Tourism chiefs and campaigners have hit out after a group to tackle tourism sector issues across different government departments has announced its refusal to discuss a VAT cut on accommodation and attractions.
The Tourism Council was unveiled in June by tourism minister Helen Grant and skills minister Matthew Hancock, saying “The Government is committed to working in partnership with the sector to build on the success achieved to date and to help deliver further economic growth for tourism related businesses across the country”.
The Tourism Council was therefore set up as a partnership between government and businesses, with the aim of improving skills and the quantity and quality of jobs available in the tourism and hospitality sectors.
But in a letter dated 23 October, Grant said that the group would not discuss VAT. She said that because of the cost to the Exchequer, the government could not consider it. But the minister did not mention any of the benefits, which include a £4bn hike in GDP and more than 120,000 new jobs, according to research conducted using the Treasury’s own economic model.
More than 90 cross party MPs now support the Cut Tourism VAT campaign, with a number of coastal Conservative MPs hitting out at the chancellor as they face increasing pressure from UKIP.
Competitive disadvantage
Britain is currently just one of four EU countries to not apply a reduced VAT rate to accommodation and attractions. The current UK rate stands at 20 percent, even though the government can use a discretionary power to cut tax on accommodation and attractions to 5 percent. The majority of European countries do this. As a result, the British tourism industry is at a serious competitive disadvantage.
Even though lowering the rate of tourism VAT would require no extra legislation on the part of the UK government, ministers still refuse to engage with the idea. In Portugal, where the prime minister was on holiday this summer, VAT on hotels is just 9 percent, meaning we are incentivising consumers to leave the UK.
New research published using the Treasury’s own economic modelling shows that cutting the rate of VAT to five percent would create 120,000 jobs and add £4 billion to GDP. Yet the Tourism Council is refusing to allow VAT on to the agenda much to the dismay of industry chiefs.
Ignoring the central issue of VAT
Dermot King, managing director of Butlins, commented:
“The Tourism Council is meant to be supporting the sector, so it looks rather ridiculous to have an industry talking shop ignoring the central issue of VAT rates. How can anyone take the Tourism Council seriously when it’s a whitewash before it has even begun?”
Whilst Graham Wason, chairman of Cut Tourism VAT campaign, added:
“It’s a shame that with more than 90 MPs now backing this campaign the tourism minister is putting her fingers in her ears and hoping this issue will go away. The fact that this group clearly has no intent on properly listening to the sector highlights how out of touch ministers are with the reality expressed by their own MPs.”
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