exchequer, if she will make an assessment of the potential merits of introducing a lower rate of VAT for the hospitality sector.

To support hospitality businesses, the Government intends to introduce permanently lower business rates for retail, hospitality, and leisure (RHL) properties, with Rateable Values below £500,000, from 2026-27.

Ahead of these changes being made, the Government recognises that businesses will need support in 2025-26. As such, the Government has prevented the current RHL relief from ending in April 2025, extending it for one year at 40 per cent up to a cash cap of £110,000 per business, and we have frozen the small business multiplier.

VAT is the UK’s second largest tax, forecast to raise £171 billion in 2024/25. Tax breaks reduce the revenue available for vital public services and must represent value for money for the taxpayer. Exceptions to the standard rate have always been limited and balanced against affordability considerations.