MSP hopeful commits to work with business and backs plan for hospitality VAT cut at Budget

• Lib Dem MSP candidate David Green sets out his party’s proposals for the Budget after a roundtable in Thurso [Fri 14 Nov] with the North Highland Chamber of Commerce where he committed to working in partnership with business. 
• The party is urging the Chancellor to slash VAT by 5% for pubs, restaurants, and other hospitality businesses in the upcoming Budget to drive growth for high streets and rural businesses alike.
• Liberal Democrats are also calling for the “renewables obligation” levy to be removed from energy bills, which would slash the typical bill by more than £90 a year, taking it to its second lowest level since the energy crisis began in 2022.

An emergency 5% VAT cut for pubs, restaurants and other hospitality businesses should be introduced in the upcoming Budget to drive growth for high streets and rural businesses alike and slash prices for hard-pressed families, an MSP hopeful has said. 

David Green, the Scottish Liberal Democrat candidate for Caithness, Sutherland and Ross, is backing his party's £12bn plan to tackle the cost of living which means that going out has become unaffordable for most people.

The party is also calling on the Chancellor to reduce household energy bills by removing the current “renewables obligation” levy. This combined support package, in place until April 2027, would save a typical family around £270 over the next eighteen months.

“Restaurants, pubs and hotels are not only central to our visitor economy but they are at the heart of our communities. We need to support local businesses and help people to afford going out. That is what Liberal Democrat plans to cut both VAT for hospitality and energy bills for households can do,” Mr Green said.

The Liberal Democrat MSP candidate set out his party’s proposals after a recent business roundtable in Thurso [Friday 14 Nov] with the North Highland Chamber of Commerce. The meeting was an opportunity to explore several of the challenges faced by north businesses.

Addressing the roundtable in Thurso, Mr Green committed to working in partnership with the North Highland Chamber of Commerce and business to deliver for the Far North. Speaking afterwards, he said:

“Businesses across the Highlands are the engine of our local economy, creating jobs and supporting communities. Let's be clear; politicians of all colours will not deliver on their public spending commitments without creating the conditions for business to thrive. 

“I am therefore grateful to the North Highland Chamber of Commerce and the members who met with me. It reinforced the challenges of rising energy costs, the damage caused by the UK government’s National Insurance hike, the unique skills and workforce challenges we face, and the vital need to invest in improving transport and connectivity.

“Of course, there is plenty to commend too from DYW North Highland’s growing success stories to the invaluable role the Chamber has played in both securing and now fighting to protect the PSO for the Wick/Aberdeen service.”

Mr Green added: “I am firmly committed to working in partnership with the North Highlands Chamber of Commerce and business to deliver for our communities. That is the only way to do the job well, as I am pleased my party’s proposals for the Budget demonstrate.”

The Liberal Democrats have confirmed their Budget proposals would be funded by a new windfall tax on big banks, originally proposed by the IPPR think tank, which could raise around £30bn in total between now and 2030. Less than half of this revenue would be needed to cover the cost of the VAT cut and that of replacing the current renewables obligation levy, which would cost around £7.5bn and £4.5bn respectively over the next eighteen months.

Mr Green believes his plans would boost footfall in pubs and restaurants, tackling the double whammy of higher taxes and lower spending currently hammering UK food and drink venues. Recent research by More in Common has shown that nearly two in three Brits (59%) think meals out at restaurants are unaffordable for most people. Over half (51%) said nights out at the pub are out of financial reach for the average person, while 45% said the same about a trip to the cinema.

ENDS

Notes to Editor:

Notes to Editor:

Please see polling material on page 9 of More in Common’s Britons and the Spending Review paper.

Bank windfall tax

The Liberal Democrats have previously called for a time-limited windfall tax on big commercial banks, originally proposed by the IPPR think tank. It would only target the “windfall” interest payments received by commercial banks as a result of the QE-related reserves they hold at the Bank of England. Those interest payments to the banking sector are currently funded by the taxpayer. The tax does not involve any change to the way in which the Bank of England conducts Quantitative Tightening (QT). It would expire when base rate returns to 2%, or when the QT programme concludes - both of which are expected to happen after 2030. IPPR’s proposals can be found here. The bank windfall tax would raise around £30bn in total between November 2025 and April 2030.

Emergency support package

The emergency support package proposed by the Liberal Democrats would be temporary, coming into effect immediately in November 2025 and expiring at the end of the next financial year, in April 2027. It would cost £12bn in total and would be funded by the bank windfall tax.

The package would be made up of two policies:

• Cutting VAT on hospitality, accommodation and attractions from 20% to 15% for 17 months, as an immediate boost to high streets. According to Liberal Democrat analysis of HMRC figures provided by the Government in a written Parliamentary Question, this would cost around £7.5bn in total between November 2025 and April 2027.
• Removing the “Renewables Obligation” (RO) levy from people’s energy bills and instead funding it through the bank windfall tax for 17 months. Based on Liberal Democrat analysis of figures published by Nesta (please see page 4 of this policy paper), this would cost £3.2bn a year, equivalent to around £4.5bn between November 2025 and April 2027. By April 2027, the Government should develop a new way of funding RO contracts, implementing Liberal Democrat proposals to move them onto the “Contracts for Difference” model.

Hospitality includes businesses such as pubs, restaurants, bars and cafes. Accommodation includes businesses such as hotels, inns, boarding houses, BnBs, caravan pitches and rented holiday homes. Attractions include businesses such as theatres, cinemas, fairs, amusement parks, concert venues, zoos and exhibitions.

Household savings

The party estimates that the two policies would save UK households an average of £270 in total between November 2025 and April 2027.

Liberal Democrats expect around 50% of the VAT cut for hospitality, accommodation and attractions to be passed on to consumers, delivering an average saving of around £135 per UK household in total between November 2025 and April 2027. 50% pass-through is in line with what happened in the accommodation and food service sector during the 2008 VAT cut [HMRC p86].

According to figures published by Nesta, removing the Renewables Obligation levy would save the typical household £94 a year, or roughly £135 between November 2025 and April 2027. The roughly 2 million households with electric storage heaters would see far greater savings in the region of £250 a year. According to Nesta, the total cost of the policy levy is £3.2bn a year, or around £4.5bn between November 2025 and April 2027. Relevant figures can be found on page 4 of this Nesta policy paper.

Reducing the typical energy bill by £94 would bring it down from £1,755 currently to £1,661 - its second lowest level since the energy crisis began in 2022 (the energy price cap briefly fell to £1,568 in July 2024).