Davey calls for hospitality industry to be exempt from NICs hike as businesses face £4.5bn “jobs tax” bombshell

EMBARGO: 22.30 Friday 7th February

The hospitality industry is facing a £4.5 billion tax bombshell over the next five years due to the Government’s National Insurance hike, Liberal Democrat research has revealed.

The data showed that next year the additional tax bill for hospitality businesses is estimated at around £870 million, rising to more than £940 million a year by the end of the decade. It means that, over the next five years, the industry will be hit by roughly £4.5 billion in additional taxes due to the Chancellor’s national insurance hike.

It comes as Party Leader Ed Davey will be campaigning in the South West today (8th February), with all elections now confirmed as going ahead in the region. Whilst on the visit he will call on the Government to exempt the hospitality industry from their “misguided” national insurance hike or risk many hospitality businesses “going to the wall”.

The research by the Lib Dems revealed that London would be the worst affected region, with the National Insurance rise adding nearly £1.1 billion to the capital’s hospitality businesses’ tax bill over the next five years. This was followed by the South East with around £620 million and then the North West with roughly £430 million in total by 2029-30.

Many hospitality businesses have been ringing alarm bells about the damage this “jobs tax” could do to their industry. The Paignton Pier Leisure and Chippy company in Devon has recently written to Liberal Democrat MPs and warned that the national insurance hike will disproportionately affect businesses like theirs as they rely on seasonal work patterns. 

There is currently no provision in the national insurance rise to guard against this for seasonal businesses. The business said that it may have to limit opening hours in off-peak months and could reduce opportunities for employment in the winter months.

The Liberal Democrats are also calling on the Government to negotiate a Youth Mobility Visa scheme with the EU so that British businesses can recruit the workers they need to fill vacancies. The Institute of Directors has said it “would be particularly beneficial for sectors like hospitality… which typically employ large numbers of young people and have struggled to find workers following the loss of movement of potential recruits between the EU”.

Liberal Democrat Leader Ed Davey said:

“Restaurants, pubs and hotels across the country are warning that the Government’s national insurance hike risks many of them going to the wall, but the Chancellor just doesn’t seem to be listening.

“Local businesses like these are the beating heart of our communities, but many are struggling after years of Conservative economic vandalism. This jobs tax would hammer them again, hitting growth and putting hundreds of thousands of jobs at risk.

“To get our economy growing strongly, the Government should be helping our hospitality sector, not hurting it. Instead of ploughing ahead with this misguided tax hike, the Chancellor needs to listen to local businesses and scrap it now.”

ENDS

Notes to Editors:

Analysis by the Liberal Democrats can be found here.

The research used the latest available ONS data on aggregate pay by region and industry to estimate the effect of the National Insurance increase on hospitality in different regions of the UK. [ONS: Earnings and employment from Pay As You Earn Real Time Information, seasonally adjusted]

Data refers to businesses undertaking “accommodation and food service activities”, which includes among others hotels, short-stay accommodation, restaurants, pubs and bars.

Institute of Directors comments can be found here.