Debate contribution: VAT for Hospitality

Debate contribution by Dr Caoimhe Archibald on 13 May 2024.

MLA

Dr Caoimhe Archibald

Party at the time

Sinn Féin

Date

13 May 2024

Type

Debate contribution (made as a minister)

Business

Opposition Business

Heading

VAT for Hospitality

Assembly identifier

Official Report component 4489474

Read the official Assembly record

Text

I welcome the opportunity to speak about this important issue. Tourism provides jobs for 75,000 people in the North, and 70% of those are outside Belfast. Therefore, that sector is key to delivering regionally balanced economic development, which is one of the key priorities for the Economy Minister, and supports jobs across the North. Hospitality is a crucial sector that plays a significant role in the success and growth of the tourism sector. Over a third of visitor spend in 2019 was on food and drink. Hospitality and tourism businesses have faced many challenges in recent years. They were severely impacted on by the COVID pandemic, when they faced significant periods of closure and restrictions on how they could operate. More recently, they have faced new pressures presented by the cost-of-living and cost-of-doing-business crises. We have seen large fluctuations in energy prices driven by our continued reliance on importing fossil fuels. In addition, VAT for hospitality here is set by the British Government at 20%, compared with 13·5% in the South. That rate significantly impacts on the hospitality sector's cost base. As others have said, that impact is further emphasised in border counties, especially when customers come to make significant purchasing decisions such as selecting venues in which to host events. VAT was previously reduced to support those sectors during the pandemic. My officials continue to highlight the adverse impacts of the VAT rate in their regular meetings with their Treasury counterparts. They will continue to emphasise the economic importance of a reduction in VAT for the sector to help struggling businesses and safeguard jobs here and to stress the impact of the relatively high rate in the North compared with the South. As my colleague Philip McGuigan said, Sinn Féin wants to see the harmonisation of VAT across the island and the maximum devolution of fiscal powers. The Fiscal Commission published its final report on 19 May 2022. It included a comprehensive suite of recommendations for progressing fiscal devolution. However, the devolution of VAT was not a recommendation made by the Fiscal Commission, with the recommendation being that other taxes be prioritised. I will consider responses to the Fiscal Commission consultation and bring proposals to the Executive in respect of fiscal powers. Currently, the focus remains on making the case to the British Government to reduce the VAT rate here. As Members are aware, when we were setting the Budget for 2024-25, demands for funding outstripped the available funding many times over. Any interventions have to be delivered in that difficult budgetary context. As Sorcha Eastwood said, addressing the challenges of rising costs cuts across several areas of government, including the Department for Communities, the Department for the Economy, my Department and the councils. The Department for the Economy is taking steps to support businesses through the delivery of the Executive's path to net zero energy strategy, a key objective of which is to ensure that all businesses have access to essential and affordable energy. Invest NI launched the energy and resource efficiency scheme on 8 May. That five-year programme is open for applications and will offer businesses grants of up to £150,000 for investment in areas such as lighting, heating and cooling equipment, motors and drives, compressed air systems and on-site renewable energy generation. That grant will help companies to invest in technologies that reduce energy consumption and carbon emissions, which will help to lower costs. Tourism NI provides a suite of advisory supports to help tourism and hospitality businesses to reduce costs, improve productivity and be more sustainable, including the "Leaner and Greener" and "Innovate Tourism" initiatives. Tourism NI's initiatives also include the "Make it Here!" campaign to boost recruitment and retention in the tourism and hospitality sectors; a comprehensive plan to further develop food and drink tourism over the next five years; high-profile and high-impact marketing campaigns to continue to drive awareness of what we have to offer; tailored courses, such as "Get into Tourism", to encourage new people into the sector; and engaging with young people on tourism and hospitality as a career option. That is an ongoing area of important work that includes partnering with the educational charity Springboard to deliver schools programmes. Tourism NI also provides funding and support to the hospitality and tourism skills (HATS) network, which delivers a range of collaborative activity to attract and retain people in the sector, as well as working closely with Hospitality Ulster and other organisations on skills and recruitment issues in the sector. Invest NI supports capital investment in tourism accommodation outside greater Belfast through its tourism development scheme. Invest NI works with around 52 hotels and guest accommodation providers, giving them advice and support towards investment in skills development, innovation, management information systems and energy efficiency. Last year, 65% of the hospitality sector was supported by my Department's small business rate relief scheme, which provides businesses with a reduction of between 20% and 50% on their rates. My Department recently extended that into 2024-25. There have been calls to match the additional support provided for those in the retail, hospitality and leisure sectors in England. Locally, rates are a devolved matter, and, due to the differences in tax bases, we are unable to afford the level of support that is available in England to such an extensive range of businesses across retail, hospitality and leisure. Those properties make up the core base of our tax base. Likewise, neither Scotland nor Wales have been able to replicate the level of relief provided in England for 2024-25. The whole business rates system has repeatedly been subject to public consultation, review, reform and revision over the past two decades — in 2007, 2012, 2016, 2017, 2019 and, most recently, this year, 2023-24. My Department is undertaking a strategic assessment of business rate reliefs following the consultation, which closed in February. Over 1,400 people responded to that consultation, and I want to take time to consider their views. In addition, the Ulster University Economic Policy Centre is undertaking independent academic research on the impact of current business rate poundage differentials. I am open to working with external bodies in order to obtain an independent view of how the system may be recalibrated. During the pandemic, the rating system was deemed modern and robust enough to be fully repurposed as the vehicle that could rapidly deliver £1·3 billion of financial assistance to businesses through the targeted rates holidays and several grant schemes, much of which supported many in the hospitality and tourism sectors. The issue for the Executive as regards the hospitality sector's interaction with the rating system is whether the Executive should provide that sector with support in addition to a share of the existing £21·5 million small business rate relief currently being awarded to 65% of the hospitality sector. I have already met representatives of the hospitality industry on a number of occasions since taking up office to discuss the challenges for the sector and Reval2026. I am also meeting representatives of Hospitality Ulster later this week to continue my engagement with the sector. Along with my colleague the Minister for the Economy and her predecessor, I have been hugely impressed by the optimism, energy and ambition of hospitality and tourism businesses. Minister Hargey sees her Department's role as enabling those industries to continue to grow in a way that aligns with an economic vision of a productive, regionally balanced net zero economy with good jobs. In fulfilling that role, she will bring forward a tourism vision and action plan that will set out a range of actions to support the growth of the tourism sector. In order to deliver that work, the Economy Minister intends to establish a tourism partnership board made up of representatives from tourism and hospitality, Executive Departments and local government. The board will help to develop and oversee an action plan that will be co-designed and co-delivered with the industry. The public and tourism industry-wide consultation that took place between November 2023 and February 2024 will also inform that action plan. Like everyone here, I value hospitality and tourism businesses immensely. They deliver value to the economy across all our constituencies, and they are an important part of the fabric of our communities. I am very aware of the challenges that all businesses face, and that is why I and my Executive colleagues are determined to continue to offer a range of supports to hospitality and tourism businesses, especially through the vital work of Tourism NI and Invest NI. In addition, my officials will continue to lobby the British Government on reducing VAT levels, given the damaging impact that they are having on the sector.

1,443 words. Text as published by the Northern Ireland Assembly.

Assessment

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Assessed 21 October 2026 at 10:28 UTC by jev-1.13.0 (requested as typesafe/jev) under rubric 2026.10-r9, methodology 1.9.

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