Coastal Tourism and Hospitality: Fiscal Support

Alistair Carmichael Excerpts

Thursday 22nd February 2024 Westminster Hall

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

It is a pleasure to serve with you in the Chair, Ms Cummins. I congratulate the hon. Member for North Devon (Selaine Saxby) on securing this debate. By accident or design, Members have spoken about a range of communities although there have been a number of common threads.

I first remind the House of my entry in the Register of Members’ Financial Interests: I am a partner in the firm that runs my family farm, which also includes holiday let accommodation. In many ways, that is a living example of the changes and opportunities that the visitor economy brings to communities such as mine in Orkney and Shetland, and doubtless to those in other coastal and island communities around the country.

Tourism is of enormous importance to communities such as ours. I listened with interest, as always, to the hon. Member for Strangford (Jim Shannon), who described the ripple effect of dropping a stone in the water. The stone in this case is the visitor economy. The benefits come very obviously to those who operate the hotels, the bed and breakfasts and the self-catering accommodation, and they go out to those who are able to work part time as self-employed tour guides, for example, and those who have jobs servicing that accommodation—they go out and out. Tourism may be a useful add-on to a conventional business. The hon. Gentleman said that a number of farm businesses in rural and coastal communities have some sort of tourism add-on—perhaps seasonal. At the end of the day, it is what they can show to their accountant at the end of the year that matters.

The way in which our rural and island coastal communities have got up and done things for themselves is an inspiring story. The real beauty of it is that, by and large, these are the self-employed or small businesses—medium-sized enterprises at most—and the money they earn and pay out stays in the communities. It goes into local shops and post offices. It allows families to live in those areas, because their children can go to local schools. We can keep local doctors, services and banks; the story continues. There is no single silver bullet for these economies, but tourism is an important part that makes the whole thing more feasible.

There are a number of significant challenges. They are not, strictly speaking, fiscal, but they are significant, given the way that they hold back island communities. In Scotland, we have an ageing ferry fleet. For island communities, that has been problematic for the past few years, and sadly it is only getting worse. The availability of labour in the local community causes real difficulty, especially in a seasonal economy. People moving into work in island communities need accommodation at a time when people are coming to stay in the same accommodation, so housing availability in our island and coastal communities is a significant issue, and Government-led—public sector —provision could make a real difference to businesses’ ability to grow.

The regulatory burden unfortunately seems to get greater every year. In Scotland, we now have the short-term let licensing scheme. It will be interesting to contrast how that works with the way in which things are now being done south of the border through a planning mechanism. I have not yet seen figures for it, but my sense is that we may see, especially in the smaller outer isles in Orkney and Shetland, a lot of people walking away from the provision of bed and breakfasts or self- catering accommodation as a consequence of the licensing regime. It is expensive for people to comply with, especially if they are away from the centre of the population. Goodness knows it is difficult enough for someone operating a business in Kirkwall and Lerwick to get work done, but if they are operating in one of the outer isles—in Sanday, Stronsay or North Ronaldsay, or perhaps in Unst, Yell or Fetlar in Shetland—that becomes yet another extra burden and cost. The farther the accommodation is from the centre, inevitably the fewer weeks in the year it can be let and the fewer people coming to stay in the community. Again, at the end of the day, is it worth it? The balance is sadly tipping in the opposite direction, towards saying no.

Those are some of the challenges, but at the end of the day, these people are self-starting and entrepreneurial and do a lot to bring economic growth to their communities, and there are certain levers that the Treasury could use to help them grow their businesses. The difference between the fiscal levers we can pull and the other grant-aided incentives and opportunities is that fiscal levers give people more opportunity to decide what is best for them and their business, rather than having to design their business to conform with the various requirements of a grant application or discount scheme.

There is a real opportunity for the Government to add value and opportunity to tourism and visitor-economy businesses in our island and coastal communities. The single most important change I hear advocated by those businesses, time and again, is the one touched on by the hon. Member for North Devon (Selaine Saxby)—the reduction in value added tax. It is rare in any sector that we hear such consistency in message. We have seen a small example of that already with the reduction to 5% during the covid pandemic. It would be interesting to know what analysis the Treasury has done of the tax take in that time—albeit everybody was operating in a much-reduced market.

I come back to my experience from my time in government, when we reduced the duty on spirits. We did so—for only the second time in history, I think—in the expectation of a significant cut in revenue. In fact it produced a significant increase in revenue to the Treasury. I cannot remember the exact figures of the tax take, but I think we expected a £600 million decrease and actually got a £800 million increase. That shows what is possible sometimes when we reduce the burden on industry and business and allow them the opportunity to use that extra cash to grow their business. I strongly suspect—indeed, significant research has been done on this by some of the big consultancies; Ernst and Young springs most readily to mind—that the same would be possible for the visitor economy in our island and coastal communities. That being the case, at a time when we want to grow the economy and are relying on that to spread the benefits of growth throughout the country instead of hoarding them here in London, surely that is something that must commend itself to the Government.