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Tue 11th Feb 2014 - Breaking News - MPs call for reduction in VAT for tourism industry
MPs call for reduction in VAT for tourism industry: A number of MPs have called on the Government to reduce VAT for the tourism sector in a debate held this morning in Westminster Hall. Margaret Ritchie, MP for South Down, who won the debate alongside Caroline Lucas, MP for Brighton Pavilion, stated: “Will the Minister robustly consider the case for a reduction in VAT on hotel accommodation and visitor attractions from 20% to 5%? Would he also consider broadening that out in future to the wider hospitality sector, including to food served in pubs and restaurants? That would encourage many more foreign visitors and provide an incentive for staycations in the domestic market. It would boost coastal resorts, rural retreats and cities and towns that have been hit hard by the economic downturn since 2008. The industry is significantly constrained by its lack of price competitiveness. The Chancellor is not long back from Davos. While there, he may have learned that the World Economic Forum places the UK in 138th place for price competitiveness for tourism, out of 140 countries. The UK sits at the bottom of the international league table, with businesses facing the challenge of the highest rates in the world for VAT, air passenger duty and visa charges. The purpose of today’s debate is not to rehearse the arguments on issues such as air passenger duty, but that placing shows that the Government’s lack of action on VAT forms part of a broader lethargy when it comes to supporting the tourism industry. The Government say that visitor numbers remain strong, but I would suggest that is in spite of the current pricing policy, rather than because of it. The UK’s balance of payments for tourist products has declined steeply in the past 15 years, making it clear that tourism growth has not been what it could have been in recent years, and that we are not maximising the industry’s enormous potential to deliver revenue and jobs. I would argue that the blame for that lies with the policy regime, which is holding back the industry’s potential. Any argument from the Government based on the cost of a VAT cut being prohibitive is highly dubious. There is strong evidence from the Treasury’s own economic modelling, as used by Professor Adam Blake in a study for the British Hospitality Association, that a VAT cut for the sector would benefit the whole economy. Yes, there might be a loss of some £640 million in the first year, but that would be comfortably offset by years two and three of the programme. Figures show that a 15% cut in tourism VAT would quickly become revenue-neutral and would result in a radically increased tax take of £2.6 billion over ten years, delivering a £4 billion boost to the gross domestic product.” Other MPs to speak in favour of a VAT cut for the sector were: Roger Williams (Brecon and Radnorshire), Nigel Dodds (Belfast North), Geoffrey Cox (Torridge and West Devon), Geoffrey Haworth (Knowsley), Tim Faron (Westmoreland and Lonsdale), Laurence Robertson (Tewkesbury), Stephen Lloyd (Eastbourne), Tessa Munt (Wells), Dr Sarah Wollaston (Totnes), Albert Owen (Ynys Mon), Mark Williams (Ceredigion), Andrew Bingham (High Peak), Mike Weir (Angus), Alan Reid (Argyll and Bute), Jim Shannon (Strangford), Simon Hart (Carmarthen West and South Pembrokeshire), Lindsay Roy (Glenrothes), Adrian Sanders (Torbay), Sammy Wilson (East Antrim), and Nick de Bois (Enfield North). Treasury Minister David Gauke said: “I reiterate that funding the cut by additional borrowing would be contrary to our long-term economic plan to get the deficit down and put our public finances in a credible position. It would entail a risk to the recovery. As all honorary Members know, the Government’s priority is to tackle the record budget deficit decisively but fairly and to restore confidence in the economy and support the economic recovery. The conclusion that we reached, therefore, which I announced in Parliament last year, is that a VAT cut would not produce sufficient economic growth to outweigh the revenue shortfall. I have not seen any new evidence since then that has led me to revisit that conclusion, so, at present, the Government have no plans to introduce a VAT cut for the sector.”
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