A VAT cut for the UK’s tourism economy would lead to a £4bn annual boost to the sector and a £3.9bn tax windfall for the Treasury, according to new research being discussed with government today.
The Nevin Report has been commissioned by the Cut Tourism VAT Campaign and says that a cut of 15% for guest accommodation would help to improve tourism to the UK and encourage more people to visit.
This would run alongside a £4bn boost to GDP per year and the creation of more than 120,000 jobs around the UK.
The Cut Tourism VAT campaign has caused quite a stir in the industry in recent weeks, with more than 70 MPs pledging their support, as well as backing from The Sun newspaper and celebrity chefs.
Nick Varney, chief executive of Merlin Entertainment, said: “Doing a few fancy posters saying ‘Heritage is Great’ and putting them up at Shanghai Airport is not going to turn around 30 years of constant decline. If all UK holidays became 15 per cent cheaper, economics tells you what’s going to happen.”
The UK is currently one of the most expensive destinations to holiday in the world, ranked 138th out of 140 for price competitiveness by the Travel and Tourism Index, and one of just four countries in Europe not to have a reduced rate of VAT for the tourism sector.
This is despite that the fact that tourism is one of the UK’s largest businesses – employing over 3.1 million people and generating £127bn of GDP in 2013 – and a cut would give a vital boost to regional business and economies reliant on the industry.
The report reveals that similar cuts made in France, Germany and Ireland in the last five years have been hugely successful, and that a cut in the UK would boost investment, jobs and visitor numbers for the UK’s tourism economy.
Ufi Ibrahim, chief executive of the British Hospitality Association said: “As the driving force behind our recovery, it’s vital we help smaller firms grow. Cutting VAT to 5% not only allows the sector to be competitive with Europe, where the majority of countries charge less VAT, but it shows hard grafting businesses the government is behind them. No one denies the cut would dent tax revenues initially, but this is a chance for politicians to prove they are really in it for the long by making an investment in an industry which is the UK’s biggest employer of young people.”
Graham Wason, chairman of the Cut Tourism VAT Campaign, said: “This new research is the economic proof the Treasury has asked for to prove what every other country in Europe knows – that cutting VAT on holidays is profitable for governments. Many of our coastal towns are ignored but cutting VAT would help them thrive. More than 60 cross-party MPs have signed our parliamentary motion and more than 1,000 companies and groups are backing the campaign. David Cameron and George Osborne should remember that next election will be won or lost in the regions and in coastal constituencies who would benefit from the huge boost cutting tourism VAT would add to our economy.”