Debate contribution: Hospitality VAT Harmonisation

Debate contribution by Ms Diana Armstrong on 10 February 2025.

MLA

Ms Diana Armstrong

Party at the time

Ulster Unionist Party

Date

10 February 2025

Type

Debate contribution

Business

Private Members' Business

Heading

Hospitality VAT Harmonisation

Assembly identifier

Official Report component 4790918

Read the official Assembly record

Text

I beg to move

I rise today not just to pay tribute to one of Northern Ireland's best business sectors but to make the case for a fairer playing field for all those men and women who pull the pints, serve our world-class food and make this place the most welcoming in the world. The hospitality and tourism sector is a vital component of the outward-facing image of Northern Ireland. It is pivotal in demonstrating all that is good about our country — the stunning landscapes, the warm welcomes, storytelling, food, music and culture. Those things entice people to travel to different parts of Northern Ireland for recreation and pleasure. The enthusiasm and energy of destination providers, many of which are small family-run businesses, have really embraced the "Giant Spirit" that Tourism NI and other stakeholders in the sector promote. In January 2025, the former Economy Minister Conor Murphy launched a 10-year tourism vision and action plan that commits to boosting tourism's subregional impact with a target of doubling the value of tourism to £2 billion per annum. Over recent years, however, the industry has experienced significant setbacks, including the COVID pandemic, the cost-of-living crisis and the cost-of-doing-business crisis. Hospitality and tourism have always shown admirable resilience, but there are three looming threats to the survival of the industry in Northern Ireland. Those are the disastrous fallout from the Chancellor's Budget, with the planned rise in employers' National Insurance rates and the national living wage; the introduction of the electronic travel authorisation (ETA); and, most recently, the Irish Government's announcement of their intention to lower VAT on hospitality in the Republic of Ireland from the current 13·5% to 9%. That VAT differential is the final straw for many in the hospitality trade who operate in close proximity to the border region, and it is on that topic that I wish to address the House. The planned reduction in hospitality VAT in the Republic of Ireland will mean a substantial differential of 11% between ROI and UK VAT rates in hospitality. That will present a huge threat to the confidence of operators in the hospitality and tourism industry in Northern Ireland. It has the potential to undo all the gains that the sector and related industries have made in bolstering our economy by £1·9 billion to date. The feeling in the industry is that that is just the final nail in the coffin for those who are already struggling with higher input and operating costs. That leads many to question how the tourism strategy and its objectives can be achieved in the long term when, in the immediate situation, businesses are facing increases in wages and running costs and now a more competitive VAT rate, in some cases only five miles from where they are located, across the border in the Republic. Figures supplied by the Northern Ireland Statistics and Research Agency (NISRA) for 2023, broken down by council areas, show that tourism in border areas is a significant driver for the local economy. For example, in my home patch of Fermanagh and Omagh, with attractions such as the Cuilcagh boardwalk trail, the Marble Arch Caves and the beautiful lakelands, it records 1·2 million night stays with a spend of £83 million. For Newry, Mourne and Down District Council and the majestic Mountains of Mourne, there were 1·6 million night stays resulting in a spend of over £79 million, and for Derry City and Strabane District Council, with the famous Derry walls and 'Derry Girls' acclaim, there were 820,000 night stays with a spend of £63 million. A big part of the tourist experience is eating out at the many hospitality outlets at our tourist attractions. It is vital that those businesses are recognised not only for the role that they play in attracting revenue to the economy but for the role that they play in providing essential flexible employment and the opportunity, for young people especially, to learn lifelong skills in public-facing roles. Unless action is taken to reduce hospitality VAT now, the ramifications for growth and job creation will be hard felt, with some businesses having to close their doors for good, and the knock-on effect on the local supply chain will be devastating. There is precedent in the request for VAT reduction. In the UK, VAT was temporarily reduced to 5% on most tourist and hospitality-related activities from July 2020 to September 2021. That was replaced by a 12·5% rate until March 2022, and increased to the standard 20% from April 2022, which now applies. That reduction in VAT spearheaded hospitality growth in the UK and helped to stabilise the sector following the pandemic. As my good friend the Member for Strangford Mr Nesbitt has told the House, derogation of VAT was applied before to another jurisdiction — the Isle of Man — to help to resolve a construction crisis, with much added benefits to its economy. That was then, and this is now, and we must argue the special case that exists in Northern Ireland. I know that there will be Members who would be more than happy to advocate for a UK-wide reduction in VAT on hospitality. In principle, I would support that, but, given the tax direction of this Labour Government, who have betrayed farmers and the elderly, the case for Northern Ireland is much stronger than UK-wide. I am sure that many of you heard Michael Cadden, who owns the Lusty Beg Island Resort and Spa in my constituency, tell BBC Northern Ireland last week that the reduced VAT rate in Ireland will make it harder to attract people over the border. He said that the disadvantage would have a greater impact on border counties as, post Good Friday Agreement, Ireland is marketed as one island for tourism but has to compete on a different base price. He added:

"The cost of a hotel bedroom without VAT in Fermanagh is virtually the same in Donegal at about £130 on average. When we add VAT, we are charging £158, but in the Republic it's €148 (£123)."

That has particular significance when scale is applied in the form of wedding or conference bookings. Once again in my constituency, a hotel such as the Killyhevlin faces the prospect of competing with another hotel just 23 miles away across the border, which would be able to offer a VAT saving of 11%. Its price offering will be a much more attractive proposition for cost-conscious customers. Based on 150 wedding guests, the saving on meals alone could be as much as £1,500, and for conferences hosting 300-plus delegates, the saving could be £3,000 to £4,000. In the current economic climate, you cannot blame customers for looking for the most price-competitive proposition. Clearly, as a result of that detrimental differential, our hospitality providers will be hit hardest, leading to job losses, reduced trading hours and potential closures. It is important to note that this industry is cross-cutting. It provides opportunities to showcase Northern Ireland's agri-food sector, with locally procured products served in restaurants and hotels. Tourism, of which the hospitality sector represents 40%-plus of the region's direct tourism jobs, contributes significantly to the economy as the fourth-largest private sector in the Province, attracting £1·2 billion expenditure to March 2024. Therefore, that differential affects many parts of the Assembly's Programme for Government and, subsequently, our economy.

As someone who is passionate about the hospitality sector in Northern Ireland, I know that we can deliver growth and safeguards for the sector by lowering taxes. Our neighbours have demonstrated that that is possible with careful government support packages through Tourism Ireland and Fáilte Ireland. A VAT reduction will bolster the industry and promote employment. Reducing hospitality VAT to ROI's expected levels would help to generate higher employment levels with increased wages and training across Northern Ireland. A level playing field for hospitality VAT with our nearest neighbours would also create the opportunity for hospitality providers to invest in the industry, improve overall quality and pass down savings to customers. It would feed through to higher expenditure in other sectors of the economy, which, in turn, would generate further tax receipts through the tourism multiplier. Many hospitality businesses across Northern Ireland have been pleading for help to weather the storm of increased National Insurance contributions and the rise of the national living wage in April 2025. Now is the time for the respective Departments to explore every possible avenue to identify support mechanisms to ensure the delivery of interim financial support. Some £60 million of Barnett consequentials will be coming to the Executive in April 2025 as a result of rate support given to GB hospitality. It would be good to see whether the same support could be given to the hospitality sector here in Northern Ireland. I call the Minister for the Economy and the Minister of Finance to work jointly to engage with HM Treasury and put the case for the harmonisation of hospitality VAT directly to the Chancellor of the Exchequer. In addition, a delegation comprising Ministers and industry stakeholders should meet the Chancellor so that this important sector of the tourism industry can survive and play its role in the Northern Ireland economy and the future vision of tourism. Hospitality and tourism, and all those who work in the sector, need urgent assistance to ensure the survival of the many hospitality businesses in Northern Ireland. I ask Members to support my call, and I commend the motion to the House.

1,580 words. Text as published by the Northern Ireland Assembly.

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Assessed 21 October 2026 at 11:56 UTC by jev-1.13.0 (requested as typesafe/jev) under rubric 2026.10-r9, methodology 1.9.

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