The Cut Tourism VAT campaign chairman is today giving evidence on how a VAT cut for attractions and accommodation would benefit the UK economy.
The Culture, Media and Sport committee inquiry on tourism, chaired by John Whittingdale, Conservative MP for Malden, has promised to investigate the effect taxation, including VAT, has on limiting the potential of the industry.
Since re-launching at the start of summer, the Cut Tourism VAT campaign has generated support from more than 90 MPs of all parties, thousands of businesses, both big and small, gaining widespread media attention.
According to the campaigners, reducing VAT on attractions and accommodation from 20 per cent to 5 per cent would create 120,000 jobs adding £4 billion to UK GDP. It would be cost free for the exchequer after four years and net £4 billion after 10 years.
They point to other stated benefits of a VAT cut including shrinking the size of the shadow economy, by encouraging more businesses to register for VAT, as well as stronger regional growth and investment.
Figures released yesterday showed a VAT cut would create 100,000 jobs outside London, and boost regional economies by £3 billion.
A VAT cut on accommodation and attractions would also boost British exports – tourism is currently the UK’s sixth largest export earner, bringing in £24 billion annually yet it is the only export subject to VAT.
The campaign can further point to a wealth of supportive evidence from around Europe. The most recent is an assessment by Deloitte of the VAT cut in Ireland.
Deloitte’s analysis revealed evidence of pass-through to lower prices; improved value-for-money perception; the biggest increase in foreign visitors since 2007; and the creation of 30,000 jobs, netting the Exchequer €165m.
The direct VAT income loss to the Exchequer was also much lower than had been forecast by government – €107m per annum rather than €350m.
Further proof of the benefits of a VAT cut, say campaigners, can be found from studies in France, Germany, the Isle of Man and other places – 24 of the other 27 EU countries apply a reduced rate of VAT to tourism.
Despite all the evidence, George Osborne has so far refused to cut VAT for the tourism industry, even though it is allowed to under EU rules.
As a result, Britain 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.
To many, this has given the impression the government is failing to take seriously the long-term decline in British tourism and domestic holidays in seaside resorts in particular.
This has been disastrous for coastal communities dependent on tourism, with a study by the Office for National Statistics (ONS) last year showing Britain’s coastal towns are among the poorest parts of the country.
Levels of deprivation in seaside resorts rose between 2007 and 2010 and 25 of England’s 31 large resorts are now considered to be exceptionally deprived.
Graham Wason, chairman of the Cut Tourism VAT campaign, says: “The tourism inquiry is a golden opportunity for politicians to show they take tourism seriously and value its contribution to British economy and society.
"Reducing VAT for the sector would create thousands of jobs and add billions to GDP and treasury revenues. For me, and the thousands of the businesses that support the campaign, a VAT cut is a no brainer.”
Nick Varney, chief executive of Merlin Entertainment, says:“For too long government policy on tourism has relied on a weak pound and fancy posters. It is time now to demonstrate bold leadership, and slash VAT from 20 per cent to 5 per cent, allowing companies to re-invest in the areas they operate in, opening more job opportunities – particularly for young people.”
Dermot King, managing director of Butlins, said: “Tourism is a major employer and export but has been consistently ignored by governments past and present. London is not an accurate snapshot of the state of the industry, and help is needed to aid struggling seaside resorts up and down the country – help that would best come in the form of a VAT cut for the sector.”