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VAT reduction a ‘no-brainer' says MP

20 January 2014 by
VAT reduction a ‘no-brainer' says MP

A reduction in VAT for hospitality businesses is a "no-brainer".

That's the view of Green Party MP Caroline Lucas, who was speaking as organisers of the Cut Tourism VAT Campaign last week held a round table with members of Parliament at the Cavendish London to discuss how best to advance the cause.

Lucas said that last year she wrote to the Treasury calling for the rate of VAT on tourism to be cut from 20% to 5%, arguing it would address the disadvantage UK operators had in the European market and create jobs. She is also seeking to secure a parliamentary debate on the issue.

"This was an issue that I put on the agenda," said Lucas. "I don't think the message from the industry to their MPs is getting through."

She advised those in the tourism industry to redouble its efforts at grass roots to lobby local MPs and furnish them with the statistics that proved just how many jobs could be created by a reduction in VAT.

Lucas added: "I wonder what we have to do to persuade the Government of its own economic model? I sent the proof to George Osborne and received a reply from [exchequer secretary] David Gauke who said that a VAT cut would not produce sufficient economic growth to outweigh the revenue shortfall and in spite of the new research he saw no evidence to revisit that conclusion."

To date the campaign has worked with Deloitte on eight detailed reports, all of which has shown that a cut in VAT on tourism will lead over a period of time to a net increase in Government income.

"The Treasury officials even gave us access to their own model to demonstrate what the impact would be," explained Cut Tourism VAT chairman Graham Wason. "They probably did that expecting we would find negative results and go away."

Wason added that the Treasury's own advisor who had built the model was engaged to put the campaign's figures through it. The results proved that a cut to 5% VAT on accommodation and attractions could be fiscally neutral and produce £4b increased GDP for the country and generate 80,000 jobs in the first stage of the campaign.

Despite having digested the proof, the Treasury was said to be wary of employing any measure that has a year one fiscal deficit.

British Hospitality chief executive Ufi Ibrahim said the Government had to be persuaded to invest in the industry. "As an investor the returns are great," she said. "We have already asked all our members to contact their constituent MPs but more has to be done to make them active supporters."

Meanwhile, Bourne Leisure director Dermot King, whose firm helped fund the latest research, said any other businesses would invest what limited resource it has in the areas of highest return.

He added: "This from an investment point of view would be an area where I would want to invest. The challenge did not come from the industry, it came from the Prime Minister. He said ‘why can't we get 50% of UK families to holiday at home?' Well you can. The biggest barrier is the cost. We are asking families to pay three times the tax as they would in France or Germany."

King said the UK tourism industry was a proven exporter, and an industry that could create jobs, particularly for young people. "It's also an industry that doesn't suck growth out of other industries. Tourism ticks all the boxes," he concluded.

With an election approaching, the MPs present agreed that their colleagues would be receptive to initiatives that could be proved job creators.

A measure of real progress will undoubtedly be if tourism can find its way into party manifestos. Though having never had a mention before, there is still some work to do before the industry is considered significant enough to be a genuine vote winner.

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