Tourism (VAT)

Debate between Baroness Ritchie of Downpatrick and Tessa Munt

Tuesday 11th February 2014 Westminster Hall

[Ms Ritchie]

I thank the hon. Gentleman for his helpful intervention. It is worth pointing out that Professor Blake used the Treasury’s model for the research that resulted in his recommendation that the focus of a VAT cut be on accommodation and visitor attractions.

I would like to make a little more progress. I would like the Minister to clarify whether the Treasury accepts the figures resulting from its modelling, and whether it contests that this measure would be revenue-neutral and bring a long-term benefit, in terms of tourism numbers, tax revenue and job creation. If the Minister has figures that dispute that, I think everybody would be grateful to see them.

I would like to set the issue in the EU context. Even if the Government concede that the cost would not be excessive, they frequently argue that if such a cut was granted to the tourism sector, every other industry would be queuing up to get a similar cut. That is simply not the case. The EU has already established that the tourism industry is one of very few labour-intensive services that would be eligible for a reduced rate of VAT. Strikingly, the vast majority of other EU member states, which appreciate the importance of the industry, have exercised that right, but not the UK. As was pointed out in a report by Deloitte in 2011, the UK is the only country in the EU that does not apply a reduced rate of VAT to some part of its tourism sector.

The UK is one of only four of the EU’s 27 member states that do not take advantage of the reduced VAT rate on visitor accommodation, one of only 14 that apply the full VAT rate to admissions to amusement parks, and one of only nine that apply the full rate to admissions to cultural attractions. Thirteen countries, including Ireland, also have a reduced VAT rate for restaurant meals. That is not a record of which the UK can be proud. We hear much from the Government about how they are constrained and restrained by Brussels; here is a perfect example of where the Government have the right to be flexible, but they have so far refused to exercise that right.

Other countries are a rich seam of information on the benefits of a cut. It is no coincidence that after such measures are implemented, countries tend to stick with them. If we compare Ireland and the UK, we see a tale of two Governments. The introduction of a 9% VAT rate for tourism-related business and services made 2013 the most successful year since the financial crisis for Irish tourism, with visitor numbers up 10% and more than 9,000 jobs created.

[Tessa Munt (Wells) (LD)]

The Minister will know of my passion for caravans, because there are so many in my constituency. I thank him for the work that he did last year to ensure that the proposed VAT rate on caravan sales was dropped from 20% to 5%, which has saved the industry in my area and other parts of the UK. I ask him to consider a tourism-related VAT cut in exactly the same vein. Holidaymakers’ loyalty to the UK, holiday businesses’ investment in the UK, and the passion for people felt by tourism staff, of whom I was one for a decade, deserve to be rewarded with a sensible approach to this issue.

[Ms Ritchie]

Yes, that is what many of us are saying. We are making a special plea to the Treasury for a sensible approach that ensures growth in our local economies.

In conclusion, to take the case of Ireland, north and south, the island is marketed as one area, but it has two different taxation regimes and two different rates of tax on tourism products, including both visitor attractions and accommodation. We believe that that needs to be synchronised in some measure. I hope that the Minister sees that there is a strong case for a VAT reduction for accommodation and attractions. It could subsequently be widened to include food served in pubs and restaurants, which forms an integral part of our wider tourism sector. That would send a strong message of support to the tourism industry and, importantly, enable it to compete on a more even basis with other European nations, which have almost unanimously introduced such measures. I know that the local tourism industry in Northern Ireland—particularly in my constituency, where wonderful work is already being done—would welcome it with open arms.

There are many MPs here from England, Scotland and Wales, and I know, having talked to some of them, that they would also welcome such measures to pump-prime and grow the local economy, and enable the tourism industry to invest in growth and jobs. This Government talk a great deal about creating growth in the private sector, delivering jobs and supporting local businesses. Here is a ready-made policy that could be implemented quickly and would deliver instant results. I hope that we have a full and frank debate about the issue, leading up to the Minister’s response and, hopefully, to some better news in the Budget report on 19 March.