Hospitality is a vital pillar of the UK economy – but it is a pillar in serious danger of falling over if the UK’s governments do not urgently intervene to take some of the economic strain.
Leading this week’s Westminster Hall debate on the issue, Stirling MP Alyn Smith implored UK Government Ministers to cut VAT on food, soft drinks and alcohol to 5%, alongside a wider package of reforms and support aimed at shoring up the sector as it weathers the cost of living crisis.
The SNP’s Mr Smith urged administrators at UK, Scottish and local level to start taking the plight of hospitality businesses seriously, and implement rapid, targeted support for an industry that is ‘vital to so many communities’.
“Our pubs, restaurants, hotels and cafes play a vital role in our communities – they keep our high streets busy, they’re community hubs, they give us a sense of place and purpose,” Smith told the House of Commons.
“Particularly in rural communities, if the pub or cafe goes they just become dormitories. Hospitality promotes social mobility – how many of us had our first job in the local bar or restaurant, pulling pints, waiting tables or doing dishes?
“Both the UK and Scottish Governments, along with local authorities, must wake up and realise the calamity facing the sector – the beer and pub sector alone accounts for 936,000 jobs and £26 billion to the economy UK-wide – in Scotland that’s 62,000 jobs and £1.8 billion in tax receipts.
“The wider hospitality sector employs 3.5 million people in one-form or another – that’s £54 billion in tax receipts,” he stressed.
“These businesses are at the sharp end of an economic crisis not of their making, and it is the duty of government to step up, step in and prevent a vital pillar of the UK economy from falling over.”
A VAT cut to 5% on food, soft drinks and alcohol would bring the UK closer to EU averages, argued Smith, who said such a measure would be ‘bureaucratically slim’, based on turnover, and could be deployed quickly.
He also urged the Scottish Government to move swiftly on a wholesale review of business rates, in light of the changing post-pandemic economy, and for other governments to do likewise.
Other early measures should, he said, include tougher regulation on energy companies and consideration of further market intervention amidst continued high energy bills. An overhaul of work visas to plug labour market shortages exacerbated by Brexit would also be welcomed by the hospitality sector.
“Am I looking for special treatment for the hospitality sector?” asked Smith. “Yes. I think they need it and I think they deserve it. So, what am I calling for? If you remember only two words from me today, it is ‘cut VAT’.”
This call was backed by a swathe of MPs across the House. Tobias Ellwood, MP for Bournemouth East (Conservative), said: “My simple, but critical, call to action today is please listen to the hospitality sector, who are screaming out that VAT is too high. Please reconsider the decision to raise VAT to 20%, otherwise you will face ever more business closures and subsequently raise less tax for the Exchequer.”
Steve Double, MP for St Austell and Newquay (Conservative), said: “I think we need more fundamental reform of business rates for the hospitality sector to reduce the burden of that particular tax.”
Tim Farron, MP for Westmorland and Lonsdale (Liberal Democrat), said: “I really hope the Minister will listen and bring in the actions we need. All we’re asking you to do, Minister, is back a sector that will boost our economy to the tune of billions more.
Rachael Maskell, MP for York Central (Labour), said: “The hospitality sector is at the sharp end of all markets sensitivities. It feels every economic challenge acutely. The sector needs support.”
Commenting, chief executive of UKHospitality, Kate Nicholls, said: “It was excellent to see so many MPs attend the debate today, responding to our calls and those of hundreds of hospitality businesses that urged them to do so.
“It’s evident from the debate that MPs recognise the challenges facing the sector and back our calls for urgent action. There was particular cross-party support to lower the rate of VAT and reform business rates – all priority asks of ours.
“I hope the strength of feeling shown today is heard loud and clear by the Government and that they take the necessary action in the Budget to help this strategically important sector,” said Nicholls.
