Hospitality Sector

[Dawn Butler in the Chair]

I beg to move,

That this House has considered Government support for the hospitality sector.

I draw Members’ attention to my entry in the Register of Members’ Financial Interests; I have also received hospitality from UKHospitality and from the British Beer and Pub Association that falls below the registrable threshold.

I am pleased to open this debate on a subject of national and local importance: the future of our hospitality sector. From pubs and restaurants to hotels and leisure centres, hospitality is more than just a convenience; it is the beating heart of our communities. It provides first jobs, second chances, career ladders and gathering places. It employs 3.5 million people and contributes £140 billion in economic activity and £54 billion in tax receipts to the Exchequer each year. Yet the sector faces an existential threat—not from a lack of demand, but from deliberate political choices made in last autumn’s Budget and the spring statement.

Those choices have hit hospitality harder than any other part of the economy. The Government’s 2024 Budget, far from being fair or progressive, has dealt a brutal blow to our high streets and local economies. The cumulative effect of increased employer national insurance contributions and cuts to business rate relief, alongside the increases in the national living wage, has added £3.4 billion to the sector’s annual cost base. Let us be clear: those numbers are not abstract. They represent shifts that businesses feel every single week and to which they are taking action in response.

Early Government figures show that 100,000 jobs were lost in just one month. That is not a warning sign —that is a siren. Part-time and entry-level workers have been the hardest hit; not highly paid City graduates, but bar staff, kitchen porters and hotel receptionists in every village, town and city across our country. The problem is even more damaging because it flies in the face of the Government’s own stated missions. The Government claim to want regional growth and better living standards across the UK, but the Budget has cancelled investment, reduced hours and led to closures in exactly the communities that need regeneration the most. The hospitality sector has outgrown the wider economy in recent years, yet it barely even features in the Government’s new industrial strategy. There are just three mentions of hospitality in the whole strategy, and one of those was because the Government had mis-spelled “hospitals”.

Hospitality is a proven route to social mobility and opportunity, accessible to everyone, not just a privileged few. Yet the Government’s actions directly contradict their levelling-up agenda. They talk about growth, but strangle the sectors that deliver it. They talk about fairness, but penalise the poorest workers. They talk about opportunity, but crush the businesses that provide it. They have forgotten that enterprise is not just about spreadsheets—it is about people, purpose and pride.

I held a pub and hospitality roundtable in my constituency, where publicans stated that the changes in the Budget had been worse than covid for their balance books and the viability of their businesses, because at least during covid the then Conservative Government gave relief and help to them; this time, they have received nothing.

My hon. Friend is absolutely right. The changes to employer national insurance contributions have meant that 774,000 workers, many of them on lower incomes or working part time, are caught in a net that punishes job creation. The cut in business rate relief from 75% to 40% has driven otherwise viable businesses into the red, hitting pubs such as the Green Man in my constituency, which has seen its business rates bills rise from about £140 a month to nearly £350 a month—before a single customer has been served or a single pint pulled. A third of hospitality businesses now operate at a loss. That is not sustainable, and it is not fair.

According to UKHospitality, the Government’s measures will cost the sector at least £3.4 billion, including a £1 billion cost from the national insurance contribution increases alone. Of course, those tax rises came in at exactly the same time as the increase in the national living wage, adding even more pressure to small business employers such as the tea room at Ashwood Nurseries, in my constituency, which already operate on tight margins.

Let me be clear: no one opposes fair pay. I am proud that the previous Government introduced the national living wage, and increased it to give workers’ incomes a boost. However, if the Government want sustainable wage increases, they cannot also pile on non-wage costs at the same time—and that is before the impact of their employment rights package, which comes into force next year. The data already shows the consequences starkly. The Office for National Statistics confirms that since the October Budget, the hospitality sector has shed 69,000 jobs, even before the latest figures from His Majesty’s Revenue and Customs. That is 3.2% of all hospitality jobs. To put that in context, the overall economy lost 1.2% of jobs in the same period, so hospitality’s job losses were 266% higher than the national average.

I too remind the House of my entry in the Register of Members’ Financial Interests. In Orkney and Shetland, the food and drink sector is an integral part of our local visitor economy, as is the hospitality sector, but neither is part of the Government’s industrial strategy. Does the hon. Gentleman agree that, if we were to bring food and drink and hospitality into the industrial strategy, we would not suffer the salami slicing of over-regulation that we are seeing, especially in Scotland, where the self-catering industry is now being hit with another round of regulatory burdens?

The right hon. Gentleman is clearly correct. One of the dangers of trying to pick winners is that those that do not make the priority list are, almost by definition, left behind. Major sectors such as hospitality and food and drink employ so many people, in every constituency, right across the age groups and in every demographic possible; leaving them out sends a very unfortunate signal, at the very least, and could be very damaging, if not corrected quickly.

A third of hospitality businesses report that they operate at a loss, with jobs lost, hours cut, investment cancelled and, sadly, many businesses closing. The Office for Budget Responsibility warns that 60% of the national insurance contributions burden will be passed on through lower wages, hitting workers despite the Chancellor’s promises. These are not abstract statistics; they are real people’s lives. Overwhelmingly, young, part-time, ethnic minority and lower-income workers are disproportionately represented among those hit, despite those being the very groups that the Government claim they want to support. The Government’s policies are deeply regressive.

It does not have to be this way. Hospitality is not asking for handouts, but for a level playing field. The sector is resilient. After the 2008 crash and during covid, it helped to revive communities and restore confidence and, within the right framework, it can do so again. It has the potential to grow six times faster than the wider economy, to create half a million jobs by 2030, and to breathe life into areas across the country, not just in the overheating south-east.

In order for the sector to do that, however, the brakes must be taken off, and there are simple, targeted steps that the Government could take now. They could protect the high streets by quickly introducing a proper reform of business rates, with a maximum discount for venues under £500,000 rateable value. They could scrap the proposed additional levy on larger hospitality businesses, which are so important to many of our communities and provide so many jobs. They could create a new lower rate of national insurance contributions for those earning between £5,000 and £9,100, to reverse April’s job losses and make it easier to hire again.

It is perhaps a pity that one particular political party in Scotland is not represented in this debate today, because this summer, in the village of Achiltibuie in north-west Ross and Cromarty, I spoke to a barman who could not stay for the rest of the year because he had nowhere to live. Accommodation is a critical problem in the remote parts of the highlands. The SNP Government should address that; I dearly hope that this debate will be looked at, read up and acted upon, because this is a critical issue.

Hospitality, as I have said, is so important in every part of the United Kingdom. We need Governments in every part of the United Kingdom to recognise that and to take the appropriate action, although I hope the hon. Gentleman will excuse me if my focus is primarily on those decisions that can be taken in Westminster and by the Government at a national level.

My challenge to the Minister today is simple: will he listen, if not to me, then to representatives from across the hospitality sector who are clear that the Government are getting this wrong? Will he support a sector that contributes £54 billion in tax receipts— far more than it gets back? Will he stand by his Government’s own missions of fairness, opportunity and growth, or will he continue policies that undermine them at every turn?

Hospitality is being taxed out of existence, and that is a political choice. We need a change of course not just for the sector, but for every community that depends on it. We need policies that reflect the value that hospitality brings—economically, socially and culturally—and we need action now.

I remind Members that they should bob if they would like to contribute to the debate. Informally, speech times should be around four minutes.

I thank the hon. Member for Kingswinford and South Staffordshire (Mike Wood) for leading today’s debate on a subject that is important for all regions in the UK, but particularly for mine. For Cornwall, the visitor sector is still an important core industry. Cornwall is a top UK tourist destination, with tourism providing 15% of Cornwall’s economy. Tourism and hospitality account for one in five jobs in the Duchy and well over 90% of our visitors come from within the UK.

In my constituency alone, there are 1,761 hospitality businesses—placing us 21st out of all UK constituencies—with a turnover of more than £4.5 million. Cornwall is a national landscape. People come from far and wide to visit our beautiful beaches and dramatic coastline. They stay in our hotels, B&Bs and holiday lets, drink in our pubs and eat in our array of brilliant cafes and restaurants. The hospitality sector in Cornwall is dynamic, creative, and one of the mainstays of our economy. However, our reliance on what is often still a seasonal sector can make us vulnerable. After the post-covid boom, Cornwall really suffered and by summer 2024 Tim Jones, chairman of South West Business Council, argued that tourism in the south-west as a whole was at its lowest for 10 years.

During the peak season, the Cornish population grows fivefold, putting strain on local NHS, water, roads and policing. To give an example, around 700 people turned up to A&E in Cornwall on August bank holiday Monday. Fair Funding for Cornwall is a campaign that Cornish politicians of all stripes have been pushing for years. I am very pleased that this Government have recognised visitor numbers, coastal areas and sparsity in the recent local government funding review and in the review of the Carr-Hill formula for NHS GP funding. I hope that follows through into more support for our services and infrastructure.

I have spoken to many businesses since I was elected a year ago, and I know that some of them have been struggling. Rising costs, high energy bills, staff shortages and pandemic debts have forced some to close up, or to consider doing so. That will have a knock-on effect on the number of employment and apprenticeship opportunities available to our young people, who have already suffered from years of broken education and isolation during covid, and a lack of special educational needs and disabilities support in schools over the last decade. The businesses themselves are often family-run, close-knit and the centres of their communities, so their loss is felt greatly.

When the hon. Lady was on that Bill Committee, did she consider the fact that a large part of the hospitality sector in Scotland would have no business rate relief, even though businesses in the south could get it? It was a favour done for England and Wales, but did not help Scotland.

As I recall it, we did not specifically consider Scotland—or I certainly did not. The Government did prevent a business rates cliff edge in April 2025 in England by extending business rate relief at a rate of 40% for 2025-26. I would welcome the Minister’s confirmation that those permanently lower rates will compare to current rates, rather than the pre-pandemic ones.

I look forward to the launch of the Government’s holiday let registration scheme later this year. If that includes registration of safety check documents and, potentially, inspection, it will ensure safety and quality standards, levelling the playing field between hotels, B&Bs and short-term lets. There are more holiday lets and second homes in Cornwall than there are people on the housing waiting list, which stands at more than 25,000. The industry in Cornwall is supportive of a scheme where safety checks are required for holiday lets, as the good providers are doing those anyway. Registration would also show us where the gluts of holiday let properties are.

For people working in the hospitality sector to live in the communities in which they work, we need investment in public transport and to tackle the housing crisis. Measures on second homes and the Government’s pledge to build more council and affordable homes on stuck sites, such as the Pydar development in Truro in my constituency, are welcome. I look forward to a strategic place partnership with Homes England to make that happen for Cornwall.

Cornwall’s chamber of commerce has said that better transport connectivity is the No. 1 priority for the businesses it represents, so I welcome the Government’s transport funding announcements. Recent upgrades to the A30 were helpful, but protection of our airport public service obligations and upgrades to our rail service —upgrading to electric power or batteries, and providing better wi-fi to make the journey of more than five hours from London to Falmouth more bearable—would be very welcome. Improved bus services are obviously very important. I welcome the commitment to the £3 fare cap, but in rural areas, getting to work and back home is often difficult, particularly after 6 pm, and that needs tackling.

At the start, I declare an interest, as my children and I own a cinema, restaurant and big visitor centre in Fort William, employing more than 100 people. I was brought up in a rural inn and my brother has a brewery. I am steeped in the hospitality sector.

At the autumn Budget, the Government increased the rate of NIC by 8.7%, which, added to other measures, resulted in an increase of 12.4% in payroll for hospitality businesses like mine. That is four times the rate of inflation. The hospitality sector in my constituency and other remote areas faces additional challenges, particularly the cost of energy. Businesses that cannot access mains gas often have to use electricity, which is four times the price of mains gas. A hotel in rural Britain, whether it be in Cornwall or the highlands, would need to pay £100,000 to heat itself using electricity; using mains gas, the cost would be £25,000, and if it were in America, heating would cost £10,000.

Environmental tariffs are on the wrong energy source. They are on renewable energy and not on imported carbon fuel mains gas. That is just so wrong. The Government declared that they are a growth Government; we now know that they meant growth in costs rather than growth in revenue. The impact of the autumn Budget was a 2% increase in the cost of the public sector and a 2% reduction in the private sector. It seems that the hospitality sector is bearing the brunt of that.

I would say that the hospitality sector in rural Britain has not struggled more in my lifetime. Both the last two Governments have plucked the golden goose of hospitality so often that it no longer has any feathers.

It is a pleasure to serve under your chairship, Ms Butler. I thank the hon. Member for Kingswinford and South Staffordshire (Mike Wood) for securing this important debate.

For many in this Chamber, I imagine that the first thing that comes to mind when I mention Cornwall is our world-leading beaches, our coastal villages and our incredible hotels and restaurants. Tourism is a key part of our local economy, and our wide range of hospitality venues, powered by hard-working, often local staff, are what make that offer possible. In South East Cornwall, hospitality supports many local families and households, but the work is often seasonal, unreliable and involves unsociable hours. It can be a difficult way to make a living and the difficulty is compounded by an affordable housing crisis in Cornwall. I welcome the Government’s efforts to fix that.

We need more first homes for local families. Alongside my Cornish colleague and hon. Friend the Member for Truro and Falmouth (Jayne Kirkham), I look forward to a strategic place partnership for homes in Cornwall. That is why I welcome the Government’s efforts to improve employment rights in the hospitality sector. The Employment Rights Bill, currently progressing through the other place, tackles exploitative zero-hours contracts and one-sided flexibility, and ensures day one rights.

There is more we can do to support a modern, vibrant hospitality sector—one that reflects Cornwall’s rich heritage and unique position. Our venues celebrate Cornish-grown and Cornish-made products through local food, local art and Cornish talent. That helps our communities, strengthens our economy and builds pride in place, but we need more year-round employment, as residents need that security and are often left struggling in the off-season, and align education and training with actual local job opportunities. Cornwall has so much to offer, which is reflected in the number of visitors we attract each year, but we need a strong system that supports and improves our communities and welcomes visitors.