TALK: Cut Tourism VAT Exclusive

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Ufi Ibrahim, CEO, British Hospitality Association explains what the campaign will mean for boutiques

What is the aim for this campaign?
The Cut Tourism VAT campaign aims to secure a 5% rate on visitor accommodation and attractions. This covers a wide range of hospitality and tourism businesses including accommodation provided by boutique and chain hoteliers and similar establishments providing holiday accommodation and the letting of camp sites and caravan parks. It also spans admissions to shows, theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions and similar cultural events and facilities as well as restaurant services.

How is the BHA being influential in supporting The Cut Tourism VAT Campaign?
This is one of the BHA’s core campaigns and has been high on our lobbying agenda for some time. The past 12 months has seen significant progress and greatly increased political support for Cut Tourism VAT. Thousands of hospitality supporters are backing the campaign, including industry bodies such as the British Hospitality Association and BALPPA, to small B&Bs, family run attractions, zoos and major international brands.

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Over 85 politicians across the UK have come out in support of the Cut Tourism VAT campaign, and as a result of last summer’s campaign, Prime Minister David Cameron made his first statement on the subject. February this year saw the first ever Parliamentary debate on tourism VAT, with MPs of all parties urging the government to implement a reduction.

The debate has also taken a high profile twist, gaining awareness with the general public thanks to The Sun’s Give Us A Break campaign, calling on Chancellor George Osborne to cut VAT on hotel accommodation and tourist attractions to 5% in a bid to give Britain’s regions a helping hand. The Sun even took a mobile beach from Downing Street to Parliament Square in time for Prime Minister’s Question Time.

How will the cut in VAT benefit the owners of boutique hotels?
In short, a reduced rate of VAT would benefit the owners of boutique hotels in numerous ways:
1. Generate higher levels of employment, with increased wage levels and training. These benefits would occur throughout the age and socio-economic spectrum and across the UK.
2. Increase additional tax receipts as a result of this additional employment with consequential savings on social security payments.
3. Increase profits, corporation tax payments and shareholder dividends.
4. Lead to further investment in the industry, improving overall quality and therefore further increasing the UK’s competitiveness.
5. Feed through to higher expenditure in other sectors of the economy, which in turn will generate further tax receipts – the ‘tourism multiplier.’ Every additional £1 of tourism expenditure generates 70p of extra expenditure in other sectors.

What will happen if VAT is not reduced on hotel accommodation and visitor attractions?
If VAT is not reduced, it’s likely that boutique hoteliers will start to witness and experience a ripple effect. The UK’s share of international tourism receipts will continue to fall in comparison with European competitor countries as well as the decline in domestic tourism expenditure by UK residents will continue (inflation, adjusted domestic tourism expenditure fell by 4% per annum between 2000 and 2008, before recovering slightly in 2009). The decline in the proportion of total UK tourism expenditure spent on holidays at home relative to holidays abroad will continue. This has fallen from 50% of total UK tourism expenditure in 2000 to 36 per cent in 2008.

All three of these scenarios conflict with the Prime Minister’s stated aims for UK tourism and the aim of the government’s tourism strategy.

What are your next steps to ensuring the campaign stays in the news and continues to garner support?
In the lead up to next year’s general election, the BHA together with a wide range of individuals and groups, continues to lobby all political parties to listen to the facts surrounding The Cut Tourism VAT Campaign.

The Sun continues to back the campaign and last month three of the UK’s biggest hotel chains – Premier Inn, Accor and InterContinental Hotels Group – pledged their support to the campaign.

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