James Murray

The VAT cut would apply to the headline rate of VAT for hospitality across businesses of all sizes as proposed, but targeted support is available in England through the business rates system by cutting the business rates for small retail, hospitality and leisure businesses. There is a wider question that other Members have raised about the wider effects that a cut would have. I want to address that directly to explain that the Treasury has considered, were there to be a cut in the rate of VAT for hospitality more broadly, what impact that would have, because the Treasury’s costing already takes account of expected behavioural effects, including the impacts on demand and supply and the resulting impact on VAT receipts. There may also be wider economic benefits, but the evidence from the independent Office for Budget Responsibility is that these effects typically offset only part of the direct cost of a tax reduction, rather than allowing the tax cuts to pay for themselves. Of course, we need to consider how any tax reduction would be paid for, as indeed the shadow Minister, the hon. Member for Grantham and Bourne, recognised, because lower VAT revenues ultimately mean higher taxes elsewhere, lower public spending or additional borrowing, all of which have economic impacts of their own. The decision not to introduce a permanent VAT reduction does not mean that the Government are standing aside from challenges facing hospitality. As many hon. Members have mentioned, in the Budget two weeks ago my right hon. Friend the Chancellor of the Exchequer deliberately prioritised support for retail, hospitality and leisure properties on our high streets. I note that the shadow Minister mentioned a relief that was in existence towards the end of his time in office; he neglected to mention that that support would have ended entirely in April 2025 and it was only thanks to this Government that anything continued. In this Budget, we have said that from April 2027 every retail, hospitality and leisure property in England will see its business rates frozen in real terms, reduced, or cut to zero. We have announced a two-year, real-terms freeze for all retail, hospitality and leisure properties, capping bill increases at inflation. We are providing an additional 20% business rates reduction for pubs and all but the largest live music venues. Increasing the small business rates relief thresholds means that about 70,000 more retail, hospitality and leisure businesses will pay no business rates at all. When the measures are taken together, half of all retail, hospitality and leisure businesses will pay no business rates from April 2027. That is significant targeted support for businesses that are at the heart of our high streets and communities. Dr Huq, I am conscious that I need to leave time for the—