Northern Ireland Hospitality Sector

The advantages could be substantial. First, it would help businesses remain viable. For many hospitality operators, a VAT reduction would improve margins at a time when costs are rising dramatically. Some businesses would pass savings directly to customers through lower prices, while others may reinvest those savings into staffing, wages, training or expansion. Either way, the money would remain within the real economy. Secondly, it would support jobs. Hospitality is one of the largest employers of our young people, and it provides opportunities for people entering the workforce, developing skills or returning to employment. Protecting hospitality means protecting livelihoods in every constituency across our country.

Thirdly, it would strengthen tourism. Visitors do not separate hotels, restaurants, cafés and attractions from their overall experience of Northern Ireland, so a more competitive hospitality sector would help to create a stronger visitor economy. Recent successes in attracting major international events have demonstrated Northern Ireland’s potential to attract visitors and generate significant economic returns, and a more competitive VAT regime would build on that success. Fourthly, it would support our high streets and local communities. Hospitality businesses create footfall, bring people into town centres and occupy premises that might otherwise stand vacant. Every restaurant, café or takeaway that survives and prospers contributes to the wider vitality of our communities.

However, there is another important question: can this be done legally? The answer is yes. Too often, discussions about Northern Ireland are dominated by what cannot be done because of the protocol or Windsor framework. On this occasion, the legal advice is clear that neither the VAT provisions that apply to Northern Ireland nor state aid considerations would prevent the UK Government from introducing a reduced VAT pilot for the hospitality sector in Northern Ireland. Indeed, article 8 of the Northern Ireland protocol specifically envisages a situation where VAT arrangements may diverge to address competitive imbalances with the Republic of Ireland, which is the case here. The legal route, the economic case and the practical mechanism exist. What is required now is the political will to act.

Of course, we have to be honest about the challenges. A reduction of VAT would have an up-front fiscal cost. The purpose of such a pilot is to measure whether increased economic activity could offset some or all of that additional revenue loss over time through growth, investment and employment. The question before us is not whether there is a cost, but whether the cost of doing nothing is greater. What is the cost of businesses closing? What is the cost of jobs being lost? What is the cost of investment leaving Northern Ireland? What is the cost of allowing a widening competitive gap between businesses north and south of the border? Those questions deserve answers, and a Northern Ireland pilot would provide them.

Northern Ireland has often been described as unique. In this case, our unique circumstances provide a unique opportunity. We have a clearly defined geographical market, face a distinct cross-border competitive challenge and have an obvious comparator in the Republic of Ireland. That makes Northern Ireland the ideal test bed for a hospitality VAT pilot. If successful, the lessons learned could inform policy across the wider United Kingdom. This proposal is pro-business, pro-worker, pro-tourism and pro-growth. More importantly, it is practical and evidence-based and deserves to be tested rather than dismissed.

The incoming Prime Minister talks of more devolution. Here is an opportunity for the Minister to put such a case in front of him. The Northern Ireland Affairs Committee has opened an evidence call for an inquiry on this subject, so it will not go away at the close of this debate. I therefore urge the Government and the Treasury to work with the Northern Ireland Executive, industry representatives and local businesses to establish a reduced VAT pilot for hospitality businesses in Northern Ireland. Let us give this vital sector a fair chance to compete, protect jobs and investment, strengthen our tourism offering and demonstrate that creative economic policy can help to unlock Northern Ireland’s full economic potential.