Cut VAT on hospitality to create more jobs

04 June 2010
Cut VAT on hospitality to create more jobs

With the new tourism minister now in place, chief executive of Travelodge Grant Hearn calls for the coalition Government to consider a VAT cut for hospitality businesses to help stimulate the economy.

When the coalition Government was formed I was hopeful that tourism's status in Whitehall would be enhanced. Before the election Jeremy Hunt, for the Conservatives, now secretary of state for culture, Olympics, media and sport, said: "We believe that by creating a minister whose sole responsibility is to engage with the industry and champion the plight of the industry within Parliament, we can strengthen the voice of this vital industry."

The Liberal Democrats, meanwhile, suggested that the responsibility for tourism move from the Department for Culture, Media & Sport (DCMS) and be placed in the Department for Business, Innovation & Skills (DBIS), something we called for in a joint report we wrote with the British Chambers of Commerce about the future of our industry.

A day of excitement aside when the new tourism minister, John Penrose, was listed as half-reporting to Vince Cable at the DBIS, before going back to solely being in the DCMS, it looks like, structurally, not much has changed. It is encouraging, though, to see that the minister's responsibilities focus on broader leisure matters, such as licensing and heritage, which is a step in the right direction.

Given his strong business background it is also to be hoped that he will understand the commercial argument for supporting tourism, something that, given the cuts the public sector faces, will need to be strongly argued for in Westminster.

Even without all the details being published, it is clear that the state-backed tourism sector will have to find efficiencies. The regional development agencies have been asked to save £270m, and they currently allocate £51.8m to tourism promotion. Local authorities will lose £1,185b, and it is hard to believe that they will not look at the £143.3m they spend on tourism promotion. And these are just the first of what will be further efficiencies called for over the next few years.

I am not arguing for tourism to be exempt from the cuts, but I would like the Government to explicitly recognise the job-creating possibilities of our industry. VisitBritain has said we have the potential to add 250,000 jobs between now and 2020, yet to get there we will need the regulatory and policy assistance that other nations give their tourism sector.

In France they cut VAT for tourism businesses from 19.6% to 5.5% last July; while at the start of this year Germany cut the VAT rate on overnight hotel stays from 19% to 7%. By stimulating demand, these cuts will prove to be revenue-positive, foster job creation and help the tourism industry grow in what are undoubtedly difficult times.

Reducing VAT in the UK for the tourism sector would be a positive action from our new Government and show us that, finally, we are being taken seriously as an industry in the corridors of power.

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