Lib Dems warn going out should not be “unaffordable luxury” as party calls for emergency hospitality VAT cut for businesses in Liverpool
- Liberal Democrats urge the Chancellor to slash VAT by 5% for pubs, restaurants, entertainment and accommodation venues as the party says too many people have been “priced out” of even “small joys” like a restaurant meal or a family day out.
As going out has become an increasingly “unaffordable luxury” for families across Liverpool, Cllr Carl Cashman, Liverpool Liberal Democrat Leader, has joined the party’s calls for an emergency 5% VAT cut for pubs, restaurants and other hospitality and entertainment businesses at the Budget later this month.
In a speech on Wednesday, 12th November, Liberal Democrat Deputy Leader and Treasury Spokesperson Daisy Cooper MP set out the party’s bold £12bn plan to tackle the cost of living and support Britain’s high streets, putting £270 back in people's pockets.
As part of the plan, VAT would be immediately cut from 20% to 15% for hospitality, accommodation and attractions, boosting struggling high streets and slashing prices for hard-pressed families across Liverpool.
Cllr Carl Cashman and the local Liberal Democrats said this plan would also boost footfall into pubs, restaurants, entertainment venues and tourist attractions across Liverpool, tackling the double whammy of higher taxes and lower spending currently hammering UK food and drink venues.
The party’s £12bn support package also includes proposals to bring down sky-high energy costs, by removing the Renewables Obligation levy currently charged on people’s electricity bills. The move would reduce the typical energy bill by more than £90 a year, taking it down to its second-lowest level since the energy crisis began in 2022.
The Liverpool Lib Dems have said that businesses in the City Centre are feeling another pinch with Labour’s end to free evening parking. Many hospitality businesses have seen a slump in their evening trade.
The 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.
Cllr Carl Cashman, Leader of the Liverpool Liberal Democrats, said:
“People all across Liverpool work incredibly hard for their paycheck, but throughout this ever-spiralling cost of living crisis, there is less and less disposable income left to go around.
“Small joys like Friday night takeaways and Saturday evenings at the cinema or bowling alley have become an unaffordable luxury for too many people. It’s devastating that we have reached this point.
“Independent family businesses have been left to struggle, hammered by the jobs tax and higher business rates bills. So many iconic venues across Liverpool have been forced to close, taking with them vital jobs and local community spaces. When you walk through the city centre or down one of the high streets across the city, it’s clear to see.
“That’s why I am backing our plan for an emergency VAT cut for hospitality, as well as the Liberal Democrat plan to immediately cut energy bills by more than £90 a year. People across Liverpool deserve to be able to afford their daily essentials, as well as the small joys that make life worth living. These proposals will put money back into people’s pockets and help them to do exactly that.”
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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 the 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, B&Bs, 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).